Thursday, August 11, 2011

Leasing a Car

I thought this was an obvious no-no but it has come to my attention that there are still smart people out there who trick themselves into thinking leasing a car is a good idea.

Think about this: Anytime a convenience factor is added in there is a cost associated.

There is the price of buying a car outright.
For people who do not save up the money to buy a car outright, 
there is a fee added (called interest), which makes the total price of the car higher.
For people who cannot afford the payments on a car, 
there was created another product called a lease. 
The fees are even higher and the restrictions stricter.

If leasing is so expensive, why do people still lease cars? The most popular reason is because they erroneously make judgment calls based on the size of the payments instead of on total cost. The payments are indeed small, but the total cost of the car is higher AND one never gets to own the car! If people took the time to do the math, they would never throw thousands of dollars at a car they will never own and thus will never be able to sell or trade in for another vehicle.

Bottom line: If you lease a car for lower payments, it means you cannot afford the car. Leases were created for people who cannot afford to buy.

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