Another Reason Why Leasing Sucks

When you give up control of when you can buy and sell your own car, you place yourself at a strategic disadvantage.

I harp on leasing a lot here as a really shitty financial transaction.   When you lease a car, you are buying it, but at a price higher than merely purchasing it.  And since the actual cost of the car is usually obscured, you don't realize how much you are paying for the car.  And you are buying the car, not renting it.   You'll find this out if you ever wreck it.   And if it is even dented slightly, or driven too far, you pay, when you turn it in - often thousands of dollars. 

No problem, they roll over the fines and excess fees into a new lease!  And over time, you pay more and more every month to own something that you should be owning outright.

But worse yet, is the timing issue.  I mentioned before a friend of mine leased a beautiful new Volvo wagon - back when they were steel tanks.  Her husband died and she went to turn in the car.  Turns out, turning it in early cost her a lot of money.  She handed them the keys to a low-mileage car that was in perfect shape, and had to pay thousands of dollars in "early termination fees".   Leasing ties your hands when life circumstances change.

With this virus thing, people are finding themselves out of a job and their lease ending.  So, turn in the car, right?   Some dealers refused to accept the cars unless you leased a new one.  "We're closed!" they would say - closed unless you want a new car, of course.  Is that legal?  Hell no.  But you are not going to hire a lawyer, pay $10,000 and sue them, are you?   This is what people don't get - companies and individuals can steal from you, and so long as the amount is small - a few thousand bucks, they know you are not going to do anything about it.

So the poor slob who has a car he no longer needs, has to keep it a few extra months and pay the monthly fees - plus late fees, in some cases.    Now the dealers are re-opening and they have no inventory of cars to sell (our drive by the Fiat-Chrysler production overflow lot shows no inventory, unless you want a burgundy minivan - they have those in spades).

But some folks have car leases that are expiring and they need a car to get to work.  They go to the dealer and.... no inventory!  Cars, Trucks, and SUVs are in such short supply that dealers are charging premium prices for their remaining inventory.   By this time next month, there may be plenty of cars on the lot.  But your lease expires today.

You have to turn in your car or pay late fees - and now your negotiating power is very, very limited. You can turn in the car and walk away - literally - and hope to find a good used car, or share a car with your spouse.   But if you want to ride, well, the dealer has you over a barrel.

Sure, you could always "buy" the car you leased, but usually the purchase price (residual) is not a very good deal.  So that's not really even a realistic option.

If you owned the car outright, you could keep it or you could sell it.  You could decide whatever it is you want to do, whenever you want to do it.  There is no time deadline forcing you to trade at a specific date.   You could decide to buy later in the year, when inventories are higher - or at the end of the year, when they are trying to close out the older models. Or you could buy a used car or whatever. You could take the bus.  You have choices, and those choices mean you have negotiating power and leverage, as you don't need the car and can afford to walk away.

But a lease?   It forces you to revisit the car dealer on a date specific, and either turn in the car and pay all those "excess wear" fees (which they pile on, to convince you to lease another car) or lease or buy a new car from them.   When you go to a dealer on a specific date and say, "I have to lease a new car TODAY" you have given up all your negotiating power.   And you have to hope what they have on the lot is a car you want, too!

Why people do this to themselves is beyond me.  There is a mindset in America that "you'll always have car payments, so you might as well lease!" and yet, cars today easily last ten years or more and are capable of going over 150,000 miles without any major repairs.  And a car loan can be as short as three years - if you buy a car you can actually afford.

This Corona Virus situation points out yet another reason why leasing is a raw deal.  But even in virus-free times, the same situation exists - with a lease, you have to trade-in your car on a date specific - a date which may or may not be a convenient date for you.

Why would anyone tie their hands this way?

A friend of mine loans her car to her grandchildren, as they are going over their lease mileage.  "It's the only way they can afford a car!" she says.  Yet leasing a car is the most expensive way to own a car.  It is like saying you can't afford groceries, so you'll eat in restaurants all the time.

And yet, I am sure they probably think that, too.  It is like the waitress we met here on the island, who was going to pay $6 a day, for over a week, for the toll to get to our island, rather than pay $45 for an annual pass.  "I can't afford that right now!" she says, and yet she probably took home more than $45 in tips that night.   I tried to explain it to her, but it was like trying to explain calculus to a mule.

The poor make poor choices, and increasingly, the middle-class is making poor choices and wondering where all their money went.  No one "took it away" from them - they gave it away.

And leasing a car is just giving away your money!

You can't fix stupid, as they day.   Should we feel sorry for stupid?  Should we be bailing out stupid?

Go ahead, if you want to.  Please use your money, though!