Over the years, finance companies tied to local car dealers have become more financial savvy. Years ago (I am talking like before 2000), leasing a car could be a better alternative to buying a car outright depending on what the car was going to be valued 3 years from now. However, those days are long gone! The finance companies now know better than ever what the profitability margin is and the sale margin for once that lease car gets turned back in.
The main advantage to leasing is a lower payment, then what you would be able to finance the car for. However, that probably means you are looking at too much car then you should be.
For somebody on a budget, it’s easy to see why leases are so tempting: You get a brand new car and a monthly payment that’s lower than a car loan. The devil is in the details. Leases have milage limits, and if you drive over them you are penalized per mile over the state agreement. I have also heard of horror stories about “normal wear and tear” that was not considered “normal”. Fixing that BMW, Mercedes or (input fancy import car here) can really add up.
Buying a car now is (just about) always better
Of course buying a car that is a few years old, and low mileages is the best way to go. But if you do buy a new car, here is what to look for.
#1 Is the dealership offering 0% financing, if not check out your local credit unions they tend to have the best rates.
#2 Gas Mileage- Remember when gas was getting to be $4.00 plus per gallon. Just because it is low today, doesn’t mean it will be in the future.
#3 Did you do your due diligence on consumer reports and reliability studies?
Is leasing ever a smart option?
Short answer…NO! however, there are some exceptions. If you are business owner who can deduct vehicle costs it might be financially savvy. Other than that, not many reasons why you should lease.
If you are the member of the ADA or AMA, Mercedes has some attractive lease advertisements, trust me they aren’t that attractive. Stay the course!