Follow-up Reader Q (Aug. 30, 2017)

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This is a follow-up reply to the previous question asked by Matt (see here) about leasing:

Matt asks:

Thanks a lot for the quick reply! Some important info I realize I left out: The salesman said there are 3 options at the end of the lease; turn it in, buy it outright or apply the supposed “equity” to a new lease. His point was that a lease will depreciate at the same rate as a car you are buying, while keeping your monthly payments lower. So if you decide to buy at the end, you are not any worse off than if you had bought from the beginning Sorry if I’m not doing a good job explaining. Maybe if you can’t explain something it means you don’t understand it, and if you don’t understand it you probably shouldn’t do it!

My reply:

One can predict depreciation, but never know for sure ahead of time. The lease is based on a prediction. If the prediction favors you, you win. If not, it favors the dealer. Basically, you are gambling.

When you buy, you “lock in” the cost of the car. There is no gambling. The price you pay the day you accept the keys is the price you pay.

And there are no worries about being dunned for “excessive” mileage; it’s your car – drive it as much as you like.

I suspect what the salesman was angling for was to get you to lease a more expensive car than you otherwise would/could were you buying it.

Whatever he’s pitching you, it’s in his interest – not yours.

Car salesmen are not known for their altruism!

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