I myself occasionally use Tor, but only use VPNs for connecting to corporate networks (i.e. don't pay for one myself).
I agree with most of what you say. VPNs can be used to circumvent geographical restrictions, but otherwise don't reliably improve privacy. All they do is change which party can see what you're doing, from your ISP to a VPN provider. Tor does actually make sure it's very unlikely anyone can see what you're doing.
Here are some reasons why I think some people might use VPNs instead of Tor:
- circumventing geographical restrictions, as already mentioned
- Tor can sometimes be unacceptably slow especially for video streaming.
- Tor is not entirely trivial to set up to use for apps that aren't Tor Browser; on Android there is something called Orbot, but on desktop operating systems I think one needs to follow relatively complex technical restrictions (I haven't done that myself, so take with a grain of salt).