Lease or Buy -- WWYD?

andiraye · Feb 11, 2016

About three years ago I got into a car accident and totaled my car. We ended up leasing a new Honda CR-V from a friend of a friend. Our lease is coming up and for various reasons we didn't put a lot of mileage on our car. This now means that we can either lease a new car for $279 per month (about $20 cheaper per month than our current lease) for 39 months, no money down, OR we can finance the buy out of the remainder of the lease for $325 per month for 60 months. The total payments for the life of the lease would be about $11K. The total payments for the life of the car loan would be about $19,500. So the loan would cost us about $8500 more. I asked our dealer friend what the expected trade-in value of the car would be at the end of the loan term and he said he couldn't really predict, but that if we bought a CR-V about 8 years ago and were trading it in today it would be worth about $8K. So economically it seems to be a break-even proposition.

Thoughts on what the better route is? Lease or buy? To me, this is entirely an economic decision -- I don't care about features, keeping up with the Joneses, etc.

One other point. I don't see myself driving our existing car much past the 8 year mark -- our last car starting to suck up repair costs at around year 9 or 10 and also started to feel a lot less safe.

natfrac · Feb 12, 2016

I tend to buy rather than lease, since I prefer to own something. If you leased another car, you'd be faced with the same decision in a few years. Not that you asked, but I had a 2000 CRV that I drove until a few years ago and now my daughter is driving it. It has over 200K miles and is still going strong with very little upkeep.

wendow · Feb 12, 2016

We buy rather than lease. We did lease early on in our marriage but always felt like after we sunk tons of money in these vehicles, we were now just giving them away (back to dealership).

We currently own two Hondas. One is a 2001 Odyssey. Been paid off for, well, I cannot remember when we had payments on it though we did finance it to buy it. We do nothing more than check-ups and oil changes and it runs great. It has 130k'ish miles. I think we are going to have to replace the timing belt in the next year and that will be pricey but having no car payment, low insurance and low registration is worth having to do occasional work on the vehicle. At least to us. Other Honda is a 2005 Civic. It has 100k'ish miles and we do nothing but check-ups and oil changes. Also, paid off long ago. We are planning to make that car the kid's car as our oldest dd will be 16yo soon. So, we will be in the market for another vehicle. And unless something has changed in the leasing world, we will buy, rather than lease.

ruadisneyfan2 · Feb 12, 2016

I agree with the pp's.
We buy because we don't mind keeping a vehicle for a long time. Both of our cars are paid for which is a good feeling. At one point we had 2 car payments. Ugh!

Leasing only makes sense if you're someone who only keeps a car until it's paid off.
My 10 yr old Toytoa Sienna only has 47k miles so I feel it has a lot of life left in it. I'm in no hurry to start up more payments.
If you don't have enough saved for a down payment to buy, I would consider another lease since you're kind of stuck but then over the next lease put a lot of savings away so you can be prepared to buy when that lease expires.
Also $0 down doesn't necessarily mean $0 out of pocket. We leased once and it was $0 down payment but we still had to pay taxes, tags, document fees, etc which was close to $2000.

antmaril · Feb 12, 2016

I haven't owned a car in 25 years. Leasing works for me. I always have a new car. I never spend any money on maintenance and the payments are lower than owning. Here's my logic (it may be stupid, I don't really know or care) -- say I own my car and want to sell it and buy another. I never really have anything because I will always need a car and I will always use the money I get for selling a car to buy another. Yes, I own the car, but whatever money I get back from it will always be used to buy another car. In addition, I would never want to own a car long enough to pay off the loan so I would always have a car payment anyway.

In all these years, I have never been charged for any wear and tear to a leased car. The majority of my friends also lease their vehicles.

My two cents.

lost*in*cyberspace · Feb 12, 2016

I think leasing rarely makes sense economically.

tzolkin · Feb 12, 2016

antmaril said:
In addition, I would never want to own a car long enough to pay off the loan so I would always have a car payment anyway.

.

This is really the only type of person that leasing makes sense for. If you "need" a new car every 2-3 years, then leasing may be a fine option.

It's certainly more expensive than keeping a car for a long time and having no payments, but probably about the same as buying often and always having a payment. I prefer paying for the car upfront and then driving it for many years to "get my money's worth" out of the purchase, but I know that others prefer to have a newer car regardless of the monthly expense.

HM · Feb 12, 2016

I would not lease a car. I usually drive too many miles in a year and would be penalized. Plus, we keep our cars fairly long. My DHs car is a 2003 and mine is a 2007. We pay them off well before the loan is due and save on interest. We buy new and keep up their maintenence.

kj2mom · Feb 12, 2016

I am a buy person. I have only bought 2 new cars and I have kept both of them for as long as I possibly could. I spend a lot of time and energy researching what I like and what I want so when I buy I know it will be a long time purchase (years longer than car payments).

Now, I hope I am correctly understanding what you are asking. In your situation, I wonder if it would make sense to turn in the lease and straight up buy something new for that $325 a month for 60 months. I am not sure I would begin a new loan on a 3 year old car with that payment. Am I making sense? Check out the market and financing options and see if you could purchase a new car for the $325 a month then at the end of the 60 months you will own a 3 year newer vehicle for the same $$$.

Crystal824 · Feb 12, 2016

We buy our cars too. We generally buy new or gently used with money down and a trade. We finance for five years. Once the car is paid for, we are usually able to go a number of years without a payment until we are forced to repeat the process. We have our two cars staggered in age in hopes to only have one car payment at a time.

In your scenario given the options, I would probably return the lease and try to find something to buy. It doesn't seem like you would be getting a deal buying the car you leased. I personally think leasing is not worth the money unless you are going to always want a new car.

CalDisneyMomof2 · Feb 12, 2016

kj2mom said:
I am a buy person. I have only bought 2 new cars and I have kept both of them for as long as I possibly could. I spend a lot of time and energy researching what I like and what I want so when I buy I know it will be a long time purchase (years longer than car payments).

Now, I hope I am correctly understanding what you are asking. In your situation, I wonder if it would make sense to turn in the lease and straight up buy something new for that $325 a month for 60 months. I am not sure I would begin a new loan on a 3 year old car with that payment. Am I making sense? Check out the market and financing options and see if you could purchase a new car for the $325 a month then at the end of the 60 months you will own a 3 year newer vehicle for the same $$$.

I was wondering the same thing since I've never leased a car before. Does that mean that after the total put into leasing plus the amount financed to buy is equaling to just over $30,000(including interest)? That seems like an awful lot for a CR-V.

supersnoop · Feb 12, 2016

A lease is a transaction where you pay someone else to guess what the car will be worth at the end of the term. And they're really good at guessing. There are very, very few situations where leasing comes out ahead, even if you trade in your car every three years. Unless you need to lease for business reasons, it always makes more financial sense to buy.

amcnj · Feb 12, 2016

You mentioned that you didn't put a lot of miles on the leased vehicle. So in effect you did not use all of the value of the leased vehicle that was expected. Therefore the vehicle may be worth more at the end of the lease than had been expected. So another way to approach it is to figure out what that vehicle with that age and that mileage is worth today, and what would the payments be to buy such a vehicle today. Then see if the payments they are asking for are similar to, higher or lower than what you would have to spend to buy such a used vehicle today.

If you do choose to lease again, definitely stick with vehicles that hold their value more, as part of the lease cost is basically paying for the difference between the price of the new vehicle versus what it is estimated to be worth x years from now with y mileage. So the higher the value at the end of the lease, the less you are paying for during the lease.

KKB · Feb 12, 2016

I grew up believing you should only buy.
Yet 2 years ago I scoured research & came up with about the same answer as you--it is pretty much a wash anymore. (remember you can make a lease your own based on money down--or not--length of lease, maximum yearly miles, etc.)
The advantage to leasing is that it is new & will probably have few mechanical issues.
The advantage to buying (in your case) is that the Insurance will likely be a bit less.
But that pretty much puts it at a break even again...
Our teens have cars that are around 15 years old. We are starting to put some serious upkeep $ into them...and honestly wish we had not put the $3500 over 2 months we put into a '99 Nissan Altima. We could have leased a new vehicle for $99/month (no money down). Yes, with upkeep over the next few years, again I think it would be close to a break even.
Everything I researched about leasing v. buying (and researching is my job...), basically it said if things are a break even leasing is the better deal.

andiraye · Feb 12, 2016

natfrac said:
I tend to buy rather than lease, since I prefer to own something. If you leased another car, you'd be faced with the same decision in a few years. Not that you asked, but I had a 2000 CRV that I drove until a few years ago and now my daughter is driving it. It has over 200K miles and is still going strong with very little upkeep.

Interesting to know about the CRV. Our last car was a Saab hatchback, which my husband brought into our marriage. It really started to fall apart around year 9 or 10 and after putting a few thousand dollars into it two years in a row, not to mention stopping dead on a major highway with a blowout (notwithstanding the fact that we'd gotten the tires checked, etc.) I wanted no part of it anymore.

andiraye · Feb 12, 2016

ruadisneyfan2 said:
I agree with the pp's.
We buy because we don't mind keeping a vehicle for a long time. Both of our cars are paid for which is a good feeling. At one point we had 2 car payments. Ugh!

Leasing only makes sense if you're someone who only keeps a car until it's paid off.
My 10 yr old Toytoa Sienna only has 47k miles so I feel it has a lot of life left in it. I'm in no hurry to start up more payments.
If you don't have enough saved for a down payment to buy, I would consider another lease since you're kind of stuck but then over the next lease put a lot of savings away so you can be prepared to buy when that lease expires.
Also $0 down doesn't necessarily mean $0 out of pocket. We leased once and it was $0 down payment but we still had to pay taxes, tags, document fees, etc which was close to $2000.

Just $200 in taxes. No other upfront costs on the lease. We are saving to buy a home so I want to put the money into that. Otherwise I would consider putting money down to purchase a car.

andiraye · Feb 12, 2016

HM said:
I would not lease a car. I usually drive too many miles in a year and would be penalized. Plus, we keep our cars fairly long. My DHs car is a 2003 and mine is a 2007. We pay them off well before the loan is due and save on interest. We buy new and keep up their maintenence.

We don't drive that much -- mostly on the weekends. We live in NYC and use a lot of public transportation M-F. So we will almost certainly never be penalized.

angierae · Feb 12, 2016

For me, I'd rather buy a car, make payments for 4-5 years, and keep it for 10, replacing it once things start needing to be fixed. The five or six years without payments make it worth it to me. If you are going to want a new car every 2-3 years, it makes far more sense to lease, unless you drive a lot of miles.

I don't care about having a new car, so I just buy something and keep it as long as possible ,with years and years of no payments and no repair costs.

redsonja76 · Feb 12, 2016

I would never ever EVER lease a car. It's renting a car, you never own it, that is crazy to me. Honda's are great cars, they will last longer than 8 years. Our civic is 11 years old and in perfect condition. We are actually giving it to our daughter. Leasing just seems like such a scam

south park · Feb 12, 2016

If you decide to lease a new car then ask for a lease with fewer miles per year. If you had 12,000 miles per year but didn't come close to using that amount - price the lease payments for 8,000 and 10,000 miles per year. One component of the lease calculation is residual value - cars with fewer miles tend to have higher residual values. The higher residual value at the end of the lease should result in a lower monthly payment.

Lease or Buy -- WWYD?

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