The last type are auto indifferent. They just buy what seems right at the time because of advertising, proximity of the dealer and features that appeal to them. They might do a little research about brands or models. Some auto dealers salivate when they see buyers like this coming. They’ll use features and glitter to sell. Fear also sells, so they’ll tout their latest safety innovations and new-car dependability against stories of on-the-road breakdowns. Auto-indifferent types on a small budget should take a practical buyer with them when they go car shopping, or they might end up leasing a more expensive model.
Leasing paperwork is very complex; you won’t understand it without the proverbial Philadelphia lawyer. Leasing only charges you for the portion of the car you use. For example, a three-year plan’s payment is based upon the depreciated car’s value at the end of the lease. Autos typically lose almost half their value in three years. Oversimplified, if you lease a $40,000 car and it is worth $20,000 at the end of the lease, the monthly payment is $20,000 divided by 36 months. Down payments make the monthly amount smaller, but loan interest increases it. Other factors are depreciation rates, mileage allowance and penalties, dealer profit and incentives.
Half of all premium upscale vehicles are sold through leasing. Image-conscious buyers, or those who like to drive new cars, typically haven’t saved for a good-size down payment or don’t want to invade their investments. A lot of the time, they simply couldn’t afford to buy these models. However, if they can swing the payment, they’re happy. They don’t care about the high long-term maintenance costs typical of these models since they won’t own it long enough for the warranty to run out.
Wise buyers know that long-term ownership and financing cars they can afford to maintain will mean more wealth in their pockets. Mathematically speaking, buying is always the lowest cost way to go, if you don’t buy too much car and buy the more dependable brands.