By Ali Omoomy
Periodically, as a consumer, you are faced with the question of whether you should lease or buy a car.
In this economic climate, every manufacturer and dealer is hoping you choose to lease for the main reason that leasing is “temporary.”
Every two to three years a driver who leases has to make a purchasing decision, and that means guaranteed sales for dealerships and manufacturers. Leases also produce a pipeline of millions of pre-owned cars from which dealers profit through reselling.
Drivers who go over the allocated “mileage allowance” because they were unable to afford a high-mileage lease, or who just didn’t pay attention to the miles they drove, are presented with the unpleasant surprise of penalties at the end of a term.
Excess mileage penalties could add up to big numbers quickly. So if you tend to rack up mileage, a lease is not for you.
Secondly, people don’t seem to recognize the money they can save when buying a “pre-owned” car.
The thousands of dollars that are dropped from the selling price in that first year of ownership are sizeable. Cars depreciate more rapidly in the first year than during any other period in their lifespan.
By avoiding owning a car during its first or second year, you avoid “losing” dollars through that rapid depreciation stage.
But, leasing could be viewed as renting for two to three years and not a bad option for consumers who want to keep up with new models and technologies.
When you buy, you can sell your car when you’re ready and not when the leasing clock tolls.
When buying a car, you’re working towards owning an asset – something you can trade-in for another car– or not. Today’s cars are made to last.
You can enjoy the pleasure of not having monthly payments for a vehicle for years. If you are working toward a debt free lifestyle, leasing is not for you, so don’t let yourself get talked into one just because the payments may be a few dollars less.
Generally speaking, you’re a leaser if: you are interested in changing cars every two to three years; you don’t drive more than 17-20k miles a year; you are not interested in building equity in your automobile; you are confident that you can keep your car in really good shape cosmetically for the duration of the lease.
If leasing is for you: negotiate the price before negotiating upfront cash and monthly payments; be very clear about how many miles per year you need and do not compromise just to lower you payments; find out what the money factor “buy rate” is and make sure there is no mark-up passed on to you; if you have done well on the price, mileage and money factor, the only way to manipulate monthly payments is by changing the amount of upfront cash.
*Ali Omoomy heads up MyHopscotch.com, a group of former automotive industry professionals who advocate for consumers. You can contact Omoomy with questions at 844-877-8537.