I know, leasing sucks, but I keep thinking of examples

[archcommus]

**SKIP TO END**

Everyone always bashes leasing vehicles unless it's for a business or something and can be written off as an expense, but is there ever a situation that it could be recommended even for an individual? Yes, many of you will say it is terrible because you can't mod the car at all, or because you have to stay within the alloted annual mileage. But let's say you knew for sure you wouldn't exceed 12k or 15k a year, and let's say you had no interest to modify your car at all. In such a case would you say leasing could be a viable option?

 

[FoBoT]

A four- or five-year lease is a recipe for disaster. Many customers end up married to a vehicle they hate or end up paying severe early termination penalties.
? If you lease for five years and your car is totaled in an accident, you could be responsible for a giant gap between the amount the insurance company will pay and the stated residual in the lease.

 

[Cawchy87]

leasing sucks.

 

[archcommus]

Originally posted by: FoBoT

If you lease for five years and your car is totaled in an accident, you could be responsible for a giant gap between the amount the insurance company will pay and the stated residual in the lease.

That's a giant reason right there.

 

[Rhin0]

Leasing=ripoff
Leasing=another way for people to "think they bought" they something they can't afford (Just like credit cards)

 

[ElFenix]

if you're going to buy a new car every 3 years anyway, a lease can be better than buying. this is because of cash flow. since your money isn't getting tied up in equity on a car, you can put it to better use. i will qualify that with a couple of comments. first, it is far easier to get screwed in a lease than a buy. anyone can calculate a buy payment with some easy math. you cannot calculate a lease payment by yourself. so, unless you have a notebook computer with leasing software on it, you're going to get screwed. you know that low price you just haggled down over the last 2 hours? they didn't use that when calculating the lease. since the lease is so much cheaper than a buy payment you don't notice. the other comment is that you're losing money if you're getting a new car every 3 years, regardless of if you're leasing or buying. if you go out to 5 years (probably 7 years for most cars nowadays), your car most likely still has cheap maintenance (insurance savings probably outweighs maitenance costs), and you're not paying someone else for the pleasure of driving it.

oh, and about the cash flow thing. most people don't do that (i.e. get the same car and put the money to a good use). most people take the extra money and get a better car. that is just stupid. if you couldn't afford to buy it, you can't afford to lease it either (especially after they charge you MSRP and screw you on your trade).

 

[archcommus]

Getting a new car every three years whether you buy OR lease is wasting money, there is no doubt about that. The question is, if you would be buying a new car every three years anyway, is leasing really a ripoff?

Would you say the best overall option considering price as well would be buying CPOs?

 

[Vic]

Leasing is a ripoff for consumers. The details are generally far too confusing for the average customer, and the disclosure is very minimal. Instead of the negotiations revolving around a concrete item like the purchase price, it revolves around the monthly payment on an abstract, the estimated depreciation during the lease term. The customer is thus at a serious disadvantage during the negotiation process and a unsuspecting customer can be easily suckered. Then they are locked into the car whether they like it or not for the entire term (unless they want to pay a high penalty). And that's only the beginning. After making payments on a car they don't own, at the end of the lease term they can get hit for expensive penalties like excessive mileage, too much wear and tear, or if that model had an unexpectedly high rate of depreciation.

Now for a successful business, which is likely to be more savvy about the negotiations in the first place, all those negatives become pluses because they can write it all off AND the don't have to pay the taxes involved with actually owning the equipment, and the relatively lower monthly payment increases cashflow. And as business generally need the prestige of always having a newer model, leasing is a great way for them to turn over a new car every 24-36 months, paying only for the depreciation of the vehicle without any of the extra burden.
Consumers do not have any of these advantages.

 

[freebee]

As an individual, if you are buying a new car frequently (<3 years) and drive fairly low miles, leases can make sense. However, listen to Vic, he knows what hes talking about.

 

[Vic]

Originally posted by: freebee
As an individual, if you are buying a new car frequently (<3 years) and drive fairly low miles, leases can make sense. However, listen to Vic, he knows what hes talking about.

Thanks, and you're right. Leases can make sense for some people. My biggest complaint about them is what ElFenix posted. Most people simply don't understand them, they are ill-equipped to deal with the more complex negotiations, and instead of using a lease to increase cashflow (as they should) they buy a more expensive car.
For these reasons, I recommend that most people buy a car instead of leasing. I've just seen too many people who got themselves screwed because they didn't know what they were getting into.

 

[archcommus]

So you'd say cost isn't really one of the reasons why leases are bad? It's just all the things that come along with it. Could you summarize all those things as just "getting pinned with fees at the end of the term"?

 

[archcommus]

Originally posted by: ElFenix
if you couldn't afford to buy it, you can't afford to lease it either

Could you further explain why this is, even if you are able to comfortably make the lease payments of the more expensive car?

 

[Rogue]

I leased a Jeep Grand Cherokee through Chrysler financial and feel quite happy about it. My other car is nearly paid off and the lower payment on the Jeep vs. what the purchase payment would have been is nice. Chrysler leasing was very straight forward and very open and honest at my dealership. I was careful to select a vehicle that would retain it's value though and Jeeps usually do. I've been happy with it. Hell, I almost own my car and haven't had a desire at all the modify it in any way, that's what made leasing one and owning the other easy for my wife and I. I don't know about leasing a vehicle as a primary vehicle though, too many things could happen there (emergency cross country drives, etc.)

 

[archcommus]

I did some research on this by reading tons of past threads last night. Most people said it's dumb to do unless you can write it off as a business expense, because you have nothing to show for it after the lease, because you risk many fees, and because you'll definitely pay more in the end.

I saw the commerical for a $112 lease payment for 36 months for a Chevy Cobalt with about $900 down. I called the dealer and got it the deal confirmed. So that would be 36 months of an extremely cheap payment, but I would need full insurance and to keep the car perfect, then at the end I would have no car and would need another.

But let's say I purchased a car for ten grand. This would require payments of nearly $200 for five years. Let's suppose that I would want full insurance anyway even if I bought it, and that I would not want to mod it at all, and that I would not go over the annual mileage. If I wanted to keep the car after those five years for another three, then of course buying would be smarter, but after those five years, if I were to buy another car anyway and trade that one in, I'm still not understanding how leasing is the worse option.

^^ I know this has been beaten into the ground for years here on ATOT, so please just answer for THIS specific scenario and then this thread can die.

 

[spidey07]

well I think my lease rules, but then again I went through my credit union for the lease.

It is nothing more than a 3 year loan on the difference between the car (that I negotiated first) and the residual.

nothing fancy.

But as others have stated lease can be a good thing, but only under very particular circumstances.

 

[Squisher]

I wish I had leased my Trailbazer rather than purchasing it, but I couldn't because at the time the wife was putting too many miles on in a year.


9 months after I purchased it the prices for new ones started to plummet.

I'm 2 years into a 5 year purchase agreement at 0% and if I wanted to sell (which I don't) I'd have to hand someone $3K-$4K to take it off my hands.

 

[archcommus]

That is my problem, I've done so much reading about it on these boards but I'm having trouble seeing why leasing sucks like so many people say in particular circumstances, like the one I mentioned three posts above.

Everyone says you'll have nothing to show for it. Well, if I buy it over a period of five years, and then trade it in for another car, I don't have anything to show for it then, either, except for how THAT car lowered my NEXT car's payments. See what I mean?

So when you're leasing you're doing the same thing, except for getting a new car in three years instead of five, AND enjoying lower payments in the meantime.

The only downside I can see is if you bring it back with problems. So you just have to take care of it and have full insurance.

So what am I missing?

Again, please tell me why leasing would suck for the example I posted in particular. It's that kind of situation that I'm wondering about.

 

[spacejamz]

here is an example someone posted from car forum for an 05 Acura TL...The key here is where you stand after 36 months:

The assumption that you come out ahead in 36 months by buying rather than leasing just doesn?t make mathematical sense to me if you look at the numbers. Assume a purchase price of $33,500 (inclusive of delivery) for an 05 TL w/Navi, 4.5% for both your loan rate and my lease rate (lease rate money factor of 0.00185 [I actually got a 0.00175, {4.2} you might have gotten better on your loan]), sales tax of 7.25%, 0 money down for both of us and a value at the end of 36 months of $19,765. (a 59% residual value as currently calculated by banks on a 36 month old 05 TL)(and they?re better at guessing values then we are) and we?ll give you the benefit of the doubt that you paid your sales tax up front rather than financing it and raising your payments.

Loan: A 60 month loan @ 4.5% = $624.54 /mo.
$624.54 per mo. x 36 mo. = $22,483.44
+ $2,428.75 sales tax (paid up front)
= $24,912.19 in total payments
Sell @ $19,765 - $14,998.96 Still owed on loan
=$4,766.04 in your pocket (your equity)

Lease: $481.40
Tax $34.90 p/mo (total $1,256.50 over 36 mo.)
=$516.30 x 36 months = $18,586.80
+ Acquisition fee $595
+ Disposition fee $350 = $19,531.80

Sell @ $19,765 w/0 owed = $0.00 in my pocket.

Your total payments = $24,912
My Total Payments = $19,531.80
You paid more = $ 5,380.39 difference - your $4,766.04 equity = $614.35

OK, no big difference then? Well, what about the question of whether or not you can actually get $19,765 for the car when you sell it. Will that be the value? Also, no dealer is going to give you that on trade in because that is the sales value of the car, not trade in value (it will be $2-3k less). You?ll have to go through the hassle of selling it yourself.

 

[vi edit]

My philosophy is that cars are a losing proposition really any way you cut. (Exceptions apply, but are rarely the norm)

If you are the type of person that KNOWS they like to trade up vehicles every couple years and can fall within the milage restrictions then leasing IS a better choice for you. The lease isn't losing you money, it's your buying habits and trading up every few years that is the bad choice. But hey, we all make choices in how we spend money.

How many people here trade up new hardware every year (or more often) and toss away hundreds of dollars (if not thousands) for the bleeding edge hardware that is worth squat in six months?

How many people pay for a $2.00 cup of coffee from starbucks/froofroo coffee shop of choice/ect instead of making it yourself or getting a refill at a gas station for $.30 a cup?

How many people buy a six pack of premium micro brew beer for $7.00+ when they could have bought the High Life for $3.50 a six pack?

How many people didn't even need to buy those things and just could have settled for water instead?

How many people pay $50 for retail jeans when they could hit an outlet store or buy an offbrand for $25?

I can go on and on. You will (almost) never come out ahead in purchasing a car. But you can minimize your losses by buying or leasing depending on your personal habit/style. If your payments are under 5% of your monthly income then it really isn't even a concern IMHO. Do what suits you best.

 

[redly]

Originally posted by: archcommus
I did some research on this by reading tons of past threads last night. Most people said it's dumb to do unless you can write it off as a business expense, because you have nothing to show for it after the lease, because you risk many fees, and because you'll definitely pay more in the end.

I saw the commerical for a $112 lease payment for 36 months for a Chevy Cobalt with about $900 down. I called the dealer and got it the deal confirmed. So that would be 36 months of an extremely cheap payment, but I would need full insurance and to keep the car perfect, then at the end I would have no car and would need another.

But let's say I purchased a car for ten grand. This would require payments of nearly $200 for five years. Let's suppose that I would want full insurance anyway even if I bought it, and that I would not want to mod it at all, and that I would not go over the annual mileage. If I wanted to keep the car after those five years for another three, then of course buying would be smarter, but after those five years, if I were to buy another car anyway and trade that one in, I'm still not understanding how leasing is the worse option.

^^ I know this has been beaten into the ground for years here on ATOT, so please just answer for THIS specific scenario and then this thread can die.

One thing I see going on here is that, ok, you own the $10000 car for 5 years. At the end of those 5 years, let's say the car is worth $2000. On your next $10000 car, you will be making payments on an $8000 loan. Now your choice is to get a shorter term loan and keep your payment the same, or lower your payment and keep the same term. Either way, you will be ahead with each subsequent car you purchase and eventually, you will be making next to nothing for car payments or buying outright with cash. (In a perfect world)

The problem with the scenario is that most people will buy a $15000+ car second time around and actually be going backward.

ANy way you look at it, it's all about how you spend your money. I've never been one to keep a car more than 2-3 years, so leasing is good choice for me as I wind up with zero equity usually when selling after owning 2 years. I get to keep the extra money that would have gone to the "owning" payment and put it into investments that yield interest. Food for thought

 

[theNEOone]

Originally posted by: spacejamz

here is an example someone posted from car forum for an 05 Acura TL...The key here is where you stand after 36 months:

You paid more = $ 5,380.39 difference - your $4,766.04 equity = $614.35

OK, no big difference then? Well, what about the question of whether or not you can actually get $19,765 for the car when you sell it. Will that be the value? Also, no dealer is going to give you that on trade in because that is the sales value of the car, not trade in value (it will be $2-3k less). You?ll have to go through the hassle of selling it yourself.

i did the same analysis on my car when i was looking to purchase it ('04 mazda 6s) and it turned out to be ~$700 more expensive to lease vs. a purchase.

i think that leases aren't inherently bad. getting a new car (or any car for that matter) is a bad financial decision, regardless of whether you buy or lease. but nobody ever said that every purchase you make has to be an investment - cars are consumables, just like computers, clothes, furniture, appliances, etc. - buy them on the basis of your willingness to purchase, that is your ability to pay vs. the utility the purchase provides.

many people say that getting screwed on a lease is easier than on a purchase, but if you're not an informed consumer, you're going to get screwed either way. any moderately intelligent person can make a lease work for them better than a purchase. in my case, it lowered my monthly payments and provides me with an extended test drive. since i was planning on purchasing the car anyway, i can buy it out at the end if it turns out that the car is good quality.


=|

 

[vi edit]

One problem that I have with leases is how they market/advertise them.

I *REALLY* dislike the fine print game they play. "Here, lease this for the low, low price of $219 a month"




......


then look at the fine print and see "$5,000 due at signing".

D'oh!

If you are going to lease, BE CERTAIN you don't get suckered into all the hidden costs and factor them in to get your REAL monthly payment. Not the payment they show you on TV or in a paper.

 

[acemcmac]

Originally posted by: spidey07
well I think my lease rules, but then again I went through my credit union for the lease.

It is nothing more than a 3 year loan on the difference between the car (that I negotiated first) and the residual.

nothing fancy.

But as others have stated lease can be a good thing, but only under very particular circumstances.

that is a great way to think of it man.....

 

[b0mbrman]

Originally posted by: acemcmac

Originally posted by: spidey07
well I think my lease rules, but then again I went through my credit union for the lease.

It is nothing more than a 3 year loan on the difference between the car (that I negotiated first) and the residual.

nothing fancy.

But as others have stated lease can be a good thing, but only under very particular circumstances.

that is a great way to think of it man.....

That is the best way to think of it.

Remember, you're not "paying" the monthly loan payment on a car, you're paying the depreciation. That's the number you should be comparing against lease offers.

 

[Squisher]

Originally posted by: vi_edit
One problem that I have with leases is how they market/advertise them.

I *REALLY* dislike the fine print game they play. "Here, lease this for the low, low price of $219 a month"




......


then look at the fine print and see "$5,000 due at signing".

D'oh!

If you are going to lease, BE CERTAIN you don't get suckered into all the hidden costs and factor them in to get your REAL monthly payment. Not the payment they show you on TV or in a paper.

You ain't kidding. Lease ads are the biggest crock out there.

I'm waiting to see an ad that says "Lease this Hummer for $1 per month................*fine print* $36,000 down."