Leasing questions.

JALLEN4 wrote:
Every time this discussion starts, people without knowledge, insist on chiming in with totally incorrect information about leasing. No one person can make a blanket statement that leasing is "not good for you" without knowing your complete financial picture, wants, and needs.

I was a dealer for more than forty years, operated multiple lease companies, and have a degree in leasing. I have leased thousands of vehicles and had this discussion thousands of times. Unequivocally the answer as to whether to lease or not is...Maybe!

The absolute lowest cost of ownership of a vehicle is to buy it new, pay cash, and keep it for more than ten years. Less than 10% of the owners do this and far more than 50% of people finance with an average term of more than 60 months. With the average down-payment, they will owe more than the value at least during the first 48 months of payments. So not leasing because you are throwing your money away is incorrect. With a zero down lease of thirty-six months, you will have lower payments and long before you are at break-even on your financed purchase, you will have turned in your lease and have no obligation.

You can lease a vehicle for any amount of miles you wish, generally up to a 100,000 mile total lease. Dealers and manufacturers often advertise 10,000 mile leases simply because the payment is lower. Often you can get even lower mileage leases for lower payments. You should lease the vehicle for the most reasonable amount of miles you are likely to drive. Leasing a vehicle for 10,000 miles a year and knowing you will be driving 20,000 miles a year is just dumb.

As even like you own the vehicle, you are going to pay for the original acquisition price, depreciation, and interest on the money whether it is lost interest by paying cash or interest on money borrowed. Generally, the leasing company sets the interest rate and it is non-negotiable unless the dealer is marking it up. Generally it is lower than borrowed funds because the leasing company receives great tax incentives. They also set the residual amount and that is also non-negotiable. The actual selling price of the vehicle is negotiable and even the low priced advertised leases are negotiable.

Leasing is only as complicated as you allow it to be. Any leasing contract has to meet government regulations and clearly spells out all the terms and conditions of the lease. If you are going to lease, seek out your best sales price of the vehicle and make sure you read both sides of the lease contract. A lease can be very beneficial for the buyer when they do their home work.

You ARE a “sales man”, it IS your “job” to “sell” things, it IS WHAT YOU DO.

You know the old question of.. How can you tell a salesman is lying?

Answer, when his mouth opens!

Of course YOU are going to endorse “leasing”, it is your job to sell using whatever “tools” you have at your disposal. If you don’t “sell” you won’t be in business for long..

Leasing is nothing more than another name for RENTING, in the case of a lease it is a LONG TERM RENTAL CONTRACT.

Sure, you can add more “mileage” to the contract, but it IS at a higher monthly payment cost.

Many folks get lured into leasing due to the monthly “payment” being lower than an outright purchase, often times folks use a lease to get a more expensive vehicle (IE top trim level, diesel, ect) that they may not qualify for or want to pay the larger payments with a purchase/loan.

The huge downside to that is the Leasee has two options at the end of the lease.

Option 1, give up the vehicle.

In doing so they surrender ALL the “payments” and other costs (insurance, taxes, title, tires, brakes and so on) along with the vehicle.

The result is 100% total loss of money AND they have NOTHING to show for that loss of money except for the limited time they got to use the vehicle.

They have NOTHING to “trade” or sell towards the next vehicle purchase, they start from ground zero each and every time they enter a new lease.

They also will get hit over the head for any damages inside or out including chipped paint, scratches, worn or broken interior and mileage overages.

On top of that since the leasee does not “own” the vehicle, they cannot “mod” the vehicle with their own “touches” unless it is 100% reversible and they don’t mind taking the time to fully reverse (IE remove all mods) the touches.

Any mods done that are not 100% reversible are going to hit you like a brick wall of charges when you hand it in. Drilling holes in the bed to install rails for a 5th wheel hitch isn’t going to be hid very easily during the end of lease inspection (and YES, they DO INSPECT the vehicles very closely).

Option 2, keep the vehicle and pay the “balloon” payment.

This option is by far the worst option of a lease due to the fact you now must get a loan to pay for the price of the vehicle which WILL be MORE THAN WHAT IT IS WORTH. The folks who do this will often end up with an additional 5-6yr loan at a much higher interest rate than if they bought a brand new vehicle over all they will have paid 8+yrs for a vehicle that they should have only paid no more than 5yrs!

I buy new with a cash downpayment, pay the loan off early saving a lot of interest (5yr loan I pay off in 2 to 3 yrs).

Then the money I would have been paying as monthly payments gets set aside for use as the downpayment for my next vehicle and or can be used to pay for out of warranty repairs.

Typically I will have not only a nice sized down payment but I will also have a used vehicle to trade in or sell off for the next purchase. It is how I can afford to continue to buy new and not put me in the poor farm. I keep em as long as the repairs don’t start costing me a monthly payment, typically 10-12 yrs and SEVERAL HUNDRED THOUSAND miles of driving.

I can make a vehicle last upwards of 10 yrs all without having a loan payment for at least 7 of those years!

If you don’t drive a lot of miles you actually are even FURTHER AHEAD TO BUY AND NOT LEASE!

Why?

Well, pretty simple, there are lots of folks in the used market looking for LOW MILEAGE USED VEHICLES! Less miles than average on your vehicle adds resale value and typically commands a higher sale price even on a trade in.. Its like “found” money for YOU the owner..

Be careful of a "salesman's" or "dealership owner" giving financial advice.. They have only ONE job to do and that is to find a way to get you to purchase from them no matter how much it may cost you down the road.