Any tips on leasing a car? Can you negotiate? Any advice on good cars or leasing deal

[sonnyjane]

What was the trim level of your Civic? My math based on AAA pricing and 1.9% for *5* years doesn't quite jibe. Could it have been a 4-year loan? (Also, when I bought my Honda a looong time ago, they stepped the financing rates: 0.9 for 3 years, 1.9 for 4 years, and 2.9 for 5 years.)

Lol I don't even know what trim level means, just that I have a basic LX with no extras, which started at $19,555. The only added expense was a security system which was $795. I got $1,000 off for my trade-in. It is a 5-year loan at 1.9%. I'm at work so don't have the exact starting figure but after taxes and those discounts I think the total payoff amount is $22,000 something. I plan to pay it off sooner than 5 years just wanted the lower monthly payments for now.

ETA I also live in California so my sales tax may be higher than most?

 

[FLCyndi]

We lease a toyota camry. I picked the camry on the lot I wanted and my husband negotiated payments. I love that I can have a new car every three years.

 

[lost*in*cyberspace]

We lease a toyota camry. I picked the camry on the lot I wanted and my husband negotiated payments. I love that I can have a new car every three years.

That is great if this works for you, but it's not financially sound to do this.

 

[brettb]

Lol I don't even know what trim level means, just that I have a basic LX with no extras, which started at $19,555. The only added expense was a security system which was $795. I got $1,000 off for my trade-in. It is a 5-year loan at 1.9%. I'm at work so don't have the exact starting figure but after taxes and those discounts I think the total payoff amount is $22,000 something. I plan to pay it off sooner than 5 years just wanted the lower monthly payments for now.

ETA I also live in California so my sales tax may be higher than most?

"LX" is the trim level. Hondas tend not to have *any* factory options. (You can get an EX with leather but that's usually referred to as an EX-L and you can get a plain EX or an EX-L with navigation. (The AAA pricing configurator even refers to EX, EX with Nav, EX-L, and EX-L with Nav as an individual "styles" or trim levels rather than offering EX and EX-L models with Nav as an available "option.") But if you get an LX, you've got an LX. If you want a particular option, you have to go up a trim level and take everything else it comes with. That can be annoying but it's a LOT simpler than shopping for a lot of other brands. The security system must have been added by the dealer.

I figured 6.5% tax (for New Jersey) and about $300 for doc and registration fees. It seem like CA would be at least 7.5% and I suspect that registration and other fees may be higher, too. (Blame Proposition 13?) And around here, Civics do not sell for MSRP....

You financed just under $23,600 if your payment is 414 on a 60-month 1.9% APR loan. (http://findbettervalue.com/2007/09/19/quick-payment-and-interest-calculations-for-car-buying/ shows $17.48 monthly per $1,000 financed for that.)

All that aside, if the OP isn't fussy about owning a particular color, trim level, or whatever, I'd hold off until later in the summer. Honda tends to get aggressive in August if I recall correctly. Selection will more limited, but incentives, either as cash factory incentives or more favorable financing and lease rates can be substantial. When we were shopping for a car for my wife a few years ago, the new Civic had just come out. The old Civics were all gone and the new ones were selling for MSRP. The dealer encouraged us to look at a hold-over Accord - it was actually less expensive than the smaller, less-equipped Civic. (She ended up with a Jetta.)

I'm not an expert on leases but it seems to me that you should still be negotiating on the *price* of the car. And I highly recommend starting with the AAA car buying service (if you're a member).

There's a lot of information about leasing here: http://www.edmunds.com/car-leasing/

I played around with the calculator and there are a few variables that need to be understood to know if a lease deal is fair:
1) The (negotiated) price (including any factory incentives)
2) The value of your trade-in (also true when buying, not a factor for the OP)
3) The "residual value" (Cars with better resale value have higher residuals values which lowers the cost of the lease during the lease period.)
4) The money factor (The APR of the financing / 2400. So when they tell you the money factor, multiply this by 2400 so you know what the effective interest rate of the deal)

There are other things, too, like Acquisition Fees and mileage and such.

The bottom line is that all these variables make it easy for a dealer to do a lot of hand-waving and make it seem like you're getting a good deal when you're not.

The only time I considered leasing was when a Volvo dealer ran the numbers on an S40. The lease deals were so heavily subsidized that the sum of the up-front and monthly payments plus the buy-out at the end of the term was less than the up-front purchase price. (We still ended up buying a Jetta.)

 

[joedplumber]

Here is why most people lease:

Example:

2013 Honda Pilot Touring

Negotiated Price = $40,000
Taxes & Fees = $2,700

Monthly payment (5 years) with no money down & 0 APR = $712

Monthly payment (3 year lease) with no money down = $509

That is a $203 difference in monthly payments. So a lot of people lease vehicles that they can not otherwise afford to buy.

Now whether you consider this living above your means is another story. If your family budget can afford a $525 a month then I would say no.

 

[tvguy]

Here is why most people lease:

Example:

2013 Honda Pilot Touring

Negotiated Price = $40,000
Taxes & Fees = $2,700

Monthly payment (5 years) with no money down & 0 APR = $712

Monthly payment (3 year lease) with no money down = $509

That is a $203 difference in monthly payments. So a lot of people lease vehicles that they can not otherwise afford to buy.

Now whether you consider this living above your means is another story. If your family budget can afford a $525 a month then I would say no.

You example is interesting, and to me, highlights to me, how important negotiating is. KBB.com lists the fair purchase price on that Honda at $36,896, so there is clearly room to negotiate on the price. On the flip side, sales tax alone here in California would be $3,442, and registration $400. And by the way, at least here in California you pay the sales tax on a leased vehicle on it's value, and pay the same registration fee.

 

[joedplumber]

You may not of check 4wd. KBB gave me $38,800.00. lol

I do believe that leasing vs. buying is 9 out of 10 times cheaper when compared on a monthly payment standpoint.

I think it wise to negotiate the purchase price than determine what the lease payments vs. the buy monthly payments would be.

 

[brettb]

<snip>
I do believe that leasing vs. buying is 9 out of 10 times cheaper when compared on a monthly payment standpoint.<sniip>

*MAYBE* if you'd normally buy a new car every 36 months. I kept my last two cars for 9 years (almost to the day.) And my last car had a trade-in value of $6,500. (It was a 2003 Honda Accord LX-V6. I was shocked!)


So buying your Honda Pilot would cost me $42720 or an average of $445/month (although front-loaded) and, given that my $23,000 Accord was worth $6,500 after 9 years, I suspect the Pilot would be worth even more. This would lower my total outlay and my average monthly cost even further, perhaps by as much as $100/month (roughly estimating that a 9-year old Pilot with 80k miles on it would be worth $10,800).

Leasing your Honda Pilot, assuming prices and rates are exactly the same after 3 and 6 years would cost me almost $55,000 and then I have nothing to trade or drive in 9 years.

Yes, I will have spent some money maintaining the car in years 4-9 that I wouldn't if I leased but based on my Accord, that would be 2 sets of tires, one battery, and the front and rear brakes. (Rears had to be done once in the first three years, too, but that doesn't count.) I'd say I spent less than $2000 for those extra 6 years of ownership beyond maintenance you'd do during the first 3 years. (I traded it in before I did the timing belt, but even then it may still have been under $2k.) I realize the tire costs for a Pilot would probably be quite a bit more than for an Accord but still.....)

Whether you lease or buy, getting a new car every 3 years is a costly luxury. Maybe leasing will save some money over buying if you do that but your example doesn't show that.

 

[joedplumber]

*MAYBE* if you'd normally buy a new car every 36 months. I kept my last two cars for 9 years (almost to the day.) And my last car had a trade-in value of $6,500. (It was a 2003 Honda Accord LX-V6. I was shocked!)


So buying your Honda Pilot would cost me $42720 or an average of $445/month (although front-loaded) and, given that my $23,000 Accord was worth $6,500 after 9 years, I suspect the Pilot would be worth even more. This would lower my total outlay and my average monthly cost even further, perhaps by as much as $100/month (roughly estimating that a 9-year old Pilot with 80k miles on it would be worth $10,800).

Leasing your Honda Pilot, assuming prices and rates are exactly the same after 3 and 6 years would cost me almost $55,000 and then I have nothing to trade or drive in 9 years.

Yes, I will have spent some money maintaining the car in years 4-9 that I wouldn't if I leased but based on my Accord, that would be 2 sets of tires, one battery, and the front and rear brakes. (Rears had to be done once in the first three years, too, but that doesn't count.) I'd say I spent less than $2000 for those extra 6 years of ownership beyond maintenance you'd do during the first 3 years. (I traded it in before I did the timing belt, but even then it may still have been under $2k.) I realize the tire costs for a Pilot would probably be quite a bit more than for an Accord but still.....)

Whether you lease or buy, getting a new car every 3 years is a costly luxury. Maybe leasing will save some money over buying if you do that but your example doesn't show that.

Sorry you lost me.

All I was saying is that for some folks leasing makes certain vehicles affordable to folks that otherwise could not to actually buy them.

Is it a waste a money? Perhaps, but only the person can determine what wasting money is. For some dining out or buying lunch is a waste of money. Other's smartphones are a waste of money.

We all chose what luxuries we are willing to throw our money at. lol

 

[brettb]

I do believe that leasing vs. buying is 9 out of 10 times cheaper when compared on a monthly payment standpoint.

Sorry you lost me.:

Yeah, I do that: Lots of math, lots of words. I talk, normal people hear "Blah blah Ginger." (My wife says that to me a lot. Bonus points if you get the reference!)

I'll try it shorter:

Your example may work when you compare leasing a car to buying a new car every three years.

But for people who keep their cars longer than 3 years, it ignores the $0 monthly payment years.

And I think leasing introduces more variables that make it easier for the dealer to take advantage of the customer.

(I'm not sure this was much better. )

 

[MrsPete]

Joedplumber is right. Most people lease because it allows them to drive a car they could not afford to buy.

The real point is, of course, SHOULD YOU drive a car that you cannot afford to buy? I think we all know the answer to that question. Of course, I'm assuming that your goal is financial security. That isn't everyone's goal.

One big problem with Joedplumber's example, however, is that it begins with a 40K vehicle. If you must rent a car (and lease is another word for rent), you should at least choose a more moderately priced vehicle.

Keeping mind too that if you lease, you may well be starting a pattern. Right now you need a car and aren't prepared. You also say the lease payment is more than you'd intended to pay. At the end of three years, which is going to pass quickly, will you be better prepared to buy another new car . . . Or will you be forced into yet another lease? If you don't know, and if you don't have a plan to put into action . . . It will not happen.

Consider the options available to you without adding a new car:

- Fix the car you have. $1000 is a big mechanic's bill, but it's only a bit more than three months of the payments you're considering taking on for three years.
- Buy a less expensive used car.
- Car pool. No, it's not always the most convenient thing to do, but if you can swing it, you can keep saving 'til you don't need to make this lease deal. We did it for three years, while we lived way out in the country.
- Can either of you walk or bike to work? We're coming into good weather.
- Brainstorm what options are available to you. I'm sure a better choice exists.

 

[MrsPete]

Yeah, I do that: Lots of math, lots of words. I talk, normal people hear "Blah blah Ginger." (My wife says that to me a lot. Bonus points if you get the reference!)

I'll try it shorter:

Your example may work when you compare leasing a car to buying a new car every three years.

But for people who keep their cars longer than 3 years, it ignores the $0 monthly payment years.

And I think leasing introduces more variables that make it easier for the dealer to take advantage of the customer.

(I'm not sure this was much better. )

Yep, buying is always cheaper if you do the long-term math. The car in question should last at least ten years (likely more -- mine is six years old, and I've never done anything except change the oil and the tires.

Even if the buyer requires a lengthy five years to pay for it, he can expect at least five years of payment-free driving. A smart person, of course, will continue to pay the payment into a savings account son that when another car is needed, he can pay cash for it.