Good time to lease a car for our situation?

[jollystomper]

First, the foundation: this is a want, not a need, and a "Blow That Dough" situation to a degree .

I like having 3 autos, and since our 3rd car was lost in a accident several months ago I have been taking my time considering what to add. We both agree a mid-dive SUV is the best option.

With our parameters of < $40K miles and nothing earlier than the 2018 model year, the total price of the vehicles we are looking at range between $28K-$35K. Paying cash would not be a problem, though if a good low loan rate was offered I would consider a partial financing.

However, the more i think about it, the more I am wondering if we should just lease a car for 3 years. The reasons:
- I am not picky over things like interior/exterior color or extra features. I rented cars enough during my Megacorp and personal travel that I am used to a variety of cars and do not have much of a personal preference. As long as it is reliable and does not leave me stranded anywhere and will not give me problems beyond scheduled service items, I am fine. I am perfectly happy at looking at whatever a dealer may have in inventory.
- As a 3rd car, we would not exceed the 10000-12000 yearly mileage limit. When we have three cars, we averaged pre-pandemic 22,000 annual miles across all three, and before the accident 19,000 annual miles across all three.
- I have not looked at all dealers, but Toyota right now is offering a 1.75% lease APR for up to 36 months. Other brands might had similar specials. That would estimate a monthly payment of around $110 for a $31K RAV4 with $10K down and a 12,000 mile annual allowance. The difference between purchasing and leasing I could put into I Bonds .
- Though we would have nothing to show for it in 3 years I would be fine having spent around 14K to have a new car for 3 years Blow That Dough!)

Of course, for that last point, I could also see if I could find a SUV for that same price in a condition that would last at least 3 years... but it likely would not be as "nice" and there would be the maintenance risk.

Any thoughts? I am curious as to what others think.

 

[corn18]

First, the foundation: this is a want, not a need, and a "Blow That Dough" situation to a degree .

I like having 3 autos, and since our 3rd car was lost in a accident several months ago I have been taking my time considering what to add. We both agree a mid-dive SUV is the best option.

With our parameters of < $40K miles and nothing earlier than the 2018 model year, the total price of the vehicles we are looking at range between $28K-$35K. Paying cash would not be a problem, though if a good low loan rate was offered I would consider a partial financing.

However, the more i think about it, the more I am wondering if we should just lease a car for 3 years. The reasons:
- I am not picky over things like interior/exterior color or extra features. I rented cars enough during my Megacorp and personal travel that I am used to a variety of cars and do not have much of a personal preference. As long as it is reliable and does not leave me stranded anywhere and will not give me problems beyond scheduled service items, I am fine. I am perfectly happy at looking at whatever a dealer may have in inventory.
- As a 3rd car, we would not exceed the 10000-12000 yearly mileage limit. When we have three cars, we averaged pre-pandemic 22,000 annual miles across all three, and before the accident 19,000 annual miles across all three.
- I have not looked at all dealers, but Toyota right now is offering a 1.75% lease APR for up to 36 months. Other brands might had similar specials. That would estimate a monthly payment of around $110 for a $31K RAV4 with $10K down and a 12,000 mile annual allowance. The difference between purchasing and leasing I could put into I Bonds .
- Though we would have nothing to show for it in 3 years I would be fine having spent around 14K to have a new car for 3 years Blow That Dough!)

Of course, for that last point, I could also see if I could find a SUV for that same price in a condition that would last at least 3 years... but it likely would not be as "nice" and there would be the maintenance risk.

Any thoughts? I am curious as to what others think.

Would be curious to see how leases are calculating residual value in these crazy times. I would think a three year lease with a reasonable cost of money rate and a realistic residual based on today's used car prices, would be a steal.

A friend of mine leased a Porsche just before COVID. Three year lease with ok terms. The current value is well north of the residual on the lease so he is going to buy it at the end of the lease and then sell it for a $12k profit.

I would think that a leasing company wants to keep residuals low no matter what is going on the used car market. So they sell you a $35k car for $32k and put the residual at $12k even though the same 3 year old model is selling for $20k.

Anyway, if the cost of money is reasonable and residual seems fair, leasing right now is not a bad option.

 

[OldShooter]

My simple-minded viewpoint is that leasing is an expensive and complicated way to borrow money. I don't borrow money to buy cars. I also don't buy new cars except when one model year old and still on the dealer lot.

Yes, I believe that there are situations where a promotional lease might make financial sense but I am not interested in digging details to seek such things out. Re residual value, I don't go to casinos either.

 

[rrppve]

First, the foundation: this is a want, not a need, and a "Blow That Dough" situation to a degree .

I like having 3 autos, and since our 3rd car was lost in a accident several months ago I have been taking my time considering what to add. We both agree a mid-dive SUV is the best option.

With our parameters of < $40K miles and nothing earlier than the 2018 model year, the total price of the vehicles we are looking at range between $28K-$35K. Paying cash would not be a problem, though if a good low loan rate was offered I would consider a partial financing.

However, the more i think about it, the more I am wondering if we should just lease a car for 3 years. The reasons:
- I am not picky over things like interior/exterior color or extra features. I rented cars enough during my Megacorp and personal travel that I am used to a variety of cars and do not have much of a personal preference. As long as it is reliable and does not leave me stranded anywhere and will not give me problems beyond scheduled service items, I am fine. I am perfectly happy at looking at whatever a dealer may have in inventory.
- As a 3rd car, we would not exceed the 10000-12000 yearly mileage limit. When we have three cars, we averaged pre-pandemic 22,000 annual miles across all three, and before the accident 19,000 annual miles across all three.
- I have not looked at all dealers, but Toyota right now is offering a 1.75% lease APR for up to 36 months. Other brands might had similar specials. That would estimate a monthly payment of around $110 for a $31K RAV4 with $10K down and a 12,000 mile annual allowance. The difference between purchasing and leasing I could put into I Bonds .
- Though we would have nothing to show for it in 3 years I would be fine having spent around 14K to have a new car for 3 years Blow That Dough!)

Of course, for that last point, I could also see if I could find a SUV for that same price in a condition that would last at least 3 years... but it likely would not be as "nice" and there would be the maintenance risk.

Any thoughts? I am curious as to what others think.

Think putting $10k down on a lease is not a good idea. Always try to minimize the drive-off payments on a lease.
If you can find a Toyota dealer willing to sell a RAV4 at sticker - MSRP, that’s actually a good deal right now. Agree that in the current crazy market, new cars are actually a better buy than used. There’s just not enough of a discount.
Personally, I’m trying to get by with one less car at the moment after turning in my lease to capture the equity in it. Tough time to buy a car - new or used.

 

[COcheesehead]

When I had my business, I leased a new car every three years. Leasing for me was super easy and I could run it through the business, though I got 1099’d for personal miles. Once I retired, I bought my last lease at the end because it was worth quite a bit more than the payoff. I don’t think I would lease now, since with a trade in, I can write a check for the difference and drive off without debt.

 

[Koolau]

My bias is to look for gently used, older used cars to buy outright. It takes some looking but low mileage older vehicles (preferably Toyota, heh, heh) are out there. My other bias is to buy lower trim models - especially for little-used vehicles. Buying a used (or new for that matter) vehicle with a massive infotainment unit seems a near guarantee of an eventual $3K repair bill.

My last car was a used T-Rav4 in base trim. It was 5 years old, spotless, no issues on CarFax, new tires and brakes with 72K on it. It cost me $13K out the door (a 2012 in 2017). So far, had to replace a battery this year - finally.

A quick look to determine current value suggests about $12K. I realize used car prices have gone up, so that value may be "unfair." My point in all this is that a decent, useful vehicle can be had for much less than a new car. Yeah, you have a used car, but I think it's worth a try but YMMV.

 

[OldShooter]

Yeah, you have a used car, but I think it's worth a try but YMMV.

Everyone drives a used car.

 

[RetiredAt55.5]

Everyone drives a used car.

Yup, lol. It's used the second it's titled in your name and driven off the lot.

 

[jollystomper]

Heard back from the nearest Toyota dealer... the salesperson said they have a few RAV4s on the lot (which I knew from the inventory) with several more coming in by the end of the month but "they go fast and 95% are quickly spoken for"). So I just asked what is available to lease and what the bottom line lease terms will be. The response just might push me away from considering this .

I agree that leasing is more complicated than buying, and as I go through the process that might sway me.

I also like used Toyotas, we bought 2 2011s (Camry and Corolla) in 2013, no issues that were not regular expected maintenance. I was sorry to lose the Corolla, it only had 70K miles so would still have lasted for years or have been a valuable trade-in these days (I was very surprised ad what the insurance company paid us for it). I do want to get a more recent year that has some of the newer safety/convenience features, but this process may drive me to a higher mileage car to keep it simple.

Funny thing, I saw a 2017 Kia Sorento in the the local CarMax inventory, same color and almost the same amount of miles as mine. I bought mine in 2019 with 27K miles for about $21K total cost.This one is listed at $26K. Crazy times .

 

[Koolau]

Everyone drives a used car.

Heh, heh, good point!

 

[Koolau]

Heard back from the nearest Toyota dealer... the salesperson said they have a few RAV4s on the lot (which I knew from the inventory) with several more coming in by the end of the month but "they go fast and 95% are quickly spoken for"). So I just asked what is available to lease and what the bottom line lease terms will be. The response just might push me away from considering this .

I agree that leasing is more complicated than buying, and as I go through the process that might sway me.

I also like used Toyotas, we bought 2 2011s (Camry and Corolla) in 2013, no issues that were not regular expected maintenance. I was sorry to lose the Corolla, it only had 70K miles so would still have lasted for years or have been a valuable trade-in these days (I was very surprised ad what the insurance company paid us for it). I do want to get a more recent year that has some of the newer safety/convenience features, but this process may drive me to a higher mileage car to keep it simple.

Funny thing, I saw a 2017 Kia Sorento in the the local CarMax inventory, same color and almost the same amount of miles as mine. I bought mine in 2019 with 27K miles for about $21K total cost.This one is listed at $26K. Crazy times .

Yeah, my hope is that by the time I need another car, the used-car prices will return to some "normal" level. I figure either supply/demand will reestablish itself or else the economy will be in recession and cars will naturally fall in price. In any case, I hope to wait out the ridiculously high prices until I can't wait any longer to replace my 22 year old Buick. YMMV

 

[ncbill]

leasehackr [sic] dot com especially their forums is the site to find out what is currently leasing well.

 

[Cayman]

It was much cheaper (11%) for us to order a new mid sized SUV than to buy used. YMMV. Depends on the make/model. Carvana will pay me $6k more than I paid 4 months ago for it. I've driven it across re country and back. Strange times indeed.
I have never found a lease that was as cheap and easy as paying cash. YMMV.

 

[Koolau]

It was much cheaper (11%) for us to order a new mid sized SUV than to buy used. YMMV. Depends on the make/model. Carvana will pay me $6k more than I paid 4 months ago for it. I've driven it across re country and back. Strange times indeed.
I have never found a lease that was as cheap and easy as paying cash. YMMV.

That's messed up!

When the recession hits (Whoops! If the recession hits.) things like car buying may begin to return to normal. SO far there seems to be no lack of demand for new (and used) cars. Pent up demand, I guess. But a recession may nip that pretty quickly. Not hoping for a recession, but already thinking in terms of "what ifs" - and one of them is lower car sales if things are like usual during a down turn. YMMV as always.

 

[Winemaker]

I can let you know the latest next Wednesday. My 19 Tacoma lease is up in August and we're going over the details of me buying it out right, leasing another, or buying another.

 

[OldShooter]

It was much cheaper (11%) for us to order a new mid sized SUV than to buy used. YMMV. Depends on the make/model. …

Yes. Rare, but it happens. I bought a ‘94 K1500 pickup that way. I was looking for a one-year-old one. Every used car manager in town had at least one, priced higher than new ones. I guess that their market is not into delayed gratification. I ordered a new one exactly to my spec at $500 over invoice and saved money over the used ones

 

[jollystomper]

Well, I heard back from one Toyota dealer for a 2022 RAV4. Their markup over MSRP is $4,000, which they claim is less than what other dealers are marking up. The out-the-door price is $37K. I am going to have them run the numbers to at least see what they come up with. Again I am not wedded to this option and might still choose to buy used if I find a good deal (ha!), or just wait and see what the recession does.

 

[REWahoo]

Well, I heard back from one Toyota dealer for a 2022 RAV4. Their markup over MSRP is $4,000, which they claim is less than what other dealers are marking up.

The last refuge of a car salesman: "At least we aren't as bad as the other guys!"

 

[gcgang]

I’d always bought used cars, even when my dad could get me the GM employee/family discount. Just didn’t seem worth the money.

Finally decided to go for new (at age 66) and decided on a lease. Probably more expensive, but less problems and no stress trying to sell the thing when you want another.

At this stage of life, I’ll pay up for reliability and convenience.

 

[jollystomper]

The last refuge of a car salesman: "At least we aren't as bad as the other guys!"

Reminds me of a Megacorp seminar I attended where Tom Peters (one of the authors of "In Search of Excellence") was the speaker. He told of meeting with a client about things they could do to improve their brand/image etc. At one point of the client executives exclaimed "Why the heck are we worrying about all of this? We're just as good as everyone else!" Peters made a client logo with that slogan, and I believe he said he told the client if they were willing to go public with that logo he would waive his consulting fee. Of course they did not.

 

[Koolau]

Reminds me of a Megacorp seminar I attended where Tom Peters (one of the authors of "In Search of Excellence") was the speaker. He told of meeting with a client about things they could do to improve their brand/image etc. At one point of the client executives exclaimed "Why the heck are we worrying about all of this? We're just as good as everyone else!" Peters made a client logo with that slogan, and I believe he said he told the client if they were willing to go public with that logo he would waive his consulting fee. Of course they did not.

Ah yes, the Tom Peters days. I remember them fondly. All of us staff and lower/middle mgmt. types would crowd into the big conference room and watch TP give some really inspiring talk. It was challenging because he made it clear that even the best companies still had a thing or three to learn. Most of it was simple and almost self evident but the old forest-for-the-trees blindness most megcorps develop made TP very wealthy.

So we all walked back to our cubes, talking about what we had learned. Within a couple of weeks or a month or three, it became obvious that upper mgmt wasn't going to let us implement any of what we learned. Eventually, I just went to TP presentations as a fun hour or so diversion - knowing it was a waste of our (but not TP's) time. YMMV

 

[marinauser]

The bottom line is that this is just a horrible time to be trying to buy or lease a car. Little to no supply, new or used, and rising interest rates. I would wait 6 month or more and see if we experience a recession. If so, car prices will come down and supply out paces demand in my mind. Also, chip shortages should ease and allow manufacturers to produce more cars to keep up with or exceed demand.

 

[jollystomper]

The bottom line is that this is just a horrible time to be trying to buy or lease a car. Little to no supply, new or used, and rising interest rates. I would wait 6 month or more and see if we experience a recession. If so, car prices will come down and supply out paces demand in my mind. Also, chip shortages should ease and allow manufacturers to produce more cars to keep up with or exceed demand.

I understand. I have not ruled out delaying. I will see what the dealer comes back with, as I tend to be cynical with initial estimates that tempt into the door, and they hope that your eyes are so blinded by the shiny car that you will put up with the changes/additions they perform.

 

[Bamaman]

I worked in the automobile business 24 years, and I was the one that taught dealers (and their salesmen) how to figure lease payments as a way to increase total profits. At the time, most leases were quoted on MSRP--much higher profit deals than average retail sales.

There are many benefits to leasing for low mileage retirees, but I'm not going to get into them. I could write a book on the subject.

But we're not in normal times. My family's luxury car dealership sells about 100 new and 100 used vehicles monthly, and there were 8 new vehicles on the lot the other day. I drove by a large Chevy dealership today, and his lot was virtually empty except for used vehicles he paid out the nose for at some auction.

Unless you absolutely have to get a new vehicle (or used vehicle), put your vehicle search on the back burner. There's always next year. I'm sorry, but I'm not going to pay $4,000 over MSRP for a RAV-4--or even MSRP.

Our two relatively new vehicles are performing very well, including a SUV Hybrid that gets 42.5 mpg. We can essentially thumb our noses at gas prices as they actually affect us very little.

 

[Koolau]

I worked in the automobile business 24 years, and I was the one that taught dealers (and their salesmen) how to figure lease payments as a way to increase total profits. At the time, most leases were quoted on MSRP--much higher profit deals than average retail sales.

There are many benefits to leasing for low mileage retirees, but I'm not going to get into them. I could write a book on the subject.

But we're not in normal times. My family's luxury car dealership sells about 100 new and 100 used vehicles monthly, and there were 8 new vehicles on the lot the other day. I drove by a large Chevy dealership today, and his lot was virtually empty except for used vehicles he paid out the nose for at some auction.

Unless you absolutely have to get a new vehicle (or used vehicle), put your vehicle search on the back burner. There's always next year. I'm sorry, but I'm not going to pay $4,000 over MSRP for a RAV-4--or even MSRP.

Our two relatively new vehicles are performing very well, including a SUV Hybrid that gets 42.5 mpg. We can essentially thumb our noses at gas prices as they actually affect us very little.

Thanks. I think this is good advice.

I feel sorry for folks who's cars are on their last leg. Otherwise, I'd pass the dealerships by and wait a year or two if you can. My 22 yo Buick gets 30 on the road and 20 in town. That's a fair amount of gas (if I used the car that much) but I can buy a lot of gas for what it would cost to replace my reliable (knock on wood) car. YMMV