Car Leasing; Marketing trick or Bubble?

Car leasing is the trend that I am sure it caught your attention. Just walk down the street and see how many ads are there for car leasing/buying.

If you don’t know what leasing is, I will try to give you a clue in few words.

You can have a brand new car for 1,5 to 3 years and pay a monthly amount to the company or to the car dealer. The car does not belong to you and you have to return it when the contract ends. Everything else is written as terms in the contract; the most of them have free roadside assistant and mechanical repairs and warranty, some not. Some countries offer special tax benefits when you lease, some not.

But have you ever wonder:

Why is this happening?
Who takes the greatest benefit out of this dealing?
What happens to the brand new car that you will use for 1,5-3 years and then return after losing the most of its value?

First lets see some facts.

The automotive industry (including chemicals, tires and all the accessories it enclosed) is the largest employer in Germany and one of the largest in the world.*

The average global production of vehicles is 100 millions per year.

The vivid imagination the car designers have, creates limo-sport-saloon-with wild appearance-but velvety driving-futuristic-smart transformer cars that are actually useless.

But how many cars and what kind of cars does the market really need?

Actually the market doesn’t need so many cars.

Many countries are overflowed from cars and problems like traffic, parking lots and environmental issues (air pollution e.t.c), even in small cities arise.

Also people nowadays cannot afford buying the new-see-above-for-more-adjectives cars that are being presented by the car companies.

But what should the manufactures do? Cut down the production? (which will lead to closing factories and fire employees)

That could be a case. But since that doesn’t benefit neither government nor manufactures, we have the solution!

Leasing!

And so we are at the second concern/question.

I am not really sure who takes the greatest benefit out of this.

--Government(s) benefits from not having to deal with hundreds of thousands (maybe millions) of uneducated unemployed. So they promote and give tax benefits on leasing.

--Manufactures benefit from having their production line going on, without losing important amounts of revenue (considering the tax refunds regulation)

--People benefit from driving cars that under other circumstances would have never be able to drive. It also serves people that need a car but move out every 3 to 4 years to another country.

Then….Who doesn’t benefit from all this?

The answer is the same as the answer of the last concern.

That car that will be returned after 2-3 years of losing the most of its value will end up in a car lot and wait for its time to

be bought as used car (which is actually not the option or simply not as "cool" as leasing a brand new luxury car every a couple of years)
be the next for the shredder machine

So who doesn’t benefit from all this?

The environment.

Leasing is a relative new marketing trick as I mentioned above, but just imagine how much resources are wasted or will be wasted in the future in the sake of this marketing trick.

Since I am a supporter of the absolute free market and don’t consider myself an environmentalist, I sat down and thought to myself; "Once this turn in a bubble, who will be responsible?"

And I came to the obvious answer. The government(s). Let me explain it.

In a free market, leasing would have never be a thing. Its a bargain at the moment because of the tax refund benefits the manufactures get from governments.

So the government prefer investing to create something unsustainable in order to avoid dealing with all those uneducated employees that are working on production lines at the moment.

The future of this industry will be really interesting.

*lets ignore the arms industry for now.

https://www.statista.com/statistics/589254/car-production-germany/
https://tradingeconomics.com/germany/car-production
https://en.wikipedia.org/wiki/List_of_largest_European_manufacturing_companies_by_revenue
https://www.forbes.com/lists/2005/183/Rank_1.html
https://en.wikipedia.org/wiki/List_of_automobile_manufacturers_of_Germany
https://www.statista.com/statistics/239229/most-sold-car-models!
http://ec.europa.eu/eurostat/statistics-explained/index.php/Passenger_cars_in_the_EU
https://www.statista.com/statistics/262747/worldwide-automobile-production-since-2000/
https://www.statista.com/statistics/200002/international-car-sales-since-1990/