Thinking about leasing to buy - is this a good plan?

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  kyfdx Moderator Posts: 237,185

  October 2014

  ajrosen said:

  My wife is carting around our 2 kids and all her PT equipment in a small 2007 Civic and is getting pretty tired of it. We also rent a minivan once or twice a year for longer trips, which costs us $500-$1000/yr.
  
  Problem is, we are still paying $380/mo on my 2010 Outback ($7K left on it). We got a trade in offer on her civic and have a few thousand we can use for a downpayment. So, is this a good plan:
  
  Honda.com is showing 35 months, 0 down. With the internet price of $30,393 I was quoted on an EX, trade in of 6K and 4K down, that brings the honda payment estimator down to $123/mo. We can fit that payment on top of the other car payments until the Outback is paid off. If we went into this expecting to pay the $17000 (based on 56% retention rate) at the end of our lease, is that an ok plan, or is there something else I'm not seeing that makes this a bad idea? I do know that we'll have a higher interest rate on the loan for the residual, but we'll be socking away about $8K before that comes due so we'll probably have a 10K loan.
  
  This is the first time I've looked at leasing, and I don't have hard lease numbers from the dealer yet (going tomorrow). I wouldn't even consider it if we had my car paid off already. Mostly I'm just looking for a good way to get into a bigger car now but we intend to keep it for 8-10 years.
  
  Thanks for any advice!

  
  It's rarely a good idea to lease a vehicle that you really want to own.. You are adding costs (acquisition fee) that you wouldn't have if you did a straight purchase..
  
  You have assets ($6K trade-in plus $4K down).. and, only 20 months of payments left on your Outback... and, the ability to save up to $8K over the next 36 months... I would bargain hard and get the Odyssey for the lowest price possible, put the least amount possible down, and use your $10K to supplement the payment until the Outback is paid off..
  
  $32K loan on the Odyssey at 1.9% AHFC financing for 60 months is $560/mo. It looks like your budget is about $500/mo. total for all car loans.. So, $380/mo. for the Outback, $120/mo. for the Odyssey and pull the other $440/mo. out of the $10K you were going to put down on the lease.. That's $8800 over the next 20 months (paid out of your $10K).. At that point, the Outback is paid off, and you only have 40 payments of $560 left on the Odyssey.
  
  36 months from now... your $10K is gone (just like if you leased), but you own that Odyssey, with a loan balance of $13,200, and just 24 more payments of $560.
  
  The numbers are pretty close to a wash.. whether you buy or lease... but, owning that car and keeping some money in the bank gives you a little more flexibility.... and, if your finances/income improve, you can keep some of that $10K and pay the payment out of monthly cash flow.
  
  If $380/mo. + $560/mo. seems like a lot to spend on two vehicles... well, it is. But, leasing doesn't really change the ultimate math.. She might be tired of that Civic, but is she $560/mo. tired of it? Stick it out for 20 more months until the Outback is paid for.. would be my best advice, if I knew you...

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