Ownership is still one of the greatest feelings in the world. I’m not talking about a house you have with a big mortgage because you really don’t own it yet. The day you pay that puppy off will truly be cause for celebration. It’s a feeling that less than the majority of people get to experience in America. When it comes to your automobiles, I’m a much bigger fan of owning versus leasing. The one time in my life I had a leasing experience back in 1993 with my Nissan Altima, I felt like an upside down pineapple cake by the time it was all said and done. Since that purchase, I will only buy used cards and I will only own them. Here are three reasons why NOT to lease a car.
- The Mileage Limit– When it comes to leasing a car, you need to make sure you always read the fine print. Typically, the lease will stipulate some annual mileage number that if exceeded will cost you more for every mile your drive over the allotted amount. For example, it may say you can drive 12,000 miles a year for the three year lease and for every mile you drive above 36,000 miles it will cost you somewhere between $.10 cents and $.30 cents per mile. This can be a big fee you’ll have to pay at the end of the lease and the dealer intentionally puts in these amounts to ensure that the resale value will be more when they sell the car to a second buyer.
- The Wear And Tear– Leases typically give you some leeway around what they call normal “wear and tear” on the car during the course of time you are leasing the vehicle. This is where you need to be careful and read the fine print. Normally, “wear and tear” may be minor scratches, dings, etc. that don’t exceed some length such as a ½ inch in diameter. Depending on the credit company you deal with they will have their own definition of “wear and tear”. If you have children who are going to be getting in and out of the car with school and sporting activities, you need to read the wear and tear on mats, seats, etc. Do you really want to be worried every time you park your car at Target whether or not someone is going to ding your door?
- The Monthly Payment Sucker– Automobile dealerships are for profit entities, which is sometimes hard to remember in the heat of the moment when you go car shopping. With a lease, the dealer is going to run the numbers knowing that they get to sell this car TWICE! Thus, if they have to price the sale of renting the car only to know that they have to sell it again later, how do you think that they will stack the odds? Of course a lease payment for three years is going to be cheaper than you making a purchase payment over five years. The most important thing if you are going to lease is to negotiate the price of the car first before you even tell them you are going to lease. Otherwise, the dealerships will size up the monthly payment you tell them and make the most of financing the car to make the deal profitable for them.
There are other reasons I don’t particularly like leasing, and buying used cars that are two to three years old are my favorite option. Have you ever had a good experience leasing? I’d love to hear both sides of this argument…
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Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS® Co-CEO and Founder oXYGen Financial, Inc. Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS.