Is It a Good Idea to Lease a New Vehicle?

by Larry Burkett as taken from Money Matters

'In my opinion, because of the depreciation on the vehicle as soon as you drive it off the lot, buying a brand new vehicle, by whatever means, is not a good deal for most people.

Typically, a new automobile's value will depreciate 15 percent to 25 percent, depending on the type of car and the retail price, just as a result of titling the vehicle.

The difficulty with buying new automobiles is simply compounded in a lease. This is because the dealer and the manufacturer are going to make a profit on each automobile, whether you buy it outright for cash, buy it with a loan, or lease it. The difficulty I see with leasing an automobile is that you usually are paying maximum retail price for the vehicle and financing it at high market rates. And, in the end, you still don't own it.

Unfortunately, most people are not concerned with what a vehicle costs them. All they're concerned about is the monthly payment; and the same is true if they lease. When an automobile is leased, the contract carries with it penalties for excessive mileage-mileage in excess of what was agreed to in the contract, which is usually around 15,000 miles per year.

Also remember that signing a lease is just as binding as signing a contract to buy a car. If you want to get out of the lease early, you'll owe early payoff penalties on the vehicle, plus whatever wear and tear is assessed.

One caution I offer to anyone who is already driving a leased vehicle: Don't allow any other person to assume your lease. Your name is still on that contract, and if that person doesn't pay you're going to pay. If the car has been abused, you'll be stuck with the bill for the wear and tear as well.

Bottom line, I don't believe that leased automobiles are an especially good deal. In fact, for most individuals outside the business environment, leases are a very bad deal.'