Back Away From The Fleece

David is ready to buy another car, and he talked to a salesman who told him he needed a lease. David wants to know if a lease is better than paying cash for a car.

QUESTION: David in Jackson is ready to buy another car, and he talked to a salesman who told him he needed a lease. David wants to know if a lease is better than paying cash for a car. Dave explains the way a lease works and why David doesn’t need one.

ANSWER: Honda is a lot of things, but stupid is not on the list. Think about it from Honda’s perspective. You’re going to hand the guy keys to a car, he’s going to give you some money now, he’s going to pay you monthly, and then he’s going to hand you the keys to the car back later or he’s going to give you money at the end—one of the two. That’s how leasing works. Honda’s going to get a car back or get some money—one of the two at the end of this thing. That car’s going to have a bunch of miles on it, and it’s going to have a value lower than any other car of its age because it’s got so many miles on it. If I’m going to hand you the keys to that car and you’re Honda, unless you’re stupid, you’re going to charge me enough to offset the fact that you’re handing me back a high-mileage car. In other words, the loss in value associated with the miles that you’re putting on the car is going to be covered by your rental payments in a fleece plus profit, or they’re stupid. And they’re not stupid. Besides that, you need to be driving a used car if you’re a road warrior. Get a one-year-old. You’re destroying whatever you drive, so destroy a $15,000 car instead of a $30,000 car.

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