Americans are financially illiterate by design

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December 3, 2024- by Steven Greer

I saw a couple of videos on Instagram about car dealers and lease transactions. One man seemed like a fairly honest Mercedes dealer trying to explain financing and leasing. During the video, it struck me as being quite illogical. The way the industry structures lease terms does not make sense to me, and I am a financial expert. There was a second video of a sleazebag car dealer who was recording the phone conversation of a customer. The customer seemed to be an insider who knew the industry well and was making certain demands. The customer said that the Truth in Lending Act does not allow dealers to charge a down payment on a lease. He also said that the interest rate dealers get is about half what they charge the customer on the lease.

I have never leased a car because I could not understand the logic of it all. It seemed like a huge scam to me to be paying a huge amount of money for a car that is not even something you own. I also do not like worrying about every mile I drive and whether or not I will exceed the maximum annual miles allowed.

I am starting to think my instincts have been correct. Again, I am literally one of the most sophisticated financial people alive. I was a finance major before med school and scored the highest in the toughest course. I was at the top of the food chain in the biggest Wall Street banks and hedge funds doing complex financial analysis. If it does not make sense to me, then it probably does not make sense (by “sense” I mean “not ripping you off”).

I think people lease out of an unwarranted fear of car maintenance. People obsess over the three-year car warranty ending as being the start of catastrophic car maintenance costs. They have been brainwashed to think that transmissions and engines will blow up after three years. That is not the case on good cars. My 2012 Mercedes is now 12 years old and I have never had a major problem with it (that wasn’t caused by an accident or some other issue insurance covered). A well-made car should do just fine if you maintain it properly. Even a cheap car like a Chevy will hold up for 300,000 miles. My parents had an Impala that had more than 200,000 miles on it. Two years ago, I spent a mere $1,000 and got it back into good shape.

So, the real reason most people lease is because they cannot afford the car that they are in. It is a way to live beyond their means. It’s a scam. Almost everyone driving an $80,000 SUV cannot afford them and should be in a $20,000 car.

It is easy to compare the cost of leasing to buying. What are the real payments made by someone who leases a car over 10-years? Then, compare the real payments made by someone who buys a car in cash and then pays for the car maintenance for seven years after the warranty expires.

It is $2,000 per month to lease a $100,000 Mercedes. That’s with no money down. Therefore, it’s $240,000 over 10-years to have a car to drive that belongs to the bank.

To buy the same $100,000 car in cash, and then pay for maintenance for seven years, is probably about $1,200 a year in maintenance, or $8,400 over 10-years.

So, the person leasing pays $131,000 more than the person who buys a car and holds it for 10-years. That’s a 121% greater cost to lease a car (assuming the car has no value after 10-years, which is a false assumption, and assuming owned vehicles are not LLC tax deductions, which is also false in many cases).

Just for the illusion of thinking that one always has a safe car under warranty, and having the latest model car, one pays more than twice what a cash buyer pays.

Even if a major part breaks, one can pay for it given that delta in scenarios. $131,000 will pay for a whole new car.

Why do people do this? Why do people run up a tab on a 30% interest credit card?

This is all due to a bigger problem created by design. Most Americans are financially illiterate. The wealthy benefit from the masses of suckers and control the educational system. The schools do not teach basic financial literacy in high school. Enslaving people with loans and interest payments is how they control the masses and create wealth.

The wealthiest people in the world usually produce nothing. They just manipulate other people with money scams.