Many Americans have an aversion to leasing or renting that is almost unique to the United States. It stems from the mantra that owning is always superior to renting, that part of the American Dream is to become a property owner and have total control over the dispensation of one’s assets.
But national folklore notwithstanding, there are some extremely compelling reasons why leasing can be a far better option, for millions of Americans, that buying a car on a bank loan. Let’s take a look at some of the reasons that you may want to seriously consider taking another look at what leasing has to offer.
Owning a car isn’t all that great
Cars are some of the most rapidly depreciating assets there are. Most cars will lose 10 percent of their value, on the day they are sold. Things don’t get much better from there. By the end of the third year of ownership, most vehicles will have lost half of their resale value. By the 15th to 20th year of existence, cars begin making their final journey, a one-way trip to the junkyard. Show cars aside, few vehicles retain anything but a tiny fraction of their original value past their 20th year of existence.
So why would anyone want to own such a high-ticket, horribly depreciating asset? The first reason is because they can do what they want with it. The most relevant example of this is the ability to drive unlimited miles on a car that you own. However, this is a somewhat paradoxical benefit. That’s because, if you decide to drive 100,000 miles per year, your car will have very likely lost more than half its value by the end of its first year. This somewhat defangs the argument that you will be charged more for going much over 15,000 per year on a typical lease. If you drive insane amounts, you’re going to pay for it, one way or another.
But the real reason that most people who are averse to leasing think buying a car is better is that you get to keep whatever the resale value of the car is when you are done with it and want to get another car. However, this idea is even more illusory than the ability to rack up high miles with impunity.
The truth is that most people don’t even begin to have the skill set necessary to maximize the resale value of their vehicles. And things can go very badly selling used cars. Something as simple as a large dent in a door can end up halving the amount you may expect to get for the car. Whereas a dealership can fix a dented door in a couple of hours, at minimal cost, the typical consumer cannot fix such a problem at all. Even a master mechanic might balk at attempting to remove the skin metal from the door frame, if he’s not also an expert at body work. This is just one example, out of virtually infinite possibilities, of something that can cause a radical drop in the car’s value when it’s time to sell.
With a lease you can just walk away. You don’t have to spend a single minute of your time or a dollar of your money to get rid of your current car. Of course, we haven’t even mentioned that the vast majority of car owners who want to get rid of their cars and buy a new one end up just trading their car into a dealership anyway. We don’t like to discourage this activity. Let’s just say it’s one of the more lucrative aspects of running a car dealership.
Unless you’re a master mechanic who’s comfortable doing body work, are a competent salesman and have the iron-clad personality to deal with all comers, selling cars is best left to the professionals. Trust us.
Leasing saves you incredible sums of money
A typical down payment on a $35,000 car can easily run above $10,000. This doesn’t even include sales tax, insurance costs and loan fees. On the other hand, the same car can be driven off the lot on a lease for just a few hundred dollars.
A lease will typically require you to prepay the first month’s payment, make a small security deposit and pay some other nominal fees. But all told, the drive-off costs on a lease will often be thousands less than what you’d end up paying on a bank loan.
The monthly fees are far less
In addition to lower drive-off costs, the monthly fees are often as little as half what they would be when purchasing the same car on a bank loan.
These are just a few of the reasons why leasing can be the best option for someone who needs the reliability and security of a brand-new car.