Many of us lease our cars. Leasing
is better for most people, but not
everyone. (Full disclosure: all
being equal, we would rather see a customer lease because owner loyalty
higher---lease customers pay less to drive a nicer, safer car
under warranty, and their satisfaction is higher.
The margins in auto retail are thin so we've built our business
volume of repeat and referral business from happy lease customers.)
Examples of People
Who Shouldn't Lease
you plan to turn your car into a street racer, don't lease, because the
company will not like your
can exhaust pipes and the huge plywood wing that you bolted on the trunk. (No one else probably will either, but that didn't stop these guys.)
- If you buy your cars and keep them forever, don't lease. You
have discovered the most economically
advantageous way to buy a car. However, while this can be a
good financial decision, it may not be a very good safety decision because you're going to be spending a lot of time in a car that's
terms of safety technology. Take a look at our Subaru Safety page...as recently as five or ten years ago, Subaru offered only a few of the features that we take for granted now. How many of these modern features does your current car have?
| ||What's that rattling? It's the sound of all those coins in my pocket that I saved by driving an old hoopty!|
Leasing Benefits for
- A lower monthly payment;
- You're always driving a safer, more reliable car less than three years old;
- A car protected by warranty with fewer repair bills;
- Investing cash elsewhere instead of tying it up
in a depreciating asset;
- Massachusetts sales
tax only on the monthly payment instead of the whole car (may vary in
- Owing nothing at lease end with the option to buy
your car at a pre-determined wholesale price;
- Excess miles are cheap to buy on a lease (10
cents per mile up front) compared to the depreciation on your financed
(more like 25 cents per mile);
- Gap insurance is free from Subaru. If a leased car is totaled in a theft or
accident, there's no risk of owing the bank more than the insurance
| ||We just inserted this picture of Blue, our Greeter, so you don't get bored. This financial stuff can be a bit ruff. Meet Blue here. |
Why don't even more people lease?
The biggest objection most folks have to leasing is that they
understand it. People tend to fear and
avoid things they don't understand, especially when they are in an
environment (such as a typical showroom). Here's
a quick contrast example between financing and leasing a $20,000 Subaru for a 60-month loan and a
$20,000 \ $20,000 \
| \ Bank
collects all $20,000 |
\ Bank collects $8,000
| \ from you over 60 months, $12,000
(residual) \ from you over 36 months,
| / plus
| / plus
| / | /
Monthly payment: $380
Monthly payment: $260
When you get a $20,000 loan, the bank pays us $20,000 for
your car and keeps your title until you pay off the entire $20,000, plus
interest. When you lease, the bank also
pays us $20,000, and keeps the title.
What's the difference? With a
loan, the bank wants back 100% of the $20,000, plus interest. With a lease, the bank only wants you to pay
back the difference between $20,000
and the residual of $12,000. The residual is a
forecast of the value of your car after the lease term, and the bank
behind that forecast.
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
till 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
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
in the bank.)
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.
- "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
out of a 36 month lease that's almost up rather than a 60 month
only half paid? Approximately 40%
of people owe more on their loans than their cars are worth---not
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
road, older cars use more gas and pollute the environment more,
safety features than modern cars, and are more likely to break down
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
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
write a big check at the end."
If you had financed the car instead, don't you think that piling on
miles would have substantially reduced the value of the car at
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 Subaru inspectors are pretty
lenient about minor damage because they want you to get another
lease. We'll even waive the first $1,000 of damage for you!
For more information about leasing, contact us!
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"I am very pleased with Planet Subaru. I was originally referred there by
a co-worker which led to my first lease experience. I went back to
discuss my lease end options with the same sales person and arranged a
second lease. Going forward, I plan to do the same." Julie A., East Taunton, MAPlanet Subaru. Your unDealership