By on October 25, 2014

2013-Toyota-Prius-Persona-Edition-Wallpaper-2

It’s another underwater lease question! Never learned to swim! But I think this one will be even easier to answer.

my wife has a 2013 toyota prius persona with the nice 17 inch wheels. she has a 3 year lease. we are 16 months in and she already has over 23,000 miles out of the alloted 36 k miles on the lease. After 36k it is .025 cents per mile. The car is 22,000 to buy out right now. Around 15k to buy when the lease is done. she likes the car. it gets above average epa- unlike ford, hyundai. even in the winter of minnesota she usually got mid 40’s which is still better than anything else on the road with the exception of the volt & tesla. anyways, what should we do with it? should we attempt to get out of the lease? there is probably a 1500 penalty of negative equity. my manager of the toyota dealer says stick with the prius as the mileage she drives will pay for the extra money we have to pay for the mileage being over 36k. would love your thoughts. does it make sense to try and get her into a traditional car- i.e. a 2015 honda accord sport?

This gives me a chance to rant for a moment about lease mileage. Buy it up front. It’s always cheaper that way. Yes, it’s possible that you won’t need it, but if your life is unlikely to change in a lower-mileage direction, it always pays to buy the mileage at the beginning of the lease rather than the end.

Twenty-five cents a mile is, frankly, rapacious. No way this is a Toyota Motor Credit lease, right? Which brings me to another lease rant: Unless you’re wealthy enough to cover a wide variety of bizarre charges, never lease with anybody but the manufacturer captive finance company. It’s simple, really: The manufacturers view your lease return as a chance to get you into another one of their cars. The banks view lease returns as a profit center. Time and again during my time at dealerships I saw banks crucify lessors for “damage” that wouldn’t have rated a second look on a captive return.

The best leases are the Ford two-year Red Carpet leases; the worst are the five-year open-enders from third-tier banks. That’s how D-listers in Hollywood lease their Lamborghinis. It’s also, quite memorably, how my father leased a 733i about thirty years ago. He did it for the tax advantages, which have long since disappeared, but the money he paid to walk away in the third year of that contract was enough to make him bleed from the eye like Mads Mikkelsen in Casino Royale.

Back to our Prius-driving friend. Let’s do some back-of-envelope stuff. 23,000 miles after 16 months is equal to about 52,000 miles by lease-end, for a rather stout overage charge of about $3,900. That’s real money.

Will the admittedly stellar fuel economy of the Prius pay for that? Let’s keep that envelope out and doodle some more. The next 29,000 miles could be done in the Prius, which returns 45mpg, for a total of $2300 or so. Trading in for one of my favorite cars, a Dodge Viper TA, would drop that mileage to about 15mpg (in my Viper experience), for a total of $6700. So the dealer has a point — as long as my reader wants a Viper. And who doesn’t?

But let’s say he chooses an Accord Sport with CVT, a car I would expect to return about 32mpg in similar usage. Now the fuel bill is down to $3200. That’s only a $900 savings against a lease overage of $3900. So the dealer’s lying, or his calculator is broken.

So keeping it to the end isn’t necessarily a money-saver. But what are the alternatives? Is the negative equity in the car really just $1500? I doubt the car would bring any more than $19k at auction. So the negative equity is closer to three grand. But here’s the interesting part: a Prius with 55,000 miles on it that is two years older can still fetch sixteen grand. It’s possible, therefore, that our reader might find himself with a bit of positive equity a couple of years down the line.

Notice a trend here? As with our last questioner, this fellow and his wife have a car the resale market for which is not mileage-sensitive. Were he lucky/unfortunate enough to be driving a Maserati or even an Audi, he’d find it difficult to shuck off his 55,000-mile three-year-old car for anything like the lease-end value.

So the question becomes: Pay a known amount now, that known amount being the cost to trade in, or gamble on the Prius retaining its value for twenty more months? I know where I’d place my bet: on the girl with the shirt.*

* Man, nothing like heavy alcohol consumption and a couple of car crashes to age you. I look like this guy’s father now!

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60 Comments on “Ask Jack: Prius Inter Pares...”


  • avatar
    golden2husky

    Spot on with the “go with the manufacturer’s lease” advice. I bought out my father’s MK VII lease at the end. The company was Manufactures Hanover Wheelease. The list of “defects” to be repaired was unreal. Tiny marks on the rims, minor stone chips of the grille, etc. I was buying it out so it did not matter, but it was clear they were out for every penny they could extort.

    For those who trade frequently, a brand that is not so mileage dependent is very important. That same calculus can work for folks who buy used as well. There are plenty of good vehicles that, for valid reasons or not, depreciate heavily. For the smart people out there, great values can be had on high mileage cars that are a few years old. The key of course is getting a good example and keeping it to the point were resale is irrelevant to you when its your turn to unload it. I know quite a few people who bought 4th gen Taurii and various Buicks and saved a ton of money over their lifetime of the cars.

    • 0 avatar
      matador

      Amen on depreciation. If you’re getting a new car, you want something that holds its value (Unless you keep it until the wheels fall off).

      For used, a Buick or Taurus is ideal. An older Buick is worthless in resale. For the used car buyer, that’s good. Buy one cheap, and keep it as long as you desire.

      With a vehicle that depreciates quickly, you have to remember that it doesn’t depreciate at the end of its life. My 1995 LeSabre was $700. Two years later, it’s worth $700. If the transmission dies, it’s worth $500-700 out here.

      Not much to lose, really.

  • avatar
    319583076

    $0.025 per mile or $0.25 per mile are very different things. Which is correct?

    • 0 avatar
      JD23

      The OP actually stated that it was $0.0025 per mile. Methinks his blatant disregard for basic arithmetic may be the root cause of his current predicament.

      • 0 avatar
        JD23

        That was supposed to be $0.00025 per mile. Apparently, I can’t type either.

        • 0 avatar
          srh

          Yes, when I first saw that, it made me re-think the idea of leasing. 100K miles over for $25? Sign me up. But the more reasonable assumption seems to be that he meant $0.025 per mile, which still seems quite affordable.

          Of course I’ve never leased a car so perhaps JB knows that the OP actually meant $0.25 per mile.

          Agreed that the fact that one of the most important lease items is off by *3 orders of magnitude* in the post might be indicative of the real problem here.

          • 0 avatar
            highdesertcat

            srh, regardless of the costs, Leasing is an excellent solution for some people, especially the aged who don’t put a lot of miles on their vehicle.

            A couple from my church in their late 70’s, recently completed their first Lease ever on a Lexus Hybrid.

            Three years, less than 15,000 total miles, still had the factory original oil, filters, everything.

            They were so pleased with the terms of their Lease that they are Leasing again.

          • 0 avatar
            Sigivald

            Yeah, I was thinking 2 and a half cents a mile isn’t exactly highway robbery.

            That’s $300 for 12kmi, which is not bad at all.

        • 0 avatar
          319583076

          Ha! I missed the units. Nice catch. This post and thread are a lesson in reading and understanding quantities and units.

  • avatar
    PrincipalDan

    Well at least you didn’t Lisa Catera.

  • avatar
    JuniperBug

    Someone (or everyone) here doesn’t know how to deal with decimals. At .025 cents per mile, as in the original question, a 16,000 mile overage would result in a $4 charge, although I highly doubt that Toyota is generous enough to offer such terms.

    I suspect the OP meant .025 DOLLARS, which is 2.5 cents per mile. At that point you’re looking at an overage charge of $400. Assuming that’s true, you’re sure to be ahead financially by holding onto the fuel efficient Prius.

    I don’t know where Jack got 25 cents per mile from.

  • avatar
    Lie2me

    Re: “girl with the shirt”

    Wow, and they say Renee Zellweger’s changed

  • avatar
    -Nate

    But ;

    Dealers _NEVER_ lie nor cheat , right ? .

    =8-) .

    -Nate

  • avatar
    VoGo

    I must have missed something, because the right answer seems straightforward. The wife likes her Prius. Let her drive it as much as she likes. Buy it out at the end of the lease – you can probably get a 4 year loan for the same monthly payment you currently have. She can drive it until the wheels fall off, which even at 17K miles/year will be like 20 years.

  • avatar
    jpolicke

    This predicament only makes me wonder once more why, unless one has a business upon which you can dump the payments as an expense, does anyone lease a car?

    • 0 avatar
      bimmermax

      Payment is cheaper than buying. Hardly anyone keeps a car till the finance contract ends.

    • 0 avatar
      chaparral

      Because after three years and 36,000 miles with me, a brand new car has a foot in the grave. I have killed five engines without running any of them low on coolant or oil.

      Start with horrid Michigan roads, then add a shifter-kart driver, then put him in a very good hourly job so he’s always late for everything after work, and you’ve got a recipe for subjecting a car to a Long Beach GP every afternoon. Shocks are annual, tires are biennial, wheels are a wear item.

      I lease a car and it’s under the manufacturer’s warranty the whole time. I hand it back and smile.

  • avatar
    Waterview

    If the OP’s figures are correct, the car will be $7,000 cheaper to purchase in just 20 months (based on buyout figures provided). This is easy – keep it. Drive it. Buy it at end of term (and keep driving it).

    • 0 avatar
      CJinSD

      I don’t know how this can be assessed without knowing the monthly lease payment and the actual cost of the miles. Are they twenty five cents a piece? Two and a half? Twenty five thousandths of a cent? If he’s paying $250 a month and less than 3 cents a mile, that’s a very different proposition from if he’s paying $400 a month and a quarter a mile.

  • avatar
    Luke42

    My wife (and I) have owned a Prius since April of 2004.

    It’s a fantastic car for long term ownership – it’s efficient, reliable, and practical. It’s also a small car optimized for conservative driving on pavement. If she accepts it’s quirks and tradeoffs and still likes the car, I’d buy it outright and keep it for a decade or two.

    After ten years, the only part of the car which isn’t as-good-as-new the interior fabrics. Most of the used Prii of similar vintage I see on used car ads have better kept interiors (except for the armrests), so I’m not going to mention the obvious conclusion because I don’t want to sleep on the couch tonight.

    The Prius is one of the best cars to own and put a lot of miles on on over a decade or two, hands down.

    Yours has a known history, and she likes the car, so I’d just buy it and drive it till it don’t drive no more.

  • avatar
    beachjesus

    Mr. Baruth –

    Have them go to Maplewood Toyota in Maplewood, MN. I live in Minneapolis and this dealership helped me out of a similar jam a couple years ago – very straightforward – good people

  • avatar
    JEFFSHADOW

    Always go with the incentivized manufacturer lease (in 1998 a $36,000 Oldsmobile Aurora leased for $442 per month including tax for three years). If you drive excessive miles trade the vehicle in somewhere else (for example: you have a Prius (already feel sorry for you…), take it to a GM store for the new Buick Cascada in 2016. If Toyota calls to ask what the miles were just say you forgot. End of story, works everytime. Do not let any Toyota store force you into a Wells Fargo or third party bank lease (hard to find these days anyway, since the financial meltdown.)I had a customer who had a 2000 Camry LE for $500 per month for 60 months PLUS a $9,000 residual! She waited two years to finally get an Alero GL for $289 per month with GMAC.
    Prius drivers have much in common with today’s millenials who are always looking down at their cell phones; they keep staring at that MPG; we all know you can almost make 51 MPG if you drive slow enough.

  • avatar
    krhodes1

    Seems like the solution is simply to buy the car at the end of the lease and keep right on driving it. It is a Prius after all.

    It baffles me that so many people seem to have no idea how many miles they actually drive. 12K a year is on the low side for pretty much everyone I know except me. And that is only because I have four cars to spread the mileage over. Even with 120+ days a year on the road for work driving the Herzt-du-jour, I STILL manage to put nearly 20K+ a year on my own cars! 8K on the BMW, 8K on the Rover (including 2500 getting it home), 5K on the FIAT, and 1K on the Spitfire.

    I will probably lease my next car. Given the low miles I put on any given car, and not having to stump up the sales tax up front, it will probably make sense to lease the 228i that will replace the FIAT next summer. Every three years feels about right for turning over the “fun car” slot in my garage. I would have leased the FIAT, but their lease deal was terrible, and being such a cheap car it just didn’t make sense.

  • avatar
    05lgt

    Jack writes about leases. Some clown on a boring junket across the country in a ram eats the webzine a budget. Comments filtered for political ideology.

    Buh bye.

    • 0 avatar
      Jack Baruth

      I think a little balance is useful. You can argue that my tenure as E-I-C was a little too far in the conversion-van-mural-featuring-bare-chested-woman-holding-a-sword-and-standing-on-the-hood-of-a-Viper-ACR direction. Derek’s calmed things down quite a bit and I think people like that.

      • 0 avatar
        danio3834

        “You can argue that my tenure as E-I-C was a little too far in the conversion-van-mural-featuring-bare-chested-woman-holding-a-sword-and-standing-on-the-hood-of-a-Viper-ACR direction.”

        No such thing. More dekotoras doing smoky donuts plz.

    • 0 avatar

      Only one of these is true (Matt didn’t even so much as submit a fuel bill for the story. It was organized by him and done totally as a volunteer). But feel free to email me, derek at ttac dot com. None of your comments have ever been filtered for political ideology, and as long as I’m around, this will never happen.

  • avatar
    Adamatari

    Let’s see… She likes the car, it gets better mileage than anything else you can get, and you want an Accord?

    Makes no sense. Drive it till the wheels fall off. The longer you drive it, the better the financial impact is versus conventional cars. Even an Accord looks terrible vs the Prius if you own it for a while. Right now, this may seem less important as we are in the middle of a gas price decline, but keep in mind that one of the best things about these vehicles (Volt and such included) is that they are also insurance against future oil price increases.

    You have piece of mind, a car your wife likes, and save more money the longer you own it relative to another vehicle. Why would you get rid of it?

    The mistake is the lease. It’s not the car.

  • avatar
    gasser

    This lease was a “fatal” error. In a lease you pay for the miles you use, either upfront or at the end. You must make a reasonable estimate of your mileage before you sign or you end up in the swamp. Keep it to 36 months and buy it then to minimize the $ damage.

  • avatar
    APaGttH

    The Pruis is the best car on the planet meme is getting old.

    Why would anyone sign a lease and not research their own driving habits before and realize, 12K miles a year isn’t going to cut it.

    • 0 avatar
      Luke42

      Owning a new car changes how you drive, no it’s not surprising that the new car in the driveway would get a lot of the read-trip miles.

      As for the Prius being the best car on the planet, I have to say that it’s the best car I’ve ever owned. It hasn’t ever been the only car in my driveway, though, because it is not a car for every purpose. It’s a small passenger car designed to be driven conservatively on pavement. Our other car has been (in order): 1) Ford Ranger 2) a Junta TDI 3) Ford Escape 4) Toyota Sienna. Except for the Jetta, these vehicles all have two things in common: a) a trailer hitch and b) they’re all good at things that the Prius doesn’t do.

      But, the bottom line is that the Prius has outlasted all of these vehicles, except for the Sienna (so far). And it’s done so by being a practical daily driver. That’s a good car in my book.

      It may not be the car for you, but it sure beats the camcord et al at their own game.

    • 0 avatar
      RedStapler

      While its Kryptonite to enthusiasts the Prius is a darn good personal transportation appliance.

      No its not going to Crawl over the Rubicon, run an 11sec quarter mile or drift down the PCH with the top down.

      Thats not its thing, but when it comes to offering a reliable, efficient vehicle that keeps the CARB Commissars content its a great car for its role.

  • avatar

    There’s a Prius Persona edition?!

    “Kenpachi Ramasama, why didn’t you drive your Prius to school today?”

    “I was in a hurry and my toast got burnt… Ronan Warriors!”

  • avatar
    william442

    The local Honda dealer, FL.,told me last week they will take me out of my Acura and into a new Honda with no money changing hands. It worked the last time.I have leased for 33 years now, and am quite happy.

    • 0 avatar
      bosozoku

      And you’ve made nearly 400 lease and full-coverage insurance payments for that privilege. That’s all well and good, but I much prefer not having monthly payments at some point in my car ownership experience.

  • avatar
    dtremit

    Out of curiosity — what makes the 24-month Ford Red Carpet leases so great?

  • avatar
    Davekaybsc

    One reason you might want to lease even if you cant use the payments as a business write-off: you want to take a risk. Let’s say you want a 2015 VW GTI, but you’re not too sure about how it will hold up. You can lease it for three years, and turn it in just as the full warranty is running out. If it’s great you can buy it out, if it’s crap, it’s VW’s problem.

    If you bought it new upfront and it’s been a nightmare, if you go to sell and then have to finance and buy another car in full after that same three year period to avoid being stuck with it out of warranty, you’ve likely taken a bath vs. the guy who leased it.

  • avatar
    Big Al from Oz

    I find it odd that people will choose a lesser car due to “money” considerations. This article seems to focus on the wrong aspect of buying a vehicle. Whatever instrument you use to purchase the vehicle, make sure you can afford it.

    I have never bought a vehicle I didn’t want to drive. I never bought a car for resale purposes. If that was the case I would have never bought a the Kia Sorento in 2004. A similarly equipped Prado was $60k and my Sorento was $40k. The Sorento is now worth $6k and the Prado $13k. So even thought the Prado holds onto value better it lost a lot more than the Kia. This was luck as I was told the Kia would devalue much worse than the Toyota.

    I do buy with FE vs power in mind, but not to the extent I will overlook a vehicle with a slight disadvantage in the FE department.

    If you must count down to the last bean when purchasing a vehicle, whether its a lease, loan or whatever then you are spending more than you can afford.

    Pay cash and try to only borrow for a home. Get rid of your credit card as well. I’ve never had a credit card either. If I don’t have the cash I don’t buy.

    Cars are dead money no matter how you cut it. Buy what you can afford and enjoy.

    When I had my business I did lease, primarily for trucks. It wasn’t a lease like nowadays that guys at work have with restrictions and/or mileage requirements.

    • 0 avatar
      schen72

      We’re on the same page here. My rule of thumb is that I only finance appreciating assets. All cars are depreciating assets, with the exception of a very small percentage, none of which I have the wherewithall to own. I buy cars in cash and I drive them until they fall apart. Then I throw them away.

    • 0 avatar
      bosozoku

      >Pay cash and try to only borrow for a home. Get rid of your credit card as well. I’ve never had a credit card either. If I don’t have the cash I don’t buy.

      At least in the US, it’s damn-near impossible to borrow for a home loan without having had at least an auto loan and some stable credit card history.

  • avatar
    Big Al from Oz

    Another comment bites the dust!

  • avatar
    Big Al from Oz

    See if no paragraphs works!
    I find it odd that people will choose a lesser car due to “money” considerations. This article seems to focus on the wrong aspect of buying a vehicle. Whatever instrument you use to purchase the vehicle, make sure you can afford it. I have never bought a vehicle I didn’t want to drive. I never bought a car for resale purposes. If that was the case I would have never bought a the Kia Sorento in 2004. A similarly equipped Prado was $60k and my Sorento was $40k. The Sorento is now worth $6k and the Prado $13k. So even thought the Prado holds onto value better it lost a lot more than the Kia. This was luck as I was told the Kia would devalue much worse than the Toyota. I do buy with FE vs power in mind, but not to the extent I will overlook a vehicle with a slight disadvantage in the FE department. If you must count down to the last bean when purchasing a vehicle, whether its a lease, loan or whatever then you are spending more than you can afford. Pay cash and try to only borrow for a home. Get rid of your credit card as well. I’ve never had a credit card either. If I don’t have the cash I don’t buy. Cars are dead money no matter how you cut it. Buy what you can afford and enjoy. When I had my business I did lease, primarily for trucks. It wasn’t a lease like nowadays that guys at work have with restrictions and/or mileage requirements.

  • avatar
    Big Al from Oz

    @TTAC Staff,
    It seems the length of the comments might have something to do with TTAC’s current WordPress issues.

    How many characters are we limited to? Or how many lines?

    There must be someone at TTAC who can give us a response on where the WordPress situation is currently at.

    How hard can it be to COMMUNICATE. GM and Toyota where sort of like that as well. Tight lipped.

  • avatar
    Mikein08

    Moral of this story: don’t lease.

  • avatar
    Pch101

    “what should we do with it?”

    Drive it until you have 35,900 miles on it, then park it until the lease is over.

    If you’re smart, then you’ll figure out how to use that car less than you have been.

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