Leasing Car with intent to buy

[RedHawk]

Has anyone here leased a car with the intention of buying it at the end of the lease? How did you calculate whether it was a good deal?

 

[lazygood4nothinbum]

i almost did that with my last car. a t-bird which i leased on a ford-subsidized contract (they paid about $100 to i think $150/month towards the lease) but then i got tired of the car and fell for a vertible stang gt. had i kept the t-bird i would have been ahead of the game by a few k. but as of this writing i am probably behind by about $5 or 6k in depreciation plus a little extra for insurance. way worth it tho, very fun to drive.

i don't know if it would have been worth buying the t-bird had i paid on a normal lease but with the original subsidized deal the numbers would have played to my favor had i cared to take advantage of that.

 

[73ss454]

First of all, don't lease cars. Since your already in the lease the best way out in most cases is to buy the car because the worst part of the deprecation is done.

Now with that said it's important to look at who the lease is with. If it's with the manufacturer the buy out is usually set. Which means that you'll have to pay the price on your contract. If it's with an outside lease company they usually will bargain with you on the buy out price. Also outside lease companies sometimes have a fee at the end of the lease to turn it in. If you buy it out you won't pay this fee.

 

[RedHawk]

Since your already in the lease the best way out in most cases is to buy the car because the worst part of the deprecation is done.

I'm not in a lease already. I fully intent to purcchase a car and drive it a long time. I am currently a junior in college looking to buy a car (still considering used vs. new, Honda civic vs. Toyota corrola, etc). Just thinking of my options. My thinking was at some point depending on the monthly payment and purchase price in the contract, it could be advantageous to lease with intent to buy at the end than just straight up buy.

 

[73ss454]

My advise at your age would be to buy a used one of the cars your looking at. Forget about leasing if your not already in it. Leasing can be tricky if your not paying attention. Do a Carfax and make sure the car is ligit and hasn't been wrecked.

Then drive the car till the wheels fall off.

Car buying, 101.

 

[Meadbh]

There's a previous thread on car leasing......

http://www.early-retirement.org/for...e-new-car-technology-changing-fast-24860.html

......and I think the conclusion was: don't.

 

[CybrMike]

I did that. I leased a BMW 3 series for 3 years. I bought it out for $24K. Because I was well under mileage usage, Blue book said it was worth $32K. I did it because the company could write off the entire lease, as opposed to depreciating the car.

Tricky things about leasing is you need to understand what interest rate they are charging you (they don't call it that), AND how much they are going to give you for the car at the end of the lease.

Sometimes manufacturers run specials on leases such that it is a better deal than buying.

Your NEVER supposed to put money down on a lease though.

 

[chinaco]

I have not run the numbers... but I suspect in most cases, you would be better off buying outright.

You will need to get specific and run the numbers. One thing you can bet... the financiers of leases are out to make money and they are pretty smart.

Lease only seems to make sense if you are going to keep the car for a very short period of time.

Personally I would buy. I am starting to look for a replacement car (just researching). When we buy... I will pay cash unless there is some extremely cheap interest rate (and the cheap rate cannot be exchanged for a cheaper price).

 

[W2R]

My advise at your age would be to buy a used one of the cars your looking at. Forget about leasing if your not already in it. Leasing can be tricky if your not paying attention. Do a Carfax and make sure the car is ligit and hasn't been wrecked.

Then drive the car till the wheels fall off.

Car buying, 101.

Ditto, plus I would suggest seriously looking at Toyotas and Hondas, because they have scored so high in reliability in Consumer Reports for the past few years. If you get a Toyota (or Honda) in decent shape, you are pretty much set and won't have to buy another for many years unless you want to.

 

[travelover]

Ditto, plus I would suggest seriously looking at Toyotas and Hondas, because they have scored so high in reliability in Consumer Reports for the past few years. If you get a Toyota (or Honda) in decent shape, you are pretty much set and won't have to buy another for many years unless you want to.

Ditto ditto. Especially if you invest the difference in cost, given your age.

 

[Meadbh]

Ditto ditto ditto. From personal experience, I can attest to the fact that, over the lifecycle of the car, a quality product will save you $$$$$.

(Drives 12 year old Honda that is almost as good as new)

 

[kcowan]

I leased 2 cars, both times because it was the cheapest way to acquire them. One was from GE Capital Leasing and their cost of acquiring the car was $1500 below dealer costs. Drove it for 3 years and sold it privately for $1400 above the buyout.

The second was a BMW Cabriolet and the dealer was offering a cheap lease rate. Bought it out after 39 months and still driving it.

Just make sure to run the numbers. Dealers like to confuse their prospects to get more money out of them. And get competitive lease bids. Dealers hate to do that but they will if pressed.

 

[lazygood4nothinbum]

I did that. I leased a BMW 3 series for 3 years. I bought it out for $24K. Because I was well under mileage usage, Blue book said it was worth $32K. I did it because the company could write off the entire lease, as opposed to depreciating the car.

i've been told to be careful of bluebook values and that it is actually the blackbook which is the more accurate industry standard.

Black Book survey personnel attend approximately 50 dealer-only wholesale auctions each week to collect up-to-the-minute information on market values of used cars and light trucks. Our editorial staff reviews the data and determines the vehicle values to be published in the next edition. Our used vehicle value guides are available through a variety of channels including online, PDA, and print formats.

 

[73ss454]

If you lease a car and turn it in every 2 or 3 years no matter what the interest rate is or how good the deal is there's another problem. Most people don't realize the depreciation factor in the first 2 or 3 years.

Cars take the biggest hit in depreciation in the first 2 or 3 years and that's the biggest reason why you don't lease cars. Take a 30K car lease it for 3 years and in most cases it worth around 52% of the original purchase price. So if you willing to spend about 15 K every 3 years then leasing is for you. If your paying attention you will never lease a car.

I was a finance manager in a car dealership for 30+ years and the smart money does not lease. One of the best lines from a customer is when they would say if they lease then they don't have to buy an extended warranty. That's real bright, save 1K to spend 15K. Or another great line was, the payments lower to lease it. Right!

 

[Darryl]

[I was a finance manager in a car dealership for 30+ years and the smart money does not lease.]

rjpatt, 733ss454 has your answer. Do not entrust the brickmaker to buy jewels.

As you start out pay cash for a used car and you can shave years off your fire date by controlling car costs.

 

[clifp]

Cars are expenses not assets. For new cars the biggest expense is depreciation, for old cars the biggest expense is repair, but depreciaton is almost always the biggest expense.

You pay a ridiculous amount of money for the privilege of the new car smell, buy used.

 

[jazz4cash]

Has anyone here leased a car with the intention of buying it at the end of the lease? How did you calculate whether it was a good deal?

Could expain why would you want to do this? What advantage do you think you would get?

 

[mathjak107]

we had this discussion a few times. if you like to get a new car evey 3 or 4 years leasing is usually the best value if you can stay within the milage., , if you hold them longer than buy it.

dont forget if you trade it in every few years you may hondle the best buy price you can get and then end up trading it in to the dealer at wholesale price.

 

[justin]

I would lease a new car if the numbers worked to my advantage versus buying (and potentially getting a loan). A lease is just a way to finance the purchase of a vehicle, and all the terms are different from a standard loan contract. But there is an interest rate and a purchase price. One advantage of a lease is that you have a "put" option - you can in essence sell your vehicle to the lessor at a price that is often pre-set.

Depending on the make and model of your car, dealers might be pushing (due to incentivization) extra hard to lease a particular model. It might work out to your advantage. Just do the math.

 

[ziggy29]

About the only time a lease really ends well for an average consumer is if the car is worth more than the lease payoff amount at the end of the lease. If the lessee has an option to buy for $12K and the car is worth $15K, that can work to your advantage. (If, on the other hand, it's worth $9K, send it back.)

Having said that, unless you know you want a new car every 3-4 years (a terrible financial move), leasing doesn't make a lot of sense above buying.

Another trend I've noticed is that cars seem to depreciate in more of a straight line than they used to. The conventional wisdom says that new cars lose 20-30% of value when you drive them off the lot. When was the last time you were able to get an ultra-low mileage used for 20-30% below new car price -- especially Hondas or Toyotas? That strategy worked so well that too many people started doing it, and the demand for "almost new" cars rose to the point where they sold for very nearly the same price as new. By all means, if you can find a nice 1-2 years old car for at least
30% below new car price, go for it. I suspect you'll come up empty-handed.

 

[travelover]

............. Another trend I've noticed is that cars seem to depreciate in more of a straight line than they used to. The conventional wisdom says that new cars lose 20-30% of value when you drive them off the lot. When was the last time you were able to get an ultra-low mileage used for 20-30% below new car price -- especially Hondas or Toyotas? That strategy worked so well that too many people started doing it, and the demand for "almost new" cars rose to the point where they sold for very nearly the same price as new. By all means, if you can find a nice 1-2 years old car for at least
30% below new car price, go for it. I suspect you'll come up empty-handed.

I'm not sure how much the depreciation curve has changed for Toyotas and Hondas, but it still seems to be steep for American cars. Here in the rust belt, where everyone gets a new car discount, one can get used Detroit iron for a song.

Because the quality gap has closed so much, you may find good value in a used American car.

 

[FinanceDude]

I'm not sure how much the depreciation curve has changed for Toyotas and Hondas, but it still seems to be steep for American cars. Here in the rust belt, where everyone gets a new car discount, one can get used Detroit iron for a song.

Because the quality gap has closed so much, you may find good value in a used American car.

Used GM products are way cheap.........

 

[bright eyed]

About the only time a lease really ends well for an average consumer is if the car is worth more than the lease payoff amount at the end of the lease. If the lessee has an option to buy for $12K and the car is worth $15K, that can work to your advantage. (If, on the other hand, it's worth $9K, send it back.)
.

That is the case for us. We chose to lease a new honda pilot. The lease is up in Jan of 2009. We pay $317/month with taxes...the purchase price is $16k on the lease contract.

So at the end of the contract we will have paid $13,400 (including $2k up front). If we purchase at the time, we will pay the $16k - which means we pretty much paid sticker price (which isn't the best thing) but we could turn around and sell it for about $19-20k at that time since it will be a 3 year old holda with less than 40k miles on it. For example, 2004 pilots with 40-50k miles are selling above $20k now.

We did it because we didn't want to commit to a car yet and thought there would be better options in 3 years (and looks like there will be) and the resale of honda is great so it didn't hurt us too much in the end. Also, we got low monthly payments (the diff went into my Roth!), vs higher monthly w/ a purchase...it still seems like a reasonable decision.

 

[FinanceDude]

That is the case for us. We chose to lease a new honda pilot. The lease is up in Jan of 2009. We pay $317/month with taxes...the purchase price is $16k on the lease contract.

So at the end of the contract we will have paid $13,400 (including $2k up front). If we purchase at the time, we will pay the $16k - which means we pretty much paid sticker price (which isn't the best thing) but we could turn around and sell it for about $19-20k at that time since it will be a 3 year old holda with less than 40k miles on it. For example, 2004 pilots with 40-50k miles are selling above $20k now.

We did it because we didn't want to commit to a car yet and thought there would be better options in 3 years (and looks like there will be) and the resale of honda is great so it didn't hurt us too much in the end. Also, we got low monthly payments (the diff went into my Roth!), vs higher monthly w/ a purchase...it still seems like a reasonable decision.

You did ok on yours. However, you still have to sell your own car, and then what will you drive? Leasing is a guaranteed way for car manufacturers to sell a bunch of new cars every 3-4 years..........

 

[bright eyed]

I know, I know...you know i second guessed letting this crowd know i leased! haha

but my SO works for a dealership so we have options on stand in cars if we need one...