Are car leases going to become a thing of the past? At least for a while?
Chrysler will be cutting out leases, since the current buying/leasing climate isn’t turning them a profit. To compensate, as it were, they’re extending their 0% financing options. I’m wondering if other automakers and dealers will start following their example. So many are now dropping SUV prices and the like because people just aren’t interested in buying.
A little voice in my head wonders “Will people start making the best car choices for their finances?” I don’t feel optimistic. Necessity may force some to adapt. And for others it will bring a wakeup call to be more practical and stay that way even when their finances get freer again. I suspect that the dozens of new PF bloggers popping up over the last months are reflected in the offline world as well.
In the end, if you have enough money you can even lease if you’d like to. It may not be the most practical decision, but it’s still your option. Having enough money buys that option. However, for the majority of us buying a sensible car and maintaining it . . . and running it into the ground . . . is sensible the way to go.
Do you think that this change in auto leases will bring about a positive change in US practices? Too soon to tell until we see if more adopt it? Nothing can stop American consumerism? … 😉
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I have always been against leases for the typical reasons, but looking at things closely there are times when it makes sense. I’ve gotten in the habit of paying cash for my last few cars, but have found that my money might have been put to better use than purchasing something that depreciates as quickly as a car – even a used one. My results were included in the following post: http://blog.lendingclub.com/2008/07/24/financial-transaction-post-mortem/
Leases are useful (I suppose) for people who use cars in their businesses: as I understand it (maybe wrongly?), 100% of the cost of the lease is deductible, and you’re not having to dork around with calculating depreciation.
But one thing I’ve never understood is why anyone would lease a personal car. What a rip! People seem to do it all the time, and in my experience, the dumber they are about money they bigger and more ridiculous the leased car.
Cars are rips all the way around, though, between their high cost and the breathtaking depreciation rates. Wouldn’t it be nice to be able to do without them? I mean…without having to get a horse, which costs as much as a car to maintain.
I’m hopeful that the current economic state will give people pause when it comes to cars in general. That we’ll come to realize that a car is only useful for getting from A to B, and that there are often other means of doing so (walking, biking, public transit…) An end to auto leases – which often encourage people to get a lot more vehicle than they would otherwise buy – would be a good start.
Interesting and thought provoking post. You would think the changes in our car buying habits would be even more drastic then they have been. But maybe there will be a trickle-down effect at some point.
Personally, my husband, who drives at least 2500 miles/month just made the switch to a Chevy Aveo which gets 40 mpg. Even with a new monthly car payment, we are actually saving money each month. His old car (a ’94 Buick Century) was getting only 15 mpg. And at that, it could only hold a 1/3 of a tank of gas without leaking. The repairs would have cost more than the car was worth. So, it was obviously a no-brainer for us. But, I really think it is worth looking into for everyone.
Unlike a lot of people in the PF world, I actually like leases. If you want a new car every few years (and that’s a huge, glowing red “if”- we all know that this is not a great choice from a purely financial point of view), leasing can sometimes be a more sensible option than purchase financing.
I don’t think we’re going to see the end of auto leases any time soon, but we are likely to see the end of heavily subsizied leases with low money factors and artificially high residual values.
No, residuals will become predictable again. Then leases can again be sold by quoting how much per month, making money for the dealers and the manufacturers again.
This is like asking whether mortgages will end because the real estate slump messed up equity assessments.
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