Walter's Reach 

Concepts for your Lease by Walt E. Ingalls

(March 13, 2015)

   Many people still have a reluctance to consider leasing even when the monthly payments are often much less to lease than they are to buy. Most often they look at the fact that after the three years of leasing they don’t own the car, yet perhaps they’re not looking at the benefits, but instead focusing on their own limitations, limitations that are a product of not seeing the whole picture. At the end of the lease, drivers are given the option to purchase the vehicle they had leased.

   In this article we’ll have established an over-view that shows both the benefits and restrictions of leasing, and it will certainly be an asset in helping you finalize your decision.  

   First, if you drive 1,000 miles per month, it’s likely that you won’t want to lease, for most leases have a limitation of around 10,000-15,000 miles per year, and every mile after that will cost around $0.20 each. Second, if you have any type of customizations made to your car, you’ll most likely not want to do so with a lease, for in the leases terms you, more than likely, agreed to terms of returning the car the same way it came off the lot when you got it.

   Now, if you’re the type of person that enjoys learning something once and using it regularly, as you learned it, for as long as you can, then you may be the type that becomes fond of a car and keeps it until the wheels fall off. Don’t be concerned about leasing, because again, you’ll have the option at the end of the lease to buy the car and you’ll know that it won’t have any more than 30,000-45,000 miles, for that’s how many miles allowed per year, times 3 years—which 3 years is often the standard duration of a lease.

   By now, perhaps you’ve heard the commercials on Pandora, TV, or the radio concerning pre-owned, certified used automobiles at new-car dealerships with warrantees that are under 15,000 miles. These pre-owned certs are often lease vehicles that are traded in for a lease on another model at the same dealership, and are generally immaculate, as ending a lease prematurely is either quite costly or with a vehicle that has certainly been used very little and kept clean.  

   In my opinion, these are simple examples of how valuable your car can be at the end of the lease, as you could sell at prices that are competitive with the dealership, and the buy-out cost after your lease is certainly going to be less than the price of these pre-cert cars. The beauty is, either you know what the car went through and how well it was taken care of because YOU were the one driving it, or you being a private seller, do not attach the costs involved above the sticker in the window that a dealership would. 

   Let me remind you, just as I wrote on February 4th, if you look at buying a car and happen to want to trade it in within three years, you may get the Kelley Blue Book value, leaving you with something like 1/2 the sticker price; which is a rather expensive 3 years that didn't really save you anything in terms of the long-term equity you may have envisioned when you bought the car, where as a 3 year lease will only be about 1/3 of the sticker value of the new car.

   The terms in your lease will establish the buy-out price, which, as a standard, is the original price of the car minus the amount of your lease payments total. Considering the dealer doesn’t lose money and you have the option to either purchase with cash or finance the remainder of the car’s original cost, as in the buy-out terms stated in the original lease agreement, you’ve basically agreed to test drive the car for 3 years, within the mileage limitation terms, or if you opt to buy-out the auto after the lease, the mileage total has no recourse or penalty.

   That’s one of the secrets you may want to keep in mind, if your car shows considerably high mileage over the lease terms, you may want to buy-out the car and sell the car privately after the lease, to cover the $2.00 per 10 mile average fees. Think about it, it’s $200 every 1,000 miles over, so if you’re only a trip from Los Angeles to Denver over, it will cost you just about what it costs to rent a car for that 900+ mile excursion.

   I hope you enjoy your car search and come out in the end with your best fit!