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Lease or Buy

Good Evening,

Should I lease or buy my next car???

I realize that’s a loaded question with pros and cons to both sides.

Where can I go to “run the numbers” to determine the best deal financially?

Thanks!

Ron

I guess that if you need to ask you don’t recognize what a great many here see is obvious. Unless you can write off the cost of a lease on taxes and your tax rate is substantial it is very much a losing proposition to lease. In the short term it allows you to drive a much more impressive automobile than you can actually afford but in the long term it is vastly more costly than purchasing a used automobile and significantly more expensive than buying a reasonably priced new vehicle and keeping it for 6 to 8 years.

Leasing is the most expensive way to have a car, because you’re alway paying for the first 2-3 years depreciation. If you want to save money and not spend more than you can afford, save up a decent (20%) down payment, and only borrow what you can afford to pay off in 36 months. Whatever that can buy, that’s the car. Keep it for 10 years, repeat.

Easiest thing in the world is to pay for too much car.

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A lease has a lower down payment, and lower monthly payment. That is attractive, but the issues come at the end of the lease. In the end the bank, or leasing company will make a profit. If you are OK with the lease deal, that is your call.

I don’t think leases are a bad deal, but this is not the low cost of ownership that leasing promotions make it out to be. Keep your eyse wide open and make a deal that works for you. If you like drivng and new car every 2-3 years and don’t mind monthly payments leases can work for you. If you can write off some ot the lease costs as a business expense (realtors, and sales reps.) even better.

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Another thing to keep in mind is the mileage limits. If you drive more than 8-10k miles a year, leasing is probably not for you. It’s sort of like going over the monthly minute allowance on your cell phone plan: very, very expensive. I have known people who parked their leased vehicle and rented a car for the last four to six months of their lease because they had hit the mileage limit and it was much cheaper to rent a car than to exceed the mileage limit. In fact, a guy who rents a machine shed on my property has had his Toyota Tundra parked next to the shed for the last two months for that very reason.

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Thank you for the feedback…all make solid financial sense.

Now what if I told you that I was a 60 year old bachelor, financially solvent and profitable, with adequate cash reserves and disposable income…no dependents nor heirs to bequeath AND also with health issues…creating a risky time horizon.

Would those variables change the equation?

Thanks,

Ron

You seem to have figured things out pretty well so far. Enjoy life.

Enjoy Life…the bottomline…thanks Rod.

Ron

Does not change the numbers.
How long do you intend to keep it ?
How much will you drive it ?

Myself , I could NEVER lease.

The times have changed.
If you don’t drive a lot of miles, leasing is cheaper.
Leasing is making more and more sense.

Since Honda’s barely depreciate, leasing is dirt cheap.

You can find a lease for $99/mo, and zero down, for 36 months.
You think you can beat that with ANY car you buy outright?
$1200/year to drive a brand new car, in perpetuity

Even at $150/mo, that’s $1800 a year to drive a brand new car.
You can spend that in 1 year on a klunker’s repairs. Easy.
EVERY repair on a klunker car and it’s $500 a pop.

You will spend less leasing a brand new car for life,
than owning a beater that looks like crap,
and is always needing something.

Unless you own a car you “love”, leasing for the win…
It’s more reliable, cheaper to own (no repairs) and you drive a modern new car with modern features.

If I ever drive an econobox again, it will be leased.
But, if you drive over 15k miles a year, you’re stuck owning.
($20,000 cash gone, plus $1200 a year in repairs once it’s a few years old)

People vastly understate the amount of money they spend on repairs.
With a lease, you’ll practically never even pay for fluids, brakes & tires again!

People who can do the math correctly will see that leasing costs more in the long term. It does let you drive a nicer car today than you could otherwise drive. It’s your call if that advantage is worth spending more of your money over time.

Leasing companies make money by leasing cars. Have you ever seen the buildings for those leasing companies? Where do you think they make the money for those buildings?

I suspect the dynamics are still the same as they were when I was in college.  The only way to make the dollars come out best for you is if you are writing it off for your business.

UsedEconobox2UsedBMW…

Could you please rephrase your paragraph…thanks!

“Unless you own a car you “love”, leasing for the win…
It’s more reliable, cheaper to own (no repairs) and you drive a modern new car with modern features.”

“No repairs” is not necessarily the case when leasing a car. You are expected to return the vehicle in reasonable mechanical shape, and if it needs repairs when it’s in your care, the bill is on you. When I was working on cars for a living, I had a customer bring in a Chevy Impala that needed a lot of brake work. He completely wore down the brake pads and kept driving the car until the piston was shoved out of one of the calipers, then kept driving it until another caliper shoved its piston out, resulting in total brake failure. The car needed around a thousand dollars worth of brake work to put it back on the road. He told us to bill the leasing company for the tow and the repairs. I said, “excuse me?” He explained that he leases cars so he doesn’t have to pay any repair bills, and that the leasing company will take care of everything. I said that’s very unusual and would need to speak to his leasing company to verify this. He was very angry when he got off the phone with them and ended up having the car towed back home because he couldn’t afford fix it, mostly because he thought he could completely destroy the brake system on his car and get it fixed on someone else’s dime.

The math says that paying $1200/year and never paying a cent for repairs is cheaper.
The fact that it’s a brand new car is just icing.

Driving a beater is a VERY expensive hobby.
Two $500 repairs in a month blow out the $1200/year lease in short order.
I wouldn’t take a beater car if it was given for free.
You are better off getting into boating and golf!

Again, you want to drive the cheapest possible car?
Then lease a brand new shi*box and stay under the mileage cap.
Another possibility is to lease a used car.
Cars are still maintenance free from 30k to 60k
However, any extra repairs may wash out the lower monthly payment.
So, all things being equal, you might as well lease the brand new car with no repairs.

Bottom line? Owning is EXPENSIVE, b/c repairs are EXPENSIVE
(Much more than a silly $99/mo payment)

If you want to drive a new car every three years and don’t exceed the mileage limits on the lease the leasing is the best way to go but it is the most expensive way to drive a car.

If you typically drive less than 12,000 miles a year, you like a new car and trade it in for another new car every 3 years; then a lease can make good economic sense. If you are a salesperson and use this car for business you can even claim some costs on your income taxes.

A lease can allow you to get a newer, fancier, luxury car for a reasonable monthly payment. You don’t own the car, but if you trade it every 3 years who cares? To your friends, family, and neighbors it is your car whether you lease it or buy it.

Myself, I don’t lease. But I buy a new car and keep it for 10+ years, or I buy a used car and keep it for 10+ years.

Before retiring I drove leased fleet vehicles that were traded in every 3 years or 55K miles whichever came first. It was nice have new cars with no breakdowns on the road as I racked up a lot of miles per year.

There is nothing wrong with leasing, it is simply a choice folks have in the car buying process.

I’ll add my 2 cents worth here. Many people only see the long term benefits of buying–of which there are many–but from a business standpoint leasing often makes more sense. You buy a car, you’re committed to $30,000. That’s a $30K liability on the books. But let’s say you lease for 3 years at $400/month. Now you’re reduced your liability by half. How is that a bad thing? Keeps your credit open for other things.

But you’re a 60 year old bachelor with ample finances. Why on earth would you want to buy a car? Lease one for a couple of years, then lease something newer and better.

I have always been against leasing, but now I am not sure. The residual values on the used cars are much higher than they were, so leasing is getting “cheaper”. Also in CA, when you buy a $20 Grand car, the sales tax is close to $1800. On a lease, you pay the tax on the monthly lease payment. If you sell the car in 3-5 years, the tax you don’t pay while leasing is somewhat substantial. After the 3rd year the cars start needing maintenance items that even for a DIY’er add to the cost of ownership. I feel, the only time buying makes sense is if you keep it for more than 7 years. There is a lot that changes in 7 years, one is the type of car you need/want.