Date registered: Mar 2006
Vehicle: 1997 E420
Location: Fort Wayne, IN
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I would disagree with the assertion that leasing is never a win-win. Properly configured, a lease gives the new car buyer options that he/she would not have with purchasing. A very simple example:
Three years after the purchase, someone who leased the car for three years can do one of the following:
1) Buy the car from the leasing company by financing the residual value for an additional term of two years. (If he decides he wants to keep the car.)
2) Pay the car off and trade it to the dealership, using the equity towards the new car. (If the value of the car is greater than the residual payoff.)
3) Walk away from the car and lease or buy a new car. (If the value of the car is less than the residual payoff.)
Now consider a buyer who purchased the car with a five year loan. After three years, he can do one of the following:
1) Continue to make the payments for two years and keep the car.
2) Pay the car off and trade it to the dealership, using the equity towards the new car. (If the value of the car is greater than the loan payoff.)
Notice that there is no option 3. If the value of the vehicle is less than the payoff, the owner is stuck. Properly configured, a lease can provide the owner the same benefits as a loan, but it adds the ability to walk away at a predetermined time. This is a simple example, but it holds true almost every time, even for high-mileage drivers IF THE LEASE IS SET UP PROPERLY IN ADVANCE.
The problem with leasing is that dealers have no incentive to educate their customers as to the benefit. It is used to get people into vehicles outside of their budget and to hide profit. Properly configured, a lease is almost always the best way to acquire a new car.
That being said, I would never ever buy a new car. I'll let someone else take the massive depreciation hit and buy their car a few years later for half what they paid for it.