Car purchase Vs. car leasing

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idle eyes
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Car purchase Vs. car leasing

Post by idle eyes » Sat Jun 17, 2017 2:10 pm

I need some thinking around whether to purchase a vehicle, or two, or lease. I don't have a compelling need to have a new car periodically. I would prefer a vehicle that I know with certainty has been well cared for. I am thinking of Acura MDX for my wife and an Acura RLX for me. We are five years away from retirement. I want a vehicle that will be durable for years to come with minimum maintenance. I'm thinking of purchase or lease to get what I want and if leased, purchase when it comes off lease. Any guidance that is available would be appreciated.

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David Jay
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Re: Car purchase Vs. car leasing

Post by David Jay » Sat Jun 17, 2017 2:26 pm

Purchasing off of lease is usually the worst option financially.

Buy if you intend to keep the vehicle (buy-and-hold :happy ), or lease if you want a new vehicle every 3 years.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Watty
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Re: Car purchase Vs. car leasing

Post by Watty » Sat Jun 17, 2017 2:54 pm

idle eyes wrote:I'm thinking of purchase or lease to get what I want and if leased, purchase when it comes off lease. Any guidance that is available would be appreciated.


The only way to know for sure is to get the actual numbers and crunch them to see if there is a clear advantage one way or the other.

Leasing rarely makes sense unless you are using the car for work and can deduct the lease cost as a business expense.

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jabberwockOG
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Re: Car purchase Vs. car leasing

Post by jabberwockOG » Sat Jun 17, 2017 3:14 pm

For the vast majority of retail (non business) customers leasing a car is the most expensive way to own a car. When you lease you are paying for 3 distinct profit and cost centers 1) Car dealer selling car, 2) company/agent providing lease 3) lease return and resales center. I think the majority of folks that claim to have a great deal on a car lease simple don't understand the full costs from inception thru return.

Leasing makes good sense for a company that requires 10+ work vehicles (that will be 100% cost tax deductible as business expense) and does not want to sacrifice operating capital for business equipment purchases.

I'd be careful buying expensive cars in the next couple of years particularly if you are going to keep them 10-12 years. Car technology is developing very rapidly right now. I'm holding off at least 5 years so we can purchase mid-level cars with reliable hybrid, safety, and autonomous driving features. These features are already being sold but the technologies and reliability factors are not as solid as I think they will be 5 years. Of course there will always be new technology but I think we are at an inflection point right now especially when it comes to the end of gas only drive trains and autonomous driving capability.

Jags4186
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Re: Car purchase Vs. car leasing

Post by Jags4186 » Sat Jun 17, 2017 3:48 pm

Leasing only financially works vs buying in 2 situations:

You lease a car and the residual value ends up being much lower than the car company thought. You turn the car in at end of lease and you likely saved money vs buying the car and selling it after the same time period.

You lease a car and the residual value is much higher than the car company thought. You buy out the lease for the renegotiated price, and sell the car for a profit.

Other than that leasing might be good if you are moving somewhere for a year or 2 and don't want the hassle of buying and selling a car. Also, I think if you value a brand new car every 3 years leasing can offer an advantage of less hassle.

But if you are looking at a strict dollar to utility matchup, of course buying is cheaper than leasing, and buying used is cheaper than buying new.

bloom2708
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Re: Car purchase Vs. car leasing

Post by bloom2708 » Sat Jun 17, 2017 3:55 pm

What are your current cars? With 5 years to retirement that puts another set of car purchases in your first years after retirement.

Maybe a stagger system. I would buy not lease.
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harrychan
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Re: Car purchase Vs. car leasing

Post by harrychan » Sat Jun 17, 2017 10:01 pm

If you are purely looking at financial aspect, the best deal is to buy a 2-3 year old car where it has depreciated but still under factory warranty.
This is not legal or certified financial advice but you know that already.

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peterinjapan
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Re: Car purchase Vs. car leasing

Post by peterinjapan » Sun Jun 18, 2017 4:53 am

I got the perfect car. 1 year old used car, the cheapest BMW they make, but very high quality and fun to drive, nearly new but with like 9000 miles on it. I got the last (I assume) standard transmission I'll likely ever drive, since they are disappearing so fast. I love that car.

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bottlecap
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Re: Car purchase Vs. car leasing

Post by bottlecap » Sun Jun 18, 2017 6:42 am

My thought would be you are doing it the most expensive way possible. But you will get to see if you like the car well enough to buy it.

JT

fundseeker
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Re: Car purchase Vs. car leasing

Post by fundseeker » Sun Jun 18, 2017 6:43 am

bloom2708 wrote:Maybe a stagger system. I would buy not lease.


+1 for this!!! I'd never lease a car, but then again, I'd never borrow money to buy one. Is paying cash for one or both of these even being considered?

CyclingDuo
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Re: Car purchase Vs. car leasing

Post by CyclingDuo » Sun Jun 18, 2017 9:44 am

idle eyes wrote:I need some thinking around whether to purchase a vehicle, or two, or lease. I don't have a compelling need to have a new car periodically. I would prefer a vehicle that I know with certainty has been well cared for. I am thinking of Acura MDX for my wife and an Acura RLX for me. We are five years away from retirement. I want a vehicle that will be durable for years to come with minimum maintenance. I'm thinking of purchase or lease to get what I want and if leased, purchase when it comes off lease. Any guidance that is available would be appreciated.


Chances are at your age(s) and this close to retirement, you have the luxury of enough savings to do either without any worries - purchase outright, or lease.

Personally, neither of us are fans of leasing or financing a car (unless the financing is some special deal like 0% interest). However, we are open to options if the situation was right. Our reasoning for that is to not carry any debt, and we keep our vehicles long enough (usually) to average out the purchase price so our cost of ownership is lower.

We agree with others above, leasing and then purchasing the car at the end of the lease is not the best way to go cost wise. A good solid test drive or two, along with perusing every single review written on both vehicles should really be telling for you about the MDX and RLX models. Drive a few other makes/models as well to make sure you are set and sure of your decision. It wouldn't surprise us that if you were looking to get both vehicles at the same time, the dealer would bend over backwards to negotiate with you for a double deal. That's a lot of service income that you would bring to their dealership over the years, so you would have a decent tilt of the upper hand in negotiating a deal.

There's a good chance both of those vehicles will give you at least 8-10+ years of excellent service. If you average out your cost of ownership for a select number of years purely based on the purchase price (set aside maintenance and repairs for now) to see what it breaks down to on a monthly basis so you can then compare to a lease. Say the RLX base model is $57K (which includes sales tax) and you keep it 10 years. That works out to $475 a month before you add fuel, insurance, maintenance, repairs, tax/title/registration fees along the way. Plus, at the end of those 10 years, believe it or not - you will be able to sell the used vehicle and get some amount (be it $10K or whatever) which then would adjust that monthly purchase price cost of $475 down to $392 a month.

If you lease a car of that price, I would imagine the 36 month lease payment will be in the $600's, plus a deposit. Guesstimate you will pay about $22K - $25K for the luxury of driving the car for 3 years. At the end, you have no car. You could then lease another for a similar situation. And on and on to equal the life of the one car you purchased. Your expenses continue to get higher and higher with the leasing for the same duration as owning a car for a decade to the point you've perhaps paid $73 - $81K for a car that you could have paid $57K for up front. Chances are you will have some repairs that are expensive enough to add several thousand dollars to your RLX if you keep it 10 years and beyond. Years 8 - 12 can start to get expensive if you drive a lot of miles (more than 15K a year). We've been a Honda family for decades and I just sank about $4K into a pair of 2005 Honda vehicles this year - suspension/struts/brakes/oil seal/driver's seat repair/windshield/broken tail light, etc... which is not out of the norm for 12 year old cars (one with 162K, one with 212K). One is going on the selling block as it has just been replaced with a 2017 Honda (paid $43K cash) and plan on driving it for 10+ years. We will keep the one with 212K and look to replace at some point in the future in an effort to stagger our purchases based on our salary and financial situation at the moment.

So just run some numbers that meet your needs/goals to see what the best scenario is for both you and your wife. As we said - I assume you have the luxury of being fine either way financially be it purchasing or leasing. Work with your dealer to see what kind of incentives they may have (leasing or purchasing or financing).

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Kenkat
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Re: Car purchase Vs. car leasing

Post by Kenkat » Sun Jun 18, 2017 2:20 pm

If you are one to keep cars for a long time, you'd be far better served by buying rather than leasing. I would only lease if you want the car for the term of the lease and plan to get rid of it hen the lease is up.

For the Acuras, I would look for 2-3 year old models. The RLX hasn't been a strong seller for Acura and so there's a pretty steep depreciation curve that is to your advantage in buying a lightly used model. The MDX is a more popular vehicle for Acura but it still looks like you can get a pretty good deal on used models. You'd have to price compare to be sure.

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