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Last time we quoted the Ancient Greeks here was on the page “Know Your Credit“, and we will give a brief update about that, but this week’s theme is about the Ancient Greek’s classical elements: Earth, Fire, Water, Air, and the Void, and how they have each been kicking North America’s behind over the past few weeks, especially this week!
Earth – an extremely strong, and unfortunately deadly, earthquake, with an 8.1 magnitude, struck off the coast of southern Mexico on the evening of September 7th, and toppled hundreds of buildings.
Fire – many of the western states of the U.S. as well as British Columbia, Canada have been dealing with wildfires, that have been substantially worse than predicted based on the cold wet winter that the area had, and it has caused some evacuations, with many more possible if the fires are not contained.
Water – Texas and Louisiana, especially the Houston, Texas metropolitan area, dealt with flooding from unheard of levels of rain associated with Hurricane Harvey
Air – between the dangerously smoky air resulting from the western wildfires in the Pacific Northwest to the winds of Hurricanes Harvey and Irma that are striking Texas, and the Caribbean and Florida, respectively, even the Air seems out to get us.
The Void – As if nature isn’t doing enough of a job on North America from coast to coast and north to south, Equifax, a credit reporting agency, acknowledged that they had suffered a data breach that potentially exposed the personal information of 143 million Americans. If some geniuses hadn’t figured out how to use vacuum tubes (i.e. a void) to create the first computer around 75 years ago, the concept of a business that stores data about almost every American and can deliver it around the world in seconds may not be feasible today. Fortunately, it’s one of our modern wonders and sources of efficiency. Unfortunately, it’s also a source of great uncertainty, now almost as uncontrollable as nature.
I Thought Leasing Only Works When Things are Stable…
Remember, when you enter into a lease you pass a major risk off to the lessor: how much is this car going to be worth when the lease term is over. The one thing everyone knows is that it will be worth less than it is today, but when you lease instead of buying you no longer have to worry about how the state of the economy, gas prices, new car prices and incentives, or general consumer tastes will impact the value compared to a forecast based on historical performance. That’s the lessor’s problem. Similarly, as long as you keep your car properly insured, have GAP coverage on the lease (either included or you purchase it as an add-on), and purchase any other assurance products that provide you peace of mind, you can reduce the impact of uncontrollable uncertainty in your life.
This brings us back to the counter-intuitive advice that in a world of uncertainty leasing may still be the right decision on how to acquire your next vehicle. If you’re unfortunate enough to have your car flooded from rain or tidal surge, or covered with ash from wildfires, or crushed under rubble from an earthquake – the same first thing is to be recognized in all cases: just be glad it’s replaceable property and not an irreplaceable human life that has been destroyed. But let’s face it, it still sucks to have your car totaled in a natural disaster, and if you survive a natural disaster you need fewer things to worry about, not more. While you can also have GAP and other assurance products on a vehicle you purchase and finance, there’s a good chance you’ll still be worse off financially needing to replace a purchased vehicle than a leased vehicle.
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- When you purchase a vehicle you pay all the sales tax upfront – regardless of whether you have the car for 1 day or 20 years. When you lease the vehicle you only pay sales tax as you go along, for the use of the vehicle when you have it, and in a lease that’s already calculated to be only for part of the car, not the whole thing.
- As described in the article “Leasing vs. the Most Powerful Force in the Universe” buying and financing a vehicle means paying compound interest versus paying simple interest, the rent charge, in a lease. This means paying a higher “cost of money” for financing compared to leasing.
- Related to #1 and #2 above, generally you can lease a vehicle with less money down than you can finance the vehicle. If the vehicle suffers a total loss, that down payment is gone. So choosing an option that reduces the down payment needed to secure the low monthly payment you can afford is also a good risk management strategy.
Dealing with Data Breaches
Fortunately, unlike the natural disasters described above, man-made disasters like a large scale theft of confidential personal information will not risk life and limb. However, as society becomes more connected and large companies have more consumers that they store confidential information about, these sorts of uncontrollable events do resemble a natural disaster: there’s an ongoing risk but it is completely unknown when it could strike. Plus, in terms of creating chaos and potential financial loss on a large scale, these events resemble natural events – but again, fortunately, the worst of it is only a risk to property. To be fair, leasing versus buying a car won’t change your risk of being the victim of a data breach; there’s really nothing you can do to reduce your likelihood of needing to deal with it. The key therefore is your response.
The best way to deal with a potential data breach is to stay vigilant in managing your credit. We suggest MyFreeScoreNow, which lets you get your credit score for free and provides credit monitoring free as well. We also encourage you to check out this article at Credit Wizard, also published by Moving Iron Systems, the same company that publishes Lease Wizard.
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