5 Reasons You Should Not Lease A Car

Leasing cars has gone through some ups and downs in terms of popularity over the past several decades.  There was a time when it seemed that everybody leased a car as the rates were unbelievable.  Then, leasing lost popularity as it came out that the reason for the low rates was because manufacturers were charging too little, so they had to raise prices, which led to the market falling out.   I admit, I leased two cars during the leasing heyday.

Now, it seems that leasing is making a comeback.  But, since automakers have learned mb-201402carstheir lessons and are not going to take losses on the lease, I’m here to tell you that leasing is a bad idea, and I present five reasons why an auto lease is a bad idea.

  1. You don’t own anything – After you purchase a car, that car will decline in value.  If you take out a loan on the car, you’ll pay for it all while the value goes down.  Paying for a depreciating asset is not a great financial move, but paying for one that you don’t have any value into is an even worse one.  At least with a car, once you’re finished paying for it, you have the value of the car that’s yours.  With a lease, you never have a single cent of that car that you can count as your own.
  2. Yet you’re responsible for everything – The automaker acts as if they’re doing you a big favor by letting you borrow their car for a ‘modest’ monthly payment, but you’re responsible for everything to do with that car.  You have to do all the maintenance (and have the records on hand to prove that you did it), make any repairs, and fix anything that gets damaged.
  3. You’re held to an unknown standard – Can you turn the car in with a small ding in the door?  What about a minor chip in the windshield?  Is that matted spot in the upholstery considered regular wear and tear or do you have get it detailed?  These are things that only the manufacturer knows and they’re not going to tell you, meaning that you’ll likely pay for things done that you wouldn’t have been charged for anyways or you’ll turn it in without fixing things that they’ll charge you for, likely at much higher rates than you would have paid.  Either way, it’s your wallet that takes a hit.
  4. Any variance on what you drive comes at a cost to you – Say you have a 24-month lease that allows you 20,000 miles.  Everybody knows that if you go over that 20,000 miles, you’ll get socked with a pretty hefty per-mile rate.  But, what they won’t tell you is that if you turn it in with less miles driven, that’s costing you as well.  How?  Because you paid for the miles that you’re not using.  Drive over or drive under the stated mileage, and you lose either way.
  5. The first lease sets a cycle that’s hard to break – One of the lures of leasing is that you can typically get a pretty low rate…on your first lease.  See, they’ll give you a decent amount for your trade-in.  Throw in a little up-front cash, and you’re driving a pretty sweet ride for $300 a month.  You laugh at the guy that bought his car and is paying $500 for the same car.  Only here’s the problem.  After your lease runs out, you don’t have another car to trade in, yet you’re going to need something to drive.  That ‘savings’ is only a one time thing. You’ll likely lease again because it still works out a bit cheaper, but you’re now in a cycle that’s very difficult to get out of.  And that’s exactly what the car makers want.

I think that leasing is a bad idea.  I think that the best approach is to buy a car, pay the car off, and work toward a goal where you can pay for a car without having to have a car payment at all.

Do you lease or own?  Do you have a car payment or are you paid off?  What do you think about car leases?  Are they the trap I’ve described or are there benefits that I’m not seeing?

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16 thoughts on “5 Reasons You Should Not Lease A Car

  1. Oh, man. Leasing a car is such a waste of money! I bought my car, used, the last time I needed one and I think it will last me for a long time. I paid it off within a year and a half and never looked back!

  2. Many years ago we leased a vehicle and we ended up getting a terrible deal. I didn’t really understand the process back then. Now, I’m dead set against leases. In the end, you spend all this money but have nothing to show for it. It doesn’t work out financially.

    • They definitely show you the ‘good’ part of your lease, but I’ve heard too many stories of other things popping in that catch people off guard, but they only realize it after the fact. Sounds like this happened to you. At least you learned your lesson and are now the wiser for it!

  3. Leasing doesn’t make make much sense… unless you can charge part of its as a tax-deductible expense for a small business. On the other hand, I suspect that for a small business, buying* a vehicle and taking the depreciation might be a better alternative.

  4. I agree with you. I know lots of people like to lease cars because they like to have a new car every four years but it’s just not a great financial choice. My friend just leased a Jetta because leasing had a lower payment than financing and she was buying a house so she leased. But at the end of four years she has to give the car back and will have nothing to show for it except a gap in her bank account. I bought a car and it was a bad financial decision because it was expensive and I didn’t really need (or use) it. I don’t think leasing is any different. A car is a big financial commitment.

  5. I generally agree with this post. I know it’s hard to believe, but Mortgage Free Mike was talked into a lease. I arrived at the dealer planning to buy, but the salesperson said leasing would be a better option because of the maintenance package (which is nice) that was complimentary for leased vehicles. As far as price, I got a good deal– about the same as buying. I do plan to buy the car with cash at the end of the term to stop the leasing cycle after one mistake.

    It’s also important to note that once you have a lease it’s very hard to get out of a lease. Turning it back in to the dealer will cost you thousands. There are restrictions some creditors place on using websites such as swapalease.com. The best thing you can do is sell the car and take a loss on it.

    If money isn’t a factor, go ahead and lease, I say. However, if I were rich, I’d rather hire someone to drive me around anyway.

  6. I’ve never leased and I definitely think it is a bad idea. Unfortunately, it does just set people up for perpetually leasing a car. That’s a large monthly expense that people who own their cars don’t have.

  7. It can be a good choice if you’re a business owner. It’s easier from a cash flow perspective. But if the business has the means and is able to hold onto the car long term, buying it is advantageous from a tax perspective.

  8. I’ve never understood why people can’t tell that the economics of leasing doesn’t payoff. It’s terrible… they just see the shiny new car every few years and the *lower payment and they get sucked right in.

  9. Yes one more thing is that leases come with mileage restrictions written into the terms of the lease. And it’s just opposite with new one. You can drive your new car as many miles as you want. Yes, leases can be a good option for some buyers. For those whose job requires them to have the image that a new car projects to be successful, a lease might be their ticket to satisfy the need.

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