Debunking the “Leasing is a Bad Option” Opinion

Go on any online forum, Facebook page or group, Twitter, or Reddit and you’ll find an overwhelming majority of commenters and members of groups discouraging many people from leasing when they ask the question. Everyone is entitled to their opinion. Some people prefer buying outright, some would rather buy certified pre-owned or used, and a growing percentage of consumers are looking at leasing rather than buying. Every consumer has their motivation as to how, what, and why they buy the cars they do, but why is leasing always ripped when someone asks the question?

One of drawbacks of leasing is the annual mileage limit that typically ranges between 10,000 – 12,000 miles, depending on the car brand. You’re also looking at a higher down payment on a lease. But there are other factors (I’ll get to that in a moment) where the $2,000 – $3,000 down payment doesn’t look so bad in the long run. You will also not have the option to trade in the car after your lease is up, but you can buy the car or look at leasing again. Lastly, any extra miles that go above the annual limit, or scratches and dents, will cost you at the end of the lease, so you must be more careful than if you bought new or used.

Now that we’ve got the negatives out of the way, let’s take a look at why leasing is actually better.

As a used car buyer, I’ve experienced dealing with maintenance due to owning an aging car. I have monthly car payments, and I had to put a $2,000 down payment on the car. Right there we’re looking at close to $4,000+ (not including the monthly payments) with the down payment and maintenance. I’m paying $200+ a month on car payments, and to put that into perspective, the payments are more than if I leased a new Mazda 3 sedan or hatchback, Toyota RAV4, or a Honda CR-V.

The payments are a concern for people inquiring about the costs of leasing, and the advice givers always go back to the payments as a strongpoint to oppose the idea of leasing. However, if you’re in the position where you can’t buy a used car outright and put a down payment on it, you’re still dealing with monthly payments. Unlike with leasing, you could be locked in for 48 – 60 months depending on how much you want to pay per month, as opposed to being committed for 24 – 36 months with a lease. So right there you’re putting in an extra year or two on an older car that could be subject to mechanical failure due to high mileage or age.

Some dealerships are now offering free maintenance with a lease. That’s huge, especially if you’re thinking longterm. There are dealerships out there that also offer competitive prices when it comes to oil changes and wheel alignment. Also with a lease, you’re less likely to have to deal with major maintenance bills with the car being so new. There are no previous owners, so the entire time you have the car you know it’s history from your first drive to the last time you’ll ever see the car.

The last positive is that dealership’s leasing offers are always changing, especially during holidays. Herb Chambers BMW of Sudbury had an offer for the BMW 328ix that you couldn’t refuse. It was $275 a month with a $3,000+ down payment (usually you’d be paying close to $300+ a month). I know the down payment would scare anyone away, but if you have the money, you can’t tell me you’d rather buy a $3,000 early 2000’s Honda Civic with 180,000 miles that’s been owned by 3 different people, than a new 3 series. Now again, it’s all about where you are financially, but whether you’re a parent or college graduate, you would prefer something new or newer than having to deal with the headaches and hassles of owning an older car.

It doesn’t have to be a BMW, but a new Mazda 3, Honda Civic, Toyota Corolla and RAV4, or Subaru would be a better option than buying used and dealing with the unknowns.

Yes, leasing has it’s downsides, but so does buying used. It really depends on what you’re specifically looking for. As someone who owns a nine year old car, driving a new car with a lower monthly payment sounds great. Also, the peace of mind of owning a new car with no mechanical issues or aging equipment would make me sleep more soundly at night.

More Car Buyers Are Leasing and That’s Good For You

The percentage of Americans leasing cars has boomed to 20% over the past few years. Rough economic times, better leasing offers, and car manufacturers creating better vehicles has helped spur the growing number of consumers leasing instead of buying new. Some car dealers may prefer that most consumers would much rather buy, and that leaves the opportunity for those who buy certified pre-owned vehicles with an endless array of quality cars at reasonable prices. As with most trends in the economy, there is always an opportunity for someone to walk away with a great deal, and right now it’s time to take advantage of the leasing craze that is growing across the country.

Tesla just unveiled a leasing program for their Model S, which will now make monthly payments cheaper for the consumer.

From the Wall Street Journal

With sales of its electric sedan declining in its home market, Tesla Motors Inc. this week launched U.S. incentives that cut its monthly lease price and aim to convince potential customers that buying the car is a safe financial bet.

Tesla Chief Executive Elon Musk said the Silicon Valley car maker is joining with U.S. Bank to cut monthly lease payments by as much as 25%. In a blog post on Saturday, he credited the bank’s lower cost of capital for the lease-rate cut. He also unveiled a “happiness guarantee,” promising to take back cars within the first 90 days of ownership “if you don’t like your car for any reason.” The return policy doesn’t allow a buyer to swap for another vehicle.

While some would say this is because of declining sales, this is happening across the board for most auto manufacturers. Leasing is becoming the new normal, especially with the uncertainty of the long term health of the economy. You might ask, “So where are the opportunities?”. Here are three cars that are under $25,000 and are from luxury brands that can be found on dealership lots. Best of all, they’re certified pre-owned and the mileage is below 31,000.

1) Volkswagen GTI/Wolfsburg Edition

8785047257_a64186dbf7_b

It’s not too uncommon to find Volkswagen Golfs, but to find multiple GTIs spanning from the years of 2011-2013 is very surprising. Even better for the consumer, there are a few Wolfsburg edition GTIs on the market that are under $25,000, one of which has only 5,000 miles on it. These are gems, and with the turbocharged engine that supplies 200 hp, you get performance and cargo room which is always a plus.

2) 2011 Lexus IS 250

2011_Lexus-IS-350_Sedan-Image-01-1024

To see these under $25,000 with close to 20,000 miles is certainly an eye opener. A local Lexus dealer outside of Boston has a few of these, and even though they are the base models, they’re still fully equipped and in great condition. Navigation system and backup assist make you feel like you’re getting away with more than what you paid for, but these are the types of deals that are out there. Seeing a Lexus IS on the market in great condition and not overly driven, it makes you question why there are certified pre-owned Toyota Camry’s and Chevrolet Malibu’s in the same price range.

3) 2011 BMW 3 Series

bmw_328i_01_small

Just as the Lexus IS, the model year may be the only reason why these luxury cars have depreciated in value. There are BMW 328i X-drives that only have 25,000 – 30,000 miles on them and priced under or at $25,000. Once again, this is a luxury sedan that will make your mouth water because to see a BMW in unbelievable condition at that price was unheard of a few years ago.

When seeing offers and deals like this, it really makes you consider going the certified pre-owned route. The automotive market is evolving, and unlike 10-15 years ago, going used isn’t a bad thing, especially when you have three solid vehicles at reasonable prices. This is only the beginning though. Seeing that there is no reason to believe the leasing trend is going to slow down, there will be more opportunities down the road. Who knows what will be on the market a year or two from now, and maybe there will be better offers than there are right now.