Buy for $16 000
The United States has a strong tradition of ownership. From the days of the pioneers, it was the dream of every American to own a plot of land that they could call their own and pass down to the next generation. There is no question that this conception of the American Dream still persists today. Many Americans still view ownership of their own house and cars as a major milestone by which to measure life’s progress.
It may be due to this that leasing automobiles has not caught on quite as strong in the United States as it has elsewhere. Many Americans would not like to admit that they are driving a car that they don’t hold title to. However, with the rising costs of cars, relative to other products, over the last decade, there are a number of very compelling reasons that many people might want to take a second look at leasing.
Leasing a vehicle, rather than buying, has a number of unique benefits to both individuals and companies. The largest upside is the simple fact that leasing requires far less up-front costs than does buying.
There are strong arguments that, in most markets, if you can afford to buy a home that you should never rent. But these arguments don’t transfer to leasing cars, which is, for all practical purposes, a form of rental. The reason is simple. Cars are rapidly depreciating assets. The average car will have lost half of its value three years after rolling off the lot for the first time. In fact, when you buy a new car, it will typically lose 11 percent of its value, the second you drive it off the dealer’s lot. That, by itself, is a huge and convincing reason not to buy a new car.
But there are even bigger reasons that a lease might make sense for you. All things being equal, a particular model of car will often have monthly payments of 25 percent to 50 percent less on a lease than if it were acquired by purchase using a bank loan. Over the course of 36 months, a typical lease term, buying may end up costing you well into the tens of thousands of dollars more, just in monthly payments.
But even more money is often saved in up-front costs. Perhaps the single most attractive feature of leasing versus buying is that leasing often requires minimal up-front investments. Leasing will usually only require a small security deposit and prepayment of the first month’s lease. It is sometimes possible to find special deals that require even less.
This can be a huge benefit to those with poor credit who may need a reliable vehicle for work. Many people in the U.S. simply aren’t able to buy a new car. Leasing can open up the opportunity to have a new car to millions of Americans, giving them reliable transportation in a country where making a living without it can be nearly impossible.
Many people, especially in the United States, reflexively assume that not owning a car is a bad thing. But this is not at all the case. Modern vehicles are many times more complex than modern homes. Yet almost no one would consider selling their own house. Yet people assume that they will have no problem selling their own car.
The truth is that selling cars is a complex and often difficult business. This is why the most successful dealerships tend to be large organizations employing tens or hundreds of talented and highly trained staff. Dealerships also enjoy many economies of scale, some of which are far greater than most people understand, that allow them to maximize value and minimize costs on every car they sell.
If you don’t mind spending 50-100 hours of your own time, dealing with low ballers, bounced checks and unserious buyers and can handle readying the car for sale yourself, maybe ownership is worth it. For most people, however, playing amateur car dealer is not the highest value option.