Leasing can be a much better deal than owning, under certain specific situations.
1) You like to switch cars every 2 or 3 years AND always switch to a NEW car model. People say that owning really starts to pay off if you hold a car longer than 5 to 7 years.
2) You have good reasons to believe the model car will depreciate much faster than leasing agents have apparently built into their leasing cost model.
3) You are a good negotiator, and can negotiate a good leasing deal.
4) You will NOT make the COMMON mistake in underestimating the miles/year you’ll drive the leased vehicle. The over-mileage penalty at end of lease is quite severe.
FOR AN EXAMPLE:
I leased a Isuzu Trooper back in 2001. I could have bought the fully loaded vehicle for about $34,000. Some people were leasing it for $500/month. I negotiated for three weeks playing different dealers against each other. They hated me. I worked them down to $360/month.
At the end of that lease, the leasing agent BEGGED me to buy the car from them. The company had grossly underestimated the depreciation that Trooper’s would experience over the lease. They figured the car would be worth something like 20 grand, when in fact it was worth only about 15 grand at end of lease, even in excellent condition. I refused to buy that truck at end of lease.
I did a very thorough spreadsheet analysis of my costs versus owning. I saved about $5,000 by leasing that vehicle. They way to do that A vs B comparison is to assume you sell a purchased vehicle at time you would have to turn in an alternatively leased vehicle, and you must be accurate in projecting its resale value at that future date; hopefully more accurate in forcasting than the leasing company is.
My current (different year and color) Isuzu Trooper I bought from a person who BOUGHT it new, and at the sale date they owed much more on the loan than what I paid them for the used truck. They made the mistake of buying NEW a quickly-depreciating vehicle.
Of course, there may be some cars that are a bad choice to lease if they really hold their value as well as claimed, and you plan to own it for more then 5 to 7 years.
