This is the final installment in our Blog Series Is Leasing Really Fleecing? Throughout the series, we have discussed many of the pitfalls and drawbacks of leasing cars. We wrote this series, because we realized that many of our clients who leased cars did not understand how leases work.
One of the biggest drawbacks with leases is that consumers who lease may be more vulnerable to auto dealer fraud. The problem is that leases are confusing, even to some attorneys, and lease contracts do not clearly disclose the various components that determine the lease payments. Interest charges are not disclosed at all.
Another problem with leases is that they are usually more expensive, at least in the long-run, than purchasing a car. Consumers who purchase their vehicles and hold on to them for a longer time than the lease term will save significant money. Additionally, many who lease cars are surprised by the high end of lease charges such as wear and tear charges and charges for miles driven in excess of the mileage permitted under the lease.
One of the pitfalls of leasing is that many leases, especially those involving luxury and near-luxury models, have mileage allowances that are substantially less than the average use of a vehicle. Many consumers who lease cars fall into a lease “trap”, where they owe large amounts at the end of the lease, only to have the dealer offer to “roll” the extra mileage charges into a new lease. They do a new lease in order to avoid the high charges, and at the end of the new lease, they are faced with the same dilemma. For this reason, leases are not a good option for consumers with long commutes or who frequently take long trips.
Another leasing pitfall is that consumers who want to end their leases early due to unexpected changes in their financial or other personal circumstances will usually have to pay early termination charges. These can amount to thousands of dollars unless the consumer is near the end of the lease term. Additionally, if a leased vehicle is repossessed, consumers do not have the same protections that the law gives to consumers who purchased and financed their cars.
These are the reasons that we do not recommend leasing for the vast majority of consumers. But does that mean that leasing is fleecing? Not necessarily.
As we acknowledged in our last article, there are some circumstances in which leasing can be advantageous. For many models, leasing can be cheaper than buying a new car and trading it in after just a few years. Turning in a car after just a few years is expensive, regardless of whether the vehicle is leased or purchased. Consumers who buy their cars (new or used) and hold them for a longer period of time will save much more money. But, for consumers who place a high value on driving newer model cars and who must get a new vehicle every few years, leasing can save them significant money.
Even in those limited circumstances, those savings can disappear if the consumer has to terminate a lease early. And, if a consumer gets a new job with a longer commute, the extra mileage charges can also substantially increase the cost.
Our bottom line is that leasing can be a good option for consumers who fully understand and accept the potential pitfalls and who place a high value on always driving a newer vehicle. But, it is important that even those consumers understand the risks of leasing and be willing to accept them.
For everybody else, leasing is fleecing.