June 07, 2007

Re-Thinking Leases

In the 1980s, leasing a car was actually a smart investment move. You could actually MAKE money on a re-sale, because rising inflation caused your initial lock-in price to be a steal when you bought out your lease at the end.

Since then, leases have turned into a financial joke, with common knowledge being that leasing is stupid.

But, I was investigating some leasing opportunities the other day. I can lease a $25,000 car for 2 years for $5,000 total, including sign-on costs. Why is that such a bad deal? I get a new car every 2 years. The only way I lose is that if I buy, I could hope that after 10 years, my car is worth more than 0, which it probably would be. But, how much more? And is that a better value than getting a new car every 2 years?


JMC said...

Hmmm... when you add in upkeep and repair costs that older cars need more of, things like new tires, brakes, transmission repair, A/C repair, etc., you may come out ahead on the lease, since cars that are 2 years or less in age probably wouldn't need any of those things.

Steve said...

You're right, you might come out ahead, especially if you're comparing it to buying a new car (and especially if you put a lot of miles on the vehicle).

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