Daily Archives: May 18, 2017

Lease vs Owning Your Vehicle

On the big picture, leasing a car vs buying a car is much more attractive.  The payments are much lower and in many cases the payment is around half the cost of buying a vehicle with a loan.  Every two or three years you turn it back in to the dealer and get another brand new vehicle.  The depreciation is the same as it is for owning the vehicle. So why would anyone want to “own” their vehicle instead of leasing it?

The first and main reason is that the owner is taking a chance on the notion that his vehicle will remain fairly serviceable for a period of  ten years or more, saving him thousands of dollars in leasing payments for at least 5 or more of those years.  Of course he would need to be willing to drive a ten year car around without fearing what other people might think about his old car.  But the owner likes his odds.

Of course there is always the possibility of acquiring the inevitable lemon, but he can ditch that if he has to  while the Leaser would have to jump through a bunch of hoops to get out of a lemon deal.

If an individual can afford to pay a monthly lease price but would hesitate at the monthly owning price then that means he/she can not really afford to drive around in this fancy, new vehicle.

What causes him or her to want to drive a vehicle he/she would not be able to afford?  Vanity.  Simple vanity.  They get off on the idea of driving down the road marveling how others must envy them in their shiny new BMW or Mercedes.  That’s just human nature.  So they jump at the chance of owning a new car for half the price, even if it costs them a couple thousand bucks every other year.  I often wonder what my vanity point is?

What does that do to the market when a large group of people lease cars instead of buying them?  It drives up the market with increased demands for new cars and so we all have higher payments, whether we choose to lease or buy.  It’s simple economics.  When you increase demand the price goes up.

The same thing happened with the housing boom and bust.  Banks and lenders found a way to increase business by temporarily lowering interest rates.  So people could afford to make payments on houses worth much more than they could really afford.  And when the temporary ARM payments increased to reality 5 or 6 years later – BOOM!  the people who once signed a loan at 3% interest were now looking at 9% or 10% – affectively doubling their payments.

So why did they go with an Adjustable Rate Mortgage that they knew would rise to triple or quadruple the interest rate in 5 to 7 years?  Vanity.  They wanted more than they could afford.  And they thought they could sell before the higher interest rates kicked in.  BOOM!  A large number of them suddenly found themselves unable to sell the house because the housing market tanked.  And os their interest rates climbed and climbed, and that, dear folks, was the moment they realized that they had screwed up.

So where did they turn to?  The banks and the governments.    So not only did they increase demand by their stupid adventure of buying houses they couldn’t afford, foreclosure on their loans costs all of us through higher taxes and loan interests.  Not to mention the fact that it devalued the price of all of our homes which are currently selling for the same price they sold for before the debacle.

Now they are tricking people with lease options into things they can’t afford.  It is driving up the price of cars tremendously.  But we didn’t learn our lesson from the housing debacle.

I’m one of the people who demanded a fixed rate mortgage on my home because I specifically did not want to buy a home I could not afford.  Myself and everyone else like me got screwed by these vain people.  First for having to bail them out and now to absorb the higher costs of doing business with lenders.

So you vain people out there, yes, I see you driving smugly around in your BMW’s, Mercedes, and mid-life crisis sports cars.  But given the results of all the homes that were foreclosed and covered by Uncle Sam, I might as well lease my vehicle too.  After all, if I’m going to get screwed I might as well get something for it.