This is an age old debate, like "tastes great!" / "less filling!". It all depends on the situation. Sometimes it's a poor choice by people living beyond their means and other times it may not be such a poor choice.
Not many people these days keep cars for 15 years. If you drive 12-15k miles a year, there comes a point where it just becomes a hassle and in some cases dangerous to run a vehicle into the ground before buying something new. In addition to that, it's the American Way to buy a new car every 3-4 years, especially if you're a car enthusiast who doesn't just consider their vehicle a means to get from point A to point B. We buy them as luxuries/status symbols. We enjoy a new car because it makes us feel good. They're not investments, unless you're a lucky one who kept that '65 Mustang in prestine condition. Very few vehicles sold today will ever become "classics" like the models of the 50's and 60's, especially foreign cars.
That said, there are benefits to leasing 'certain' vehicles at certain times. Not all vehicles are good lease deals. If you lease cars that have higher residuals, like Hondas, Acuras, BMW's, Lexus's, etc... you can get alot of car for very little out of pocket expense and an affordable monthly payment, especially if they're running incentives on a model that isn't selling well. If you lease cars that have crappy resale value, like VW's, Hyundai's and just about any domestic, you're going to pay through the teeth and not have anything to show for it. Sure, we'd all love to walk into a dealer and buy a car cash out of pocket, but the majority of people live from paycheck to paycheck and think in terms of how much money per month they can spend. I'm not saying this is "smart", but this is the way it is.
Another thing is, not everyone wants to take that kind of money and put it into something that is just going to depreciate. This is all about which way is going to lose me LESS money over a period of time. Heck, I have the money in the bank to go buy a 3 cash out of pocket right now, but do I want to do that? Is there something else I can use that money for to make me money in the long run? Upgrades to my house, downpayment on a property (the market is great for buying right now!), money market account, stocks/bonds, feed my IRA, etc... Do you really want to tie that kind of money into something you are not going to get a return off of when you can lease, always have a nice new car and not have to worry about putting huge amounts of cash down on a vehicle to do so.
I think we've established that the most financially-smart way to go would be to buy cash out of pocket, pay no interest, and run the car into the dirt, be it 10, 15, 20 years. Who knows? But, lets compare buying a $25,000 car cash out of pocket and keeping it for 4 years, vs. leasing the same car with very little money down and putting most of that $25,000 into a money market account at 4.5%. We'll assume no sales tax or title/tags to make it easier, .0025 money factor (6% interest), 54% residual (This is more like a 4-year Honda residual) and $1,000 out of pocket for acquisition fee and security deposit (which you should get back!). Normally you have to pay first month's payment with a lease also, but I won't include that. Monthly payment is $335.83. Over the course of a 48 month lease, this is $16,119.84 and you're paying $4,620 in interest over that 4 years.
Now lets go to the person that forked over $25,000 cash on the same car. He keeps the car for 4 years, drives the exact same amount of mileage and now decides he wants something new. Ok, does he sell privately or does he trade it in? He knows that he can probably get more money if he sells privately, but at the same time he's gotta wait for that certain someone to come along and want to buy the car. If he trades in, he's going to take a hit on the "profits" (and I use that term loosely), but he can get it over with and be in and out with a new car the same day. Decisions decisions.... I know for me, when I get a bug up my rearend to go buy a new car, I don't want to deal with potential buyers pussy-footing around and holding up my purchase. That's just the impatience in me and I know I'm not alone. So lets assume he trades up. If the car Blue Book's for around $13,500, you know the dealer is only going to give about $11,000, if that. Nowaday's dealers like to give you "auction value" because if it doesn't sell on their lot, they send it to auction. Assuming the car trades for $11,000, he lost $14,000 over 4 years of ownership, so he's roughly $2,000 ahead of the game and has $11,000 out of the original $25,000 to use on another vehicle.
The other guy who leased that same car put that money in a money market at 4.5% and it's worth $29,920. Roughly $30,000-16,000=$14,000>$11,000.
There are so many variables though, as you can say that the guy who bought cash out of pocket can now save his $335 a month that he's not spending on a lease payment and have $16,000 in the bank after 4 years to add to his $11,000 he gets for the trade and come out ahead. Of course that takes financial discepline, which most of us lack.
The moral is you will, in most cases, lose less money over your lifetime purchasing vehicles, rather than leasing because much like renting an apartment, you are paying someone else to use their property and make a profit and will have nothing in return when all is said and done.
