New Car: Buying vs Leasing: Who Is Really Getting Ripped Off?

It's your choice.

But, why would you choose the more expensive option?

Leasing is for wealthy people. They like to drive a new car every 2-3 years. Who can blame them? It is fun. Those beautiful driving machines are not cheap. Well, let's just say it: they are very expensive. The person driving one of those cars probably wouldn't admit it. They will tell you, “Oh, I didn’t buy it, I’m just leasing it for $900 a month.” Psychologically, I guess it feels good to drive a $75,000 car for “just” $900 a month.

Of course, dealers just love these customers. You want to know what the leasing requirements are?
High credit score, full insurance coverage, low mileage at the time of return and a hefty down payment... And they come back every 3 years.

Did I mention the clause about the condition of the vehicle? Leasing agreements clearly state that the vehicle has to be in same condition at the end of lease as in the beginning. The same! It sounds ridiculous, but it’s true. Can you do it? I can’t. There is no way a regular driver could avoid "wear-and-tear" scratches on the vehicle. So, every scratch becomes a penalty. More money for the dealers!

Finally, do not forget over-mileage penalties! Usually, 10,000 miles a year is offered for free. However, every mile over the limit is extra from your own pocket. Wow!

Can you see how this all starts to add up? "Not cheap" is an understatement.

Amazingly, the dealers are getting back the cars with no scratches, low mileage and in perfect condition to sell them again!

TV commercial advertisements are mostly for leases. AMAZING DEAL: ONLY $199 A MONTH.
But, is it really an AMAZING DEAL?
It never is. You don’t have to have an accounting degree to figure it out.

There is one very important number you have to pay close attention to.
By law, a leasing company has to figure out the “RESALE VALUE” of the vehicle for when the lease expires. And it has to be clearly printed in the leasing agreement. No wonder they know exactly how much it will sell for.

This is the only number that’s negotiable when leasing.
So, let’s try to lease a regular HONDA CIVIC. We will round the numbers for ease of calculation.


MSRP: $20,000 (sticker price)

36 months x $200 = $7,200 (Monthly payment)
Down Payment: $2,000
Resale value: $15,000 (Determined by the dealer)

This is how much you are paying when you lease it.
$15,000 + $7,200 + $2,000 = $24,200

Again: MSRP: $20,000

An extra $4,200! AMAZING DEAL or AMAZING RIP OFF?
Once again, it's your choice.