Leasing vs. buying a car

H

hornfan1977

< 25 Posts
I need some advice here. I don't have much in the bank at all and can't afford more than $200-250 a month for a car payment. I've got a 1994 Acura Legend that is in good shape with around 110K miles that I can probably get 3-4K for trade in. I'm looking at buying a Honda Accord. What are the pros and cons of leasing vs buying a 1 or 2 year old car? I'm guessing that buying a certified used one would probably be better but the monthly payments would be higher. Any thoughts on which way to go?
 
Certainly not leasing IMO. You pay a massive amount of money to drive a car by their rules and have nothing to show for it financially when the term ends. I horrible financial decision, IMO. To each his own though, there are certainly plenty of people who do it. It allows people to get into more car then they can afford.
 
At the end of your lease you will be worse off than you are now. You would be better off driving that Acura until the wheels fell off.
 
hornfan, if you have a good credit rating leasing a car would not be a bad idea. The interest rates vary for each individuals credit rating. I would check the residual rate of the lease. Right now, our best rate is .0001 percent. That is like not paying interest at all during the lease. So that means at the end of the term the buying price will be lower then expected. Leasing only works if your balloon is low. So that means you must stay under the allowed mileage.
Just this week, a client leased a Double Cab Tundra for 259 dollars per month with 3500 down. The mileage allowance is 15000 miles per year. Not bad
 
I'm in the same boat right now. I'm actually looking at leasing becuase I can write off my monthly payments as a business expense (self-employed). It would make better sense for me to do it since I don't have to deal with depreciation as the car ages and I can write off the same amount every year with a lease.
 
I wish there was a straight answer because I've thought about this myself. When you think about it, how many people who buy a car actually end up keeping it for the whole term of the loan. Probably not that many. They end up trading in with negative equity. I have never leased, but am considering it more and more.
 
1. if you only want a new car for a few years, lease it. it makes no saense not to.

2. with interest rates so low, longer term ownership makes some sense.

3. paying an increasing cost of money to purchase a decreasing in value "asset" is silly economically for some.
 
Short term... new cars are the most expensive way to BUY a car. Leasing however is by far the most expensive way to drive. Study after study confirms, that long-term, leasing will fleece you of more money.

In reply to:
Click to expand...
 
I just returned a "leased" Saab 9-5 Aero. (Actually, it was a GM "SmartBuy".) I drove it for 3 years. I put no money down and paid ~ $8K less than MSRP for it, and my monthly payments were $150 less than they are for our Ford Expedition, which we bought for roughly the same amount with $1K down. (That vehicle is about 6 months from being paid off. We will keep it and drive it into the ground.)

The Saab was underwater when the note came due, so I just gave it back to the dealer and walked away. There was a $250 "disposition fee" and they dinged me for $80 worth of "excessive wear". The car was in great shape, but I was prepared for a battle on wear, so the $80 didn't bother me.

All in all, I have a hard time seeing a downside to the deal. I'm currently driving an old Honda, simply because I want to maximize my cashflow as I am about to build a new house, but I'd probably "lease" again. I'm the type who likes a new car every few years, so if I can find a good deal, why not? Sure, it's a bad "investment" . . . a CAR is a bad "investment". If you're the type who will drive a car until the wheels fall off, then good for you, because you are minimizing the downside of that bad investment, but don't fool yourself -- it's still nowhere to put your money. Personally, I consider a nice car as a privilege I've earned. Some people buy boats, some do coke, I like a nice car. (Within reason. I've never spent more than $32K on a car.)

All this having been said, given your circumstances, I can't see why you wouldn't continue to drive your Acura, unless it's costing you $200/month in maintenance. If you're close to living paycheck to paycheck, then a car payment doesn't help things much, does it?
 
Jimmyjazz,

I just don't agree. True that your monthly payment would ALWAYS be cheaper with a lease. But you have nothing to show for it. With a bought car. You may spend 25 more a month over a 3 yr loan. But after the 3 years you can now SELL THE CAR for 7k or more. Do ALL the numbers and everytime LONG-TERM leasing is more expensive.

Very interesting...
The Link
 
I don't agree with your numbers. $25/month more for a purchased vehicle? I'd say at least $100/month more. In my case, $150/month more. Why not invest that difference? You'd have a lot more than NOTHING to show for it when you have to return the vehicle.

You're right that LONG-TERM leasing makes less sense, but if you're talking about 2 or 3 years, I just don't see it that way. Purchasing a vehicle and applying little down payment is going to keep you underwater for at least a year or two.

I'd bet that the two scenarios come out pretty close most of the time, if we're talking about acquiring a new car every 2 or 3 years with similar down payments and reasonable interest rates.
 
Jimmy,

Look at the first link I provided you and look at the numbers.

Lets go with your example of 150 more a month. So after 3 years. You have paid 5400 less. No chump change. However, would you be able to sell THAT car for over 5400 at that mark your 3-year loan or lease ends?? OF COURSE.

I just looked up the SAAB 9-5 aero at kbb. After 3 years **If** you bought a slightly used car and drove under 15k a year. Its private party value is $15,000. The Link

You can tinker with kbb and find the accurate value. But yes, the buyer pays 5400 more over 3 years, but then they sell the car for well over that 5400. Thus, even in a 'short' term setting of 3 years, buying is cheaper.

However, then you do have to go through the pain and trouble of having to sell the car and/or getting screwed with trade-ins.
 
Alright... this will be my last post on this subject.

Here are the numbers... For a brand new car 5-year loan. vs a new leased car (a 3 year lease & the first 2 years of second lease)

New Car Ownership — Five Year Total ( 3 year loan @ 6%)

Down Payment $3,000
Monthly payment $608.00 per month $21,888
Insurance $5,700
Maintenance & repairs $1,100
DMV Fees ($300 included in monthly payments for first year) $1,000
TOTAL $32,388

New Car Lease — Five Year Total (Two 3-year leases @ 6%)

Down Payment $2,000
Monthly payment $350 /month for 36 months $21,840
$385 /month for 24 months
Insurance $6,900
Maintenance & repairs $800
DMV Fees (included in monthly payments for first year) $1,230
TOTAL $32,140

However, the value of the bought car in 5 years is still over 7k, while the leased cars value is 0 to you. So 25,388 or 32,140??
Conclusions

Now we see that leasing becomes the most expensive way to drive — in the long run.

Leasing vs. Buying New — Using the figures presented in this article, it is $6,752 more to lease a new car over a five-year period, than it is to buy the same car outright. This breaks down to $1,350 more per year to lease rather than to buy a new car.

FromThe Link

for more details. If you disagree with the numbers, take it up with the website. My other numbers were just hypothetical, but these are very accurate.
 
You can make that your last post on the subject if you like, but I don't think what you posted is relevant to the discussion at hand.

The ONLY situation in which I'm arguing in favor of leasing is when the "buyer" routinely flips new vehicles every 2 or 3 years. I'm not surprised that you can argue in favor of purchasing if you're going to keep the car 5 years (or more). Regardless, you've used different down payments, different insurance rates (which might happen with a lease but not likely with a balloon note), and different maintenance numbers. AND, you had to initiate a second lease, which is absurd!

Again, compare the cost of leasing a car for 3 years versus purchasing the same car (with the same down payment & same interest rate) on a 5-YEAR NOTE but getting rid of the car at YEAR 3.
 
Bernard-I'm just tired of driving a 10+ year old vehicle that is getting worn down. I plan on buying a certified used car, probably 1-2 years old, in 3 years. Mileage isn't an issue for me since I don't drive out of town very often. So, leasing seems like the right option if I don't plan on owning this vehicle, want to get something new, and have lower monthly payments that I can afford. Anyone have any experiences with Apple leasing?
 
You are better off driving that car until it stops, but here are some basic numbers if you buy.

- On a $15k car, a 5 yr term at 5% is going to yield a $250 pmt before insurance.
- To get the payment down to $200, you are going to have to find a used car for $12k at the same terms, again, before insurance.

What kind of certified used car, only a couple of years old can you find for $12k. Whatever you do, pay a mechanic to look at what you want to buy. I once bought a so-called 'demonstrator, that was only driving by the dealer's wife'. This is from a large dealership. Then one day, if find shattered windshield glass under the carpet under the front seat. Don't trust any dealer's word.

In reply to:
Click to expand...
 
Here is all you need to know about lease vs buy. Which one does a dealer want you to do when you walk on to their lot? Exactly lease. They want you to lease the car which is a damn good indicator it is bad for you the consumer unless you have a business and can wirte it off. Car dealers are not out to put you in the car using a financial instrument that will help you. They put you in the car using the financial instrument that is best for them - a lease. They do this because at the end of the term you'll be upside down almost always. You turn the car in, they get a nice 3 year car to put on their used lot, and you start the cycle over again. The average person who buys a car and drives it 10 year vs the person who leases in perpetuity will save close to 500K over thier lifetime. No small chunch of change.
 
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