To Lease Or Not To Lease? That Is The Question |
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Reginald Garibaldi
23 August 2012
To lease or not to lease? That is the question Leasing is an option that previously had been the exclusive domain of the very well-to-do, but has become a viable option for the masses. Let us examine the pros and cons of leasing cheap cars versus buying.
What may be leased
Not just the top of the line models from the elite manufacturers are available for lease. True, Mercedes and Jaguar are still mostly leased, but less expensive models from Ford are also leasable vehicles. But within your budget you may well qualify for more car than you thought you could afford.
What to expect
A lease is determined by the projected value of the vehicle at the end of the time period the lease runs. True, the upper end vehicles will be worth more, but perhaps not in relationship to their original price. An example: vehicle "A" sells for 50,000 new and is projected to be worth 20,000 in three years. Vehicle "B" is listed at 30,000 new and 15,000 in three years. Although Vehicle "A" is worth 5000 more its comparable value is less by 10 percent (40 percent versus 50 percent).
Length does matter
With short-term leases, three years or less, most standard maintenance will be included by the manufacturer. This results in little, if any, out of pocket expenses for you. When the vehicle enters the age of more expensive problems, your lease is over and you have another new vehicle to drive. At 40,000 km a year, after three years, you will barely need to replace the tyres.
Investment versus purchase
The moment you drive your new vehicle off the dealer's lot, it depreciates in value. The wealthy do not buy items that depreciate in value; they lease them. You can do the same. A vehicle purchase is the second or third most expensive transaction you will conduct, behind your real estate and advanced education. And you will conduct such transactions every five to eight years. So each time you are losing money: on the depreciation, maintenance, and time and effort selling it used. Why expose yourself to such losses?
But I don't own anything!
That is true, but only as far as it goes. Think about it: While you are making payments, do you own the vehicle? Miss two or three such payments and find out who really owns it. More vehicle for less money, newer vehicles more often, no big maintenance concerns. Check out an Audi car lease today! More than you thought; less than you feared.