Auto Leases - Better than Buying?

Obtaining a car is a major purchase for anyone. There are so many factors to consider when looking to get a new car - the make and model, safety ratings, but perhaps the biggest question is whether you should buy or lease the car. Auto leases are one of the most misunderstood offers from car dealerships when considering a new car. In fact, a couple of myths surround auto leases. Let me attempt to clear them up now.

Myth one - auto leases cannot be negotiated. Because auto leases are so unfamiliar to a majority of consumers, many assume that the monthly payment is set in stone. This is not so. The way that auto leases work is that the dealership "sells" the car to a leasing company (many car companies have leasing companies such as Ford Motor Credit. The leasing company than leases the company to you. You cannot usually negotiate with the leasing company. What you can do is negotiate the purchase price that the dealership sends to the leasing company - just as you would negotiate the price if you yourself were buying the car.

Myth two - auto leases are a waste of money. True, auto leases don't build any equity. Equity is simply defined as owning something that you've paid off an amount of. For instance, if you have paid a third of your car payments off, you have that much equity in your car. But the way that cars depreciate so quickly, that third you might have paid in car payments might represent a full half or more of the actual resale value. In other words, you are losing money while making car payments. Auto leases, on the other hand, don't attempt to build any equity. In the short term, auto leases always save you money.

Myth three - auto leases are a complicated process. Auto leases are actually just as easy as any car purchase plan. The difference is that you enter into a lease agreement with essentially an agreed upon selling price when the lease is over. You "sell" the car back to the leasing company for a previously agreed upon price. The amount you pay each month is usually the difference between this price and the original sale price with some financing charges included. Again, in the short term, auto leases are always a cheaper option to buy a new car.

Auto leases aren't for everyone. Some people prefer to buy a car, use it until it they pay it off, and then continue to use essentially a free car until the car's costs to maintain and repair it outweigh it's value or even until it falls apart altogether. But if you prefer a new car every 2 to 4 years, auto leases are certainly your best option.

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