We get it, that perpetual new car smell and the luxury of always driving the latest model. You’re never out of warranty and, heck, it costs less per month than a car note. What’s not to like about leasing?
A lot of things, actually…
Ok, yes, sometimes leasing is okay. If this is you:
- Always driving a new car is more important to you than owning your car
- You have great credit
- You don’t drive a lot
If any of those things aren’t you, leasing is not a good idea. It’s probably a terrible idea.
The Scary Thing About Leasing
Leases, especially bad credit leases, should be called dealership leashes. Seriously. Dealers lure you in by offering lower downpayment options and lower monthly payments compared to buying a new car… but there’s a trick.
How do they offer lower payments? With a lease, your down payment and monthly payments are not based on the total value of the vehicle. Instead, they are based on how much the vehicle will depreciate in value during the term of your lease. (Yes, you get to pay for all the depreciation, with no ownership of the vehicle.)
While lease payments are often lower than car payments, the interest rates are higher. So you’re actually paying more interest on less principle and with nothing to show for it.
They’ve got you paying real money for nothing, and thinking you got a good deal.
We’ve seen people who, chasing the lowest monthly payment, end up paying 15.9% interest on eight year leases. They could have paid off a car and had no car note within five years.
The lease fun doesn’t end when the lease term is up, either. The car was driven too much or the car isn’t in perfect condition, you get to pay for expensive penalties. As you can imagine, after an 8 year lease the miles are up, the condition is down, and the fees are going to hurt.
If you choose to buy the car, you’ll end up paying much more than if you’d just bought it in the first place.
Guys, we’re sorry to tell you that at the end of a lease term, there’s there’s really no happy ending. Just lesser evils. Your best bet is to cut your losses and walk away. Unfortunately, often times after seeing how much they’d have to pay to own the car, and how much monthly payments on that “new” car are going to be, people resign themselves to leasing another car. The cycle continues. (We may or may not secretly be working on a script for a horror film called The Leashening: The Lease Cycle Continues).
Once They’ve Got You On The Leash, You Are Stuck
Hopefully you’re reading this because you’re thinking about a lease, not because you’ve got one. Because once they’ve got you on the line, you are stuck. You can’t refinance it or trade it in, it’s not yours. And when it comes to enforcing the lease, dealers have teeth.
Here in Manitoba, the worst a bank is going to do to you if you default on your loan is repossess the vehicle. Sucks, but not the end of the world.
But when it comes to enforcing your lease, shady dealers have teeth. Not only can they take your car away, some go so far as to take a lien out on your home if you default on your lease.
They put a lien on your home… for a car that was never going to be yours. Worst rental ever. (Yes, even worse than renting Speed 2.)
Let Somebody Else Pay For Depreciation
Whether it’s a new car or a lease, you get to pay for all the depreciation. Why do that to yourself?
You know what’s cheaper than a low lease payment? How about having no car payment at all. Buying a used car will put your much, much closer to owning your car than buying new or leashing leasing.
You could pay off a car in the time it’d take you to have nothing to show for a bad credit lease. Buying a quality used vehicle is smart, and as it happens we sell a few.
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