Leasing a car: tell me the good the bad and the ugly

[golfgal]

If you want a new car every 2-3 years or so and plan on always having a car payment, leasing is almost always a better deal--lower payments, usually no money down, etc. No, you don't "own" your car when you are done but who cares if you are getting a new one. We are drive them until you die people because we put on more than 15,000/year. In the end we get MAYBE $500 from the junkyard on the car, but then again, we haven't had car payments for years and years. It's a trade off. If we move back to our old town where we put very few miles on our car, I will start leasing a car because I like having new cars .

 

[bumbershoot]

Leasing can be helpful, but you want to make sure that you have the TIME to read that lease agreement *thoroughly*. Might be worth it to have a lawyer there to read it, too.

I leased for 12 years (3 cars) and was happy for 10 years. And then, even though I thought I had read them thoroughly, I had forgotten bits and pieces over time, and the two early turn-ins and procedures that were followed during them sort of watered down my understanding, and I was surprised by the amount I needed to pay at the end.

So even when you understand it, you might not thoroughly understand or remember it.

Leasing worked for me while I was single. No one ever offered to help me be mechanically inclined, and I never tried to be on my own (apart from an oil and filter change once), so it's nice to have a nice new car under all sorts of warranty. My first lease even had the first 2 years of maintenance stuff included! It was lovely.

But then I met DH, and he's mechanically inclined and he's a person to call if I had a problem, so then I didn't NEED the brand new car anymore.

And, it turns out, they had been rolling over the end-of-lease charges into my new car's lease payments, so the payments had been going up with each car. And I didn't actually realize it.

went through a lease phase then went back to buying but regret buying our vehicles. why? the payments are higher for the same thing and instead of putting the $ towards a new vehicle every few years instead Ihave to to put it into maintenance and repairs like tires and brakes, dents and ever reducing gas milage. I'd rather get the new car. To me buying only makes sense if i am putting on very high milage

Now that is a REALLY interesting perspective! Thank you for that.

But I did once buy tires for my leased vehicle so that's not different, and if the dent had been bad enough I would have had it fixed or would have paid for it at the end anyway, and the normal maintenance had to be done anyway, so...in my situation I'm not sure it would work, but it's still a neat perspective, *especially* if you can get a lease that INCLUDES the maintenance for a few years!

I
He had to buy new tires for the leased car and I asked him what happens when he turns the car in? They get to keep the tires after pay off?

If your owned car's tires go bad and you replace them, and then you sell the car...don't the tires go with the car as well?

The benefits of a lease are intangibles.
Fixed predictable cost. Allows you to get more car for the same monthly payment. Allows you to get a new car more often. In some circumstances, it may be easier to write off a vehicle for business use, although the IRS really cracked down on that in recent years.

A lease NEVER makes sense if you are looking for the lowest cost per mile. But people who have the things I mention above as a priority, they are willing to pay for those intangibles.

As long as you KNOW what you are getting into, have good expectations, and WANT and need what you are getting into, it can be good.

I haven't owned a car in more than 20 years. I always drive a new car and I've never been charged a disposition fee or received a bill for damages. I've never gone over the mileage. I just return the car to the dealer and pick up my new car. No down payment - easy peasy. It works for me.

Same dealership/lender? I'd be careful that they aren't just biding their time until you turn it in, to charge you those years of no turn-in fees. It's what VCI did to me, and it was in my agreements, I just didn't realize I wasn't understanding what I was reading at the time.

To another poster who compared leasing to renting versus buying, please stop watching Suze Orman, they are completely different, although I question many who discredit renting over buying your home (it's not as cut and dry as people make it out to be, if you actually run the numbers).

Renting a house/apartment/condo doesn't yield NOTHING like people think. It yields a place over your head for a certain amount of time, a place where you likely do not have to do any maintenance or pay for any big things. It is often a place far bigger and/or nicer than you could get if you were buying it.

Once we stop renting and get a mortgage, sure, we can paint and not worry about it...but what that microwave goes out, WE get to pay for its repair or replacement, we don't just get to call our landlady and have someone sent over to deal with it.

And even if a person puts cash down to flat out buy a place...all it takes is for the city/county/state to decide to build a highway over it, and you discover how much you actually OWN that house and land....

 

[manning]

The most expensive way to have a car is to lease it, and any financial advisor worth his salt will tell you that.

 

[crz4mm2]

I drive too many miles for a lease. Tried it once, not for me.

 

[golfgal]

The most expensive way to have a car is to lease it, and any financial advisor worth his salt will tell you that.

You have to get the entire story though--sure, leasing is expensive if you use it for a "down payment" and buy out the car at the end-it would be much less expensive then buying outright, but if you "buy" a new car every few years, leasing is the most economical way to do that. Getting a new car every 2-3 years IS expensive but that becomes a lifestyle choice. Your biggest bang for your buck is to pay cash for a 2-3 year old car, but not everyone wants to go that route either.

 

[tvguy]

We have never paid any money down, including taxes, never have paid a balloon or exit fee, never been charged for damages or excess wear/tear.

I will be honest, leases are a mystery to me. But checking the auto section in today's paper, all the lease deals list a monthly price, and in the fine print say "tax, license and $xxxxxx due at lease signing". The dollar amount varies from $1,999 to $3,999. Now I seem to recall that California requires dealers to collect the tax and license up front, but they do require a heft down payment for a lease.

 

[jlewisinsyr]

I will be honest, leases are a mystery to me. But checking the auto section in today's paper, all the lease deals list a monthly price, and in the fine print say "tax, license and $xxxxxx due at lease signing". The dollar amount varies from $1,999 to $3,999. Now I seem to recall that California requires dealers to collect the tax and license up front, but they do require a heft down payment for a lease.

Do you pay the price listed in the paper for a car when they are just talking about a buy price? No, everything is negotiable.

 

[timmac]

Leasing a car is a poor financial decision. What you're literally doing, is buying a car and at the same time, agreeing the sell the car back to the dealer for a predetermined price after a predetermined time; what you pay is the difference between the purchase price and the later buy back price. I may be slightly oversimplifying this, but it's a more accurate explanation than the analogy of "renting" something.

The problem with this is, you're leasing the car (paying for) only during the first X few years, when the depreciation is the highest. Thus, at the most expensive time possible.

In terms of best ways to make your money on a car, buy close-to-new, and keep it until it's run into the ground is almost always the best way to go. (Buying outright new and keeping until it dies is often a decent option as well, depending on warranty and special offers you might be able to get)

 

[OceanAnnie]

I always looked at it this way too.

I had a boss that leased his vehicles. I asked him why he did that. He told me most of the "well off" people he knew did this. Okay.

He had to buy new tires for the leased car and I asked him what happens when he turns the car in? They get to keep the tires after pay off? He didn't know at the time. I finished paying my vehicle off during this same time frame and told him I didn't understand leasing. I have read where the leasing contracts are complicated and something about balloon payments that didn't look very good to me. I told him I did understand buying and that it's nice to actually have something when the payments are done.

I never did hear what happened with those tires.

Yeah. I just wanted him to tell me about it.

If your owned car's tires go bad and you replace them, and then you sell the car...don't the tires go with the car as well?

...

See above.

 

[tvguy]

Do you pay the price listed in the paper for a car when they are just talking about a buy price? No, everything is negotiable.

Well, usually the cars on ad in the paper are loss leaders, with limited availability, often with a disclaimer "1 at this price". Most dealers here advertise their best bargains to get you on the lot. But I certainly can see where everything would be negotiable, except tax and license since state law requires the leasee to pay that up front.

 

[antmaril]

keep it until it's run into the ground is almost always the best way to go.

See, I never want to do that. I like having a new car every two or three years. So, if I purchase a car, I will have higher monthly payments, I will have to sell the car or give it to the dealer as a down payment on a new car and do it all again. I will always have a car payment, so why do I want to purchase a car? What do I gain buy owning the car?

 

[OceanAnnie]

See, I never want to do that. I like having a new car every two or three years. So, if I purchase a car, I will have higher monthly payments, I will have to sell the car or give it to the dealer as a down payment on a new car and do it all again. I will always have a car payment, so why do I want to purchase a car? What do I gain buy owning the car?

It depends on what you want. Leasing vs buying satisfies different wants/needs.

Those that lease state they want/like a new car every 2- 3 years. There's nothing wrong with that. It's just a different mindset.

As an example, we don't buy vehicles that are brand new. We buy a "nearly" new used vehicle and forgo the depreciation. That serves us. We don't have higher monthly payments. We go into it knowing we won't always have a payment on our vehicle. Once the vehicle is paid for, we save the payment we would have made to put towards a "new to us" vehicle later. That's what we gain.

Buying isn't for everyone as evidenced by this thread nor is leasing. But it works in the end.

 

[Dan Murphy]

I will be honest, leases are a mystery to me. But checking the auto section in today's paper, all the lease deals list a monthly price, and in the fine print say "tax, license and $xxxxxx due at lease signing". The dollar amount varies from $1,999 to $3,999. Now I seem to recall that California requires dealers to collect the tax and license up front, but they do require a heft down payment for a lease.

An automobile manufacturer and/or dealer can advertise any monthly payment for a vehicle that they want to. They could advertise $59 a month or $600 a month, or any other price. It all is a function of what up front deposit they want/you want to put down. They want to advertise a seemingly exceptionally attractive monthly price (lease or purchase) to attract potential buyers/leasees to their store. Once there, a buyer/leasee can pay whatever they want up front, a lot, a little, nothing. Doing so will raise or lower the monthly payment proportionately. I elect to pay nothing up front, no tax, no nothing. My lease payment is as high as it will be for my particular auto. I have no skin in the game of a depreciating item.

Leasing a car is a poor financial decision. What you're literally doing, is buying a car and at the same time, agreeing the sell the car back to the dealer for a predetermined price after a predetermined time; what you pay is the difference between the purchase price and the later buy back price. I may be slightly oversimplifying this, but it's a more accurate explanation than the analogy of "renting" something.

The problem with this is, you're leasing the car (paying for) only during the first X few years, when the depreciation is the highest. Thus, at the most expensive time possible.

In terms of best ways to make your money on a car, buy close-to-new, and keep it until it's run into the ground is almost always the best way to go. (Buying outright new and keeping until it dies is often a decent option as well, depending on warranty and special offers you might be able to get)

Keep in mind you are not literally buying a car, but rather determining up front how much of the car's value you will 'consume' over the lease period (typically 40-60%), add a mutually agreed to finance cost, divide by the number of months of the total lease period and wind up with you monthly lease payment. Buying/financing, on the other hand, makes the assumption you the buyer will consume 100% of its value over your holding period. Therefore you pay or finance 100% of the cost, plus finance costs, if financing. As the vehicle depreciates, you still have the total amount 'invested'. If there is minimal or no value left at the end, you consumed 100%, or close to it.

Both methods of acquiring an automobile are good, neither are bad. They are appropriate for different consumers, just like the vehicles themselves. All cars are good, none are bad. They are appropriate for different consumers.


(not to be taken as financial advice)

 

[PRINCESS VIJA]

thanks everyone for your comments. It certainly is eye opening to see the different viewpoints. Still not sure which way to go, I will have to evaluate everything and go from there. Thanks again!

 

[manning]

See, I never want to do that. I like having a new car every two or three years. So, if I purchase a car, I will have higher monthly payments, I will have to sell the car or give it to the dealer as a down payment on a new car and do it all again. I will always have a car payment, so why do I want to purchase a car? What do I gain buy owning the car?

If you buy it and run it until it stops, you buy fewer cars and be able to retire in comfort. All my cars were brand new. Bought my first one at 19 and 49 years later am on my fifth.

The most expensive thing you will buy in your lifetime is a house, the second, a close second, are cars.

And I am retired in comfort.

 

[jwfla422]

I haven't owned a car in more than 20 years. I always drive a new car and I've never been charged a disposition fee or received a bill for damages. I've never gone over the mileage. I just return the car to the dealer and pick up my new car. No down payment - easy peasy. It works for me.

DITTO, I think it also depends on who you lease from too. I've leased the same make/model car for the past 10 yrs from the same dealership and never had a problem. I'm on my 4th vehicle from them.

I do have to admit though...the last one I had which was a 2008 I looked into buying outright because I really liked the design of that model year HOWEVER it would have ended up costing me a fairly large down payment and a higher monthly payment for 5 yrs to buy a 3 yr old car! To lease a new one (same make/model 2011), no down payment and less $$ a month, do the math-it was a no brainer for me!

So I disagree totally with throwing away money. Cars depreciate in value as soon as you drive it off the lot. I couldn't afford this particular car new if I had to buy it outright or after 3 yrs...so I get a new one every 3 to 4 yrs.

I keep looking at other makes and models whenever my lease nears it's end, but I like this one and keep going back to it. And, sometimes, it even costs me less than the last one I leased, doesn't make sense, right, but it's true. They roll over my miles onto the new car too! I didn't even have to put new tires on my last vehicle!

But, like I said at the beginning, depends on the dealership, the car company, etc. Make sure to find out any details. Read the contract and the fine print. Many charge a huge inception fee, my dealer doesn't. We have stayed with the same dealership so that also helps with the lease incentives.

I've owned cars before this and by the time I've paid them off, the maintenance would force me into a new car. With my leases, the only maintenance is the oil changes and 15K/30K service because if anything else goes wrong it's under warrantee since the leases never exceed 3 yrs.

 

[BernardandMissBianca]

That will be 520,000 miles!!!

Sorry Dan, I wasn't trying to ignore you. For some reason I'm not getting some of my email notifications.

I average 1000 a week because of the kids. I drive everyone to school (4 kids in 3 schools in 3 different towns), plus sports, etc. As the kids get older the mileage will go down, DS15 will be driving his own car in 2 years.
We also opted to buy a diesel which typically runs better and longer then a gas fueled car, and DH used to be a mechanic in a former life so he tends to the cars. We also elected to buy a German car because we've had excellent luck with the quality.

According to DH with proper maintenance we could get well over 400,000 miles out of the Audi.

 

[antmaril]

If you buy it and run it until it stops, you buy fewer cars and be able to retire in comfort. All my cars were brand new. Bought my first one at 19 and 49 years later am on my fifth.

The most expensive thing you will buy in your lifetime is a house, the second, a close second, are cars.

And I am retired in comfort.

I, too, am retired in comfort and, as I said in my earlier post, I haven't owned a car in over 20 years. I guess owning a car and running it into the ground is not necessarily the key to a comfortable retirement.

 

[jlewisinsyr]

If you buy it and run it until it stops, you buy fewer cars and be able to retire in comfort. All my cars were brand new. Bought my first one at 19 and 49 years later am on my fifth.

The most expensive thing you will buy in your lifetime is a house, the second, a close second, are cars.

And I am retired in comfort.

If you want to retire in comfort, don't buy anything, become a hermit and don't shop, don't go on vacation, don't go out to dinner, etc. There is nothing wrong with good financial planning, but correlating a comfortable retirement to leasing or buying is not very logical.

 

[dawson5]

DITTO, I think it also depends on who you lease from too. I've leased the same make/model car for the past 10 yrs from the same dealership and never had a problem. I'm on my 4th vehicle from them.

I do have to admit though...the last one I had which was a 2008 I looked into buying outright because I really liked the design of that model year HOWEVER it would have ended up costing me a fairly large down payment and a higher monthly payment for 5 yrs to buy a 3 yr old car! To lease a new one (same make/model 2011), no down payment and less $$ a month, do the math-it was a no brainer for me!

So I disagree totally with throwing away money. Cars depreciate in value as soon as you drive it off the lot. I couldn't afford this particular car new if I had to buy it outright or after 3 yrs...so I get a new one every 3 to 4 yrs.

I keep looking at other makes and models whenever my lease nears it's end, but I like this one and keep going back to it. And, sometimes, it even costs me less than the last one I leased, doesn't make sense, right, but it's true. They roll over my miles onto the new car too! I didn't even have to put new tires on my last vehicle!

But, like I said at the beginning, depends on the dealership, the car company, etc. Make sure to find out any details. Read the contract and the fine print. Many charge a huge inception fee, my dealer doesn't. We have stayed with the same dealership so that also helps with the lease incentives.

I've owned cars before this and by the time I've paid them off, the maintenance would force me into a new car. With my leases, the only maintenance is the oil changes and 15K/30K service because if anything else goes wrong it's under warrantee since the leases never exceed 3 yrs.

Did you look at what the value of the car was, instead of what it would cost you to buy your leased car? The only car I've ever leased was similar to that. The residual value was so high, it would have cost us something like $5-7,000 more to buy "our" vehicle, instead of another vehicle same make/model/mileage. If they would have kept it local, we would have looked into buying it, but it went to Indianapolis to an auto auction.