In both circumstances, this looks pretty bad — particularly when you start to add it up over time with years that we’ll likely see in the future. But even in the best case, it’s not a good deal.
One way we can explain some of this is with an example: suppose you have a car and you decide, instead of paying a little money, to lease the car from Toyota.
You do so on a 3year, 25 mpg lease. And Toyota says that for 12 months of this 3 years, you pay only $200 over the phone! As you can well imagine, you’re going to be happy. And that’s it — you’ll have a great car and have no car payments in that 3 years. That’s the only way this kind and length of lease would fit our model.
The real problem here is that a lot of these cars are going to see mileage before the car comes to you. In the future, this is going to hit some of the larger OEMs, which may decide to roll out bigger, more lucrative long-term leases.
This is good for you as well; you pay little. If you see mileage on the car, then you end up ahead from both sides with no payments or anything, and all of this is for a fantastic and relatively cheap deal.
In the longer term, this also means that there are fewer cars on the road, so you don’t get an economic boost from the more cars. So, maybe an example from your own driving history will help…
So if you know that most of your rides are going to start on the highway and be out on the road for 12-14 months, then you get no advantage. But on the other hand, if you know that you’ll start and end each month in Detroit, where you have about 12/14 cars, then you get the extra mileage because you might have an even better deal if you start the lease in Detroit (but only once). (If you didn’t know? Great.)
This gets more complicated with the longer-term leases, but here’s the way I put it: let’s say you pay for a 3-year, 35 mpg lease using a car-buying website. But as the miles build up, your car has to end up in a dealer for the next 3 years, as you have to return it. It’s then only a short ride to the end before it arrives in your possession.
So you get the extra miles, but
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