In early 2014, leasing is coming back with a vengeance.
I reported last week in my free weekly newsletter that in the 4th quarter of 2013, and so far in 2014, leasing was at an all-time high. Leasing has become a hot topic once again on the Car Pro Radio Show. So, is leasing right for you?
Understand that leasing is not for everyone. Although some will disagree with me, if you drive more than 20,000 miles per year, you have no business leasing. There are some real advantages to leasing for sure, but only if you are not a high mileage driver.
The reason I like leasing is because if you just stay within the allotted mileage, you cannot owe more on your car than its value at the end of the lease. If you do, simply walk away. If you have equity, you get to keep that for your next lease or purchase. For me, the perfect lease is three years or less. Odds are you won’t have to buy tires, and you won’t be out a ton of money on maintenance costs like timing belts, etc. You always have the latest options and safety features.
If you are going to get on a cycle of back-to-back leases, you have to get in the mindset of never owning a car. While leasing, you are paying a lower than usual monthly payment which allows you to buy a nicer model, or pocket the savings. These are all things to consider when pondering whether to lease or buy.
If you are a person who likes to be without a car payment and drive a car until the wheels fall off, leasing is not for you. I would never go into a lease planning to buy the car at the end of the lease, as this defeats the advantages of leasing in the first place.
I recommend, too, leasing directly from a dealership instead of a third party lease company. The third party lease companies purchase from local dealerships, mark them up, and then generally stretch a lease out to four, five, or six years. That is just too long to lease in most cases and why add that extra profit margin when it is not necessary?
I would tell you also that many times, there are low lease interest factors offered from the factory to help keep payments low. This is very prevalent with the imports and luxury brands. A third party lease company does not have access to those rates. I hear from people all the time who have been burned on leasing from years ago. Today, the manufacturers love leasing because it puts you back into the market sooner and should result in them selling more cars. Some manufacturers make leasing such an attractive proposition it is hard to resist.
One recent trend I am seeing is senior citizens who are leasing. They like the freedom of not having to part with their cash, or not having to commit to a long finance contract.
So if leasing is right for you, and you are sure of your mileage driven, it is a great way to get a car. After all, you are only paying for the best years of the car’s life, the first three years.