To Lease or Not To Lease

I’m going to take a break from the debt and philosophy of finance topics and share something a little more practical: buying vs. leasing cars. I didn’t always know what it meant to lease a car, so let’s start there. To lease is essentially to rent. Unlike housing, though, cars dramatically lose value over time, so the way it plays out is a bit different. When you strike a leasing deal with a dealer, you are agreeing to pay a smaller monthly payment (than if you were buying) for a specific amount of time, say two years. The dealer doesn’t need to get the full cost of the car out of you (hence the lower payment) because you are agreeing to give the car back at the end of the lease, at which point the dealer will sell the car at its current, 2-year-old market price. Since she is able to still sell the car, she only needs to get part of the cost of the car out of you. For this reason, when you lease a car, you need to think of it as belonging to the dealer, because it does. Just like anything you rent, any damage or use beyond what is expected or normal is going to come out of your pocket.

So Should You Lease?

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