I’m often asked on the Compass MoneyWise call-in radio program, should I lease a car instead of buying, because it seems like it’s the cheapest way to go.
My answer is always the same: Don’t even think about it! But a lot more people these days are doing more than just thinking about it.
The car pricing website www.edmunds.com reports that according to their surveys 27% of all cars in our country are now leased instead of purchased. And Millennials (ages 18-34) lease more than any other age category suggesting that unlike older adults they would rather sacrifice long-term financial benefits of owning an auto to get into a bigger or more luxurious vehicle.
Here are the 3 reasons I like to call it care fleecing instead of car leasing!
1st, in addition to the monthly lease payment, you’re wacked by mileage fees if you travel over a certain amount of miles. And most people who lease a car do. Guess what? The mileage fees are steep—normally about 12 cents a mile.
2nd, when you turn the leased car back in, if there are any bumps, bruises or scratches, you pay to repair them – big time!
3rd, when you turn the car back in, unlike buying a car, you have NOTHING to show for it.
Your best decision is to buy a car and pay if off. Then, continue making the car payments…….but to yourself. That way when you’re ready for a newer car, the trade-in plus the cash you saved should allow you to buy the car for cash and never use car debt again!