Leasing


#1

How does car leasing REALLY work and who does it work best for? (This isn’t really a Ford Fiesta question but they made me pick one.)


#2

Patsy , this has been discussed many times here . Some people think it is a good deal , I don’t because at the end of the lease period all you have is a stack of receipts and no vehicle.

I suggest you put ( Should I lease a vehicle ) in your search engine and read several articles .

As for who it works best for is companies that use leasing as a tax dodge.


#3

I’m sure it’s been discussed but I’m new here and couldn’t find a good way to search topics. I did Google it…not sure I understood a lot except what I already know: It works for some and not for others. My college grad is getting into her first cart. My husband is pushing lease but I feel there are too many strings/unknowns. Not sure she wants to buy something new since she’s not sure where she’ll be in a few years; could very well be a place that doesn’t require a car.


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#4

Just tell your husband that if someone needs to terminate a lease early it will be really expensive . Also at lease end there might be charges for excessive wear or damage . Plus a new young grad is going to have high insurance rates and they will have to have full coverage .

I am not sure why you had so much trouble with your search on the web . I saw plenty of good articles that explain the pros and cons of leasing.


#5

The bottom line… leasing is the most expensive way to own a car.

Leasing locks you in for 2, 3 or 4 years to a car that you might not want or need a year down the road. If you lose your job, you still have to make payments. If you own it even if you are making payments to a bank, YOU can decide when it is time to sell.

Simple enough?


#6

Almost. (:
Are you saying you can’t just “turn it in early?” That would really help me convince my husband…he just had knee surgery and is watching WAY too many leasing commercials.


#7

Well , you can but the remainder of the leasing payments will still have to be made plus a early turn in fee.

Maybe it is time for your new grad to do her own research and tell your husband to ignore the leasing ads.


#8

It works for me as I want a new car every three years and leasing enables me to incur a lower payment.


#9

The payment thinking is exactly why people lease cars. They can’t comprehend owning a car without payments. If it works for you, fine, but it is the most expensive way to own a car.

Lease cars give me the opportunity to buy 3 year old cars for 60% of the price of a new one with 80% of the life left. Your daughter can do that too.


#10

But you are not just out of college with an uncertain employment future plus parents who apparently don’t understand leasing .


#11

One more issue with leasing - it puts the new grad on a never-ending treadmill of monthly payments. It also may create expensive expectations of always having a new or near-new car, and one nicer than the grad could afford to buy.

Better for the grad to buy a car they can afford, used if necessary, and keep it for a while. Once paid off, keep putting the monthly payments into the ‘next car’ account.


#12

If you are a business, with a fleet of vehicles, leasing can be beneficial for tax purposes. If you are a family/individual, leasing offers NO benefit whatsoever. Even if for some reason you like to “trade up” every few years, it is almost always cheaper to buy and resell when the need arises.

The ONLY reason people lease is to be able to drive a more expensive car than they could otherwise afford. Unlike a loan payment, which includes the price of the car itself, the lease payment only includes expected depreciation plus interest (which is called a “money factor” to obscure this fact).


#13

Leasing is a car rental, just like going to Avis except for 3-4 years. You pay for the use of the car including their depreciation, interest on the money, etc. You also need to comply with all the dealer service requirements to keep the warranty in effect plus pay for any damage beyond “normal wear and tear” when you turn the car in. At the end you own nothing and start all over again.

So in the long run it is more expensive than buying but the monthly rates can be less, which for some folks just starting out provides a trouble free car for less money until they get on their feet.

You may run across a post or two where there has been a major catastrophe with a leased car like $8000 for a new engine with only a few months to go on the lease. Yep, you gotta pay the $8000 and turn the car in again at the end. So there are huge risks.


#14

Leasing has advantages but they aren’t necessarily financial. Only you can decide if it’s right for your family.

I had an uncle who bought a new car every 3 or 4 years. He had some nice ones. Wildcat, GS, Monte Carlo, Cutlass, Impala SS, SHO. But he spent his entire life in rented houses and apartments. Maybe he would have been better off buying houses and leasing cars.


#15

Heh heh heh. Reminds me, I worked with a guy that was pretty conservative and always rented his house. I guess he was about 60 when his landlady wanted to sell and he asked whether it was something he should do or not. I don’t know if he ever did but at that time he would have quadrupled his money within 15 years. Always drove an old car even though he had plenty of money. He said once there was only one time in his life when he was down to about $1.20 in his pocket and that worried him.

Yeah a time to rent and a time to buy as ole Ecclesiastes said.


#16

The first consideration in leasing is the miles per year. 10 to 12k is fairly normal, if you drive more than that unless you plan on buying out the car at the end of the lease, or have a deal as was offered with our Kia, if you leased another they would forgive the mileage. I chose leasing for the wifes car, mileage not a problem, no worries about repairs, brakes tires etc. and a dependable car to do the 200 mile round trip to see her mother. We had a 2003 windstar, after all expenses after 11 years cost us $218 a month. We would have kept it longer but on her trips gauges would go whacko, interior lights would flash on and off, and no mechanic could diagnose a fix. Yes I re soldered the board in the cluster, no good. So for $200 a month we did a 3 year lease, no down. That ran out then upgraded to a rav4 awd etc for $300 a month. May buy it out for $17k as I am retiring and the mileage limit could be a problem.
Having a dependable car for her and trips to mom consideration number 1.
Hope this helps


#17

For anyone who drives a lot of miles a year, leasing is absolutely out of the question. One of the reasons leasing costs so much is that you wind up getting a new car every 2 or 3 years which is expensive even if you are buying them. I bought my car newover 7 years ago and will not replace it for a few years yet. The cheapest way to buy a cad is to buy a 2 or 3 year old one and keep it a long time. If you are going to lease, get a car that depreciates very slowly. That usually means Japanese. Sometimes you see ads for some car makes where a $27000 car costs less than a $25000 model. That means the more expensive one depreciates less.

Remember, lease prices can be negotiated just like buy prices. Go to car dealers and drive cars you think you would like. When you find the make, model and equipment you want, get a price from them and then let them know that all price negotiations will be done via internet or phone, your choice, not theirs. Make sure you know exactly what is included in the price they give you. Any surprizes when you go to pay or sign for financing, walk away.


#18

There are aspects of driving a car that have nothing to do with money and there are requirements that can’t be directly translated into financial costs.

I was recently at an automotive-related training seminar and one of the trainers put it very simply: “I want a car with the latest tech features so I can integrate my work life easily. I don’t want to deal with maintenance and repairs, I don’t want to think about what tires to buy or when I need new brakes. I don’t want to worry about where to take my car when the warranty runs out. That’s why I lease a car every 3 years.”

I don’t think there’s a way to quantify those requirements into a dollar figure anymore than you can do a cost/benefit analysis of ski lift passes.


#19

after 3yrs the lease is over. than what? lease another car? buy it?
you just rented a car for 3yrs. now what is your next move?


#20

I turn the cars in when my leases end.