Owning vs. Leasing

[Juked07]

What are pros and cons of each?

 

[Kroze]

Would you like to buy one DVD movie & own it for 15 years or rent a new DVD for $3 a month with the option to change to a different dvd movie every 3 years for 15 years ?

 

[Mermaidman]

Originally posted by: Kroze
Would you like to buy one DVD movie & own it for 15 years or rent a new DVD for $3 a month with the option to change to a different dvd movie every 3 years for 15 years ?

:roll: fail

 

[BassBomb]

Lease is more expensive and isn't actually your car.

Owning is more expensive upfront but less in the long run and you own the car.

 

[franksta]

Originally posted by: Mermaidman

Originally posted by: Kroze
Would you like to buy one DVD movie & own it for 15 years or rent a new DVD for $3 a month with the option to change to a different dvd movie every 3 years for 15 years ?

:roll: fail

The only part that's 'fail' is that leasing never ends until you buy. If you lease your entire life you'll always have a car payment and never own a car.

 

[GoatMonkey]

There are mileage limitations on leases.

When you return a leased car, it will be inspected in great detail. You pay for any damages. Door dings, etc..

A leased car has to be maintained by the dealer. You can't use your own mechanic if there is a problem. But you shouldn't be charged for any repairs.

You pay for the initial depreciation on a leased car. If you buy a slightly used car, maybe one that just finished it's lease for example, somebody else will eat the depreciation cost.

Whether you own or lease for a short term you're paying the depreciation. If you're planning on only owning the car for 3 years or so, then you have to calculate if you think it will be worth more at the end of that time to sell it yourself, or to accept the dealers projected value. You never know really. I just sold my old car for $3k over kbb value.

 

[PingSpike]

The American automakers are all either discontinuing leases or raising their prices to the point it would never make any sense because the resale value is so bad they don't make any money on them, so soon enough the answer will be clear.

And with Japanese cars, which...flying in the face of logic, are some how worth more than a brand new one now, after being driven 10K miles and having your baby vomit in the back seat...are therefore not really great candidates for lease unless you can't afford a new one.

 

[Juked07]

Suppose you have the assets to buy a car up front right now. Would leasing ever be better than owning in that case?

 

[BassBomb]

Originally posted by: Juked07
Suppose you have the assets to buy a car up front right now. Would leasing ever be better than owning in that case?

I would not think so. Even without the $$ up front, I would not lease. Financing is better IMO

 

[boomerang]

Originally posted by: Juked07
Suppose you have the assets to buy a car up front right now. Would leasing ever be better than owning in that case?

What else could you do with that money? If you could make more with it than spending it on a depreciating asset, would you?

 

[KDKPSJ]

To me, leasing makes sense ONLY IF it's leased for business for tax purpose. For personal, it's not reasonable unless you get a great deal.

You should pay for it, you should watch out its odometer, you should watch out small dings, and in the end, you get nothing.

 

[overst33r]

Leasing lets you live beyond your means. That is, the msrp of the vehicle would be too high if you were to buy it, or so it seems.

 

[krunchykrome]

Lease: Make monthly payments for 2+ years on a car. After 2 years, you give the car back. You're essentially renting it, with the option to buy at the end of the lease. Also, there are mileage limitations in the lease (ex: you can only drive it 12K miles per year)

Own: Make monthly payments. In theory you own the car from day 1. Technically, you own the car after the last finance payment is made. No mileage limitations.

Basically, a lease is a great way for someone to live beyond their means and burn their money.

I knew a guy at my previous firm. I think he made around $65K. He drove a 2006 5 series BMW. It was a lease. He was complaining that he only had 6 or 7 months with the car before he had to give it back. He was 35 and he rented an apartment. Great decision making skills right there.

 

[SearchMaster]

Leasing can make sense if you go through cars every couple of years. There are some people that simply cannot stand to have the same car for more than 2 years, in which case leasing isn't a bad idea. Generally speaking though, it's not as financially sound as buying especially if you drive a car until the wheels fall off.

 

[Xyclone]

Originally posted by: PingSpike
The American automakers are all either discontinuing leases or raising their prices to the point it would never make any sense because the resale value is so bad they don't make any money on them, so soon enough the answer will be clear.

And with Japanese cars, which...flying in the face of logic, are some how worth more than a brand new one now, after being driven 10K miles and having your baby vomit in the back seat...are therefore not really great candidates for lease unless you can't afford a new one.

My thoughts exactly. If you're buying a car with very high resale value, you can sell it for a nice price when you want to sell it, but if you're buying an American car, you're making a bad decision (usually, here come the flames) and you can go ahead and never buy them.

 

[dirtboy]

Leasing isn't more expensive and I own my leased car just as much as someone who owns their financed car. 😉 I don't like having a car out of warranty and I have no problems with mileage limits or keeping a car in good condition, so it works very well for me. I also enjoy getting a new car every 24 months. I've owned cars in the past and that isn't all that great imho.

 

[boomerang]

Originally posted by: dirtboy
Leasing isn't more expensive and I own my leased car just as much as someone who owns their financed car. 😉 I don't like having a car out of warranty and I have no problems with mileage limits or keeping a car in good condition, so it works very well for me. I also enjoy getting a new car every 24 months. I've owned cars in the past and that isn't all that great imho.

I would agree for those exact reasons, having leased my cars for nearly 20 years.

Some folks get hung up on owning things. They should buy. To me, it only makes sense to buy big ticket items if they have the probability of going up in value.

 

[GoatMonkey]

Originally posted by: Xyclone

Originally posted by: PingSpike
The American automakers are all either discontinuing leases or raising their prices to the point it would never make any sense because the resale value is so bad they don't make any money on them, so soon enough the answer will be clear.

And with Japanese cars, which...flying in the face of logic, are some how worth more than a brand new one now, after being driven 10K miles and having your baby vomit in the back seat...are therefore not really great candidates for lease unless you can't afford a new one.

My thoughts exactly. If you're buying a car with very high resale value, you can sell it for a nice price when you want to sell it, but if you're buying an American car, you're making a bad decision (usually, here come the flames) and you can go ahead and never buy them.

That is why I recommend buying a used car. Especially one that depreciates quickly in the first couple of years.

I'll give you the example of my last car. Purchased a 1 year old 1999 Mustang GT in 2000 for $17800. Sold last week for $7000. So, that's about $1350 a year not counting gas and maintenance. That makes it about $112 a month to own it. That seems pretty reasonable compared to many leases I see that are around $300 to $400 per month.

 

[spidey07]

Originally posted by: dirtboy
Leasing isn't more expensive and I own my leased car just as much as someone who owns their financed car. 😉 I don't like having a car out of warranty and I have no problems with mileage limits or keeping a car in good condition, so it works very well for me. I also enjoy getting a new car every 24 months. I've owned cars in the past and that isn't all that great imho.

Correct. Buy things that appreciate, lease things that depreciate. That's financial common sense 101.

Many/most times you can come out ahead when leasing especially if the car is worth more than the residual, you negotiated a good rate on the lease and you put the difference in the monthly payment into something that makes more money for you.

 

[sjwaste]

Originally posted by: krunchykrome
Lease: Make monthly payments for 2+ years on a car. After 2 years, you give the car back. You're essentially renting it, with the option to buy at the end of the lease. Also, there are mileage limitations in the lease (ex: you can only drive it 12K miles per year)

Own: Make monthly payments. In theory you own the car from day 1. Technically, you own the car after the last finance payment is made. No mileage limitations.

Basically, a lease is a great way for someone to live beyond their means and burn their money.

I knew a guy at my previous firm. I think he made around $65K. He drove a 2006 5 series BMW. It was a lease. He was complaining that he only had 6 or 7 months with the car before he had to give it back. He was 35 and he rented an apartment. Great decision making skills right there.

I hope you took notes, krunchy. That guy knows how to live.

Seriously though, do you venture into Northern VA much? A leased car, preferably a BMW or Infiniti, one price class up from what you could afford to buy, is pretty much required. I knew a guy at my last company, 1 year out of college, started at 40k and wasn't topping 50. Leased a G35, over $400/mo.

He also lived in my building, so I had a pretty good idea of what his fixed monthly expenses were. I'm pretty sure he had to use a credit card when he went out.

 

[sjwaste]

Originally posted by: spidey07

Originally posted by: dirtboy
Leasing isn't more expensive and I own my leased car just as much as someone who owns their financed car. 😉 I don't like having a car out of warranty and I have no problems with mileage limits or keeping a car in good condition, so it works very well for me. I also enjoy getting a new car every 24 months. I've owned cars in the past and that isn't all that great imho.

Correct. Buy things that appreciate, lease things that depreciate. That's financial common sense 101.

Many/most times you can come out ahead when leasing especially if the car is worth more than the residual, you negotiated a good rate on the lease and you put the difference in the monthly payment into something that makes more money for you.

This presumes you wouldn't be driving what you financed into the ground, though. Yes, at year 3, the lease comes out over the finance because you're not paying to depreciate the car to nothing. However, when the car is practically worthless on paper, if you still intend to drive it, financing comes out ahead most of the time (most = you get a few years out of it).

If you plan to flip the car in under 5 years, yeah, lease it.

 

[iamwiz82]

Originally posted by: spidey07

Originally posted by: dirtboy
Leasing isn't more expensive and I own my leased car just as much as someone who owns their financed car. 😉 I don't like having a car out of warranty and I have no problems with mileage limits or keeping a car in good condition, so it works very well for me. I also enjoy getting a new car every 24 months. I've owned cars in the past and that isn't all that great imho.

Correct. Buy things that appreciate, lease things that depreciate. That's financial common sense 101.

Many/most times you can come out ahead when leasing especially if the car is worth more than the residual, you negotiated a good rate on the lease and you put the difference in the monthly payment into something that makes more money for you.

You know AT, leasing is evil because they read it on the Internet. 😉

Now, if You can only afford $X/mo and you go lease a car for exactly that, then you are an idiot. People who pay $400/mo for a car which would have had a $500 payment on a 60 month lease don't have a clue. Now when you can lease a car at $180/mo versus buying it for $500/mo you got yourself a good deal. Run the numbers and see when you break even.

 

[ponyo]

People who leased those giant luxury SUVs are looking pretty smart right now. 😉

I don't know a thing about leasing and have never leased so I won't comment on it. I do know something about owning though. You should never finance a car for more than 48 months unless they pay you to with special 0% financing or something similar. 42 months or shorter term is preferred. If the payment is too high with 36-42 month financing, you need to find a cheaper car. Best purchases are 2-3 year old cars paid with cash or no longer than 36 month financing. You'll eliminate most of the initial new car depreciation and will build equity quickly with short term financing.

Longterm financing like 5-7 years is like a prison sentence. Avoid it at all costs unless they pay you to take it with 0% financing.

 

[spidey07]

Naustica, if I could lease a 3 year old car I would do it in a heartbeat provided the rate was like 2-3% and the residual was realistic.

There is no equity or growth with a depreciating asset, that's why you lease and make your money make more money for you elsewhere.

 

[RichieZ]

or you could assume a lease and get a massive incentive to buy the car out at the end, I got $5K from BMW for my Z4. I bought it for wholesale value (mannnheim auction) +$500.