Lease

Our 26 year old daughter puts on about 15,000 miles a year, maybe more. Are there any good high mileage leasing programs? I am a fan of buying and driving it forever, but she is not.

First I would suggest that your 26 year old daughter has a right to make her own mistakes and wile I don’t know how you are approaching this remember she is not an adult and not a kid.

OK now my advice to her. Leasing is almost always a very bad idea. First it locks you into a decision and at 26 years old your future may change faster than expected and in ways you don’t expect. With a lease those changes (like moving, job changes marriage divorce kids etc.) can make the conditions you signed for very restricting or expensive. Leases almost always cost more than any other way of driving, even when it seems cheapest when you first look at it. We see many many people here who come looking for a way out and there is none. Avoid the lease thing.

Even if it means not getting the car you want or even taking the bus, avoid that auto lease.

If she’s never leased before, have her go to a website like http://www.swapalease.com and find one close to her and let her take over someone else’s lease for a year or so. This way she gets to see how bad a lease is, and might help her understand your point of view.

A lease is a bad idea for a low mileage driver…and an EXTREMELY bad idea for a high mileage driver.

Leases were originally designed for businesses, where the cars were replaced regularly and the cost would be an operating expense rather than a capital expendature (different accounting results). During the recession in the '70s people began leasing rather than buying because the monthly payments were significantly lower, and with both unemployment and interest rates in the double digits it was considered by many to be a stop-gap measure, a way to survive in bad times. Dealers also began to see it as a way to “move” cars in bad times…while still maintaining their inventory! Businesses use the asset value of their inventory to access operating capital loans. And they developed lease programs for consumers. Wherein the consumer always loses. Payments go directly into the dealer’s bank account rather than into equity in the car.

If you buy a car and make payments, you’ll ultimately own the car. If you lease a car and make payments, you’ll end up with nothing. Zero. Zilch. And if the car develops a problem, you can’t trade it, sell it, or conflagrate it like you can a car that you bought.

Oh, and with all respect to my friend Joseph, my adult children both come to me for car advice and I hope they always do. It makes me feel useful. When your kids grow up your job becomes to be there for them. And besides, my daughter helps me with my cell phone!

Merry Christmas everyone!

Great articulation on leasing. Leasing is very unsuitable for individuals, unless you can write off the expense, or you work for a company that pays you a monthly lump sum, such as $500 to have a late model car. My brother-in-law is sales manager for 2 radio stations (he sells air time) and does not like the worries of ownership. His company pays him enough to lease a car on a 3 year basis, with provison they take the car off his hands, if necessary, should he lose his job.

For private individuals, if you cannot afford to buy it, you certainly cannot afford to lease it.

I tend to agree and have always been against leasing as more expensive and for people that want to have more car than they can afford, however, I am warming to the idea myself provided, and only if, the mileage is kept down. One reason is the high repair cost of some of the later model used cars. Depending on the car I am starting to think that a good warrantee is very important to avoid repair costs in the multiple thousands on some cars. Best would be to buy a new car with a good guarantee but if that is not possible then I’m not sure a lease is worse than a 3-4 year old car that is susceptible to high repair costs.

Car companies are starting to warranty their vehicles for 5 to 10 years now, save for Honda and maybe Toyota which do 3 years still, so it kinda makes sense to buy a new car. If one needs to lease a Civic or Accent or some other low end vehicle, you seriously need to reevaluate your monthly spending.

I know that Joseph mistyped the part about not being an adult.

As long as she dont go crazy on miles your good. She might drive 10k one year and 18k the next. The best way to do a lease is to do a short term like 24-30mths. This way if she wants out ealier than contract all she has to do go to the dealer and pick up another and do it again, and usually they will waive security deposit on the next one. I was a leasing manager for a dealer for 25 years and my opinion of it is as long as if a new car it’s going to be good. Buy used cars but lease new. Saturn usually has pretty strong lease programs. Good luck and I dont think that its a bad deal for her. If you finance or lease it… you dont own it until its all paid for.

Refer to the other leasing post. IMHO, leasing a car (or borrowing money to buy a new car) is always a horrible deal. If you cannot write a check for your new car, you need to be buying the cheapest used car that will meet your needs until you save enough cash to buy what you want. Getting locked into a commitment for a car that will depreciate significantly in the first couple of years is a very bad plan. It is still easier to escape from and upside-down loan (bad plan) than a lease (worse plan). Don’t do it, ever.

I expect that shorter leases will be more expensive per month than longer ones. Cars depreciate most in the first 2 to 3 years and that must be factored into the lease.

oh my god, when the car is return you better be ready to spend $1000 for repairs you need the inside to spot less you will the same factory tires replace you need new brake you will need to fix even a small mark or bent.you better prove how well you took care oil changes. I would feel better if got a loan from the mob they will only shot in the head the lease company play head games any money you think you might save to put down on the next car is sucked up Lesson for the sucking sound it is money going down the drain. and if you you some else toals the car your ins company only gives blue book value. if you get $8000 and the lease still has $11000 due you will pay the balance. if it is a lemmon the lemmon laws does aplly to a lease car because you do not own the car. BUT A NICE ONE YEAR OLD CAR WITH REST OF THE FACTORY LEFT LIKE A NICE TOYOTA. SHE GET A MUCH LOWER PRICE AND EVEN WITH 18000 MILE ON IT SHE SHOULD ABLE TO GET 82000 MILE WARR.
AND AT 35 CENTS FOR EXTRA MILAGE YOU COULD PAY ANOTHER $ 2000 dollars.

Leasing is a bad idea. My husband had a lease when we met and the payments were $250 a month for a four year lease. When the lease was over he still owed a few thousand dollars for going over mileage and repairs that the car needed. We ended up paying the same as if we had just bought the car and we didn’t even get to keep it. That was totally lame; we will NEVER do that again. When we returned that car, it was a Toyota Corolla, we bought a used Mazda Protege for the same payments as we had on the lease, and we got to keep that one once the term was over. Much better to just buy a barely used car.

Thanks Doc.

Yeah, for businesses and some individuals who can deduct ownership expenses it works. For most of us it’s a raw deal.

Hmmmm. While I agree leases can be costly, one does have to stay within the mileage limits, take good care of the car, have any necessary repairs done, etc. or you will get nailed at turn in time. You are just renting the use of the car.

As far as borrowing money to pay for a car, let’s be realistic-most don’t and maybe even shouldn’t. Just run the math. It all depends on what you will pay for the interest rate and what you can make on the money by not spending it. Good car loans are between 5-7% and there still are some zero loans out there. You can earn anywhere from 7-15% on your money by investing it. So why would one give up earning more money on the $20-30,000 saved than what they would pay out? You are just talking about the present value of the money versus the future as well as the opportunity cost. There is nothing wrong with borrowing money when it makes sense to do so. Whether it is a depreciating asset or not really makes no difference. Money is money whether spent on an appreciable asset or depreciable asset. Food and fuel to eat the house is also a depreciable asset but.

Sorry but these extreme money positions just don’t make sense for the majority of people out there.

yeah, I don’t even want to guess what the fees were on the civic when the lady who had it before me paid. I got my 99 in oct. 01 with 46k miles on it. If she got a 15k/year she was about 1500 miles over the limit for a 3 year lease, and that’s assuming it was bought in the fall/winter of '98. IIRC the saleswoman told me it was off a 2 year lease, so, in that case she was 15k miles over the limit.

“So why would one give up earning more money on the $20-30,000 saved than what they would pay out?”

One word: risk (been there, done that).

I guess I didn’t realize that only spending money you actually have is an “extreme position,” my bad. The “majority of people” are a financial disaster (credit card debt, no savings, insufficient retirement, stupid loans/leases on vehicles they can’t afford, etc), I’ll pass.

If you can’t talk her out of it…

Leases will allow say, 10-12K annual mileage. You’ll need to estimate the additional annual miles beyond lease allowance, then dealer will estimate the additional mileage cost and add it into the monthly payment. Bet it will be the same, if not more, than she might have with a normal car payment. Leases are not consumer-friendly - they favor the dealer big time.

It’s against the law to make a balloon payment due on a money loan. It’s apparently not on a car lease. The biggest complaint people have told me about the lease car at turn-in time is that the lease company demands that the car be in, practically, brand new condition …even at the end of 4 or 5 year lease! A (balloon) charge is placed on those vehicles which don’t meet this ridiculous “standard”.

We’re leasing a Forester. Needed a new car right away for a new job right out graduate school. Didn’t have a lot of liquid assets on hand, but enough to make the monthly lease payment. After three years (at the end of the lease), when we’re in a more secure financial situation, we’ll pay off what’s left and keep the car. Bought the extended warranty from Subaru, and no need to worry about mileage or dings/dents because we’ll keep the car.