Again: New car lease vs.buy

[JOHNNIE36]

I know this topic has been kicked around for a long time. I went back to posts on this subject in 2006 and the later ones. I've leased our last four vehicles but I think the time has come to change my outlook. I thought I would post some "bullet" thoughts and then let forum members shoot holes in my thinking. My basis for this thinking are many: I'll turn 80 this year and have enjoyed 27 years of FIRE. My only necessity in a car is to have something really reliable and cost effective going into my later years. When I go to that used car lot in the sky, I want my wife to have something paid for that would last until she could no longer drive. Maybe it would be better to just pay cash and have it over with but with 0% financing, why use your own money. Here's some of my thoughts:

* Should I lease for three years to make sure the car looks like it will last for ten years? What if it was a lemon and I had a lot of repairs under warranty. I wouldn't want that car and it would be easier to dump it after the lease period.
* On a lease, I would have only paid the sales tax on the period I used the car instead of the full tax hit. Then If I bought the leased car, the sales tax would be for the remaining value of the vehicle.
* Should I buy our current vehicle (2013 Toyota Prius V, 28K miles that I can buy for $23K). Great car so far with five more years left on the battery warranty.. Maybe buy extended warranty on the rest of the vehicle? Maybe not. What's the cost of new batteries?
* I'm leaning toward a new Camry 4-cyl XLE or a comparable Honda Accord. Something for around $30K. If I buy, maybe I should shop for a new 2015 Toyota or Camry. I could avoid the big one year depreciation hit.
* Getting away from Toyota and Honda, the Hyundai has a 10 year warranty. It's rated highly in Consumer Reports. I wouldn't really care about resale value and wouldn't have to buy an extended warranty.

Too many if's, and's or buts. This is the kind of stuff that keeps me awake at night. What's the big deal? It's only a car. Any thoughts or suggestions would be appreciated.
.

 

[REWahoo]

Johnnie, your post reminds me of my dad, who bought his "last new car" three times.

I've never been a fan of leasing, choosing to buy with cash or take advantage of 0% financing if available. Renting, even for two or three years at a time, always calculated out to be far more expensive than owning for 10 years/120,000 miles, whichever came first.

But if you have the money, lease a Jag or a Benz and enjoy!

 

[W2R]

This section of your post stood out to me as being extremely sensible:

I'll turn 80 this year and have enjoyed 27 years of FIRE. My only necessity in a car is to have something really reliable and cost effective going into my later years. When I go to that used car lot in the sky, I want my wife to have something paid for that would last until she could no longer drive. Maybe it would be better to just pay cash and have it over with but with 0% financing, why use your own money. Here's some of my thoughts:

Instead of leasing, I would suggest buying a car. My opinion is that the chances of getting a lemon are pretty small these days, especially if you do your research and get a brand with a good repair record.

I'm leaning toward a new Camry 4-cyl XLE or a comparable Honda Accord. Something for around $30K. If I buy, maybe I should shop for a new 2015 Toyota or Camry. I could avoid the big one year depreciation hit.

Yes, this is what I would choose to do if I was in your shoes. I'd buy (not lease) a 2015 Camry or Accord. Good savings, good cars.

 

[tfudtuckerpucker]

I have a friend, a bit younger than you, who just totalled her car. Fortunately she was not seriously injured. She decided to not replace her car, and instead just use uber. She lives in the city, and doesn't drive that much. So depending on lots of factors, it could be cheaper and safer. It's not for me right now, but maybe someday.

 

[HadEnuff]

Johnnie, among your many good points you raised one that I think really sways the deal towards leasing, and that is protection from a lemon. If you get a lemon, you can give it back. Along the same line of thinking, I had an uncle with a brand new Murano. He got T-Boned at a 4 way intersection. He and his wife were OK, but the car SHOULD have been totaled. Instead the INSCO paid to have it bent back into shape. It was never the same, and when he went to trade it in the Carfax was negative, the dealer didn't want it because it had been so badly bent... you lease, not your problem..
Having figured all of that out on my own, two months ago I bought a car...don't ask me why.. I still don't know...I guess I forgot all of my clever thinking...

 

[DrRoy]

I have considered the various options in the past but have always seen leasing as a bad deal. You are paying a premium for the highest depreciation years of a car's life. I have had 5 vehicles that I bought new and kept for 10 years +/- or up to 190,000 miles. I have had very mixed results with used cars, most of them helping my kids find something they could afford. Too many developed problems. Seen the most trouble with Fords. My last purchase was a year ago, a very nicely equipped Chevy Malibu for $21,500 after incentives. Also looked at Passat and Accord but the Chevy won the contest and I would do it again. I am very happy with it.

 

[cooch96]

I think the plum time to lease was a few years ago when dealers were desperate to get wheels off their lot.

Sounds like your currently leased car is solid. I'd probably stick with that and buy it. But going with one of the other cars you listed also sounds wise. I believe new batteries are in the $7-10k range.

But going with uber or lyft or your local taxi service is also feasible: less risk, no maintenance, might even be cheaper, and convenience is likely to get better as time marches.

So my advice is to find a three-sided coin; call heads, tails, or feet; and flip it until it says to do whatever you wanted to do in the first place.

 

[ikonomore]

Turn the lease in on the Prius. The new prius is coming out as we speak. Your old one's price is way too high.

You should just buy a camry or accord. If it's a lemon, trade it in before the bumper to bumper warranty is up. Do not buy an extended warranty. You have until the manufacturer's warranty is up to buy one if you must.

 

[Souschef]

My suggestion is to either go to one of the car rental places and get a one year old car, or get one from a dealer that came off lease.My wife is still driving her 1998 Cadillac lol

 

[capjak]

I have had good luck with Lexus Certified, which is what my wife drives, they give you 3 additional year bumper to bumper warranty up to 100,000 miles a very good reliable car. Kept the last certified pre owned Lexus for 11 years and 179,000 miles traded in on another certified lexus no issues at all with the cars.

For me I drive BMW bought new 4 year 50,000 mile warranty plus all maintence included (not tires) and it is hard to move to anything else after driving one, but that is just me.

 

[Sunset]

I had a Hyundai Sonata for 12 years. Very dependable car.
We also have a Camry, the Sonata was about $4K less than a comparable Sonata which is why I went for the Sonata.

I do think Camry is a better quality vehicle, and we will probably buy another Camry to replace it. If money was tight, then I'd buy a Sonata, the 10 yr warranty was certainly piece of mind (It is only 5 yrs if you buy a used one).

Leasing is fine only if you run a business and can write off the lease cost, that is the real purpose and benefit, its a straight expense not depreciation. For ordinary folks it is an expensive way to have a new car as you never stop paying.

I keep my cars 10 years minimum, so even if I took out a loan, payments would stop after 3-4 years, but someone leasing for 10 years keeps paying every year.

 

[Texas Proud]

Johnnie, among your many good points you raised one that I think really sways the deal towards leasing, and that is protection from a lemon. If you get a lemon, you can give it back. Along the same line of thinking, I had an uncle with a brand new Murano. He got T-Boned at a 4 way intersection. He and his wife were OK, but the car SHOULD have been totaled. Instead the INSCO paid to have it bent back into shape. It was never the same, and when he went to trade it in the Carfax was negative, the dealer didn't want it because it had been so badly bent... you lease, not your problem..
Having figured all of that out on my own, two months ago I bought a car...don't ask me why.. I still don't know...I guess I forgot all of my clever thinking...

I have zero knowledge in this arena, but wouldn't the same problem come into effect with a lease IOW, they could claim excess 'wear and tear' or some other legal wording in the lease making you pay for the loss in value of the car due to the wreck.....


Also, I think taking out a totaled car in the equation is the best way to view it... there are always things that might happen to change the benefits or detriments, but you have to calculate on the most likely outcome.... and the most likely outcome is NOT a totaled car....

 

[JOHNNIE36]

I have had good luck with Lexus Certified, which is what my wife drives, they give you 3 additional year bumper to bumper warranty up to 100,000 miles a very good reliable car. Kept the last certified pre owned Lexus for 11 years and 179,000 miles traded in on another certified lexus no issues at all with the cars.

That's a great thought also. In the past, my son always bought certified used Chevy trucks and was happy with those purchases. Future DIL drives a Lexus certified used SUV and she is happy. I could save the big depreciation hit by going this way. I'll check into that and the kind of warranties they offer.

 

[brett]

Don't buy out the Prius. Why buy old technology?

It will depreciate even faster when newer product hits the street.

We very much like Toyota product but we no longer put enough mileage on our vehicles to have a positive payback on a Prius. Maybe next time around.

I think the lease depends on the financial model-the T's and C's such as mileage cap, payments, buyout. Leases can differ so much. You need to be very careful.

If you are not writing off the car as a business expense and if the imputed interest rate on the lease is higher than the after tax return on money that you would otherwise use to buy the car then you are better off buying. Assuming that you are not buying a lemon.

 

[harley]

But if you have the money, lease a Jag or a Benz and enjoy!

Then you can be like a lot of the drivers here in FL. I've never seen so many Jags, Bentleys, Cobras and Maseratis going 35 in the left hand lane of a 55 mph road. Many with a turn signal on for mile after mile. Most of them do turn left eventually, though.

 

[marko]

I've been leasing Mercedes for over 20 years.

While it's not for those who are looking for the most financial 'efficiency', I find it allows me to drive a better car for less money than if I bought it outright. I'm not one to keep a car for 5+ years.

Plus as noted, I get to dodge the sales tax a bit as I only pay sales tax on the monthly payment vs coming up with 6.25% on $60K-$80K every few years.

I've never run into the issue of getting hit with a 'wear and tear' tab (I've even turned 'em in with a few good dings); maybe because I've already lined up a new car with the same dealer.

 

[HadEnuff]

I have zero knowledge in this arena, but wouldn't the same problem come into effect with a lease IOW, they could claim excess 'wear and tear' or some other legal wording in the lease making you pay for the loss in value of the car due to the wreck.....


Also, I think taking out a totaled car in the equation is the best way to view it... there are always things that might happen to change the benefits or detriments, but you have to calculate on the most likely outcome.... and the most likely outcome is NOT a totaled car....

I don't know for sure about how they deal with that. Heck, maybe when you lease it, the INSCO has to deal with the lease company, rather than you, since they "own" the car. I've never leased. I fully intended to the last time around, but I wound up buying a Toyota, instead of leasing. Still not sure why, other than I intend to keep this Toyota at least the 14 years I kept the last one.

As far as what you say about "likely" outcomes, I disagree. That's why I have fire insurance.

 

[Al in Ohio]

Johnnie, among your many good points you raised one that I think really sways the deal towards leasing, and that is protection from a lemon. If you get a lemon, you can give it back. Along the same line of thinking, I had an uncle with a brand new Murano. He got T-Boned at a 4 way intersection. He and his wife were OK, but the car SHOULD have been totaled. Instead the INSCO paid to have it bent back into shape. It was never the same, and when he went to trade it in the Carfax was negative, the dealer didn't want it because it had been so badly bent... you lease, not your problem..
Having figured all of that out on my own, two months ago I bought a car...don't ask me why.. I still don't know...I guess I forgot all of my clever thinking...

That scenario is very rare. Buying a lemon is also as long as you know what brands to steer clear of.


Sent from my iPad using Early Retirement Forum

 

[HadEnuff]

That scenario is very rare. Buying a lemon is also as long as you know what brands to steer clear of.


Sent from my iPad using Early Retirement Forum

Everybody makes a lemon once in a while. And even if your car isn't "totaled", an accident repair history on Carfax will definitely give you a problem at resale or trade in time.
I'm not saying it definitely makes leasing a better deal than buying, merely stating that it does provide a layer of protection. And these darn cars are so expensive, that a misadventure is really a costly experience. So if you are on the fence, it's something to consider.

 

[wanaberetiree]

I've been leasing Mercedes for over 20 years.

While it's not for those who are looking for the most financial 'efficiency', I find it allows me to drive a better car for less money than if I bought it outright. I'm not one to keep a car for 5+ years.

Plus as noted, I get to dodge the sales tax a bit as I only pay sales tax on the monthly payment vs coming up with 6.25% on $60K-$80K every few years.

I've never run into the issue of getting hit with a 'wear and tear' tab (I've even turned 'em in with a few good dings); maybe because I've already lined up a new car with the same dealer.

So assuming you buy a new Mercedes every 3 years and sell the old one, it would not make sense financially? or too much hassle?

 

[Texas Proud]

I don't know for sure about how they deal with that. Heck, maybe when you lease it, the INSCO has to deal with the lease company, rather than you, since they "own" the car. I've never leased. I fully intended to the last time around, but I wound up buying a Toyota, instead of leasing. Still not sure why, other than I intend to keep this Toyota at least the 14 years I kept the last one.

As far as what you say about "likely" outcomes, I disagree. That's why I have fire insurance.

I do not think you buy fire insurance because you think it is a likely outcome... and I bet that having the house burn down was not included in your decision to buy the house.... as even you mentioned, you bought a Toyota because you expect to keep it 14 years... you do not expect to keep it for 5 and then total it out... so totaling out the car was not in your decision to buy (well, at least that is what I assume)....

An insurance decision is separate from a buying decision IMO...

 

[Texas Proud]

Everybody makes a lemon once in a while. And even if your car isn't "totaled", an accident repair history on Carfax will definitely give you a problem at resale or trade in time.
I'm not saying it definitely makes leasing a better deal than buying, merely stating that it does provide a layer of protection. And these darn cars are so expensive, that a misadventure is really a costly experience. So if you are on the fence, it's something to consider.

I do agree... which is why I got an extra $1200 from the insurance company of the guy who caused $7K worth of damage to our new Honda... the repair shop seems to have repaired it back to original condition (and they have a lifetime guarantee).... but I know when it comes time to sell the fact it was in an accident will get me less money....

 

[JOHNNIE36]

I cannot believe all the interest in this subject. Every post got me to think about something and makes me think even more about my situation. However, as I mentioned in the beginning, I'm into my 80th year. If I buy, it will certainly be my last car (and maybe I don't want that). I have already made up my mind about a few things: I'm not buying my current Prius V. It will be either a Toyota or a Honda and not a hybrid (not worth the extra money for the low miles we drive in a year. If I decide to lease again, it will have to be the very best deal going and there will be no out of pocket cash. I am leaning to purchase because I don't want to have to go through this thought process again.

Thanks to all for the interesting posts and for taking the time to respond.

 

[Katsmeow]

* I'm leaning toward a new Camry 4-cyl XLE or a comparable Honda Accord. Something for around $30K. If I buy, maybe I should shop for a new 2015 Toyota or Camry. I could avoid the big one year depreciation hit.

My experience is that dealers don't give enough discount for a new prior model year car. They give a discount but it isn't equal to depreciation. If you want a 2015, get a good low mileage used one.

 

[gerntz]

Had previously always bought outright. Went with 3 year lease a year ago because I didn't want to put the money out upfront on my most expensive car ever & find I didn't like it. The lemon issue wasn't a concern.

With one non-drive issue exception, I love it & will likely purchase at end of lease. Probably cost me more, but that lowered risks as I perceived them & so not a problem. Call it insurance.