Written by Omie Ismail
Monday, 14 September 2009 16:36
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Leasing is just another word for renting. Many leases are like renting an apartment with an option to buy. While renting an apartment can make alot of sense, leasing a car almost never does. So why is it that so many real estate brokers that tout buying a house actually lease that Mercedes?
The first reason that you should never lease a car is that its a complex transaction with too many variables.
When you are buying a car with cash, there is only one variable, the price. When you are leasing a car, the dealer gets to play with nearly a dozen different variables to maximize his profit. Some of them are as follows:
- 1) Mileage allowance
- 2) Cost per excess mile
- 3) Capitalized Cost
- 4) Capitalized Cost Reduction
- 5) Money Factor
- 6) Lease Term
- 7) Purchase Option Price
So leasing isn't just a little more complicated, its a lot more complicated than buying. And its hard enough to get a good deal with the dealer when you have one variable to negotiate. Now it is true that leasing will give you lower payments and if you understand all the variables and walk into the dealer with lease software, you might be able to get a fair lease. And if on top of that you're the kind of person who absolutely has to have a new car every two or three years then it would be the better option than just buying. But leasing has a way of restricting your options. Let me give you a few examples.