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Post by J12 on Apr 3, 2013 12:19:40 GMT -5
I wanted to get some general opinions from people who may previously leased or are currently leasing vehicles. My hand-me-down vehicle developed some pretty significant issues over the last couple of weeks and, with advice from both of my parents, and several family members with automotive experience, I've come to the conclusion that it's time to dump my car while it still has some value, and look into an upgrade.
Currently, my car is sitting at the garage awaiting "official diagnosis" and trade-in value, but we've been given some rough estimates and have calculated potential payment plans on leasing a 2013 Toyota Prius. The lease is an attractive offer, and has payments I can certainly afford when taking my trade in into consideration as a cap cost reduction.
I've heard great things, and horrible things about leasing. My mom leases, but she owns a business and uses the lease as a write off. She does very little traveling, so it makes perfect sense for her.
Meanwhile, I'm not a car guy. I don't feel the need to constantly have the latest and greatest. In other words, I can see myself owning a vehicle for several years - not just the term of a lease.
I'm most interested to hear people's stories with buyout terms in their specific leases. I calculated my mom's and arrived at the conclusion that, while her buyout cost at the end of the lease is more than the car's actual MSRP, it is still significantly less than what she would have paid in interest to finance and purchase the vehicle.
My biggest hang up is that I know Prius' hold their value like no other. In fact, nearly all sources I've consulted rank the Prius as either #1 or #2 on smallest depreciation. That has me wondering about how much extra they could potentially try to squeeze out of me at the end of the lease should I decide to purchase the vehicle.
I know every lease is a case by case basis, but I'd like to hear any of experiences, positive or negative, that people have had with leasing in the past.
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NameRedacted™
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Post by NameRedacted™ on Apr 3, 2013 12:42:06 GMT -5
I'm glad you made this thread as I too have had my wife's car in and out of a mechanic shop recently and have been considering leasing a vehicle. Can't wait to see some replies here.
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Post by Kliquid on Apr 3, 2013 12:58:46 GMT -5
My wife and I both began leasing our cars in 2012. She got a Ford Escape, me a Honda Pilot.
The truth is that leasing a car is a better short-term financial option than it is long-term. As in, there really is no long-term benefit of leasing.
I always ask people this question...how long are you planning on owning this vehicle? Are you the kind of person who prefers to get every last bit of life out of your vehicles? Are you cool with driving the same car for 10 years? If so, then BUYING is the right option for you.
Now if you are the kind of person who has driven multiple different cars and finds yourself "bored" with vehicles quickly, then buying is definitely not the right option for you. Leasing would likely be smarter.
Buying means higher monthly payments and if you're planning on selling the vehicle before your loan is up, then you're throwing money down the drain by buying.
The biggest benefits of leasing are that your monthly payments are lower and that the car is under warranty for the entire time that you own it. That, and you're driving a NEW car.
The major disadvantages of leasing are that you are limited in mileage (this is a major one -- you really need to be careful that you don't drive more than your lease allows or they will absolutely murder you in fees) and that you will not "make money" on it in the end.
Because I work from home and don't drive to work every day, leasing two cars works fine for my wife and I (we don't go over our mileage). We are both also the kind of people who don't want to drive an old piece of crap car until it dies.
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Post by JC Motors on Apr 3, 2013 13:03:06 GMT -5
Don't lease a vehicle. Because when it's up you have nothing to trade in.
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Post by ~*Young $ Money*~ on Apr 3, 2013 13:09:23 GMT -5
I wouldn't really suggest leasing one. I say this for a few reasons. My cousin did and thought was cool with her new car until she had a further commute and had to literally park it in her driveway and buy a piece of crap bc her miles were almost up. Another story is my family friend leased, he had a couple scratches in the car that you couldn't really see but he got banged in fees when he had to turn it in. I always preferred buying bc you can do whatever in the hell you want it's your car
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Post by J12 on Apr 3, 2013 13:10:59 GMT -5
My wife and I both began leasing our cars in 2012. She got a Ford Escape, me a Honda Pilot. The truth is that leasing a car is a better short-term financial option than it is long-term. As in, there really is no long-term benefit of leasing. I always ask people this question...how long are you planning on owning this vehicle? Are you the kind of person who prefers to get every last bit of life out of your vehicles? Are you cool with driving the same car for 10 years? If so, then BUYING is the right option for you. Now if you are the kind of person who has driven multiple different cars and finds yourself "bored" with vehicles quickly, then buying is definitely not the right option for you. Leasing would likely be smarter. Buying means higher monthly payments and if you're planning on selling the vehicle before your loan is up, then you're throwing money down the drain by buying. The biggest benefits of leasing are that your monthly payments are lower and that the car is under warranty for the entire time that you own it. That, and you're driving a NEW car. The major disadvantages of leasing are that you are limited in mileage (this is a major one -- you really need to be careful that you don't drive more than your lease allows or they will absolutely murder you in fees) and that you will not "make money" on it in the end. Because I work from home and don't drive to work every day, leasing two cars works fine for my wife and I (we don't go over our mileage). We are both also the kind of people who don't want to drive an old piece of crap car until it dies. Thanks for the input. If you don't mind me asking, did you see a significant jump in insurance costs due to leasing? I'm awaiting quotes from my insurance agent on both financing and leasing, but I've heard they can nail you pretty hard on leases. As I said, I'm not a car person in the slightest. I get bored with cell phones, but certainly not cars. I've had my vehicle since I first got my license, and I've never felt the need to upgrade - partially because i simply don't care about cars that much, and also because I never really had the money. This entire situation reared its head over the last four days or so when my car started to really take a turn for the worse. In all likelihood, leasing is probably my best option as of right now. I question my ability to afford the monthly payment if I were to finance, whereas I'm very comfortable with the leasing payment. Buyout is my absolute biggest question mark right now, but I understand that portion is probably more or less impossible to predict until I sit down at the dealership with the paperwork in front of me. Thankfully, automotive has always been an area where my family is well taken care of. My uncle is the general manager of the dealership we shop at, and my cousin is our insurance agent. It's nice to at least be able to trust both parties fully and know they're really working with my best interest in mind.
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Post by Kliquid on Apr 3, 2013 13:59:32 GMT -5
Don't lease a vehicle. Because when it's up you have nothing to trade in. Most people end up trading their car in for almost nothing in the end. Think about it -- after 6+ years and 80-90k + miles, how much is your car really going to be worth?
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Post by Hulkamaniac on Apr 3, 2013 14:00:01 GMT -5
Do NOT lease a car under any circumstances. Just don't do it. From a pure dollars and cents perspective, leasing is the most expensive way to own/operate a vehicle. It makes no financial sense whatsoever. Please don't take my word for it though. I'm jut some schmuck at the end of the day. Take the word of Edmund's and Consumer Reports. They agree with me.
My advice - scrape up $2-3k and buy a used car. Better yet, sell the car you've got and use that money to buy something used.
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Post by Kliquid on Apr 3, 2013 14:45:24 GMT -5
If all you care about is the financial aspects then yes, like I said, buying is better than leasing; particularly in the long run.
If you're comfortable driving a $2-3k car, then do that. If you like the comfort/look/feel/safety of a new car, then buying a $2-3k car makes no sense.
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Post by Hulkamaniac on Apr 3, 2013 14:53:32 GMT -5
If all you care about is the financial aspects then yes, like I said, buying is better than leasing; particularly in the long run. If you're comfortable driving a $2-3k car, then do that. If you like the comfort/look/feel/safety of a new car, then buying a $2-3k car makes no sense. Specious argument. I paid $6,500 for my car 3 years ago. According to KBB it's worth $7,000. It's an 8 yr old car (5 at the time of purchase). Does it have the look/feel of a new car? No, but new cars don't have that for more than a year or so anyway. It's just as comfortable and safe and reliable as any new car on the market is. And I paid cash for it so I have no payments at all which puts me $200-400 ahead every month of everyone who is leasing.
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anxietydestroys
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Post by anxietydestroys on Apr 3, 2013 16:55:56 GMT -5
Okay here's my experience with leasing. I purchased my old neighbor's car when I was first learning how to drive. Two years later that car died.
I was working part-time jobs but needed a new car. I wanted a brand new one. I had very little established credit. I decided to lease a 2003 Carolla CE. At the time my parents consigned. It was a 5 year lease.
Skip ahead 5 years. My LEASED car had been through a lot. I was over my mileage and had significant body damage. I went to return the car knowing all of the former. The guy we leased from had been working there for years and still in fact worked there when it was time to trade in. Both my father and I knew that I wanted to BUY my next car. I was at the time getting a promotion and my pay was largely increasing and my credit had been well established. So I was able to turn in my damaged car with the over mileage FOR NO COST because I purchased a 2007 Carolla S. Also, getting the payment exactly what I wanted per month (after 2 hours of discussion). I have since paid off the 2007 and I am still driving it.
Point is, it was a great first car buying option for me because my game plan was stick with a brand and model I could lease then UPGRADE and buy. Another way of thinking about it that hasn't been discussed yet.
Kliq's First post was on point.
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Post by Kliquid on Apr 3, 2013 17:45:39 GMT -5
Specious argument. I paid $6,500 for my car 3 years ago. According to KBB it's worth $7,000. It's an 8 yr old car (5 at the time of purchase). Does it have the look/feel of a new car? No, but new cars don't have that for more than a year or so anyway. It's just as comfortable and safe and reliable as any new car on the market is. And I paid cash for it so I have no payments at all which puts me $200-400 ahead every month of everyone who is leasing. KBB is not a very accurate representation of the selling price of vehicles. Most dealerships, for example, will only give you BLACK book prices, which is significantly less. But anyway.... If you were looking to get a Honda Pilot in the Twin Cities area, for example, and wanted to pay under $7000, you'd literally be looking at a 2000-2003 version with 140,000+ miles. Now it's certainly possible that a vehicle with 140,000+ miles can still run, to compare it to a new vehicle is apples to oranges.
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Post by Hulkamaniac on Apr 3, 2013 19:06:01 GMT -5
Specious argument. I paid $6,500 for my car 3 years ago. According to KBB it's worth $7,000. It's an 8 yr old car (5 at the time of purchase). Does it have the look/feel of a new car? No, but new cars don't have that for more than a year or so anyway. It's just as comfortable and safe and reliable as any new car on the market is. And I paid cash for it so I have no payments at all which puts me $200-400 ahead every month of everyone who is leasing. KBB is not a very accurate representation of the selling price of vehicles. Most dealerships, for example, will only give you BLACK book prices, which is significantly less. But anyway.... If you were looking to get a Honda Pilot in the Twin Cities area, for example, and wanted to pay under $7000, you'd literally be looking at a 2000-2003 version with 140,000+ miles. Now it's certainly possible that a vehicle with 140,000+ miles can still run, to compare it to a new vehicle is apples to oranges. You have a fair enough point on KBB, nevertheless, if I sold the car today I would very likely get close to what I bought out of the thing making it a very, very inexpensive way to operate a car. You are right about the Pilot, but that's not the only SUV on the market if one wants an SUV. My car is a 4 dr Sedan. You can find a perfectly serviceable vehicle for $6-7k. And you're not married to the car either. You can take the $300-400 you were planning to spend on payments and save it. In 6 months, you've got ~$2k or so. You can go out and buy a $9k car because the $7k car will not have lost anywhere close to $2k in value. You can't say the same for your new car that you're buying/leasing. Like I said, don't take my word for it. Look at the experts. Edmunds - www.edmunds.com/car-buying/compare-the-costs-buying-vs-leasing-vs-buying-a-used-car.htmlConsumer Reports - news.consumerreports.org/money/2011/04/car-leasings-return-may-not-be-good-thing.htmlHowStuffWorks - auto.howstuffworks.com/buying-selling/buy-or-lease.htmThere are a few others that show up in a simple Google search, but they have religious overtones. No need to open that can of worms when simple math is enough.
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Post by Nivro™ on Apr 3, 2013 19:16:07 GMT -5
To me, leasing a car is in the same boat as renting furniture/electronics or renting an apartment. I would try to get qualified for a loan and buy your own car. You can find very reliable vehicles for under $10k.
In 2001 (my senior year in HS) I bought my car and paid it off in 5 years. About 3 months ago the transmission went out on it. The car is only worth about $2k right now, it would take nearly $3k to fix the tranny. Obviously not worth it. Ive got $9k to spend on a car right now and am currently looking at 05-10 Nissan Pathfinders (mostly have between 90-110K miles on them) but most Nissan's, if properly taken care of, can get you 200+ thousand miles on them.
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Post by Kliquid on Apr 4, 2013 15:40:49 GMT -5
KBB is not a very accurate representation of the selling price of vehicles. Most dealerships, for example, will only give you BLACK book prices, which is significantly less. But anyway.... If you were looking to get a Honda Pilot in the Twin Cities area, for example, and wanted to pay under $7000, you'd literally be looking at a 2000-2003 version with 140,000+ miles. Now it's certainly possible that a vehicle with 140,000+ miles can still run, to compare it to a new vehicle is apples to oranges. You have a fair enough point on KBB, nevertheless, if I sold the car today I would very likely get close to what I bought out of the thing making it a very, very inexpensive way to operate a car. You are right about the Pilot, but that's not the only SUV on the market if one wants an SUV. My car is a 4 dr Sedan. You can find a perfectly serviceable vehicle for $6-7k. And you're not married to the car either. You can take the $300-400 you were planning to spend on payments and save it. In 6 months, you've got ~$2k or so. You can go out and buy a $9k car because the $7k car will not have lost anywhere close to $2k in value. You can't say the same for your new car that you're buying/leasing. Like I said, don't take my word for it. Look at the experts. Edmunds - www.edmunds.com/car-buying/compare-the-costs-buying-vs-leasing-vs-buying-a-used-car.htmlConsumer Reports - news.consumerreports.org/money/2011/04/car-leasings-return-may-not-be-good-thing.htmlHowStuffWorks - auto.howstuffworks.com/buying-selling/buy-or-lease.htmThere are a few others that show up in a simple Google search, but they have religious overtones. No need to open that can of worms when simple math is enough. I don't believe anyone has ever said, "It makes more long-term financial sense to lease than it does to buy." No one is making that argument. But if you want a new car, and plan on changing cars only a few years down the road, then it absolutely makes sense to lease. It just does. You can try to explain to people that they shouldn't do this (and financially, you're right), but if you're expecting to get rid of the car in 3-5 years anyway, buying does not make more sense than leasing.
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Post by Quanthor on Apr 4, 2013 15:50:24 GMT -5
I would never lease. A lot of travelling salesman do and it makes sense for them. Or if you want a fresh ride all the time if that's your thing.
I'd rather buy and pay it off in 5 years than to continually have car payments.
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Post by Hulkamaniac on Apr 4, 2013 17:16:45 GMT -5
You have a fair enough point on KBB, nevertheless, if I sold the car today I would very likely get close to what I bought out of the thing making it a very, very inexpensive way to operate a car. You are right about the Pilot, but that's not the only SUV on the market if one wants an SUV. My car is a 4 dr Sedan. You can find a perfectly serviceable vehicle for $6-7k. And you're not married to the car either. You can take the $300-400 you were planning to spend on payments and save it. In 6 months, you've got ~$2k or so. You can go out and buy a $9k car because the $7k car will not have lost anywhere close to $2k in value. You can't say the same for your new car that you're buying/leasing. Like I said, don't take my word for it. Look at the experts. Edmunds - www.edmunds.com/car-buying/compare-the-costs-buying-vs-leasing-vs-buying-a-used-car.htmlConsumer Reports - news.consumerreports.org/money/2011/04/car-leasings-return-may-not-be-good-thing.htmlHowStuffWorks - auto.howstuffworks.com/buying-selling/buy-or-lease.htmThere are a few others that show up in a simple Google search, but they have religious overtones. No need to open that can of worms when simple math is enough. I don't believe anyone has ever said, "It makes more long-term financial sense to lease than it does to buy." No one is making that argument. But if you want a new car, and plan on changing cars only a few years down the road, then it absolutely makes sense to lease. It just does. You can try to explain to people that they shouldn't do this (and financially, you're right), but if you're expecting to get rid of the car in 3-5 years anyway, buying does not make more sense than leasing. Doesn't make short term financial sense to lease either, but it's your money. Whatever you want to do with it is fine. If you pay cash for a car and take your lease payment and invest it you will end up with several hundred thousand dollars at the end of the day. In any case, it's your money. The question was whether leasing was a good idea. From a financial perspective it is a horrible idea both long term and short term.
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Post by Kliquid on Apr 4, 2013 17:23:26 GMT -5
I'd rather buy and pay it off in 5 years than to continually have car payments. Again, this only is financially sensible if you're planning on keeping the car beyond three-to-five years. Let's consider a few things real quickly... 1. When I bought my Honda Pilot, the monthly lease payments were $390/mo. To buy the same car, I was looking at monthly payments of about $540/mo. (if I put the same amount of money down at signing) Not every car is this much and the ratios aren't exactly the same, but it is always going to cost more to buy than lease, in terms of monthly payments. 2. Leases have built-in depreciation values. Presuming you take decent care of the vehicle and don't drive way past your mileage, they give you an estimated number of how much they believe the car will be worth when you return it. When the lease is over, you can usually choose to buy the vehicle from the dealer for that amount. In some cases, the estimated number is way higher than what it is ACTUALLY worth and it's best for you to just walk away. In other cases, the number is significantly lower than what it's ACTUALLY worth and you can decide to buy "your" vehicle at a discounted price. 3. Some dealerships, such as the Honda dealership I got my car at, will allow you to sell your vehicle while leasing it. For example, if the dealership expects my vehicle to be worth $20,000 when I return it to them after the lease, but I know that I can get $24,000 for it; I can opt to sell the vehicle for $24,000, give the $20,000 to the dealership, and pocket the remaining $4,000. If the current trends continue on Pilots, I will be pocketing roughly $5,000 when my lease is up. 4. When you lease a car, you are under a full warranty from the beginning to the end of your lease. When you buy a car, you either need to purchase an extended warranty or deal with the standard warranty, which often times does not cover very much. Of course, when something goes wrong on the vehicle, you can be out thousands of dollars at a time for every situation where you didn't have a warranty. SO.... After three years (the end of my lease), I will have spent $5040 less on my Pilot than I would have if I bought it up front. This is just in monthly payment differences. This does NOT include any potential issues that may have come up with the car that would have needed repair if I had bought it instead of leasing. If I choose to sell my Pilot and take the (roughly) $5,000 profit, I am now up to over $10000 saved over if I had bought it. Of course, at this time, I will have to look for another vehicle (which is, of course) another expense. For the sake of argument, let's say I lease another vehicle for the exact same amount ($390/mo). Now add in the next two years... Roughly $12960 more in payments if I were have "bought" the car, versus $9360 if I leased again. But it would then be mine, if I had bought. After five years and somewhere around 65,000 miles; let's estimate that the vehicle is now worth $18,000. If I were to sell it right then and there, I could get $18,000 and put it toward my next vehicle. However, during that five years, I would have spent $8640 more in payments. That does not include additional warranty costs. It does not include replacing tires, brakes, other normal wear-and-tear, etc. If you plan on keeping your vehicle for longer than five years, you also have the ability to be "payment free," which is always a nice thing. However, you're also driving an older vehicle now with quite a few miles. Basically, what I'm saying is that, after five years, if I sold my vehicle for $18000, I will have spent somewhere between $3500 - $5000 more on leasing instead of buying. Again, this assumes no major issues with the vehicle itself. So as you can see, it definitely pays to BUY vs. LEASE in the long-run. -------- HOWEVER... If you're like a lot of people out there who buy a car, put it on a five year payment plan, and then sell it halfway through that plan, you are doing yourself a major financial disservice. Not only are you paying more per month for buying vs. leasing, but you are also likely going to find out that your car is worth less after three years than what you owe on your loan. This means that you are "under water" on your car loan. If you get into this situation and want to sell your car, you will need to pay out of pocket for the difference between what you owe on the vehicle and what you receive from the new buyer. Cars are often "under water" for at least 3-4 years before the owner finally gets into the green and the car is actually worth more than what he or she owes. It's all a cost/benefit thing. Anyone who tries to talk to you about "investing" in a vehicle is an idiot. Vehicles are, inherently, depreciating assets. This is why Dr. Hulk is very smart to buy an older, used vehicle. He knows that the majority of the depreciation already happened by the time he bought it.
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Post by Quanthor on Apr 4, 2013 17:38:26 GMT -5
See my wife and I are frugal. We bought a 2004 Kia Rio for about 10 grand new with a 10 year 100,000 mile warranty. Paid it off in 5 and have put minimal money into it ever since. Only maintenance related expenditures. So in the past 5 years I've got a tune up, some new tires and oil changes. Probably spent maybe 1 thousand dollars on the car during that span of 5 years. That's hardly anything. Leasing during that time we would have spent more than that in every year of that 5.
The quality of car sucks, but that was far more economically viable than leasing in every way.
I do however agree with that philosophy when it comes to renting/leasing vs buying a home though....even though I'm a home owner.
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Post by Kliquid on Apr 4, 2013 17:57:24 GMT -5
Yes, this is assuming that you're buying a new car.
It's always wiser, financially, to buy a used car because you do not take the brunt of the depreciation.
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