I Don’t Have Any Equity When I Lease.

June 18, 2014
Posted by: Thomas Automotive Family

J. Paul Getty, founder of Getty Oil, was credited with the sage advice,

“If it appreciates, buy it. If it depreciates, lease it.” The main point is, “why would one want to invest in something that looses value?”

Because cars are used up as you drive them and because newer ones tend to have improvements in safety and other features, they depreciate with time and mileage.

As an example, on a leased car with an original sales value of $20,000 and a guaranteed future value of $12,000 at the end of the lease, you only pay the difference of $8000 plus interest costs during the lease.

So one way to look at your equity is that it is the $12,000 that you did not pay in the lease that you would have paid had you bought it.