By on August 2, 2011

Who should lease? Some folks believe that short term non-ownership is the perfect fit for the über-rich and nouveau riche. The rich can afford to drive whatever strikes their fancy after all… and who wants to own a Taurus when you can lease a Bentley?

As for the new rich or the soon to be rich; they also need a taste of their success. So why not a lease? Well, because I have gone nearly blue in my face over the years telling aspiring lessees that the math doesn’t work. Convenience… perhaps… worry-free ownership… maybe. But moneywise? Nein. Nyet. No.

Reason can only go so far in life. Even enthusiasts have a thing for the automotive fling. So here are seven types of lease happy shoppers I’ve met in my travels. In their own words of course.

The Speculator:

What’s the best way to make a fortune? I know! Invest in something I know absolutely nothing about!

Let’s see now . It’s 2011 and I will definitely be buying at the bottom of the market according to CNBC and Jim Rogers. Let’s see what’s out there. Silver. Gold. Frozen Orange Juice. AAA rated CMO’s. Municipal Bonds from the great state of New Jersey. Pork bellies. The Los Angeles Dodgers.

Okay, I’ll lease a Yuppie-mobile and throw the rest in whatever Jim Cramer recommends. I’m sure that things will turn out just peachy.

The Ditz:

Like OMG! Have you seen the new Lexus FT250hqr-v.111ZZZ?

It’s like so sporty and sexual. Like… I can’t believe that anyone here would buy anything other a Lexus? Everything else is so… like 2010…

For only $449 a month I have…like… a real luxury sports car! What’s that? The engine size? Didn’t I already tell you? It’s… like… a Lexus engine! Aren’t all their engines the same?

SUV Sam:

I don’t care what it is! SUV, Pickup. Front Loader. Garbage Truck, Canyonero.

Just make sure it’s got 200 pounds of leather, gets me that nice tax deduction from Uncle Sam (that greedy bastard), and gets clear reception to all things Rush.

I want something safe for my family. Something that has thick windows so I won’t have to worry about hearing the wails of a few liberals if I accidentally run over them on the way to work.

The Dying:

My last ride?

Do I really want a Buick?

If I can’t take it with me I may as well have fun with it. Hmm… how about a BMW-MB 760il AMG-L with the ‘Jetson robot’ option that makes Brazilian Espressos and day trading recommendations? Lease is only $1200 a month. Not bad since I won’t miss it. I’ll just keep driving it until (thud!)

The Wanna-Be:

I just graduated from law school with $100,000 of student loan debt. I need a car that will show my new employer that I’ve arrived.

My commute is only about eight miles. But I want something that has presence in the parking lot. It should be a BMW, a BMW, or an Audi.

A lease works perfectly for me since I’ll be working intravenously for the next several years.

The Pseudo Tightwad:

Yeah, I’m gonna get me one of those hybrids so that I can figure out my exact expenditures for the next 39 months.

I hear the Toyonda Monkey Fart is pretty cheap at $179 / month. That’s only $6441, plus tax, title, tag, new car insurance, registration, ad valorem, and floormats. A friend of mine works at a Toyota dealership. I’ll hit him up for some barely used floormats that they keep in a pile and two bottled waters.

Of course the suspension on this thing bottoms out whenever it hits any road gristle but I really don’t mind. I’ll just use my old retainer from junior high whenever I get on the road.

The Revolver:

I get bored easily. I mean REAL easily.

Cars, food, travel, the opposite sex… would any of these things truly be worth it if you just kept on ‘doing’ the same thing? Not for me.

Look, if I buy ‘new’ then I’m stuck with the same $50,000 vehicle for the next 12 years. I can’t stomach that thought.

Most cars, like most relationships, break down at some point. I want something that is good looking and reliable right before I dump it. That’s why I always lease!

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91 Comments on “Hammer Time: Who Should Lease?...”


  • avatar
    Educator(of teachers)Dan

    Thanks for giving me a laugh today, Lang. I think the math works best for the dying. Why not try to blow everything ya got? (Especially if you happen to hate your heirs and the tax man.)

  • avatar
    sitting@home

    “But moneywise? Nein. Nyet. No.”

    Funny text, but please explain the financials. If the lease is based on an expected residual then is there any difference financially to buying new and selling for that residual value ? If not then the stereotypes listed apply just as much to any new car shopper who intends to sell the moment the warranty is up.

    • 0 avatar
      FromaBuick6

      Well, for one, buying doesn’t lock you into X miles per year or a penalty. I drive 15,000+ miles a year…leasing is a non-starter for me.

      Sure, when you lease a car, you don’t need a lot of money down (if any), but you also don’t have a car when the payments are up. So you have to scramble to lease or buy another car, you can’t break the payment cycle. At least if you buy, the car’s yours when you send in the last payment, and you have the luxury of holding onto it indefinitely if your life situation changes. My parents used to religiously trade bottom-feeder Camcords every five years, but five years gradually became 7, then 10, then 12 years, thanks to unforeseen circumstances, different priorities and the realization that an endless cycle of new vehicles just isn’t necessary.

      The only time a lease makes “sense” is on a luxury car. But a luxury car is an extravagance, there awful values and most people who buy/lease them just can’t afford them. Period. If you really need that BMW driving experience, get a used one.

      • 0 avatar
        NulloModo

        If you can commit to owning a car for 10 years, yes, buying can work out ahead in the numbers. Most people however don’t keep their cars that long.

        Even in high mileage situations a lease can work out. Yes, the lease payments will be higher on a high mileage lease, as the higher the mileage, the lower the residual. However, when you drive a lot of miles on your car, it also lowers the resale value for a buy.

      • 0 avatar
        vbofw

        Nullo Nullo Nullo….if you can commit to 10 years buying CAN work out as cheaper? I would say it’s a virtual certainty.

        Even at 6 years, compare the balance sheet of the guy who financed (and owns an asset to sell) to the guy who completed two 36 month leases.

        I know cars aren’t solely about the money to everybody, but owning over the long run is most certainly cheaper on in 95% of situations.

      • 0 avatar
        SimonAlberta

        Well, it CAN work out cheaper to lease 3 cars versus owning 1 for 9 or 10 years…the repairs and maintainence costs could/should be WAY lower in the leasing scenario.

        Not saying it WILL be cheaper or that it would OFTEN be cheaper just that it COULD be.

        You’d have to analyze a large number of scenarios and be an excellent fortune teller to know whether it was ever going to work for you in any PARTICULAR situation though.

  • avatar
    Patrickj

    So, what is the answer when you have a spouse whose life goal is to own an Audi A4?

    The consensus here is that it’s reckless to own any Euro car without a warranty, buying a new one would cost $600 a month for 6 years (painful, but not unaffordable), and buying certified off-lease is overpriced by the definition of most.

    To me, leasing seems like the best of a set of bad options to get it out of her system.

    • 0 avatar
      ExPatBrit

      I agree, if you don’t plan on keeping it past warranty why bother “owning” it.

      We have had 4 Audis, all of them have been pretty reliable .

      However I DIY 99% of the maintenance otherwise I would be very poor.

      Mr Lang ,very amusing , I know at least one person of each category!

    • 0 avatar
      Educator(of teachers)Dan

      That’s why if I know I’m dying I’ll lease a German car – please don’t stop me from leasing a BMW 7 Series, Audi A8, or MB S class. If I recover I don’t want to own it out of warranty.

    • 0 avatar
      FromaBuick6

      The answer is to tell her to get over it. Sit down and explain what a financial black hole an A4/328i/C300/etc is, regardless if its financed, leased or a CPO. Then buy her one of the many perfectly good midsize sedans for $20-25k and drive it to the wheels fall off. Put the saved money towards a mortgage, retirement, other debt or a multitude of other things that are either more financially sound or more fulfilling that some overpriced, unreliable yuppie mobile.

      And if she balks at that, get a divorce, because that car is probably the least of your problems.

      • 0 avatar
        Patrickj

        I’ve been successful at talking her out of it for about 15 years, but am losing the “can’t afford it” excuse–largely due to an increase in her income.

        Not sure it’s worth trying to win, just looking for the most sensible way to lose at this point.

      • 0 avatar
        200k-min

        I had a wife that was dead set on the luxury vehicle. Spent years talking her out of it. Finally caved and bought the $50k car. Paid cash, as it’s pretty easy to save a big nest egg when you drive the common mans car for a decade or more without any car payments. She left me anyway.

        I don’t blame the car for the divorce, but in the end caving on my principles didn’t help anything in the marriage dept. When all was said and done I got the house and she got the car. Ten years from now the house will still be a place to live, but the luxury car will be all used up and worth little to nothing. My ex just didn’t have the “bigger picture” perspective.

      • 0 avatar
        sco

        Hoo, if only women were so simple.

    • 0 avatar
      ajla

      Just buy her a B5 version with the 2.8L.

    • 0 avatar
      mnm4ever

      Its not like shes asking for an R8 (like my wife wants!), or even an S4. The A4 is a perfectly fine mid-sized sedan and its very affordable to buy new, buy used, or lease. Let her get one for God’s sake!!

      There is nothing wrong with buying a used European car, stop letting the Consumer Reports readers scare you. Shop smart, do the research, and you will be fine. Or buy a new one. Or lease a new one. Work out the numbers, look for subsidized lease specials, those are almost always the best option. A standard non-subsidized lease is not usually that great of a deal. Audi is offering some lease and finance deals right now on the A4, along with $1500 cash back… the sample lease is $389/mo with $3k at inception. If you can live with the mileage restrictions, thats a pretty good deal. I only put slightly less money down on my purchase of a used GTI and my payment is about that.

    • 0 avatar
      Mathias

      Like others said: the A4 is a fine car. Some have nasty quirks, others are very durable; a matter of some luck. Either lease it & ‘get it out of her system’ like you said, or find yourself a good independent mechanic first who really knows these cars. Maintenance on Audis finicky, and lots of dealer service depts — esp. for VW/Audi! — or totally incompetent. They have a lot of captive customers, and it shows. Also, they can never use aftermarket anything, and Audi parts are expensive.
      A good indy will know when to go OEM and when to buy aftermarket, and he’ll know what service is crucial and what isn’t.

    • 0 avatar
      B.C.

      New spouse time? Probably cheaper, too. Anyone who doesn’t share compatible short/medium/long term views needs to get the boot, pronto.

      And an A4 is aiming a bit low when it comes to life goals …

      • 0 avatar
        rpn453

        You’d dump a wife because she wants a different car than you? A car that isn’t even terribly expensive or impractical? You must be perpetually single.

  • avatar
    ajla

    Can I please have the Ditz’s phone number?

  • avatar
    Mathias

    Okay, I’ll take the Ditz ;->

    I think there are plenty of people for whom leasing makes financial sense… they just may not be people who make good financial decisions in general. But when I think that my insurance costs are $70/month for each car, and that some leases run around $200/month, it’s hard to see it as such a bad idea. At least there’s a limit to the cost. I’ve seen people do a LOT worse with a purchase.

    The newly graduated lawyer might be a good example; if she’s putting in 70 hours/week trying to make partner for the next N years, having zero car worries might actually be an investment. The “BMW, BMW, or Audi” is a different story, but sensible shoes, with a subvented lease, why not?

    I’ve never leased before; I’m too much of a control freak. But I’ve seen some deals where I might be tempted.

  • avatar

    top three determinants should be miles driven per year, preferred term of possession, and cash vs finance.

  • avatar
    DC Bruce

    Well, I’m amused, too: and I’ve never leased. That said, it appears that, at certain times, certain luxury automakers have used cheap leases as a way of moving the metal without (in the short term at least) eroding the retail pricing of their cars, something that they don’t want to start doing. (The story is different when all of these cars came off lease and hit the used market 2-3 years later.) The math works if, at the end of the lease, you can purchase the car outright for less than you could buy the same car, in the same condition, etc. on the used market. And, of course, you make that purchase, rather than turn the car in and get a new lease.

    I have a feeling that, in reality, leasing is a habit that is not easily given up, however; and that few people do what I’m suggesting.

    And then, there’s the other problem of liquidating the lease if you find yourself in a financial jam — not as easy as selling a car that you own. At least two of my past car purchases were used cars less than a year old from people who said they needed to get rid of a car payment in order to get a mortgage to buy a house. Not only were both cars under the transferable factory warranty, but the owner of one of them had even purchased an extended warranty . . . also transferable.

    Sweet!

  • avatar
    shortthrowsixspeed

    my mom is a lifetime leaser. she’s had a new accord on lease every 2-3 years for the past several generations. She uses the car for work and deducts the payments. Also, she likes the convenience and the service. Honda knows it’s essentially their car and you’re just borrowing it, so they “gave” (she paid for it somewhere i’m sure) her free carwashes and paint treatments along with the free maintenance. now that she’s retiring, she’s gonna buy out the lease. it’s cheaper than other accords of the same year with similar miles and she knows that it’s been meticulously maintained. I wonder though how much that accord is costing her in total.

  • avatar
    Pch101

    Cars are generally a waste of money, regardless. If the goal is to be financially prudent, the best course of action is to get a bus pass.

    But this isn’t The Truth About Mass Transit. Some people like that new car smell just for the sake of it. I don’t see any bitterness against those who opt to buy filet mignon over liver, even though the filet costs several times more. I don’t see why aspersions have to be cast at those who fritter their money away on cars (just so long as they can afford them.)

    If the cost of renting the car costs less in depreciation plus interest that does buying the same car with debt plus interest (or, if paying cash, the lost opportunity cost of the money that is being immediately paid out), then I don’t see the problem with leasing, especially for those who intend to swap cars every 2-3 years, anyway. Of course, it isn’t financially optimal, but no car really is.

    Of course, a lot of people get screwed with leasing, just as they get screwed with buying anything else. But those who understand what it is (paying for depreciation at an imputed interest rate) can do well enough with it, particularly if the lease is subsidized and the anticipated residuals are high enough.

  • avatar
    Jeff Waingrow

    Lot’s of people who lease get to write the whole thing off as a business expense. When the lease ends, they drop it off and get whatever they then feel like having. From pickup until drop off three years later, no additional costs for them at all. For those not on a tight budget, it’s absolutely the nicest of luxuries. If life were only about spending the least, nobody would ever eat in a restaurant, go on a vacation or even buy a good set of golf clubs. And since leasers take the biggest hit on depreciation, they help their fellow citizens buy lightly used cars at very favorable prices. So leasers are thoughtful people too.

  • avatar
    SunnyvaleCA

    What is the consensis (if any) about the merits of buying a 2 to 4 year old car that was someone else’s lease but returned back to the dealer at expiration? I’ve heard that a very high percentage of BMWs are leased, but I’ve also heard some of the cars are abused (turbos reprogrammed, run around race tracks, not serviced) because the original “owner” knows he/she will be turning it in after a few years.

    In other news, I know people who lease but are probably overpaying and not even realizing it because they don’t understand how to evaluate the *combination* of up-front lease fees and monthly payments.

    Does leasing have an advantage in a high-tax state like California? If I buy a car I pay 9.25% sales tax on the entire cost of the car, but if I lease I only pay that tax on… well, something less; I’m not sure what.

    I worked for a company that leased top-level managers the “car of their choice.” The added benefit is that they worked a very high lease cost and a very low end-of-lease buyout, which the employee was allowed to take personally. So the company wrote off the (very high cost) lease against company income and then the employee bought the car for cheap after 3 years but paid very little (after tax) money for it.

    • 0 avatar
      LeMansteve

      My 2004 330i was purchased from a private party who bought the car in 2006 after his lease was up. He had records of regular service at the dealer and really didn’t drive the car much (45.5k over 4 years). I bought the car in 12/2008 and it has been great. I rode out the extended maintenance plan and warranty until May 2010! The car has required little more than regular oil services and tires. Any maintenance I can do myself, I do. The car is very easy to work on.

      My next car will probably be a…used BMW.

      • 0 avatar
        DC Bruce

        As the owner of a CPO ’01 Z3 (purchased by me in ’03), I don’t subscribe to the “drive the shit out of it” theory for every BMW. In addition to the CPO warranty, my car had every indication of a very fastidious first owner, including, for example a bra for the front end. I’d be more concerned about buying such a car from a second owner.

        The 3-series comes in all flavors . . . some hot, some pretty mild. It’s doubtful that a 328i with an automatic was subjected to a lot of hoonery by its first owner. OTOH, I’d stay away from buying a used M3, because that’s probably a different story.

        Sadly, according to my independent mechanic who has cared for my Z3 since the CPO warranty expired, BMWs are becoming increasingly complex cars, which rules out shade tree mechanics. PWM-driven water and oil pumps are now the norm in the interest of eking out a bit more fuel economy, with complex electrical system management controls that try to capture as much wasted energy from the car as possible and store it in the battery. So, you’re next used BMW may not be as nice in that respect as your ’04.

    • 0 avatar
      200k-min

      I’ve bought an off lease vehicle before and had absolutely zero problems with it. Then again, it wasn’t a hoon-mobile. I think off lease is just fine but you have to be careful of what you are buying. Would I buy an off lease Mustang or Camaro? Heck no. Neither would I buy an off lease 3-series. Everyone I know that has a 3-series is a kid who “can just afford the payments” and flogs the living hell out of it. Who gives a damn if BMW is picking up the maintenance if it’s abused. Meanwhile I know actual adults that lease 5-series and don’t try to beat the car within an inch of its life. I’ve always bought used, but always steered clear of vehicles that appeal to the “less mature” drivers and had zero problems.

  • avatar
    mcw

    Odd conversations for a car website. People have different priorities. A car is entertainment for some. Others like golf, travel, wine, whatever it may be.

    My wife and I have no debt other than a mortgage. We both max out our 401k and have extra savings. Is it irresponsible to buy or lease an Audi A4 rather than buy and keep a Honda Accord for ten years and put the difference in savings? Is it equally so if you have a lengthy commute in traffic and want to enjoy a nice car? Is it shallow to want a nice car? Is it irresponsible to travel rather than put that money towards the kids’ college funds?

    One could always save more and be more frugal, but there should be a reasonable balance. I don’t think leasing a luxury car for $600 a month is necessarily irresponsible. But if you are doing it while having massive debt or playing the credit card balance transfer game than it’s not the most prudent decision.

  • avatar
    mazder3

    I knew one of those dying leasers. Terminal cancer. Poor guy outlived his beloved leased Maxima and he got put/put himself/i dunno into a Murano. I would hate to be the Nissan dealer who sold him that Murano. He passed on inside of it after parking it at home.

  • avatar
    WaftableTorque

    The advertising industry is more clever than I thought. If that leasing photo with the skyscraper reflection isn’t subliminally phallic, I don’t know what is.

  • avatar
    dwford

    Here’s how I explain leasing to my customers: the 2012 Elantra GLS has a 66% residual for 36 months/12k per year. If you lease 2 Elantras over 6 years, you have paid for only 68% of a car, where as if you BUY an Elantra for 72 months, you are paying for 100% of the car over that time. Plus, you will do next to no maintenance on it, just 5 oil changes/ tire rotations. No brainer. Your lease may vary.

    You can get screwed leasing, though. It is too easy to focus solely on payment and end up letting the dealer lease it to you at above MSRP. The money factor can also be marked up on some leases – though not usually the price leader advertised models.

    • 0 avatar
      FromaBuick6

      But if you buy the Elantra, you’ll pay it off in 6 years (although, really, it should be 5 years, because nobody should be financing an economy car for 72 months) and still have four years of warranty coverage, without a monthly payment.

      • 0 avatar
        NulloModo

        You’ll have 4 years of powertrain, but the bumper to bumper coverage will have expired.

        Here’s another example, based on a 2011 Fiesta SES Hatchback, MSRP $21,090, buy vs lease, both at $500 over invoice, $3,000 down, assuming $500 dealer fee and $200 in misc. state and tag fees, and 6% sales tax:

        Lease for 36 months with 15,000 miles allowed per year -
        Payment $251, lease end residual $10,755

        Buy for 60 months at 3.9% interest –
        Payment $363, principal owed 36 months in $8,048

        At that 36 month point you would have spent $9,036 in payments on the lease, vs $13,068 in payments on the buy. Assuming you wanted to buy out the car in cash at that time your total spent on the finance deal would be $21,116, while on the lease the total would be $20,420.

        In this case leasing the car actually saves you $700 if you want to buy the car out (and if you want to finance the buyout, yes, you are financing a larger amount at the end of the lease, but when you take into account the savings made on the payments up to that point, or if you were to have saved the difference in each monthly payment and used it as a down payment on the buyout, you still come out ahead) or, if you decide three years in you would rather have a different vehicle, you’ve paid $4,032 less over the course of three years, and you can walk away free and clear. Chances are you won’t have $4,000 worth of equity in that car three years into a five year loan.

      • 0 avatar
        Steve B

        I took out a 72 month loan on an economy car. I mainly took it because the current incentive was a $1K military rebate if financed through Toyota. I planned to take it out, pay it for a few months, and then just pay the whole thing off, or pay as much or as little as I want on it.

        Then I started thinking: At 3.39%, if inflation rates kick up, the real interest rate will be very low. If I put the money I would have spent to pay it off into a MMA or Index Fund, I may very well do better at the end than if I’d just paid it off, and will have more in my savings for any bumps in the road.

    • 0 avatar
      Patrickj

      Though if you bought, and own one 6 year old Elantra with 72,000 miles, you have a car worth 30% or more of new value and have been without a payment for a year or more.

      The 66% residual is a market distortion that may be worth taking advantage of, since a car with 55% is historically considered to be pretty good resale.

      With reasonable care, your Elantra will be well shy of being a beater for 72,000 more miles.

      • 0 avatar
        dwford

        66% is pretty high, but given the insane auction prices right now, 66% is not too far off. Sonata and Accent are around 59% for 36 months. As the car ages, you start to get into the more expensive maintenance items – tires, brakes, shocks, etc. So even without a car loan payment, it is unlikely that your only costs will be gas and insurance in the paid off years.

        Leasing is also providing you flexibility should your needs change. 3 years into a 72 month auto loan, you are probably at break-even or still under water, and need to quickly change vehicles could be expensive. Leasing allows you to reassess your vehicle needs more easily. Look at all the people who owned the huge SUVs in 2008. They got killed trying to trade them when gas prices spiked. If they had leased, they could have just finished up the lease and let the automaker take the hit – which those who leased were able to do.

    • 0 avatar
      mnm4ever

      @dwford… your explanation is a great example of why leasing is still so confusing to consumers!! Didnt clear up a thing! :)

      @Nullo… thank you for 2 such concise explanations which clearly and completely show the difference, and similarities, of leasing vs. buying.

  • avatar
    golden2husky

    Leasing is generally for those who want more car than they can afford, but there are exceptions. Consider this move:

    Back in the day my dad owned his own business. He leased a 1988 Mark VII LSC and structured the lease to increase the size of the payments to reduce the buyout number. The company paid the monthly lease payments. When the lease was near its end, the company put four new tires on it and did some PM as well. I bought the car from the leasing company for the predetermined residual for thousands less than true market value. A big win for me!!

  • avatar
    mnm4ever

    I appreciate the humor along with the financial education. But your examples are extreme ends of the system… the person who cannot really afford what they want to drive, the person who doesnt know cars or research thier “deal” very well, the people who blindly buy whatever thier social circle expects them to buy, etc. Those types of people make poor financial decisions on many things, not only leasing cars. They would make the exact same mistakes even if leasing didnt exist, they would simply BUY the “wrong” car.

    This is a blog for enthusiasts, not economists. There is a passion involved in automobile ownership and it doesnt always make the best financial option. There is nothing inherently WRONG with wanting to drive an Audi instead of an Accord, if my wife wanted one and it was affordable to us, I would let her get it, and I would decide the best method of financing/leasing/buying for us. Just because someone makes a choice thats different from your own, doesnt make them stupid or wrong, its just what works for them.

    • 0 avatar
      carguy

      +1 For many cars are emotional objects just like boats, art, fine wine and travel are for other people. This has nothing to do with economic rationalism – its what people want and leases are a way for them to get it.

      You may as well write an article berating drinkers of good beer because cheaper beer will get you just as drunk for half the money.

      • 0 avatar
        Pch101

        It makes sense not to overpay for cars and to negotiate viciously…er, I mean well, when buying them.

        It makes sense to avoid leasing if buying is a better option.

        It makes sense to avoid certain vehicles that are particularly bad or in jeopardy of becoming orphans (Saab, anyone?)

        But yes, it doesn’t make sense to piss all over someone’s decision to get a decent set of wheels if the buyer can afford it. And it doesn’t make sense to assume that leasing is inherently bad (although it often is — the majority of car buyers really should avoid it.)

        Generally speaking, cars don’t make good financial sense. Used ones aren’t necessarily a bargain, either, particularly when buying one involves purchasing someone else’s abuse and lack of maintenance. Cars are almost never an investment, and shouldn’t be treated as such. Love isn’t a rational thing.

      • 0 avatar
        WaftableTorque

        A lot of sub-prime people want nice furniture and the latest electronics. That still doesn’t mean that rent-to-own is good for them, whatever emotional attachment they have to a $1000 plasma TV that will cost them $25 a week for the next 3 years. Bad math is still bad math. Automotive leasing isn’t quite that rapacious, though I’m sure some will try.

      • 0 avatar
        NulloModo

        WaftableTorque –

        A big difference between leasing and rent to own is that in the case of rent to own stores the effective interest rate is usually sky high. In the case of leasing, the lease rate or money factor often ends up being lower than the available bank rates for a finance at that time.

    • 0 avatar

      Enthusiasts and economists are not mutually exclusive sets. Furthermore, economists understand that sometimes a financially irrational purchase can actually help a consumer (people are always consumers in economists’ jargon) maximize his or her utility.

      Having said all that, I don’t understand leasing except in the case of someone who gets a real financial advantage and is not using it to have more car than they can afford. But I probably fit Steve’s model of a sensible car buyer. Nonetheless, when I push the engine of my ’99 Accord 5-speed above 4,000, or round the corners at speed the way they taught me at Skip Barber, the voice inside my head says, “I love this car!” There is a certain off-ramp where I exit the highway to get to my coffee jernt, which has a sharp curve, and then a long, gentle curve. I would squeal my tires around the sharp curve, and then floor it. One day, and for several weeks after that, there was a cop on that ramp.

      • 0 avatar
        Sam P

        I work in a finance-related field. I know that leasing a car can be a better deal than buying for some consumers.

        I don’t care. I want to own my cars outright. Signing up for what’s essentially a long term car rental doesn’t appeal to me, even if I’m saving a few bucks.

      • 0 avatar
        mnm4ever

        @David, nothing wrong with that feeling at all, the 99 Accord was an especially fun yet practical and reliable car. I doubt you would get the same joy driving a brand new one! I have the same feelings about our 2001 MR2, I dont think anyone is saying buying a used car is a bad deal.

        The point I am making is, used cars are not the best choice for everyone. There is a risk in buying used, and the typical buyer out there who doesnt know cars and who gets taken advantage of by repair shops is afraid of risk.

        So, if you are a typical consumer who wants to drive a new car every 3 yrs, always in warranty with the least amount of risk, and you always drive within the typical mileage limitations of a lease, and you can shop for specials and subsidized deals, there is no reason to avoid leasing simply because you dont understand it, or because you have some deep seated need to “own” your car (though if you finance the car, do you really own it?). If you are going to choose to be in a perpetual payment anyway, why not lease and cut that payment by a third or more?

  • avatar
    mountainman

    Toyonda Monkey Fart – gotta love it.

    I pile on way too many miles in a given year. I could never lease a car, ever.

  • avatar

    whenever I read about leasing, it looks more like a thing you should never do, I do not agree with that assumption, there are way too many factors that need to be considered, in my case, I am willing to put $240 a month to drive a new car, it works for me, I’m doing about 14k miles per year.
    Also, I own a smart phone that cost me money every month (data plan) with 8 mega pixel camera, do I use it as a camera? no, I bought myself a Nikon SLR for over $1000 dollar, why? because I’m willing to spend that amount of money on something that ls important to me.
    For some reason, we look at cars or what we spend on them like something different from anything else we spend money on, I think it’s more of a personal priority issue.

  • avatar
    ixim

    Lease – Add up all the payments, upfront $$, if any, turn-in $$, if any and divide by the number of months = your actual monthly cost. Keep leasing a new one every 3 years. Buy – Add in all payments + normal higher mileage expenses like tires, batteries, brake jobs, major tuneups/services, etc. In both cases, divide the total cost [leave out gas, tolls, insurance] by the number of miles driven over, say, 5, 10 years. Cost per mile may very well be the same. And, with the leases, you always have a warranted, latest model ride. Works best with subsidized leases, though. YMMV.

    • 0 avatar

      ixim:

      Totally agree with you, my last car was equipped with 17 inch tires that cost me $800 to replace after 35k miles.
      You forgot one more thing, you always drive a safer car.

      • 0 avatar
        ixim

        I should have mentioned the cheaper insurance on the older car. I also should have mentioned the reduced dependability/safety factor of an older car. Do the long division – there’s still not much if any difference per mile between a cheap lease [NOT one of those $5K down; $599/mo. luxo deals] and a 150K miles/10 years + driving it into the ground scenario.

  • avatar
    jmo

    From what I understand – if you drive less than 15k a year and you like having a new car every three years – then leasing if often the cheapest option.

    I’d like Steve to explain what he has against people would we prefer to drive a new car every day vs. spending the money on say food, booze, a boat, a vacation, a pool or anything else that people spend their money on.

    This of course assumes that Steve spends more than is absolutely necessary for his survival.

    • 0 avatar
      SunnyvaleCA

      I agree with your post. That said, I think Mr. Lang was mostly just having some fun with his article (although his stereotypes are uncomfortably accurate).

      I suspect that the biggest rip-offs in leasing are from the financially illiterate. When someone sees that they can put “no money down” for “just a little bit more per month” or for “keep the same monthly payment but go for 4 years instead of 2″ you just have to shake your head. Call me a geek, but my first question would be “give me your formula and I’ll tell you my terms.”. Of course if they actually told me the formula I’d probably run away screaming. :-)

      Mr. Lang, please follow up with an article where you spill the beans about the inside scoop on leasing! Does BMW really lease 90% of their new fleet? Why? What leases are “better values”? Is it just a matter or tax evasion or the desire to pre-pay to have a new car every 3 years? I bought my first *new* car in 2009 and was about to write the check when the dealer said “would you like 1.9% financing?” The answer was an immediate “yes please! — I’ll pre-pay my 4.75% home loan.” Might the dealer have been able to surprise me with some sort of fantastic lease deal with such no-brainer finances?

    • 0 avatar
      mnm4ever

      I agree with you as well, and I think the main point is that people who drive less than 15k miles a year and who like driving a new car every 3 yrs are thought to be fiscally irresponsible, which is obviously not true. It really has nothing to do with leasing vs buying, from a purely financial point of view, choosing a brand new car is not the most cost effective option. But the same can be said of anything, why buy a new TV or new furniture? They can be bought used for a fraction of the new price, just search Craigslist for deals.

      We buy new because its easier, less hassle, more choices, less risk, and basically, its nice to have a brand new car sometime. For some people, a lease works out well, especially a subsidized deal on a less popular car. Other times, not so much.

      • 0 avatar
        jmo

        from a purely financial point of view, choosing a brand new car is not the most cost effective option.

        That was true many years ago but it’s not true now. In many instances a new car can end up being cheaper than a 3 year old car in terms of total cost of ownership.

      • 0 avatar
        mnm4ever

        I agree, but I didnt say a 3yo used car, and I never said the savings were significant either way. If you want to consider strictly the cheapest option, you buy a used car. Probably a really old used car, for example I saw a 1985 Oldsmobile Calais with 50k original miles in showroom condition for $2000 just a few days ago. I know you are a big proponent of buying a new Honda over a used Honda because they tend to sell for such a price premium, but almost any other brand doesnt enjoy such resale values. And if you buy a 1 day old Honda that costs even $1 less than the same one thats brand new, there is a savings there. Its miniscule, but its there.

        I would choose the new one too, which was my point to @200k-min with his Accord example below… buying a used Accord for $15k when new ones could have been had for $16k simply isnt a good deal. But I bought a 1yo GTI for $19k, a brand new one just like it was selling for $27k, I consider that to be a significant savings and worth buying used.

      • 0 avatar
        jmo

        Probably a really old used car, for example I saw a 1985 Oldsmobile Calais with 50k original miles in showroom condition for $2000 just a few days ago.

        As someone else mentioned the car market is very efficient, if the car is only selling for $2000 there’s a reason.

        But I bought a 1yo GTI for $19k, a brand new one just like it was selling for $27k

        And by “selling” you don’t mean MSRP do you? Mine was $27k but after cash back and $1000 owner loyalty it was 23 and change. Consider that a one year old GTI has used up 6% of its useful life or $1440 we’re down to 21,500. Now, looking online the only way you could have got a 1 year old GTI for 19k was if it wasn’t CPO or it had a lot of miles.

        You may think you saved 8k but you’re lucky to have saved 2k. And, if it isn’t CPO and considering you don’t know what really happened to the car before you got it – you might not saved anything.

      • 0 avatar
        mnm4ever

        @jmo, I always enjoy when you like to argue over things I agree with you on… so fun!!

        It is an 85 Olds Calais, we are not talking the pinnacle of automotive engineering. Its really worth $2k, and it sold within days, and it was unadvertised. It was a blue-hair special, rare to find one in such nice shape, but not worth a lot of money, its a 27yo car. The car market is only efficient for fairly new vehicles at dealerships, when you get into the old/high mileage market, its like the wild west, and good deals go fast. I should have bought it for my daughter when I first saw it, but she HATED it, and I didnt feel like fighting about it. She will regret it when she ends up with an old Accord with matte paint and 120k miles for the same price. :)

        And NO, I dont mean MSRP, just like I dont mean my car was advertised at $19k either. I am talking out the door price, after haggling, including taxes, doc fees, etc. I cross-shopped 3 different GTIs; 1 new 2010 model, the used 2008 model I got, a used 2009 base model, along with a new leftover 2009 Civic Si. The 2010 GTI was haggled down to $27k, my used one was haggled down to $19k (advertised for $22ish IIRC), for a real world cost savings of $8k. It did not have high miles, it had 12k miles when I bought it, but I mistyped, it was 2 model years old when I bought it, although it had only been titled for 1 yr, as it was a late seller originally, and the 2010′s had just come out then. But even with your 6%/yr estimate figured for 2 years (12%), and using the actual selling price, not the sticker price to calculate, that would put the remaining value at around $23,500, for an actual savings of $4500, which to me was still worthwhile, as well as ensuring I didnt have to absorb the huge initial depreciation that a new VW tends to take. Also, since I couldnt care less if my GTI was a 2010 (I dont like the new look anyway), a 2009, or a 2008, I was happy to pay even less, since it had such low miles and was in showroom condition.

        I do not like CPO cars, I think thats silly for someone to pay a premium price for a used car just to get an extended warranty, which is all a CPO is. I had the car inspected by my mechanic and a friend who wholesales used cars, I had a CarFax and an Autocheck pulled on it, and it had 12k miles and was well within the factory warranty. Not one thing on the car was damaged, or even scratched, it was, quite simply, perfect. I was pissed that the dealership lost the manual though. The only part of the car that causes me significant worry as for reliability is the DSG transmission, and my model year comes with a factory 100k warranty on the DSG, which is much better than the CPO warranty VW offers anyway. And if I really want an extended warranty, there are better options than the one VW sells anyway, so why bother with a CPO?? By the time you pay the premium you are, as you like to say, better off buying new.

        Now, the big thing I did miss out on was free maintenance, which came on the 2009 and 2010 model. But I dont like VW dealers, I dont think they offer “scheduled” free oil changes, and I dont trust them anyways. All I would have gotten was 4 or 5 free oil changes, and 1 free tran fluid change. I ended up getting the trans fluid change anyway for free, thanks to a recall on the DSG, and I do my own oil changes, so far I have spent around $200 on those. So I am sure you will want to throw those into your value calculator, but it wasnt a big deal to me. The 2009 used base model was negoiated down to $20k, $1k more than the 2008, but it had no sunroof, no upgraded audio, some of the accessories were not included, and the biggest thing was it was a 2-dr, I really wanted a 4-dr. It was probably a better deal, and I loved that it was red, but I am still happy with my choice.

        So, worse case scenario, I saved about $4500 by getting my used GTI vs. buying a new one, and most importantly, I am really happy with the car as it closes in on 50k miles. I considered it an $8000 savings off the only other GTI I was considering, so I am going with my bigger savings TO ME, if not to everyone. Now that the bumper to bumper warranty is almost gone, I suppose my VW joy will be tested, but for now, I am happy.

        And, to be fair to your original point THAT I WAS AGREEING WITH ALL ALONG, the Civic Si was by far the best deal. I was able to negotiate an insane price on it… out the door for just a tad under $20k, with floor mats and tinted windows and even a clear bra installed. It was a left-over 2009, one of only like 3 in the state, and the only red one, which was the ONLY color my wife was interested in. They had rebates, incentives, dealer cash, even special financing available on it, just a steal. There were 3 or 4 used Civic Si’s I found, the cheapest one was advertised on internet sale for $16999, with 60k miles, a 2007 model, in ugly silver with aftermarket ugly wheels, obviously owned by a young person and simply not in good shape at all. The remaining used ones were priced higher than the brand new one I was going to get. It was a no-brainer and easily supporting your theory that in some cases you are better off buying new. The new Si was perfect, never hooned, etc, and its a Honda, most likely will never require a major repair, or even a minor repair. I probably should have got that car. My wife wanted that car, she hated the GTI, she loved the Si. And it was a real stick shift, no DSG worries!!! But in the end, thats why I didnt get it… my wife. If I had gotten the Si, I would have driven it for about 2 months and she would have taken it over, and it wouldnt have been “MY CAR”. The GTI is all mine, I dont have to fight over it, so I am happy. Check with me in another 50k miles to see if I am still happy with that choice!!

  • avatar
    Steven Lang

    Interesting.

    A lot of folks have are assuming that I have even a small amount of genuine interest in what other people end up doing with their money.

    Nothing can be further from the truth.

    Your side table can be a Vladimir Kagan worth $10,000… or a free one you found near a dumpster. It doesn’t matter to me.

    The same goes with your car.

    I don’t care. Not even a bit. If it makes you happy… then wonderful. If it doesn’t… so be it. Life goes on.

    But if I’m asked whether it makes sense for someone to lease I’m going to say, “Hell no!” 99 times out of 100. It may work for perhaps 2% of consumers… and most of those are extreme examples of consumers who are already making foolish financial decisions.

    As for my own frugal nature, so far as I can tell I am already living the good life. Heck I spent this past weekend at a nice lakehouse with a big boat, jet skis, and absolutely awesome food. But I would never lease any of the big toys unless I could sell them for the same or more money at some point. But hey, that’s just me.

    I don’t believe in throwing a five figure sum into a depreciating asset that I don’t even get to own. But you know what? If you do then that’s your decision. Enjoy it.

    • 0 avatar
      Astigmatism

      And yet, Steve, there’s unquestionably a mindset on this board that people should never buy German cars, that everybody else is overpaying for their ride, that buying a 10-year-old Crown Vic and driving it for the next 800,000 miles – and servicing it yourself with parts you found in a salvage yard – is somehow the only morally worthy thing to do.

      I read TTAC largely because it’s an easy and amusing enough way to follow industry news and keep tabs on real-world reliability, but the Suze Orman-style paternalistic attitude that causes every New or Used article to end up with the advice above, regardless of the individual situation, is just comical. A woman offers to buy her newly-graduated daughter a car for $8k or so; everyone assumes she’s about to lose her job, and tells the daughter to get a bus pas and put the money into an annuity. A guy wants to trade up to a larger car so that his family, kids and dog are more comfortable; he’s told he’s being financially stupid and doesn’t really need more room.

      I like cars, and will happily spend a larger slice of my income on a car in exchange for spending less on something else. It so happens that I bought a used car because I got a great deal on one and I’m saving up for a down payment on a house; but plenty of people legitimately like driving new cars, get geeked out by the feel of a BMW or Audi, and don’t feel like going through the hassle or up-front cost of a bank loan. For them, leasing is a perfectly reasonable decision.

      Besides, as someone who works in the structured finance field: very smart billion-dollar companies lease properties every day. Virtually any airplane you ride on is leased from a finance company. Consumer lease rates aren’t honestly all that much worse than what the big boys are getting these days – it all gets securitized to the same folks, at pretty much the same rates, anyway. If it works for them, why shouldn’t it work for you?

      • 0 avatar
        OhioPilot09

        +1,000,000

        Of course it doesn’t hurt that I’m one of people deemed financially stupid for wanting space for my growing family…

        People write questions to TTAC for honest feedback on their situation, not a lecture on how to live. I almost stopped reading New or Used since everytime the conclusion is “drive your car until it dies or you do, whichever comes first.”

      • 0 avatar
        jkross22

        Astigmatism,

        I agree with you. It’s an odd combination of passion and some odd strain of paternalism that gets kicked up when people ask for advice on the ride they want. Great observation on your part.

    • 0 avatar
      jmo

      A lot of folks have are assuming that I have even a small amount of genuine interest in what other people end up doing with their money.

      Nothing can be further from the truth

      Can’t agree with you there. You seem to derive a great deal of your self worth from judging others – and the degree that others may actually be making valid choices bothers you a lot.

      You may say you don’t agree – but everything you write indicates the opposite.

  • avatar
    200k-min

    I bought a loaded up ’99 Honda Accord EX-L just off-lease in 2001. It had just under 30k miles on it and I picked it up for a smidge over $15k. It was not CPO or anything, basically dropped off, oil changed, good detail and sold to me.

    Ten years later the vehile has about 180,000 miles on it. Since I’ve averaged about 15,000 miles/year a lease could have worked for me on that front. So, what does a top end Accord lease for? Honda.com is advertising a stripped 5 speed LX Accord right now for $1,999 down and $189/month for 36 months. That’s $8803 at the end of the term, excluding other fees. Over three lease terms I’d be in for $26,409 + $1,999 + X months of the 4th lease term. All in I’d be over the $30k total invested at 10 years. And I remind you, that’s for a stripped down vehicle ~ but new.

    Instead I’m still driving my ’99 with all those miles on it. What have I done since my original $15k purchase. Well, it’s on a 3rd set of tires, I’ve done one timing belt change, wheel bearings all around, new coils and stuts, standard oil changes, coolant flushes, tranny service. Aside from that, not much else, and I remind you this is over a decade, not a year or two. I do my own oil changes, but everything else is done by a trusted independant mechanic. Being a Quicken junkie I know exactly what I’ve spent which to date is just under $11,000.

    So I’m in for $26k where the lease option would put me over $30k (very conservative) at this point. Then again, I own my vehicle and it’s still runs like a top. Every month I keep driving it the dividends pay me back more.

    Another note, I’m on cheap liability only insurance. $500/year, that’s it. Doubtful a lease would allow me to self-insure for collision and comp. That’s another cost, including much increased license tab fees for a new vehicle. But just in the purchase and maintenace dept I’m already $4k ahead.

    Driving a new car all the time just doesn’t appeal to me and cash in the bank appeals to other things I want. Still have my eye on getting a mid-90′s Acura NSX. After all, there is a reason I do read an enthusiast site like this one.

    • 0 avatar
      vbofw

      you’ve saved $4k in 10 years. Or $33 a month. I tip my hat to the analysis, but assume many if not most people would be happy to trade that $33 per month to drive a new car.

      • 0 avatar
        Astigmatism

        Perfectly put.

        Also: I’m betting you can do a lot better than $1999 down and $189 a month on a base-model Accord. Scanning the hometown Boston Globe autos section: 2011 Accord LX for $2900 down plus fees, $119/month for 36 months; 2011 Accord LX for $999 cap cost reduction + lease startup fees due at signing, $169/month for 36 months. Heck, six months ago I was offered an Infiniti G25 for nothing – $0, including fees – down, $299/month for 36 months at 15k miles/year. If you’re looking for a car that isn’t exactly flying off the lot, the lease company will practically pay you.

      • 0 avatar
        mnm4ever

        Funny, I was thinking the exact same thing…. $33 a month… big deal. For $33 a month, you can drive a brand new car and never worry about any big repair bills, no worry about taking a long trip and breaking down, or the car not starting one day when you simply dont have time to mess with it. Not to mention, the original purchase price seems high to me… $15k for a 3yo 99 Accord with 30k miles?? In 2001 IIRC you could buy a brand new Accord for around $16k if you stuck with a 4cyl 5sp model.

      • 0 avatar
        vbofw

        to be fair, in this particular situation the $33 a month savings is AFTER repairs. So the pre-repair savings is $125 per month, for 10 years.

      • 0 avatar
        mnm4ever

        You cant really eliminate the repair costs from the picture, thats the point. He said he spent $11k in maintenance, thats significant.

    • 0 avatar
      LectroByte

      A better comparison might have been buying a new car and driving it for 10 years versus the lease, rather than comparing leasing to buying a CPO and keeping it. You spent about the same amount of money, but never got that new car smell. Not sure saving the $33 / month there would be worth it to me either, I do all my own maintenance for the most part but at some point you start to trust the car less and less, start to want to rent something for a long trip, more little things breaking, more shop visits etc.

      • 0 avatar
        200k-min

        My point was that there is savings in buying over leasing when you add in the purchase price and maintenance, all be it small. I also bought a loaded EX-L model, my example is the stripper DX Accord. A least on the EX model would definately be more. The new car would have more bells and whistles, but things like leather and sunroof don’t change, but would be added cost in every lease.

        The real savings add up in taxes and fees over the long run. I mentioned the fact that I dropped collision and comp on a 10+ year old vehicle. That savings is huge. My annual license tab fees are only $50 vs. $500+ on a new vehicle.

        Also, the longer I drive the old beater the bigger the payoff becomes. Not saying my model is perfect, but when the goal is long term savings for other toys it works. Not saying nobody should lease, just don’t tell me it’s a financial win.

      • 0 avatar
        LectroByte

        You’ve basically compared buying and keeping a used car to leasing a new one, that still seems like apples and oranges. I do see your point, but I’m sure some folks would say you would have been way better off financially to buy one that is 5 years old with 60k on it, and then keep it for 6 or 7 years, and then find another five year old.

      • 0 avatar
        mnm4ever

        I dont think they even make a DX Accord anymore, and the LX is not really a stripper, the only thing you give up is a sunroof and leather, and I think you would find the lease payment wouldnt change too much even if you moved up to the EX-L.

        Your insurance savings is also misleading, you were not able to drop full coverage for the entire time, only recently. Basically, if you finance, you need full coverage. And if the car is worth more than around $5k, you would be better off keeping full coverage. Its only when the car reaches beater status that you can take that risk.

        If anything, your example proves the value of leasing, as it shows the minimal savings acheived by financing a slightly used car and keeping it maintained for 10+ yrs, vs. leasing a new car every 3 yrs.

  • avatar
    jmo

    Still have my eye on getting a mid-90′s Acura NSX. After all, there is a reason I do read an enthusiast site like this one.

    And that is fantastic! I know people similar to you who drive an older Accord and used the money saved to help pay for boats, motor cycles, jet skis, snow mobiles, etc.

    But, I’m sure you’d could understand someone thinking – “You know what, rather than have an Accord and a CBR and a Jet Ski- I’d rather just have a new MDX every 3 years.”

  • avatar
    geozinger

    I never leased until about 10 years ago. By then I had two small children and was worried that the older cars my wife and I drove were becoming unsafe (in terms of technology, airbags, etc).

    We ended up leasing three cars consecutively over eight years. It bugged me that it was essentially a long-term rental, but it was good to know that the car was more reliable and safer than the older cars we had when the kids were very young. Now that my kids have reached adulthood, we bought a nice car, and I have old beaters for me to play with.

    Unless my life situation changes drastically, I will stick to buying cars rather than leasing. But for others, I believe it’s a good alternative.

  • avatar

    I think Steve is channelling Dave Ramsey. I love it!

    I leased a Miata for 2 years. I enjoyed the car immensely, but I’d rather not have a monthly payment, so I’ll continue to drive my 5 year old paid for car until I can buy a lightly used car for cash.

    I don’t understand why people get so adamant one way or another. Who cares what other people do with their money? Other people’s advice is different from yours. That’s what makes these forums great. Lots of different views.

    For what it’s worth, I am unexpectedly replacing my broken HVAC system tomorrow to the tune of $6,600. Had I still had a car payment I would not have been able to save as much money, and then this repair would have depleted my savings completely. You never know what life is going to deal you, that’s why it’s better to have less obligations.

    • 0 avatar
      jmo

      Had I still had a car payment I would not have been able to save as much money

      I guess I just object to the idea that the “nice car” money is coming out of money that should have been saved, rather than being redirected from any of the million other things people waste money on.

  • avatar
    JMII

    My brother (and his wife) like to lease: they get a new car every 3 years with no worries and are happy with the lower payments. So if you want a new vehicle every few years you might as well lease as you’ll always have payments. The math doesn’t make sense but you avoid having to sell your car privately and then just repeat the headache again 2 years from now.

    Now a few years ago my brother got a killer lease deal on VW Golf 337 (special edition). After the lease was over the buy out amount was a fraction of what the car was worth due to its limited production run. So he bought it and then immediately sold it (within three days) cashing out with a nice chunk of change. On the other hand I leased a car once and it was a huge waste – basically worthless in the end (Mitsubishi Eclipse) however it did get me a nicer car for less per month, so it wasn’t a total loss, I really enjoyed the car and it had oil consumption issues so I was glad to offload back to the dealer.

    However one of the reasons I have a spare vehicle now is because I purchased all my cars since and have kept them a long time (9+ years) which means several years of ZERO payments. The best payment is NO payment! Our Volvo was bought coming off a lease (good deals to be had) and my next car will be a used purchase just so we can manage a short 3 year financing deal… and once again be payment free again as quick as possible.

    And yes I own a boat… and was only able to do that because I bought used vehicles and paid them off quickly. In the “waste of money” category a boat is #1, so I don’t judge other people’s “foolish” leasing habits. You have to drive your car every day so do whatever makes you happy, even if the math doesn’t make sense.

    • 0 avatar
      jmo

      You have to drive your car every day so do whatever makes you happy, even if the math doesn’t make sense.

      In both cases the math makes sense in terms of $ per unit of enjoyment. It being summer, some people might prefer an Accord and a boat while others would prefer just an A5 cabriolet. It just depends on where you find the most value.

  • avatar
    Corky Boyd

    Since the early 1990s I have done only leases. Part was the appeal of artificailly low lease prices manufacturers were giving until recently, especially in the Detroit area where I lived until 2001. By leasing I avoided the ultimate indignity of new car acquisition, determining the value of your turn in. On a lease — interest, depreciation and most importantly the residual value is predetermined at the time of the lease. You just make the payments and barring any damage, there are no adjustments.

    To lease properly you must do your homework and you must be flexible. If you have your heart set on a red Escalade with an upgraded trim level, and there are no factory lease programs on it, you will get hosed. Newspapers used to be the best source to find what the market is. I saved $90 a month by having an ad for a Grand Cherokee from another dealer in hand. You will get hosed if you just walk in and ask for a lease quote. Even if there is a factory program, dealers won’t quote it unless you ask. Today you can’t rely newspapers for the latest programs. But most manufacturers have websites that will give you that information.

    Earlier this year I found the Cadillac CTS model I wanted to lease was a strippo (no leather interior), so I leased a Hyundai Genesis.

    People who don’t lease and hold their cars two or three years after their payments stop are still being hit with depreciation often $2 or 3 thousand a year ($150 to 250/month). You still have to make that up when you trade it in.

    Another reason for leasing is you are generally under warranty for the term of the lease. There are no $1,200 surprises. If the lease extends beyond the warranty, most dealers will gladly sell you extended warranty coverage.

    Again: If you do your homework, can be flexible about manufacturers and models and don’t exceed the mileage you signed up for, leasing is for you.

  • avatar
    Mathias

    The car market is extremely efficient; that is to say, new/used/leasing are very competitive with each other.

    So many people are convinced that “buying used saves money” that used-car prices have been driven up to the point where it’s a wash for many mainstream vehicles.

    One thing to keep in mind is the climate. While you can cruise around Hotlanta for 20 years in the same car, the rust belt ain’t like that.

    At ten years old, many repairs can get nasty expensive because stuff is rusted and frozen. I’ve been trolling for a nice fullsize van for traveling, and more than once have I seen a nice-looking vehicle that proudly advertised “new brake lines.” When it comes to that level of rust damage, it’s time to run away.

    My best deal ever was a 2004 Vibe 5sp bought new with a GM Card discount, then sold 2.5 years later. The depreciation was $70/month. I probably could have leased it for a similar amount by putting the rebate up as a cap cost reduction.

    My worst car ever was a 93 Aerostar, bought used for $3,800 and the frequent repairs done at a good indy mechanic. By the time I sold it after 3 years, I’d paid 20 cents per mile. That’s more than my wife’s ’03 Sienna w/ 130k miles, which we bought new.

    It really pays to work through the financial details and not be stuck on “used is cheaper” and “leasing is for yahoos.”

  • avatar
    njdave

    Another point not mentioned so far is crossing state lines with a lease. I grew up in NY, when I graduated high school the family moved to NJ. My mother sold real estate and leased her car, the tax writeoff made it a good decision. Dad was real good on financial stuff. But when she went to re-register the car in NJ, she had to show a tax stamp showing sales tax had already been paid in another jurisdiction, or pay the tax to NJ. Since it was a lease she had no tax stamp, and this friggin state made her pay sales tax on a vehicle that wasn’t sold! Took a big hit on that one.

  • avatar
    FleetofWheel

    Surely bankrate.com or some other web site has a good lease vs. buy calculator.

    Maybe TTAC will evolve to offer that type of content.

  • avatar

    Perhaps there is the “No Hassle Type” missing.
    In Germany, there is a very good reason not to buy, but to lease a car, if you have a business.
    If you have a business and BUY a business car than you are liable to give warranties when you SELL that car, even it is run-down. You can’t exclude warranties for a minimum of one year, independent how old your car is, and independent of the mileage (except you sell it as scrap, explicitly).
    That (amongst other issues) prevents almost all business owners I know here from buying a car. As the seller has to prove that it is not his fault when something went wrong int the hands of the buyer, he is worse off than a car manufacturer. A car manufacturer can limit warranties.
    Laws certainly are different in the US.


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