Lease or buy new car

[indykid]

One other thing to consider, buying an off lease vehicle. The lessee had to maintain it to the lease standard, number of miles on it very reasonable, and they paid the initial depreciation.

 

[hoosierdoc]

I think if you have pretty fair income and really like driving new cars, leasing would be the way to go. Otherwise buy new and drive it until the wheels fall off.
Or buy slightly used and drive until the wheels fall off.

Income has nothing to do with it. Just say "if you like wasting money and have some need to change cars every two years, then leasing is an option". You could buy a car and sell it every two years and get the same effect without getting royally screwed on the lease.

i know someone who just got a lease on a car for 10,000 miles. Just with work and home driving he'll be at 7500 miles if he does five days a week and 49 weeks a year. It's a very nice car. He only drives it to/from work and none of the family can enjoy it due to mileage restrictions.

 

[Indy_Guy_77]

Another option to keep in mind:

Leasing a vehicle CAN work out:

Look for the vehicles that depreciate the most. Like a Chevy Malibu.

If you can get a low lease... You plan on the car being available to you for purchase at the end of your lease term...for not much money.

If you can get in on one of those zero-down and $200/month for 36 month leases... That's only $7200 in "car payments". You could probably buy the car for another $6 or 7k. That'd be roughly $16-17k in total for the car (note, you'd pay sales tax on the purchase price)

You'd have to research residual values on vehicles for yourself - but looking up the vehicles that depreciate the most is easy.

This is just about the only avenue where having a fleece as an individual CAN make sense.

 

[spec4]

We keep our cars a long time. Buying new, I get exactly what I want and know the entire history of the car because I am making it. When considering a year old car that someone else has taken the hit on, I would really why to know why they are dumping it. Of course there are many exceptions but caveat emptor. I once bought a 97 Cadillac from a dealership. The car had 6700 miles on it. Salesman said it was the owners and he got a new one every year. Made sense so I bought it and kept it for nine years. Again, caveat emptor on any used car. The only possible advantage I can see to leasing is if you have a business and can deduct the lease expense (notwithstanding any personal use).

 

[hoosierdoc]

The business can deduct the vehicle expense if you buy too, plus deduct the depreciation.

 

[Naptown]

I have always purchased. I just feel like they hook you (or my wife) by putting you in a nice, new car every 39 months (or however long). The thing I feel like EVERYONE misses, is you ALWAYS have a car payment. I'm not sure why this is OK by so many people. Trying paying off a car and driving it for several years afterwards. That is a great feeling.

 

[rockhopper46038]

It complete depends upon what's important to you. Financially, buying used and keeping it until it dies is by far the best decision, but I know plenty of people that couldn't stand not being able to swap out for a new car every 2-3years. It's financially silly, but life is too short to drive yourself crazy if you're one that loves new cars.

 

[hoosierdoc]

Can you imagine if Americans decided they would not have car payments? The average family would probably get a $7000/raise annually for the rest of their life.

 

[mShu7]

Leasing is the most expensive way to operate a vehicle.

Cash is king.

 

[planedriver]

What they don't discuss on the car lot is how taxes work and residual value. My best advise is if you have a business (LLC, Sub chap S, etc) talk to your tax person before you do anything. Sometimes the lease is 100% deductible. Don't get me wrong there are many other ways of recouping auto expense but that's is a question for the tax person.

 

[HoughMade]

Can you imagine if Americans decided they would not have car payments? The average family would probably get a $7000/raise annually for the rest of their life.

Yes...I can. I said 'goodbye' to car payments in 2000 and I'm never going back.

 

[hooky]

Another option to keep in mind:

Leasing a vehicle CAN work out:

Look for the vehicles that depreciate the most. Like a Chevy Malibu.

If you can get a low lease... You plan on the car being available to you for purchase at the end of your lease term...for not much money.

If you can get in on one of those zero-down and $200/month for 36 month leases... That's only $7200 in "car payments". You could probably buy the car for another $6 or 7k. That'd be roughly $16-17k in total for the car (note, you'd pay sales tax on the purchase price)

You'd have to research residual values on vehicles for yourself - but looking up the vehicles that depreciate the most is easy.

This is just about the only avenue where having a fleece as an individual CAN make sense.

Except that's not the way it works for the residual. The dealer relies on the turn in vehicle being sold back to him with enough spread that he can sell as used to make money and for that to work, you have to be the one eats all depreciation. If you could lease it and then buy it cheaper at the end of the term than buying it outright, the dealer and the leasing company would be the losers and that isn't going to happen. If you go look at Edmunds or some of the other sites, 3 year old Malibus aren't going for anywhere close to $6 or 7K.

 

[Bosshoss]

Ok I'm no expert but have bought or leased over 50 vehicles since I was 16. First thing is cash is king but very few can afford that especially when they are younger and have kids in the house.
Those that are buying new and financing are NOT building equity until probably half way through the life of the loan. The depreciation is keeping up with the amount owed. Usually in the first year or year and a half you are WAY upside down on a 5 year note(owe more than the car is worth) and this gap will narrow until approximately halfway through the loan.
If you keep a vehicle until it dies you also have to figure in repairs and major maintenance. Tires and brakes several times and with the new vehicles and their complexity repair cost are rapidly rising and can't always be done by a person at home.
Those that are saying buy a 1-2 year old vehicle be careful as from my experience the difference in price may only be a couple of thousand from a brand new one sitting on the lot. The new one will have a full warranty while the 1-2 year old vehicle will have part of it's warranty used up and half its tires used up depending on miles.
As for leasing you are paying the depreciation of the vehicle.
Example: I'm currently leasing a 2013 Chevy Equinox it has been over a year but this will be close.
If I purchased the Equinox the 60 month payments would have been just over $500 per month for the vehicle I got and all discounts applied and NO DOWN PAYMENT.
I'm leasing for 39 months and 12000 miles per year. My lease payment is $260 per month with same discounts and NO MONEY DOWN.
I don't have to worry about replacing tires or brakes or any repairs as long as I'm leasing it as it is under warranty.
Now to those that say you are not building equity you are right. BUT if I were to take the difference in my lease payment and the purchase payment and put it in the bank at the end of my lease it would be very close if not better than the equity that a purchased vehicle would have at 39 months into a 60 month loan.
At the end of a lease you don't have to worry about trade in values or trying to sell the vehicle just walk away. Be careful and check your residual value if you think the vehicle is worth more than the residual you have the option of selling the vehicle yourself and pocketing the amount over the residual value.
Sales tax on a $30k vehicle will be $2100 if purchasing and a lease you only pay sales tax on that months payment. My $260 lease payment includes the sales tax for that month.
Leasing is not for everyone but it works and is not the devil.
You do have to watch the miles and don't sell your self short on miles they are a lot cheaper at the front than going over at the end. I have a second vehicle that I would have had anyway and if I get close I just drive that a while.

 

[hoosierdoc]

How about this math, even young people with kids in the home can play along.

pretend you want a $300 car payment (low, I know). First car: buy a $1000 beater and have min car insurance on it. Save $300/mo in an account. After six months, take that $1000 car and sell for $1000, add your $1800 and get a $3000 paid for car. Drive that for 12 months with min insurance sell the $3000 car, add your $3600 you saved and get a $7000 paid for car. Drive it for 12 months, then sell it for $6000, add the $3600 you saved and buy a $10k car outright.

Now you're in a nice car after 30 months you own a $10k car outright, have no payments, and can be saving $300/mo towards retirement. Invest your $300/mo you are saving for 40 years at 8% return and that alone is worth a miion dollars at retirement. Or... Keep a car payment your whole life and whine that you just can't get ahead.

avoiding car payments and investingit will give you a $40,000/year income in retirement, minimum. With ZERO other investments. But I know, you have to wait 30 months to drive a $10k car... For the record, I drive an $8k car and have no car payments.

 

[Bosshoss]

How about this math, even young people with kids in the home can play along.

pretend you want a $300 car payment (low, I know). First car: buy a $1000 beater and have min car insurance on it. Save $300/mo in an account. After six months, take that $1000 car and sell for $1000, add your $1800 and get a $3000 paid for car. Drive that for 12 months with min insurance sell the $3000 car, add your $3600 you saved and get a $7000 paid for car. Drive it for 12 months, then sell it for $6000, add the $3600 you saved and buy a $10k car outright.

Now you're in a nice car after 30 months you own a $10k car outright, have no payments, and can be saving $300/mo towards retirement. Invest your $300/mo you are saving for 40 years at 8% return and that alone is worth a miion dollars at retirement. Or... Keep a car payment your whole life and whine that you just can't get ahead.

avoiding car payments and investingit will give you a $40,000/year income in retirement, minimum. With ZERO other investments. But I know, you have to wait 30 months to drive a $10k car... For the record, I drive an $8k car and have no car payments.

Doc I don't disagree but I know some that don't have the initial $1000 to buy in.
What kind of car are you buying that cost $10k and last 40 years .

I wasn't trying to tell people how the smartest way to live their life is because I don't know what that is.
I just posted my experiences with leasing.

 

[hoosierdoc]

I would think they can cash flow a new car along the way as needed. My car is on year 10. If they don't have $1000 to buy the beater they sure as heck don't need a car payment...

 

[Dargasonus]

I haven't had a car payment in 5 years. That is nicer to me than driving a new car I don't even own.

 

[Mr Evilwrench]

Haven't had a car payment since sometime back in the 90s. I know that won't work when you're dug in so deep that not digging anymore won't help (I was there back then, too) but the car I wind up driving the most is the 94 chicken, in fact the oldest of my vehicles. Of course, I've never been vain much about what I drive, and I don't drive that much; the chicken had just over 71K on it when the odometer stopped working a couple of months ago.

Leasing, in my opinion, is the equivalent for cars to what Rent-A-Center or whatnot is for furniture or appliances. I remember stories of people paying $1800 to own $200 VCRs. It offers something nice for a monthly payment that seems affordable, for people that aren't willing or able suffer for a couple of months to pony up the down payment, but can scare up the monthly payment. Purchase, even with a loan, allows you to have ownership of the car at the end of what would be the lease term for equivalent payments, no limits, and you don't have to turn it in better than new.

The nearest I've ever bought a car to new was in 2010; I bought a dealer demo 2010 with 8K on it. It still doesn't have 20K. Buy one off lease, or a rental fleet car. The maintenance requirements are so stringent that you're getting something that's proven good (not a lemon) and been well kept, either way.

 

[spec4]

I'm not an accountant, but if you go this way doesn't the car have to be in the name of the business, not the individual? Would you be allowed to break out personal from business miles? I knew a guy who was an appraiser and leased a car for business but used it a least 50% personal. He got a Cadillac saying with the tax break he could afford the fancier car.

 

[Scuba591]

As Boss said, and I agree, there are advantages. Costs over the life to maintain are almost never considered... but should be if only looking at it financially. Leasing can allow a person to step up to a nicer car. that has non financial benefits which may be more important to that person. I own my vehicle. Or I should say my trust does. Leasing for a business may have tax benefits that the trust is not allowed. I may have to look into that.