Leasing vs Buying, what about when the lease price is this low?


#1

I’m looking to buy a new car for work commute (about 40 miles a day or so) and deciding whether to buy or lease. My work commute consists of 60% highway, the rest is city driving bumper to bumper. Most of the roads are full of multiple potholes. I do about 450 miles per month.

There are special signing events where I can get a Jetta, Corolla, or a Prius C for $99 a month with $0 due at signing for 36 months with up to 12k miles every year. I’m not an expert at “financial math” but isn’t this a better deal than buying a car? Buying the car would be about $20K and require 5 year finance.

Every 3 years, I could just get a $99 lease and keep it going. All maintenance would be covered.

I have no idea how much more insurance would cost.

So is the lease better than buying the car?

Edit: I did a insurance quote for the Jetta and it’s about a $50 increase in the 6 month premium.


#2

40 miles a day by 5 is 200 miles by 50weeks is 10000 miles a year. That leaves 2000 miles for weekends and vacation. You are correct . your math skills need work.


#3

Whose to say the lease will be that amount when up. Maybe it’s just for first time leasors. I would read the fine print before I decided anything was the best way of doing it. I am one of the few here who think occasionally, leasing is better. But, it dependeds upon a person’s individual finances and use situation and a one size fits all policy seldom works for everyone.


#4

The devil is in the details. This sounds like a good offer - but there are “come on” ads all the time in the world of auto sales. Go to a dealer and see if you can really lease a car as advertised? Is the car a completely stripped down model or equipped to your needs? I’d expect a significant attempt to up sell you to a more expensive car.

Leasing can work if you don’t exceed the mileage allowed on the lease, if you want to have a “new” car every 3 years, and like the ease of getting rid of the old car when you get a new one. The least expensive car is one you buy used when it is about 2-3 years old and then keep it for at least 5 years and 10 years is even better.


#5

I agree with the others - your miles/day doesn’t match your miles/month. Like UT said, lots of these deals can’t actually be made. But sure, check it out (with a realistic miles/year estimate), see what they say. Just be ready for the HARD SELL, and walk away quickly. Do NOT give them the keys to your car!


#6

How do you know that all maintenance will be covered? We lease cars at work and are responsible for paying not only for the maintenance, but also for incidentals caused by design flaws in the cars (bad Escape transmissions burned the transmission fluid - they made us pay for a fluid change).

At any rate, at the end of 3 years you have paid 3600 (plus however many thousands the dealership will tack on, which will likely be a lot) and have nothing to show for it. Not a great deal.


#7

READ !
Read the whole lease agreement …BEFORE you do anything.
It sure sounds to me that there’s a huge caveat hiding in there that you’re not seeing yet.
Plus…it sounds like you drive a lot more than their allowed total…for which you’ll pay dearly.
READ !


#8

Normally leases should not be used for commuting cars because of the mileage. Agree with the others.


#9

Sorry, some clarifications. I only commute 3 days a week (so at 40 miles a day, it’s less than 450 miles per week). So around 6000 miles a year. And also, I plan to lease a reliable car…like a Corolla. I’m guessing the maintenance will be covered…but even if it wasn’t, it’s really cheap on a new car.

I still don’t get the math part of it…here are my calculations:
$99 * 36 = $3600 (for lease)

Buying car:
$20,000 (say base price of car) / 60 months (5 year finance) = $333 monthly payment

If you instead put the $20,000 for entirely for leasing…
$20,000 / $99 = 202 months = 16 years with a new car every 3 years

Chances are if I buy the car, it will not last 16 years without major maintenance.

So to me, wouldn’t the lease make more sense?


#10

Some issues: the $99/month may not exist, lots of cases where very few get that rate. It may not be available in 3, 6, 9 etc years; your math ignores the equity in the car; you won’t be getting a $20k car for $99/month, it would be the basest stripped model on the lot, more like $15,000 after discounts. Assume it’s worth, say, $3,000 after 9 years, so you’re $12,000 out of pocket, plus finance charges. Compare that to 9X12X$100 = $10,800, still looks OK. But that assumes $99/month. If that turns into $199/month (which it easily could), you’re now at $21,600 for 9 years, much more than $12,000.

Like I said, if you can actually get it for $99/month for 3 years, I’d sure consider it. But that’s a BIG ‘if’.


#11

Several dealers near me are offering Lease specials…the LOWEST lease payment for a $20k car is $159. The $99 lease is for a $11k car. I don’t see how a dealer is going to take a loss on a lease.


#12

I agree, Mike. My general rule of thumb is divide the financed (after down payment) car price by 1000 to get a rough idea of the lease cost, so a $20k car would be about $200/month.


#13

Ahhh right I forgot about the equity part.

So is $99 lease on a $11k car good?

11,000 / 60 = $189 per month for 5 years

$99 * 36 = $3600

$11,000 / $99 = 111 months = 9 years, with a new car every 3 years

I just need a base car that gets from Point A to Point B reliably (don’t really care much about the features). Considering the above, would you get the lease?


#14

Maybe, IF the cheap car really fit my needs. But you need to find out if the $99 lease actually exists for you.


#15

It sounds like you don’t know the actual purchase price of the car you’re considering leasing. You’ve guessed at $20,000 and then $11,000, which is a big difference. It would be best if you got the real number here. As others have said, $99 is very low, so you’re looking at a very stripped-down car or you’ve overlooked some charges here.

As already mentioned, you need to plan only for the situation over the next three years. You can’t assume you’ll be able to get a price like this in three years.

Have you considered what happens if this job starts requiring that you commute five days a week or if you end up in a different job? That could get expensive.


#16

The $99 dollar leases advertised have many hidden caveats and require qualifing for all applicable incentives such as Military,recent college graduate, lease loyalty, competing brand lease and also don’t include lease or bank fees, sales taxes or lease ending fees and may apply only to one particular car they have had in stock a long time or even to a bare bones equipped car of which they have none in stock.


#17

Oh, but it says $0 due to at signing? What does that mean then? I see other leases requiring something like $2000 due to at signing.

Is that the sales, taxes, processing etc? If so, how can they do $0 due at signing?


#18

Ads lie. It’s that simple.


#19

You’re still assuming that the lease payment you’re seeing advertised today will be available in perpetuity. That is almost guaranteed to not be the case. After all, 9 years ago we’d have been appalled at a $100/month lease payment for a cheapo econobox. :wink:

As for how they can do $0 due at signing, you only get that if you have good credit. And you need good credit to get that because they’re recovering what they would have charged you at signing by having a slightly higher price over the term of the lease. Basically, they’re trusting you to be good for paying them the however many thousand in closing costs over time. You’re getting a loan. On a lease.


#20

You really need to read the document carefully or have someone do it for you like a CPA. It might say something like “zero due at signing except for tax, license, and fees”. You have to ask, how are they going to pay for the license if they don’t collect it?