Buy or Lease a car?

[Bamaman]

I worked for 24 years for a major auto manufacturer and managed the largest lease fleet in the U.S. I also taught common everyday car salesmen how to sell leasing vs. retail sales in order to increase their commissions.

I could write a novel about automobile/truck leasing, as there are so many angles to leasing a vehicle. I'm not going to get into it here.

But let me say that retail leasing is essentially financing a car with a balloon payment in 24, 36 or 48 months. This requires a customer with a high FICO score and good credit.

Many people know how to purchase a car--driving a hard bargain. With leasing, you're going for the lowest monthly payment. Unfortunately, very few people know how to lease a car, and their lease is based on the dealer being paid "MSRP" for their lease by the manufacturer's finance source.

If a dealer offers you a car that would cost $400 per month to buy, you might have an advertised lease payment of $299. If you offer the dealer $225 per month, he might can take the deal. PAYMENTS ARE NEGOTIABLE ON LEASES.

Another angle is that manufacturers often throw out large sales incentives on leases--much like they do on cars/trucks purchased. They can throw rebates to the dealer, or they often will buy down the inherent interest rate the lease is based on--or both. This is when leasing gets to especially be a bargain.

My current car is a Lexus IS, which I bought for the long term. Fortunately, my family owns a Lexus dealership and I can get in one at dead cost--$4K less than others would pay. I could probably lease such a car for about the same monthly payment as a VW Golf or Honda Civic. Hey, that'd be a great deal.

As a retiree, we're keeping our cars longer and just buying them. My 75,000 mile driving has dropped to 40K per year on 3 cars. We have the Lexus, a 2012 Civic and a new Ford Explorer (people hauler.) I also have an old diesel Ford F250 to haul my fifth wheel trailer.
I'm careful to drive low depreciating cars that are very durable--which makes them solid values.

With the average car costing $32K and trucks pushing $50-60k MSRP, you're going to see many people leasing cars that really cannot afford new vehicles. Maybe lease customer will one day figure out how to negotiate their transportation needs without making their car salesman rich.

 

[eta2020]

With the average car costing $32K and trucks pushing $50-60k MSRP, you're going to see many people leasing cars that really cannot afford new vehicles. Maybe lease customer will one day figure out how to negotiate their transportation needs without making their car salesman rich.

I hope to belong to group of people who CAN afford new vehicle without a lease

And courtesy to my habit of not financing items that cost peanuts as compared my net worth
I most likely will.

I am pretty sure I got to point of those things being peanuts by doing what I did..... and one of those things
is buying cars in cash.

 

[Jerry1]

I lease my cars and I love it. Of course I'm still working and having a nice car that's never out of warranty is one of the few things I splurge on. I'm in the car a lot and for me, it's worth it. However, from a cost standpoint, it all comes down to one thing and while I didn't read every post in this thread, I only saw cost per unit alluded to. That one thing is cost per mile. When you buy or lease a car, you're buying miles. Make assumptions, run your numbers and you'll have your answer.

I used to get my cars from a person who would trade in their car. I would give them what the dealer would give them so it was a good deal. I used to be very proud to get my cost per mile in the 10 cents per mile range. (buy for $5000, drive 50,000 miles, spend about $1000 in repairs and sell the car for $1000 when done). I kept my cars in good repair and while well used, they were very reliable.

The challenge comes in when you make the decision to drive a nice car. I've run some numbers with friends and driving a newer car, keeping it for about 5 years, driving about 20K miles per year I'm seeing under 30 cents per mile. That's pretty good for a newer used car. Personally, I think this is the sweet spot and probably where I'll be in retirement - a couple year old, low mileage car driven for about 75K to 100K miles then replace.

If you want to drive a new car and replace it every 2 to 3 years, I've found it better to lease. Also, don't be so worried about going over on the miles. If you look at a lease, you buy a base set of miles for the monthly payment and the cost of additional miles is usually pretty good (around 25 cents per mile). Just don't go overboard or you'll be in the zone of excessive wear and tear.

My last several leases have been Buicks, which hold a 50,000 mile warranty. I get a two year lease with 50,000 miles (25K per year) at a cost of about 32 cents per mile.

One of the challenges I may undertake in retirement is to see if I can replicate the 10 cents per mile I was getting in my younger days (at least for one of my cars). After driving nice cars for so long, it will be difficult, but I think with one nicer car and one older car, I think I can do it.