Leasing a Car/Truck?

[M.D. Holloway]

A friend is going to lease. I'm not a fan of leasing and really I never think it made smart money sense but if you were to lease a vehicle what would be the circumstances and what make/model to go for? I know it prolly depends on what you want t use the car/truck for - ok, everything.

[wayner]

I look at leasing at just another form of financing. A loan of a different sort.

My accountant describes it as a way to own a car that you otherwise couldn't afford since you only own it for the lease period.

In some ways it is less expensive since you only pay the tax on the use price, not the full purchase price. If you buy scar you pay tax on the full purchase price but never get any of that back if you sell it.

[recycled sixtie]

Not a bad thing leasing. If a person is contemplating a complex German car then you have the warranty without putting out a ton of money if you buy it. If it is problematic say due repair issues at the end of the lease you can hand it back.

If you bought it and it ends up being a pos then it is possible to take a big hit selling it particularly when the warranty runs out.

Guy

[onewhippedpuppy]

Eric (kaisen) was always a big advocate for leasing, and I believe there were a few scenarios in which it made more sense than financing a car. If you buy new and trade cars every few years, I think the tax advantages from leasing as well as not having to take a depreciation hit on your trade in are the primary ones. But, you're always a slave to that payment.

[Porsche-O-Phile]

I'm quite happy having not ever leased. I own my cars free and clear. No payments, no nothin. I like it that way. I'm not so vain that I need to be seen in a "new" car every two years (to say nothing of paying the highest insurance rates, etc.)

I think owning a nice, 5-10 year old car is the right way to go. monthly payments are for chumps and eating depreciation is for bigger chumps.

[Chocaholic]

Guess I'm a chump. I chose to lease my airport car rather than buy. New Honda Accord Sport. 3 year 15k/yr lease at $245/mo. The cash blown on a 5-10 year old junker is saved and more than enough to cover the small lease pmt for 3 yrs. When I land at Hartsfield and go to my car at 11pm, I'm pretty sure it'll get me home without drama and when the warranty runs out I grab a new one.

These are appliances...not where I want to put my money. Just leased a new Civic for my daughter to take to college. Miniscule payment, almost no cash outlay and I don't have to worry about repairs or reliability when she's 4 hours away.

We chumps just don't know what's good for us. Good to have others here that are so much smarter to point out the errors of our ways!

[Oracle]

monthly payments are for chumps and eating depreciation is for bigger chumps.

Thanks to that people the economy works. If all Americans were to do that same spending as yours the whole country collapsed.
Your opinion is so perplexing...

[wdfifteen]

I'm glad I leased my BMW 535. I was so happy to drop it at the dealer after 3 years and walk away, I felt like a 4000 lb weight had been lifted off my shoulders. Generally I buy used and keep it 'till it falls apart, and I'm back to that philosophy now.

[wayner]

Originally Posted by Chocaholic

Guess I'm a chump. I chose to lease my airport car rather than buy. New Honda Accord Sport. 3 year 15k/yr lease at $245/mo. The cash blown on a 5-10 year old junker is saved and more than enough to cover the small lease pmt for 3 yrs. When I land at Hartsfield and go to my car at 11pm, I'm pretty sure it'll get me home without drama and when the warranty runs out I grab a new one.

These are appliances...not where I want to put my money. Just leased a new Civic for my daughter to take to college. Miniscule payment, almost no cash outlay and I don't have to worry about repairs or reliability when she's 4 hours away.

We chumps just don't know what's good for us. Good to have others here that are so much smarter to point out the errors of our ways!

After I read this I looked into the cost of a lease for my daughter. He university car is getting quite old and now that she is out in the real world with a sales job on the road all the time, I worry about her car.

The cost of a civic lease was only $42.00 per week.
Holy crap! I know there are probably some hidden expenses but I spend at least $25 bucks a week just on coffee!

I never thought to suggest a lease to her. As long as we factor in the mileage during negotiation, it sounds perfect for someone who needs an appliance and can't afford to be without a car.

Thanks!

[Chocaholic]

Yep....I finally convinced my dad (85 years old) to lease his car. Had an 08 Chevy, slipping trans, a few dings and bangs, etc. Since I help with their expenses, I couldn't see writing a $15k check for another used car off warranty. He finally agreed and did a 2 year lease on a small Chevy SUV (loves it...go figure). His lease payment is about $220/month and I have no conerns regarding reliability or repairs...nor does he. Especially since they're in Michigan and I'm in GA.

Plenty of reasons to disagree with P-O-P on this one.

[LakeCleElum]

Originally Posted by Chocaholic

Yep....I finally convinced my dad (85 years old) to lease his car. Had an 08 Chevy, slipping trans, a few dings and bangs, etc. Since I help with their expenses, I couldn't see writing a $15k check for another used car off warranty. He finally agreed and did a 2 year lease on a small Chevy SUV (loves it...go figure). His lease payment is about $220/month and I have no conerns regarding reliability or repairs...nor does he. Especially since they're in Michigan and I'm in GA
.

Make sense for older people.....Hell, if I make 85, I'll be happy to lease by the week if that's what they want......

[Porsche-O-Phile]

I'm glad I leased my BMW 535. I was so happy to drop it at the dealer after 3 years and walk away, I felt like a 4000 lb weight had been lifted off my shoulders. Generally I buy used and keep it 'till it falls apart, and I'm back to that philosophy now.

This.

I don't understand the vitriol towards the anti-payment crowd (including me). I don't like oweing money to people and I like owning it to banks even less. I made my last payment in 2009 or 2010 (whatever it was) and I've been happily living free and clear ever since. My next car will be an early 90s Jeep Wrangler (I specifically want pre-OBD2) and I'm planning on buying it cash - best specimen I can find, probably this spring sometime. I'll carry basic liability insurance only just as I do on all my cars - there's some additional monthly cost saving too, not to mention registration fees and all the rest. I think new vehicles are money pits and exist solely to separate vain people from their money. I don't play that game. If others want to, whatever. I don't think I can be convinced that eating the "value" of depreciation on a vehicle, paying the highest insurance premiums to protect the dealer's (not your) interest, paying full freight for taxes and fees and essentially paying the same monthly nut as a purchase only you DON'T get a title at the end of it makes sense. If I'm going to make payments and put up with all the other rip-offs / nickel-dime stuff (which I probably won't) I want a damn title at the end and I intend to drive a he thing until the wheels fall off, then put new wheels on and drive it again until THOSE wheels fall off.

People complain about the cost of maintenance. Sorry, I don't buy it. Even a complete piece of junk that's averaging $300, $400 a month in repairs (unlikely) is costing less than a payment (purchase or lease). And if you DIY you'll likely never come close to those numbers. You're saving a LOT by not betting against yourself. Warranties are overrated anyway. Most times the dealer will just try to find some way to sleaze out of paying anyway. I'd rather own the car and handle any fix-ups on MY terms, not beholden to their unscrupulous wiles... It's always worked pretty well for me. I like not paying mechanics and I REALLY like not paying dealer mechanics.

Hey if you like handing other people your money for false senses of security, be my guest. Not for me. I'll live "payments free" thanks.

[Chocaholic]

Thanks for the pearls of wisdom. But...would you advise your strategy for my 85 year old father? Or my 18 year old daughter away from school?

Even a complete piece of junk that's averaging $300, $400 a month in repairs (unlikely) is costing less than a payment Would you say this makes sense for the scenarios above?

There's a whole world beyond yourself...believe it or not. Leasing makes sense for in many scenarios. No one is arguing with your situation, but you can explain your perspective without belittling or insulting others. Just sayin'.

[M.D. Holloway]

Repairs on a POS never are $300 to $400 a month - they are more like $800 to $2000 a hit but I see your point of total cost of ownership.

Seems like for a work car/truck that you can use the payments for as an expense then it would help as a write off no? As would gas and maintenance or a car payment...

[88-diamondblue]

Really depends on what company is offering the lease. I leased a 2013 Civic for $189 month no money down and sold her 2001 for $3000 which at some point in the near future was going to need tires and other work. She will be done with college before the lease is done and is most likely purchase the car. Having her in a safe reliable car far outweighs the payments for the vehicle and will be under warranty the whole time.

I leased my Acura with no money down and just got a new TLX to replace the TL, 6000 miles over on the lease, Acura forgives 7500 miles when you get another car and got out of my lease early to boot. And with the dealer maintenance program I spent about $300 out of pocket including the cost of a new set of tires over the 3 years I had the car. There is a cost per month no matter how you do it. I have done it both ways. I don't care to work on my daily drivers so much anymore. Ether way works, just what your comfortable with.

[wayner]

Originally Posted by Porsche-O-Phile

This.

I don't understand the vitriol towards the anti-payment crowd (including me). I don't like oweing money to people and I like owning it to banks even less. I made my last payment in 2009 or 2010 (whatever it was) and I've been happily living free and clear ever since. ...

My truck is a 2005. I love it and don't want to get rid of it, so I understand longevity and anti payment, but I was one of the ones to weight in early on the benefits of a lease. There are drawbacks as well, but there is no one best answer.

Keep in mind that you are not payment free as you think.
A person needs to look at total cost of ownership over the period they own the vehicle. That is one aspect.

Then there is risk of breakdown as well as the cost of down time. That is another factor

Still another is the opportunity cost of tying up the capital in the first place versus making payment which leave your other money free to work for you.

The total cost of ownership one is the one most people don't fully appreciate. Take for instance a used jeep that you buy for a low cost. Lets assume under but near $10k and very little maintenance. Your depreciation is slow or the first few years, but the last $5k could suddenly drop all in one year depending on condition.

You need to plot money in (purchase plus expenses) against depreciation. Just because it is paid off doesn't mean that it isn't costing you hidden money to drive it.

A valid point is that leases keep you in the high depreciation years (years 1-3) but any car is typically going to cost you a minimum of $1k per year maintenance plus depreciation. Older cars might cost $2k-$3k in a single year if unlucky.

We had a 2008 mini. Purchased 1 year out of warranty to save money.
In two years it cost $6k in maintenance and it depreciated $9k. Extreme I know but another factor for newer cars with all these gizmos, one sensor can cost you $2k.
In the old days if you lost a $700.00 transmission that might have been enough to retire your old beater, now $2k sensor might do it.

I'm afraid of owning newer cars very long.
If I want new for reducing risk on my business vehicle or my daughter's car away out of town, I'll look close at a lease. For my wife's car that she drives a short distance to work, she has an old vintage hot rod truck. If it breaks she takes my car and I take the 911. Different tactics for different situations.

[aigel]

The question really needs to be

"Lease or buy?"

Not, should I drive a beater or lease a new car. That is so much apple and oranges, it doesn't even make sense to discuss.

I am a "buy cash" and drive into the ground kid of guy. I'll be happy to own a new car for 10-15 years and do it again. To 150k miles there is very little a modern car will need, if you drive an appliance.

G

[onewhippedpuppy]

Originally Posted by wayner

Still another is the opportunity cost of tying up the capital in the first place versus making payment which leave your other money free to work for you.

This is the one area that I disagree with, and I hear it all the time with loans. If you borrow $30k at 4% for 5 years with that reasoning, you are essentially stating that your money will make better than 4% over the loan term. There aren't many investments that GUARANTEE any meaningful amount of interest. But I can assure you, the interest that you pay on a loan is guaranteed. Would you borrow money to invest it? Because in this scenario, that's exactly what you're doing.

If money is no concern then it's really irrelevant. When I was laid off in April, one of the keys to surviving without any hit to the lifestyle of my family was only a mortgage to worry about. If had car payments it would have been much more difficult.

[aigel]

I agree with OWP. If you can't save enough for a decent appliance car, maybe it is time to ride the bus.

Only up side to leasing is if the car gets smashed 3 months into ownership. Not your problem, drop it off after lease ends. If you own it, they will fix it for you or total it, and you will always end up with the short end of the stick. I am always a little uncomfortable driving a relatively high value car I own ...

G

[Porsche-O-Phile]

Interesting points and while not necessarily wrong some of them really sound like a stretch / rationalization, at least to me. I think the "right" thing to do is whatever makes a person happy with their decision (or failing that, the least miserable). I think it's not simplistic at all to say if one makes a payment of "X" (really "$X" plus "$Y" in interest) on a steeply depreciating object that's less financially beneficial than NOT making a payment. Money either goes out the door or it doesn't. With a payment, it does. With a "free and clear", it doesn't (or perhaps more correctly it does once and then that's it).

The notion that if you're not making a payment you'll somehow pay the same or more in maintenance is just silly and in my experiences, not borne out by facts at all - in fact quite the opposite. It also presupposes that a car "on payments" (lease or purchase) will be free of maintenance costs, which I also think is a stretch. Warranties are frequently skirted by dealerships and they often come with deductables, exclusions, etc. certain things (tires, brake pads, etc.) are going to cost the same (approximately) on any car and are unavoidable.

At the end of the day, do what works for you in your situation but I really like the idea of not writing checks to banks for increasingly-worthless piles of driveway rust every month. Let some other sucker do that, eat the depreciation and I'll gladly get another 100k or 200k of reasonably trouble-free use out of it without caring what the book value is. Just my $0.02.

Oh, and I totally agree with Matt - in a layoff, one does NOT want a car payment. The very first thing you should do (after the obligatory night of sitting at the bar getting schite-faced) is drop any vehicle with a payment off at whatever dealership one got it from. Best to avoid such situations completely, but if you find yourself in it, dump the car(s) and focus on keeping a roof over your head and groceries on the table. Priorities.