Poll: Lease vs. Buy Auto

[REWahoo]

A discussion on another thread about leasing a car brings up the question of how many FIREds and FIREd wannabees lease their vehicles.

You can find a buy vs. lease calculator here.

[Arif]

I've never run the numbers but always ASSumed leasing would be a bad move akin to renting a house instead of buying (without the wild speculation). You never own it and you just pay what amounts to the depreciation over and over again. Cars are more dependable now a days(even Fords) so i don't but the argument about not having to deal with repairs.

[mathjak107]

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actually my leases worked out great...my current lease even worked out cheaper than the depreciation i would have lost had i bought it...i only pay sales tax on the portion on the lease not the entire car and best of all i dont want to own a car anymore after the warranty is up.....when i figured out what it would cost to buy my vehicle,add the optional warranty at the end of the warranty period,the major services due at that point plus tires ,they can have the vehicle back.........i own my 99 nissan altima..compared to what that car has cost me to keep it going for 100,000 plus miles i could have leased one almost every 3 years...besides the reliability factor on cars today seems to drop big time around the fourth year or so.at least in my experience..i own as well as lease but im going all lease eventually ,
i dont even want to talk about the volvo i bought.....in the 8 years i tried to own that car the only thing that i think didnt get replaced was the glove compartment door....actually i had a company car too so i drove it 6-7000 miles a year.once it became my main vehicle ooooh man i never wanted to own an older car again...nothing like new!
my buddy bought a chrysler minivan,,he is in his 4 year of payments and forgetting the fact he has a warranty the un-reliability factor of it has him wanting to get rid of it.....the thing depreciated so much hes going to get killed

[soupcxan]

The biggest cost associated with owning a car is the depreciation and you're going to pay for it regardless of whether you lease or buy. The depreciation is usually steepest for a new car during the first three years of its life. The problem with leasing is not that it is inherently more expensive than buying (all things being equal) but that it requires you to constantly get a new car every 2-4 years, when the depreciation is the highest.

Also, the dealership is generally much more knowledgable about the financial details of leasing (cap cost, residual value, etc.) than the buyer which gives them an advantage in negotiations. It's easier to hide a bad deal through a bunch of lease mumbo-jumbo than a straight purchase, even if it's financed.

There may also be tax benefits to leasing for some, if you can deduct it as a business expense.

[mathjak107]

you are correct soup,its much easier to get a bad deal leasing......they can really hide the costs.....no question there..had it done to me once....

yep biggest depreciation is in the early years and it works out close.problem after that is the cost of ownership goes way up..here in nyc an optional warranty can add 1800.00 bucks and with 400-1000.00 services here in nyc its expensive...the days of the 35.00 buck alternator are gone..my last few vehicles all had some major costly problem between 36,00 and 45,000 miles that really hurt.....

[Craig]

I worked in the retail auto business as a CFO for 13 years ... the industry loves people who lease cars every 2 years or so.* So did I ... those folks were the source of our income.

But, as a wise financial move ... NOT.* Unless it is your passion, buy them a couple years old, and drive them into the ground.

[lazygood4nothinbum]

very good friend of mine who works with wayne huizinga's auto group tells me to lease if you plan on keeping the car less than 4 years (assuming the amount you drive is near the allowed mileage). otherwise you buy.

my $400/month current lease on the $38k t-bird is subsidized by ford because they were trying to put more t-birds on the road. at the time when i leased, my then paid-for $15k stang was depreciating by about $250-300 per month.

i originally bought the stang a few months old with 3000 miles on it for $18k from an auto auction when they were selling retail for $23k.

after this lease i'm planning to buy another stang and hold for 5 years. after that if i wind up selling house and living a cruising lifestyle on a boat i'll be carless and just getting good deals on weekend rates from enterprise.

[audreyh1]

I never considered buying an extended warranty. I never had major repair expenses until over 80,000 to 100,000 miles - and even then not super high ($500?). Them Toyotas and Hondas seem to last forever.

Audrey

[Spanky]

No leasing ever since I am driving more than 30,000 miles per year.

[mathjak107]

well jd powers called it correct a few years ago..back in the 90's the long reliabilty of cars was putting toyota and nissan out of business..maximas were going 200,000 miles with barely a service or parts, and jd said thru the years we will see a finite life of about 4 years as they realize they are putting themselves out of business...boy were they right..my early years of perfect nissan reliability ended up being only true for about 36-48 months ...both my altima and quest needed alternators by 42,000 miles...
no doubt a 2 year lease is expensive but a 36-48 month with full warrany and maintainence is tough competition...
if your lucky enough to get a good late model car today thats trouble free you win,but if you get the more normal of lately 36-48 months trouble free then owning is a headache...as for me as long as i can afford it ill take a new car every 3-4 years thank you

[73ss454]

Quote:

Originally Posted by Charles I worked in the retail auto business as a CFO for 13 years ... the industry loves people who lease cars every 2 years or so.* So did I ... those folks were the source of our income. But, as a wise financial move ... NOT.* Unless it is your passion, buy them a couple years old, and drive them into the ground.

Charles hit the nail on the head.* This is the correct thing to do.

But if you like a new car every 2 or 3 years, have a good time.

Leasing is an automotive scam designed to put people in more expensive cars than they would normaly be able to afford.* This also allows the dealer and manufacturer to have a captive customer at the end of the lease.* Depreation is the killer, don't be fooled and I know most people here are not.

[mathjak107]

Lease versus buy? Let's simplify the answers and summarize them here:

1. The short-term monthly cost of leasing is always significantly less than the cost of buying.
For the same car, same price, same term, and same down payment, monthly lease payments will always be 30%-60% lower than loan payments. This is still true even when compared to 0% or low-interest loans.


2. The medium-term cost of leasing is about the same as the cost of buying, assuming the buyer sells/trades their vehicle at loan-end.
The overall cost of leasing compared to buying, over the same lease/loan term, is approximately the same, more or less, assuming the buyer sells the vehicle at the end of the loan. Comparisons sometimes show buying to cost a little less than leasing due to fewer fees, lower finance costs, and the assumption that a purchased vehicle will return full market value if it is sold or traded at the end of the loan (often a bad assumption, especialy if traded). However, when the benefits of wisely investing monthly lease savings are considered, the net cost of leasing can easily be less than buying.


3. The long-term cost of leasing is always more than the cost of buying, assuming the buyer keeps the vehicle.
If a buyer keeps his car after the loan has been paid off and drives it for many more years, the cost is spread over a longer term. It doesn't take rocket science to figure out that the cost of buying one car and driving it for ten years is less expensive than leasing or buying five different cars over the same period. Therefore, short-term leasing is always more expensive that long-term buying. If long-term financial benefits were the most important objective in acquiring a new car, it would always be best to buy the car and drive it for as long as it survives — or until the cost of maintenance and repairs begins to exceed the cost of replacing it. However, many automotive consumers have other objectives that reduce the importance of long-term cost savings.

[73ss454]

Go back and read the post from Charles, now keep reading it until you get it. Once you get it go buy a 2 year old car and a warranty.

[mathjak107]

if financial savings are the priority you are right.in fact 2 years old is probley the best value their is in a long term hold.......
but ill tell you nothing like that new car smell and feel if thats your priority.....my wife and i arent travelers or go on expensive vacations...but we love our toys and cars.........
i have been driving a nissan xterra the last four years and i got to say for me there was nothing like the feel if that new x3 bmw when i test drove it...just different priorities

[73ss454]

Now you got it!

The #'s don't work but the feeling is great.

I agree!

[Mysto]

I find that as long as I lease with a cheap one - I come out about even. We alway lease the lowest rate we can get (don't care what brand and we keep them small - what the heck we aren't going to keep it anyway and we have no maint exposure) I have two cars - one I bought cash and the other we lease and the real costs are very close. I pay on average about $230 month (no down) plus a cheapie oil change when required. There is no sinking fund and no maint costs and when I let my wife take off in the car I have a feeling of security that I don't get with a 5 or 6 year old car.
At the end of the day it's a crap shoot - If your car gives years of trouble free service you win - If not I win IMHO

[BigMoneyJim]

Quote:

Originally Posted by mathjak107 but ill tell you nothing like that new car smell and feel if thats your priority.....

You can buy that smell, and a professional interior cleaning can make it look and feel new, too. Heck, you could probably recarpet and re-upholster (or replace the seats) on a 2-year old car and still come out cheaper.

Me, I don't take care of the care more than necessary to keep it running, and I kinda trash them out. Or at least I think I do, but somehow my sister's newer cars are more dented and older looking than mine. Go figure.

[laurence]

Hmm, a lot of "the car will just fall apart in 5 years anyway" talk here. Between DW and I we've had 5 cars in the last 15 years:

'83 Honda Accord, sold it with 190k on it, still running like a champ, even all the little interior buttons worked.

'85 Volvo Station Wagon (hers, nothing like a hot chick in a hot car : ). Donated it with 250k on it, head gasket partially blown but still running, would have cost ~$800 to fix - I think that's two months lease payments?

'89 Ford Escort Station Wagon (to replace the hot Volvo), it had 80k when we got it, 120k when we donated it, fully running, again no problems whatsoever.

'00 VW Passat, this was our lemon car, electrical issues, air bag fault, ABS system went out, we sold it to CARMAX last fall rather than fix the last. But had we fixed it, the total cost of the repairs would have been ~$3500, less than a year's lease payments.

'02 Jeep Grand Cherokee, 70k miles on it, still going strong, hasn't cost us a dime over ruitine maintenance. And the inline six gets pretty decent gas mileage, too!

A lot of people remember that one time they took a car in and had a 2 grand repair bill, and think, "Aw, it's cheaper to buy a new one!". But those bills don't come every month, they probably don't come every year, that lease payment bill will be in your mailbox every 1st of the month, you can count on it.

If your decision to lease is because you want more car than you can comfortably afford through buying, or you can't bear to drive a 4 year old car, hey, you gotta do what you gotta do, but there is no way to justify the decision on an economic basis.

[astromeria]

Man, a car doesn't stop feeling new to me till it's about 7 - 7.5 years old * My husband & I feel quite secure with me driving my 8-yr-old Toyota 4Runner (The Truck), bought new, which has needed one minor fix one time (forget what it was--it cost under $100). His 02 Prius, also bought new, has needed nothing but maintenance (and fixing a scratched fender when we shiipped it across the country). We don't drive our cars hard, which probably helps, and pay attention to reliability records. With a lease, I'd worry about parking lot dings, driving too many miles, and getting the upholstery dirty. Plus, with a new car every few years, we'd always have big auto insurance bills. I enjoy getting a new car, but prefer to get my thrills elsewhere...like leaning my cheek on the Taj Mahal.

Chacon a son gout!

[Craig]

lazygood4nothinbum hit the exception ... sometimes OEM's "put money in the trunk" by discounting cars via leasing programs.* If that's the deal, then yes ... the lease can work, and you can buy the car off the lease, at termination.

A Toyota, Nissan, Honda, and (even) some domestics last a heck of a long time these days ... we're producing excellent cars now. Buy one without too many gizmos, and there is less to break.

That Wayne Huizenga company is AutoNation ... same co. I worked with ... good company, and we loved those folks who liked the smell of a new car.*

Best of luck.