| Why leasing is not Smart |
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From a purely financial point of view, leasing by individuals who don't have their own businesses is NOT financially smart!!! Leases were made for companies, NOT individuals. If you are a sole proprietor, you can write off the monthly lease payments on a car as well as the insurance and maintenance on the Schedule C of your income tax return. You can't do that if you are employed by a business.
Leasing became popular by car dealers because they could get an
individual into a car they otherwise couldn't afford. Once you've gotten into a lease it's nearly impossible to stop leasing cars in the future because you own NOTHING at the end of the lease. In fact, you may OWE due to mileage or damage. Any down payment you had in the car is gone.
You are paying only for that portion of the car you will be using i.e. 36 months and 45k miles. At the end of the lease a person has no
money to put down on another car and gets talked into another lease.
Even if you buy the car in end, you'll be paying a LOT in finance
charges because you'll end up taking the car over as much as 10 years!!(5 year lease + 5 years to pay off the buy out). You'll also be required to carry more insurance and a lower deductible since you have to protect the true owner of the car, the leasing company. You'll also need to car "gap" insurance to cover the difference between what the car is worth and what is owed on it. This "gap" can be substantial and expensive.
Remember, insurance only pays what the car with WORTH not what is OWED on it. If you have little or no money down, this gap will, of course, increase.
Here is an advise. If you can only afford to lease the car you're looking at, you can't afford the car. If you want a new car, look for one that you can afford to buy. If you can't afford the car you want new, don't lease it, buy it used. The only people who benefit from leases are business and the self-employed who can write them off. Don't fall in love with a car you can only afford to lease.
I'm not trying to cut anyone down, just trying to offer some sound financial advice to those who may not know what the true costs of
leasing are. I don't know tax codes in Canada so our friends to
the North can ignore this. No flames please, there are a lot of
younger people out there who truly don't know! Even my 34 year old
neighbors don't know and are now trapped in the leasing game with $800 a month in lease payments on 2 cars!!
Trish
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