It can make more sense to lease a car, but beware of drawbacks
— -- With the auto industry in free fall, the deals on new cars seem too good to be true sometimes. Often, they are.
Lease deals, in fact, may be better than they have ever been. But does that mean it's time for consumers to cast away concerns about leasing vs. buying?
Many auto experts say no — and maybe.
"A lease is always more expensive than an equivalent loan," says Anthony Giorgianni, associate editor for Consumer Reports Money Adviser newsletter. "I'm not opposed to leasing. I just think that people need to understand what they're doing."
"For most people most of the time, they are better off purchasing a car," says Jack Nerad, editorial director of Kelley Blue Book and kbb.com.
"Serial leasers wind up having higher auto costs and less flexibility," says Phil Reed, senior consumer advice editor at Edmunds.com. "If you own your car, you can decide to stretch ownership until the wheels fall off."
Still, leasing is often attractive because of the low monthly payments when compared with purchases, especially of luxury vehicles. Dealers and their finance companies can afford to offer these lower payments because consumers are paying back only a portion of the car's total cost over the period of the lease, not the full amount. The payments are based on the projected loss in value of the car during the lease period, plus finance charges, fees and taxes, after first subtracting any upfront payments.
Three out of the five "best deals" on kbb.com this week are leases. Despite getting burned when SUVs and other vehicles depreciated faster than they expected, finance companies and dealers are back pushing leases as easy, cost-effective ways for cash-strapped consumers to get into a new vehicle.
And Reed notes that leases with low monthly payments and low "drive-off costs" can be a good deal because consumers don't have to worry about their resale value as they would with a purchase.
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