Moving to CA for 2 yrs, lease or buy used car?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Sophia1884
Posts: 98
Joined: Mon Aug 05, 2013 10:23 pm

Moving to CA for 2 yrs, lease or buy used car?

Post by Sophia1884 » Thu Apr 27, 2017 6:51 am

Hello all!

My family of three, including a toddler, are moving to Monterey, CA in October for 2-2.5 yrs. We've moved every 4yrs so have always bought used, inexpensive cars with decent luck. This time around, we have the toddler and will only be around for 2-2.5 yrs, then moving back overseas (a chance we may stay on in the States but won't know until much later). Since we don't know anyone in the area to help us look at used cars, someone suggested that we lease a car. We are not familiar with the pros/cons of this. Usually, I would wait to arrive, pay a mechanic to go with me to test/look at cars, then buy one for $5,000 or less (maybe a bit more). Now though, I want to make sure the car is safe for the kiddo but don't' want to buy a new car...not sure what to do. What are your thoughts on leasing cars?

We'd like a four door car with decent/good/excellent safety rating that we can take on road trips all over the West coast (so plenty of trunk space!). We don't expect to drive cross-country.

Thank you in advance for the advice!

User avatar
8foot7
Posts: 692
Joined: Mon Jan 05, 2015 7:29 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by 8foot7 » Thu Apr 27, 2017 6:54 am

A 2 year lease is probably not going to give you very many miles to do road trips all over the west. I think the rate for overages is 25 cents per mile or something absurd like that.

User avatar
Shackleton
Posts: 287
Joined: Mon Dec 29, 2014 6:20 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by Shackleton » Thu Apr 27, 2017 7:16 am

I'd look at newer, possible CPO, cars at a reputable dealer (maybe Carmax?) so that you'd have some feeling of confidence in the transaction. You will spend a bit more compared to a private party sale, but since you don't have a lot of confidence in your ability to find a good used car this seems like the best option especially with your concerns for the toddler and desire to drive all over (which I highly recommend!). I would not consider a lease because aside from the mileage costs, you don't get any of your money back when you leave at the end of the lease and you don't know exactly how long you might want to lease for.
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton

Silk McCue
Posts: 1119
Joined: Thu Feb 25, 2016 7:11 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by Silk McCue » Thu Apr 27, 2017 7:29 am

Shackleton wrote:I'd look at newer, possible CPO, cars at a reputable dealer (maybe Carmax?) so that you'd have some feeling of confidence in the transaction. You will spend a bit more compared to a private party sale, but since you don't have a lot of confidence in your ability to find a good used car this seems like the best option especially with your concerns for the toddler and desire to drive all over (which I highly recommend!). I would not consider a lease because aside from the mileage costs, you don't get any of your money back when you leave at the end of the lease and you don't know exactly how long you might want to lease for.
+1 Carmax

Sophia1884
Posts: 98
Joined: Mon Aug 05, 2013 10:23 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by Sophia1884 » Thu Apr 27, 2017 8:19 am

It's not even 7 am and you guys are already making my life easier! Thank you :)
8foot7 wrote:A 2 year lease is probably not going to give you very many miles to do road trips all over the west. I think the rate for overages is 25 cents per mile or something absurd like that.
I didn't realize it was per mile actually, thought it was a total number per year and assumed that number would cover our trips as long as it wasn't to NY.
Shackleton wrote: I'd look at newer, possible CPO, cars at a reputable dealer (maybe Carmax?) so that you'd have some feeling of confidence in the transaction. You will spend a bit more compared to a private party sale, but since you don't have a lot of confidence in your ability to find a good used car this seems like the best option especially with your concerns for the toddler and desire to drive all over (which I highly recommend!). I would not consider a lease because aside from the mileage costs, you don't get any of your money back when you leave at the end of the lease and you don't know exactly how long you might want to lease for.
Didn't know about CPO as it has never existed where we've been. Will look at CarMax and see what it is :)
Shackleton wrote: and you don't know exactly how long you might want to lease for.


True, I had not considered that part of it. Between the limited mileage, existence of a service that can guarantee a used vehicle and the uncertainty of time, I think we'll be in the market for a car. Thank you!

User avatar
Watty
Posts: 13832
Joined: Wed Oct 10, 2007 3:55 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by Watty » Thu Apr 27, 2017 8:21 am

Comparing buying a $5,000 used car to leasing a $20,000+ new car is a lot different. You will likely have a hard time buying "four door car with decent/good/excellent safety rating that we can take on road trips all over" for $5,000 especially if you want one that is very dependable and you want to buy it in a hurry.

Another big problem is that it sounds like you do not have a set date when you will no longer need the car. If you get a two year lease and then need it for another six months that would be a problem. Even needing for an extra six weeks could mean that you would need to rent a different car for six weeks. If there is any chance that you might need to cut your stay short that would also be a problem with the lease.

I once had to buy a car when when I moved across the country and did not want bring my old car with me. A big problem is that if you need to buy a used car in a hurry it is very difficult to do that quickly in a new town that you don't know well. Paying for a rental car for a few weeks can get expensive and when you arrive you will also likely be very busy with your new job and getting settled in so making the time to car shop may be difficult.

I was open to buying a new car but the car models I was interested in were in short supply right then so I was not able to find any decent deals.

What I ended up doing was buying a used rental car from Hertz and that worked out well for me and the car still had a little bit of the full warranty left.

https://www.hertzcarsales.com/

Some of the other big rental car companies in the US are Avis, Enterprise, Budget, and Dollar. They would also have used car sales but I have not dealt with them.

There have been a number of threads about buying used rental cars and there are mixed opinions about doing that. Many people have had good results with buying used rental cars but some people are concerned that they might have been abused. You would still want to have the car inspected by a mechanic so I think those concerns or overblown and even if there was a problem you would still have a powertrain warranty that typically lasts for around five years.

If you are open to spending more then you might consider buying a used rental car that is just a couple of years old. You can often rent the car for a few days first to decide if you want to buy it or not. I have often seen used Toyota Yaris for less than $10,000 but it is a small car, at least for the US.

There is also a large company named Carmax that buys and sells used cars that many people think is reputable and it has fixed prices so that you do not have try to negotiate a fair price. You can see their inventory online.

https://www.carmax.com/

Personally I think that their prices are too high and their offers to buy cars are too low but they are convenient and have a decent reputation. You would still want to have your mechanic to check the car.

A couple of things about buying a car in the US to keep in mind.

1) When you buy a car in the US you will also have to pay a lot of fees and taxes and this will be a significant amount. This will vary greatly by where you are at so be sure to research this. When you are talking to a car dealer ask about the "out the door" price.

2) You will be required to register the car and get a licence plate. Typically a dealer will handle that paperwork but you will likely need to know the address where you will be living and have proof of that since the registration fees are based on which city and county you are living in. If you move you will need to update your car registration and driver license.

3) You will need to get car insurance before you pick up your car and you will need to decide how much to get. There will be a state minimum for the liability insurance but that is way too low so do not buy a policy that is only for the state minimum. There are different limits for things like liability, collision, comprehensive, etc so you will need to research this. The US is well known for having lots of lawsuits so you really need a lot of car insurance. I would consider $250,000 in liability insurance to be barely adequate but most people on this board probably have at least a million dollars in coverage through an umbrella policy.

4) You will likely need to a US driver's licence after couple of months but I don't know the rules on that so be sure to research that.

5) Car dealers can be picky about how you can pay for a car. They certainly will not take an overseas check. Be sure to think through the mechanics of how you will actually pay for it.

User avatar
sunny_socal
Posts: 1610
Joined: Tue Mar 24, 2015 4:22 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by sunny_socal » Thu Apr 27, 2017 8:30 am

Sophia1884 wrote: <snip>
Didn't know about CPO as it has never existed where we've been. Will look at CarMax and see what it is :)
www.carmax.com

It's a used car wonderland! But, you won't get much for $5k at carmax :(

traveltoomuch
Posts: 516
Joined: Fri Mar 15, 2013 5:48 am

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by traveltoomuch » Thu Apr 27, 2017 8:50 am

Sophia1884 wrote: I didn't realize it was per mile actually, thought it was a total number per year and assumed that number would cover our trips as long as it wasn't to NY.
It's a per mile charge over some base allowance, perhaps 12k/year. Another downside: you'll need to carry collision insurance, and on a newer car - that might result in a higher insurance bill than you're accustomed to.

Buying and selling used cars in my usual style can take some time, and I'd be asking myself whether I wanted to commit to that effort when I wasn't expecting to keep the car for very long. If I thought the mileage allowance would be sufficient and I could find a lease with enough flexibility, I would consider leasing. You'll still likely come out ahead by buying.

TBillT
Posts: 384
Joined: Sat Sep 17, 2011 1:43 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by TBillT » Thu Apr 27, 2017 8:57 am

One thing to consider is that CA is pushing Plug_ins, including good financial incentives and giving Plug_ins the right to use free HOV with single occupant, which can be a time saver depending on your commute. Under $5k will be hard though.

You could go with something like a used Plug-in Prius (2012-2015), which might lose free HOV by 1-Jan 2019 due to being a Plug_in "Lite" but it has the same roomy cargo space for a family as the regular Gen3 Prius hybrid - which has quite a lot of space. Or skip the HOV and get a Gen3 Prius, or maybe a newer Gen4.

Sophia1884
Posts: 98
Joined: Mon Aug 05, 2013 10:23 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by Sophia1884 » Thu Apr 27, 2017 9:25 am

Watty wrote:Comparing buying a $5,000 used car to leasing a $20,000+ new car is a lot different. You will likely have a hard time buying "four door car with decent/good/excellent safety rating that we can take on road trips all over" for $5,000 especially if you want one that is very dependable and you want to buy it in a hurry.
Thanks for the break down of insurance and suggestions. Looks like this will be a much more expensive endeavor than it usually is.
TBillT wrote: You could go with something like a used Plug-in Prius (2012-2015), which might lose free HOV by 1-Jan 2019 due to being a Plug_in "Lite" but it has the same roomy cargo space for a family as the regular Gen3 Prius hybrid - which has quite a lot of space. Or skip the HOV and get a Gen3 Prius, or maybe a newer Gen4.
I had to look up HOV...and was reminded that we're headed into a metropolis. My biggest road obstacles currently are random tractors and pheasants.

traveltoomuch
Posts: 516
Joined: Fri Mar 15, 2013 5:48 am

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by traveltoomuch » Thu Apr 27, 2017 10:55 am

Sophia1884 wrote: I had to look up HOV...and was reminded that we're headed into a metropolis.
I don't think of Monterey that way. You'll be within driving distance of a metropolis, but Monterey is still over an hour's drive from even the outskirts of San Jose. I don't think you'll encounter many HOV lanes in your day to day life.

inbox788
Posts: 5400
Joined: Thu Mar 15, 2012 5:24 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by inbox788 » Thu Apr 27, 2017 11:12 am

I'm not sure you'd save that much with Carmax. Their prices are high retail for used cars. And while they pay a decent amount for trade-in (high trade-in values, but low vs private sale), your 2 year depreciation may be similar.

Look at the cost of a 3 year, 36000 mile lease (12k). Will that be sufficient for your driving? Overages are more like $0.15/mile. You could do 10k or 15k/year if you know ahead of time to save a little. You should be able to get something for under $300/month+tax, zero cost. So the average cost is about $0.30/mile. Sometimes you might see 2 year leases that make sense, but more rare and doesn't seem to fit your needs. If you have left over time or mileage, you could sell it to Carmax or others and recoup some of the $10-12k in total payments. If you find something closer to $200/month, you are talking about $8k total.

If you buy and sell a used car, you probably lose about 20% in depreciation in 2 years, so $4k on a $20k car. You also pay almost 10% sales tax, so there's another $2k. Repair and maintenance costs may be a little higher. Here's were looking at about $6-7k. So costs a little less, but you're also driving a used car not new. And if you own, you have more flexibility around when you sell.

Least expensive solution is to buy a used car around $10k. You could try looking at things around $5k, but they're going to be older and less reliable. IMO, this is probably the route to take for the short term need and also a decent option for longer needs. Total costs estimate around $3-4k if you don't face major repair.

https://www.edmunds.com/car-leasing/mon ... deals.html

If you lease, watch out for those extra fees, like lease disposal. BTW, insurance costs should decrease with car age and cost. Also higher for less experienced drivers.

random_walker_77
Posts: 605
Joined: Tue May 21, 2013 8:49 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by random_walker_77 » Thu Apr 27, 2017 1:58 pm

Another option is to take over someone else's lease. This gets you a shorter lease, and sometimes more favorable terms, as some people are willing to pay you extra to free them from their lease. Maybe you do a short term lease for 6-12 months, to give you time to scope out the used car market, or seek a lease that matches your timescale. Monterey is a small market, but if you're driving down from SF or LA, there'll be lots of cars in those markets.

There are multiple sites for it: leasetrader.com / swapalease.com / leasequit.com

article: http://www.bankrate.com/loans/auto-loan ... ssumption/

Here's a couple threads discussing it:
viewtopic.php?t=116950
https://www.fatwallet.com/forums/finance/1275693

btenny
Posts: 4499
Joined: Sun Oct 07, 2007 6:47 pm

Re: Moving to CA for 2 yrs, lease or buy used car?

Post by btenny » Thu Apr 27, 2017 6:18 pm

You can shorten or extend a lease at your option. Most new cars are financed by the factory bank. They will take the car back early but charge you fees same for keeping it longer, just pay for the extra months. Buy you still have select a car to lease and negotiate terms, etc. If you know about what kind of car you want leasing will get you a nice car for 30 month terms and 12k or 18k miles per year.
Then you can use it from 24 to 36 months. It will be more than a used car but no big cash and no big tax bill. Initial cash for a lease is $3k or so. A good used car will be $20k plus taxes, etc maybe another $3k so $23k total.

Post Reply