As the U.S. tries to fix its long-term macroeconomic problems, an increasing number of consumers are apparently busy worsening their own microeconomic problems. John Sternal, a spokesman for LeaseTrader.com, recently told DailyFinance that, “What we’re basically seeing now is, instead of one out of every five people leasing, we believe one out of every four are leasing. In the world of automotive, that is a very significant uptick.” And in the world of personal finance, this is a very significant tragedy.
Here’s the deal: Car leasing is a terrible financial plan. As Thomas J. Stanley reported in his book Stop Acting Rich, about 80% of millionaires have never leased a car. They didn’t lease cars before they were rich and now that they’re rich, they still don’t lease cars. Consumer Reports noted back in April that “leasing generally is the most expensive way to drive a new car. … But there’s another big factor that makes leasing more expensive. Lessees often end up in a cycle of getting a new car every few years, the period during which cars lose their value the fastest. That typically leaves them paying much more than if they bought a new car with a loan and kept it for four years or longer.”
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There have been so many good behavioral changes that are coming out of the recession: Couponing has made a roaring comeback and even become the main thrust of a reality TV show, thrift stores are chic, libraries are seeing their traffic surge, and people are buying homes that they can afford.
There are many guides to getting the best deal on a car lease, and more than few websites with long, convoluted discussions about whether it’s a good option. But what consumers really need to know is this: People who end up with strong financial lives don’t lease cars.