Believe it or not, this new Grand Cherokee leases for the same finance payment as the used Grand Cherokee!
Many of us at Planet lease our cars. Leasing is better for most people, but not everyone. (Full disclosure: all things being equal, we would rather see a customer lease because owner loyalty is higher—lease customers pay less to drive a nicer, safer car that’s under warranty, and their satisfaction is higher. The margins in auto retail are thin so we’ve built our business on the volume of repeat and referral business from happy lease customers.)
Examples of People Who Shouldn’t Lease
Leasing Benefits for Everybody Else:
Why don’t even more people lease?
The biggest objection most folks have to leasing is that they don’t understand it. People tend to fear and avoid things they don’t understand, especially when they are in an uncomfortable environment (such as a typical showroom). Here’s a quick contrast example between financing and leasing a $20,000 vehicle for a 60-month loan and a 36-month lease:
Common Misconceptions about Leasing
“With a lease, I don’t own anything.” When you take out a loan, do you get the title? Not until you pay off the whole amount. So you don’t really “own” it til it’s paid off. A lease is the same way. The bank retains the title and if you want to own the car you just pay off the lease.
“With a loan, I own the car at the end.” True. But not much of a car…a five year old car with higher miles. If the lease saves you $120 a month for the term of a 60 month loan, that’s $7,200 that you have in your pocket instead of your car. (And that’s assuming you didn’t make some additional interest on it by investing it or putting it in the bank.)
“It’s better to own than rent.” The reason you should buy a house instead of rent is because the house usually appreciates (or at least they did before the financial crisis). But cars depreciate. And they have significant costs. Most people who lease never pay for brakes or tires, for example, because they don’t keep the car long enough to wear them out. If you finance your car for five years, you’ll almost certainly need tires and brakes at least once, plus other repairs.
“The dealer makes more money when I lease.” This is true, but not in the way that you would think. Whether you buy or lease at Planet, you pay the same price for the car. However, we do sell more cars overall because research shows that lease customers are more likely to become customers for life (and why wouldn’t they? They’re always driving a newer, safer, more reliable car for a smaller payment!)
“I can’t trade the car in before lease end.” Actually, you can. After driving your car for 30 months, don’t you think it’s less expensive to get out of a 36 month lease that’s almost up rather than a 60 month loan that’s only half paid? Approximately 40% of people owe more on their loans than their cars are worth—not only do they not have equity, they are actually “upside down.”
“I don’t want a new car every few years. I like to buy new, pay the car off, and then have the car without a payment.” While you may not have a payment in those out years, there are still costs. You’ll be spending more in repairs to keep an older car on the road, older cars use more gas and pollute the environment more, have fewer safety features than modern cars, and are more likely to break down and leave you in a dangerous situation.
“I drive too many miles.” Cars depreciate about 25 cents per mile. Yet with a lease, you can buy additional miles upfront for only 10 cents. At the end, if you go over, they’re only 15 cents. People who put a lot of miles on financed cars usually end up owing more than they are worth—not only do you not own your car, it owns you!
“I had a bad experience with a lease because I drove over the miles and I had to write a big check at the end.” If you had financed the car instead, don’t you think that piling on extra miles would have substantially reduced the value of the car at trade in time? Cars depreciate about 25 cents per mile but they only cost 15 cents on a lease if you go over. If you buy them up front, they’re only 10 cents! So if you’re concerned about driving a lot of miles, we’ll build them into the lease for you. Either way, you’re better off putting too many miles on somebody else’s car!
“I had a bad experience with a lease because I had to pay for damage at the end.” People who trade in financed cars with damage have to pay too—because they get less at trade-in time. You don’t get a bill in the mail for it, but you still pay it. Furthermore, our experience with lease returns is that the inspectors are pretty lenient about minor damage because they want you to get another lease.