Almost every lease includes something along the lines of "we expect this car to be worth $X at the end of lease term, and, if it's not, we charge you for it".
At that point, why lease? The leasing payments are a significant chunk of the loan payments anyway.
Used car market is pretty great if you have weeks available to find a good one that has been used well and maintained properly.
Anectodal as it might be I drive a stupid unreliable car from 2004... that has been going faultless twelve years in my hands.
Luck is also involved, but some research into engine tech and model build quality goes a long way in restricting the research and it's way better than those statistic collecting websites that don't account, for example, years of mehanical abuse that some brand gets more than other because of the segment they appeal.
I'm kind of a petrolhead, but a friendly mechanic can give you the right tip if you feed him enough info about what needs you have. you need to be flexible tho, some good model are ugly or may not fit your personal style
I don't think they "charge" your for it at the end of the lease.
Leases have a "residual value" which is what they expect the car to be worth at the end of the lease, assuming it was kept in good running condition.
They can charge you for excess mileage, extreme wear and tear, and faulty/lack of maintenance - but all of these have been true for a long time.
My parents have leased several cars and in each case they were over by a few thousand miles. They paid the 10 or 15 cents per mile penalty ($150-300) and washed their hands of the car when they were done. Then the leasing company sent a truck to pick it up.
We lease 1 car because it will be under warranty. All scheduled maintenance is included - oil changes, tire rotations, etc. That's probably a few hundred over 3 years. Tires and brakes aren't so we have to keep an eye on those towards lease end.
Some things to consider:
When we were pricing out the options, the higher end model actually worked out with lower payments because the residual value (price they think it will be at end of lease) was higher for the higher end car.
It is a good way to "try" a vehicle/brand and if it turns out to not be super reliable/has issues or you just don't like it but can deal with it for 2-3 years, then you are done and walk away.
If you are looking long term - buying a used car is the better option. Financing a used car means monthly payments and if you are looking at things from a monthly cash flow perspective, leasing can be cheaper monthly - but pay more long term. Usually the rates for auto loans are much cheaper than credit cards so if you have CC debt, leasing can get you a lower monthly than buying and you can put the extra money per month towards debt.
I had a co-worker who wanted to drive an Audi but didn't want to be on the hook for keeping it fixed (or getting rid of it) once the warranty ran out. I'm thinking that most current German cars are like that.
I think it appeals to businesses where they can simply roll the lease over to a new car every the years, so it's basically just a cheap long-term rental. If you're happy to drive a 5+ year old car it makes far more sense to just buy it, pay it off and keep it.
> People owing more on their cars then they are worth, then defaulting.
I read somewhere that car loans are some of the safest secured loans for lenders. People will skimp on food, rent, and everything else before they default on their car.
It's not really comparable. Most people need a car to get to work, or even look for work. You can sleep in your car but you can't drive your house. So they really will default on the car payment last.
It's definitely a dynamical system. There is a limit to the new car's price due to used cars (both availability as a function of increased reliability, exchangeability and the economy), leases [a bet on the future], the competition, as well as transactional costs and don't forget interest rates.
So if you own a car manufacturer what do you do? :)
You are stuck with it for that whole term though. You'll be upside down on it immediately, and your loan principal won't catch up to the residual value of the car for 5-6 years with a loan that long. That means you can't easily trade it in for another one, and any kind of financial hardship is more likely to result in repossession.
But the automaker isn't making much money with a 0% loan rate, because the bank isn't taking the hit on that (the automaker is paying them somehow), so it basically means the automaker isn't getting the full price that was paid.
This is how they will make money. You have to lower credit scores but extend the payment. That justifies the higher price on average.
Still... I guess it is not enough. And the people that take advantage of this at 0% keep the car longer..