Could I be wrong about car leasing?
I think it's a bad financial move for the overwhelming majority of people who do it. But every time I rail against leasing, I get a flood of mail from people who say I'm "dead wrong" (I guess being just wrong doesn't convey the message strongly enough).
Here's a snippet of one e-mail: "Have you ever driven a used car until it's pushed off the road? Have you factored in years of getting rides to and from your car to cope with repairs, not to mention the expense of wasted time and the possibility of unsafe breakdowns? If not, you really shouldn't be commenting on leasing. Buying a car is a waste of money."
Well, I have driven a car that needed to be pushed off the road. In fact, when I owned this lemon (a hatchback Datsun that was actually orange) it was a good thing my grandfather was a tow truck driver. I was always calling him to come tow the car.
But I didn't hang on to the car long after it started causing me major problems. At that point it does make sense -- if the car is that unreliable and it breaks down before you can schedule repairs -- to buy another vehicle.
However, I was rather impressed by people who argued passionately for what they said were the following positive aspects of leasing:
* You get to drive a better car for a lower monthly payment than if you took out a loan.
* When your lease ends, you don't have the hassle of negotiating on your trade-in.
* It's a good deal if you don't drive a lot of miles every year.
* You're not investing in a depreciating asset.
* If you like to trade cars every one, two or three years, then leasing is an "awesome tool."
All the above points sound reasonable. But are they, once you apply what I call Big Mama (my grandmother) common sense? Let's see:
* You get more car for less. Translation -- you can drive a car you can't afford to buy. What's most attractive about leasing is the idea that you can drive a Cadillac even if you have a Chevy budget. That's fine, but chances are something else in your financial life will get shortchanged.
* You don't have the hassle of trading in your old car. People, please. There is enough information out there to help even my 9-year-old daughter negotiate a good deal on a trade-in. There are Edmunds.com, Consumer Reports and the Kelley Blue Book to help you figure out what your old car is worth. And a lot of this information is free.
* Leasing makes sense if you don't drive a lot. Most leases allow you to drive 12,000 to 15,000 miles a year. If you go over that limit, expect to pay (typically 15 cents, but it could be more) for each additional mile. I've heard from countless consumers who had to pay for extra mileage. What if you have to change jobs and have a much longer commute? It happens -- all the time.
* Don't buy a car because it's a depreciating asset. Really? While that sounds so sophisticated, such logic will keep you in a car payment for the rest of your life. If it were true that you shouldn't buy depreciating assets, why not rent your television, your clothes or your furniture? It's true that a depreciating asset loses its value over time. But when you buy a car, you've still got an asset. "At the end of a [lease] contract, after you have paid much more than if you had purchased, you own nothing," said John T. Armstrong, a certified public accountant in Hampton, Va., who used to work in the auto industry. "I have seen many people bring the car back at the end of the contract and have to walk home." Armstrong agrees with me about this nonsensical depreciation argument.
"Depreciation is just an accounting term that we use to write off the useful life of the asset's ability to produce earnings," Armstrong said. "We cannot and should not use this in our personal finances. Our personal assets do not generate revenue and therefore cannot be depreciated. So leasing a car for business purposes is okay, but never for personal use."
In the end, you may still feel like the reader who said: "You are clearly imposing your values, lifestyle choices, etc., to a whole class of people."
I will grant you this -- when it comes to decisions such as leasing, that's why it's called "personal finance." It's always your choice what to do with your finances.
So, you don't have to agree with me, but wealth happens when you follow good advice.
Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at www.npr.org. Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or send e-mail to firstname.lastname@example.org. Comments and questions are welcome, but please note that they may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.