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In basic terms, leasing is simply paying only for that portion of the car that you will actually use. So, if you are considering a 1998 Toyota Camry, for instance, and plan to keep it for only 3 years, leasing (if you have that option) may be a smarter way to go. Why buy it for $12,000 when you can lease it for a total expense to you of $6,000? Wouldn't you rather have that extra $6,000 in your pocket?
But you're saying "Sure I save $6,000, but I don't own anything at the end of the lease". So what?! What do you suppose an 8-year old, 120,000 mile car is worth anyway? Put that saved $6,000 to use as a down payment (cap reduction) on another lease car in 2006. With leasing, as long as you don't keep a car longer than 4 years, you'll almost always be ahead of the game!
So find a good used car, check its history, have a trained mechanic look it over, and if it makes sense for you.....LEASE it!
What happens to the cars customers trade-in? If they are really quality cars, the dealer might put them in his used car inventory, but more often than not he will wholesale them out, because they don't fit the criteria for what his used car customers want, in terms of make, model and mileage.
Why are the professional auctions such a good source of quality cars? Because they get first dibs on rental cars and lease terminations...popular make cars with low mileage which have been carefully maintained.
Can you or I go to one of these auctions? Not unless you are a franchised new car dealer. The local car auctions that you might see advertised and that you would be allowed to go to usually don't have cars anywhere near the quality of the professional auctions. And if you do patronize these local auctions, you're really buying blind; that is, you don't know what you're getting. The used cars purchased by car dealers are the best cars available.
Does it always pay to buy a used car from a dealer? Well, if it's a franchised new car dealer, then yes, it usually does. If it's strictly a used car dealer, without any manufacturer connection, you are taking a bigger risk. If it's a used car from a friend, relative or classified ad, be smart...have it thoroughly checked out by a certified mechanic. Also make sure you check the VIN number through a reliable research service. Spending a few insurance dollars to check a car out before you plunk down thousands to purchase it is the smart way to go.