As my friend who is now a president of a bank told me a long time ago if you cant afford to buy it then you for sure cant afford to lease it. most leases in my opinion are a scam to get you to throw away money.
From Forest Gump: "Don't own nothin' if you can help it. If you can, even rent your shoes."
Leases are an enigma to many people. It's more than a glorified rental agreement. Leases are a relatively inexpensive way to use a piece of equipment for an extended period without incurring many of the costs of ownership, which include, amongst other things, dealing with a depreciating asset, but still receiving tax benefits and a predefined exit.
The attraction to leases for cars include lower payments, little responsibility for the vehicle's maintenance, and at the end, you turn it in and, if desired, roll into another brand new car. Also, if you decide to keep the car at lease end, the sale price has been predetermined and is in the lease contract.
As an example, a $10,000 car with a two year residual value of $6,000 (or 60%) will lease for less than two hundred dollars per month, if that, on a two year lease because you're only financing the $4,000 you "used-up" of the vehicle's value. This is as opposed to purchasing, where you finance the whole $10,000. In both cases we're assuming no money down (for the sake of simplicity).
At the end of the lease term, the lessee will have paid $4,000 plus interest which will have been significantly less than the finance rate, plus tax on the original $4,000. Then, you can jump into a brand new car and do it again.
At the end of the purchase term, however, the buyer will have paid $10,000 plus tax and interest, and had a higher monthly payment the whole time. "But now I own it! I have no more payments! It's mine."
True, but what is it you now own? You paid around $13,000 total for a car that is now five years old and only worth about $4,800. You're in the same car for as long as you can, attempting to amortize the total cost of purchase over as long as possible to justify it. Unfortunately, you're no longer under warranty. Instead of car payments, you have repairs. You may have purchased an extended warranty, but you have to add that $1200-$2,000+ cost into your total purchase calculation. You may have even financed it in with the car loan, so add interest too.
As a serial leaser, I can say that I quite enjoy being in a new car every couple of years, always under warranty, and little if any worry about the car since I don't own it, nor do I want to. The caveat, however, is mileage. Someone considering a lease must take your anticipated number of miles driven each year into account. A certain number of miles per year are included in the lease, and higher allotments are available for an increase in price, but they are not unlimited. Ford scales from between 10,000 up to 19,000 miles per year of a lease. This is the highest I have seen available. Since we lease two cars and they are staggered, I have the fun, and it is fun, of shopping for a new car every year, alternating between the two.
Just food for thought.
