Automotive leasing has been gradually gaining steam every year, and consumers on the east and west coast have turned it into the preferred method of vehicle ownership. In the New York Metro Area for instance, leased vehicles often account for 75 - 90% of all automotive purchases.
So why hasn’t leasing caught on as fast in the rest of the country? Is it simply another case of the coasts setting the trend and the land-locked states showing up late to the party? Will leasing ever extinguish the concept of financing entirely? Because really, who in their right mind would want to pay $500/mo when they could pay $300/mo for the same exact vehicle?
Not so fast… financing is alive and well for many reasons, the most notable being that it’s still the better investment.
In fact, of the two options, financing is really the only one you could call an “investment”. In a lease, you’ve agreed to pay the vehicle off while its value is in the red - the period where it’s worth less than what you owe on it. It’s when the vehicle reaches a point of being in equity that financing and leasing take two different paths. At this point, a leased vehicle is returned to the bank, and you’re back to square one without a dollar in your pocket. Meanwhile, a financed vehicle becomes an asset once the vehicle is worth more than you owe, and usually reaches a maximum return value later on, around the time that you’re making your last few payments on the loan.
We can see how the length of ownership truly dictates how much value you’ll get out of your vehicle. If you get rid of cars every 3 or 4 years, then financing doesn’t really net you any profit (typical of drivers on the coast, hence the popularity of leasing). Holding onto your vehicle for 5 years or more is the secret to keeping your automotive expense as low as possible, and us fast talkin’, fast walkin’ folk on the coasts are too busy looking for the next best thing to stay in one car for that long. That’s why leasing is so popular on the coasts and not so much in the rest of the country, plain and simple.
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