Is leasing a vehicle the right move for you?

Everyday I sit at my desk at the Ford dealership and hear my coworkers give their best pitch to try to convince their customer that leasing is the right option for them. Why do they do this? Well the less experience salesmen do it because it is the path of lease resistance. Generally lease payments are going to be less expensive than the payments you receive when purchasing a vehicle, and for less experience or bad salesmen this makes it easier to sell the vehicle. I don’t blame them, vehicle prices have skyrocketed in the last 20 years, I get sticker shock almost every time I see the new year models first roll off the transport truck. I have a 1996 Ford Bronco that has every bell and whistle you could get on it, and back then I could’ve purchased it for a little over $25,000 not getting any discounts or rebates. Now that $25,000 will only get me a regular cab base model F150 after some serious discounts from the dealership and rebates from Ford Motor Company. This becomes a major problem for inexperience salesmen. How can they justify that kind of asking price when F150’s can cost as high as $67,000? They force leasing down your throat because the payments are easier to swallow than the ones on purchasing. Don’t be pressured into leasing!

First thing to consider when deciding if a lease is right for you, is to understand what a lease actually is. Since a large portion of my clients only keep their cars for 3-4 years without ever paying off their loan, some of them are left with negative equity when it comes time for them to get a new vehicle. Leasing become a great way to prevent yourself from accruing negative equity and getting stuck rolling over money into your next loan always stuck with a higher payment then you should be paying. When you lease a vehicle you are only paying for the portion of the vehicle you use. Most leases now days give you three options to finish up your lease. First you can trade it in at any time, though I do not recommend trading out unless you are 5-6 months out considering that is generally the sweet spot when you get close to breaking even on the lease. Secondly, you can by it out right at the end of the lease, for the lease end value plus tax, title, and license. I don’t not recommend this option unless you are absolutely in love with the vehicle and can’t stand to get rid of it. Generally if you buy the vehicle at the end of your lease you will have over paid by a few thousand dollars than what you could’ve originally bought it for. Finally my favorite option, “term it.” At the end of your lease if you decide you want to save the environment and ride a bike, you can without worry about trying to pay off the vehicle or selling it for what you owe on it. As long as you stay under the allotted milage and you don’t cause damage to the vehicle other than “normal wear and tear” you can just drive back to the dealership you got it from and give them the keys to the car and walk away with no money out of pocket(from most major brand). The company you are leasing it from takes all the risk of what the car market will do in a few years, not you. Yes, leasing can be a very valuable option for someone like me who switches vehicles every other year, but it definitely isn’t for everyone. Second thing when deciding between purchasing or leasing is to decide how long you plan on keeping the vehicle. If you are the type of person who tends to keep their vehicle for six years or longer then leasing might not be the correct fit for you. With most vehicles on the market today you can expect them to last for around 8-10 years or 100,000 miles with little to no hick-ups, so don’t be afraid of keeping them for a while. Even though you can get your money’s worth from buying a car don’t think of them as investments. Cars are depreciating assets, unless you plan on keeping them in the garage and never driving. What is the fun in that? I personally love leasing because it always keep me in a vehicle that has the latest technology and safety features. It also ensures the fact that I will alway be covered under warranty, so I don’t have to worry about to many unexpected repair cost coming out of my pocket, unlike my 1996 Bronco which constantly ask me to put more money into it.

Last thing to consider is how many miles you drive a year. Don’t be afraid that you can not stay under the advertised 10,500 miles a year. They have different options on leases depending on how many miles you drive. Depending on which brand you choose to lease from they can have milage ranges all the way up to 30,000 miles per year. Inexperienced salesmen will say “miles don’t matter as long as you buy it at the end of your lease or trade it in early”, but don’t listen to them. All brands have figured out their lease end value to a “T”. After years of research they have come up with formulas to determine what the vehicle will be worth at the end of your lease. If you sign up for a 10,500 mile a year lease but you drive over 15,000 miles a year you are guaranteed to have some negative equity wether you “term it” or trade it. If you “term it” when you are over your miles you will have to pay up to $.25 a mile that you go over. If you are over your miles by 10,000 miles, you’ll be responsible for $2,500 at the end of your lease. So pick your plan carefully to prevent any extra cost at the end.

Wether you decide on leasing or purchasing, pick the best option for you and your family. Don’t let pushy salesmen force you to make a bad financial decision or one that you are uncomfortable with. Buying a new vehicle is one you should be fun and exciting, not something you should dread. Do your research and don’t be afraid to stand up to an overbearing salesman.

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