To all the Realtors out there who say this: "I would NEVER lease a car, because you don't OWN anything and you don't END UP with anything", I say this: YOU JUST DON'T GET IT.
Let me first clear the air by answering this question: "Do I lease my car?" YES, OF COURSE. But this is not what qualifies me to make the above statement. I spent 20 years leasing cars, mainly to self employed and professionals. I was eventually "recruited away" from this business because I bonded so well with my mortgage broker auto lease clients.
You see, mortgage people, by their profession, are "money people". They "get" what leasing is all about. Leasing is about these 2 things:
- You place your cash in assets that appreciate, not things that depreciate (like hunks of steel that lose 25% of their value the minute they roll over the curb)
- Three words: AWESOME TAX BENEFITS
Quite frankly, you don't OWN anything when you purchase a car and place a loan on it. The bank owns the car until you pay it off. Same thing with LEASING...the bank owns the car until you pay it off. Leasing a car is NOT the same thing as leasing real estate. When you lease a car you have all of the same ownership benefits and responsibilities.
Getting a loan on your car is finance plan A. Getting a lease is finance plan B. Getting a lease instead of getting a loan on a car is much more closely related to choosing a 100% loan on a 5 year adjustable rate mortgage instead of a 30 year FIXED rate loan, with a 20% down payment.
So what if I told you that by taking that 30 year mortgage, and paying $200,000 down, you would have a HIGHER PAYMENT, A MUCH LOWER TAX BENEFIT, and WOULD BE ON THE HOOK FOR THE VALUE OF THE HOUSE AT THE END OF THE 5 YEARS... OR......
You could do this by taking the 5 year adjustable rate mortgage (with 100% financing):
- Keep your $200,000...invest it.
- Have a much bigger tax write off assuming business use
- Bank will assume entire responsibility for value of the house. If it is worth more at the end of the 5 years, you get the equity. If it is worth less, just give it back to the bank and walk away!
- Oh yes, and even though you are not making a down payment, your payments are 30% LESS, and your "closing costs" are far less (because sales tax is not collected up front on a lease...it is paid on each payment)
A final rebuttal to those who say, "Yes, but once I finish paying for my car I will drive it without payments for years, so I will buy instead of lease!" Please, get real about this, and analyze whether you feel obligated to do this, or really WANT to do this (and always remember that the cornerstones of success in our society are really great real estate and really great vehicles...these things have a tremendous impact on our day to day lives).
A more likely scenario: You drive the car for 4 years. Your factory warranty has run out. little things are beginning to go wrong. Technology and safety features are more advanced now. Your car is somewhat dated, and starting to show wear and tear. Your lifestyle has changed. Car no longer fits your "image". You start checking out new cars in the parking lot with a twinge of jealousy.
You never have to be in that space again if you take the time to understand how auto leasing really works, and the benefits an auto lease can bring to your financial table.
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