Buying vs. Leasing


#1

Our family car is on its last leg - a 2000 VW Jetta. We are trying to decide whether to buy or lease our next vehicle. We’ve never leased before but our mechanic and several friends have recommended this option from personal experience.

What is the best way to unload our VW, and what are the pros and cons of leasing vs. buying?


#2

Leasing is OK if you buy a new car every 2 or 3 years (the most expensive way to have a car, by the way), you’ll pay a bit more (the leasing company has to get their $$), but it would be convenient. Other than that, it’s not a good idea, especially if you now keep cars for 5-10 years. Why do they say you should do it?


#3

With due respect to your friends and mechanic, you need to carefully research lease vs buy options. Given the mileages I run up annually, a lease would never work for me. You need to conduct a good analysis of your needs, the lease offer and the buy offer to determine if the lease is the economical way to go. Consumer Reports and others can provide a worksheet to help you in this analysis.

Leasing is like renting a house; you have no equity at the end, and in the car lease, you have many repair/upkeep responsibilities that landlords may provide when renting a house.


#4

Do not lease.
Your history shows you keep your vehicle 10 years.


#5

Your mechanic may treat leasing as a business expense and tax deduction. If you own a business and trade every 3 years, a lease makes sense, since Uncle Sam will be picking up a good deal of the cost.

If you doin’t have a business, or dont’ get a mileage allowance from your employer, you should not lease. it’s a lot more expensive that buying and keeping a car a long time. I agree with the other posters.

If you can’t afford to buy a new car, you certainly cannot afford to LEASE one!


#6

Financially Leasing is the WORSE option. You’re far better off buying a car and keeping it for 8-10 years.

Business tax options have been greatly reduced in the past 5 years. Many friends of mine who own their own business stopped leasing because of the non-existant tax breaks.


#7

Leasing is just a nice way of saying renting. You wind up with nothing and pay dearly for that privilege…Be sure to ask how many miles a year you are allowed to drive it, and how much per mile for “excess” mileage…


#8

Additionally, if you lease and wind up with a lemon you have absolutely no options but to live with it until the lease end. And if you decide you’d like to take a trip…you’ll pay dearly for the miles above your lease limit. Really dearly.

leasing works for businesses because it’s an operating expense that reduces their profit on which they pay taxes. Buying a car for a business becomes a capital expense, subject to only depreciation writeoff. The accounting is different.

Look at it this way: if you buy a car on a 5 year loan, at that end of the loan you have a vehicle all paid for, all yours. If you lease a car for five years at the end of the lease they come take it from you…you have nothing, nada, not even a spare tire. You walk. Or start over from scratch.


#9

Add the total costs up. As much as everyone has attempted to talk you out of it, “it depends”. The market determines the true value of the turned in vehicle, but the residual is fixed. The bottom line is, and this is IF the numbers aren’t “fudged” by the leaser, the costs between the two is very little. The only thing is you’re buying a very expensive used car. This is under the assumption that you keep the car.

Mileage, many exceed the limits …mark that excess OFF of the residual price. Take the difference in payment (at times HALF) …take that avoided cost OFF the residual. In the end, if you come up with a few hundred to the bad, who cares. You got to use all that liberated cash years ago when it was worth more than those same $$ will be at the end of the lease.

It depends on if you ultimately want to keep the car anyway. At that point it really doesn’t matter.

I do agree that anyone who trades with anything owed on the vehicle is leasing. They just don’t know it.


#10

#11

This is true, but only if it’s compared to a purchase for the same amount of time. This is a very expensive way to buy the use of a car, either way. Much better to buy and hold.


#12

The lease of a personal automobile appears to be a real lopsided deal for the leasing dealer. The only benefit it offers the customer is getting a more luxurious and expensive car than they could get in a purchase.


#13

I agree. Worded differently, it allows people to drive more expensive cars than they can afford. In reality, they pay a price to do this, the price is the trap of having to continue making payments forever, one lease after the next, and loss of the asset value they would have built had they bought, so they don’t realize it’s costing them more.

In reality they’d be much better off IMHO to simply buy something they can afford.


#14

Problem is, most people only look at that monthly payment, nothing more. I’ve had my insurance agent tell me they’ve had people go out and buy a new car then balk when they hear how much it’ll cost to insure the thing.


#15

My own philosophy is by leasing you are guaranteeing monthly payments into eternity, as once the lease is over, you lease another. My philosophy has been buy with 5 years of payments, own the car for 10, We put 10k per year on our cars and I am one of those idiots that pays 1k for extended warranty so I will have no major expenses before I get the car paid off. After that bank the monthly payment for future repairs, which has worked out well for me as the total net of repairs vs lease payments for those extra 5 years has been a big net gain.


#16

Personally, I have owned my car for 11 years. I haven’t made a car payment since January 2004. For the life of me, I can’t imagine leasing a car. If you lease, you will never have the satisfaction of making the last payment and knowing the car is yours.

Owning a car is about the freedom of having the choice of going where you want when you want. When you lease a car, that freedom is curtailed by the mileage limit.


#17

Also, if you bank the payments for several years, then you can pay CASH for that next new car.


#18

I have a good friend who leased a Nissan Pathfinder some time back. He turned in an Izuzu trooper as part of the lease. This person maintains his cars and they are always immaculate. At the end of the lease, the leasing dealership said that the tires were worn and he owed money for replacement tires. My friend is no hotrodder–he was in his late 60’s at the time, and stayed within the mileage limit on the lease. My friend finally settled by buying the Pathfinder, but he lost money on the lease deal.

As has been discussed earlier on this board, many feel, including me, that a car from a rental fleet is often a good purchase. Make arrangements for your finanacing before you talk to the dealer. Then consult publications to get an idea of the true value of the car.

I doubt that any dealer will really want your old VW. Sell it yourself for whatever you can get.


#19

Leasing; who needs it? It is cool to say you leased a car. I don’t care to complicate anything just to be trendy. I can’t think of one single benefit of paying too much and worrying about every little thing that could happen to the car or wondering if the dealer is going to play hardball with you when the lease is done. Why bother?


#20

Has anyone else noticed that car commercials these days rarely EVER mention the price of the car? Car commercials these days are almost exclusively lease offers, and they only tell you the monthly payment (if you qualify, of course). Caddyman said “Leasing is just a nice way of saying renting”. I couldn’t agree more. If they advertised it as renting, no one would do it, so they use the word lease to make it sound respectable.

Also, ask yourself, why are they pushing the leases so hard? Because that’s where the profit is for them.

BTW, I am now seeing lease offers for basic cars like Honda Civics and Toyota Corollas. I wonder if this means that the price of a new car is moving beyond the reach of the average driver?