I thought I’d pick another semi-controversial topic for my post this week. Why? Because I love the debate and discussion, and ultimately the gained education from bringing up these topics with you guys. You’re a smart bunch and you’re always willing to share with each other. Plus I always learn some new perspectives on things. Today, I want to share my thoughts on car leases and why they make absolutely no financial sense. I know, I know – I’m just begging for some of you to disagree with me before I even get started. But that’s exactly why the comments section is at the END of the post.
Just to be sure we’re working from the same definition; let me give you a quick run-down of what an auto lease actually is. In simplest terms, an auto lease is a long-term rental agreement between you and a car company. You make monthly payments and take care of the car but technically the car company still owns it. At the end of an agreed-upon lease term (usually two or three years), you have the option to purchase the car at its “residual value” (fancy term for the amount the car company estimated its market value would be at the end of the lease) or turn the car back in. See – you don’t own a leased car – you simply “rent” it.
So why is this a bad financial plan? Let me get to that part after I mention a few good things about leasing a vehicle: [Read more…]