Car leasing: yes or no?

[Montecfo]

Answer is "It Depends"

As someone who buys all my cars, usually used, and pays cash, I still think leases can make sense. Depends on pricing, alternative uses of cash, vehicle involved, expected time to own and expected mileage.

Buying cars coming off lease can also make sense. It Depends.

 

[Qs Laptop]

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.

New trucks are typically in the $40,000 to $50,000 price range, or higher. If you plan on buying it new and keeping it for 10 years I can possibly see paying cash. However, in today's changing technology climate I can't see having a 10 year old vehicle. So if you are going to have it for 5 years or less, why not keep all that cash invested somewhere and lease the vehicle? You're paying for depreciation either way but with the lease you are only paying for the depreciation you're using, not to mention avoiding the lump sum sales tax amount.

 

[Hermit]

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.

I had the timing belt changed on my 2004 Audi TT at 49000 miles. That car has been as maintenance free as any car I have had. Maybe it is because I had that belt changed?

 

[OldShooter]

New trucks are typically in the $40,000 to $50,000 price range, or higher. If you plan on buying it new and keeping it for 10 years I can possibly see paying cash. However, in today's changing technology climate I can't see having a 10 year old vehicle. So if you are going to have it for 5 years or less, why not keep all that cash invested somewhere and lease the vehicle? You're paying for depreciation either way but with the lease you are only paying for the depreciation you're using, not to mention avoiding the lump sum sales tax amount.

Essentially, you're saying that I should borrow money, paying non-deductible interest, and invest it. No thanks. If I want to borrow, I have a margin account and the investment interest is tax deductible. Also, I avoid some of the depreciation hit by not buying the current model year. Finally, if I want to borrow money somewhere else there are much cheaper ways to do that than leasing.

In truth, there is no question about borrowing money to buy things anyway. We are sitting on solid 7 figures in cash and fixed income investments right now and almost certainly will be for the rest of our lives.

Re "technology" every light truck I have ever seen has four wheels, an engine, and a transmission, plus a passenger compartment. That's what I buy. I try to avoid electronic dashboard toys both because they are a safety distraction and because replacements are very expensive when they fail. And they're gonna fail. Ambient conditions for electronics in cars are close to military spec limits, but the components, assemblies, and testing are not mil-spec.

 

[OldShooter]

I had the timing belt changed on my 2004 Audi TT at 49000 miles. That car has been as maintenance free as any car I have had. Maybe it is because I had that belt changed?

Actually the story on those belts is kind of funny. IIRC the factory recommendation was that the belt be changed at 120,000km., which would be 75K miles. In my wife's owner manual, it said 120K miles. Someone forgot to do the conversion. It was about 80K miles when the thing let go. Hence, Audi finally caved and covered the failure.

It was obviously not an uncommon thing, as Audi stocked fully assembled heads in the US. No reason for that unless there is a recurring problem that destroys heads.

 

[marko]

not to mention avoiding the lump sum sales tax amount.

Another good reason. In Mass, saving 6.25% on a 60K car puts a big dent in the first year's monthly payment!

 

[golfnut]

Never leased - We're in the keep the car for a long, long time camp.

Maybe leasing a car would be a good idea when you kinda know it will be your last one?? As an example, when you are about to hit 80 yrs. old

 

[Jerry1]

I recently read somewhere:

Yes - Lease if you want to keep car <5 years
No - if you want to keep car >= 5 years

I can't back this up with an article or study, but I feel like there's probably a donut hole here. But I certainly agree that how long you own the vehicle makes a big difference.

I'd say Lease if you want a car 3-5 years. Basically, you want a car never out of warranty.

I'd say buy if you want to drive it into the ground which would be more than 5 years for most. Say 10.

Between 5 and 10 years, there's probably situations where either option can yield good results.

As this thread indicates, it's more about lifestyle and how you see a car than it is about the finances. Many (me up until retirement) like to have a new car frequently. I think I did very well on my leases. I had my cost per mile in a very good range, never had repairs to pay for and always had the nice new features. Not that I've retired and I drive far less miles, my thought is that keeping them long term is a better option. I'm not firm on this yet and my backup position is that me and DW lease one car and drive the other into the ground. Kind of the best of both worlds.

 

[COcheesehead]

I lease, but I run the lease back through my business for some tax advantages. When I retire, I will buy...a previously leased vehicle.

 

[LuckyDog]

We live in the country and drive too many miles to make leasing worthwhile...

 

[kgtest]

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.

Only one truck you need. DF bought one a few months after retiring. 910lb ft yah baby, blow that dough! Or DF dough, my inheritance.

2017 Silverado 2500HD Heavy Duty Truck | Chevrolet

 

[Nomoresnow]

I've never leased because I keep cars eight years+ then bite the bullet and return to the dealer for a good used car, typically 2-3 yrs. old with about 20-40K on them, keep them 5, 6 years until paid, enjoy ~ 2yrs. of 0 payments and use that savings to rinse, repeat. Got a 2010 RAV 4 with 217K on it, going strong.

 

[bobandsherry]

I've never leased because I keep cars eight years+ then bite the bullet and return to the dealer for a good used car, typically 2-3 yrs. old with about 20-40K on them, keep them 5, 6 years until paid, enjoy ~ 2yrs. of 0 payments and use that savings to rinse, repeat. Got a 2010 RAV 4 with 217K on it, going strong.

Cars today last much longer than the junk sold decades ago, especially if you maintain them properly. Just curious, how much did you pay for the Rav 4 and how much have you spent on repairs and maintenance?

 

[Katsmeow]

Life time leaser here. Usually ~$60k MSRP cars. ~$5500 yearly top lease payments (~$450 pm) all in no cap reduction.

Incudes GAP insurance, all maintenance, roadside assistance, Sat Radio. AND MOST IMPORTANT. Resale after Accident insurance. If it gets hit and gets a Carfax / AutoCheck Scar, you can just give it back at the end of the lease no questions asked.

Skeptical? Try selling or trading a used car with a Carfax Scar....... Value Priceless.

Could you explain this? I'm not sure what you are saying. Are you see that when figuring the cost of a lease you include your cost for gap insurance, maintenance and Sat Radio or are you saying you get that included in the lease?

Also what is Resale after Accident Insurance? Is this something you are buying or that is included with the lease?

As for leasing - I have literally never done a lease. I've mostly been a buy new and keep a long time person. Currently we have 2 vehicles. I have an Explorer I've had about 6 1/2 years. Still running great. Has a lot of safety features that are important to me (like adaptive cruise control) so I don't have a need to get rid of it. Our other vehicle is a small that is almost 6 years old. We are thinking to make a change for another SUV moving the Explorer to our back up car.

The first thought was just to buy new (most newer used cars nowadays really don't seem worth it). But, our money is mostly in retirement funds. So withdrawing money to pay cash for a car hurts us from a tax standpoint. We could get a loan, of course, but I am not really thrilled with that idea. I had thought about leasing. Part of what I am thinking about is ease of maintenance and known expenses so not having to worry about unanticipated repair cost.

My only real issue is with mileage. We don't drive as much as we used to but we sometimes take driving vacations so I am worried about going over on mileage. Still this is an option I would consider for one car.

 

[ShokWaveRider]

Are you see that when figuring the cost of a lease you include your cost for gap insurance, maintenance and Sat Radio or are you saying you get that included in the lease?

Yes, they all came with the lease.

Also what is Resale after Accident Insurance? Is this something you are buying or that is included with the lease?

That is my term. No additional actual insurance, just peace of mind. These days you cannot sell a used car with a Carfax Scar, you should not buy one that has any either. If you have an accident of any kind it ruins the resale value on any car. With a lease it does not matter.

 

[bobandsherry]

The answer is like this.... Yes, no, maybe. No one right answer for everyone.

 

[CaliKid]

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.

Swapalease is great. I have never pulled the trigger but there sometimes are some nice looking deals on a car with a year or so left.

Another good place to look for incredible deals, on new leases, is leasehackr.com They often have brand new cars for about $150/month by taking advantage of certain incentives and negotiating a decent deal.

 

[ExFlyBoy5]

Swapalease is great. I have never pulled the trigger but there sometimes are some nice looking deals on a car with a year or so left.

Another good place to look for incredible deals, on new leases, is leasehackr.com They often have brand new cars for about $150/month by taking advantage of certain incentives and negotiating a decent deal.

I took a quick gander at the website and I was amazed at HOW MUCH some of these folks are paying to lease a car! Granted, it's been a long time since I financed a car (and have never leased)..but damn!

So, no. I will not be leasing a car anytime soon.

I am not so sure how good a deal it would be here in Georgia. I am not sure how the title tax is figured on a "swapped lease", but I do know that for a purchase, that will cost you 7% of the FMV.

Edit: In Georgia, you will be taxed 7% of the lease payments. Still a decent chunk of money IMHO.

Georgia passed a revision of its tax law in 2017 that changes the way TAVT is calculated for leased vehicles. House Bill 340 which is effective as of January 1, 2018 taxes only the sum of lease payments, not the entire value of the vehicle as before — a much more fair tax for leasing consumers in Georgia.

https://www.leaseguide.com/glossary/georgia-car-lease/

 

[ShokWaveRider]

Remember, as interest rates rise, leasing becomes less desirable, unless the leasing company makes concessions. Mercedes is notorious for charging higher interest and having lower residual values on their leases. that is why I changed from Merc to BMW. And YES they can be negotiated.

 

[brett]

I took over a lease a number of years ago when I was working. The vehicle was a business expense for tax purposes.

Two outcomes at the time. On a pre tax basis it was not the best alternative. On an after tax basis it was financially advantageous to me so we moved forward with it. It may not have been so good at the start of the lease. I assumed the vehicle in month 19 of a three year lease. Turned out to be a good deal for us since we also took advantage of a lower than market end of lease buyout.

 

[Human]

Anyone know of a good auto lease vs. buy calculator?

I understand that it's complicated - and I doubt any calculator would capture all the factors - but it could provide one data point to help quantify the dollar difference.

 

[JonB]

We have typically been buy and hold owners keeping cars more than 10 years, but 2.5 years back we decided our son needed AWD on the car he had at school, so he inherited mine. After doing some research on my options and the recommendation of a friend at work, I took a plunge into a 3 yr lease. At the time it seemed technology was advancing quickly in the cars, but the charging infrastructure and range of full electric cars were not yet to the tipping point to go that route. I was able to find a car that had been driven by the owner of a dealership with about 5K miles on it and was being offered at over 20% off the sticker price, so some of the initial depreciation had already been factored into the price to me. The car still had a decent residual value, so the the 20% off made for very low payments vs a typical lease.

But a few months back I accelerated my retirement plans, and it seems my DW and I don’t both need cars, she almost never drives by herself since I am around... I am thinking to just turn in the leased car in 6 months and walk away without hassles; if I could turn it in tomorrow and avoid the remaining payments, I probably would.

So lessons for me are 1) leasing a demo can be a decent deal financially, but 2) things change and the new life situation may not match up exactly with the end of the lease.

Guess I will be waiting a few more years for an electric car. Heard the Tesla 3 series has a waiting list of 1.5 years and having a lot of problems getting quality parts to support demand, so maybe it will be a few more years before I think about the next car purchase...

 

[marko]

Anyone know of a good auto lease vs. buy calculator?

I understand that it's complicated - and I doubt any calculator would capture all the factors - but it could provide one data point to help quantify the dollar difference.

A calculator will give you the dollar difference and, as you note, one data point.

It won't provide the intangibles --more car for less money, less worry, etc-- as noted within this thread.

I suspect that if the dollars alone are one's criteria then leasing will not be a winner.

 

[RunningBum]

Part of the reason I hold onto cars more than 5 years is partly economics, partly familiarity with a reliable car, and partly because I hate the selling process. I hate selling it myself, and that's not a good option anymore anyway because I live pretty remotely. I feel like a take a beating when I trade in at a dealer or try to sell someplace like CarMax.

Does that make me a better candidate for leasing if I'm ok with the economics of a new car every 5 years? Or are you just locking in taking that beating on a trade-in by leasing?

 

[RunningBum]

I'll also say that leasing seems a bit like an annuity to me. I don't know if I can understand exactly what I'm getting into, and feel like I could get what looks like a great deal, only to find out I locked myself into a bad deal. Is there a good place to really understand all the ins and outs of leasing, so you know what to look for in a contract?

With an outright purchase, it's one check and I'm done with them unless I need warranty work done. I don't do the loan deals or extended warranties or service plans.

I will check out that Leasehackr site. I see they have a "Leasing 101" link. If there's a better learning site, point me to it.