Buying vs Leasing new vehicle

[squirrel]

I leased my Honda quite a few years ago. It was cheaper to lease a new car than for me to get a loan to buy a used one. I did have a car to trade in and that went towards the lease. The lease rate was lower than the bank's loan rate.

I was able a year or so later claim some of the lease payments as a business expense (approx. 4 yrs).

I bought the lease out a few years ago, I still have very low milage on it.

 

[Tink-aholic]

I don't know...doesn't Dave Ramsay call them "F L E E C E S" ?

We paid cash for our last two vehicles; bought them new off the lot on the same day. We researched them a great deal ahead of time, planned our purchase well, and bought a loaded minivan and a four-door compact for $30K together. We'll drive them until they die.

 

[undertheradar]

I'm tired tonight so I still don't follow your figures. Of course I don't know the cost of the original car or payments, so i will make up numbers. If the original cost was 30000 and your monthly payment was 300 for 5 years it would be 30000 - 18000 = 12000 balance.

The buyout offered is 15000. Using my made up numbers isn't it costing 3000 more to go the lease/purchase route than just purchasing it in the first place?

Shouldn't you compare the cost of purchasing the vehicle using the original price of the car and not the current used price?

I'm not trying to be difficult - just trying to learn plus I am tired too many Christmas events!

Not going to put exact figures here but you should be able to follow. MSRP: $37,995. Sales tax rate 7.25%. Wrote check for just over $700.00. Monthly payment near $500.00. Buyout for end of lease: $4,000.00. Payment if purchasing vehicle at start was near $700.00 month. Lease payments plus buyout are $7,000.00 less than buying vehicle from day one. We were at the dealer and ran numbers with different down payments, lease vs purchase, and this was the lowest cost option on that day. This was a lease program on very specific models and worked for us. I did not go in looking to lease.

I stated the used value when comparing the cost of lease buyout to the cost of the vehicle on the used market. For our particular transaction, we got a tremendous value. This is not always the case and I was shocked at how the numbers worked in our favor when we leased this vehicle.

 

[deedeezee]

I was always told that the 3 main reasons to lease were -

If your company was paying
If you wanted to drive a more expensive car than you can afford to buy.
If you need to have a new car every three years.

Good rules of thumb, I totally agree. OP, leases can work for some people, but for the majority they aren't a very good deal. A friend owed several thousand in "over-mileage" fees - they really do add up.

 

[DawnM]

We couldn't save a bundle at all.

We were looking at a Toyota Sequoia in 2004. We got a fleet price of $4,500 less than sticker price. We couldn't find a used one for even close to that that wasn't over 4 years old.

The loan on a new car was .09% vs. the 6% for a used vehicle.

We actually saved a bundle buying new.

That was before gas prices went soaring.

Dawn

I would NEVER buy a "new" car.. the depreciation on anything new is horrible. If you are looking at buying a car it pays to look at something 1-2 years old that is certified and carries an extended warranty, you will save a bundle.

For me, I always lease. I write it off under my business, I always have a "new" car and my service is usually always included because they want to make sure you are taking care of it.

 

[manning]

Calculate it yourself

http://www.money-zine.com/Calculators/Auto-Loan-Calculators/Buy-or-Lease-a-Car-Calculator/

 

[Jey12]

Not all new cars have a horrible depreciation that you'd want to avoid and lease instead. For us we bought a 2004 Pontiac Vibe brand new in 2003. Right now it has 95k in miles on it, and is blue booked in the condition it's in for resale on the private market around 6-7k. We originally paid 15k with 1.9% interest and it's been paid off for over 3 years. The battery is the only thing we've had to replace. In my area there is no public transportation and to get anywhere you're making at least a 20 mile roundtrip. I don't know a single person who would value from leasing a vehicle unless they planned to just go from lease to lease, simply because of the mileage restrictions of leasing. If you plan on jumping into another lease after your current one is up often they will "forgive" the overage on miles. I don't understand why my inlaws don't lease, because they trade in and buy a new car more often than I buy new pairs of shoes. As for the other 98% of people I know I couldn't see where a lease would be beneficial for them.

For the last 3 years we have not had a $300 a month car payment and that has saved us over 10k. Aside from normal maintenance you'd pay for on any car we've spent $100 for a new battery and that's it. Right now we have a year left on a 2008 Jeep Patriot. Paid 17k at 2.8% for 5 years, and it has a lifetime bumper to bumper warranty on it from the dealership. We owe around 5k and it's valued around 10-11k. The only time I've ever been upside down with a new vehicle is for the first, maybe second, year of ownership and that's what GAP insurance is for. My personal opinion is if you do your research on resale values in the type of car you are looking for and take your time looking for the best deal there's no reason to lease unless it's for the 3 reasons a PP listed.

 

[Pea-n-Me]

Not all new cars have a horrible depreciation that you'd want to avoid and lease instead. For us we bought a 2004 Pontiac Vibe brand new in 2003. Right now it has 95k in miles on it, and is blue booked in the condition it's in for resale on the private market around 6-7k. We originally paid 15k with 1.9% interest and it's been paid off for over 3 years. The battery is the only thing we've had to replace. In my area there is no public transportation and to get anywhere you're making at least a 20 mile roundtrip. I don't know a single person who would value from leasing a vehicle unless they planned to just go from lease to lease, simply because of the mileage restrictions of leasing. If you plan on jumping into another lease after your current one is up often they will "forgive" the overage on miles. I don't understand why my inlaws don't lease, because they trade in and buy a new car more often than I buy new pairs of shoes. As for the other 98% of people I know I couldn't see where a lease would be beneficial for them.

While I agree with your basic premise about buying, I'm with many others on this thread that it's best to plan to "drive it into the ground" afterward. Book values are one thing, but the reality is it can be hard, if not impossible, to get the prices listed in them, depending on the vehicle. I would be very surprised if you could get 6 or 7K for your Vibe in the private market at 9 years old with almost 100K miles - even though it's very valuable to you. This is the hard reality about car buying.

 

[hsmamato2]

DH and I are going thru this right now....we have 2 cars,one is 16,one is 17- we haven't had a payment in 10 years on anything. That said,it's time to replace a car (really!) We were planning to buy a 2 year old model of our fave car- turns out they're hard to get used,and in good shape (!) and the used price is less difference than 3k when all is said and done,and with none of the worries about used cars,plus a full warranty on new. The world is topsy turvy! I think we might do the one thing we thought we'd never do,buy a new car! SInce we do use our cars for a LONG time (lol) it should work for us,tho I'm curious about leasing new upfront,then buying our own car later.....I'll check into that and see if it can save us more.......

 

[pandamom]

We leased our last van and worked great for us. DH has a work car and I work from home so we put very few miles on the van. Since we usually get a new vehicle every 3 years or so it worked out well. Last year, about 3 months before our lease was up, we went in to look at the new models and were able to get the new town and country with all the bells and whistles for the same payment (5 year loan), no money down and 0% financing. Dealership paid the last 3 months on our lease and didn't charge for some damage we thought we'd have to pay for (small crack in the windowshield from a rock and a broken dvr remote). We really like this van so may keep it for awhile longer this time.

 

[FLCyndi]

First Time Leaser-I just leased a 2011 Toyota Camry LE in May with all the bells and whistles.

I generally only put about 12k miles on my cars and like to trade in every three years. I had a 2006 Rav4 with 60k miles that I sold on my own before going into the lease.

We are Toyota people so Toyotas were my first choice-My payment is about $300 a month and I put nothing down. Toyota carries the gap insurance and my own insurance went up about $10 a month on the leased vehicle.

Toyota also has a 3 year maintenance plan. I pay nothing on all maintenance for 36 months-oil changes, tire rotation, etc. Also included in my payment is excessive wear and tear up to $5000.

I have been very pleased with the car and service so far, and will probably lease again when the current lease is up. I have no desire to purchase after lease is up.

 

[manning]

Got a 1993 Town Car. Got it brand new. It has 195k+ miles on it and still going strong

Boy, have I saved money on cars.

I'm in my late 60s and have owned 4 cars, all brand new. All that money I saved has gone into my retirement fund.

Leasing or buying, both ways depreciation is big time.

Retirement is great.

 

[Jey12]

While I agree with your basic premise about buying, I'm with many others on this thread that it's best to plan to "drive it into the ground" afterward. Book values are one thing, but the reality is it can be hard, if not impossible, to get the prices listed in them, depending on the vehicle. I would be very surprised if you could get 6 or 7K for your Vibe in the private market at 9 years old with almost 100K miles - even though it's very valuable to you. This is the hard reality about car buying.

I have no intention of selling our cars. Sorry if that's what it sounded like. I drive them about 2 weeks past dead. I'm with the group of if you plan on having or want a new car every couple of years, then lease. I used the figures because of a PP that stated new cars have a high depreciation on their value. Mine do not. 6-7k for a 9 year old Pontiac Vibe with just under 100k is not that far fetched of a price. Most of these cars run with minimal maintenance with many more miles on them than I have on mine. A used car retailer normally lists this car in the condition of ours for around 8-9k and you're lucky if you find one with under 100k on it. The sticker price on the Vibe's jumped considerably in the last few years it was made from 16k up to 24k, I have no idea why? It's a nice compact crossover but not 24k nice IMO.

 

[Plumeria9]

Interesting thread, because I keep asking this same question. I have an '02 Honda Odyssey that I just had to put a new transmission in this summer ($4K) and it only had 79K miles on it at the time. I saw a post in this thread w/ someone else who also had a 9 year old Ody. Hope this doesn't happen to you also. So even though I haven't had a car payment on this vehicle in 4 years, I have still put almost $9K into the car SINCE payoff for new tranny, new brakes, new tires, fixing the automatic door, battery, timing belt, wheel bushings, motor mounts, and general maintenance plus other things that go down as the car ages. DH nor myself cannot do any repairs ourselves, that is part of the problem. I feel like I might as well be putting my money into a newer car and not have to worry about the aging aspects of a car. Am I in the minority in saying that I would prefer to drive a newer car than an older one? I feel like this car is the Rodney Dangerfield of cars. No respect. People cut me off w/o a second thought. My car still is still in good condition, but everybody knows its "just a minivan". I drive around 10K miles a year, so I would be fine w/ that aspect of a lease. I'm also a good driver and haven't had any incidents (knock on wood). I'm feeling like I would try it once to see how I liked it and save a few bucks for buying the next car.

 

[Jey12]

Interesting thread, because I keep asking this same question. I have an '02 Honda Odyssey that I just had to put a new transmission in this summer ($4K) and it only had 79K miles on it at the time. I saw a post in this thread w/ someone else who also had a 9 year old Ody. Hope this doesn't happen to you also. So even though I haven't had a car payment on this vehicle in 4 years, I have still put almost $9K into the car SINCE payoff for new tranny, new brakes, new tires, fixing the automatic door, battery, timing belt, wheel bushings, motor mounts, and general maintenance plus other things that go down as the car ages. DH nor myself cannot do any repairs ourselves, that is part of the problem. I feel like I might as well be putting my money into a newer car and not have to worry about the aging aspects of a car. Am I in the minority in saying that I would prefer to drive a newer car than an older one? I feel like this car is the Rodney Dangerfield of cars. No respect. People cut me off w/o a second thought. My car still is still in good condition, but everybody knows its "just a minivan". I drive around 10K miles a year, so I would be fine w/ that aspect of a lease. I'm also a good driver and haven't had any incidents (knock on wood). I'm feeling like I would try it once to see how I liked it and save a few bucks for buying the next car.

I don't think you're in the minority. I'd love to drive a new car whenever I wanted. In our instance our cars have held up so well it's not financially smart to trade them in just because we might want or like something newer. In your instance where your vehicle seems to be a hot mess a lease might be something for you to look into? If we'd had to replace a transmission I would really have to look hard at the long term benefits, and would be very tempted to call the car dead and buy a new one. Thankfully we lucked into a special with our last vehicle purchase and they were offering a lifetime bumper to bumper on our Jeep. This means things like the transmission, engine, powertrain, and well anything that's usually covered in the first 36k on this vehicle is covered for life. So if the transmission was to go out on this vehicle it would only cost me the $50 warranty deductible. If we were talking 3k to fix it, I would strongly consider a new vehicle. If my experience was vehicles breaking down and costing me around $200 a month to keep going after they were paid off a lease might be the best option. For us that hasn't been our experience so we just buy new, drive it past dead and buy new again.

 

[Plumeria9]

I don't think you're in the minority. I'd love to drive a new car whenever I wanted. In our instance our cars have held up so well it's not financially smart to trade them in just because we might want or like something newer. In your instance where your vehicle seems to be a hot mess a lease might be something for you to look into? If we'd had to replace a transmission I would really have to look hard at the long term benefits, and would be very tempted to call the car dead and buy a new one. Thankfully we lucked into a special with our last vehicle purchase and they were offering a lifetime bumper to bumper on our Jeep. This means things like the transmission, engine, powertrain, and well anything that's usually covered in the first 36k on this vehicle is covered for life. So if the transmission was to go out on this vehicle it would only cost me the $50 warranty deductible. If we were talking 3k to fix it, I would strongly consider a new vehicle. If my experience was vehicles breaking down and costing me around $200 a month to keep going after they were paid off a lease might be the best option. For us that hasn't been our experience so we just buy new, drive it past dead and buy new again.

Thanks for your response. See, maybe leasing is the way to go for me next time. At the time, when the tranny went out, we were in no position to buy anything, and, didn't know what to buy anyway. Buying is a huge task w/ tons of research. Leasing might not be such a chore since we would be looking for the best deal and warranty, etc. and if I wound up hating the car, no worries as it would be gone in 3 years.

 

[Plumeria9]

First Time Leaser-I just leased a 2011 Toyota Camry LE in May with all the bells and whistles.

I generally only put about 12k miles on my cars and like to trade in every three years. I had a 2006 Rav4 with 60k miles that I sold on my own before going into the lease.

We are Toyota people so Toyotas were my first choice-My payment is about $300 a month and I put nothing down. Toyota carries the gap insurance and my own insurance went up about $10 a month on the leased vehicle.

Toyota also has a 3 year maintenance plan. I pay nothing on all maintenance for 36 months-oil changes, tire rotation, etc. Also included in my payment is excessive wear and tear up to $5000.

I have been very pleased with the car and service so far, and will probably lease again when the current lease is up. I have no desire to purchase after lease is up.

Great deal! I will be on the lookout for something similar myself. My first car was a Toyota, I loved it!