Leasing can be very confusing and there is a bit of a paradox here. If you do it right leasing can save you a ton of money and allow you to drive a much nicer vehicle than you could otherwise afford, but done wrong it can cost you thousands! The principle behind leasing is simple; you are simply renting the car just as if from Enterprise or Alamo but for a longer period of time. You never own the vehicle unless you take out the option to buy it at the end. You do usually get to add things to it if you wish like custom wheels. The transaction is very similar between a lease and a purchase with one important difference.
When you purchase a vehicle you pay for the entire cost with your payments and down payment so for example if you bought a car for $20,000 and finance the car for 36 months you will pay the $20,000 plus interest and end up paying as much as $25,000 total. If we look at a lease on the same car the transaction may be the same except that $10,000 is subtracted in advance from the amount the leasing company would charge every month. In this example you would pay payments based on 25,000 minus $10,000 and at the end the leasing company owns the car.
In theory if you can lease a vehicle for a monthly payment based on the same profit margin that you would pay if you purchased the vehicle it would be a great deal for many people. The problem is that it usually doesn't work that way because dealers use the ability to hide things in the contract to rip people off. I have seen profits as high as $11,000 on one deal! You have to be careful. Are you a candidate for leasing? If we listen to the automotive industry everyone should be leasing but this is simply not the case.
Are you the type of person that always has a car payment and trades every three years? If so, a lease may be good for you. If your goal is to pay for a vehicle and then own it debt free then a lease is not what you want. You must be sure that you are financially stable and know that your income will be able to pay the lease. Leases are very expensive to break or terminate early. Don't lease if you are tight financially or have any concerns about job security.
Gregg Hall is a business consultant and author for many online and offline businesses and lives in Navarre Florida with his 16 year old son. Get quality car care products from http://www.carcarewizards.com
