To lease or to Buy


#1

So I have been looking at new trucks to replace my old Ford F150. One of the questions I have been pondering is weather I should lease a New Truck since I cannot afford the payments on it to buy outright or to just buy a used truck. I don’t beat up my truck that bad. I average about 10K miles a year. I use it to work around the house, haul my boat, hunting and other normal truck stuff. I current truck is 7 years old.


#2

[b]Leasing a vehicle is losing proposition.

That money they want up front is the depreciation value of the vehicle over the lease period.

You are limited to the number of miles the vehicle can be driven over the lease period. Going over that mileage limit has penalty payment of so much per mile over the limit. The lease agreement will reflect what this penalty is.

When the vehicle is returned at the end of the lease, you can be charged a penalty for what the leasing company deems as excess wear and tear. And since it’s their property, they can charge what they want for this.

If it’s a closed-end-lease, which means you don’t have the option of buying the vehicle at the end of the lease, you paid all that money over the lease period, but walk away with nothing.

And finally, when you hear that there are residency retrictions while leasing a vehicle, they mean that you can’t move to another location far from the dealer where the vehicle was leased from. That’s because the leased vehicle has to be returned to the dealer where it was leased from.

A neighbor found this out when he leased a vehicle from a dealer in Chicago. During the lease period, his job required that he move here to Minneapolis. At the end of the lease, he thought he could just drop it off at any dealer that sold that vehicle. NOPE! It had to be returned to the dealer in Chicago. In doing this, he went over the mileage limit in the lease agreement. And paid something like 25 cents for each mile over the limit.

So you’re far better off in purchasing a vehicle outright. Even if it’s used. Because when the payments are done, you own the vehicle!

Tester[/b]


#3

Well,leases to the general public were designed to convince people to acquire more vehicle than they otherwise could afford. In a lease, you pay the depreciation for what you use, plus a hefty profit for the dealer. They work fine for businesses that write off the full cost of the vehicle but generally end up costing more for the general public.

So the first danger signal is if you can’t afford the payments to purchase, or need to stretch the payments out to five or six years. It means you are buying more than you should. For 10K a year which is nothing, why not find a good deal on a couple year old truck and pay for it in three years instead. Then after three years you can decide again if there is any reason to buy a new one.

Bing


#4

I agree with the others, leasing is almost never a good deal. I would also be very reluctant to borrow money to buy a vehicle, especially a new one. If you have to borrow money, shop for the least expensive vehicle that will meet your needs. Vehicles are terrible investments.


#5

If the choice is just another pickup, you should seriously consider keeping the one you have. Maybe you should see an upholsterer and/or order new carpeting from a page in a truck magazine. It could liven it up a little. Make sure the new truck is more comfortable or obviously better if you buy one.


#6

Leasing is almost always a bad idea for a non-business. It will limit your future choices and cost more in the long run.


#7

Leasing is ALWAYS a loosing proposition.

We hire a LOT of freshouts. These guys/girls are 22-25 engineers with a starting salary of about $50k. The first thing they do is BUY(usually LEASE) a new vehicle. This sudden WEALTH to them and they have know idea out to manage it.

Every once in a while you’ll see a kid who’ll buy a small AFFORDABLE car with managable payments. Then after 3-4 years it’s paid off…Another 4-5 years later they’re ready for a new car…Only this time they can AFFORD they car they want…AND pay for it cash.

I think a good goal is to get out of this leasing and buying a car with a loan as quickly as you can. So you may have to drive a smaller/less desirable vehicle for while. In the long run you’ll be far better off.


#8

Every once in a while you’ll see a kid who’ll buy a small AFFORDABLE car with managable payments. Then after 3-4 years it’s paid off…Another 4-5 years later they’re ready for a new car…Only this time they can AFFORD they car they want…AND pay for it cash.

I mostly agree with you, but I would rather see them drive their college beater until they can pay cash for that “AFFORDABLE” first real car, then start saving for the next one. When they save some cash, buy a good car for cash (however, I would still avoid brand new cars because the initial depreciation is just too high for some kid making $50K). The best deal is usually a fairly new high quality used car. They can start buying new cars (for cash) is 10 or 15 years after they’ve accumulated some wealth, if that’s still their priority. I still refuse to waste money by buying new cars, it’s just a bad deal.

I also see some of these kids go into debt to buy some new $40K POS that will only be worth about $10K by the time they get it paid off, assuming they don’t trade it on another one while they are still upside down. Some people learn the hard way.

I do agree with your main points; never/ever lease a car, and avoid borrowing money to buy cars unless absolutely necessary.


#9

Buy only.


#10

I own 2 cars, one is 8 years old(99) and the other is 42 years old(65). Both are in great shape, though the old one required a LOT of work to get it there.
Is there anything wrong with your truck right now? Does it need a new engine/transmission? You won’t get anything for it in trade if that’s why. If nothing is wrong and you’re just struck with the new car(truck) bug, like me, then wait until you can afford the vehicle you want. Invest in some CDs, let that money earn YOU interest, not the bank.


#11

So, if I read your usage description correctly this is a “play” truck. It’s used to haul your boat, household projects, etc. Not something you depend on for a living. So, why do you need a new(er) truck? Fix up what you have and save up until you can afford a new truck. Leases are for suckers.


#12

In the long run, leasing will be more expensive unless plan on keeping your cars three years or less. As others have mentioned, what you are doing is financing the depreciation plus some additional profit. I have leased in the past but paid cash for my last cars because I intend to keep them until the wheels fall off. That said, I know a lot of people who are financially astute who lease because they don’t want to keep the car more than a few years and can afford the payment.


#13

Leasing only makes sense if it is written off as a business expense.

If you buy another truck, get one that is at least 2 years old. That will get a lot of the depreciation over with. The truck could depreciate $10,000 in the first two years. If you need a loan to buy the truck, fix the old one and save for a truck that you can buy with cash.


#14

I mostly agree with you, but I would rather see them drive their college beater until they can pay cash for that “AFFORDABLE” first real car, then start saving for the next one.

Many never had a college beater. They drove their parents car to the interview…One guy even took a bus.

And with most of these kids they don’t know the first thing about cars. I don’t recommend buying ANY beater if you don’t have the means or knowledge to fix it yourself. It may work out…it may NOT. In the long run they’ll be better off buying a new or slightly used RELIABLE vehicle and keeping it for 8-10 years.


#15

In the long run they’ll be better off buying a new or slightly used RELIABLE vehicle and keeping it for 8-10 years.

Only if they can write a check for it. In the long run, they will be better off without any debt. It’s still cheaper to pay someone to patch a beater together than to make car payments, or they can learn some basic auto repair. They can buy a “new or slightly used RELIABLE vehicle” when they can actually afford it. If they buy it with their own real money, they may even decide to keep it for 15 years. Besides, driving a beater for a while “builds character.”

Never/ever borrow money to buy something that is going to decrease in value. If you absolutely have to borrow money to get transportation to work, buy a functional $5000 car and pay it off as quickly as possible, then never make that mistake again. Some kid making $50K out of school should be able to save enough cash to buy a year decent car within a year.


#16

I’m going to go against the grain here:

Leasing is a good idea for individuals under a few conditions:

  1. You like to get a new car every 2-3 years (and perpetually have your car under bumper-to-bumper warranty)

  2. You don’t want the hassle of having to sell your car when you’re ready for a new one.

  3. You’d prefer lower monthly payments.

  4. Ending up with less money over the course of 3 years is less important than having many new cars.


#17

Amen to everthing said thus far. What’s wrong with the Ford you already have? You can do a lot of fixing up/repairing for just a couple of months worth of new car payments and then you can sit back and not have payments (and cry yourself all the way to the bank). If you can leave that money alone then when the Ford truly dies you can either pay cash or at least a huge downpayment on a short term loan for something newer.

It will be hard to ever get ahead if you strap yourself into an expensive lease because you’ll be in a similar situation 3 years from now. Likewise, a long term loan (and a lot of interest) will finally be paid off when the vehicle seems old. You may be tempted to turn right around and start payments all over again on something newer.


#18

Even under those conditions, it’s a horrible deal. You can accomplish exactly the same thing by buying the car and financing it (which I wouldn’t recommend either) then trading it in for a new car every three years. The lease option is only an “advantage” if you are trying to buy a car you cannot afford (like I did once when I was young and stupid) because it reduces or eliminates the down payment.

For individuals, leasing is nothing more than “creative financing” to sucker people into buying something they can’t afford. It’s the automotive equivalent of a no-money-down home mortgage. Leasing may be appropriate in some very specific business tax situations, but I have never been advised to lease a car for my business.


#19

You may be tempted to turn right around and start payments all over again on something newer.

I’m in that boat right now. I know my car(s) will probably last forever, they’re paid for, are in good shape and run like champs. I’d love to have a brand new car, but I did just get out of car payments after 8 years(financed one car, but turned it in, most likely upside down, to get my civic), and I love being able to say “hey, it’s paid for, I don’t care”


#20

Personally, I find it more efficient to buy rather than lease. I keep my cars for many years and, therefore, avoid paying depreciation over and over. However, there are people who would rather have a new car every two or three years and aren’t concerned about the cost. Perhaps they would rather do this than go on expensive vacations, play golf, etc. I don’t think you can buy a car every two or three years for what you can lease one for. Certainly, it’s more expensive to lease than buy and hold, but some people just want a new car more often and this is probably a lower cost by the month for them. Never will be cheaper than buy and hold but to each his or her own.