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When you lease a car you are effectively paying for the portion of the value you use up for the time you have the car.

Consider this simple example (I have ignored the time value of money for simplicity sake)

Person A ? buys a $48,000 car, keeps it for 4 years and sells it for $24,000 to an arm?s length buyer

Person B ? leases the same car for 4 years for $500 per month (48 * $500 = $24,000)

So who is better off? Over the 4 years both person A and B are out of pocket the same $24,000.

So with respect to your arguments

1. You'll Never Stop Making Payments ? this is true for both buying and leasing a car. If you want to continue to have a new vehicle after the 4 year period Person A will have to buy a new car, and person B will have to enter a new lease.

2. Extra Charges For Mileage And Wear ? again, you fail to take into account this would have on person A when he sold his car, would you pay the same price to buy a 4 year old car with 100,000 km as you would for one with 200,000, or 40,000, the answer to this question is invariably no. The mileage and wear and tear would impact the residual value of a leased car in the same way, since a lease is based on a pay for use premise, if you use more than is assumed in the initial calculation of payments, you should pay more of the value.

3. With No Equity, You're Out Of Luck if it's Totaled ? well technically you are only out the portion that you used. You mention that you don?t have a down payment for the next lease, and that your subsequent payments were higher. They way a lease is structured if person B pays a down payment of $12,000, their payments will be $250, but at the end of the lease, they will be out of pocket roughly the same amount (12,000 + 48*$250 $24,000). If your lease came to term, you would turn the vehicle in, and would not have a down payment for the next lease either

In addition to the above, other benefits of the lease include not having to worry about maintaining a vehicle as oil changes etc are often included in the price.
In summary, I don?t want to come off as pro-lease, as the accountant in me advocates doing a fair and unbiased analysis. There are some very simple tools in excel that allow you to calculate what the Net Present Value (NPV) of each option would be. An NPV analysis factors in the time value of money. In other words if you gave me $100 today, I would be better off than if you gave me $100 a year form now as I could invest the $100 for a year and earn some interest. By learning these tools you can ensure that you are getting the best possible deal, as when a lease is structured properly, the NPV should be the same, and you should be in the same financial position regardless of your choice. As always, this is a case of caveat emptor, as you need to know what you are signing up for.

Jason Schultz, CA