80. Although they should be considered independently, often the investing and financing decisions are considered together.

It’s easy to understand the allure of auto leasing: Consumers make lower monthly payments; dealers gain volume, move expensive inventory—and keep customers. So it’s not surprising to find that one of every three new cars on the road today is leased.
The truth is, dealers have profited more from leasing than from selling. An Atlanta-based leasing expert says, “On a sale a dealer makes about $1,200 to $1,500 in profit. On a lease, it might be $2,500 or $3,000.” That’s fine, he notes, “unless it’s done deceptively.”
SOURCE: Deanna Oxender Burgess, “Buy or Lease: The Eternal Question,” Journal of Accountancy (April 1999), p. 25.
Reprinted with permission from the Journal of Accountancy. Copyright (2000) by American Institute of CPAs. Opinions of the authors are their own and do not necessarily reflect policies of the AICPA.
Complex lease contracts combined with hidden costs complicate the decision to lease or buy. Only recently have key lease terms such as the cost of the car been disclosed to consumers. Laws in a handful of states, as well as Federal Reserve Board Regulation M, which became effective in October 1997, and leasing data available on the Internet are prompting dealers to make increased disclosures. Unfortunately, some fees, including the interest rate the dealer uses to calculate the lease payment, known in the industry as the money factor, still remain unknown to the consumer.

a. Discuss why some consumers might find leasing a car to be more appealing than purchasing one.

b. Even if not required by law, is the practice of not disclosing lease information ethical? Discuss.

c. As an accountant, how could you aid a client in a car-buying situation?