September 16, 2007

What To Do When Your Car Lease Ends

"So many options, so little time."

That's how a letter from the dealership where I lease my car starts. I'm invited to start thinking about my options as there are new models and "many new attractive leasing options". I've still got 12 months left in my 39 month lease. The dealership is certainly being proactive. They did get me thinking.

Five Options
Five options are
  1. lease another car now (paying a penalty of thousands); forget that
  2. lease another new car at the end of the lease (the dealer's preference)
  3. buy the car at the end of the lease for the residual value for resale or to keep
  4. import a car from the US where prices are much lower (see at
  5. takeover an existing lease (e.g., at LeaseBusters)
Each choice includes the worst step: negotiation. How do you know you're paying a fair price? There are tips at sites like Insider Car Secrets.

What Millionaires Do
In The Millionaire Mind, author Thomas J Stanley reports that millionaires buy (not lease) quality used (not new) cars. Since cars depreciate rapidly, the savings from buying "pre-owned" outweigh the additional maintenance costs. Owing to poor reliability, German imports like Audi, BMW, Mercedes and Porsche make lousy choices. Buying domestic or Japanese is more cost effective.
The most reliable used car, a 1998 Lexus LS400 had fewer problems than a 2006 Mercedes-Benz ML500, according to Consumer Reports. For new vehicles, the owner of the Mercedes M-class is likely to experience 10 times as many problems than with a Toyota Highlander Hybrid. Sadly, the more reliable cars are less enjoyable to drive.
Naturally, there are pros and cons to each option. Luckily, there's plenty of time to decide. Too much time.

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