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-   -   Leasing vs. Owning a Car? (http://www.wakeworld.com/forum/showthread.php?t=799767)

chillinoj 08-30-2013 5:57 AM

Leasing vs. Owning a Car?
 
My girlfriend got a job in sales so she spends most her time driving around the city and the miles have really added up quickly. She was looking to sell her car and buy a new one anyways, but this has really motivated her to find something more business appropriate and better gas mileage.

One of her co workers can get her a good deal on a used infiniti, but on the other side of the coin she is considering leasing a BMW(or other cars on that level)

Seems like monthly payments will come out to be about the same, I've just never looked that much into leasing cars, anybody know the pros & cons of leasing? any key details we need to pay attention to?

axxxiswake 08-30-2013 6:16 AM

If she's driving and "the miles have really added up quickly" I would recommend purchasing. Leasing has mileage restrictions, that can cost a lot on the back end.

sidekicknicholas 08-30-2013 6:18 AM

Quote:

o she spends most her time driving around the city and the miles have really added up quickly.
+
Quote:

leasing
=
Not good.

Almost always a lease will charge you like crazy for miles over 30k / 36k over 3 years.... without specifics on how many miles, my gut reaction is she would smash through that amount and you would be stuck paying out the butt for the overage mileage or buy out the car to avoid those charges.... which in that case you might as well have just bought the car from the start.


my advice.... get a 06+ civic, use that for her work miles

racer808 08-30-2013 6:31 AM

High miles, no lease. Otherwise I like leasing, I write off the lease on my taxes, I am always under the miles & I get a new truck every 3 years.

nitrousbird 08-30-2013 6:34 AM

As said above, mileage is a killer on a lease. But even if that wasn't a factor think about this - dealers LOVE leases. Why is that:

- Typically gets buyers into cars they couldn't afford to purchase

- Guaranteed return customers. With a purchase, the customer could keep the car for 10 years. On a lease, they are returning a car in 2-4 years...and imagine that, there is a customer walking into a dealership to turn in a lease that is in need of a car.

- Pricing discussions are more centered around payments vs. price - dealers love this

- Most folks don't understand how the leasing rate works. There is a set value of the car at the end of the lease (based on the book depreciation based on mileage, vehicle and years). Then there is the purchase price and financing interest in there. Most folks don't negotiate the purchase price like they would when buying a car = more profit for the dealer

- Leasing is typically in-house financing = more money. They don't want you getting a loan at your bank or credit union like you might when purchasing a car.

- Guaranteed good used inventory. Dealers are getting cars back in 2-4 years with fairly low mileage...EXACTLY what they want to sell on the used market. In an ideal world, a dealer would do all new cars as leases and all used as lease returns

- No dealing with trade in's for those doing lease after lease. No haggling with that, auctioning off the POS they took in, etc.

Put it this way, do you want to rent a new car for a couple of years or own a car. My truck is getting long in the tooth but not having a car payment and/or plunking down a bunch of cash to get a newer vehicle has been great motivation to just keep my truck. It's nice that at the end of making payments the vehicle is yours. I've got a mechanically sound vehicle with minimal costs. Or lease and go through the cycle over and over.

wakebordr11 08-30-2013 7:08 AM

Quote:

Originally Posted by chillinoj (Post 1842193)
My girlfriend got a job in sales so she spends most her time driving around the city and the miles have really added up quickly. She was looking to sell her car and buy a new one anyways, but this has really motivated her to find something more business appropriate and better gas mileage.

One of her co workers can get her a good deal on a used infiniti, but on the other side of the coin she is considering leasing a BMW(or other cars on that level)

Seems like monthly payments will come out to be about the same, I've just never looked that much into leasing cars, anybody know the pros & cons of leasing? any key details we need to pay attention to?

What does she drive now and what is business appropriate? This one always stumped me...

Also, what are high miles? I think assuming any car made from 2005 to now should be sold before the 100k mark is a mistake. Cars these days are 2-300k mile animals, at least thats how I look at them. Business appropriate is good fuel mileage, low payment, low maintenance...

boardman74 08-30-2013 7:08 AM

Milage is the number one killer of a lease. Ask someone who hates lease why, chances are they will tell you they went over milage and got burned on it.

Its a great option if you can keep the milage down. But the first thing you said was the miles are piling up..that ends the lease conversation there. Standard lease is 10-12K miles per year. If piling up is less than that to you then you might be OK. If piling up means 25-30K a year like it does to me it's going to cost you alot of money at turn in. Usually somewhere between $0.25-0.50 PER MILE!!

DenverRider 08-30-2013 7:56 AM

If I were her, I would buy two cars. Get one that's a disposable car near the end of it's significant depreciation period and cheap from craigslist. Just a plain jane commuter. Use it for work and then sell it and buy a different one every year. Then she can get a nicer car to drive evenings and weekends like the BMW you were talking about. Racking up the miles on an expensive European car is going to cost her a fortune whether it's a lease or not. You'll have to know cars pretty well to do this. It's not that hard to learn though. Cars aren't rocket science.

sidekicknicholas 08-30-2013 10:30 AM

Quote:

If I were her, I would buy two cars. Get one that's a disposable car near the end of it's significant depreciation period and cheap from craigslist.
This is exactly what I am doing.

I picked up a 05' RSX with 70k for $6000 out the door and its great. Maintenance is cheap, gets 35 mpg in the city, and was fairly cheap for the miles / longevity I'll get out of it.

Keeping the miles down on my IS350 is nice.

phatboypimp 08-30-2013 11:52 AM

I am not a leaser. I never have been. Renting a car like that is expensive. If I were you I would model out the different approaches here. I think a second - high mileage car - works for a lot of people but now you are maintaining, insuring and depending on where you live parking a third high mileage vehicle. With that said it is likely to get better mileage and keep the abuse off of a nice luxury car.

In my opinion - after having two cars - one for work mileage and one for personal mileage it wasn't worth the work/expense. If I were in your shoes, I would find a 1-2 year used (<20,000 mile) car that has good style and high reliability (likely an import) and purchase it and keep it for the next five years.

Gotmods 08-30-2013 12:22 PM

I leased for 12 years while Building my business. I would average 80,000 miles over the two years I had the vehicle. The way I looked at it I could have a nice car at around $700 a month or put $350 in my pocket without the write off. The thing most people don't understand about a lease is that the residual completely negotiable. I would also build the miles into my lease since I knew I was going to be way over the allotted miles.
You are indeed renting the car so in the end it comes down to if you want a new vehicle every two years and if you have the ability to write it off.

MNRIDER 08-31-2013 7:21 PM

It's funny so many people say you are renting a car during a lease. You are simply making payments on the part of the vehicle you use. Ownership is the same as someone who is making payments to a financial institution. They hold the title. You just have the opportunity to get out of it in a couple years and get a new one. Each vehicle is under full bumper to bumper warranty through the duration of the lease so there are no maintenance costs and you can generally afford a better equipped vehicle.

It seems like a no brainer. No maintenance costs, a lower payment, a nicer car, and a new car every three years.

On the flip side I'm not saying this is great for everyone. If you don't drive either 12k or 15k this is a terrible idea. It also does not work for folks who get attached to cars.

For full disclosure I do sell vehicles for a living but I do not feel that a lease is only beneficial to the dealer.

DenverRider 08-31-2013 8:30 PM

It is funny Joe ... ha ha ... it's wicked funny. I was just laughing to myself the other day about how funny it is that people say you are renting a car when you lease it. The other day the people that rent my old house from me signed another year LEASE and I laughed because when they signed the lease, they thought they were renting my house. My wife and I laughed about that for hours. They thought they were renting my house but they were actually only paying for the part of the house that they use.

MNRIDER 09-01-2013 5:42 AM

In a home lease there are tenant rights, there is no land ownership. In a car lease, ownership and liability are the same as financing with a bank. In both cases there is a lien against the title. A car lease could be closer compared to purchasing a home contract for deed.

But hey, I'm not trying to sell anyone a car here, and Im trying to offend any lease haters. I'm just try to add my 2 cents.

Ewok01 09-01-2013 6:19 AM

Leasing a vehicle is good if you like making payments your entire life. I don't, and here is Dave Ramsey's quick explanation of why leases are not a good "deal" for the consumer, flame on:

http://www.daveramsey.com/index.cfm?...ntItemId=10367

Explain How A Car Lease Works
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.

ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.

During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.

Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.

People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car.

shawndoggy 09-01-2013 7:04 AM

Quote:

Originally Posted by Ewok01 (Post 1842505)
Leasing a vehicle is good if you like making payments your entire life. I don't, and here is Dave Ramsey's quick explanation of why leases are not a good "deal" for the consumer, flame on:

http://www.daveramsey.com/index.cfm?...ntItemId=10367

Explain How A Car Lease Works
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.

ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.

During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.

Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.

People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car.

Who leases a car for 60 months?

I am a serial car flipper and the concept of the lease would probably be good for me because no matter what I tell myself, the thrill is usually gone after 3 years. If you ARE a chronic financed car owner (I am a cash used buyer myself), and you meet the mileage parameters, why not pay $200 a month to use an accord for the best 3 years of the vehicles existence? Zero repair liability, no worries about getting worked over at trade in time, no hassle of meeting sketch Craigslist buyers etc.

Cars are depreciating assets. It's not like owning a home (ha and in the past decade owning a home hasn't been all that lucrative either in a lot of places). In 25 years most every car will be in a junkyard, and after 8-10 years every car is going to need more than routine maintenance. Sure it can still be cheaper in the long run, but there are many people who just want the car to work and not have to worry about that kind of stuff.

If you can negotiate the residual to reflect the depreciation of the vehicle accurately at the end of the lease, then that's all you are really paying for. Of course the depreciation is also greatest during those first three years.

If this forum were all about sound financial moves none of us would own boats. Those things drink money like its going out of style.

Ewok01 09-01-2013 7:24 AM

I just wanted to make sure all sides are represented here, there was a car salesman here saying how great leases are. Everyone's situation is different, I put too many miles on per year to even consider a lease, my grandparents had a few lease cars and they were happy with the deal.

boardman74 09-01-2013 8:07 AM

The main thing that kills a lease for most of us. Those leases the car dealer advertises for 99 bucks a months are usually 10-12K miles a year. This for the most part is a boat owners forum. Boat owners drive a lot. Drive to and from the lake, cabins, vacations, the dealer, drive 12 hours to pick up a new boat. Alot of us drive way to much to lease. Well for it to be cost effective. For the most part if you finance most of a new vehicle and drive it 3 years, you will have little to no equity. Thats the same with a lease. You drive it for 3 years and turn it in. Not alot different. I leased one time. I built in extra miles as I knew I drove a lot. I was young and changed vehicles a lot. I guess at the time I needed to save the $20 a month, because when I added "real" milage to the lease(18K per year) that all the cheaper it was. They were super picky about condition at turn in and it was a 4x4 truck. I use my truck, but don't abuse it. It had a few small scratches that I would consider normal for 3 years old. They charged me alot for them, then they charged me a recondition fee. I found it in the fine print later, but be aware they can and will add charges like that. My truck was clean and not trashed in need of major cleaning.

Here is another thought for low milage users who do fall into the lease category. I am finding that cars that have very low milage(10K like a lease) hold their value way better and are worth significantly more. My wife only uses her car between 8-9K a year because she only drives it to work and we use my truck for everything else. We traded her last one at 3 years and the dealer paid premium money for the car on trade. Dealers need the low milage trades for their "certified" programs. I don't know about all brands, but VW pays good money for low milage cars.

But the OP stated she was racking miles up and a common thread thru most of these posts the #1 thing that kills a lease is racking up miles.

DenverRider 09-01-2013 8:47 AM

Now that I'm done blasting Joe's condescending "it's funny" comment I'll mention something that isn't being considered in these leases. With a lease you are constantly paying for the 1st year of depreciation over and over. If you are comparing a lease to buying a new car that you sell on in 3 years it may be closer to the same thing. You, however, can buy a car that is one or two years old with low miles for significantly less than new. I don't know why anyone buys anything bran new. As far as I know, there is no way to significantly reduce your lease rate by leasing a car that isn't bran new.

Maintenance on the other hand is only a big deal if you haven't bothered to learn the exotic science of car maintenance. Seriously, if you can't figure out how to fix a car that isn't a Ferrari (other than auto trans rebuild) then how did you figure out how to make enough money to buy the car? There are books and youtube videos that can walk you through almost anything and tools are cheap. The work is rewarding, a nice change of pace from a desk job, and much of the knowledge you gain can be applied to boat maintenance and emergency repair when you're floating in the middle of the lake with an engine that won't start. I have a 2004 and a 2006 that I haven't had to do anything with other than change the oil and the battery. The 2004 still even has the original brake pads on it. How much maintenance do you think a 3 year old Toyota Camry needs? If it's serious, then it's probably covered by warranty anyway.

shawndoggy 09-01-2013 8:51 AM

Leasing vs. Owning a Car?
 
Lol my wife has a phd and I guarantee she can't find the dipstick on her car. Do you cut your own hair too? Cuz that clearly ain't rocket science.

I love working on the boat... As a hobby. I have no desire to work on a car in the dark cold of winter so my wife can get to work the next day.


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