Why Leasing a Car is Profitable?

Today, I went with a good friend to a local dealership. She is looking to get a new car to use for the next couple of years and me, being the responsible, personal finance guru (at least as she sees it), I am along to make sure she doesn’t do anything stupid. She actually wants to lease to avoid the hassle of having to sell it in a couple of years and to be able to drive a new car. She knows better than to buy a brand new car, but she isn’t hesitating to lease one.

This dilemma actually forced me to looking into the details of leasing a car. I didn’t even know how to lease a car before she asked me for help. But, I have since done my homework and figured out why I will never do it myself. Plus, I’m just an ownership kind of guy.

Going with her to the dealership helped me realize why leasing a car is so popular for the dealerships. I know why it is popular with the consumers (driving a new car, having a set fee that you will pay, no major expenses, and no stress in selling it). But a dealership is quite different. They are looking to make a profit and leasing a car works toward this goal quite well.

Benefits of Leasing a Car for a Dealership

No One Likes to Buy a New Car – Everyone has been told from their childhood that they should never buy a new car. I think that the only people who are interested in buying new cars are those who have extra money to throw around. You know… the people who would rather pay extra to avoid long lines or spend time searching for the best deal. By leasing a car, dealerships move cars off the lot with money coming in and the opportunity to sell the car at the end of the lease.

More Money – Leasing a car is more expensive than buying a car; while it may mean less money upfront, it is more money in the long run for the Dealership.

Limited Mileage – One way to keep the monthly payment on a lease low is to have a low-mileage lease. This benefits the driver, but it ultimately benefits the dealership. Do you think they care about a few dollars less each month over a 2 year period? Nope! They care about getting a car back with low mileage and being more valuable and rare than other cars on the market.

True Cost of Car Ownership

An excellent infographic from the folks at Go Banking Rates showing the true cost of car ownership.

I often joke that cars are the worst “investment” that Americans make since many are paying finance charges on a depreciating asset, and much of the math shown in the graphic reaffirms why I make such negative (albeit realistic) statements.

Almost makes you want to go carless, doesn’t it?

The true cost of car ownership varies greatly based on a myriad of factors including the size of your vehicle, condition purchased (new vs. used), mileage accrued, brand and state of purchases.

According to AAA, the average cost to operate and own your vehicle is 70.7 cents a mile which totals a whopping $5,925 annual average (if the car is driven 10,000 miles annually).

5 Money-Saving Car Leasing Tips and Tricks

The invention of the automobile heralded the golden age of transportation. Driving a car has become one of the most convenient and fastest ways to get from Point A to Point B. Most of the time, you rely on a car to get to work, to bring the kids to school, to do the grocery shopping, and to run your everyday errands. However, owning a car can be quite expensive. This is why many people prefer to lease a car instead of buying.

Aside from your monthly car payments, you have to think about paying for insurance, fuel, and car maintenance. That can add up to a pretty penny. And as your car gets older, you will be shelling more to covers its maintenance costs. To maximize the longevity of your vehicle, it is importance to take care of it.

Here are some tips and tricks that will help you save on your car lease maintenance:

  1. Read the owner’s manual from cover to cover.

Being well-educated is part of being a good driver and a conscientious car leaser. Not all vehicles are the same, and it is important that you know your vehicle inside and out. Pressing the wrong button or doing something wrong, such as opening a sealed radiator, might prove costly and damaging. Read your car’s manual from cover to cover and pick up vital information like how to operate the various features of the car, the type of fuel that is recommended, and the recommended maintenance schedule.

  1. Make sure your tires are in tip top shape.

Your tires are the parts of the car that are in constant contact with the road. It is important that you keep them in top condition because they can expensive to replace. Well-maintained tires can also help improve fuel efficiency and the overall well-being of your vehicle. You don’t want to drive too fast when on rough roads, and you want to make a regular check to make sure that there are no punctures and that the air pressure is at the recommended level. Rotate your tires from the front to the back every now and then so that the wear and tear is spread out evenly. Check on the wheel alignment every now and then. Misaligned wheels and axles can cause further damage to your vehicle.

  1. Follow your car’s maintenance schedule.

Car manufacturers will have a suggested maintenance schedule for your car. It can either be at regular time periods such as once a year, or it can be based on distance, perhaps every 10,000 miles. Some higher end models have conditioned based services schedules, where-in the onboard computer calculates the service schedule based on several variables. These service intervals are the optimal way to taking care of your car. You should make sure that you bring in your car for regular maintenance. Don’t wait until something is wrong. As they say, prevention is better, and cheaper, than the cure.

  1. Replace windshield wiper blade and other filters by yourself.

Windshield wiper blades, oil filters, and air filters are consumable items. Since they have a short lifespan due to the wear and tear on them, it is advisable to replace them regularly. Windshield wiper blades are considered as safety equipment because they wipe away any dirt and fluid that may be blocking your vision. Worn out wiper blades will be ineffective and will cause smudges and poor visibility. Air and oil filters block out dirt and other minute particles that may clog up your vehicle. If these filters are unchanged, they may contribute to fuel inefficiency, fail to block out impurities and at worst case scenario, cause damage to the car. While your friendly neighborhood mechanic can do all these for you, replacing wiper blades and filters are quite easy to do. You can do it yourself to save on mechanic fees. If you get some instruction from your local auto club and buy the necessary equipment from the store, you can do it yourself.

  1. Minimize your car’s load.

Your car’s total weight is important in its overall fuel efficiency. Logic will tell you that the heavier your car is, the fuel the engine will consume to get you the power and acceleration you need. That’s why vehicle manufacturers make a conscious effort to lessen the gross weight of the car by using lightweight but strong materials such as thermoplastics and carbon fiber. Therefore, you should also make the effort to keep your car as light as possible.

It is quite easy to think of your car as a storage area on wheels. You keep boxes of stuff in your trunk even though you don’t need it every day. Multiple pairs of shoes, a small bag of clothes, children’s toy, boxes of books and folders, and sometime even food rations are permanently kept in the car. Lugging around all the things that are cluttering up your back seats and trunk every day will lower your fuel efficiency, and it can increase the wear and tear on your vehicle faster. So, you want to clean your car every month and remove the heavy things that you do not need. You’ll be surprised at the amount of gas that you save.

Follow these tips and tricks will allow you to save on fuel and improve the life of your car.