Leases are just an alternate way to finance a vehicle. To blanketly say that they are good or bad is wrong. There are many cases where leasing makes sense it all depends on the individual's needs and how the programs are.
When leases make sense:
You drive high miles-Yes. But be realistic with what you drive. If you drive 20,000 miles a year, build a 20,000 mile a year lease, don’t buy a 10,000 a year lease and expect your habits to change by it’s self. Building your miles up front in a lease tend to be less expensive than the charges at the end, in some cases by 50%, ask. Some leases will also refund you the extra miles that you paid for if you don’t use them, again ask. Nothing depreciates a car faster than miles on the odometer, let the leasing company take the hit of depreciation.
You come to the realization that you will always have a car payment- If you know that you will have a car payment. If thats the case, why not be in a new car every 3 years and be under warranty and risk extra expenses of out of warranty maintenance? Using that $32,000 car as a reference, putting 10% down and a tax rate of 8% along with an interest rate of about 4%, your payment is still $575 for 60 months and if you want a payment under $500, you have to go a whopping 72 months. Ouch.
You don’t keep a car more than 3 years- See above. Needs change, wants change. How often de we get tired of a ski after a season? not uncommon to get tired or bored with a car after three years.
You are out of equity on the car you are in- Yes it happens, you have a car that you want to trade and owe $10,000 on a car thats worth only $7500. Be it in a loan or a lease, that money has to go somewhere. Why I suggest the lease here is that with the GAP insurance that leases have, if the car is totaled at any point on the lease, you are forgiven that debt. In a purchase, that can still cary over. Am I saying that you will total a car? No, but this is a consideration. After the three years you are out of the out of equity cycle.
When leasing does NOT make sense:
You keep a car a long time- I bought my TDi wagon because I planned on keeping it a while, I am going on 4 years and I am happy with it and I plan on keeping it another 4. Leasing didn’t make sense for me in this purchase for that reason. My previous Forester I did lease because A. The lease deal was super strong and B. I only planned on keeping it 2 years (they had a good 2 year lease which is rare). It worked out well because I didn’t like the car.
You are rough on your cars or you modify them- Residuals (the projected future value which is part of the lease calculation) is based upon the vehicle coming back in “average” 3 year old condition so it can be resold. An aftermarket lowered suspension or custom paint job is frowned upon, stock as close to original is better. Now, adding leather or tinting windows tend to be fine but will not change the residual, but ask. So if adding leather is a cost of $1200 you will basically be “financing” the who amount over term of the lease so it will be about $33/mo (plus interest & tax) ) more in the lease. Again, there are exception some lease companies might give a flat projected residual for that leather of say $300 so you will be dividing $900 by the term so it will be $25 plus the other costs.
