You always see this disclaimer on car ads. Is something an ordinary person with good credit can get. Or is it essentially impossible and just a means for them to dangle a low rate.
Pretty much it means nigh perfect credit. But no, when announced by a major automobile company, it’s not a bait & switch.
Mind you, a lease is almost always a bad idea for a individual.
… because you end up paying more over the life of the lease than if you rented, and have no equity at the end.
If you are a “not qualified very well at all” lessee, then you might be able to get a lease for a new car when you’d be unable to get a loan for the same car. That doesn’t mean it’s a good deal per se, but it’s perhaps the only way for you to get into a new car.
Sorry - is ‘rented’ the word you meant here? Because for one thing, if you rent a car long-term I imagine that would get very pricy, and also no equity. (Did you mean purchased with a loan?)
I do agree a lease is usually a bad financial move, I was just curious about the terminology.
The restricted mileage of lease means you can really only drive it on short trips to work; when I still commuted I’d put 20,000 miles a year on a car total and IRC a typical lease is 12,000. So why do so many people lease a car anyway? Ignorance, or people that want to drive to work, show off to the coworkers a better/newer car than they would ordinarily be able to afford?
I take it that since leases tend to be a bad deal for consumers the converse is they tend to be a good deal for car companies which is why they’re advertised so heavily?
In the US, there are two different structures to borrow a car. One of them is short term “renting” from places like Hertz and Enterprise. People commonly do this when traveling - they fly to Boston and rent a car rather than driving to the Boston area. People commonly rent a car for the week. The second is a long term “lease”, which is normally done for obtaining a car to drive locally/ to work / etc. Leases are commonly obtained through a dealership and are frequently new cars. Instead of buying it through a loan (or paying it in cash (which nowadays means 100% money down e.g. via a check, not a suitcase full of money)), you sign an agreement where the dealership sells the car to a leasing company and the leasing company leases the car to you for, say, five years. After the five years is up, the car still belongs to the leasing company and you can walk away debt-free as long has you haven’t abused the car.
One thing I’ve heard is that with a lease, you can get a more upscale car than you could buy. So, for the price of buying a Toyota or a Chevrolet, you might be able to lease a Lexus, Cadillac, or BMW. Of course, in the end, if you had bought the Chevy you would have a Chevy in the end. If you leased a Cadillac, at the end, you would have nothing.
I understand all that. (The system is much the same in Canada.) My confusion was that anson2995 appeared to be comparing leasing to renting “over the life of the lease” and saying that renting was the better option where you paid less (and possibly had equity.) Is this your opinion as well?
This is basically correct, but exaggerated. It’s more like: for the price of buying a cheap Toyota (or a cheap Lexus), you could lease a fully-loaded Toyota (or a fully-loaded Lexus) for a similar monthly payment.
It’s true that when you lease, you have nothing when the lease is over. And it is also true that when you purchase, you can have the car for many additional years. Those are objective facts suitable for General Questions. Another objective fact is than when a person purchases the car, even for the first few years, he’ll be lacking many of the features that he could have gotten for the same monthly payment by leasing. So which is the better deal? It depends on many factors. One size does not fit all.
To get back to the OP, a “well-qualified lessee” is someone with good credit.
Like it or not, your credit score is how businesses measure your value as a human being.
And it does depend on the customer’s definition of value. If the customer is a hotshot businessman who wants a luxury car to impress peers, customers, or supplyers, then leasing that BMW may make a lot of sense. If you’re a lower middle class blue collar worker who needs a car that will make it to work every day and can take a bit of abuse from hyperactive children and can take the grit of gravel roads, then maybe buying that Chevy and working on it at home makes a lot of sense.
I’ve understood “well-qualified lessee” to be someone with VERY good credit.
And I’ve never imagined that credit score has any connection whatsoever to how businesses measure your value as a human being. Rather, it is how they estimate the likelihood that you’ll pay back the loan.
This is not entirely accurate - at teh end of the lease, you always have the option to buy the vehicle for x dollars - if by some chance that option is less than the current blue book, you have equity that can be used for trade in purposes.
It is accurate that you can just walk away and owe nothing - but I have seen that not go quite as expected as well - so, as always, be careful of the fine print.
Excellent point. People tend to think of owning one’s home as an investment which renting one’s home never is. But with cars, one could argue that both buying and leasing have a certain investment angle to them, if you’re the kind of person who trades it in after a few years.
There used to be leases where the buy back value was determined at the time of purchase. They were very advantageous because the buy back would be paid in inflated dollars. I leased a cheap car on those terms in 1978, worked out great for me in the end. But I haven’t heard of that since then. I leased another car to make it easy to write off as a company vehicle. In that case the buy back calculated at the end of the lease was still worth it, though without the tax advantage it would have ended up costing more than a loan.
You can get hit hard if you have excess mileage, and all damage has to be repaired, sometimes only by authorized dealers who will charge a premium. And your insurance has be sufficient to make you whole in case the car gets totalled. You could end up owing the rest of the lease plus the buy back in that case.
My wife and I recently purchased a (used) car and discovered that our credit ratings were both comfortably north of 800. The salesman was (or at least acted) impressed and although he didn’t talk us into a lease, they offered to finance us for well over a percentage point lower than any other place (banks and credit unions) that we looked at. So the good credit score can be an advantage when purchasing as well as leasing.
Usually there is small print in the commercial (on TV, of course), that will define what “well qualified” means. I’ve noticed that this is an A+ or better rating, in the manufacturer’s scale.
You’re right, I meant leased. In my head, I was thinking of a rent vs buy metaphor for housing, and it just leaked out.
Someone else mentioned the downside of leasing for those who might exceed the mileage limit. The downside applies just as well to a purchased vehicle, in the form of increased maintenance costs and decreased equity.