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Pros & Cons of Leasing a Car vs. Buying a Car

By Heather Levin

girl yellow carYou’ve probably heard more than once that car leasing is a bad deal. And in many cases, it definitely makes more sense to buy a car outright. But this doesn’t mean leasing a car is a bad move for everyone. Like any issue, there are pros and cons to leasing a car.

Around 20% of all new car transactions are leases, so it’s clear that there are definitely people out there who love the thought of always driving around in a new car.

But what’s the best decision for you? Well, whether or not to lease a car depends on a lot of factors including how much money you have (both up front, as well as for a monthly payment), how much you drive, and how much time you want to spend on your car.

Let’s take a look at the pros and cons of leasing so you can make the best decision for your situation and circumstances.

Pros of Leasing a Car

  1. New car, all the time. Leasing a car means you always get to drive around in a sweet new ride. For many people, this is an emotional boost that can’t be ignored. If you love cars and driving, this is a big perk.
  2. Less maintenance issues. Because you’re always driving a newer car, you usually don’t have to deal with the regular maintenance issues that car owners face as their vehicles age. You turn in your car before all those problems start showing up (e.g. bad brakes or shot transmission). If you lead a very busy life, or you’re on the road a lot, this is one less stress you have to deal with.
  3. Leases are tax deductible for small businesses. If you’re self-employed or you own a business, you can write off your lease as a business expense.
  4. “Afford” a nicer car. If you’ve ever wondered how it is that so many people can afford to drive BMWs and Range Rovers, then wonder no more. According to LeaseGuide.com, around 75% of all luxury cars are leased. The reason is because banks don’t like to loan out more than $30,000 for a car loan. If you want a car that’s worth more than that and you don’t have the money to make up the difference, leasing is your only option. On the upside, your monthly payment will be lower than if you actually bought a car. Leasing allows you to “afford” a nicer car than you’d get if you had to buy it.
  5. Few upfront costs. Speaking of costs, leasing allows you to get into a car with very few “upfront” costs. You often don’t need a down payment (or if you do, it’s fairly low), your monthly payments are lower, and your sales tax is going to be a lot lower since you only have to pay tax on the value of the car you actually used. According to Edmunds.com, this means that during the life of your lease, you’re going to pay roughly half the sales tax you would if you bought the car.

car keys cash calendar

Cons of Leasing a Car

  1. Lease contract amount doesn’t change, even after an accident. If you get into a car accident and the vehicle is totaled, you’ll still be responsible to pay back the full lease contract amount. Even if the insurance company gives you back less than what you owe to the dealership, you’ll be responsible for the full amount. If you do go with a lease, at least be smart enough to buy gap insurance which covers you for that difference that you would owe to the dealership.
  2. Limits on time and distance. Many times, the lease agreement will be for 5 years/60,000 miles. So, if you go over that 60,000 miles and keep it until the 5 years is up, you’ll pay a penalty for every mile over 60,000. Think about how many miles you put on a car each year. Most people use well over 12,000 per year. Leasing a car means you have to really “budget” your miles, which can add stress and frustration to your life. Of course, you can negotiate your mileage, and you should, but budgeting miles is a major drawback for many people. On the flip side, if you do a good job budgeting your miles, and stay under your yearly allotment, you don’t get any credit for the miles you didn’t put on the car.
  3. Liability for payments. If you lose a job or experience a heavy time of financial hardship and cannot afford the payment anymore, the dealership will recover the car and sell it on auction. If they sell it for less than you owe for the lease agreement, you will be legally responsible to pay the difference.
  4. No ownership, but still responsible for repairs. Leasing a car means it’s not yours; any repairs that aren’t covered by the warranty are your responsibility. But when you turn in the car, you don’t benefit from the investment you made into that car. Leasing a car also means that you can’t modify it like you’d be able to if you’d bought it (e.g. adding a custom paint job or spoiler). And if your kids spill paint on the backseat, or your dog nibbles a bit of the upholstery, you’re going to have to pay extra for “wear and tear” when you turn the car in. Not fun.
  5. Can’t claim vehicle as an asset. Again, you can’t claim the car as an asset. It is technically still an asset of the dealership that leased it to you.
  6. Steep car payments and opportunity cost. A lease starts a trend of perpetually paying a car payment. If you never paid a car payment and the average car payment in the U.S. was $350 a month, putting that $350 a month in a mutual fund that made 10% would become $791,171 in 30 years.
  7. More expensive to buy after lease. If you decide to take the option to buy the car at the end of the lease term, you’ll have paid much more than the cost of the car even if you had financed it.
  8. Stuck in lease after signing. Another common complaint with leasing is that once you sign a contract, you’re “stuck” in that lease until your term expires. However, sites like Swapalease and LeaseTrader allow you to “sublet” your lease to someone else, just like you’d do with an apartment.

swapalease

Final Word

Most of the time, wealthy people pour money into assets and investments that go up in value, not down like cars do. Warren Buffet, for example, drives around a used pick-up truck during much of his personal time. He has lived in the same house that he bought about 30 years ago. He’s wealthy because he knows that possessions are a horrible investment and they rarely buy the happiness that they promise. Similarly, leasing a car doesn’t build any kind of financial value.

On the other hand, to some people, their car is an important part of their life. They love the feel of driving around a new car, and they love not having to worry about maintaining an older vehicle. Sure, leasing a car is akin to renting a house; you’re paying money out each month, none of which builds equity for you. But this might not be as important as the feeling you get every day from a new car. And that’s fine too. Sometimes, the joy of leasing a new car every few years is worth the extra expense.

Whether you buy or lease a car is a highly personal decision. Like every issue, there are pros and cons. So, think about your passion, your finances, and your personal situation carefully before making a final decision.

What are your thoughts on leasing a car?

(photo credit: Shutterstock)

Heather Levin
Heather Levin is a freelance writer based in Detroit, MI. She's passionately committed to living green, saving money, and helping others do the same in their life.

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  • http://www.jonwaraas.com Jon Waraas

    No one wanted to debate with you over this?

    I lease a 2006 ford f-150. I put 2500 down on it and pay 210$ a month for it. If I buy it from them they will take the 7500$ (210 x 2 years plus the down payment) off the 31k that it would cost if I bought it. Plus, its a bigger tax write off for a corp. I also have a deal with them that If I trade it for another truck, they wont charge me for the miles and down payment.

    I think its a good deal.

    Quote:

    If you get in an accident and the vehicle is totaled, you’ll still be responsible to pay back the full lease contract amount. Even if the insurance company gives you back less than what you owe to the dealership, you’ll be responsible for the full amount. If you do go with a lease, at least be smart enough to buy “gap” insurance which covers you for that difference that you would owe to the dealership.

    This is the same with buying a car. The bank/lender will make you pay them back the full amount that you owe on the loan even if you wreck it.

    And thanks for guest blogging for JonWaraas.Com :)

    • Arthur

      This is the reason why you(the author) should not lease: lack of education can be extremely expensive! #1 Most times the manufacturer does include “GAP” coverage in your payment and or your insurance automatically raise your coverages to 100/300/50k when you express to them u’re leasing.#2 Leasing a vehicle almost is’nt ever good for 5 or 6 yrs cuz that is too much to pay out for a vehicle that you may not want to own by then plus, most people financing do own the vehicle by then-around the 5th year. #3 Loosing your job would definantly put a damper on things but; 250 vs 399 is much easier to swallow or borrow!!! and ur right the bank would come and resale the vehicle if you cant make the payments but, in most cases they receive more $for your car cuz (lets face it) leasee’s tend to take better care and have less miles=higher value!#4 the car is not yours anyway until u’ve made the 72nd payment its called a lein! and to address #7 at the end of the lease term u have the “option” to buy…if its not worth the residual amount, the beauty is you can walk away(in most cases)

      • Carlos Trejo

        In response to everyone that has stated their valuable opinions, I applaud you for doing so. I find it amazing we can have such a difference of mindsets in this world for it would be utterly boring in itself to all think alike.

        I agree with both sides in their own way, but there is one detail that must not go unheard. Once someone states their own thought dealing with the matter at hand, don’t belittle this person for accidentally caps locking the majority of his paragraph or for his lack of proper spelling and/or indirect syntax. Don’t be glued to your pedestal just because he/she doesn’t spell as such a grand inquisitor as yourself. He/She had a valid point and for that is respected so and not ridiculed. I am an active duty Marine and have seen this time and time again on every one of my deployments. People thinking foreign nationals are idiots just because their english is horrible. Strange how the roles get reversed on us when we end up setting foot on their country.
        These days, I thought we were much more mature than that. Are we not educated? At least have the decency to pretend so people like myself wont have to apologize cause of people like you due to rude behavior.
        This post has turned into somewhat of a… for a lack of better words, a bash-fest upon each other.

        Respect goes a long way. I urge any of you to be mindful of that on a daily basis.

    • kevin

      I’m sure you will be paying for a car payment fo the rest of your life. You are so stupid.

  • Dustin

    1. Jon made clear you’re f’d either way. Agreed. This is not just for leased vehicles.
    3. How is it any better to be stuck with a loan payment? Answer, it’s not.
    4. Get a BMW.
    5. You made it clear in your other piece that a car shouldn’t be considered an asset anyway. I would stick to this school of thought and not use it as support for not leasing a vehicle.
    6. This assumes the alternative is NO car, which is stupid. If you want a car, regardless of how you pay for it, there are opportunity costs.

    To make the claim that leasing a car is ALWAYS a bad idea is not smart. Using ALWAYS in general is not smart. The more I read your advice, the more I believe you are not smart.

    IF you’re going to borrow money and be forced to pay it back, take a loan from yourself and not the bank. Home equity loan or life insurance policies have many benefits. I suggest you do some reading.

    • kevin

      Another ignorant, who can’t realize that lease is ALWAYS bad. It is only good for the dealerships and that is why they always offer you a lease.

  • Tonk

    I can see why its worse than buying if you pay for your car with straight cash. However most people take out a loan when they get a new car, and I don’t see how that is any better, other than the restriction in mileage. Do you want to be hassled with selling the car if you don’t want it in 3 years?

    • http://livingstingy.blogspot.com/ Robert Platt Bell

      Some of these restrictions on mileage are pretty onerous. $0.25 per mile for anything over 12,000 miles.

      The average American drives 15,000 miles a year, which comes to 9000 miles over on a 3year lease, which equals $2250 in excess mileage. That ain’t chump change. I’ve seen charges as high as $0.45 a mile on some luxury marques.

      I had a friend who actually garaged his leased car for the last year of the lease and bought a junker for $1000, just to avoid the excess mileage charges.

      Or take my friend with the leased pickup trucks. They put a RhinoLiner spray-in bedliner in the truck, and the dealer told them it was “excess wear and tear” and would have to be removed (you can’t remove it). The dealer finally caved in, only after they agreed to lease yet another Truck.

      Which of course, was the deal from the get-go. These use these turn-in charges to get you to lease another car.

      Or take my neighbor. Her husband leased a brand-new Volvo. It had 10,000 miles on it when he died. She didn’t need two cars, so she turned it in and had to pay nearly $10,000 in “early turn-in fees”. OUCH!

      The more complicated you can make any transaction, the easier it is to rip-off the consumer, and leases are very complex transactions.

      The other aspect not touched upon in this thread is the “closing costs” – many dealers pad in “document fees” and other garbage charges, not to mention a high list price (you are buying the car, actually) and a high interest rate (you are borrowing money actually) which the buyer never notices as he is fixated on the monthly lease rate.

      Not having a car payment is wonderful. You can put money in the bank, save up, and then buy a late-model used car for cash. And with cash, you can negotiate a heck of a deal. And have more money in the bank.
      Would you buy a car for sticker price, finance it at 10% interest and pay $500 in “document prep fees”? Of course not. But many people leasing do just that, because all they see is the monthly payment.

      Yes, there are a lot of stupid people in the world. You can become fabulously wealthy by just not doing what they do.

      It is as simple as that.

      • Anna

        When you lease, you can get insurance to cover the wear and tear. It’s not expensive, if you are worried about having excess damage. There are also 15,000 mile leases. If you are silly enough to get a 12,000 mile lease when you know you drive 30,000 miles a year, you probably deserve to pay the overage for being a dumbie. That woman could have looked in to having someone take over her lease.

        Also, you don’t have to pay sticker price when you lease. You can still negotiate the price of the car just like you would with buying. You can also negotiate the residual. Leases often do have a high residual, but technically if you plan on turning it in, that’s better for you. When you lease you are only paying for the value of the car you use, so if you have a higher residual, you are using less of the value, so you pay less overall and have a lower monthly payment. If you decide to keep the car, though, you have pretty much screwed yourself.
        You are still borrowing money, but you don’t necessarily have to have a high interest rate. It’s probably based on credit like a regular interest rate.
        10% is COMPLETELY ridiculous. Not saying that isn’t realistic, but I would never agree to pay that high of an interest rate on a loan or a lease. Leases are sneaky though, because it’s a money factor, and I’m not sure how to translate that into an interest rate.

        When I went to buy my car, which I started out looking at a 2006 Jetta which they wanted to sell for 13,000… which I thought was a bit high for a 4 year old car that probably sold for 17,000 brand new… the dealer kept trying to get me to focus on the monthly payment. He made a comment about how most people are mainly concerned with that. I just looked at him like he was retarded and told him, “No, I still care about how much money I’m paying overall.”

  • http://everyroadtaken.wordpress.com Paul

    Tonk said “Do you want to be hassled with selling the car if you don’t want it in 3 years?”

    With the way the economy is you would think we are passed the “want” stage…

    Buy a car, pay cash or finance it for the shortest term possible. Keep it as long as it runs well. Sell it to a college kid for 2500 bucks. Repeat.

    There is no more fiscally sound way to own a vehicle than that.

    • Anna

      A car is generally a big expense. I don’t want to spend that much money on something I’m not gonna be satisfied with, regardless of how the economy is.

  • Master of Finance

    Amen, brother! These car companies that peddle the lease know exactly what they’re doing. They’re the biggest PT Barnum’s in business.

    Buy a nice, reliable used car and then pour the $3oo – $400/month into your Roth IRA.

  • http://www.artificialrobot.com Sean

    I agre with Master of Finance. My wife and I have 1 car for our family and we are saving now for a second car which we don’t anticipate needing for at least 5 years. My hope is to buy a car outright when the time comes. No lease, no debt, just a car from day 1.

  • Audra

    I myself have never leased a car. I’ve thought about it, but never wanted to be locked into paying for something that I would never really own. Maybe I’m wrong, but I’ve always been of the opinion that it was better to buy used (even if it’s just a year old if you’re scared of older cars). A car salesman told me once that when you drive a car off the lot, it automatically loses 5K in value. (Don’t know where he got that average, but it sounds about right.) But as far as leasing…I would have to investigate it further, but everything in the article above made perfect sense to me. Thanks for the share.

  • DG

    I agree. True sometimes leasing cars works out for some people but I consider leasing a farce. They always find something extra to charge you with at the end and owning though still pricey is so much better.

  • Wain A

    I’ve known people who continue to lease over and over again, just to be able to drive new every 3 or so years, new sheet metal with never ending payments. Leasing may make sense only to those who are able to deduct for business purpose. For regular Joes who drive to work and park all day long then do the drive back home and so on leasing makes no sense. In most cases the contract requires insurance coverage that comes with a high premium and if you ding the car during the lease period, you must pay for the damage out of your own packet. If you’re capable enough to use a cheap calculator you’ll know leasing is not for you; put extra miles and the punishment goes up even more. Leasing without tax benefits is for morons.

    • Arthur

      Alright….Leasing 101: I have 6 kids and I lease, so ther is no way that my vehicle will be the same as I’ve received it; and manufacteres know that…and so they do allow for “NORMAL WEAR AND TEAR”. If in fact you do receive an occasional ding, scratch or stain;it falls under that catagory. By any-way, dont they appraise your vehicl when its time to trade it in and devalue your trade based on accidents, miles, and axcessive wear any way? Sure they do….constantly making payements? I’d like to know that after 3 or 4 years I have an option and can make a choice at that point to evaluate if this vehicle is still right for me. Its common that people make 72 payments, midway they start paying for maintnance and then after that the hate the vehicle, they realize its not as practical as it was 5-6 yrs ago, pay $10,000 or more in intrest plus the car, trade it in and get like 2-3k for this vehicle! Cars are not built like the oldies but goodies when all you needed was a wrench…and most can only run til about 120k anyways then u gotta junk it…so, do what you feel but unless your 60yrs old and have money in the bank(for sudden maintnace cost) leasing aint all that bad!P.S mechanics always have calculators and they’ll show u what the true cost of ownership can be!

      • http://livingstingy.blogspot.com/ Robert Platt Bell

        A lot here that is wrong, so it is hard to know where to begin.

        As I noted, wear and tear charges are socked to you when you try to STOP leasing. Most dealers will waive or reduce them, or fold them into your next lease, if you stay on the bandwagon. So it is used as a cudgel to beat you up into leasing a new car.

        As for cars lasting “only 120,000 miles” perhaps you should check out a Honda or Toyota which are more than capable of going 200,000 miles or more, with minimal maintenance. Even modern American cars are good for 150,000 miles or more.

        As for buying a new car and making “72 payments” that is a BAD idea. If you cannot finance a car in 36-48 payments, chances are you are buying too much car for your income range.

        And that is the bottom line on leasing: Most people do it so they can afford “more car” than they really can afford, from a NET WORTH standpoint. They are literally borrowing against their future so they can have it all now. And they won’t see the damage done to their overall Estate until they try to retire and realize they are not as well off as they thought they were.

        When your “six kids” all want to go to college, you’ll wish you had that lease money and drove an old beater all those years.

        Unless you are a mult-millionaire, in which case, you would not be leasing anyway, as you could afford to buy, right?

  • tkd

    Really….ur title should be “10things bad About having a car”…..take the bus or taxi….I leases and bought cars its no different…

  • Verne Olmstead

    Not sure what you are talking about having to pay for maintenance, other than oil changes. I have been leasing for years and have NEVER had to pay for repair maintenance. Just last year the front right end bearing and hub collapsed. GMC fixed it free of charge. That was two years into the deal. I have had other instances with the same results.

    You make some good points, but you need to be more accurate. I have been very happy with my leases. It’s the only way to go in my book.

  • EL PE

    OK FOLKS, the person that wrote the topic that started this all is saying that financing AND leasing are bad

    hes saying that buying a good used car is good.AND PUTTING THE MONEY YOU WOULD HAVE USED TO LEASE OF FINANCE IN THE BANK over the course of 30 years.

    but what he doesnt realize for some reason is that a good used car is
    $6,000-$10,000 and what he also doesnt realize is that after that $6-$10 your going to be pouring more and more money into it for repairs and maintance over the years.BOUT $200-300 A MONTH IS SOME CASES

    or you can buy a BAD used car for $1,000-$2,500 and we all know that buy the time you would have been done paying off a loan,finace,or lease you would have poured close to the same amount of money into that used vehical you bought for 1,000-2,500.

    so why not drive a BRAND NEW VEHICAL WHILE YOUR YOUNG,OR YOUR KIDS ARE YOUNG.

    DO YOU REALLY WANT YOUR KIDS BEING TEASED WHEN YOU DROP THEM OFF AT SCHOOL IN A CRAPY VEHICAL

    LIFE IS SHORT IN 30 YEARS YOU COULD BE SIXTY….AND WHEN THERE 60 THEY WILL HAVE NEVER HAVE LIVED IT UP AND THEY WILL ALWAYS SAY DARN,I WISH I BOUGHT THAT 2010 CHALLANGER WHEN I WAS 30

    NOW IM 60 AND IT DOESNT EVEN MAKE SENCE TO OWN A NICE CAR.

    SOME PEOPLE ARE PYCOLOGICALLY GONE FROM HAVING HAVE HAS FINCIAL TROUBLES.LIKE LOOSING MONEY IN A INVESTMENT,BEING SCAMED.AND MORE.SO THEY DONT RELIZE THAT THERE COLLECTING MONEY AND NEVER LETTING IT GO IS A DISEASE.

    BOTTOM LINE GET A NICE CAR…FEEL GOOD.

    IF YOU WANT TO PUT $350.00 A MONTH IN THE BANK….THEN WORK HARDER MAKE MORE MONEY.ITS AS SIMPLE AS THAT.

    MOST OF US READING THIS POST ARE PROBLY 30-60 YEARS OLD.
    WHAT ARE YOU GOING TO DO AT 60-80 WITH $700K IN THE BANK

    ILL TELL YOU WHAT YOUR GONG TO DO….YOUR GOING TO WISH YOU COULD BUY BACK YOUR YOUNG DAYS.TO OWN A NICE VEHICAL

    P.S. I DONT LEASE OR FINANCE

    I OWN A USED 1995 BOUGHT IT IN 2006 AND ITS 2010

    IT HAS COSTED ME WELL OVER WHAT A BRAND NEW CAR WOULD COST.

    I WISH I FINANCED OR LEASED. ID LOOK GOOD,LOOK PROFESSIONAL,FEEL GOOD,AND WOULDNT HAVE A CAR IN THE SHOP ONCE A MONTH HAVING TO DEAL WITH RIP OFF MACHANICS.

    ALSO LEASING AND FINACEING BOTH SEEM TO HAVE THERE STRONG POINTS.
    SEE.
    YOU FINACE A VEHICAL FOR 7 YEARS….THEN WHEN YOUR DONE PAYING IT.YOU ONLY DRIVE IT FOR ANOTHER 3 AND EVEN IN THAT SPAN OF TIME YOUR PAYING FOR MAINTANCE.

    LEASING…WELL….YOUR CHILLIN ALL DAY ALL MONTH ALL YEAR.

    LEASING IS COMPARIBLE TO PAYING RENT

    FINANCEING IS COMPARIBLE TO PAYING MORGAGE

    AND OWNING A USED CAR IS COMAPARIBLE TO LIVING IN A CARDBOARD BOX.

    AM I RIGHT OR AM I RIGHT!!!!!!!!THANKS!

    other people reading this will say…well

    I can buy my kids cars (arent they going to have there own money to do that,how are they going to learn the value of a dollar like you supposibly did,they will never learn from there own mistakes if you baby them)

    I can put it away for my kids collage fund (well if you raise your children right they will get all A’S or play a sport very well and get a free collage education,what….are you going to buy there education instead of them earning it.)

    thanks again.

    • Joseph

      This guy above me shouldn’t own a computer, or a car….he can’t spell to boot.

    • http://www.freewilly.com Jack the Rat

      EL PE is right. Paying more for a junk car not worth it. Its ok to lease if you dont want to worry about the car braking down.

    • http://madsaver.com Mac

      I disagree, and that’s hard to do as the english & spelling is terrible on this comment. If you can’t afford a new car, don’t buy one. An almost-new car under warranty is JUST AS GOOD as a brand new car. Sometimes more so, as the price is much more reasonable. Any issues can be resolved for free under warranty.

      The original article was not about buying junk cars. It was listing some reasons why leasing new cars could be a bad decision. No matter how much money I earn, I never plan on wasting money on a new car or a new lease. That’s no way to generate an income.

      • Anna

        I’m currently in the market for a car, and after looking around I have to say…
        Getting a GOOD used car, that still has warranty is really not that much cheaper than buying a brand new car.
        I was looking at certified used Corollas, and the price difference from the new cars that I saw was 2,000 or less.
        Also, this is going from a certified used LE Corolla to a brand new Corolla S with moon roof and spoiler. When I went to the dealership, I told him I wanted used. When I saw how much the used cars were, I told him I’d rather suck up the extra 2,000 and get the brand new car with the nicer features.

        Obviously, if you can’t afford something, don’t buy. But… leasing isn’t exactly buying, either

        Also, it doesn’t matter if you buy or lease or whatever, a car is NOT an asset. A car is not a way to generate income, either… Unless you have a classic car that is in high demand, you are going to lose money on your car. Obviously, you’ll lose less if you buy an older car at a cheaper price.

        It’s about what more important to you. Should you save for retirement or enjoy your new sports car while you are still young enough to realize what speed you are going?

        For me personally, living in a place where the weather is amazing most of the year, I want a convertible mini cooper. Driving around on a nearly daily basis with the top down feeling the sunshine is an experience that is worth the extra money.
        I can’t afford to buy one right now, but in two or three years when I have paid some of my debts off I can. Problem, I need a car now. So I’m probably going to lease one. That way I’m not driving around a ragged piece of junk, forking out money left and right for repair bills… or when the time comes to trade in, I’m stuck with a loan that the trade in value of the car I bought just for in-the-meantime wont cover.

        Of course, I could spend my time really searching for that great deal on a used car to drive in the meantime, but I’m a firm believer in the idea that my time is the most valuable thing I have, even more valuable than money. You won’t see me waiting in lines for black Christmas sales, and you won’t see me spending months of my time searching for a car for less than $5000 that is in great condition that I will be able to drive for three years plus without repairs.

        I have to say I agree with El Pe, even if he used caps lock.

        • gigi

          I know this is pretty old but must say I agree with Anna and, yes, El Pe. Leasing vs Financing Cars is not as cut and dry as Renting Vs Owning real estate and while I agree that renting is a waste (I rent and hate it!) I think the lease versus buy decision should not be looked at as an investment decision (if so, financing would always win, because you end up owning something…even if that something is a car that has depreciated in value and will be a p.i.t.a. to get rid off) but a lifestyle choice. The way I see it, if you have budgeted for it and can afford it I don’t think there’s anything wrong with leasing new every couple years rather than wearing your car to the bone every 10 years. Trust me, I’ve owned my 15 year old car for 10 years. It just broke down and I’m renting a 2012model. I’m realizing that having a new car greatly improves your quality of life, not only from an image perspective, but a peace-of-mind perspective as well. I don’t know if the cost savings from running cars into the ground to spread out the cost is worth the peace of mind leasing affords.

        • gigi

          I know this is pretty old but must say I agree with Anna and, yes, El Pe. Leasing vs Financing Cars is not as cut and dry as Renting Vs Owning real estate and while I agree that renting is a waste (I rent and hate it!) I think the lease versus buy decision should not be looked at as an investment decision (if so, financing would always win, because you end up owning something…even if that something is a car that has depreciated in value and will be a p.i.t.a. to get rid off) but a lifestyle choice. The way I see it, if you have budgeted for it and can afford it I don’t think there’s anything wrong with leasing new every couple years rather than wearing your car to the bone every 10 years. Trust me, I’ve owned my 15 year old car for 10 years. It just broke down and I’m renting a 2012model. I’m realizing that having a new car greatly improves your quality of life, not only from an image perspective, but a peace-of-mind perspective as well. I don’t know if the cost savings from running cars into the ground to spread out the cost is worth the peace of mind leasing affords.

    • http://livingstingy.blogspot.com/ Robert Platt Bell

      “SOME PEOPLE ARE PYCOLOGICALLY GONE FROM HAVING HAVE HAS FINCIAL TROUBLES.LIKE LOOSING MONEY IN A INVESTMENT,BEING SCAMED.AND MORE.SO THEY DONT RELIZE THAT THERE COLLECTING MONEY AND NEVER LETTING IT GO IS A DISEASE.

      BOTTOM LINE GET A NICE CAR…FEEL GOOD.”

      Wow, that is some logic! And since it is in ALL CAPS it makes perfect sense!

      I think the reply above is the best argument against leasing.

      And I should hope that all cars are “braking down” [sic] at least when approaching a red light.

    • Tweedle

      I’d rather my kids not be teased because their parents CANNOT spell. Although I am not concerned about what you speak of because I drive very nice luxury cars, which are a bit of a waste of money, I’ll admit THAT I PAID FOR IN CASH.

  • VC

    THIS GUY WHO WRITE THIS IS A COMPLETE IDIOT.

    • Erik Folgate

      VC, care to expand on your opinion of why I’m an idiot?

      • BVN

        Leasing has run in my family for years. The article keeps harping on “you pay and don’t own” Let’s take one good look at the numbers (and yes I am a finance manager for a leasing company:
        $30,000 car

        Lease:
        36 months
        35% residual ($10,500)
        rate- 5%
        Payment- $669 (including 7% lease tax)
        Total outlay for the car- $669 x 36 + 10,500= $34,584

        Loan:
        60 months
        rate- 5%
        Payment- $606 (including 7% sales tax)
        Total outlay for the car- $606 x 60 payments= $36,360
        **Your payoff in 36 months is $13,808- which is $3000 higher than your lease residual.

        Someone tell me how it can be cheaper to buy vs. lease?!?!?
        I would love to hear someone argue the numbers with me. If you ever want to ask me something send an email to [email protected]

        • Mark Raymond

          You’re comparing a 36-month lease with a 60-month loan? That’s not a good comparison. Obviously, after the 36-month lease is up, you have to buy or lease another car. With the 60-month loan, your payments are finished and you have a car that’s at least worth a little.

        • faz

          I don’t follow your logic that leasing is the better move financially. To me it just looks like you pay a little less with a lease but get nothing when you finish paying on it. With a loan, at least you have something, even if it cost you a few thousand extra, you have something that has value.

          In your hypo you gave a $30,000 car- this would presumably be worth at least $3,000 after 5 years. I financed my Tacoma in 05 for $25,000 and 5 years later my truck is worth $16,000. (I have a buyer this month so I know it’s worth that).

          Please help me see how the numbers work out in favor of leasing. I understand the non-monetary reasons why leasing is better but it does not seem to a better financial move.

          I would imagine a $30,000 car would be worth at least $3,000 but would probably be worth more.

        • Jim Koontz

          How about paying cash for that $30,000 vehicle. Then you save $34,584 (lease cost) – $30,000 (purchase cost)= $4,584 savings. If you don’t have the cash, you can’t afford it. And you can take the $4,584 savings and invest it and earn interest on the money you would have spent financing or leasing a car.

        • http://livingstingy.blogspot.com/ Robert Platt Bell

          “and yes I am a finance manager for a leasing company”

          Well, one can’t argue with that logic, nor your SPAM AD for more business. No thanks, I won’t be e-mailing you for “more info” on great lease deals.

          The numbers you are using here are picked out of a hat, and don’t address a whole host of issues, including, down payment costs (for both buying and leasing) excess wear and mileage charges (which can run into the thousands of dollars) plus INSURANCE costs, which drop as a car gets older.

          The bottom line is this: The most expensive way to drive a car is to drive a BRAND NEW one, whether financed or leased, as you are paying for the staggering deprecation on a new car.

          Most new cars depreciate 10% in the first MILE of useage – by the time you get the car home, it is worth thousands less than what you paid for it at the dealer (and a lease is basically a purchase, so you are paying for it in terms of lease payments).

          But let’s look at some of the GLARING FLAWS (or OMISSIONS in your math:

          Most cars, even the most poorly made American cars, are worth about 50% of their purchase price after 5 years. In your scenario, the remaining car payments after 36 months is $13,808. For a $30,000 car, the value of the car would be about $15,000 which means it would be worth more than the remaining car payments.

          Now lets look at your hypothetical lease – a residual payment of $10,500? Who are you kidding? No leasing company would set a residual so low. If you are going to make up numbers, I guess, you might as well make up good ones. Check out this site:

          http://www.leaseguide.com/leasevsbuy.htm

          Which at least shows a more reasonable residual. And although that site (sponsored by the leasing industry) shows a “total cost” being LESS for leasing, they fail to take into account that at the end of the loan you OWN the car (worth $15,000) which makes buying far less expensive.

          Everyone I know who has leased a car (and this accounts for dozens of leases) has told me that they have NEVER bought the car at the end of the lease, as the “residual” was far and above the used car value of the car. In other words, it would have been cheaper to turn in the leased car and just buy the car when it appears on the used car lot next door.

          Only one friend of mine actually BOUGHT his car, and that was only because his “wear and tear” charges were so high, he faced thousands of dollars in cash payments due if he wanted to turn it in. So he financed the “residual” on a three year note, but paid well over market value for the car.

          He got hosed.

          Sorry, no sale!

          If it is heavily advertised on TeeVee is probably is a raw deal for the consumer – a good rule of thumb to follow.

        • Nancy

          I teach math and your info is faulty. You’re comparing 36 months (lease) to 60 months (buy). How does that work?

  • Kyle

    I’m shocked at how many people seem to think leasing is just as good as buying. It all depends what you are looking for. If you want to spend the least amount of money, buy a reliable brand of used car that has about 50,000 miles on it. Pay for it out of your own pocket, and you will be way ahead of the game.

    I bought a toyota camry with 150k miles on it for $4,0000 and have had it for 6 years. I’ve put about $3,000 into it for repairs/maintenance and put about 25k miles on the car. That comes to less than $100 bucks a month for a decent looking, reliable car. Not to mention it gets 25-30 mpg. Go ahead and lease if you like having a new car every 2 years. But if you’re looking to save money, leasing really doesn’t make any sense.

  • Chad

    I purchased a used 2003 Chevy Cavalier LS Sport Coupe in 2005 for $11,000 with 7000 miles on it. I paid it off in 2007, total of all payments was right around $12,000. Today in 2010, it currently has 53,000 miles on it, still looks as good as the day i bought it, runs as good as the day I bought it, I dont have to pay for full coverage insurance, my tags are cheaper than if it was new, and i’ve had no payment for 3 years. (it has been going in to a savings account which has built up enough to what that cavalier would have sold for new, about 21,000.) If i would have leased a 2005 Cavalier when I bought mine, I would have had to put $3500 down, and 36 payments of 229 a month, which would have cost me 700 dollars more than what i spent out of pocket for my car, and i would have had to give the car back to them and start all over with another lease or buy another car. My biggest expense owning the car to date has been fuel costs, otherwise nothing has really gone wrong with the car since i’ve had it, its now 7 years old. Its interesting that I could sell my car today for about $6500 if i really wanted to. making my total cost of ownership not counting fuel, about half of what i paid for it. however since its in such great condition i think i’ll keep it.. in my case buying a cheap well cared for 2 year old car was a way better deal than leasing a new car of the same model and trim. Especiall considering the only difference between my car and a new one at the time was a subtle change to the tailights, no other changes were made between 2003 and 2005 on that car.

    • Anna

      Jeez. I got my 2001 Cav in 2003, with 20 something thousand miles. Now it has over 150,000 miles on it. It’s fuel pump went out at least once… which is a common problem on Cavs and Cobalts… now it is setting in my garage because it won’t pass the emissions test here, and I feel like it isn’t worth fixing.

    • http://livingstingy.blogspot.com/ Robert Platt Bell

      Correct answer! Buying a late-model secondhand car (which are often lease turn-ins) is the best value overall. And the savings are not only in the car price, but in ancillary prices such as insurance and taxes as well.

      The Cavalier was one of the more reliable inexpensive cars that GM made (I used to work there). It ain’t a Honda or Toyota, but it will go 150,000 miles without too many troubles.

      To the fellow with fuel pump problems – keep the tank more than half full. Running out of gas can damage or ruin a lot of electronic fuel pumps. On some cars, these are actually located in the tank and cooled by the fuel. People who run around with $5 of gas in the tank tend to go through a lot of fuel pumps.

      But if you have 150K on a 10-year old Cavalier that won’t pass emissions, it is time to sell it for whatever you can get for it. It ain’t doing you no good parked in the garage. It served you well. Time to move on.

      Good Luck!

  • http://www.airporttrans.com airporttrans

    But I think Lease a car is not a bad idea.
    There is no doubt that when you go on a holiday you want to enjoy yourself, right? Is it possible to Lease a car and still enjoy your trip/jun/enjoy on a reduced budget, yes it is!
    A Lease car offers a much safer option than taking your own vehicle. You will have the peace of mind knowing that the vehicle is mechanically perfect and in the event of any breakdowns you are guaranteed a free replacement vehicle.

  • Dennis

    Everybody that purchases a used car takes a risk of it being a lemon (even highly mechanical people get jobbed). I pretty sure there are more people out there that bought a used vechile that they wish they didn’t buy, than people that have enjoyed a great deal on a used vehicle. I have bought 2 used (one being a lemon), never bought new, and I have leased. They all have advantages and disadvantages I am sure. Leases are tricky and if you are smart about it can be worked into a great deal. Just like a used car salesman you must be aware of deciet and cons. I worked three internet people and walked away with a pretty good deal on my lease, IMHO. The key with every purchase you do, is the homework.

  • http://www.passjobinterviews.com Tom Smith

    I was thinking leasing a new car, however instead, i decided to follow peoples advice and go for a cheaper, used car (25k versus 11k). I bought a honda, a week after I bought it, after it was inspected by a mechanic service, the transmission was found to be just about to snap. It did, and I got hit with a 2k repair bill. Pile on top of that the fact that most banks give 36 month loans for the majority of 3+ year old cars, I end up spending about the same a month on an older (almost 10 years old) car with no warranty.

    I know it doesn’t happen all the time, but buying a used car is very risky, people drive cars like crap most of the time.

    • Jfhubel

      I can understand what you are saying but if I had just bought that Honda from a dealer I would have been at his door the next morning demanding a repair. Any other type of purchase I would have spent some cash for an extended warrantee at least for the first year. That said, buying warrantees are a whole other issue and can also be lemons without due dilagence.

    • Tweedle

      Sorry this happened to you but it sounds like you need a better mechanic to do pre-purchase inspections. For 11k, you could have bought a car under warranty from a dealer. And, whoa, you have a loan for this purchase? You should have purchased something you could have paid cash for.

      Lessons learned for next time?

  • Shelby

    This is my story of used-car ownership: In 2007, I bought a 2005 suv with premium upgrades. I paid for the suv outright, thinking this was a great deal and that the car would last for many years. Now it is 5 years old and out of warranty. I drive less than the average person, so the suv only has about 60k miles. I have taken great care of it, but despite all of this my transmission and radiator are now malfunctioning and need to be replaced. My thought is that a lease would be a great next move for me because I do not want to pay the estimated $4000 to have these new parts installed. I fear that the breakdown of these vital components is a warning of further fall-apart to come. My experience makes me NEVER want to buy a used car again, and to NEVER have a car out of warranty again. If I trade it in now, its value is trashed despite its otherwise excellent shape and amenities. Will my engine need to be replaced next? I can’t predict it. But I do know that a 3-year lease on a new suv would guarantee that I would own a warrantied vehicle that I could be free of once the warranty has expired. Sounds like a great deal to me.

  • Dermitus

    If one of your goals is to upgrade to a new car every few years, then if you weigh that factor into the decision it may seem like a better deal?

  • tk

    This article is on point any if anyone disagrees contact Suze Ormon!!!!!!!!!!!!! maybe she’ll be able to explain it better.

  • DK

    I don’t see lease as a bad deal….I see it as “You get what you pay for”. When you are constantly leasing every 3-4 years, you are always driving trouble free, with the latest safety and comfort features all the time.
    Yes, you have save a few thousand if you buy a new car and use it for 10-12 year and even more if you buy a used car and use it for 10-12 year. But for some people, who earn more than x dollars/hour (don’t know what x is), the hassles and time lost during breakdowns can cost them a lot more money…Remember the quote “Time is money”. Personally I haven’t leased a car yet, but as my income rises and my kids grow up, I notice I have lesser time available…I see myself leasing cars between the ages of 40-55. But once kids are gone to school or I have retired, I will switch back to owning….
    It all depends on each person’s situation….

    • Erik Folgate

      I hate paying monthly payments. It drains all of my monthly cash flow. I feel like i Have no money left over at the end of the monthy when all I am doing is writing checks to other people. This is the main reason why I hate leases. It’s a perpetual car payment, and I don’t want to be paying car payments the rest of my life.

      If you can understand that, then you can understand why I hate leases so much.

    • Tweedle

      I believe many people are already well above the income level you describe and hands down, the fastest in terms of your time is paying cash. Trust me. I bill $250/hour and have no shortage of work, and I pay cash.

  • Kim Black

    I agree with the arguement that owning is better “IF” you have a good used vehicle that you know the history on and can afford to pay cash. BUT, if you don’t have the cash, then is it better to finance or lease? My scenario is this. I currently have a car that I pay $365.00 per month for 24 more months. That equates to $8760.00 total cost at the end of the 24 months. At that point, the car will have depreciated to about $6,000.00 in value. I am thinking about selling the car and making about $1500.00 profit right now and putting that money in the bank. I can lease a brand new Honda for $141.00 per month for 30 months/15,000 mile allowance which equals = $4230.00 that includes gap insurance and damage waiver insurance through Honda finance with 0 down. I still have to pay tax, tag, etc., but you do that with any car you buy new or used. That saves me $224.00 per month over what I currently pay. I take the $224.00 savings per month, put it in the bank for the 30 month lease time which equals = $6,720.00 CASH plus the profits I made off the sell of my current car puts $8,220.00 in the bank. I also can count the “lease” payments as a tax write-off for my business use which will save me approx. another $1,000.00 over the 30 month lease time. That equates to $9,220.00 in savings. If I keep my current car, it will be worth around $6,000.00 at payoff, or lease a vehicle @ 30 months and have $8,220.00 in the bank to pay “CASH” for a really good used car (paid for). $8,220.00 in cash looks better to me than paying off my current car and having only around $6,000.00 in value in my current car at payoff. What am I missing here ?? Buying a new car is totally out of the question as the “depreciation” of a new car rolling off the lot is a lot more in 30 months than what I lose with lease payments!! Thats a no brainer there.

  • http://livingstingy.blogspot.com/ Robert Platt Bell

    Nice posting Erik, but I doubt you will change the minds of the leasing faithful. It’s like trying to tell a pot smoker living in his parent’s basement that maybe he should give up pot. Good Luck with that!

    People who lease want it all NOW and they will use whatever self-justification necessary to make the argument that “leasing makes sense”.

    For example, several of the responses here hype on “repair costs” as being as high as $300 a month and also how “unreliable” used cars are. $300 a month. Please be serious.

    A 2-3 year old Honda or Toyota, off-lease (let some other chump pay that huge 25% depreciation!) is stil under warranty and is a very reliable car for 150,000 miles or more, with little more than brake pads and tires needing to be replaced. $300 a month?

    Perhaps your readers are foolish enough to buy American cars?

    By the way, this paranoid fear of repair costs seems to permeate our society. People seem to think they will be saddled with a $10,000 repair bill on a $5000 car. If car need that many repairs, you junk it, plain and simple. I guess in their universe, there are two types of cars only, brand new “reliable” ones and clapped-out junkers, with nothing in-between.

    Buying a late-model secondhand car saves a lot of money. Not only do you save “a few thousand” dollars (as one poster put it) by buying over leasing, You can save half to three-quarters the cost, depending on how you approach it. Literally tens of thousands of dollars in savings are possible, which compounded over time, equals hundreds of thousands of dollars in retirement savings.

    For example, my neighbor leased two Chevy pickups in a row, on three year leases each. The second lease is up in three months, and at that point, they will be driving their Hush Puppies to work.

    On the other hand, if they had BOUGHT the first truck and financed it over the same period (for about the same payment) they’d OWN OUTRIGHT that truck, which would be worth about $10,000 right now.

    Um, $10,000. I’ll take that.

    But there are even greater savings if you buy a car that some other chump leased. (forget buying your leased car at the end of the lease – they hose you on the price!). A good quality car with 30,000 miles on the clock is indistinguishable from brand new, but costs 2./3 to 3/4 as much, and with proper care, will last as long. For a really good deal, look for a late model used car from the ORIGINAL OWNER, with all service records – they are out three, and cost 20% less than what a dealer charges for a used car.

    You can finance such a car through your credit union very easily (most of your responders and naysayers seem to think that unless you can get dealer financing you have to pay cash) and pay off the car in three years for about the same lease payment as a new car. And chances are, it will be under warrenty for most of that time. I bought a used Camry this way, and most people thought I had bought a “new car”. What was the difference again?

    Now if really want to save money, forget buying “luxury cars” like an Acura or a Lexus (both makes usually using leases to snag people who otherwise could not afford them) and buy a secondhand Honda or Toyota (often the same car) for about 1/4 the cost.

    Once the car payments are done, you can go to a higher deductible on car insurance or drop it entirely (it really isn’t cost-effective on older cars anyway) and watch your car insurance premiums drop off the map.

    I pay $31 a month for GEICO basic liability coverage on my 2002 BMW X5 (bought used, paid cash, five years ago) and 1999 M Roadster (bought used, paid cash about 7 years ago). You read that right – THIRTY-ONE DOLLARS A MONTH.

    And both are in like-new condition and turn more heads than a brand new leased whatever.

    And all those monthly payments I DID’T MAKE leasing? I put that into various investments, which panned out about as your hypothecial shows.

    But again, you and I are talking to the wind. Ignorant people will see only what they want to see. And when they are old and poor and wonder what the heck happened, they won’t be looking inward and thinking that perhaps maybe the financial mistakes they made in their 30′s and 40′s caused them to be where they are now.

    No, no, it will all be the government’s fault, or something like that.

    People who lease – who are not businessmen writing off the cost – are weak thinkers. And weak thinkers want it all now, and someone else to pay for it.

    • Vemaja74

      I am leasing a toyota corolla and my car was hit while it was parked. Can u help me figure out how to get my car fixed without owing the finance company?? I still have 5 months left on the lease but my insurance company did not consider it a total loss. My email address is [email protected] I appreciate any help here.

    • Herpa_Derp_Leasing_Is_Dumb

      Foolish enough to buy american cars? Are you serious?

      You just nulled every point you made by making one stupid and ignorant comment.

      Go drive by a Honda or Toyota service bay, are they empty?

  • http://livingstingy.blogspot.com/ Robert Platt Bell

    The other side of leasing – the dark side – is the mileage and wear and tear charges. Most leases are limited to 12,000 miles a year. The average American drives 15,000 miles a year. At turn-in time, if you do not lease another car, they will ding you for thousands of dollars in excess mileage and wear and tear charges.

    In fact, that is the big stick that car dealers use to get you to re-lease yet another car – they scew you with these charges if you try to walk away from the leasing merry-go-round.

    It is like you are a junkie and they are the drug dealer. Just try quitting. Go ahead, try!

    All those excess mileage charges etc, will be folded into the cost of the next lease – the same way dealers take “negative equity” on trade-ins and then fold it into a new car loan. The buyer gets further and further into debt over time and the terms are quite onerous.

    Speaking of terms, what are they? Everyone commenting here knows the monthly lease cost, but few have noted the PURCHASE PRICE and COST OF MONEY (Interest Rate).

    You see, a Lease is actually a purchase with a buy-back at the end, folded into a loan agreement. You pay a purchase price on the car, and pay an interest rate on the loan. Federal Law requires that they disclose this information to you, but salesmen play it down, harping on the monthly payment instead.

    So in effect, the leasee ends up paying list price (or over list, sometimes) and staggeringly high interest rates (10% or more) but doesn’t realize it, as they are chasing that monthly payment.

    You do own the car, at least from the insurance perspective as well as personal property taxes (in jurisdictions like Northern Virginia). The leasing company just agrees to buy it back at the end of the lease.

    Dealers love leases as it moves metal off the lot and gets people back in as return customers. The only problem they have had is that it does flood the used car market with a lot of 2-3 year old used cars with low mileage, which to the astute are a far better bargain than a new car. So many off-lease cars have flooded the market that places like CAR MAX have emerged to handle the sheer volume of these vehicles.

    If you want to get wealthy, you have to think about NET WORTH not MONTHLY PAYMENTS. Unfortunately, most Americans, particularly the poor and the struggling middle class, think of their money as something that flows though their hands, rather than something they own.

    OWNING MONEY is a concept worth thinking about.

    The road to middle-class povery is paved with car payments, or worse, lease payments.

    It is such a shame, too, as you see people making good money – $50,000 to $100,000 a year, claiming they are living “paycheck to paycheck”. They have lots of shiny toys and a garge full of junk, but nothing in the bank, no savings, and no plans for the future.

    And unfortunately, I will be taxed to support these bozos. Just wait for it.

  • Anna

    Aside from leasing vs buying vs get a bike… Everyone who keeps saying if you can’t pay cash for it, you can’t afford it… I feel like that’s a little silly. I don’t think most people would ever be capable of buying a house with cash, yet a lot of people buy houses. I think its more, if you can afford to make the monthly payments plus a little extra, then you can afford it.
    Also, you can’t really claim what is best value when everyone doesn’t value the same things. Sure money is a necessity, but maybe the security of knowing you have a warranty on your car is more valuable to someone than a little extra money each month? Call it materialistic, but some people enjoy nice things, and maybe the concept of driving a new car is more valuable than a little extra money.

    • Tweedle

      Houses are appreciable assets OVER THE LONG TERM, even though they are prone to short-term slumps, they appreciate over time. Cars do not.

    • Tweedle

      Also, you’d still have a warranty on a car you pay cash for, if you buy new/CPO/late-model used. You don’t only get a warranty if you finance/lease. The bottom line is you are rationalizing that it makes financial sense when it really doesn’t. You want a new car because you want a new car. That’s fine, despite being not great from a financial perspective. But, the reasons you’ve given for it making more sense (comparing to a mortgage and bringing up the warranty) do not make sense.

  • baron rust

    trick is not to buy cash that is so retarded. If you have good credit get a 0-4% interest rate and invest the remainer of the money at a higher return then your apr. the money to would have put into a depreciating asset is working for you.

  • Viktran

    I respectfully disagree…..
    I have owned several cars over my short lifetime on this Planet and can assure you that when these old cars start breaking down it will cost you an arm and a leg to fix it (all repair costs are upfront!! No financing)
    So I stopped leasing in my thirties and bought this really nice BMW (that I love driving by the way) and BAM!!! $1500.00 for breaks and battery….with God’s grace I can afford to pay upfront now but what about a college student? Or someone living paycheck to paycheck….you want a hassle free car lease it BUT make sure you don’t drive above what you negotiate…..Honda Civics are $190/month with no down….Can’t beat that!!! for a little over $2000.00 a year you can relax and not worry about your old car breaking down……surely stay away from the slick used car salespeople……….
    Remeber in life it’s ALL perspective!
    Ask a business owner who gets to deduct 90% of the lease as business expense is not really a bad deal if you are in the 30% tax bracket(hence the leased Benz and BMW’s!!!!)
    Just my 2 cents

    • josh

      if you can afford a lease then you can afford to put that money aside for repairs. You just need to have the self control to put it and keep it there. if you put 190 a month away, then in 18 months you would have saved 3420 dollars, more that enough to replace or rebuild the motor if you shop around. in 5 years you would have 11,400 in savings. even if you had to replace the motor and transmition and other things up to 7 grand ( which is an exageration) then you would still have 4,400 dollars left over, and if you spent that much ( 7 thousand) on the car you probably could drive it another 3-5 years after the inital 5 years……

  • http://livingstingy.blogspot.com/2011/01/never-lease-car.html Robert Platt Bell

    Some silly arguments being presented here:

    1. Get a 0% loan and “invest” the rest and come out ahead! Wrong. You see, the low interest financing is subsidized by the padded price of the car. There is no free lunch, you are just paying “interest” in the form of the $1500 to $2500 rebate you are not getting. No deals there.

    2. 4% auto loan is better than your rate of return in the market: Think again. Not paying interest at 4% is a solid 100% guaranteed “investment”, like a government backed bond or Certificate of Deposit. – not some speculative stock investment. Go down to your local bank and tell them you want a 4% CD for three years. When they get done laughing at you, they will toss you out of the bank. And it doesn’t matter what prevailing rates are – high or low – interest rates on loans are ALWAYS higher than rates on savings. If you get a below-market rate, it is only because the car price is padded accordingly.

    3. Car Repairs Cost More: Using a BMW as an example (against a Honda) is specious. Yes, they can be expensive to repair – if you take them to the dealer. Afraid of repairs? Buy a used one with a CPO (Certified Pre-Owned) extended warranty) – still about half the cost of a new one.

    For most makes and models, however, the cost of “repairs” on a LATE MODEL USED CAR are trivial – a few hundred dollars a year. Comparing 300,000 mile clapped-out junkers to brand new cars is specious and a straw-man argument.

    And of course, you have OTHER CHOICES besides paying $1500 for “breaks” [sic]. A battery for my X5 was $89 at BJ’s Wholesale. New Rotors and pads are hardly more than $300. I am not sure where the extra $1000 is coming from, other than you being foolish.

    If you are going to own a used BMW out of warranty, be handy with tools, or know a good independent mechanic. And, by the way, a PRE-PURCHASE INSPECTION would have turned up the brake and battery issues on your car. Your ignorance with regard to cars doesn’t mean leasing suddenly makes sense.

    4. Business Owners can Deduct Lease Costs: True, but you aren’t a business owner, so what’s the point?

    5. The cost to lease a new Honda is “only” about $2000 a year: Well, that is not counting the closing costs AND the excess mileage costs you will incur when you turn it in, which can run into the thousands of dollars. PLUS, you are paying for high-dollar collision insurance, to the tune of $500 to $1000 a year – or more, particularly if you are younger. The insurance on my 1999 BMW M Roadster is only $16 a month. Not to mention lower property tax costs, if they are applicable in your area.

    THE BEST BARGAIN out there is a car about 1-3 years old with under 50,000 miles on it. The largest single chunk of deprecation is off it, and it will be reliable for at least 3-5 years if not more, needing little more than tires, brakes, and maybe a battery. Such cars can cost less than HALF to own than leasing a new car. And if you can save up your money, you can pay cash.

    Fortunately, there are tons of such cars on the market, thanks to bone-heads who lease. But the BEST DEAL is to buy such a car from the original owner, who took care of it and has all the service records, changed the oil, waxed it, garaged it, and babied it. Do such cars exist? Yea, tons of them. But most idiots run off to the new car dealer, convinced they are “safer” with a new car.

    Do the opposite of the great mass of unwashed fools and you will make out like a bandit.

    Seems to me like a lot of people are trying to self-justify their poor financial choices. $2000 a year (plus the insurance!) put into a savings account will yield enough to pay CASH for a two-year old Honda within a few short years. Such a car can be owned PAYMENT-FREE for a DECADE or more. The choice is yours. I live on a retirement island. I’ve seen the results of people who lease for years at a time – they end up living on Social Security.

    The road to middle-class poverty is paved with car payments – or worse, lease payments.

    But what do I know, just an old millionaire here. Never leased a car – which is why I am a millionaire.

    If you want advice from poor people (who think a $1500 repair is “a lot of money”) then lease a car. Leasing is poverty-think at its worst. You can have shiny-shiny for low, low monthly payments. But the overall effect to your NET WORTH is never calculated, just the monthly payment.

    Cash flow is not wealth! Oh, well, most people never figure that out.

    • Tweedle

      Respectfully disagree with the first point. I’ve gotten 0-.9% interest rate on cars that I’ve already negotiated a very good price on simply by: letting them believe price is my biggest concern and I’d take higher financing; mentioning at the last second (after purchase agreement is drawn up and before loan docs are signed) that I’ve decided to pay cash, which they don’t like because they MAKE LOTS of money in commission when you finance, due to kickbacks from their corporate finance dept.; “relenting” to finance after all, but for a much better rate (max of .9%). As I said, they make a lot less off a cash paying customer and are more likely to discount the car if you finance because they can make up lost commission on the sales price via the kickback from their corporate finance company. I only ever do this if I can literally get a rate less than 1% and there is no rebate on the car, as financing at the low rate often does make you ineligible for the rebate, and I always have the cash to pay for a car in full before I even start looking. I, too, am a millionaire.

  • sabbir

    $5 in 2008 is not equal to $5 in 2011, if you dont believe it then leasing is bad. and also before u get into a lease your mind should be modern and your thought should be driving new models all the time. do you know that, let say you leased a car today and you like it so much that you wanna buy the car. go to the dealer next day and you can buy the same car. or you can trick them to get out from the lease. how? you go to the dealer and tell them i will be getting another car let say you have honda accord lease and you wanna get civic . now you want to buy civic. change the car and get out of the show room and sell it to some one else. this would be the best way to minimize your penalty when u wanna get out from lease car.
    a good business man is the one who keeps his money flowing.

    • Tweedle

      sabbir, it would never work. Those lease agreements are locked in tight, unless you want to upgrade to a more expensive lease on another car in lieu. They know all the tricks.

  • Murs

    I get that everyone is skeptical about the mileage and wear & tear charges for leasing a car but that just goes directly with your driving style. Obviously if you are going to be driving long distances and you know it, then leasing options aren’t for you. Plain and simple. But if you are one of those people who don’t trash their stuff and want a new car every few years, then leasing is perfect. What a lot of people don’t understand is that you can also negotiate with the dealership when you are setting up the next lease contract. If you take good condition of the car and maybe go a little over the mileage, you might be able to transfer the cost a little to the new lease or maybe, if you are really sweet to the dealership, you can get out of it.

  • http://livingstingy.blogspot.com/2011/01/never-lease-car.html Robert Platt Bell

    You’ve got to be kidding me, right?

    $5 in 2008 is worth about $5 in 2011 – inflation is at an all-time low. And what does this have to do with the staggering amount of money people throw away in leases?

    As for “going back to the showroom” to “trick” the car dealer into getting out of the lease, good luck with that! You see, people THINK they can put one over on a car dealer. But here’s the deal – they do more car deals in one week that you do in a lifetime. They’ve seen it all, and the only “tricks” are the ones they play on YOU.

    The trick you propose will still squander 25-50% of the value of the car – if you go to sell that Civic, you’ll take a 10-20% loss right off the bad.

    The transaction costs involved in buying brand-new cars are staggering. For the cost of LEASING a brand-new car, you can make the monthly payments on a 1-3 year old “modern” car, and when all is said and done, you OWN it, with no further payments.

    The guy leasing, is driving his hush-puppies at the end of the lease.

    As for the comment about “keeping your money flowing” I would suggest that a good business man is one that KEEPS HIS MONEY, period. Spending is not wealth. Accumulating money is wealth, and you can’t accumulate wealth if you think of your income in terms of monthly payments it can support.

    Do what you want to, of course, but please do not ask the government to bail you out when it all goes horribly wrong, which means I have to support you with your tax dollars. And yes, I have seen this firsthand. People who “spend it all” in their 30′s and 40′s, then lose their jobs in their 50′s and then retire DESTITUTE in their 60′s. It ain’t pretty.

    Or, like a friend of mine, don’t lecture me about how “lucky” I am for being “rich” while riding around in his LEASED CAR. He makes more money than I do, but thinks I’m “lucky” because I did without and put money in the bank. And now he’s unhappy with life and wants me to “loan” him money.

    I didn’t become a millionaire by leasing cars, and neither will you. Spending is not wealth, just dissipation of wealth.

    If you want to lease a car, fine – but at least be up-front about the logic of it and don’t try to make up these lame excuses that it makes financial sense, because it never does.

    All it is, is an excuse to stroke your own ego, at the expense of your net worth and future wealth. Period.

    Even if you can deduct the cost as a business expense, it is often far cheaper to own. You can’t deduct your way to wealth, either.

    • josh

      well said, very true. people want their needs covered ( now or in the future) so that they can just pay for their wants. ( now.) i say now because non of these persons have the self control to wait.

    • Tweedle

      +1 again. Robertplattbell, but you’re wasting your breath and you know it.

    • Anoura Logan

      I like the way you think!

      All I know is I’m buying a new camaro below invoice and when it gets high miles I’m gonna put a blown corvette engine in it I traded someone for and ride that pony till I give it to my grand babies who will then sell it for double what I paid .

      The real investment is taking shop class and knowing how your 3500lb projectile of death operates enough to never pay a third of what most spend on big repairs.

      Leasing or buying new can be good for you if you do it right.
      On the other side of the spectrum, you can be given a brand new car and forget to put oil in it and boom your engines seized.

      This is my explanation of its not the car it’s not the terms or if you buy or lease, it’s
      Doing the best you can do with the knowledge you have and not shooting yourself in the foot.

  • http://[email protected] Rob

    No one can tell me whats a bad idea for me. Every persons situation is different. I can give you 7 reasons why leasing works for me. Good for Warren Buffet and his used pick up truck, he doesn’t impress me. I drive a new car every 2-3 years and I love it. And lastly, Im not looking to be the richest guy in the cemetery when I die. Its only money!!!

    • josh

      i could tell you that standing in the middle of the freeway was a bad idea for you but guess you wouldn’t listen. I could also tell you that buying 1995 ford escort for 20 grand was a bad idea for you, but you wouldn’t listen. And nobody needs to have the most money when you die, but you don’t want to be forced to work in retirement, and to have a comfortable retirement is worth it. Live like no one else now ( live poor when you are young) and you can live like no one else later. ( you will have saved and be well off in your golden years.) not working at a burger joint because you wanted to live it up when you were younger…..

      • Trae0789

        Or you could die when you’re >60 years old and never get to those years…

      • Booch

        You obviously make less than 100K and deeply it shows.

  • Robert

    Wow you guys are so far off. Here is a perfect example of a situation where a lease is better than a buy:

    A few things to keep in mind:
    -All closed end leases include insurance similar to GAP insurance so totaling the vehicle is not an issue any longer.
    -Leasing a new vehicle very typically has a lower interest rate than a buy and sometimes even a higher rebate depending on the model. Reason for this is most people that do lease come back and lease again meaning more business for the manufacture.
    -”Dealerships” as referenced above do not lease cars. Finance companies do. Usually the manufactures.
    -Closed end leases give you a guaranteed value after three years. Purchases do not.

    Let me give you an example of why a guaranteed value can is a big deal. Customer #1 buys a SUV on a 72 month term for 30,000. Customer #2 leases the same SUV for 36 months. 3 years later gas prices go up and SUV values drop greatly. Customer #1 still has a bank lien on their SUV and owes the bank his remaining balance of 15,735.00, at this time this is a debt, not an asset. Both customers needs have changed and gas prices are costing them so much driving the gas guzzling SUV’s that they both need to make a change. Customer #1 goes in to the dealership to trade in his SUV. He finds out the trade in value is only 10,500, but he still owes the 15,735.00 so now he must roll that into his new loan or come out of pocket with the difference of 5,235.00. Not fun. Now Customer #2 does the same thing only he’s not worried about current trade in value because he purchased his SUV with a closed end lease that guaranteed his future value at 15,735.

    Obviously in this situation Customer #2 would turn the SUV in and pay the 300-400 turn in fee and come out nearly $5,000 better than customer #1. Now that doesn’t even include how much lower out of pocket he had in the first three years due to the lease payment being roughly $70 lower monthly. This is a real situation that happened to thousands just a few years ago when gas hit 4/gallon and everyone scrambled to get rid of their big SUV’s.

    Now let’s go the other way and say that gas prices didn’t drop the values. Customer #1 can simply continue to keep his suv and the 3 years of remaining payments and THEN he will truely own his vehicle and at that time it would be an asset. This is where most of the misconceptions of leasing are. Customer #2 can come back to the dealership, pay no fees and finance the remaining value of his SUV (15,735 residual from earlier) for 36 months and he too will own his SUV and have it as an asset. No difference at all.

    Things that everyone accepts as facts about leasing that are false:
    - Leasing is renting a car – False, Leasing is simply another way to purchase a vehicle. Your payments still go toward the car. You still have a lease payoff at any time. Lease for 36 months and decide you want to own the car? Great then just finance the remaining unpaid balance for another 3 years. You still own the car after 6 years. Oh and you only pay the residual if you decide to do this. Some people for some reason simply assume that all your lease payments are just rent and then you pay full price again for the car. Wrong, all of your lease payments paid down the balance you still owe on that car.

    Now I’m not saying that leasing is always better because it isn’t, but what I am saying is it’s a definite option that everyone should consider. More often that not you can get more rebates AND a lower interest rates on leasing from the manufactures. As far as the whole keeping a car until the wheels fall off is cheaper than constantly having a payment debate. Yes it is, but it’s convenience everyone wants. People that lease simply decide they will take a low car payment all the time instead of dealing with all the maintenance and frustration of an older vehicle. When you only own cars from 0-45000 miles you simply don’t do much maintenance. Oil changes and maybe tires. That’s it. Now cars with 45000-150000 miles what are you doing to them? Hoses, Belts, tune-ups, transmission and coolant flushes, clutches, alignments, brakes, tires, etc, etc. It seems it’s almost endless. Plus that’s not even talking about repairs. Stuff goes wrong with cars. Over half of the vehicles purchased in the last decade will have a major repair(defined as something costing over 2000 parts and labor) once between 45000-150000 miles. Is it cheaper? Yes. Is it riskier? Yes. Is it a major headache? Yes. It also saves money to mooch off your friends and just think about all that money saved that you could put into a mutual fund? Point is at some point you have to ask yourself if it’s worth it to you to have a nice car and not worry about all the headaches of a used car and trade in values.

    Leasing is NOT renting a car and you don’t own your car until it’s paid off even if you elect to buy. If you’re buying a new car then do yourself a favor and figure it out. Compare the lease. If you’re looking at a decent car or a newer model, then it will have a good residual and the Lease can save you real money. A couple of general rules that apply:

    Lease deals are better the sooner you purchase a new model. Last year’s left over models will NOT be good lease vehicles. Stale and boring cars will have the biggest incentives on buying. Their leases are not good because they are not in demand and there are better cars available which equates to the residual value being low hence why the lease isn’t good on these vehicles. Now if you plan to turn your lease into a purchase then it’s a wash because the lower residual means your buy out at the end is also low. If you plan to only worry about a payment and always have a new car under warranty and continually lease then another bonus is you will get the best cars on the market. The more popular a car is, the less it depreciates. When you’re leasing a vehicle you are paying the depreciation only. Less depreciation = better car and lower payment.

    • Robertplattbell

      You make some good points, and yes, leasing is BUYING the car, not RENTING it. It is just a purchase and repurchase agreement – you own the car.

      And yes, you have to negotiate on price and interest rates – and be smart about it. But many folks get snookered as lease agreements tend to BURY the interest rate (cost of money) and purchase price. People focus on MONTHLY PAYMENT and get screwed.

      But the big deal is you are BUYING the initial 10-20% depreciation that occurs when you drive a car off the dealer lot. That is a huge hit.

      This “fear of repairs” is nonsense – most cars have 4 or 5 year warranties – sometimes as high as 10 on powertrain. Even an American car can go 100,000 miles without much effort.

      A better buy is to buy a car that is off-lease – for about 2/3 the price of the new car. Let the leasing Chump pay for all that horrible depreciation and get only 3 years use out of the car. You can pay CASH for the used car (well, I can, anyway) and drive it for years at about HALF the operating cost of the fellow who leased it.

      If you have a business and can deduct car expenses, leasing sometimes makes “sense” – but you can’t deduct your way to wealth. Even for a businessman, lower costs means more profits.

      For consumers, buying brand-new cars is the most expensive way to go about owning a car. And as you point out, leasing is just buying a brand-new car.

      My friends who lease are turning in their truck this month. Someone hit it in the parking lot and put a nice scratch in it. If they owned it, it would be no big deal – the cost of repair is less than their deductible and it is a small scratch. But when they turn in the vehicle, they will be dinged for “excess wear”.

      They parked the truck this summer and decided not to take a trip to visit friends, because the lease limits them to 12,000 miles a year, and they were close to the mileage limit on the lease.

      Some fun, eh?

      FEAR is a bad reason to make any financial decision. And the only thing I am seeing here is FEAR of “outrageous expensive repairs!!!” (with exclamation points!). Come on, people, a brake job costing $1500? Shop around. Once out of warranty, you can take the car to places other than the dealer. Sheesh!

      Of course, it pays to know something about cars. People who are clueless about cars live in this constant fear of repairs.

      Sorry, but I think I’ll keep my PAID for BMWs over chain-leasing any day.

      Debt-free is the way to be. And it is not a matter of “taking money to the grave” as one wag said – it is a matter of NOT BEING BROKE IN RETIREMENT.

      Take a hard look at your 401(k) balance before signing lease papers. You’ll need $1,000,000 in that account just to get a $40,000 income in retirement. Most folks have $100,000 or less. How they will survive in their golden years is beyond me…..

      You can live large in your 40′s, but you pay for it in your 60′s. I live on a retirement island and I see the sad results….

      • Robertplattbell

        Also note that a “Paid for” car can cost a lot less to insure. I pay $32 a month through GEICO to insure my 2002 X5 and 1999 M Roadster. Of course, I don’t bother with collision. What is parked in my garage is not what I consider a major asset.

        Of course, I’ve seen people with more money tied up in cars than in their house. Priorities, I guess. When the shiite hits the fan, though, you can’t eat a car. And you can’t even sell a leased car.

        Oh yea, forgot about that one. My neighbor leased a beautiful new Volvo. Then he died. The widow didn’t want the car, so she took it back to the dealer. They made her pay nearly all of the remaining lease payments to get out from under the car. Ouch.

        When you OWN a car, you can sell it when you want to, not when someone else tells you it is time to.

        Leasing is the MOST EXPENSIVE way to ride. And the damage to your net worth won’t be readily apparent until you are older.

        Trust me….

      • Tweedle

        +1

    • Tweedle

      Where your logic is flawed is assuming everyone who buys a car is financing, and also the idea that contemporary cars will start incurring expensive repairs in just a few years or starting at ~45k miles is ridiculous, with a few exceptions. Most modern cars do not start needing expensive reparis at anything close to the timeframe you describe. The bottom line is, unless the lease write off makes sense as a write off against your business, any kind of car payment (whether for a leased vehicle or a financed new or used vehicle) likely doesn’t make sense and you can’t really afford the car. Most people are driving around in cars they cannot afford. We purchase our vehicles and pay in full at the time of purchase. We sometimes buy late model used or lease returms. We occasionally finance when there are 0-1% APR deals, and invest the money we’d have spend to buy the cars outright, but we always have on hand the cash to pay in full. We have no debt to speak of, other than our mortgage, have fully funded retirement accounts, fully funded emergency accounts/savings, etc. I realize we aren’t the norm, but most people live far beyond their means. We drive luxury cars, by the way, so this isn’t about having to sacrifice a nice car in order to afford paying for it outright. I will admit that we don’t have to drive luxury cars. They are a luxury. The money could be better put toward something else, but we are among the few who can truly afford are vehicles live far below our means.

  • pdizzle34

    Try this scenario:
    I’m a medical student who drives a 2000 Grand Prix which is about to break down at any moment. I have room in my budget to spend about $220/mo max on a replacement vehicle. I’ve been to numerous dealerships and looked at many USED cars and the best deal I could get was almost $200/mo for 5 or 6 years on cars that already have 60,000 miles on them. So what’s the point of “buying” when six years from now I’ll be in the same boat as I am now. Now consider leasing: I lease a new car now for the same rate for 3 years with a couple thousand down. I only drive about 8,000-10,000 miles a year. In three years when the lease expires I find a new car with a similar lease and do the same thing. Since I am a med student, I am assuming in 6 years that I’ll be in a much better financial situation and I’ll be able to buy a new car instead of lease. My point is that if you are responsible with your property (as I am), and can meet the conditions spelled out in the lease (as I would), then wouldn’t leasing be a better option as a temporary, short-term solution? Sounds like it to me.

    • josh

      well take that 220 a month and put it in a savings acount, and in 1 year you could have 2,640 (enough to replace the motor if you did some shoping around) in 5 years you could replace the engine and transmition and many other part up to 7 thousand in repairs ( now that doesn’t sound very fun but…) But if that same 2000 Grand prix lasted another only 5 years ( probably could last longer with 7 grand in it) 5 years putting aside that 220 every month you would now have paid in 13,200. ok, now subtract that 7 grand you have had to dump into the grand prix. YOU STILL HAVE $7,200! that is how much you have saved by driving around your old beat up car. do that in 2 increments and you have $14,400 in cash to buy a car and not have and payment, or do what ever you want to with it.

      • gigi

        I’m in the exact same situation (except not med school, but a degree that I’m just starting out on and a 1996 Camry instead of Grand Prix) and the exact same budget, and have already done the “Throw what I would have paid on a car loan/lease into a savings account for repairs thing”. It’s not fun. A lot of time at repair shops, a lot of worrying, and a lot of driving around in a beat up car. No I didn’t replace the engine but might as well have.

        If you’re just over it, like I am, I feel like leasing is a good option as well, especially considering the cars I can afford right now will be worth so little when I’m done paying them off in 4 years and won’t come with a warranty. I don’t think the $6-7k “equity” I’d earn in 4 years is worth the increased payments and lack of warranty I’d get by purchasing a 2 year old economy car right now.

  • Brother Dave

    The best experience I had with a leased care was the new one my employer let me drive for 2-years, then let me buy it out at the end. So I took very good care of it during the lease, knowing I’d get a nice care at a very fair price. Whats not to like?

  • Stephen

    I am just curious how do you get the $791k compunded capital from the initial $350? Is there a software to do this? Thx

  • Jeannefreeman

    I’m 68 and who knows how long I’ll be able to drive…my kids don’t want the hassle of doing something with my car when I’m gone…Still driving my 1998 Saturn…love that car…never had any problems with it…but…it’s bound to go sometime…then I will lease something “fun” and all the kids will have to do is turn it in…Till then it’s me, my Saturn, and I

  • Paula

    Wow. A lot of passionate responses here regarding leasing vs buying. I will just say that I have done it all. I have purchased a new car, purchased a vehicle off lease, and now contemplating leasing a car. I am 42 years old and only spent about 2 years (since I was 19) without a car payment. Once I purchase a car, I tire of it or start incurring a lot of expenses with the vehicle, and trade it in. I only went without a car payment when I bought my house.

    I think the decision is based on personal preference. I like driving a newer car. I’ve kept my purchased cars (both new and used) past the warranty and ended up spending money with maintenance and repairs. It’s all part of owning a vehicle. My brother drives a VW Golf that is paid off – and has over 100k miles on it – and he is constantly putting money into keeping it on the road. Is it as much as a new car payment, NO, but it is still money that is being spent on the vehicle. And it is a hassle to have to take it to the repair shop to argue with the service department who is trying to charge you more than what the repair costs.

    It’s all a matter of personal preference. As I stated before, I purchased an off lease vehicle (Mercedes ML350) and now I am ready to trade it in for something else. I rarely keep my cars through the full term of my purchase agreement anyway. Leasing attracts me for that reason. Am I wasting money, probably! But I do save a lot of money in my 401k retirement plan, and I do own my home (my mortgage payment is 1600) and will have it paid off within the next 15 years, so I think I’m doing ok. I work hard, why not treat myself? I deserve it!

  • http://pulse.yahoo.com/_3GWTVPQ7P3BGUI2AN2Q2HDAQCE SOOTHSAYER

    Me?…….I drive a Caddy.

  • Brucethegolfer

    fascinating….I’m enjoying this. I’m 65, I’ve bought new, used, old, leased, blown up, raced…you get the idea. Now, you gotta decide for yourself. If you buy a 3 year old car you should be paying 1/2 of new, unless it is a SAAB (which I have) then its more 1/3. You can get 100,000 mile warranties from date of purchase nowadays. The last lease I had I got for my daughter who was in college. She had an old car, I’m a daddy worried. So, I traded her old car in and leased her a new Nissan Altima for $139 a month. Worked out perfectly for us. She graduates, gets her job, buys another car…..used Pontiac for about 40% of new….with only 20k miles.
    On the other hand, I have 173+k on my 03 Hyundai Santa Fe. Regular maintenance and an occasional minor repair.
    To warranties…..they are a positive. No, I don’t sell them, however, I’ve blown up a motor without….it was a van and I took care of it, as I do all of my equipment. Only had 63k and a fresh oil change. When I told my mechanic he didn’t believe it. He checked the engine and said he’d never seen a 318 Dodge blow up…..until now.
    Had a GMC van that was perfect, until I hit 110,000 miles, between that and 150,000 cost me $13,000 in repairs, a regular money pit….I thought it had morphed into a boat!
    Put 200,000 on a Cadillac….only repair outside of brakes, tires, battery, and oil changes was a water pump at 150k…..then had #5 child and had to trade for a van.
    While I’m on the subject of cars…..new cars are soooo much better than that old due-due I drove back in the day. We were overhauling between 50-100k. Heck, a decent car today isn’t even broken in at 50k. And each new model gets better (ok, most of the time).
    So, a long winded….depends.
    I gotta address the “put a scratch in a lease and return it as damaged goods” comment. Nowadays my experience is that if your car gets hurt they will total it if they can….uhoh, salvage title….or at least el baddo comment on carfax. Your value just dropped! Big time.
    Do what makes you happiest…..and makes the most sense, if you have any. I have been able to make purchases and leased logically. My attitude is that it is a car, a piece of equipment. I love people, cars are expensive inanimate objects, I don’t love them.
    Make whatever you do serve you.
    God bless

  • Chadsakarter

    Leasing works for me, as I am in my third one. All though my wife’s car is financed and we are in a good position with that loan. LEASING isn’t for everyone, especially if you’re the classic old fellow that likes to own the car for many years to come… Just described my wife and that’s why we didn’t lease her vehicle when we signed the papers on it new. But myself on the other hand, I get tired of any “new” car that was my choice within the first few years and I become addicted to shopping for a new one whenever I get a free moment. I do LOVE driving a nice newer car and that’s just me, not smart, but I have a great investor that makes up for that. So let’s try not to become arrogant and act like our overbearing opinions to lease vs finance will change anyone’s life. Each to their own and hopefully it really works for them.

  • Christina

    Thank you for the interesting and informative perspectives shared above. I can see friends and relatives in the various scenarios mentioned. I’ve often wondered- why do they lease? Now I have a better idea as to the thinking that goes behind the process.

  • RED

    I feel I should put my 10 cents in… I have a unique situation and leasing is going to help me! I bought a 2011 Chevy Equinox and I hate it. Well guess what, the value of the car doped a lot and I owe about 9000 more then its worth. Well with the leasing option I get to get a new truck that I love, and turn in the truck in 39 months and get out Scot free. :)

    • Hsdaeraw

      dont go to “nice cars for good people” bad lemons lasting about two months if your luky..oh yeah they say they will fix issues during leasing, but make sur you find out thatif a transmission were to go out after two monthe months your burnt, bad people geting rich

  • Foremankesley

    Albuquerque NM- “Nice cars for goood people…ever wonder how they can sell 13-15 cars a day. Sure walk out with a car that day and make them rich but make sure you aren’t getting a lemon, and that later the promise that they will fix any problem during your leasing time……make sure you get the facts in writing. Find out what they do and dont fix. bad business people with a deal that will make you smile, but trust me the smile wont last over two months……

    • DlKIC 34

      I had the same problem and they tryed to scare me off with credit score issues..hey those can be fixed!

  • Hdladb N

    “nice cars for good people getting rich off poor…and the fact that everyone walkes out with a car that day.. think about it people!!!!! dont let the smiles fool ya

  • Aussie_bob_austin

    Its a bit of a shell game … a leasing company has little interest in negociating the price from a dealer so worst case you pay MSRP or whatever to start with … I can also believe leasing direct from the manufacturer may cut out the middle man.

  • T.W

    you say leasing is good but all the money you put into the lease you never get back.plus you said if you lease theres less maintenance.this is not true.japanese imports have the lowest cost of ownership and if you do all the regular maintenance you should not have any problems.leasing is a waste of money.plus dealers dont tell you that a third party inspection agency(autovin) is going to inspect the car at the end of lease. autovin is very inconsistent. one inspector might inspect the car and find nothing while on the other hand,when a second inspector inspects the car he might find a bunch of things wrong.you can get 0% finance up to 84 months now with no penalty if you make payments in advance of what is owed.

    eg: my friend and i both returned our mazda lease together and we both had snow tires on our cars.both were mazda3 gt’s. my friend got charged $400 for snow tires and i did not get charged anything. i think is very unfair and is destroying the reputation of the manufacturer.i cant believe a manufacturer would depend on the third party inspection agency to represent their brand. lots of autovins inspectors are under qualified.most are employees that worked in other field such as retail or at auto trader, with no experience really inspecting a car.

  • Ali-0300

    are cons are removed in Islamic banking, product itself is called AUTO IJARAH. Do check if you really want to see the difference between normal banking and Islamic Banking. :)

  • Just My Two Cents

    I don’t know if people are still reading and/or commenting here as I don’t see any dates. I find it so interesting to hear the different viewpoints. From the perspective of someone who doesn’t have enough cash to buy a car outright, I find that often the less-wise financial decisions are the only options available to people in my situation. I don’t really care what people think of me or my car as I drive down the road (though I’d prefer that it not have obvious dents or rust so I don’t have to be too embarrassed) but basically a car for me is A to B transportation. I have a cousin who bought a VW bug because it was “cute” and she likes to look good when she drives. Unfortunately, she has four kids so the whole family couldn’t even get somewhere without someone else coming to pick up some of the kids. That is idiotic and I didn’t feel sorry for her when it got repossessed because it was a ridiculous purchase in the first place.

    I know logically most people who are good with money would say it is better to buy a good used car and then save your money so you can trade up to a better good used car and so on until you buy all your good used cars with cash. But in reality, it’s so hard to do for some of us! I don’t begrudge those of you who can and have done it. I admire you. But saving money is really hard because there are always other legitimate reasons to spend that savings (unexpected need for hearing aides or glasses or A/C goes out, etc.) that hanging on to the planned savings has been hard for me to do. Now that our 12 year old GMC Jimmy needs $1100 more work after just last week we put $600 into it, I’m done with that and looking for something else. It looks like a choice between a car payment or a lease payment. Maybe this next time I’ll be able to buy the pretty good used and save the difference and trade up and eventually get where some of you have managed to do. But I do have empathy for those who feel like every day is a constant, dreary reminder of all the good stuff they’ve had to do without over many years; and thus a new car they couldn’t afford to buy, but somehow can get a lease for seems very enticing. I empathize but won’t do that myself. It’s just hard for all of us and most of us are trying. Thanks for everyone’s comments~

  • http://profile.yahoo.com/RMWITIOPCATSJQ6TPEDBWMHRIY BobDole

    7/12/12 – Let me give you all the short version:

    Leasing = good for small businesses. Easier paperwork and a tax benefit.
    Buying = good for the regular Joe.

    If you feel compelled to lease a car to “feel good” about yourself, then you have some other real serious issues you need to face. If you are this sort of person, more likely than not, you are making other poor financial decisions in your life.

    For a smart person who buys a decent car that lasts 10 years or more AFTER paying it off, that’s anywhere from $30k of savings. For a clown who leases and do not own a business, be prepared to work until you are 80 years old if this is you.

  • Angellura

    This is a horrible example why you shouldn’t Lease a car. It seems as if you give the cons but justify them in the same breath. I think your clearly in favor of leasing a car. This is something an average working class person should never consider. Financial traps like this is why most people in this country are in debt. If you have the means to save and pay in full, that’s always the best option. Warren Buffet takes private jets when he travels. Don’t get it twisted.

  • RickDees

    Lots of comments about NOT leasing here. We were always a family that bought a good used car as well. Kept them for around half a decade and traded for something else. Most decent used vehicles are still in the 20K range (we need an SUV for many reasons too numerous to list here). In fact, a 3 year old Chevy Tahoe still goes for over 30K easily. Which generally requires a 5 or 6 year loan for the average “Joe” to afford the pmts. Then we counted how many times after that half decade we actually still kept the now almost 10 year old car. ZERO. In other words, we were always making payments on something in order to keep it at least semi-reliable. Plus, the trade was worth around 7000 for something we paid 30K for. Total loss: 23 THOUSAND dollars every 6 years.
    A lease on the other hand did several things for us: it lowered our payments for a BRAND NEW car. It gave us a car that, during the lease, would only need occasional engine oil and filter changes. And it GUARANTEED us to be able to just give the car back to the dealer and walk away as long as we did not go over the 1000 miles per month allotted (which we never even come close to). PLUS, we find that most manufactureres give you a “loyalty rebate” if you lease another new car of the same brand. This generally covers any upfront costs of the new lease, and the payments are generally the same as the old one, so you basically get a brand new car every 3 years for nothing except indefinate low payments.
    Basically, if you are one that keeps you car until it is a beater, and dont mind putting thousands of dollars into it to keep it for 10 years or more, then leasing is NOT for you. However, if you come to terms with the fact that car buying is the absolute worst investment you can make, and the fact that most people just really “rent” their transportation throughout their lives anyway, then leasing makes good sense, gives you the latest and greatest in cars every few years, and gives you sense of confidence that your car will never break down. And if it does, the manufacturer will take complete care of you. Try that with a 12 year old car with quarter of a million miles on it.

  • RickDees

    Just to add as well: like most in this country we have two vehicles. One that we use for just about everything from grocery getting to going to work daily to taking on long trips through terrain in winter that if your car broke down you have a probability of dying. THAT car is the leased car. Our other one is a paid for old truck. It has well over 100K miles on it. And even though it is nice not to have to make payments on that truck, guess what: it needs a trans rebuild right now. And it could use a front end rebuild (ball joints, bushings, tie rod ends etc). Total cost of all that: around 3 grand. So you tell me, which is the better value? Luckily, we dont drive the old truck as much. If we did, it would probably need even more.

  • Juan De La Rosa

    if you manage money well, then lease payments should be no big deal. who doesn’t want to drive a new car? Who doesn’t want to build their credit score? Lower interests rates on everything financed, and you aren’t committed to a vehicle which will have issues later on in the future.

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