Car lease deals may not be such a deal

Published On: Oct 03 2012 01:20:54 PM CDT   Updated On: Oct 03 2012 01:21:09 PM CDT

Looking to lease a new car? Car dealerships are looking to clear last model-year's inventory to make room for the new models. However, the best lease deals will not necessarily save you money.

A recent analysis from consumerreports.org looked at newspaper advertisements for 2012 models, including the Toyota RAV4, Subaru Outback and Mini Cooper Countryman. In the end, the leases were more expensive than buying.

With leases, the monthly payments are low because you only pay for depreciation on the car, not for its full value, and the amount of predicted depreciation has been reduced to lower the cost to the customer. However, after years of making low payments, you still do not own the car. Since you have no trade-in equity, you are left going back to the dealership for another lease, making payments on another car.

Once on the lease cycle, this scenario repeats until you can make a down payment big enough to buy a car. Meantime, you are providing a steady flow of low-mileage cars for the dealership to sell. Timing can be difficult to manage because lease contracts have odd term lengths, such as 39 or 42 months.

The better deal in the long run may be buying a reliable car and holding on to it.