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Car leasing: yes or no?
Old 03-13-2018, 03:00 PM   #1
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Car leasing: yes or no?

Curious as to how you all feel about this. Though I generally keep a car for at least ten years, I have on occasion leased. Each time I leased I feel like it worked out pretty well for me. The first car had a transmission problem they never could figure out so I turned it in at the end of the lease. The second time was when GM was going under and they were practically giving them away just to raise money! The third time I leased a vehicle I wasn't sure I was going to like (4 wheel drive suv). I ended up loving it and still have it twelve years later.
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Old 03-13-2018, 03:04 PM   #2
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I drive old beaters and swap 'em out every few years - I like to try different toys.

I keep DW in a lease, so she's never driving anything that would make me nervous.
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Old 03-13-2018, 03:43 PM   #3
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Just remember that you can negotiate the lease payment, and the dealer has plenty of profit built into the lease where he can drop the payments substantially.

The best leases often happen to be on popular cars like a Honda Accord, Toyota Camry, Honda Civic, Toyota Corolla, Lexus' and other models with high resale prices in the used market. They also happen to also be durable and trouble free vehicles--not like many high line German cars.
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Old 03-13-2018, 04:05 PM   #4
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On economic grounds a lease is not very sensible. It is an opaque combination of a loan and a small bit of insurance on the resale value of the car. Also, leases typically involve new cars, so there is the depreciation hit. Where the lease rate is low relative to market, the difference is buried in the vehicle sell price --- tanstaafl, though there may not be a way to negotiate the car price down in lieu of taking the lease deal.

I buy lots of things that are not very sensible on economic grounds, so can't say that anyone's decision to lease is wise or unwise in the bigger picture.

Personally I would never consider a lease. I've had one car loan in my life, right when I got out of graduate school. Since then we've only bought cars that we could pay cash for. Recently we've been well off enough to be buying new cars that are one model year old and still on the dealers' lots. IMO that's still not really economically defensible but we at least avoid a majority of the first year depreciation. We keep 'em until they get rusty, typically 10+ years and 150K miles. My current Nissan pickup is a 2004 model with 109K and probably has a couple more years before we sell it.
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Old 03-13-2018, 04:29 PM   #5
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We keep 'em until they get rusty, typically 10+ years and 150K miles. My current Nissan pickup is a 2004 model with 109K and probably has a couple more years before we sell it.
Will you replace it with another used car? If so, how old or the number of miles is acceptable?

I am thinking about a 2012 Honda Civic with 50K miles.
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Old 03-13-2018, 05:06 PM   #6
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Will you replace it with another used car? If so, how old or the number of miles is acceptable?

I am thinking about a 2012 Honda Civic with 50K miles.
Actually that one may not get replaced. We have two cars and the truck for only two drivers and our need for the truck is diminishing.

If I go shopping will will start by looking for a truck that is a model year old, no more than two. For one year old I will shop new as well as used. Often one-and two-year old trucks are scarce on the used car lots, so I may go with new. All cash, regardless.

Re your Honda I would not worry about the age but would look very carefully if it had lived in a torture type climate like Arizona or the northern tier rust belt. 50K miles is just getting broken in, so I would look hard at replacing belts, especially the timing belt -- depending on what Honda's recommendations are. My wife had an Audi TT where the belt broke at 80K, stopping the engine cold and bending some valves. $4K! After some haggling, Audi paid for a brand new head but that was more luck than skill. So I am paranoid about timing belts. If an automatic I'd inspect the fluid carefully and maybe even drop the pan for a look. But generally I would expect it to be a good car. Tires & brakes would be a haggling point but I would not blink at having to pay for those soon after purchase.
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Old 03-13-2018, 05:11 PM   #7
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DW and I each lease a BMW and Mercedes respectively.

Yes, I know it isn't good financial practice, but I get a new car every 2 or 3 years and don't have to worry about anything. We also like getting the latest safety items and gadgetry. Kind of follows into the category of "blow that dough" but we get to drive a nice car for less than buying it.

We like the high end cars but even needing a new set of brakes can set you back $2K-3K so keeping them long term isn't a good idea for us; I heard that repair costs is one of the reasons leasing these cars is so popular.
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Old 03-13-2018, 05:21 PM   #8
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I lease, feel with right negotiations and finding the right level of deals with incentives you can do very well. My current lease has a break even period of 10.8 years vs. buying. So after 10.8 years my out of pocket on payments would break even with if I bought the car. That doesn't account for any maintenance and repairs that would need to be put into a car I would buy, my lease has full maintenance and is under warranty for the full lease period, so expect no out of pocket costs.

I'm OK a regular payment knowing I have a dependable car, expect no surprise expenses and I get all the new safety features too.
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Old 03-13-2018, 05:33 PM   #9
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DW and I each lease a BMW and Mercedes respectively.

Yes, I know it isn't good financial practice, but I get a new car every 2 or 3 years and don't have to worry about anything. We also like getting the latest safety items and gadgetry. Kind of follows into the category of "blow that dough" but we get to drive a nice car for less than buying it.

We like the high end cars but even needing a new set of brakes can set you back $2K-3K so keeping them long term isn't a good idea for us; I heard that repair costs is one of the reasons leasing these cars is so popular.
+1

I like your style, Marko.

While I've not done this, always buying "predepreciated" vehicles, I'm ready to reward myself and do the not financially optimal thing, and get a new vehicle that I like. My 11 year old BMW750 is probably due for significant maintenance.
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Old 03-13-2018, 05:47 PM   #10
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+1

I like your style, Marko.

While I've not done this, always buying "predepreciated" vehicles, I'm ready to reward myself and do the not financially optimal thing, and get a new vehicle that I like. My 11 year old BMW750 is probably due for significant maintenance.
Find yourself a good independent mechanic with German car experience. Just about every market has one.
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Old 03-13-2018, 06:28 PM   #11
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I'm a buy and hold investor vehicle buyer. I have a 94, 2006, and 2015. The 94 is a garage queen Camaro Z28 with low miles, the 2006 a Subaru and the 2015 a F150. All purchased new. The 06 has 140K+ miles, I'm keeping it sort of just as a game to see how many miles I can put on it without anything super major going wrong.
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Old 03-13-2018, 06:51 PM   #12
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On economic grounds a lease is not very sensible. It is an opaque combination of a loan and a small bit of insurance on the resale value of the car.

I buy lots of things that are not very sensible on economic grounds, so can't say that anyone's decision to lease is wise or unwise in the bigger picture.

Personally I would never consider a lease. I've had one car loan in my life, right when I got out of graduate school. Since then we've only bought cars that we could pay cash for.
Like OldShooter, we pay cash for our cars and drive them well over 100k miles.

I enjoy negotiating and getting a very good price. A lease has never made sense dollar-wise for any of the 10 vehicles I've purchased. I would lease if the numbers told me to.

But you or others may find a lease that makes financial sense. Plus leases have other, non-financial benefits (a new car every 1-3 years, no repairs, etc) so it truly is based on individual needs and preferences.
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Old 03-13-2018, 07:53 PM   #13
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I lease a pickup truck as a business expense. I've been doing this for 23 years now. The first couple of leases was a learning experience but now I've got the process down cold. I'll just say the advertised prices you see are just a starting point. If you have excellent credit you can do much better than the advertised monthly payment.

Leasing is not cost efficient, but it sure is hassle-free efficient. No repair worries for 36 months (never lease a vehicle for longer then the warranty period.) Probably 5 oil changes (get them thrown in as freebies when you make the deal) several tire rotations, and a set of wiper blades is about all the maintenance you need to do.

You get the latest electronics, latest safety items, increased fuel economy, etc. etc.

With a lease you are basically driving the depreciation of the vehicle (the "residual value factor"). Consider the cash outlay of a 2 or 3 year old car. $20,000 to $25,000? I'd rather have that money invested in something, earning me money and just pay for the depreciation with a lease.

I like having the latest stuff, the best safety equipment, and no repair hassles so much that my wife has started leasing as well. I figure it costs about $500 to $600 more than buying the same car over the 36 month lease. That is, after 36 months you would be out about $500 more than if you had bought the car and kept it. To me, it's worth it.

My wife has a 2016 Dodge Charger SXT all wheel drive that she pays $257 a month. It's got some nice equipment too--leather and ventilated seats, memory seats, climate control, remote start, etc. Nothing was paid down, nothing came out of pocket, not even tax and license. A true "zero down" lease. Sign the papers and take the key fob.

So yes, leasing costs more. But the peace of mind and getting a new car every three years is worth it to me. YOLO.
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Old 03-13-2018, 08:04 PM   #14
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I have a friend that just retired at 59 years old. His wife is still working and makes about $80,000. When he was working he made about the same amount.

They invested early and often and have saved just short of $2 million. No debt, no mortgage. Their kids are grown and in their 30's. He drives a six year old Hyundai Santa Fe and she drives an eight year old Hyundai Sonata.

He always gives me grief when I get a new leased truck. I explain it's for business.
"Man, I wish I could get a new truck" he always says.
"Why don't you do it. You have the money. What are you saving it for if not for something like this?"
"The wife won't let me."
"What?"
"Leasing is not as cost effective as buying a used car."
"Dude, you've got 2 million dollars! The interest you earn on some of your investments for a couple of months would pay for the lease!"
"Wife won't let me do it."

He then tells me about the European vacations his wife takes him on.
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Old 03-13-2018, 08:32 PM   #15
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I have been a buy and hold guy for my entire life.
The exception was the AMC Gremlin. Lol.
But.
1. Our next car will be 100% electric.
2. Technology is moving so rapidly (no matter what the propulsion system)
that I am not sure that buy and hold makes sense.
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Old 03-13-2018, 08:52 PM   #16
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Re your Honda I would not worry about the age but would look very carefully if it had lived in a torture type climate like Arizona or the northern tier rust belt. 50K miles is just getting broken in, so I would look hard at replacing belts, especially the timing belt -- depending on what Honda's recommendations are.
Thanks.

The 2012 Honda Civic has a chain based on the following site:
Honda Timing Belt and Timing Chain List - Your Car Angel - Your Car Angel
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Old 03-13-2018, 09:08 PM   #17
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I've never leased but some of the mfr sponsored deals appear to be cheaper than buying if that particular model is what you want and the mileage restrictions, etc satisfy your needs. When this question comes up I often think of the extra long term loans up to 7 yrs with zero down are more like leasing than buying. It's hard for me to part with cash when I can get a loan for 3% or less.
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Old 03-13-2018, 09:41 PM   #18
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I recently read somewhere:

Yes - Lease if you want to keep car <5 years
No - if you want to keep car >= 5 years
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Old 03-13-2018, 11:01 PM   #19
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I have never leased, but I do watch swapalease.com. They have short term leases wth lots of miles that look interesting. I would love to get a caddie with a 6 month lease and 15k miles and drive that thing all over the country in style.
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Old 03-14-2018, 06:41 AM   #20
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+1

I like your style, Marko.

While I've not done this, always buying "predepreciated" vehicles, I'm ready to reward myself and do the not financially optimal thing, and get a new vehicle that I like. My 11 year old BMW750 is probably due for significant maintenance.
Thanks. Here's the thing: If you're just looking at the numbers, leasing doesn't make sense.

But there's a 'knowing the cost of everything but the value of nothing' in that equation. We do sort of a reverse analysis where we decide on the car we want to drive and then figure out the cheapest way to drive it; leasing fits that bill.
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