When does it make sense to lease a car?

[rcpratt]

I love coming in threads like these and seeing all the anti-lease elitists

You can't justify leasing/buying new based on the finances alone. Some people like, want, or prefer new/newer cars. I bet if we dug into some of these elitist's lives we would find plenty of their purchases that we could criticize. Different people prioritize different things.

 

[halik]

I love coming in threads like these and seeing all the anti-lease elitists

You can't justify leasing/buying new based on the finances alone. Some people like, want, or prefer new/newer cars. I bet if we dug into some of these elitist's lives we would find plenty of their purchases that we could criticize. Different people prioritize different things.

You absolutely justify lease vs buy decision based on finances alone. You find out how much more it costs to lease versus own over the same time period and then figure out if that's worth the convenience of having a new car halfway through.

The problem is like 90% of people that lease w/o business expensing never do the math and just use some BS arguments how it's cheaper to lease or you can the car cheaper or something (see Kaido).

I would expect that vast majority of people would buy rather than lease if you'd present them with the actual total cost up front.

 

[Doppel]

Well they're both fools if they're buying or leasing a new car every 2-3 years. Talk about wasting a ton of money. Smart money is buying used and keeping it for a long time.

I must say I really don't feel very foolish paying $200-250/month indefinitely to have a brand new vehicle that will never cause me problems, which always is up to date with newest safety mandates, etc. Financially it's only a small premium over having something used.

I bet if we dug into some of these elitist's lives we would find plenty of their purchases that we could criticize. Different people prioritize different things.

Of course. I spent $5k on my bedroom furniture and yet despite this totally frivolous expense (I already had some that "worked" beforehand) I was criticized recently by a guy after I told him I lease because it's a "waste of money". Meanwhile he commutes a massively far distance in a car that gets terrible gas and surely doesn't realize how silly his criticism is. My lease payment is probably about what he spends on gas alone.

The problem is like 90% of people that lease w/o business expensing never do the math

Same page on that. Most people are terrible with numbers and absolutely pathetic at figuring out what is actually involved in cost of a car. This includes some people who love leasing and some who "hate it" because "you have nothing to show for it", which is the statement of a person who has automatically proven they incorrectly see a car as an investment and not a cost.

 

[Midwayman]

I must say I really don't feel very foolish paying $200-250/month indefinitely to have a brand new vehicle that will never cause me problems, which always is up to date with newest safety mandates, etc. Financially it's only a small premium over having something used.Of course.

Its the indefinitely part that's the issue. You are continually paying for the most expensive part of deprecation of the vehicle. Doesn't matter if you buy or lease. New cars are bad news financially. The cost of new cars vs a recent model used car will add years until you are able to retire. I guess its up to you if its worth it.

 

[halik]

I must say I really don't feel very foolish paying $200-250/month indefinitely to have a brand new vehicle that will never cause me problems, which always is up to date with newest safety mandates, etc. Financially it's only a small premium over having something used.

The fact you're talking in terms of monthly payments and make statements like so makes me think you fall into said 90% group...

In the example above, the difference is 31% of the msrp leasing vs owning new for 60months. The difference between leasing and a CPO is even bigger.

 

[thomsbrain]

It doesn't matter if you need/want a new car ever 2-3 years, keep it until it dies, drive a little, or drive a lot. It is still always better to buy and sell than to lease. Manufacturers offer leases for one reason only: They make more money with leases than sales.* That money comes out of your pocket. They pay very smart people to figure out how much they need to charge for the lease based on residual values in order to ream you. Do you really think you know more about the market and expected costs/residuals of the vehicle than the actuaries who do nothing but crunch the numbers all day, every day?

*OK, they also offer leases on experimental vehicles they need to get back for research, like the Honda FCX Clarity.

 

[Kaido]

The problem is like 90% of people that lease w/o business expensing never do the math and just use some BS arguments how it's cheaper to lease or you can the car cheaper or something (see Kaido).

I would expect that vast majority of people would buy rather than lease if you'd present them with the actual total cost up front.

I can see you're rather emotional about leasing

Anyway, it depends on your situation. If you're the type of person who keeps their car for a long time, you can get a lot of mileage out of buying it. I usually don't keep my cars for more than about 5 years (mostly because I've always had clunkers and they break to the point of not being economical to fix). Leasing is almost never the most economical option, but economics are not the only metric involved in buying a car, and there are also short-term economics (monthly payments) and long-term economics (having a car you own, that you can sell or trade-in).

Financially, the value of the car after paying it off is one way to look at it. However, I also have to deal with the month-to-month costs, in my situation. So my financial argument is that (1) I typically don't keep cars longer than 5 years, and (2) I'd rather have a lower monthly payment, consistently, than a larger one, and then have to deal with paying for additional repairs such as brakes and tries down the road. At the end of that 5 years, if you had bought the car, you have the value of the car you can sell, and with leasing you have nothing. But month-to-month, the leasing rate is lower, which is beneficial to my existing budget. So in my particular case, leasing makes a lot of sense with to me.

We can talk about depreciation, new cars, newer & older used cars, leasing, and all kinds of stuff, but from my perspective, I like having a consistent, smaller monthly bill with no large repair costs and then swapping out cars. That's why I said in my original post that you need to have the right situation for it (particularly the mileage limitation) and you have to want to do it, because it's almost always better economically in the long-term to buy a car than to lease cars. But I'm sure you'll post a rebuttal to this, so have at it :wub:

 

[Kaido]

It doesn't matter if you need/want a new car ever 2-3 years, keep it until it dies, drive a little, or drive a lot. It is still always better to buy and sell than to lease.

Well, not "always". I started leasing in college because I was broke, needed a car, and leasing got me in at a better monthly rate than anything else I could find that wasn't a total junker. Ah, the heady days of Saturn

 

[Imdmn04]

Lease makes sense if you:

1. You like to drive new cars every 2-3 years
2. You can afford to do #1 comfortably and you are financially savvy.
3. You find cars that makes sense to lease (i.e. cars with high residuals).

For example, BMW 3 series have one of the highest residuals offered by any automaker (typically their financing arm) out on the market. The residual is about 62% after 3 years. You basically pay the depreciation (38% value of the car) and interest on a lease (and also tax).

In this case, it makes sense to lease the car. Because if you were to purchase the car and sell the car after 3 years out on the open market, you may not get 62% of value as offered by the lease. Plus you have to pay tax on the entire car instead of the leased payment (though it is state-dependent).

If you are financially educated and know what you are doing, you can actually save lots of money compared to buying and selling after 3 years (whether to switch cars every 3 years is another matter and a personal preference). But just comparing the two situations where you plan to get rid of the car after 3 years regardless, leasing may make sense.

Also, I would never prop down large sum of cash at once ($45-$50k for a BMW) on a rapidly depreciating asset when I can use that money for other forms of investments. Always make other people's money work for you, especially when the interest is so low in the current economic climate.

 

[iamwiz82]

Lease makes sense if you:

1. You like to drive new cars every 2-3 years
2. You can afford to do #1 comfortably and you are financially savvy.
3. You find cars that makes sense to lease (i.e. cars with high residuals).

For example, BMW 3 series have one of the highest residuals offered by any automaker (typically their financing arm) out on the market. The residual is about 62% after 3 years. You basically pay the depreciation (38% value of the car) and interest on a lease (and also tax).

In this case, it makes sense to lease the car. Because if you were to purchase the car and sell the car after 3 years out on the open market, you may not get 62% of value as offered by the lease. Plus you have to pay tax on the entire car instead of the leased payment (though it is state-dependent).

If you are financially educated and know what you are doing, you can actually save lots of money compared to buying and selling after 3 years (whether to switch cars every 3 years is another matter and a personal preference). But just comparing the two situations where you plan to get rid of the car after 3 years regardless, leasing may make sense.

Also, I would never prop down large sum of cash at once ($45-$50k for a BMW) on a rapidly depreciating asset when I can use that money for other forms of investments. Always make other people's money work for you, especially when the interest is so low in the current economic climate.

Check lease prices on European Delivery. Very low cost...

 

[Kaido]

Check lease prices on European Delivery. Very low cost...

Whoa!! I have never heard of this! That is awesome!!

http://www.bmwusa.com/Standard/Cont...tent/Explore/Experience/EuropeanDelivery.aspx

 

[disports]

Check lease prices on European Delivery. Very low cost...

This is what I plan on doing this year!

 

[iamwiz82]

Whoa!! I have never heard of this! That is awesome!!

http://www.bmwusa.com/Standard/Cont...tent/Explore/Experience/EuropeanDelivery.aspx

Stupidly low leasing too. Because you are leasing against MSRP but are paying 15% under that it really helps. The Activehybrid3 is really tempting because of the massive rebates/credits.

 

[Doppel]

It doesn't matter if you need/want a new car ever 2-3 years, keep it until it dies, drive a little, or drive a lot. It is still always better to buy and sell than to lease. Manufacturers offer leases for one reason only: They make more money with leases than sales.* That money comes out of your pocket. They pay very smart people to figure out how much they need to charge for the lease based on residual values in order to ream you. Do you really think you know more about the market and expected costs/residuals of the vehicle than the actuaries who do nothing but crunch the numbers all day, every day?

*OK, they also offer leases on experimental vehicles they need to get back for research, like the Honda FCX Clarity.

Patently, wildly untrue. As I said earlier when you buy you pay sales tax on everything, when you lease you don't. If you lease with a good money factor, like one can do these days, you pay no lease interest rate premium and need not hassle with selling it after (e.g. possibly taking a bath).

Manufacturers like lessees because it builds huge brand loyalty.

 

[iamwiz82]

Patently, wildly untrue. As I said earlier when you buy you pay sales tax on everything, when you lease you don't. If you lease with a good money factor, like one can do these days, you pay no lease interest rate premium and need not hassle with selling it after (e.g. possibly taking a bath).

Manufacturers like lessees because it builds huge brand loyalty.

Some states require you to pay taxes upfront. Lease killer, IMHO.

 

[Doppel]

Some states require you to pay taxes upfront. Lease killer, IMHO.

Yeah if you have to pay tax on the entire purchase price leasing definitely loses appeal in those states.

 

[power_hour]

*removed*

 

[Richard N]

I just leased a Hyundai last year. First tine lease for me. I put 4k in up front, 21,500 vehicle cost, 13,500 purchase price at end for 39 months, 250/mo payment. I just went thru a short sale on a home so my credit isn't great at 690. Car is for the Mrs. and she travels alot for work so there is no question we will have to buy the car at the end. The way I look at it we are renting a car and in 39 months we can buy it for what I hope will be about the same cost as buying the same car used. The advantage is we will have been the ones caring for it and will know its history. I currently set aside 100 per weekly paycheck towards the purchase so I should have enough at the end to pay it off. That is the other part. As a construction worker my income varies by up to 2k per month so if I don't have that extra hundred no biggie and can still make payment during the winter slow season. Worst case I only save say 8k and have tofinance the rest at the ned my credit should be better and I can get a low interest loan instead of the higher interest I would get now. I guess why it made sense for us was not wanting to be locked in to a high monthly payment for 36 months (or even 48). And there is something good to be said about new car ownership. I've owned many cars over the years (like 30+) and a few were bought new. Time will tell if leasing is for us.

While I'm thinking about it, can one of you familiar with current auto rates figure out what my payment would have been if I had bought at 39mos? To include fees and taxes bump the vehicle cost to 24k. Thanks

 

[Throckmorton]

Doesn't it feel weird not owning the car you're driving?

 

[Richard N]

Doesn't it feel weird not owning the car you're driving?

We have the intention of buying so no. If it was going to be turned back in then I would be worried to the point of slightly paranoid something was going to happen and I would be stuck paying for it. Kinda like if I was borrowing it from someone I didn't know.

 

[heymrdj]

Doesn't it feel weird not owning the car you're driving?

Not really. But then again I take care of my cars the same. Honda civic is a leas, dodge dart is a lease, and the expedtion is paid off. Just as I worry about the leases getting damaged someone hit and run my expedition in the parking lot and I still paid out of pocket to repair it. I still take care of rust or dings or scuffs. I find many people that pull the "you have to care for the lease" card drive cars that cosmetically look like ass. And that's ok if that's their deal. I however don't treat my cars that way so its no difference to me at all.