To buy or Lease...That is the question

[Drekce]

I am looking into getting a new Lexus IS 300 in the near future and am wondering whether I should buy or lease.

The car costs about $34,000 if I want to buy it, but the payments can be much lower if I choose to lease. I will most likely want a new car within 3-4 years of getting the IS 300 anyway, so if that is the case is leasing still a bad option?

I need opinions, experiences , or anything else that may be helpful.

thanks.

 

[punkrawket]

i think that leasing is dumb....

because.... after your lease is up... you have nothing to show for it.... no car... unless you decide to buy the car after it's up. the way i feel about it is... why live a life you can't afford... sure you could get the lower payments on a nice ride... but when the lease is up... you don't get to keep the car

eh... but that's me

 

[hevnsnt]

I have never understood why anyone would lease. It does not make any financial sense.

It is like renting.. In the end, you spent a lot of money and have nothing to show for it.

 

[Don Vito Corleone]

If you intend to replace the car that quickly, leasing may be your best option. IMO the virtues of "ownership" are often overrated, since so many people tend to get rid of the cars so quickly that they take the brunt of massive depreciation.

 

[hevnsnt]

hehe.. we must have been typing at the same time..

 

[Drekce]

Just to clear things up...I CAN afford this car either way, I'm just trying to get informed on what will be the best way to move forward.

 

[EagleKeeper]

With leasing, you are paying for the loss of value of the car when you use it (depreciation).

At the end of the time of the lease, you have nothing to show. Leasing also may limit you on mileage. An extra 10K miles (easy to do if you make a few trips/vacations over a 2-3 year period) at 0.20 mile penaly can cost you an extra $2K at termination. Penalty costs may vary, however, the lease agreements have very low mileage allowances.

If you are going to own the car but turn it in every 2-4 years, that ends up being the same as leasing.

The problem pops up is what happens if you can no longer lease when the lease term expires. You must either buy out the lease or find another vehicle to purchase.

 

[nord1899]

Check out the advice over at Edmunds.com. They have a section devoted to leasing.

Here is the Pro/Cons for those too lazy to go to the link:

Pros & Cons

The lists below summarize the pros and cons of leasing versus buying:

Advantages of Leasing
[*]Lower monthly payments
[*]Lower down payment
[*]You can drive a better car for less money each month
[*]Lower repair costs (with a three-year lease, the factory warranty covers most repairs)
[*]You can drive a new car every two or three years
[*]No trade-in hassles at the end of the lease
[*]You pay sales tax only on the portion of the car you finance

Disadvantages of Leasing
[*]You don't own the car at the end of the lease
[*]Your mileage is limited to a set amount, typically 10,000 to15,000 a year
[*]Lease contracts are confusing, so it makes it difficult to ensure you're getting a fair deal
[*]Leasing is more expensive in the long run
[*]Wear-and-tear charges can add up
[*]It's hard to terminate a lease early if your driving needs change

Advantages of Buying
[*]Pride of ownership ? you can do with your car as you please
[*]Car buying is more economical in the long run
[*]No mileage penalty
[*]Increased flexibility ? you can sell the car whenever you want

Disadvantages of Buying
[*]Higher down payment
[*]Higher monthly payments
[*]You're responsible for maintenance costs once the warranty expires (or have to buy an extended warranty)
[*]Trade-in or selling hassles
[*]Your money is tied up in a car, which depreciates, rather than an investment which appreciates

 

[Jeraden]

If you are planning on getting a new car anyways in 3-4 years, I think leasing makes the most sense. A lot of people think leasing is stupid, and I thought that too for a while, but have since changed my mind and am actually leasing my current car now. If you get a 3-year lease, you'll notice the total of the lease payments equals about 50% of the purchase price of the car. If you purchase a car, you'll find that in 3 years your car has depreciated about 50% also. Supposedly the lease cost actually depends on what the dealers predicted resale value of the car will be when the lease expires. Usually you have the option to just outright purchase the car at that point for its value (although thats kinda dumb in my opinion). If you lease a car that ends up depreciating faster than normal, then leasing actually saved you money. If you lease a car that depreciated less than normal, then you actually ended up paying more than if you bought it.

Overall I think leasing will always cost you a tad more than buying and reselling, but sometimes you can get a good deal and thats not the case. The main thing thats nice is you just turn the car in and lease a new one. If you buy it, you gotta go through the hassle of attempting to sell the car - which is actually what I'm trying to do right now. I'm finding its actually fairly hard to get the true book value of the car by selling it on your own. People seem more comfortable buying a car from a dealership than from an independent owner.

One thing to realize though, when you buy a car, you are paying a percentage of the total value in financing (whether its 2.9%, 1.9% etc). With a lease you don't really have a financing charge - its built ito the lease price. If you have 30k financing, thats about $900 you paid the first year in financing chargings assuming a 3% rate (lower actually since you are paying some of that off during the year). A 30k car would run you about $400/month for a 3 year lease. That financing charge therefore is like 2 monthly lease payments - something a lot of people forget about when comparing buy vs. lease costs.

The only time you should really avoid the lease is if you plan on putting a lot of miles on a car. You basically get 1000 miles/month on a lease. Going over that is expensive! (25 cents a mile on mine).

This all assumes you want a new car every few years and you do pay a premium for it.

If its cost-effectiveness you want, its actually best to buy a 3 year old car and keep it till it dies. The depreciation during the first 3 years is pretty high (basically half the value of the car). And you can keep that car for many more years until it starts to get unreliable. Say you drive 12k miles/year (lease standard and realistic). Say a car has a lifespan of 100k miles. After 3 years your car has 36k miles (1/3rd of its life gone), yet depreciated 50% of its value - so 17% depreciation per year. After that it still has 6 years left (2/3 of its life) and might depreciate 50% more - so thats 8% depreciation per year and will still have a small resale value - 9yr old car with 100k miles - you might get around 1k for it or so depending on the model.

Personally, I get bored with a car after about 3 years and want something new. While the lease isn't cheaper persay its certainly not that much more expensive and the convenience of not having to try to sell it is worth it.

 

[SCSIfreek]

Here is the break down:

Lease - If you want to change cars every 3-4 years and dont want to deal with caring for your car. If its broken? take it back kinna deal.

Buying - If you are planning to keep your car for more than 5 years. Also you're driving high mileage on your vehicle. worst case after 5 years you'll still have the resale value of your car even though you're paying more for yours loan than leasing.

Hope this helps. 🙂 People who always wanted to switch cars looks at leasing and I don't blame them for it caused they'll be driving a new car in 3-4 years.


--Scsi

 

[charliebrown]

Recommend you buy unless you're using the car for business and can deduct the lease payment.

Another problem with leasing is the mileage; if you go over xx miles per month (usually 12,000 to 15,000) then you'll wind up owing money when you turn the car in at the end of the lease.