What are your thoughts on leasing a car?

[notfred]

Normally, I don't like paying for things I don't get to keep, but these lease deals I'm seeing are cheap! VW is offering a jetta for $199/mo (or maybe it was a passat.... I forget) Ford has a $5/day (about $150/month) deal gonig on Mustangs....

My fiancee needs a better car, and for under $200/month it seems like we might as well get a brand new one. Anyone have any experience with these? Am I actually going to be able to get a car for the advertised price, or is it deceptive advertising?

 

[Yossarian]

don't forget the $2800 or so you have to put down on the Mustang.

 

[Ranger X]

Usually the mileage restrictions are a drag.

 

[CChaos]

Well, if you can't afford to buy and you really want a new car then your only choice is to lease. If you can get a reasonable monthly payment, put nothing down, use less than the alloted mileage, and lease for around the duration of the warranty then it's not so bad. Buying is pretty much always better, but I have no complaints about my current lease.

 

[MuffD]

If you could afford to buy a car, I would rather do that. I don't like "renting" cars.

 

[Ynog]

Leasing allows you to get a car than you can normally not afford to buy.

But there are mileage restrictions not to mention they love to hit you for every nick or scrap that the car comes back with.

 

[kranky]

I am anti-lease myself. (We own two cars and haven't had a car payment in four years).

But if you lease, make sure you check what your insurance will cost. You'll probably be required to get gap insurance on top of your regular car insurance.

 

[Ameesh]

imo leasing provides way more flexibility then buy especially with the fact that buying a depreciating asset is alway a waste of money. with a lease you are only paying the loss of the value of the car over time rather then paying for the whole damn thing.

as far as numbers go you have to run the numbers in each situation but i have found that leasing comes out to be a better option even if youi decide at the end of the lease that you like the car and want to finace the residual amount.

 

[Ryan]

I couldn't ever lease a car. When I am putting a large amount of money twards something, I want it to be mine. I don't want to have to worry about things like mileage, the condition of the car, etc. I can't see wasting your money and then not have anything to show for it.

 

[conjur]

In many leases, you're only dinged on the mileage penalty if you turn the car in and walk away. If you refinance the residual, trade it in, or sell it to a 3rd party, you don't typically pay the penalty (at least with an American Honda lease you don't)

And, buy a car and trade it in after 4-5 yrs and you will get bupkis for a trade. Dealers give you wholesale/auction value for your trade. If you can sell it to a 3rd party you can benefit but that can take longer and invade your privacy.

 

[MrBond]

With the mustang lease, you'll be getting a basic mustang. KBB is calling that about an $18,000 car (msrp + destination).

A 3 year lease is gonna cost you $5400 at $150/month. Call it a $3000 down payment, so $8400 total. If you can get a 5 year lease at that price, $12,000 for the mustang. But that's doubtful.

With 0% financing, your payment would be about $250/month, assuming a $3000 down payment and a 60 month lease. 36 month lease, about $417/month.

I don't know how much it'll cost to buy the mustang off the lease, but that's an issue. My buddy spent about $10,000 on his mustang GT convertible, I don't know what year (I'm thinking 2001), and it was on a used car lot.

 

[Armitage]

IMHO, with rare exceptions, it is among the worst personal finance decisions you can make.

You have nothing to show for your cash when the lease is up.

You pay insurance on a newer/more expensive car then you might otherwise buy. Consider "gap" insurance if you total it and the insurance company gives you less then the elase residual.

Run the risk of getting shafted on damage or mileage on return ... or have it sitting in the garage a few months before return so you don't go over.

Take the same amount and buy a decent used car that you can afford ... drive it for a few years past the when its paid off and you'll be ahead of the game.

of course, it's no fun to live within you means right?

 

[Ameesh]

its ridiculous how many people in this thread dont understand the simple fact that cars depreciate in value.

at the end of the 3 years the money youve put in the "purchase payments" and the money i put into my "lease payments" maybe equal but niether of us have anything to show for it. your money is gone through the depreciation of the vehicle, you didnt gain a damn thing!

more then likely the payments for a lease will be alot less then a payment for a purchase especially if you get a nicer car that doesnt depreciate fast.

again each situation is different, you have to compare the apr to the money factor and work the numbers but in the most part, if you get a nicer car you are better of leasing.

case in point: all my uncles are all succesfull doctors, they can afford to buy there cars right off but they all choose to lease, 1 of them just got a brand new 745iL on lease, he could easily pay cash for 5 of them if he wanted but he realizes the value and flexibility a lease gives you.

 

[FoBoT]

no

most people shouldn't lease, don't let them trick you

 

[Armitage]

Originally posted by: Ameesh
its ridiculous how many people in this thread dont understand the simple fact that cars depreciate in value.

at the end of the 3 years the money youve put in the "purchase payments" and the money i put into my "lease payments" maybe equal but niether of us have anything to show for it. your money is gone through the depreciation of the vehicle, you didnt gain a damn thing!

And if you never plan to keep a car for more then 3 years, then maybe leasing is a good way to accomplish what, IMHO, is a bad financial strategy (always owning a car < 3 years old) for the average person. Try keeping the car 6+ years and saving big with lower insurance and no car payments for 3+ years. Plus the freedom to do what you want with your car. And at the end you'll likely still get enough for your used car to make a good down payment on the next one.

more then likely the payments for a lease will be alot less then a payment for a purchase especially if you get a nicer car that doesnt depreciate fast.

again each situation is different, you have to compare the apr to the money factor and work the numbers but in the most part, if you get a nicer car you are better of leasing.

case in point: all my uncles are all succesfull doctors, they can afford to buy there cars right off but they all choose to lease, 1 of them just got a brand new 745iL on lease, he could easily pay cash for 5 of them if he wanted but he realizes the value and flexibility a lease gives you.

For your "rich uncles" it doesn't really matter one way or another. For most of us, owning a car sucks up a significant part of the budget ... probably your 2nd or 3rd highest expense.

 

[conjur]

Originally posted by: ergeorge
IMHO, with rare exceptions, it is among the worst personal finance decisions you can make.

You have nothing to show for your cash when the lease is up.

You pay insurance on a newer/more expensive car then you might otherwise buy. Consider "gap" insurance if you total it and the insurance company gives you less then the elase residual.

Run the risk of getting shafted on damage or mileage on return ... or have it sitting in the garage a few months before return so you don't go over.

Take the same amount and buy a decent used car that you can afford ... drive it for a few years past the when its paid off and you'll be ahead of the game.

of course, it's no fun to live within you means right?

Ok...you purchase a car, say, a Honda Accord EX and finance $20,000 over 60 mos. and have payments of, oh, $375 (at 4.9%). And, let's assume the total purchase price ($23,500) + taxes ($1,410), title/fees ($90) was $25,000 so you put down $5000.

I lease the car at an equivalent APR but put $0 money down...nothing out of pocket (as many leases can be done these days). So, I'm going to lease a $23,500 car for 48 mos. Let's assume a residual of about 45% (that's probably low for an Accord EX). So, the amount financed is $15,000. $15,000 for 4yrs at 4.9% is $330. Now, add on the 6% tax and the lease payment is roughly $350. So, I'm saving $25/mo. for 48 mos ($1200) plus I still have the original $5000 that I didn't put down when I bought the vehicle.

Now, 4 yrs later you still owe $4500. The residual value on the vehicle is $10,575 for the lease but if you were to trade the car in you'd be lucky to get what you owe on it after 4 years (dealers only give wholesale/auction value for trade-in).

So, after 4 yrs in a regular finance you've spent $5,000 + $18,000 = $23,000 and have nothing to show at trade (just a wash). In the lease, only $16,800 has been spent (a savings of $6,200!) and I'm no worse off than the person who financed and wants to trade after 4 years. Now, I have the option of financing the residual ($10,575) for, let's say, 2 years at 4.9% which is $463/mo or another $11,123 for a total outlay of 27,923. The original finance still has $4500 to go above the original $23,000 spent which brings a total of $27,500 over 60 mos. The only benefit is it's paid off one year sooner and cost only $423 less (leasing and financing the residual took 72 mos. to pay off and only cost $423 more).

Now, there's some play, obviously, in that scenario but it's rather accurate.

Leases are not as bad as they used to be (the old days of acquisition fees, disposition fees, etc. are gone). And, American Honda includes gap insurance in the lease so that's not an extra cost.

The benefit here is that leasing allows someone to buy a nicer car for little or no money down or buy an even better car by putting money down. If you plan on getting a new car every 3-4 years, leasing is defintely an attractive option.

 

[Armitage]

A question ... do you pay the equivalent of a yearly personal property tax on leased vehicles?
For example, when I register my 2 year old tundra, it costs me approx $400, vs. my 10 year old Honda at about $50 (registration is about $25, rest is tax). This is in Colorado. I've heard California is worse, but my car was never registered in CA while I was there.

 

[conjur]

Originally posted by: ergeorge
A question ... do you pay the equivalent of a yearly personal property tax on leased vehicles?
For example, when I register my 2 year old tundra, it costs me approx $400, vs. my 10 year old Honda at about $50 (registration is about $25, rest is tax). This is in Colorado. I've heard California is worse, but my car was never registered in CA while I was there.

In KY and IN, personal property tax is still paid on the vehicle by the lessee. No change vs. financing.

 

[ynot167]

Why bother leasing(renting) a car you cannot afford to buy, when you can buy a cheaper car. People shouldn't spend beyond their means.

Totally against leasing!!!


Remember you can almost always haggle with a car dealer.... I'm sure they want your business!!!
Also, there are plenty of incentives out there, such as low APR. I've seen as low as 0% for 5 years.

 

[notfred]

What's with all this "spend beyond your means" stuff? If you can afford the payments, it's not beyond your means, obviously.

 

[LAUST]

If it's on a commuter type car with a high resale value it's a great idea for people looking for something new every 3 or 4 years that is reliable.

On something like a truck or sports car I don't think it's a great plan.

 

[kermalou]

i couldn't afford my car any other way, and since i got burned by my old car this was a great deal. i got a 40K car for 5K down and about 350 a month for 3 years. since my work is 2 miles from my house and it's a two seater, i am under themiles by about 5K miles. so for me a lease is a good deal, if you drive a lot forget about it.

if you want a cheaper lease, try looking at a pre-owned vehicle. my car was a year old and came with a better warranty than a new car.

 

[kranky]

Originally posted by: Tyler
What's with all this "spend beyond your means" stuff? If you can afford the payments, it's not beyond your means, obviously.

That's the same rationalization that gets people into massive credit card debt. Looking only at the payment can lead to poor financial decisions. (I know you weren't talking about credit cards, but the same concept applies IMHO).

I agree with the previous posters that leasing is probably a good idea if you are going to get a new car every three years anyway. That doesn't make it a good idea financially.

With all due respect to your uncles, Ameesh, doctors are notorious for being atrocious with managing money.

 

[TheNinja]

I would never Fleece a vehicle. Then again I will probably never buy a brand new vehicle, I'll get something low miles 3-4 years old, let someone else take the huge depreciation hit at the beginning. If you must get a new vehicle and if you are a normally conservative person with your money (i.e. you are not filthy rich) fleecing a vehicle is not usually the best option. This is just a relatively new thing pushed by dealerships b/c people figure it is less to lease than to buy and when I lease I can get a sweet ride and *boom* the dealer "sells" more vehicles.

 

[vi edit]

Originally posted by: ynot167
Why bother leasing(renting) a car you cannot afford to buy, when you can buy a cheaper car. People shouldn't spend beyond their means.

Totally against leasing!!!


Remember you can almost always haggle with a car dealer.... I'm sure they want your business!!!
Also, there are plenty of incentives out there, such as low APR. I've seen as low as 0% for 5 years.

Leasing is no less intelligent than people dumping $500 a year into their PC's, consoles, stereo equipment, ect. It's not dumb at all if you have zero intentions of keeping the car longer than 3 years.