Having used multiple spreadsheets to illustrate the dollars and cents around the leasing vs buying option, let me conclude. It depends on how you view uncertainty.
As I said earlier, one big advantage of leasing is its clarity and certainty. You know how much you are going to pay, and that is how much it will cost you. Period.
With buying a car, you will potentially save a lot of money compared to leasing, but you will also face some uncertainty in the total cost of owning the car. One big factor is how much you will get when you sell the car.
There are all kinds of tools and resources that help you determine how much you will likely get, but there is no guarantee. But if you are the type of person that does not mind the uncertainty, then buying is a better option. But you are one of those people who do not like to deal with the uncertainty (or the hassle) around selling the car, then leasing is more attractive.
So think of the difference in cost between leasing and buying the “risk premium”. When we frame the difference this way, we can almost view it as an insurance program. For a fee that is equal to that risk premium, you will not need to worry about all the uncertainties.
Let me conclude with one news article. It was just reported that Best Buy was going to introduce a membership program called “Best Buy Total Tech” for $199 a year. Its benefits include:
- unlimited Geek Squad technology support on all the technology in your home.
- 24 months of product protection on most Best Buy purchases and two-year Apple Care on all Apple device purchases made at Best Buy.
- free shipping and standard installation, including large appliances.
So someone who do not want to deal with all the headaches and uncertainties of tech purchases, it may be a very attractive insurance policy.
So the business takeaway: Uncertainties create pain, and therefore businesses can creative value by pricing the pain and taking away the uncertainties.