Is Leasing Bad For Business

Dave tells Bill that leasing a car is not just bad for personal use, but bad for business.

QUESTION: Bill asks if Dave’s rule for leasing a car extends to leasing a car for a business.

ANSWER: It’s not the best way to spend your money. It’s still the most expensive, even if you are putting a million miles on it. Here’s how it works. They take the car off the lot at $20,000 and brings it back, and it’s worth $5,000, they’ve lost $15,000 unless they got it from me. That lease payment has to incorporate loss of value plus a profit, which you can bet they aren’t going to do. The loss in value of that car is absorbed into the payments plus a profit, which is a lot higher than they interest rate you’d just borrow from a bank.