As the Big Cajun Man at Canadian Personal Finance pointed out, car companies are shying away from leasing cars. This may seem puzzling, but will make sense after looking at the true nature of car leases.
The term “car lease” was great marketing. It gives the illusion that the dealership takes the risk, and you just rent the car for a while and get a new one when it suits you. The truth is that with a car lease you take much the same risks as if you buy the car.
If something happens during the term of a car lease that makes the car worth less than expected at the end of the lease, you’re on the hook and will have to make up the difference. The best way to think of it is that you own the car, but owe a lump sum at the end of the lease. If the car happens to be worth as much as this lump sum owed, then you’re okay. If not, dig into your wallet.
When leasing a car you have lower payments than if you took out a loan, but this just means that you’re paying it off more slowly. In fact, during the early part of the lease, often you aren’t even keeping up with the depreciation on the car.
So, for the first part of the lease, you may actually owe more than the car is worth. This is a risk for the car company. With the recent credit crunch, car companies are smart to avoid such risks. So, it’s no wonder that some car companies don’t want to lease cars these days.