It's amazing. I operate a web site that provides objective consumer information about car leasing and I'm frequently amazed at the misconceptions or, should I say, uninformed conclusions that many people have about leasing. Let's look at some of them now.
1) Leasing is a scam by dealers - Not true. Car dealers didn't invent leasing. Leasing is a valid method of financing capital equipment that has been used for over a hundred years in business. However, it has only been within the last 25 years that leasing has become popular with automotive consumers. Since it is not well understood by most consumers, dealers oftentimes encourage leasing when it isn't the right option in a particular situation. The key lesson here is that, if you don't understand leasing, stay away from it.
2) You make payments for the life of a lease and have nothing to show for it at the end - That's right. But the payments are lower and only pay for the depreciation that all cars experience, even those purchased with a loan, which is money you never see again in either case. Plus, you pay finance charges either way, which you also never see again.
3) Dealers make money by charging you extra fees in the beginning of a lease - Not true. The only fee that is specifically associated with leasing at the beginning of a lease is the “acquisition fee" which is charged by the lease company, not the dealer. There may be a security deposit requirement, which you get back at lease-end. All other charges and fees are the same as those for a purchased car.
4) Dealers make money by charging you extra fees at the end of a lease - Not true. Lease companies charge lease-end fees, not dealers. Lease-end fees could be for excessive mileage, which is simply a way of compensating the lease company for the extra depeciation in resale value you created by driving more miles than you originally agreed to. Furthermore, if you damaged the car, or didn't replace tires when they needed to be replaced, you can be charged. Fair enough.
5) Leases are like renting and work the same way - Wrong. Leasing is not at all like renting. You can't end a lease any time you choose. You can't swap vehicles in the middle of a lease. A down payment is not a security deposit. The first month's payment is not a down payment. A security deposit is refundable and not a fee.
Al Hearn is owner and operator of LeaseGuide.com , a popular web site for automotive consumers interested in leasing. It has served many thousands of visitors since 1995.