A Suze Orman exclusive

Let's first talk about why leasing is such an ego stroker. As I just mentioned, it allows you to drive a car you couldn't afford to buy for yourself. And why is that important? Because you suffer from status-symbolitis. You want your car to be the talk of the office parking lot, or to turn heads at the stoplight. People, wake up. You are spending money you don't have, to impress people you don't really know. Where is the logic in that?

If you want a flashy car, you should be able to write a check for it. Not lease it, not finance it. That's just financial common sense. There's a reason they call them luxury cars; they should be for people who have the money to afford that luxury. If you need to lease a luxury, that's a pretty good sign you can't afford it. Actually, a lot of people who finance a luxury car can't really afford it either. I know there are plenty of folks who drive a $65,000 car even though their retirement investments are way too low, they don't have a sufficient emergency cash fund, and they aren't doing anything to save for their kid's college education. But hey, they sure look fine driving their status symbol. Give me a break.

Getting Rear-Ended When the Lease is Over
When you lease a car, essentially you are borrowing it from a leasing company for a fixed period of time. The most common lease period is three years, although four-year leases are popping up now as well. When the lease is over, you can either buy the car outright or turn it back in.

Whether you are planning on buying the car at the end of the lease or not, it is probably going to end up being a bad financial move. The sale price the leasing company will offer you is usually not a good deal. This price, known as the "residual value," can be inflated because of some financial sleight of hand the leasing company pulled off, under the guise of getting your monthly payment as low as possible, way back when you signed the lease.

So what do you do? You hand the car in at the end of the lease period. And that turns out to be really sticky too.

If you don't return the car in pristine condition, you are going to get charged some extra fees. Please explain to me who wouldn't have wear-and-tear on a car they drove for three years, especially if there were kids squirming and spilling in the back seat.

There's also the odometer issue. Most leases stipulate that only the first 12,000 miles a year are covered by the lease. After that you will be charged a per-mile fee, maybe 15 cents or so. Here's just one scenario to ponder. You lease the car and don't worry about the mileage because your office is four miles from your home. Now let's jump ahead one year. You decide to move, or you land a fabulous new job that's not as close to home. Your daily roundtrip commute jumps from eight miles to 30 miles. That means just to get to and from work you are going to run up about 7,500 miles a year rather than 2,000. That will leave you just 4,500 miles to live your life: run errands, go to the movies, visit your friends and family, take a road trip. And what happens if Mom or Dad becomes ill and you decide to make the 300-mile roundtrip trek home each week to visit them?

The point is that life is full of unknowns. Right? When you sign a lease you can't possibly understand where your life is going to be in six months or two years. Your lease doesn't care what happens in your future; it won't adjust to your changing lifestyle. And that can end up costing you big-time.

Let's say you end up averaging 13,000 miles a year. That will mean over the three years you will be 3,000 miles over the limit. That's gonna cost you an extra $450 when you turn the car back in. Overrun your limit by 2,000 miles a year and you will be forking over $1,000 when you hand in the keys. The car experts at Edmunds.com tell me that they estimate about 10 percent of leasers exceed their mileage allowance, and typically by a whopping 5,000 miles a year. At 15 cents a mile, that's going to be another $2,250 they owe when they finish a three-year lease. Hmm… I bet every one of them assumed when they took out the lease that they would never go over the 12,000 limit.