Here’s Why Leasing a Car is Stupid

it's 1941 in chicago you own a large company and you need salesmen to sell your product so you hire 75 men you lend them one third down payment so they can buy a car and since they're using their own cars on the road you also pay for their mileage and gas but here's the problem any salesman with his own car is now a hot commodity in the sales business in other words other companies start poaching your salesmen and they leave before paying off the loan what will you do now today we're looking at how this true event created the car leasing industry that we know today we'll also see some of the biggest car leasing scams and i'll explain why car leasing isn't for everyone so hop in and let's get going the fastest way to understand car leasing is to see what it's not when you buy a car you pay for it in full on day one and you own the car when you walk out the door or you can take out a loan as soon as you pay off the loan the car is fully yours it's like when you take a mortgage on a house once you pay off the mortgage the house is fully yours and the bank has no claim to it but leasing is more like renting a car from the dealer for a certain amount of time it's usually around 36 to 48 months when your lease period is over you can either choose to return it to the dealer or lease another car or you can purchase at the predetermined price found in your lease contract think of it like renting an apartment you pay rent every month but once your rental agreement expires you have no actual ownership to the unit leasing a car isn't for everyone but before i tell you why let's rewind a bit how did leeson even become a thing believe it or not before cars existed in the u.s people leased horse and buggies but actually the concept of leasing started even before then we can trace it back to the singer sewing machine people could lease a singer sewing machine by paying five dollars per month with the option to purchase it later if they wanted to but it wasn't until 1941 that car leasing the way we know it today got started that's when zolly frank who owned a chevrolet dealership saw the dilemma faced by petrol lager a large pharmaceutical company in chicago mentioned at the onset of this video zolly proposed that he rent each card petrol logger for 45 bucks a month the lease agreement included replacing the car yearly including tires maintenance oil changes and collision insurance without deductible petrol lager wasn't sure the idea at first but they were willing to try they started by leasing five cars the arrangement turned out profitable for both parties so much so in fact the next year petrol logger leased 75 cars and that's how car leasing took off demand for leases picked up rather quickly this led brokers and banks to get in on the action unfortunately many banks made some big mistakes along the way for example many overvalued a vehicle's worth at the end of the lease term this resulted in profit losses for the banks so the banks pulled out of the carly's in business customers on the other hand were perfectly happy to drive that new car their neighbors were talking about for a lot less than they could buy one for car leasing continued to grow in popularity in the following decades by the first half of 2016 the leasing market in the u.s had an all-time high thanks to millennials and older consumers who are driving the demand today in fact car leasing in the u.s has doubled in popularity over the last five years a major advantage to leasing versus buying is that when you lease a car you have lower monthly payments to make in general the payment you make each month is much less than if you were to actually take out a car loan and buy the car this gives consumers the option to go for a much larger fancier ride than they normally would do because of the cost difference but just a reminder you're not paying to own the car you're just leasing it you're only paying to drive the car leasing also means you can drive a new car every few years so this is a great option if you're the type of person who loves to get the newest iphone as soon as it comes out this means you can lease a slick new tesla and then as soon as your lease is up you can lease a newer and even slicker one that same day without ever having to go through the hassle of selling your old car first but there are disadvantages to leasing and tons of leasing scams to watch out for too one disadvantage of car leasing is at the end of your lease you're expected to return the car to the leasing company in the same condition at the start of the lease this means no cool new decals and definitely no shiny new customized wheels if you do decide to customize your car anyway the finance company may require you to reverse any modifications you have made so there's a cost and inconvenience in that sense oh if you're the type of person who loves to customize your car leasing probably isn't the best option for you now leasing companies expect you to return the car in good clean shape this means you have to repair any damage to your car that your dealer finds excessive if you try to return a car to the dealer with for example an excessive correct windshield guess what the company will charge you which means more money coming out of your own pocket for something you never even own it's good to know though that some leases do include basic maintenance so your cost will only be insurance and fuel that is unless you somehow manage to completely total your car now if you're the type of person who drives the kids to school in the morning and then takes the car to work picks everybody up at the end of the day and then decides to go on a spontaneous weekend road trip you might need to watch out if you're leashing your car leasing has varying mileage limits usually around ten thousand fifteen thousand miles a year if you go over the mileage you're gonna have to pay extra per mile so be careful thinking of leasing a new ride so people give you a higher uber driver rating well you may be surprised to learn that some contracts don't allow you to use your leased vehicle for ride sharing programs like uber or lyft and remember any miles you use towards a large sharing business means less miles for your own personal driving some people are surprised to learn that they're actually cheaper to buy a car and hold on to it as long as you can instead of leasing one that's because you don't build any equity on a lease car you also have to pay some extra fees that don't come with a loan like the acquisition or lease initiation fee did you know that you need a pretty good credit score to be able to even qualify for a decent lease if you do qualify with a lower score you're likely to have a higher leasing interest rate in other words your lease cost will be much more expensive most banks credit unions and other financial sources don't even offer credit for leases this means the average american is limited to using captive financing pretty much it means you have to work with a financial arm of a major car company the downside is that you're restricted to whatever rate the lender wants to offer but now let's talk about the biggest car leasing scams believe it or not there are plenty out there one of the most common scams is a dealer raising the price of your car after you've already negotiated its price the negotiated price of your car has a direct effect on the monthly lease payments this is called capitalized costs the law requires that capitalized costs be stated in the contract but many consumers don't actually know this this means that your dealer can easily add a few thousand dollars to the price after negotiation and you won't even know if you are one of the few that did notice and tell your dealer they'll usually claim it was an honest mistake yeah right some consumers also don't know that they can negotiate the purchase price during the lease discussion they just leave it to the dealer to decide the price and they just pay the manufacturer's suggested retail price or msrp if you want to avoid the scam remember to double check the capitalized cost is the same that you originally negotiated for the car in the first place scam number two is that you gotta watch out for hidden add-ons when the dealer sneaks in these add-ons to your lease this increases the overall price of the vehicle sometimes as simple as pin striping or even extended warranties can be added to the lease and you may not even notice those increased monthly payments oh by the way buying an extended warranty on a lease doesn't make much sense since the manufacturer warranty will almost always cover everything for the short duration of the lease so keep your eyes out for that one too another scam is that the dealer might increase the length of the lease right under your nose if the monthly payment for your 24-36 month lease is too high some dealers will lengthen the term of the lease to 39 months or longer to lower the payment the problem is they might not tell you yes it'll be written in your contract but if you're not paying attention it can be easy to miss this means that when you come in at the end of your lease to return your car you could be met by the sorry surprise that you still have to keep your car and pay your lease payments for several months longer than you thought so always read the lease document thoroughly and the fine print so let's say after all this you decide to still lease the car rather than buy well then here are the first helpful tips to make sure you get the best deal and experience one first consider the real total cost of leasing when you think of the word total some people assume the total sum of their monthly payments but that's not the case with leasing you need to also consider the down payment acquisition fee and security deposit fees this can easily add five grand to your total lease cost if you only look at the monthly lease payments that's misleading because in reality you'll pay more than that if you love your lease car so much that you want to buy it as soon as possible well some contracts actually do allow for an early buyout which means you can purchase the vehicle before the end of the lease contract but just be aware that this often involves extra fees generally a lease and buyout is a better deal also it's generally recommended that you avoid putting down any money that goes towards capitalized cost reduction in other words avoid down payments if you can putting down this money is a risk let's say your car gets stolen or totaled the day after you lease it well guess what you won't get any of your down payment back putting money down on a lease does reduce your monthly payment but it doesn't lower the overall cost this means in the long run it won't save you money as you would on a car loan this is because all the interest charges are computed into the lease price up front meaning the total cost of the lease is set ahead of time whether you decide to make a down payment or not the overall amount you pay for your vehicle does not change are you thinking of canceling your lease early then you should look carefully at what your contract says about early termination fees one exception to this rule is if you're in the military in certain circumstances like you've been ordered to move or you get deployed the federal service member civil relief act allows you to cancel a car lease and you won't even have to pay an early termination charge or penalty but now you tell me what do you think is better leasing a car buying if you've leased the car before and have any funnier horror stories please share by commenting below and if you like this video please like and subscribe thanks for your support

Channel: Scotty Kilmer

Views: 334,711

Keywords: auto, auto repair, car, car diy, car repair, cars, diy, how to, mechanic, repair, scotty kilmer, car review, buying, buying a car, car advice, car buying, car buying guide, car buying tips, car lease, car leasing explained, here's why, lease, lease a car, lease vs buy, lease vs buy a car, lease vs buy used car, leasing a car, leasing vs buying, leasing vs buying a car, leasing vs buying a used car, should i buy or lease a car, here's why leasing a car is stupid, stupid, dumb

Id: mFlbWdTMbWs

Length: 10min 18sec (618 seconds)

Published: Wed Feb 16 2022