To Lease or Not to Lease

3. The Basics of Leasing

The Case for and Against
In a general sense, the case for leasing is that you are paying for only that depreciable portion of the car you use. The case against leasing is that you never own the car, van, or truck. The case for leasing says that you are not tying up as much of your capital as you would were you to finance the vehicle. The case against leasing says that once you've committed to a lease, you are truly committed because it can be expensive to terminate early.

From the dealer's perspective, the case for leasing is that leases generally are more profitable to the dealership than other financial agreements. Furthermore, as one manufacturer's spokesman was quoted in Business Week, "Leasing provides camouflage for price increases."

Two of the great allies of car salespeople are "the uninformed customer" and the customer's "ego-driven fear" of appearing not to understand the various components of the deal. Since most people don't want to look stupid in the eyes of a salesperson, they let themselves be intimidated out of asking questions and of asking for-even demanding-a simplified, step-by-step explanation of all the factors that go into making up a lease payment. Possibly no other transaction creates the opportunity for more confusion.

Sometimes, the desire to drive an exciting car for a low monthly payment clouds a person's better judgment. As a result, more often than not they: