Holm Automotive Center
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Buy vs Lease: Common Misconceptions
LEASING: COMMON MISCONCEPTIONS
Q: I have no equity.
A: The equity in a lease is the cash that you have saved over the course of the lease plus, any maintenance and repair expenses are avoided. In addition, if the vehicle is worth less than the residual amount, you have "hidden" savings. That is the avoided loss.
Q: I drive too many miles.
A: Actually, the more miles you drive the more money you save and the less risk you are exposed to. The expense of excess mileage charges in a lease are less than actual depreciation in ownership.
Q: What about excess wear and tear charges?
A: If you owned the vehicle and went to trade it in, in the same condition, the appraisal would be less. When you come right down to it, holding the title isn't always that great. As a rule, the older the vehicle, the more attention it's going to need. When you add up all the tune-ups, tires, oil changes and headaches, (not to mention your time), holding your vehicle's title may be more of a problem than it's worth.
Q: What if I want to break my lease?
A: The flexibility to break a lease is the same as the flexibility to break a loan. You may sell the vehicle in both cases and if you get less than the payoff you will be responsible fro making up the difference.
Q: I've been burned before or I've hear horror stories about leasing?
A: It is true, there have been abuses in leasing over the years. The old open-end lease is an example or the customers were not put in a proper lease: possibly too long or not for the proper miles. In an open end lease, the lessee (customer) was on the hook for the residual value, not the lesser!
The abuses in leasing have been eliminated. Today's lease is referred to as a closed-end lease, which means the lessee, is protected from any of the downside of a diminished value situation because the lessor guarantees the residual-not you!
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