Have to get a new vehicle. To Lease or To Buy?

[shtr3]

I havent bought a new vehicle in 10 years and am having to get one now. I have never leased, but would like to hear from some of you that do and see if that would be a better option for us right now, pros and cons. Or just buy again, but really cant afford a big monthly payment right now, thats why im looking at leasing. Thanks in advance.

Ric

[Nik Habicht]

The big problem with a lease is if you drive more than 12,000 miles a year -- the extra mileage charges add up quickly.....

Add in that at the end of the lease you walk away with nothing, and I'd prefer to run, rather than walk away.....

That said, if you do drive less than 12,000 miles a year, and always want to drive a current car, and don't mind having a constant payment, then it might be ok....

It's worked for some friends of mine....

[Steve RA]

In my opinion, it's a good deal for a company to furnish vehicles to employees, but, not a good deal for individuals. Best is to bargain like mad and pay cash, next would be to first track down the best interest rate you can find and then bargain with dealer as in a cash deal. I don't think leasing is a real good deal for individuals.

[Vlad]

Do the math, that is the only answer.

What is the required down payment? What is the official residual value of the car at the end of term? Are you likely to driver over the millage allowance? Are you like to wear the interior hauling steel to the range? Do you qualify for the low advertised interest rates on a sale? How much money are you in for including the required down payment that 2-3 years of lease payments.

Personally, for my specific concerns and circumstances, the only time I would lease a car would be if I really couldnt afford the monthly payments on a 5 or 6 year term. Personally I don't drive enough to go over the millage limit, but I do haul stuff around and I work on a collage campus so my doors get dinged and scratched. I do keep cars until they die so a 6 year term doesn't bother me if I had to go that way if the interest rates were low.

On the other hand if I really needed a new car and I couldn't make the monthly payments on a car I wanted or if there was no car I really wanted or could afford, I would consider a real cheap car I could live with for a short lease. There is an advantage to a car you don't have to pay maintenance on and don't have to live with it for two long of a time if you don't love it.

The other thing is look at what promotional rates are available. A few months ago I was halfheartedly shopping for a new vehicle and I've noticed that 3 offerings I was looking at actually cost the same. They were spaced by about $2-3k between each other but the interest rates were spaced by about 1% which if you did the math over 5 years the price of the 3 was the same.

Also calculate fuel savings in the math. Lets say you now spend $200 a month on gas on your old car, but a new car would use $100 per month. Now your monthly payment is really $100 less then the calculator says. Does that work in your budget?

[Butterpuc]

Leasing sounds inexpensive.... Right before you go to turn it in. As mentioned earlier... Mileage overage, dinged doors, dinged bumpers, small scratches, big scratches, stains in the floorboards, stains on the seats, it adds up real quick. Enough that you will probably opt to purchase the car you have been leasing and paying a large balloon payment for another 4 years.

You can get burned quick.

[Lifeislarge]

One thing that people often neglect is that fact that leases are also negotiable. Everyone grinds the dealer on price for purchase but do the same for a lease. You'll be surprised how much lower you can get the payment-often enough to negate additional mileage. Do not get suckered into add-ons on a lease. You have to have full coverage by law, but you get no value from paint protection, wheels, bolt ons ect. The manufacturer knows what normal wear and tear is on a three year old car so don't sweat the small stuff.

[kneelingatlas]

The best deal out there is to pay cash for a 2-3 year old car with ~20K miles on it. That is if you plan to keep it for it's useful life (which sounds like you).

[BritinUSA]

The best deal out there is to pay cash for a 2-3 year old car with ~20K miles on it. That is if you plan to keep it for it's useful life (which sounds like you).

+1

Cars lose most of their value in the first couple of years, getting something 2-3 years old with an extended warranty will save you a ton of money.

[shtr3]

thanks for all the replies guys, very useful info.

[Sarge]

I leased once and will never do it again unless I am just flat desperate and short on money.

In the end I spent a lot if money on a car that I just handed back to the dealer

[Steve RA]

Another little point, never buy an extended warranty from anyone but the mfr.

[Vlad]

I leased once and will never do it again unless I am just flat desperate and short on money.

In the end I spent a lot if money on a car that I just handed back to the dealer

It can feel that way, but math tells the story. All vehicles are depreciating assets, their value will eventually be zero, unless they are collectables. Daily drivers go to zero in 10-15years depending on style of driving, location, uses, etc. About half way through that or earlier you start putting extra money into them, timing belts, AC compressors, water pumps, etc, etc.

Add EVERY dime you spent on the car divide by the number of months you held it, and you may find that that car held for 10+ years might have cost more per month then a cheaper lease.

With the lease you also got better millage every 3 year, and depending how you drove it never bought a set of tires. Heck, on some of them you might have never payed for a an oil change and likelihood is you never lost a days work from the car being broken. You also got that new car smell every 3 years.

That said, I buy my cars and I keep them until repairing them becomes more expensive then buying a new one. On the other hand I buy fairly cheap vehicles (or at least value leaders in their class), I try to buy them when dealers want to be rid of them, and I argue a lot of the dealer about the price.

[Frankly]

The best deal out there is to pay cash for a 2-3 year old car with ~20K miles on it. That is if you plan to keep it for it's useful life (which sounds like you).

I'll never finance a new car again, better to drive a junker while you save up to buy a better used car and then keep saving.

Even if you have to rent for the occasional big trip you'll come out ahead in short order.

Edited September 9, 2014 by Frankly

[bajaholic]

It will also depend on the term of the lease and style/brand/model of vehicle. Couple of years ago we leased a Cadillac SRX on a 24 month lease, the manufacturer was pushing hard to get this model into the market. It was WELL worth the money to lease it. Cost us less than 1/2 than if we would have purchased it outright. Buying it at the end though was not in the cards, the residual value was substantially higher than what we would want to spend, so we just turned it in at the end of the lease and purchased a different vehicle.

This approach did work for Cadillac because if you have looked at those units, they have held their value well.

Just a side note, we did increase the lease mileage to 15K per year rather than the 12K. The only problem was that my wife was CONSTANTLY assessing her mileage throughout the lease and was afraid to take it anywhere she thought might put her over in mileage by the end. So it wasn't real convenient at times.

We have always purchased our vehicles, this was the first lease, it worked for us at the time, but don't think I would do it on a regular basis. Too much worrying about the mileage etc. So as far as financially, it was a better deal for that specific lease, but most others I have seen, not so much...

[morpheus]

also save money by doing the maintenance yourself

[Butterpuc]

I happened to recently purchase a new vehicle a month ago or so, for our son. It was against every fiber in my body to do so, I am a big believer in buying a 2-3 year old used vehicle with 40-50k miles. However, my wife and I searched for 6 months for a vehicle we felt comfortable purchasing and could not find a used vehicle that met our needs. We ended up purchasing a 2014 Toyota Corolla for less than a 2012 Toyota Corolla we were looking at, on the same dealer lot... And I don't mean a couple of hundred dollars less, almost $2000 less and the 2014 was loaded.

Used car prices have gotten stupid high! If we found a Honda Civic of Toyota Corolla used in the price range we were looking for it had 120+k miles on it... if it only had 40-50k miles it was as expensive as new car. I'm telling you 6 months of searching, neither of us could believe it.

[Vlad]

Used car prices are still suffering from the cash for clunkers thing. It removed a lot of cars that would have otherwise ended up on the used market.

[Sarge]

I leased once and will never do it again unless I am just flat desperate and short on money.

In the end I spent a lot if money on a car that I just handed back to the dealer

It can feel that way, but math tells the story. All vehicles are depreciating assets, their value will eventually be zero, unless they are collectables. Daily drivers go to zero in 10-15years depending on style of driving, location, uses, etc. About half way through that or earlier you start putting extra money into them, timing belts, AC compressors, water pumps, etc, etc.

Add EVERY dime you spent on the car divide by the number of months you held it, and you may find that that car held for 10+ years might have cost more per month then a cheaper lease.

With the lease you also got better millage every 3 year, and depending how you drove it never bought a set of tires. Heck, on some of them you might have never payed for a an oil change and likelihood is you never lost a days work from the car being broken. You also got that new car smell every 3 years.

That said, I buy my cars and I keep them until repairing them becomes more expensive then buying a new one. On the other hand I buy fairly cheap vehicles (or at least value leaders in their class), I try to buy them when dealers want to be rid of them, and I argue a lot of the dealer about the price.

I guess that COULD make sense depending on the car. I only drive Toyotas so I am not familiar with spending a lot of money to keep them running.

I keep cars a long time as well. I put a timing belt on our 02 Sienna a few years ago and I have put two batteries in it since we bought it. Brakes twice. Of course new tires every 5 years or so. Oil changes and that's it. I do those myself for about $25.

My 05 Tacoma has had one battery, one brake job , tires once and oil changes.

I was paying about $500 a month each in payments but those stopped years ago. So for ME the cost is much cheaper than buying a lesser vehicle every few years.

But, I have a sister that only drives brand new Chevy SUV's so she leases and gets one every two years. That works for her. Makes sense as chevy's are wore out in two years anyway!

[ktm300]

I guess that COULD make sense depending on the car. I only drive Toyotas so I am not familiar with spending a lot of money to keep them running.

I keep cars a long time as well. I put a timing belt on our 02 Sienna a few years ago and I have put two batteries in it since we bought it. Brakes twice. Of course new tires every 5 years or so. Oil changes and that's it. I do those myself for about $25.

My 05 Tacoma has had one battery, one brake job , tires once and oil changes.

I was paying about $500 a month each in payments but those stopped years ago. So for ME the cost is much cheaper than buying a lesser vehicle every few years.

But, I have a sister that only drives brand new Chevy SUV's so she leases and gets one every two years. That works for her. Makes sense as chevy's are wore out in two years anyway!

I find it interesting how different people have different experiences with cars. We had two Toyotas and hated both of them. Nothing major on either one, just stupid stuff. About 7 years ago we bought a new GMC truck when they were giving them away and have had nothing but good luck with it.

We are just now retiring a 1999 Mercedes E320 wagon with a touch over 300k on the speedo. Cost per mile on that car, gas, tires, purchase price, etc was about 27 cents a mile. That is assuming we get nothing for it when we sell it. (my wife keeps great records). Start doing the math, .27 per mile is about as good as it gets when you look at gas cost at .15+-

I drive an 07 E350 sedan with about 125k on it that I paid 14k for. I will probably take it to 200k or more. My wife got a "new" 2008 E350 wagon and will drive it till it dies.

[Frankly]

Yeah here we got my wife a new Volvo V70 wagon 2001 for $34K, only $2K more than a freaking Subaru. It's the basic 2wd with none of the fancy extras except leather and the Winter package - less to go wrong. With good snow tires it outperformed my 4x4 Xterra and was a more comfortable ride. And their reputation for safety is not unwarranted. I've since "inherited" it and have strong enough self-esteem to handle the stigma of driving an elite latte mobile to the range. 200K miles and only routine maintenance although the hoses/soft parts get replaced with age. Looks 98% new and they keep the same body style forever.

I'll just rent a pick up twice a year when I need one, I grew up with trucks and always had one but I find less and less use for one.

Of course selling a reasonably priced good quality car isn't profitable and they stopped importing this model a few years back, forcing you into a more expensive and complex version.