Leasing is all the rage in the auto industry again, but does it make sense for you to get into a car this way?
Why leasing is not as good as it seems
I’ve seen several news reports that say leasing is now the No. 1 strategy of automakers and car dealers to reverse the trend that we’re keeping cars much longer. The average age of a car out on the road is now the longest it’s ever been.
One story I saw proclaimed that 200,000 miles is the new 100,000 miles, as more people start to see their cars as being babies once they hit 100,000 miles and keep them on the road.
With increases in car reliability, it’s entirely possible that you might keep a car 10 years without breaking a sweat. That’s not good for automakers and dealers. So you’ll be seeing a strong effort to lease one in three of every new cars that gets sold.
For the most part, leasing is a disaster for you. Edmunds.com has new numbers to give you a sense of just how much of a disaster it can be. Basing their calculations on a car that sells in the mid $20,000 range, they’ve estimated leasing will cost you $6,000 more than buying the car new. That loss goes up to over $10,000 vs. buying a gently used version of that same car a couple of model years old.
When you get on that lease treadmill every 2-4 years, each time you’re taking on an obligation and you have nothing to show for it at the end. Each time you take on 100% of the loss in value of the vehicle for the time you drive it.
There are only 2 exceptions to my ‘no leases’ rule
The first is if you like new wheels every two or three years. The second has to do with fancy luxury cars, electric cars, and some other alternative fuel vehicles. These kinds of cars don’t get discounted, but you will find factory-subsidized leases that can be a deal. You’ll know it’s a factory-subsidized lease when you see a manufacturer’s ad on TV or a website telling you it’s such.
On the flip side of the equation, all the leasing going on today means there will be deals coming for used car buyers. I’m advising used car buyers to start looking for deals as early as 2016 all the way through 2018. When those cars come off lease, you’ll get the deals!