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To Lease or to Buy?

Apr 19, 2024

While leasing a car has long been a popular option for drivers looking to lower monthly payments, journalists with an eye on the automotive industry have noted that leasing hit a road bump during the pandemic years.  Today, however, thanks to shifting market dynamics, drivers are once again opting to lease in order to avoid the costs of buying currently imposed by high interest rates.

A recent tweet by Car Dealership Guy, entrepreneur Yossi Levi, predicts that, “…vehicle lease penetration will reach all-time highs in the coming years.”  Why?  Per Levi’s tweet, “…saving 10-25% on a vehicle’s monthly payment by leasing instead of buying outright is no longer a ‘want’—it’s a ‘need’ for most people.”  Car prices are approaching all-time highs and buying is a painful stretch for many people who deal with adjustable rate mortgages or high and rising rents, along with the inflated cost of gas and groceries.

Yossi, who hosts a popular podcast, notes that car manufacturers have focused on big cars equipped with lots of high-tech features that, along with higher interest rates and low product supply, are nudging buying costs up and up.  Still, owning a car does have its rewards.  You are free to customize your vehicle and there’s no limit on your annual mileage.  On the other hand, although you have equity in your vehicle, even a high-end new car doesn’t hold its value—particularly in the short term.  So, if you know you will want another new car in a few years, you are likely to lose money when go to sell or trade the car in.

With many car manufacturers offering advantageous lease deals, leasing may be a smart move as a way to avoid some of the effects of high interest rates.  As a plus, you can return your vehicle at the end of three years in exchange for a brand-new car with all the latest bells and whistles.  You also have the option to buy your leased vehicle at the end of lease term (the buyout price is stated in the original lease agreement.).  It’s a matter of finances, lifestyle and personal preference.