Lexus Leaning On Leases More Than Ever To Combat Pressure From The Germans

Across the industry people are leasing. Some research suggests that after years of a horrible economy that people want to splurge and leasing is more car for the money.

With how cheap leases are, I honestly question the sanity of people who buy.

MDarringer: With today's low interest rates and customized offerings, lease or finance can work out to be a wash. For example, when I bought (financed) my current vehicle, it was for a 60 month term at a low fixed rate, nothing down, and a balloon payment at the end. Sound familiar? That's like a lease, with the exception that a lease has mileage limits and penalties, and the ability to walk away at the end of the terms... with the lessor ALWAYS having the upper hand, financially speaking.

The lease offers walk-away convenience at a cost, while the "special finance" puts a little more money in your pocket at the end of the term.

For anyone using all or part of their vehicle for business, there are also tax considerations of expensing the lease vs depreciating an owned asset plus financing interest expense.

And finally, there's the question of how long do you plan to keep the car? Today's average car age is 11.5 years.

I won't get into Opportunity Cost, that's comparing cash flow difference between leasing and financing, and taking the surplus cash you save with the lower payments and investing it in higher-yield financial vehicles.

It's not as clear cut as "financing is insane."

@TheSteve You're partially correct.

The sad fact is that most people finance the balloon payment at the end because they have not put money aside to pay it, but even if they have, their monthly payment is an artificial number given that they have to set aside money. In some cases, if the balloon payment is not paid in full the manufacturer's credit requires financing through them and the interest rate on the balloon payment is specified and high. People don't read the fine print.

The ex-wife of a friend bought a Mini. She financed it for 5 years and had an $11k balloon payment. She would have paid $44K for a $31K vehicle, so not exactly a brilliant deal, but she thought it was.

Fortunately, we were able to dump her buy onto a lease of the new Mini.

I am an opponent of balloon payments, and 72 or 84 month contracts.

Many manufacturer leases have protection in them for a very modest cost. Ford calls theirs "wear care" which covers $4K in damages. The fee for wear care is tiny.

If a person is planning to drive a car until it dies, then buying makes sense, but we have people who buy and trade up at 3-4 year intervals and for them, buying is utterly stupid.

I did not like the balloon payment plan because I felt there was too much risk at the end of the term. Either I stuck with the brand or I paid off the residual. Not that I probably wouldn't have minded sticking with the brand or paying off the residual if I truly liked the car, but I know me and I wanted the option to be free to go to a different brand without recourse. Putting a bit more upfront wasn't much of a consequence for that less-risky end result.

I should me more "F#ck the idiot customer" but I actually wan the customer to have a good deal.

Balloon payment is bad for customers as are 72 and 84 month buys.

If you're leasing longer than 2 years right now you're losing money.