Buy or Lease a car?

[World Traveler]

We lease one car and own two others. Lease has worked out well raising three kids. Mom always gets the new vehicle of her choice for changing circumstances. When we got married she had a nice RX-7. She loved it. Second kid came along and it was time to say b-bye and hello mini van. Recent years leases: an Expedition , CRV, Explorer and now we've come full circle VW Eos convertible. I drive my 2001 F-250 bubba truck. Last kid drives a 2013 Mazda 3. He wrecked the 04 focus that made it through the other two. Hydroplaned into a car minimal damage but totaled the car. Chalk that one up to experience. Mazda will be his launch out of the nest car. We have been happy with the choice to lease and hang on to others. Economic sense maybe not but not having to worry about repairs on the car we drive most of the time and having to haggle over a new and old trade in Priceless!


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[JPatrick]

Thank you!

Chalk up another...

 

[travelover]

I've only leased when I worked for MegaMotors and that one year lease was at an artificially low rate and came with free maintenance, unlimited liability- no deductible insurance and unlimited mileage. In other words, too good to pass up. So, I see the appeal of leasing.

Now I buy new or buy slightly used, but still in warranty, and keep the vehicle for 10 years. It helps to think in terms of buckets and envision a bucket of money not paid in monthly fees as being there to pay for "free" repairs.

 

[Texas Proud]

Down here in The Great Swamp, Toyota dealers are still selling new 2015 Camry's for a couple of grand under $25,000. Corolla's are a hair less. Both are advertised as cheap lease deals also. Seems to be a big overstock of all new brands here though.

New Toyota Inventory Near Houston | New Toyota Dealer Serving Crosby

Hyundai prices are still cheaper..... and more % off list


http://www.northfreewayhyundai.com/Hyundai-searchnew.aspx?st=msrp ASC&pn=50&model=Sonata



There also is a new Camry coming out next year.... I think that is why I got my new Pilot at such a discount... a new one coming out next year...

 

[pb4uski]

This is a very timely thread for me in that we are in the market for a new/slightly used SUV. We usually own our cars for 5-10 years and have had good luck with few out of warranty repairs and we usually put about 10k miles a year on each vehicle and usually trade at 120k miles +/-.

For years I found good values in 2-3 year old used vehicles coming off of lease with less than 36k miles, but that seemed to change in the mid 2000s and I found that these slightly used vehicles didn't have enough of a discount from new vehicles to justify going used. I'm finding the same thing now so far.

While I have never considered leasing in the past there do seem to be some good lease deals out there. I am looking at these lease deals purely financially.. if the interest rate implicit in the purchase cost compared to the upfront cost, monthly lease payments and end of lease buyout is not too excessive then I'll consider it.

 

[misanman]

Not a fan of leasing

We have mostly purchased our cars but did lease on two occasions and I've decided that leasing is not for me. Here are my reasons:

1. For me, cars are a "freedom tool". If we want to take off for somewhere the car lets us do that. With a leased vehicle I found that I was always thinking about whether I was adding too many miles (or not enough!). I found that it was psychologically limiting. It sometimes affected which car we'd take on a trip as we'd avoid a car that was accumulating too many miles even though it may have been the most appropriate vehicle. Or if I was low on miles I'd drive that car rather than risk leaving lease miles "on the table".

2. I think leases are more prone to manipulation. On our last lease, the dealer tried to sneak in a monthly charge for "rental car replacement". Said they added it to all their leases. I'm guessing many folks wouldn't notice as long as they could afford the monthly payment.

3. At lease expiration I didn't like being forced into a vehicle change on the leasing companies schedule rather than mine. The lease was up so now it was my responsibility to do something "this month", when I wasn't really interested in changing cars at that particular time. Then there was the hassle of the vehicle inspection. Although I've never personally had problems with this I'm acquainted with others that ran into additional charges for excess "wear and tear".

4. On my two leases, I never found that buying the vehicle at lease end was a very good deal. Seems like the residual value was more than the market rate, making it harder to break the lease cycle.

5. Once I got into leasing it seemed hard to get out. If you have leased a car and then decide to go back to a purchase you have no vehicle equity to apply to the new car purchase.

6. I think leasing tends to put you into a fairly rapid "refresh cycle" and results in higher overall costs. I guess this point could be argued but I think this is why Dave Ramsey refers to leases as "fleeces". Related to this is that leases make it easier to select a more expensive vehicle with all the "doodads" as long as one can afford the monthly lease cost.

7. I don't like monthly payments and, conversely, love the feeling that comes with having a car completely paid for.

Bottom line for me is that I feel more "in charge" with a vehicle purchase. With a vehicle lease I felt that it was all about the dealer and the leasing company.

My 2 cents, anyway.

 

[harley]

For years I found good values in 2-3 year old used vehicles coming off of lease with less than 36k miles, but that seemed to change in the mid 2000s and I found that these slightly used vehicles didn't have enough of a discount from new vehicles to justify going used. I'm finding the same thing now so far.

I think the used car market was severely impacted by the Cash for Clunkers program, which resulted in a lot of high quality used cars being junked instead of released back into the market. From some things I've read, the used market is just starting to regain it's inventory, so maybe you'll be able to find decent used cars again.

We have mostly purchased our cars but did lease on two occasions and I've decided that leasing is not for me. Here are my reasons:

1. For me, cars are a "freedom tool". If we want to take off for somewhere the car lets us do that. With a leased vehicle I found that I was always thinking about whether I was adding too many miles (or not enough!). I found that it was psychologically limiting. It sometimes affected which car we'd take on a trip as we'd avoid a car that was accumulating too many miles even though it may have been the most appropriate vehicle. Or if I was low on miles I'd drive that car rather than risk leaving lease miles "on the table".

2. I think leases are more prone to manipulation. On our last lease, the dealer tried to sneak in a monthly charge for "rental car replacement". Said they added it to all their leases. I'm guessing many folks wouldn't notice as long as they could afford the monthly payment.

3. At lease expiration I didn't like being forced into a vehicle change on the leasing companies schedule rather than mine. The lease was up so now it was my responsibility to do something "this month", when I wasn't really interested in changing cars at that particular time. Then there was the hassle of the vehicle inspection. Although I've never personally had problems with this I'm acquainted with others that ran into additional charges for excess "wear and tear".

4. On my two leases, I never found that buying the vehicle at lease end was a very good deal. Seems like the residual value was more than the market rate, making it harder to break the lease cycle.

5. Once I got into leasing it seemed hard to get out. If you have leased a car and then decide to go back to a purchase you have no vehicle equity to apply to the new car purchase.

6. I think leasing tends to put you into a fairly rapid "refresh cycle" and results in higher overall costs. I guess this point could be argued but I think this is why Dave Ramsey refers to leases as "fleeces". Related to this is that leases make it easier to select a more expensive vehicle with all the "doodads" as long as one can afford the monthly lease cost.

7. I don't like monthly payments and, conversely, love the feeling that comes with having a car completely paid for.

Bottom line for me is that I feel more "in charge" with a vehicle purchase. With a vehicle lease I felt that it was all about the dealer and the leasing company.

My 2 cents, anyway.

Those are all excellent points. My biggest issue with leasing I think would be the forever payments. I like having a mortgage, but it would drive me crazy to be having to make car payments for the rest of my life. We buy our cars for cash, and driving them for 10+ years makes the cost per year pretty low. I guess if I was someone who liked a new car every few years leasing might make some sense, but that's never been an interest. Also, if I started having all those problems like Johnny listed I might change my mind, but we've been pretty lucky so far.

 

[eta2020]

Whichever makes you happy...buy it or lease it.

Personally I just can not associate any type of self satisfaction with fancy car that one changes every 3 years.

People think 'It'll be a total blast if I have a BMW,' and at first it is. Then it becomes the new standard, and you don't notice it as much.

But what a blast I had today riding my 200 dollar bike through Historic Lexington, Lincoln, Concord Massachusetts today on lovely Spring day and that ride does not get old from year to year.

 

[RunningBum]

Whichever makes you happy...buy it or lease it.

Personally I just can not associate any type of self satisfaction with fancy car that one changes every 3 years.

People think 'It'll be a total blast if I have a BMW,' and at first it is. Then it becomes the new standard, and you don't notice it as much.

It's not just fancy, many people are looking for the reliability of a new car, and the latest in safety features. Hard to argue with that.

It's also hard to beat a car with a good history of maintenance and reliability, which is one reason I hang onto a good car.

 

[Rick_Head]

Depends on circumstances.

We always paid cash for cars. DW thought she might like an SUV (but wasn't sure), so we leased a Ford Explorer in 99. She liked it, she crunched it (dealer fix). At 3 year mark, Explorers had a bad rep (tire issues) and we thought a couple of scratches would make it worth buying because the tire issue destroyed the residual. The dealer wanted full residual, but didn't complain about the condition (salesman said "best lease return I've seen") but we could have bought a similar one cheaper (I think they thought we'd do it) so purchased an Escape.

In this case, we had prepaid the lease (ie. one lump sum) which gave meant interest rates didn't matter and they were a bit higher than today's.

Warranty/schmorantee, today's cars are good for about double the warranty with routine maintenance. I'll take my 2005 Mustang (60K miles) anywhere, anytime. That said, I just might be tempted to trade it for a LEASED F-type Jag. No way I'm coughing up C$85K for an Indian car with unknown residual.

 

[yakers]

Mostly don't lease but have a couple times. The first was a Mazda Miata in 98, for one year, really cheap lease, we wanted to see how it would work as a second car we had one child home at the time,we called it our one year test-drive. Worked great, bought a new one after the lease end, still have it, DW says I can sell it when I pry it out of her cold, dead hands. We are currently leasing a 2012 Ford Focus Electric, it is a great deal, $259 a month zero down, and mostly we weren't sure about the technology and range issues. We love the car, the 80 mile range works well as our local car. Lease ends in a few months and we will see what ever is available for electric and plug in cars, will buy or lease depending on the market.

 

[tessaduncan]

I know zip about leasing and even less about cars. Could someone please tell me if this a good/decent deal on a lease? One year ago I leased a Dodge Dart (sales price $19043; MSRP = $21130) $1000 down and $122/mo for 24mo (thus total cost of lease = $3927). Residual value = $13735, 15000 miles/yr. DH should get a comparable discount when this lease is up next year.

 

[eta2020]

I know zip about leasing and even less about cars. Could someone please tell me if this a good/decent deal on a lease? One year ago I leased a Dodge Dart (sales price $19043; MSRP = $21130) $1000 down and $122/mo for 24mo (thus total cost of lease = $3927). Residual value = $13735, 15000 miles/yr. DH should get a comparable discount when this lease is up next year.

I don't know, but I know that buying and driving it until it's wheels come off is better deal.

And doing it with something like Honda Civic is better deal then with Dodge Dart.

BTW for fun I compared 2 cars. Civic is more expensive yet I know as a cash buyer I can drive LX off the lot with taxes, plates and fees for less then (Dodge Dart sales price $19043)......let alone MSRP = $21130. I don't know what kind of deal would cash buyer get for Dart.....I would expect even better then Civic.

 

[marko]

My brother is on his second lease of a new Toyota Camry.

It works for him because:
1) he's an idiot with cars and doesn't take car of them mechanically; a new car every 3 years is a good thing
2) he's the type who 'always has a car payment'...a lower payment with a new car makes sense
3) part of #2, if he bought a new car, his payment would be a lot more for a lot longer (5 years), so he'd be driving a 5 year old car with a huge payment.
4) part of #3, after 4 years, he'd need new brakes, shocks etc and still be paying a big payment.

The idea is for him to just keep getting new cars and paying a smaller payments.

 

[eta2020]

My brother is on his second lease of a new Toyota Camry.

It works for him because:
1) he's an idiot with cars and doesn't take car of them mechanically; a new car every 3 years is a good thing
2) he's the type who 'always has a car payment'...a lower payment with a new car makes sense
3) part of #2, if he bought a new car, his payment would be a lot more for a lot longer (5 years), so he'd be driving a 5 year old car with a huge payment.
4) part of #3, after 4 years, he'd need new brakes, shocks etc and still be paying a big payment.

The idea is for him to just keep getting new cars and paying a smaller payments.

If he really always pays smaller and smaller payment in 50 years he will lease BMW for 1 dollar a year

He has some new undiscovered way of building wealth. Please share details of it with rest of us.

 

[marko]

If he really always pays smaller and smaller payment in 50 years he will lease BMW for 1 dollar a year

He has some new undiscovered way of building wealth. Please share details of it with rest of us.

You missed the point. It doesn't mean he's paying a smaller and smaller payment.

If he bought a new Camry with $2800 down, he'd have a 5 year loan for (I'm guessing) $250-$300 a month [edit: $425 a month]. After 5 years, his car would be a junk and he'd need another just as his payments would end.

Same car with a 3 year lease with $2800 down is $155 a month. His previous 3 year lease was $160 a month.

He's paying a smaller payment for the same car versus a car loan.

 

[marko]

But what a blast I had today riding my 200 dollar bike through Historic Lexington, Lincoln, Concord Massachusetts today on lovely Spring day and that ride does not get old from year to year.

Must've been a 'wicked blast' in February.

 

[Andre1969]

If he really always pays smaller and smaller payment in 50 years he will lease BMW for 1 dollar a year

He has some new undiscovered way of building wealth. Please share details of it with rest of us.

The Toyota Camry has really held the line on price over the years, and more recently, they've been cranking up the volume and dumping them into rental fleets and such, and using a lot of incentives to keep them moving. So that might be one reason that the brother's current Camry has a lower monthly payment than the previous one.

But that's not something you can count on, consistently.

 

[marko]

The Toyota Camry has really held the line on price over the years, and more recently, they've been cranking up the volume and dumping them into rental fleets and such, and using a lot of incentives to keep them moving. So that might be one reason that the brother's current Camry has a lower monthly payment than the previous one.

But that's not something you can count on, consistently.

Well, the real point is that he gets the same car for half the payment price had he taken a loan. His lease is based on ~$25K model.

 

[pb4uski]

I know zip about leasing and even less about cars. Could someone please tell me if this a good/decent deal on a lease? One year ago I leased a Dodge Dart (sales price $19043; MSRP = $21130) $1000 down and $122/mo for 24mo (thus total cost of lease = $3927). Residual value = $13735, 15000 miles/yr. DH should get a comparable discount when this lease is up next year.

Something doesn't seem right with your lease numbers in that usually the sum of the upfront, monthly lease payments and residual value are more than the sales price.

According to TrueCar one should be able to buy a Dart for about 90% of MSRP and your purchase price was right there.

 

[utrecht]

How did I know that this thread would turn to "its cheaper to drive a car til the wheels fall off" even though I stated in the original post that we have decided to splurge and get new cars every 3 years even though we know it costs more in the long run than buying a car and driving it for 10 years or more?

I already know that and don't care anymore. We saved our butts off for decades so we could splurge and we want to splurge on always having new cars.

 

[Animorph]

That just puts us back to the implied interest rate on the lease versus what you could make with the money in the market or some safer investment. Is it easier to buy and trade-in at the dealer or lease? I've got to think there are enough moving parts and risk shifting in a lease that the effective interest rate might be a little high. But there are always special deals, either way.

 

[ikonomore]

Something doesn't seem right with your lease numbers in that usually the sum of the upfront, monthly lease payments and residual value are more than the sales price.

According to TrueCar one should be able to buy a Dart for about 90% of MSRP and your purchase price was right there.

^^^ This guy is right. How do you have $4k of of total cost not add up to the sales price? $3927 + $13735 = $17662.

In lease guide's calculator I put 0% for sales tax, 0% for rent charge and still am at $180 per month. Did you trade in a car?

 

[jazz4cash]

Rethinking my long held opposition to leasing, it occurs to me that the ultra long car loans (6-7 yrs) are more like open ended leases. Many lease to acquire more car than they could otherwise afford, but we're now talking about being in a position to pay more for the convenience of not worrying about keeping the tires rotated (!). That said, we are in the market for a new ride soon and want to splurge after keeping the last one 15 yrs so I will look at leasing seriously but expect to buy due to super low loan rates.

 

[eta2020]

How did I know that this thread would turn to "its cheaper to drive a car til the wheels fall off" even though I stated in the original post that we have decided to splurge and get new cars every 3 years even though we know it costs more in the long run than buying a car and driving it for 10 years or more?

I already know that and don't care anymore. We saved our butts off for decades so we could splurge and we want to splurge on always having new cars.

Then you are asking a wrong question. You should ask what is more enjoyable buying car or leasing it, not what is cheaper.

Buying it is more pleasure. Why?

Because you are free to own it for 7 months or 26 months or 7 years. It is all up to you when you get your next car.

Because you can take it around USA 20 times and put on it 200 000 plus miles and nobody will penalize you for it. You have no milage limits to worry about.

Because you don't need to worry about any dink or scratch on car. Nobody will tell you to pay for it at the end of the lease.

And I am talking about buying it like somebody who can afford it...That is in cash. Not like Marko's brother who is comparing monthly payments . If monthly payments is something you need to worry about then you may not be in a position to have car for a pleasure of it.

If I have to worry about somebody making dent on my car or about putting too many miles on it and I have to keep that car till specific date that is not splurging in my mind