All across the world, the trend of leasing cars has been on a steady rise. For example, if you go back ten years ago to the year 2009, you will find that auto leasing was reserved primarily for business executives and for companies and that this practice was not very common among Israeli citizens. However, in Australia during this same time, around eighty percent of new cars were privately leased. Leasing is not something new in other parts of the world; however, that is not true of Israel.
By undertaking a lease agreement, the consumer agrees to make a down payment on their vehicle and then to make monthly lease payments based on the outstanding balance of their vehicle. Then, at the end of the lease agreement, the consumer can choose to pay off the remainder of their car’s outstanding balance and purchase the vehicle or trade their vehicle up for another new leased vehicle. Leasing ultimately allows an individual to drive a new vehicle all of the time. However, financial reports show that people who lease their vehicles throughout the entirety of their lease’s term often, in over 60% of the cases, choose to upgrade to a new vehicle. Ultimately, what this means is regular monthly payments year in and year out because the borrower does not want to pay the remaining balance of their vehicle, despite a roughly thirty percent down-payment required for many lease agreements. Leasing ultimately keeps the individual consumer in debt, since they are always making payments for an asset they do not fully own. People are staying in their leases, opting to move up to a new vehicle when their lease term ends. Many personal finance experts recommend consumers to purchase their vehicles second-hand and to try their very best to buy their vehicles entirely with cash. Today with the internet, it is very easy to use an online REVs check to ensure you are purchasing a quality used vehicle. It is very important that consumers ensure they research a variety of vehicles before they make their purchase to increase their odds of buying a reliable vehicle.
Leasing does make financial sense for some situations. Leases can be useful for certain types of businesses while reduced out-of-pocket expenses are another significant benefit, in addition to no upfront tax charges. Since the individual is not purchasing the vehicle, it is very much possible to avoid these upfront taxes, which often add a large amount of money to the total purchase price of the vehicle.
Even the Israeli Defense Ministry is leasing their own vehicles and they have announced a 3,500 vehicle lease that will be the biggest lease in Israel’s auto industry. They also have plans to lease additional vehicles in the future. Leasing will help the Defense Ministry save money, but the same cannot be said for regular consumers.
While household debt is on the rise across the world, we each have the responsibility to ensure we do not contribute to this global problem.