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Money Mistake Monday – The I Fell For Another Car Lease Syndrome.

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In this week’s edition of Money Mistake Monday, I am going to talk about car leases. Back in my freewheeling days, I leased cars. Audi’s, to be exact. After driving a Honda Civic into the ground, I decided I deserved better so I leased a brand new Audi A4…man that was a nice car. I felt like such a badass, but little did I know that no one else gave a crap and I was not getting the looks that I thought I was getting. The reason I leased? The car salesman sold me on the monthly payment – and I disregarded anything I had ever heard about the perils of focusing only on the monthly payment. I put down my $2500 cash (off a credit card, to be exact) and drove away in my new Audi, all for the low low cost of $371 a month.

That $371 a month sure seemed low enough, until about 6 months into the lease when it started to hurt bad. It was the first time I had a car payment and I was only making $30,000 a year. It was not easy.

But still, about 2 years into my lease, my salesman contacted me and asked me to come in and take a look at the new Audi’s. And I did, stupidly enough. These new ones were even nicer! For only another $2,000 down and a small jump in my monthly payment, I could get out of my lease and start a new one. Sold! Bad, bad move.

About 1.5 years into that lease, I had an epiphany of sorts – why was I renting a car for $400 a month? I was not building any equity at all and I had to give the car back at the end of the lease. This was quite stupid! So I found out that Audi allowed me to sell my car to someone else and get out of my lease, as long as the value of the car was paid off. I placed an ad in the paper and had several people interested, but they were all a little wary of giving me a check for the car but waiting until Audi cleared it in order to actually get the car. Finally, a woman bought the car, we paid off Audi, and she took my “like-new” Audi away from me and saved me from renting a car for any longer. I was out from underneath the second bad lease I had signed up for, and I was never going to do that again.

Since then, I have only bought my cars. No more borrowing from a credit card for a down payment, no more renting cars only to return it and being stuck with an empty wallet. Sure, I don’t buy my cars in cash like I should, but the next one we buy will definitely be paid for in cash. Ever since buying that first new car after the leases, I paid off all my debt and built up my savings and retirement funds. So the next time I need a car, we will pay for more, if not all of it, in cash and we will not be paying interest to any bank on a depreciating asset.

If you lease cars, make sure you know what you are doing and do not concentrate only on the “low monthly payment” that the dealers try to sell you on. I can see the appeal in leasing as you get a new car every year, but after my two leases I refuse to rent a car at those prices, because that is effectively what you are doing – renting.

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Comments (15)

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  1. I remember falling for the lie that leasing cars was what ‘smart’ or ‘sophisticated’ people did. I leased two cars when I was younger, nothing as nice as your Audis, but I finally realized how stupid it was and put an end to that as well.

  2. RR says:

    You know, I was also completely against leasing until I talked about it with my cousin, who lives in an Eastern state where they salt the roads. We took a road trip to visit her in my 1990 Acura. Anyway, we saw very few cars my age back there, and those we did were all rusted out. Cousin leases, and pointed out that she just couldn’t keep a car for 10-15 years–it would rust out due to the salt and snow. So, for her, leasing means she gets to drive a new car, and not have to worry about long term wear due to environmental factors. It can make sense, but, as you note, you need to know exactly why you are making that rent vs. own decision.

  3. Laura says:

    I haven’t leased but my current car loan has higher interest rate than I like right now. 13.75% is insane!

  4. [...] My Two Dollars:  Money Mistake Monday -  The I Fell For Another Car Lease Syndrome [...]

  5. dster says:

    Thanks for visiting my website!the next car I’m going to blog about is the Mustang shelby cobra GT 500!

  6. MoneyNing says:

    Yikes! I’m glad to hear that you are out of the leasing business! Sometimes nothing teaches better than going through it the hard way! At least you’ve learned something new!

  7. [...] My Two Dollars (M): Money Mistake Monday – The I Fell For Another Car Lease Syndrome. [...]

  8. marie says:

    I own my own business so my accountant says leasing is not a bad way to go. I like to drive a new car so i get short leases and move on to my new model and write off the cost of the lease. Any thoughts?

  9. david says:

    That could work Marie, but you could still buy a car and write off those payments – and have equity to roll into another new car after 5 years. For me, leasing made no sense so I stopped doing it…

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