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Leasing vs. Purchasing

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  • fezofezo Posts: 9,383
    Good advice.

    I still keep thinking my brother must have the only Kia with zero problems but I don't know any actual people to compare his experience to.
  • harry70harry70 Posts: 5
    edited April 2010
    Well, my first thought is you need a better mechanic. I while back, I was in same situation with 10 year old 100k+ miles Accord with broken AC. My mechanic pulled a used AC compressor from junkyard and fixed it for a few hundred. Many Honda models including Civics are highly desirable used cars, especially around $2-3k, and yours is still relatively young. http://www.hondabeat.com/highmiles.php

    That said, you seem to be able to afford a newer car, so trade up! Besides a little more comfort, AC could be considered borderline safety feature in the desert for your baby. Looks like you're looking for a bigger car, which should further increase the safety factor. I'd suggest you make sure it has a side curtain airbag, which most SUVs after 2005 have, but depend on make/model, so check and verify.

    I don't know anything useful about the Sportage or Patriot, but I think the residual is lower than the CR-V. This means that used ones go for less than the CR-V, and may be better deals if they're reliable for you. The problem with a used CR-V is the high residual/resale value, which means that while used ones have good reliability and desirability, they'll cost you more. If you're planning on keeping it a long time, just purchase a new one. You won't pay that much more averaged out over time. Whether you lease or purchase depends on a lot of factors, but the best deal you can make and cash flow are factors. In general, the purchase will be the better deal in the long run, but if you negotiate a great lease or if you sell it sooner, then a lease might come out ahead. Anyway, used CR-V is a poor compromise in my view. If it doesn't strain your finances, just buy or lease a new one and defer the final purchase for 3 years. Or go the opposite extreme and go cheap on something further along the depreciation curve.
  • blueiedgodblueiedgod Posts: 2,797
    edited July 2010
    My husband and I have always been warned against the follies of leasing. We have to get out of my current car (2002 Civic) because the AC goes out on it unpredictably and we have two small children (in California). The wisdom given to me in the past is that the best value is to buy a car new and run it completely into the ground. True? Now we are looking to get into something with $300-$325 monthly payments, which we could do on a 36 mo. CRV lease through the Honda dealership. We could also do it by purchasing a 2006 or 2007 CRV with 45-60,000 miles on it for roughly $16-17,000. What is our best bet? We would purchase the lease at the end and keep the car for 8 years, if it held up. Does that make it as valuable as purchasing it from the get go? Thanks for your advice.

    Leasing and then buying probably not the wisest idea. Yeah, it makes it apprear more affordable, but in the long run, it cost a lot more. You usually end up paying the sales taxes twice, and the averaged interest is usually higher.

    If you say you can afford $300/month, have you been putting that money away every month? A year's worth of $300/month is $3600. 5 years of stashing the money away will give $18,000 to purchase a vehicle out right, or with minimal amount to be financed.

    We just financed a 2010 CR-V EX 4WD and our payments are $288/month at 2.9%. No we did not lease, we bought it.

    We also have a 2005 CR-V EX AWD that has been paid off, but we have been putting the amount equivalent to the car payment into a high yield savings account. This is the repair money, and if we decide to replace the 2005 CR-V, it will be the downpayment money. Depending on how long we keep the CR-V, we may have enough to buy the next car outright with cash.

    Fiscal discipline is all that is needed to live comfortably.
  • dwynnedwynne Posts: 4,018
    In most states, sales tax is due only on the payment (or the depreciation of the car) and not the full amount. So if you lease, then buy, you are not paying taxes twice. You DO pay taxes on principle and interest if paying on the payment. There is the bank acquisition fee to consider as well. So you pay tax on the payment, then tax on the buyout price - not twice.

    With a captive lease deal it can be a no-brainer (and very little difference in the total amount it costs) for you to lease, then buy. I have had leases for as little as 0.3% effective finance rate - heck even Honda has had 2% and less lease deals I have taken advantage of. Now, if there is a choice to take a cheap finance rate as well, then running the numbers will favor buying outright.

    Some clever BMW owners will lease with a promo rate, then turn the car in and buy it back CPO from the dealer to get an extended factory warranty on it. This can work with other brands as well.

    The cheapest way to possess any car is to save and pay cash for it and drive it until it falls apart. Most folks can't or won't do that, so we have lease and loan deals to consider. I always say just run the numbers, with a cheap enough lease deal and no discounted financing you might surprised and how well you can come out.

    Most folks also don't keep their cars very long either. Lives and needs and wants change or they just want something new. Most folks get ripped on their trade in as well. Again, if leasing you could turn in and walk away and go get something new at lease end.

    The real beauty of the lease is the bank taking the chance on the future value. Resale value goes into the tank because of problems or gas prices or whatever and you just turn it in. With a long term loan you are upside down forever with the car. If the value holds, then it becomes a bargain to buy at lease end - below market value. Folks also don't understand that any dealer can buy an on lease car (from most lease banks) before the term is up. I have make as much as $2k selling an on lease car to someone (or direct to a dealer) when the market was right. We leased my wife's Pilot for way down into the holdback (the dealer made $200 or so) and at a rate of 0.00014 (0.336% effective). After about 2 1/2 years and 37k my wife wanted something more fuel efficient, so we sold the Pilot to a dealer for $2k more than the current buyout. The market was strong for Pilots at that time (and other 3 row SUVs) and we took advantage of it to cash out and get into something else. Also a lease, also cheap, and at a good negotiated price - with a payment a good deal less than the Pilot payment - and $2k in the bank :D
  • tidestertidester Posts: 10,109
    Fiscal discipline is all that is needed to live comfortably.

    Fiscal discipline only gets you so far in the real world. The key to living comfortably lies entirely in how you define comfort. :)

    tidester, host
    SUVs and Smart Shopper
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,778
    What you were able to do isn't the norm and people need to know that.

    You leased the right car at the right time.
  • dwynnedwynne Posts: 4,018
    I have only had to turn in 2 of all the cars I have ever leased, the others were all sold for some "profit" from $0 to $2k. So I guess I just keep getting lucky?

    If you get a lease deal at a below market rate, and get a good deal on the price of the new car, then you should come out OK down the road. Like I said, if your ultimate goal is to own the car and they offer discounted financing then that is the way to go. If offered a discounted lease rate but real world finance rate, then run the numbers and see how it works out. Many times I find that you are within $1k (total of all payments) or less if you lease / buy or if you just buy. With such a small difference, let the lease bank take the risks and do the lease - then decide at lease end if you really want to keep the car or not.

    I am planning on keeping my latest S2000, but I leased it first due to 0.00073 MF on the lease - coupled with a selling price a little more $1,500 under invoice ($1k dealer money + > $500 into holdback).
  • cdnpinheadcdnpinhead Forest Lakes, AZPosts: 3,288
    alert to the hosts. :mad:
  • exb0exb0 Posts: 539
    You would be lucky if it is just spam. It could be a physhing attempt.
  • carteachcarteach Posts: 179
    I'm thinking about selling my 2006 Acura TL. I should get about 14K for it. Right now I have a '95 Subie with 218,000 as well as the Acura. I know the Subie isn't going to last that much longer and I need a more versatile car.

    Also, I don't want to get to the point that my car needs expensive repairs. The Subaru has been very good to me. But I know repairs/maintenance on the Acura won't be cheap.

    I had originally planned to use the money from the Acura for a down payment on another car which I'd probably keep another five years. (My logic is that I'd always have a down payment in the value of my old car.) But now I'm wondering whether I'd be better off putting that $14K in the bank/cd/?? and leasing a car for three years. I've owned many cars, so the buying process is not new to me. But I have no clue about leasing.

    I drive about 16K miles a year. Have two dogs (planning on wagon/suv with them NOT on the seats) that would go in it very occasionally and two grandkids that I tote around once in a while. I want a car that is close to the top of the line. Don't know how that factors into the equation.


    Thanks.
  • stickguystickguy Posts: 14,930
    the miles you put on are going to hurt you.

    just from a surface look you seem like a better candidate to just buy something.

    2013 Acura RDX (wife's) and 2007 Volvo S40 (mine)

  • steine13steine13 Posts: 2,413
    the used car market is at an all-time high. that has to work itself into residual values, I'd think.

    there are cars that it makes sense to lease, even with 1k/yr over the typical 15k allotment. i couldn't tell you which ones, though.

    as always, you have to run the numbers.

    i've never leased, being too much of a control freak, but i think it's an attractive option.

    cheers -m
  • dwynnedwynne Posts: 4,018
    Way too many factors to explain them all in one message :-)

    Basically it all depends on the lease money factor and residual compared to the loan rate (if financing) for a particular model. If your goal is to own the car (eventually) then buying is always cheaper. To get x years of use of it, then that depends on a lot of stuff.

    Loan money is cheap right now (my CU is doing 1.9% to 3.49% on car purchases) so in order for a lease to be a great deal you need a discounted lease rate and / or an inflated residual. Captive lease banks (e.g BMW Financial Services) can set rates and values that reflect how bad the company wants to move a model - not based on real world values. If you want something they need to move when they are pretty desperate to move it and you can get quite a deal. I have leased at < 1% effective rate before a few times and under 2% quite a few times.

    On the other hand, with money so cheap you can't make much socking your cash away most places.

    Typical leases are written for 12k or 15k per year, but you should be able to get a lease written for more miles (or factor in the over mile charges into the equation).

    I would decide what you want to get, then we can compare captive loan and lease offers and what 3rd party lease and loans are available and get a better answer.
  • steverstever Viva Las CrucesPosts: 41,252
    A reporter is hoping to find someone who recently bought a new car and took out a car loan for the first time in a few years.

    Please respond to pr@edmunds.com by Tuesday, February 7, 2012 with your daytime contact information and a few words about your experience.

    Moderator
    Minivan fan. Feel free to message or email me - stever@edmunds.com.

  • my gf and I cannot decide on whether or not to lease or purchase a new car. She needs a car to drive to/from school which is less than 2 miles and internship (twice a week, less than 5 miles). Base on her driving routines, she will be driving less than 12k a year. We just want to get something new and cheap that she can use for the next three years.

    please help us understand available options
  • steine13steine13 Posts: 2,413
    Forget making blanket decisions here... make reasonable assumptions about residual value and other costs, then work out the cost per month AND cost per mile, and compare.

    Then figure out what your personal preference is, if any, and how much that's worth to you.

    Real-world used-car values are at or near all-time highs, and that has worked to drive residuals up and make leasing more attractive then it's been. Whether it's for you is something you have to figure out for yourself.

    I've never leased until this January, when I stumbled into a $133/month lease on a Cruze LT 6MT with $890 due at signing, 24 month term.
    The starts aligned, and the various GM marketing departments didn't, so they kinda screwed up and made the lease super cheap.

    Alternatively, I could have bought the car for around $16 out-the-door.
    The only reason I leased is in 1.5 years I'd rather start over than look for a buyer, but the cost over two years should have been about the same.

    Lots to like about leasing, except you drive a rental car for 2-3 years. I'm not sure I'd do it if I didn't have a beater around for hauling and scratching-up duties.

    Cheers -Mathias
  • steverstever Viva Las CrucesPosts: 41,252
    edited February 24
    "With leasing, dealers realize they have a "built-in return customer" and consumers are also realizing the benefits of taking on a lease.

    Leasing requires less of a time and maintenance investment than ownership, and in today's on-the-go, busy world, leasing often "fits more into a 2013 lifestyle" Caldwell said.

    There are also more lease offers out there. It's not the high-end luxury brands anymore; mainstream staples like the Honda Civic are in the game and creating a "wide spectrum" of options for consumers."

    Leasing Levels Believed to Have Hit 2013 High & Could Rise Even More (Auto Remarketing)

    (The breakdown is at the bottom of the link).

    Moderator
    Minivan fan. Feel free to message or email me - stever@edmunds.com.

  • MichaellMichaell ColoradoPosts: 6,325
    Leasing requires less of a time and maintenance investment than ownership, and in today&#146;s on-the-go, busy world, leasing often &#147;fits more into a 2013 lifestyle,&#148; Caldwell said.

    There are also more lease offers out there. It&#146;s not the high-end luxury brands anymore; mainstream staples like the Honda Civic are in the game and creating a &#147;wide spectrum&#148; of options for consumers."


    I couldn't agree more. I recently leased a 2013 Hyundai Elantra GT for $230/mo - including maintenance visits. 3 years, 15K/yr.

    Yes, in 3 years I'll have to make a decision about whether to keep it or get something else, but that gives me 3 years to think about it.

    No way could I get that kind of payment on financing, unless I put a bunch of money down.

    MODERATOR
    2013 Hyundai Elantra GT / 2010 Mazda CX-7 GT / 2014 MINI Countryman S ALL4
    Need help navigating? michaell@edmunds.com - or send a private message by clicking on my name.
    Share your vehicle reviews

  • stickguystickguy Posts: 14,930

    I am going through this debate with my son now. he graduated recently from college, and is working on getting his 1st permanent job. If that happens, he is ready to get something newer than his 14 YO 172K Acura. and of course, wants something nice, so no strippo Accent or some such.

    but typical recent grad, decent income (cashflow) but little to put down. so he either takes a 5 year loan, cleans out his bank account and $400+/month payment, or a sign and drive lease for less than $300 that conserves his funds.

    even a few year old car can be expensive enough that, if you keep a loan to 3 years (no way doing more than that on a 2009/2010), you can still be at $400/mo if you have little down.

    so, a subsidized lease to start, and save some money on the side. Next one can be a buy.

    2013 Acura RDX (wife's) and 2007 Volvo S40 (mine)

  • methotamethota Posts: 1

    Dealers get the same amount of money... click on the link and read the page to get the real "leasing vs. buying" facts

    http://www.subaru-montreal.com/en/leasing-vs-buying

  • leonardopleonardop Posts: 1
    By experience, don't do lease!
  • mc731mc731 Posts: 4

    Hello,

    Hoping for some help...

    I'm looking into leasing a new JGC...this one in particular: http://quirkchryslerjeep.com/new/Jeep/2014-Jeep-Grand+Cherokee-3f3646a00a0a00e07dd18651c9f8edfc.htm w/ a price quote via email of $35995. I live in Massachusetts.

    I have never leased a car so this is all pretty new to me. I did the Chrysler credit app and was approved for "up to" $49,900 in financing. Figured I would see what I was eligible for before dealing with a dealer. The credit score they pulled was 698 from Experian. What tier is that?

    Would I have a decent shot at leasing this vehicle? Looking to lease for 36/mo 10k miles. I have a trade w/ some equity some of which can be used to cover relevant fees. Want to cash out some equity if that is even a possibility. Looking to keep my payments at or less than $400 which may be unrealistic.

    Any advice and insight would be much appreciated. Would like to have some concrete knowledge before visiting a dealer.

  • MichaellMichaell ColoradoPosts: 6,325

    @mc731 said:

    Hello,

    Hoping for some help...

    I'm looking into leasing a new JGC...this one in particular: http://quirkchryslerjeep.com/new/Jeep/2014-Jeep-Grand+Cherokee-3f3646a00a0a00e07dd18651c9f8edfc.htm w/ a price quote via email of $35995. I live in Massachusetts.

    I have never leased a car so this is all pretty new to me. I did the Chrysler credit app and was approved for "up to" $49,900 in financing. Figured I would see what I was eligible for before dealing with a dealer. The credit score they pulled was 698 from Experian. What tier is that?

    Would I have a decent shot at leasing this vehicle? Looking to lease for 36/mo 10k miles. I have a trade w/ some equity some of which can be used to cover relevant fees. Want to cash out some equity if that is even a possibility. Looking to keep my payments at or less than $400 which may be unrealistic.

    Any advice and insight would be much appreciated. Would like to have some concrete knowledge before visiting a dealer.

    My co-host has answered your questions over in the "Questions about Financing New Vehicles" topic.

    MODERATOR
    2013 Hyundai Elantra GT / 2010 Mazda CX-7 GT / 2014 MINI Countryman S ALL4
    Need help navigating? michaell@edmunds.com - or send a private message by clicking on my name.
    Share your vehicle reviews

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