Lease vs Buying a Car

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cloneman33
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Lease vs Buying a Car

Post by cloneman33 » Tue Jun 25, 2019 10:15 am

I have always bought my vehicles. Looking for folks opinions on buying vs leasing vehicles? Also, are there used vehicle leases or just new? Is the instant decline of value of a new car priced into a new car lease price? Thanks for any help!

Thegame14
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Re: Lease vs Buying a Car

Post by Thegame14 » Tue Jun 25, 2019 10:17 am

I would always buy, less restrictions, and also I wouldn't buy brand new, Id get CPO, put 20% down in cash, and then pay off 3 or 5 years depending on interest rate.

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cloneman33
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Re: Lease vs Buying a Car

Post by cloneman33 » Tue Jun 25, 2019 10:20 am

Pardon the ignorance but what is CPO?

Zecht
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Re: Lease vs Buying a Car

Post by Zecht » Tue Jun 25, 2019 10:22 am

So first off, you should probably start reading some of Tom's stuff on Jalopnik so you can have a more informed opinion about it, I always suggest people start here
https://jalopnik.com/four-reasons-why-l ... 1679962322

There is a whole guide to all the details of leasing in several of the other posts, but it boils down to two things. If you keep your car longer than 5ish years, it's not a good plan to lease. If you want a non-luxury car, or want something that depreciates extremely rapidly, you should probably not lease. Leasing is good for people that don't drive much, like swapping out their ride every 3ish years, and enjoy having more car than would be affordable if they went the purchasing route.

Regardless of all the hyperbole about buying always being a better monetary decision, that's only true if the behaviors that make that a generally true statement back it up. Many common behaviors such as swapping the cars out and buying a nicer car than a purchase budget would allow are the two big ways that people would have been better off leasing.

Blue456
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Re: Lease vs Buying a Car

Post by Blue456 » Tue Jun 25, 2019 10:24 am

With lease you get less for your money. Not worth it. You are even better off buying brand new vehicle than getting a lease. However you gonna get best bang for buck by getting used 2-4 years old. It will run well for another 5 years minimum without getting hit with 40% depreciation value in the first 3 years of ownership of brand new car.

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dm200
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Re: Lease vs Buying a Car

Post by dm200 » Tue Jun 25, 2019 10:34 am

cloneman33 wrote:
Tue Jun 25, 2019 10:15 am
I have always bought my vehicles. Looking for folks opinions on buying vs leasing vehicles? Also, are there used vehicle leases or just new? Is the instant decline of value of a new car priced into a new car lease price? Thanks for any help!
Except for some cases where leased vehicle is used primarily for business AND it is desired/necessary to always have a nice, late model car - leasing is not better than buying (except in some unusual situations). A lease is, under the covers, a balloon loan amortized over many years with the balloon due at the end of the lease. The lease has a guarantee value as the 'cover" on the balloon loan.

Disadvantages of a lease:
1. If you drive more miles than allowed, you pay extra for each mile.
2. If you drive fewer than the allowed miles, you are paying for miles you do not use
3. In some jurisdictions, there are taxes on lease payments
4. If your circumstances change and you want/need a different vehicle, it can be costly to get out of the lease early.
5. With a lease, you (as far as I know) must deal in person to turn over the car, etc. at the end of the lease. That means you are "captive" for a big sales pitch to lease again.

I suggest buying (and financing, perhaps) the car (and make sure to negotiate a good price) you want and need. if a lower monthly payment is a goal, look for credit union balloon loans or lease-like financing.

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sk2101
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Re: Lease vs Buying a Car

Post by sk2101 » Tue Jun 25, 2019 10:35 am

Every time people make blanket statements like "lease is always more expensive" you know they don't know what they are talking about. Sometimes buying is better, sometimes leasing is better, it all depends on the circumstances and on the deal you can get.

I suggest you read up on leasehackr forum and get informed about leases. When you can lease a car for $150/month with $0 down it is very hard to beat that buy buying any car, unless you are driving a jalopy that is 10 years old. Of course, this is an extreme example but just to make the point. But generally if you want to change cars every 3 years, keep your mileage under 12K/year and you are not picky about what you want to get (i.e. get whatever brand is piling lease incentives on), a lease can be very advantageous.

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Re: Lease vs Buying a Car

Post by flyphotoguy » Tue Jun 25, 2019 10:36 am

I've always bought used ever since reading the book(s) millionaire next door/millionaire mind. I have a friend who's been leasing nice cars since I can remember. He's been cycling Benz, BMWs, Audis, etc. but that works for him coz he likes replacing his cars every few years. If you're considering it, check your lifestyle so if you feel like driving nice cars often and don't want to worry about maintenance and get the latest one always, leasing might be the better option.

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Toons
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Re: Lease vs Buying a Car

Post by Toons » Tue Jun 25, 2019 10:37 am

I have not crunched the numbers when it comes to leasing,
I just prefer to own the vehicle,
It is mine ,to do as I please
No restrictions
less to think about.


:idea:
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deltaneutral83
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Re: Lease vs Buying a Car

Post by deltaneutral83 » Tue Jun 25, 2019 10:39 am

Average lease backs out the interest rate to somewhere between 12-15%. Not good, again, that's the average, terms are always different and some leases can make sense, but not many.

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Re: Lease vs Buying a Car

Post by dm200 » Tue Jun 25, 2019 10:42 am

sk2101 wrote:
Tue Jun 25, 2019 10:35 am
Every time people make blanket statements like "lease is always more expensive" you know they don't know what they are talking about. Sometimes buying is better, sometimes leasing is better, it all depends on the circumstances and on the deal you can get.

I suggest you read up on leasehackr forum and get informed about leases. When you can lease a car for $150/month with $0 down it is very hard to beat that buy buying any car, unless you are driving a jalopy that is 10 years old. Of course, this is an extreme example but just to make the point. But generally if you want to change cars every 3 years, keep your mileage under 12K/year and you are not picky about what you want to get (i.e. get whatever brand is piling lease incentives on), a lease can be very advantageous.
My, admittedly anecdotal, opinion is that the determination of cases where leasing was beneficial to the driver is 20/20 hindsight. These cases, in my observation, are cases where the projection of the car value by the leasing company have been very, very wrong - and the leasing individual does very well.

A lot of folks do not know, for example, that a lease, under the covers, is a balloon loan. The leasing company borrows money to pay for the car and pays back that loan using the lease payments. I have been in related entities where I have seen how these balloon loans work.
Last edited by dm200 on Tue Jun 25, 2019 10:44 am, edited 1 time in total.

RJC
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Re: Lease vs Buying a Car

Post by RJC » Tue Jun 25, 2019 10:44 am

There is a reason why dealers are always pushing for the lease.

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sk2101
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Re: Lease vs Buying a Car

Post by sk2101 » Tue Jun 25, 2019 10:58 am

dm200 wrote:
Tue Jun 25, 2019 10:42 am
My, admittedly anecdotal, opinion is that the determination of cases where leasing was beneficial to the driver is 20/20 hindsight. These cases, in my observation, are cases where the projection of the car value by the leasing company have been very, very wrong - and the leasing individual does very well.
Another advantage for leasing is that the resale value of the vehicle is guaranteed. You don't need to worry about selling or trade it in and be ripped off. In the extreme rare case that the vehicle has appreciated you have the option of selling it to carmax and pocketing the difference.

I am not here to defend one view or the other. In my household I do both. I lease for my wife and buy for me. She drives fewer miles and wants to drive a newer vehicle. I used to buy her cars, and I have crunched the numbers and leasing works out cheaper in her case. For me, I drive 20K miles/year and I don't care about driving an older, high mileage vehicle so I buy my cars and keep them a long time. That is the cheap alternative for my case.

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dm200
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Re: Lease vs Buying a Car

Post by dm200 » Tue Jun 25, 2019 11:22 am

Another advantage for leasing is that the resale value of the vehicle is guaranteed. You don't need to worry about selling or trade it in and be ripped off.
True - BUT, in my opinion, you pay a price for this guarantee.

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Re: Lease vs Buying a Car

Post by ncbill » Tue Jun 25, 2019 11:32 am

Leases are convenient, especially if you want something new every 2-3 years.

And there's always something on sale.

I just got a broker's offer for a well-equipped truck, 4x4, crew cab, for ~$300/month, $0 due at signing...not bad for a ~$40,000 truck.

If that price holds for July I'll probably pick one up (want to retire one of my older vehicles)
Last edited by ncbill on Tue Jun 25, 2019 11:40 am, edited 1 time in total.

02nz
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Re: Lease vs Buying a Car

Post by 02nz » Tue Jun 25, 2019 11:36 am

cloneman33 wrote:
Tue Jun 25, 2019 10:20 am
Pardon the ignorance but what is CPO?
Certified pre-owned. The dealer does some checks on the car, the manufacturer gives it a longer warranty (but generally it starts from the original delivery date), and the dealer marks it up.

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Re: Lease vs Buying a Car

Post by Meaty » Tue Jun 25, 2019 11:45 am

cloneman33 wrote:
Tue Jun 25, 2019 10:15 am
I have always bought my vehicles. Looking for folks opinions on buying vs leasing vehicles? Also, are there used vehicle leases or just new? Is the instant decline of value of a new car priced into a new car lease price? Thanks for any help!
Leasing a car is the most expensive way to drive.
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Re: Lease vs Buying a Car

Post by hudson » Tue Jun 25, 2019 11:49 am

sk2101 wrote:
Tue Jun 25, 2019 10:35 am
Every time people make blanket statements like "lease is always more expensive" you know they don't know what they are talking about. Sometimes buying is better, sometimes leasing is better, it all depends on the circumstances and on the deal you can get.
I couldn't agree more. It depends on the buyer; it depends on the need.
I was short on cash years ago...I was shopping for the lowest possible monthly payment... and got a 7 year lease/buy deal on a 2002 Saturn for $190 a month. That fit my needs.
I've used James Bragg's FightingChance to buy my last few vehicles; he coaches folks on getting a good deal on a lease also. I've always felt like I was getting my money's worth.

James Bragg....
"With our empowering guide to buying or leasing a new car, you’ll be in total control, conducting the process from your home or office among several dealers that you choose. We teach you exactly what to do and say and when to do it. And we’ll be here to answer your questions by phone, including going through your best-offer lease numbers with you."
Last edited by hudson on Tue Jun 25, 2019 12:09 pm, edited 1 time in total.

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Re: Lease vs Buying a Car

Post by mountain-lion » Tue Jun 25, 2019 11:58 am

deltaneutral83 wrote:
Tue Jun 25, 2019 10:39 am
Average lease backs out the interest rate to somewhere between 12-15%.
This is patently false. A 12% interest rate would be a money factor of 0.005. A quick scan on leasehackr.com shows dozens of dealer opening lease offers that are about half that, from luxury cars to econoboxes across many brands, regions, and car-types. Negotiation will get them even lower than that.

Leasing is almost never the most frugal option, but can be advantageous depending on your driving and car purchasing preferecnes. But at least be accurate about the disadvantages.

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Re: Lease vs Buying a Car

Post by donaldfair71 » Tue Jun 25, 2019 12:05 pm

dm200 wrote:
Tue Jun 25, 2019 11:22 am
Another advantage for leasing is that the resale value of the vehicle is guaranteed. You don't need to worry about selling or trade it in and be ripped off.
True - BUT, in my opinion, you pay a price for this guarantee.
No free lunches.

The guarantee is baked into the price paid for the lease. Dealerships aren't dumb. They don't give away value.

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Re: Lease vs Buying a Car

Post by 02nz » Tue Jun 25, 2019 12:05 pm

I wouldn't categorically rule out leases. On plug-in hybrids and EVs in particular, it can work out very well.

Example: About a year ago I leased a Chevy Volt plug-in hybrid, one pay at about $8600 out the door (incl. about 9% tax). With utility rebate and the CA state credit, the net cost was about $6600 for 30,000 miles of driving.

I'm getting about 91% on electricity, the remaining 9% on gas. Those 30K miles will cost about $240 in gas (40 MPG, $3.50/gal) and about $1180 in electricity (assuming 3 mi/KWHr at $0.13/hr), total about $1420 for 30K miles. I'll actually do better than that, with some free charging and higher efficiency driving.

I'll spend $0 on maintenance/repairs, as the Volt is under warranty the entire 3 years, and 2 oil changes/tire rotations are included (they reduced this to 1 visit for more recent purchases, but even that is enough). It's extremely unlikely I'll need to replace brakes/tires before I turn the car in.

So net cost before insurance/registration is about $8,000 for 3 years/30K miles.

The car the Volt replaced netted about 20 MPG, so gas alone would have been over $5K. Three years of maintenance, repairs might cost $1K if I was lucky and nothing major broke. And depreciation over 3 years would have been at the very least $5K, likely higher. So I'm saving at least $3K, probably closer to $5K. (That's for a 4-year-old car; a newer car would have lower maintenance/repair costs but higher depreciation.)

The Volt has been discontinued but there are other good lease deals on EVs and plug-in hybrids; actually there are still some Volts on dealer lots, on which you can probably score a better deal than I did, and of course obsolescence is not a worry if you're going to turn the car in after 3 years. The key with leasing EVs is to work out the right deal that captures the savings from the $7500 federal tax credit*, which is not paid directly to the lessee. With the right mix of state and utility incentives, it can be more economical to lease an EV or PHEV than a conventional car - in my case it was even cheaper than keeping my already-depreciated 4-year-old car. And that's before considering other benefits (smoothness/quietness, reducing carbon emissions, etc.) or perks like HOV lane stickers.

Leasehackr and http://ev-vin.blogspot.com/ are two good places to start.

* The tax credit is being phased out for Tesla and GM, but other manufacturers' cars still qualify for the full credit. For plug-in hybrids, the amount can be less, depending on battery capacity. Higher-range PHEVs like the Honda Clarity get the full $7500, while those with smaller batteries may only get $3-4K. The EPA has a list of the individual amounts.

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Re: Lease vs Buying a Car

Post by rallycobra » Tue Jun 25, 2019 12:20 pm

I prefer to buy 2.5-4 yr old cars still under the original warranty to new.

You have to negotiate a new purchase or a lease the same way and be sensitive to cash back and interest rate, or money factor (interest rate / 24) on the lease. If these come out the same, I think leasing is a better option.

When I needed a new vehicle, I have come out better leasing. At the end of the lease, if you feel like the lease was too expensive and you are giving back too much value to the dealer, you have the option to buy the car out. If the car is worth less than the buyout and you return it you came out ahead instead of purchasing. When the car is not repairable by the dealer (Audi A4), you drive their loaner for 2 months (Audi A6) and the lease ends you give the car back. You can't lose leasing this way. Of course sometimes the manufacturer may give extra cash to purchase, and that throws this equation off.
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Re: Lease vs Buying a Car

Post by adamthesmythe » Tue Jun 25, 2019 12:20 pm

I start with the presumption that buying is usually the best and cheapest way to get a car. And that in some special circumstances leasing may be better.

What are the special circumstances that make you suspect leasing will be better?

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Re: Lease vs Buying a Car

Post by tealeaves » Tue Jun 25, 2019 12:36 pm

It's never a decision that can be made in a vacuum. Factors to consider (other than the obvious "monthly lease vs. car loan/amortized cash purchase cost" ) are expected costs of maintenance for the purchase option (especially if not a new car), insurance savings of the purchase option (if not a relatively new car), and perceived value of always having the latest safety features (if leasing a new car every 36 months). I used to always buy as the "default" but now find the decision needs to be made on a case by case basis.

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Re: Lease vs Buying a Car

Post by deltaneutral83 » Tue Jun 25, 2019 12:54 pm

mountain-lion wrote:
Tue Jun 25, 2019 11:58 am
deltaneutral83 wrote:
Tue Jun 25, 2019 10:39 am
Average lease backs out the interest rate to somewhere between 12-15%.
This is patently false. A 12% interest rate would be a money factor of 0.005. A quick scan on leasehackr.com shows dozens of dealer opening lease offers that are about half that, from luxury cars to econoboxes across many brands, regions, and car-types. Negotiation will get them even lower than that.

Leasing is almost never the most frugal option, but can be advantageous depending on your driving and car purchasing preferecnes. But at least be accurate about the disadvantages.
Well I'd have to look more into it, just going off some numbers I got from a few friends who lease vehicles. If I could lease a vehicle for 6% or lower I'd actually be more inclined to take a look. Thanks for posting the website.

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Re: Lease vs Buying a Car

Post by Nate79 » Tue Jun 25, 2019 1:33 pm

In general leasing is the most expensive way to buy. Financially you are much better off to buy a used car and drive it when it is in the lower depreciating years of operation. If you plan to buy a new car every three years you already are operating a car at the most expensive time of it's life. Leasing is just a little bit worse due to higher financing costs.

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Re: Lease vs Buying a Car

Post by dm200 » Tue Jun 25, 2019 1:51 pm

Here is a credit union with an interesting "flex loan" for buying either new or late model used, BUT with a lease-like guaranteed "value" when the balloon payment is due. The interest rate is 1% (100 basis points) higher than a similar fully amortizing car loan of the same type. This might be the best of both worlds - and, unlike leasing, you can finance a late model used car..

https://www.arlingtoncu.org/personal/bo ... x-car-loan

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Re: Lease vs Buying a Car

Post by Van Down By Da River » Tue Jun 25, 2019 1:55 pm

The lease vs buy is just like the buy vs rent real estate debate, everyone situation is different, and for some people, despite 'throwing their money away' leasing and renting makes sense.

I would never lease a car, not because of the cost, but because I cant have nice things and every car I own ends up getting trashed, and I could not imagine what the dealership would charge me every time I went in for routine inspections.

Just last week one of my kids spilled an entire cup of milk under one of the seats, and the other 'keyed' my car with the handle from his bike, grinding up against the whole side.... :oops:

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dm200
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Re: Lease vs Buying a Car

Post by dm200 » Tue Jun 25, 2019 2:01 pm

Just last week one of my kids spilled an entire cup of milk under one of the seats, and the other 'keyed' my car with the handle from his bike, grinding up against the whole side.... :oops:
They will "grow up"! Hope there is a gap between the children and the grandchildren :oops:

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Re: Lease vs Buying a Car

Post by FireSekr » Tue Jun 25, 2019 2:34 pm

dm200 wrote:
Tue Jun 25, 2019 10:42 am
sk2101 wrote:
Tue Jun 25, 2019 10:35 am
Every time people make blanket statements like "lease is always more expensive" you know they don't know what they are talking about. Sometimes buying is better, sometimes leasing is better, it all depends on the circumstances and on the deal you can get.

I suggest you read up on leasehackr forum and get informed about leases. When you can lease a car for $150/month with $0 down it is very hard to beat that buy buying any car, unless you are driving a jalopy that is 10 years old. Of course, this is an extreme example but just to make the point. But generally if you want to change cars every 3 years, keep your mileage under 12K/year and you are not picky about what you want to get (i.e. get whatever brand is piling lease incentives on), a lease can be very advantageous.
My, admittedly anecdotal, opinion is that the determination of cases where leasing was beneficial to the driver is 20/20 hindsight. These cases, in my observation, are cases where the projection of the car value by the leasing company have been very, very wrong - and the leasing individual does very well.

A lot of folks do not know, for example, that a lease, under the covers, is a balloon loan. The leasing company borrows money to pay for the car and pays back that loan using the lease payments. I have been in related entities where I have seen how these balloon loans work.
I greatly prefer buying over leasing as I don’t want to be locked into something or forced to replace it after 3 years if I’m perfectly happy with it.

That said, certain brands intentionally underestimate depreciation to increase the number of leases. BMW typically is very optimistic on their residuals and they’re usually much cheaper to lease than to buy. I leased my 5 series with a 62% residual after 3 years.

Go look on BMW CPO website and you’ll see that 3 year old non M BMWs are asking for about 50% of their original MSRP. Negotiate the price a bit and actual selling price is probably 45-50% of the original MSRP on a 3 year old car.

As much as I hate the inflexibility of leasing, it makes sense in this scenario. I’d rather pay 38% depreciation over 3 years by leasing than pay 50% over the same time period by purchasing.

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Re: Lease vs Buying a Car

Post by MikeG62 » Tue Jun 25, 2019 2:40 pm

deltaneutral83 wrote:
Tue Jun 25, 2019 10:39 am
Average lease backs out the interest rate to somewhere between 12-15%. Not good, again, that's the average, terms are always different and some leases can make sense, but not many.
I've not seen rates anything like double digits and I have negotiated about 7 leases in the last several years (for myself and family). Maybe this was the case in the 1980's?

Just completed the negotiation for my Dad on a 2019 Lexus ES350. He's picking it up tomorrow. MF is 0.0003 which translates to an annual interest rate of 0.72%. That is 72/100ths of 1.0%. If he were willing to put down three security deposits, the interest rate drops to 0.15%.

Negotiated a lease for my daughter which closed last month on a Jeep Grand Cherokee Limited. MF is also 0.0003 or 0.72% interest rates. Chrysler does not do MSD's so not opportunity to buy down the interest rate further.

Negotiated lease for my other daughter in Dec of 2018 on a Lexus NX. MF was 0.00065 which translates to interest rate of 1.56%. She put down 8 security deposits and dropped the MF to 0.00001 which is an interest rate of 0.024% (right, 2.4/100ths of 1.0%).

Lease on my wife's BMW (negotiated in Nov 2018) has interest rate of 3.14%. Lease on my Audi (negotiated in July of 2017) is 3.79%.

In addition to MF's sometimes auto companies offer special incentives to lease (not available on purchase - or different on purchase). For example, on my Daughter's Jeep, Chrysler Capital was offering $2,000 additional incentive to lease.

None of this is to defend leasing as better, or always better than buying. I've owned many cars in my 40 years or driving and until recently always bought my cars. A well negotiated purchase, held for 6-9 years, well maintained and kept in great condition is nearly always a cheaper form of ownership than leasing. Having said that, driving a car that's always under warranty and driving something new every three years (including new technology and safety aids) is worth paying a bit more for - in my view. As I am retired, I just want to drive cars under warranty and swap them out every three years for something new.
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Watty
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Re: Lease vs Buying a Car

Post by Watty » Tue Jun 25, 2019 2:47 pm

You need to consider that there are two people at the lease negotiating table;

1) You

2) Someone that has been dealing with writing multiple car leases every day for the last 20 years who has someone else double checking every deal to make sure that it is a good deal for the dealership.

The odds are stacked against you from getting a great deal at the dealerships expense.

Probably the best you can hope for is some sort of "win/win" situation where both you and the dealer do OK because you are looking at the deal with different objectives where the dealer has some sort of manufacture incentive to lease cars for a limited time.

I like buying new cars with deals that I negotiate over the internet so that I have a "done deal" by the time I go into a dealership. When I do this I know what car I want so price is the only negotiating point so I am at less of a disadvantage in dealing with an experienced salesperson.

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Re: Lease vs Buying a Car

Post by onourway » Tue Jun 25, 2019 3:00 pm

Watty wrote:
Tue Jun 25, 2019 2:47 pm
You need to consider that there are two people at the lease negotiating table;

1) You

2) Someone that has been dealing with writing multiple car leases every day for the last 20 years who has someone else double checking every deal to make sure that it is a good deal for the dealership.

The odds are stacked against you from getting a great deal at the dealerships expense.

Probably the best you can hope for is some sort of "win/win" situation where both you and the dealer do OK because you are looking at the deal with different objectives where the dealer has some sort of manufacture incentive to lease cars for a limited time.

I like buying new cars with deals that I negotiate over the internet so that I have a "done deal" by the time I go into a dealership. When I do this I know what car I want so price is the only negotiating point so I am at less of a disadvantage in dealing with an experienced salesperson.
I would actually argue that this is an argument in favor of leasing. In my experience most people at the dealership don't actually understand how a lease works. They only understand the down and monthly payments. Everything else they just plug into their program to get out the numbers. If you take the time to actually understand how a lease works and find what deals are available direct from corporate you have the upper hand. This is why people who educate themselves through sites like leasehackr can find such amazing deals.

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Re: Lease vs Buying a Car

Post by surfstar » Tue Jun 25, 2019 3:22 pm

Can't "modify" a leased car. (well, you can, but you should remove/return it to OEM after, thereby doubling the install costs)
and I don't mean lower/lift/performance type options

We camp a lot, have lots of heavy climbing/camping gear in the car, so I added airlift coil helper springs (VW Golf Sportwagen). PITA to install - no way I'd want to take those out after just 3yr/36k miles. I also added underbody aero panels that are available on VW euro/hybrid models - these net me a little better hwy mpg. OEM parts, but technically shouldn't be installed on a leased vehicle.
We drive a lot for road trips. No way I want to pay $/mi penalty on a lease.
I DIY maintenance. No issue when you own the car. Leased? They might question your mechanical maintenance.

and on and on

For a select few, leasing makes fiscal sense. For most it is so they can always drive something "new". Eventually these type of vehicle users may just buy into a carshare program and never "own" a vehicle again. That model probably wouldn't work for us, but could replace one of the vehicles. Self-driving, electric car sharing - that'd be the way to go.

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sk2101
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Re: Lease vs Buying a Car

Post by sk2101 » Tue Jun 25, 2019 4:58 pm

surfstar wrote:
Tue Jun 25, 2019 3:22 pm
Can't "modify" a leased car. (well, you can, but you should remove/return it to OEM after, thereby doubling the install costs)
and I don't mean lower/lift/performance type options

We camp a lot, have lots of heavy climbing/camping gear in the car, so I added airlift coil helper springs (VW Golf Sportwagen). PITA to install - no way I'd want to take those out after just 3yr/36k miles. I also added underbody aero panels that are available on VW euro/hybrid models - these net me a little better hwy mpg. OEM parts, but technically shouldn't be installed on a leased vehicle.
We drive a lot for road trips. No way I want to pay $/mi penalty on a lease.
I DIY maintenance. No issue when you own the car. Leased? They might question your mechanical maintenance.

If you are modifying your vehicle then should not consider a lease. The only exception I have seen is dealer installed accessories like hitch mounts which would be Ok, but they need to be OEM.

However, regarding maintenance - with a leased vehicle there is virtually no maintenance needed during the lease period, save for oil changes which you can DIY if you want to. I have never even had to get tires changed on any car that I have leased - another cost savings.

Trader Joe
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Re: Lease vs Buying a Car

Post by Trader Joe » Tue Jun 25, 2019 5:23 pm

cloneman33 wrote:
Tue Jun 25, 2019 10:15 am
I have always bought my vehicles. Looking for folks opinions on buying vs leasing vehicles? Also, are there used vehicle leases or just new? Is the instant decline of value of a new car priced into a new car lease price? Thanks for any help!
I always buy with cash. No loan, no debt. I consider leasing a car a complete waste of money. Best of luck

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Re: Lease vs Buying a Car

Post by Luckywon » Tue Jun 25, 2019 5:41 pm

sk2101 wrote:
Tue Jun 25, 2019 10:35 am
Every time people make blanket statements like "lease is always more expensive" you know they don't know what they are talking about. Sometimes buying is better, sometimes leasing is better, it all depends on the circumstances and on the deal you can get.
I agree 100 %, I'm baffled by the almost religious fervor some have against leasing. I have posted before on this so I'm copying a portion of a previous post of mine here:

There are a lot of factors in play in considering to buy vs lease a vehicle and they are specific to each person and each deal. So you need to do some homework and become familiar with the basic concepts and mathematics of leasing and also considering what your personal preferences and plans are.

If you like to drive a new vehicle every 3 or 4 years, then I think leasing is usually a better choice, because I do not like the idea of having to sell a used vehicle. But what if you think you may like to keep the vehicle for a long time? It is often stated that "If you like to keep a car a long time, it's better to buy." I believe it is more complicated than that and I want to focus on why I state that because in understanding my points, you will understand a lot about leasing:

A few leasing facts I need to mention first as background:

A lease can be thought of as an agreement where you promise to pay:
-Lease initiation fee and lease termination fee
-A predetermined amount for the depreciation of the car over the term of the lease
-Finance charges
-Excess wear and tear and excess mileage

Importantly, you have the option to purchase the vehicle from the finance company at the end of the lease. If you do so, the purchase price will be the residual value of the car specified in the lease, which is the difference between the agreed upon price of the vehicle and amount of depreciation paid over the lease. If you elect to purchase the vehicle, you are not responsible for paying excess wear and tear and mileage charges. In my experience, the lease termination fee will also often be waived. The point is, the total amount paid (exclusive of financing and lease fees) is the same whether you purchase at the outset or you purchase at the end of the lease.

Now back to why it may make sense to lease, even if you think you may like to keep the vehicle for many years:

As I stated above, you can purchase a vehicle by leasing it and then buying it at the end of the lease, and the amount you pay for the car will differ only by lease initiation fees and finance fees. You may pay more by leasing first, but not always. Some leases are structured with very low finance fees. So, it may actually be cheaper or marginally less expensive to lease a car and then purchase it at lease termination rather purchasing the car at the outset, depending on how you would finance the car. But there are a few other reasons why the strategy of leasing first and then purchasing may end up favoring the consumer:

-If the finance company underestimated the depreciation, you can walk away at the end of the lease. You have had the benefit of driving a car over the term of the lease terms at a discounted rate, compared to the depreciation that has actually occurred. This is not exactly a windfall, as there was only a loser here, i.e. the finance company, and no real winner. But, at least you were insulated from being stuck with a vehicle that depreciated faster than anticipated. Also, you may not be sure or may have changed your mind about whether the vehicle is right for you long term. It is generally easier to walk away from a lease at the end of its term than to sell a car.

-If, on the other hand, the finance company overestimated the depreciation, it means you have paid for more depreciation than actually occurred. This is one of the risks of a lease, i.e. that you overpay for depreciation. But you can effectively recover this excess depreciation by purchasing the vehicle, if you want to keep it. If you do not want to keep the vehicle, you may be able to partially recover your loss by negotiating with the finance company or dealer to give you some cash at the time of lease return, in consideration of the difference between the value of the vehicle and the amount you are entitled to purchase the vehicle for. The reason the finance company may do this is you have the theoretical option of purchasing the vehicle and then immediately selling it rather than returning something to them that has more value than what you would pay them to keep it. If the finance company will not talk to you you may be able to get the dealer to give you cash or credit. The reason the dealer may do this is they generally have the option of keeping the vehicle and selling it, and therefore if the vehicle is worth more than its residual value it has value to them and they will want you to return it to them rather than another dealer. This fact can be used as leverage. (I have done so successfully.)

-If you have a major accident during the term of the lease you can return the repaired vehicle at the end of the lease and you are not stuck with the extra depreciation associated with a damaged vehicle. This excess depreciation is usually difficult to recover from an insurance company. Along the same lines note that it is important to amortize as much as possible fees and taxes into your lease payment and make no down payment (capital cost reduction). This is because if the car is totaled, these funds will not be recovered. If you have made no down payments and amortized all fees, if your car is totaled early in the lease you will be probably be much better off than if you had purchased.

-It may be more favorable for tax reasons for some people who are self employed or have solely owned corporations to lease.

Anyway, I offer the above as some things to consider as you decide what is best for you. leasehackr.com is a good site to bounce questions off and for lease calculators and other information about leasing in general.

kmurp
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Re: Lease vs Buying a Car

Post by kmurp » Tue Jun 25, 2019 6:17 pm

ncbill wrote:
Tue Jun 25, 2019 11:32 am
Leases are convenient, especially if you want something new every 2-3 years.

And there's always something on sale.

I just got a broker's offer for a well-equipped truck, 4x4, crew cab, for ~$300/month, $0 due at signing...not bad for a ~$40,000 truck.

If that price holds for July I'll probably pick one up (want to retire one of my older vehicles)
How does one find a lease broker?

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cloneman33
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Re: Lease vs Buying a Car

Post by cloneman33 » Tue Jun 25, 2019 6:50 pm

Thanks for all the comments. I am leaning to the 2-4 year old vehicle and paying cash. Would like to not have a payment and have a car that has depreciated to its real value. I will research some more. Need to get a vehicle in the next few weeks!

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snackdog
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Re: Lease vs Buying a Car

Post by snackdog » Tue Jun 25, 2019 7:15 pm

There have been some amazing lease hacks possible the last few years where, depending on your state, you could get a great new car for well under $100/month. Some were electrics with huge tax credits, rebates and incentives. Leasing can be vastly cheaper than buying, under certain circumstances.

Small Savanna
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Re: Lease vs Buying a Car

Post by Small Savanna » Tue Jun 25, 2019 8:17 pm

We've done both - my wife and I bought five cars and leased two over the course of about 30 years. Most of them stayed in the family for a decade or so. Most recently the motivation for leasing was to manage cash flow. It was a way to have a nice car for a reasonable monthly payment during a time when we had two kids in college. Now that we're on the other side of that we've gone back to buying.

I suspect buying is usually less expensive, although the difference isn't crazy. We leased a 2015 BMW 328 for $340/month and ended up buying it at the end of the lease for $22K, so total cost was about $34K. It was a dealer demo model with 7,000 miles on it, procured at the tail end of the model year, so it wasn't exactly new, but close. As others have pointed out buying a gently used car is usually the best way to save money.

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Re: Lease vs Buying a Car

Post by crossbow » Tue Jun 25, 2019 11:31 pm

I leased a brand new MB few year back and during the course of my lease I got rear ended 4 times. FOUR!!! No impact to me as I got everything repaired to factory spec under the other parties insurance and had a loaner while car was in the shop but... I pity the dealer I turned it in to. With 4 accident records on the vehicle history, I don't know how he would have been able to sell it. It was definitely worth less than the contractual buyout price.

josehde
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Re: Lease vs Buying a Car

Post by josehde » Wed Jun 26, 2019 4:00 am

snackdog wrote:
Tue Jun 25, 2019 7:15 pm
There have been some amazing lease hacks possible the last few years where, depending on your state, you could get a great new car for well under $100/month. Some were electrics with huge tax credits, rebates and incentives. Leasing can be vastly cheaper than buying, under certain circumstances.
Care to share more details about those hacks? Really interested if it's legit.

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snackdog
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Re: Lease vs Buying a Car

Post by snackdog » Wed Jun 26, 2019 7:14 am

Just check out leasehackr.com.

For example. https://leasehackr.com/blog/2015/11/25/ ... nth-0-down

Things get weird when the car companies fix the residual value then start offering incentives which chip away at the sales price, sometimes driving it nearly to the residual (resulting in low to zero lease payments).

ncbill
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Re: Lease vs Buying a Car

Post by ncbill » Wed Jun 26, 2019 7:16 am

kmurp wrote:
Tue Jun 25, 2019 6:17 pm
ncbill wrote:
Tue Jun 25, 2019 11:32 am
Leases are convenient, especially if you want something new every 2-3 years.

And there's always something on sale.

I just got a broker's offer for a well-equipped truck, 4x4, crew cab, for ~$300/month, $0 due at signing...not bad for a ~$40,000 truck.

If that price holds for July I'll probably pick one up (want to retire one of my older vehicles)
How does one find a lease broker?
dealer & broker reviews:

https://forum.leasehackr.com/c/reviews

gregwils
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Re: Lease vs Buying a Car

Post by gregwils » Wed Jun 26, 2019 8:01 am

I agree with the posts that suggest 'it depends' as both modes of acquiring a vehicle have benefits. You need to consider your needs, then set your priorities. Length of ownership, number of miles, utility for transportation vs personal statement, economy vs luxury, limited liquidity vs cash in hand, etc. I'm a purchase with cash and hold guy, but there are instances where leasing makes sense.

I

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sk2101
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Re: Lease vs Buying a Car

Post by sk2101 » Wed Jun 26, 2019 8:17 am

Just backing up a case with some numbers. Right now there is a post with some Kia leases on leasehackr. One of the leases is for a KIA FORTE LXS

$0 DOWN
24 month lease,12,000 miles per year $233 LA Tax inc.
36 month lease,10,000 miles per year $210 LA Tax inc.

From Edmunds True Cost to Own, the cost to own a Kia Forte LXS over 5 Years would be:
Depreciation: $11,566
Financing: $3,160 (adding that to make it apples to apples since there is an opportunity cost even if I pay cash)
Taxes: $1,767
Repairs: $578 (should be for tires)
I am not adding maintenance as I assume those would be the same in both cases as Kia does not include free maintenance during warranty.
Total: $17,071

I could alternatively lease the same car for 36 months and then for 24 months to cover the same 5 years. This would cost $13,152 + $400 $400 (2 disposition fees) = $13,952. That's $3,119 cheaper then buying the car and I would have a new car for the last 2 years. Of course if I did another 3 year lease it would be cheaper but I wanted to make things simpler for comparison.

The key is to find a good lease to start with. If I just walk into a dealership and ask for a lease I am not never going to get a deal that will make financial sense.

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dm200
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Re: Lease vs Buying a Car

Post by dm200 » Wed Jun 26, 2019 8:26 am

OK - for those of you that believe leasing for personal use can often make financial sense, how can this be financially justified? [Not just convenience]

The leasing company has to buy the cars (just as you would), finance them and pay interest (just as you would) and provide/pay for admin costs, maybe some added taxes, pay for or take the risk of getting back a devalued car - and perhaps some non-reimbursed maintenance/repair of the car. The dealer/sales person receive commission on "selling" the lease. There also might be costs/risks to the leasing company if the customer is late making payments or skips on the payments.

I know, for a fact, that the underlying loan financing the leased car is a balloon loan.

I wonder if there are any folks here who are real insiders of leasing?

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Re: Lease vs Buying a Car

Post by onourway » Wed Jun 26, 2019 8:39 am

dm200 wrote:
Wed Jun 26, 2019 8:26 am
OK - for those of you that believe leasing for personal use can often make financial sense, how can this be financially justified? [Not just convenience]

The leasing company has to buy the cars (just as you would), finance them and pay interest (just as you would) and provide/pay for admin costs, maybe some added taxes, pay for or take the risk of getting back a devalued car - and perhaps some non-reimbursed maintenance/repair of the car. The dealer/sales person receive commission on "selling" the lease. There also might be costs/risks to the leasing company if the customer is late making payments or skips on the payments.

I know, for a fact, that the underlying loan financing the leased car is a balloon loan.

I wonder if there are any folks here who are real insiders of leasing?
The short answer is the really good deals are financial gymnastics played by the manufacturers in order to boost sales in the short term.

The exact details of how have already been outlined here - a lease has 3 moving parts. The residual value (generally set by the manufacturer and non-negotiable) - this is a big part of getting a good lease - finding a vehicle that has an unrealistically high residual. Second is the money factor (interest rate) which can be very low in a lease through a variety of means. Third is the final negotiated sales price. The closer the sale price to the residual, the cheaper the lease, as a lease is simply Sales Price - Residual * Money Factor. In other words, you are paying the estimated depreciation for the number of years and number of miles you are allowed, plus some finance charge. That's it.

The 'leasing company' is generally the manufacturer of the automobile. Those costs you list are baked into their prices.

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dm200
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Re: Lease vs Buying a Car

Post by dm200 » Wed Jun 26, 2019 8:44 am

The short answer is the really good deals are financial gymnastics played by the manufacturers in order to boost sales in the short term.

The exact details of how have already been outlined here - a lease has 3 moving parts. The residual value (generally set by the manufacturer and non-negotiable) - this is a big part of getting a good lease - finding a vehicle that has an unrealistically high residual. Second is the money factor (interest rate) which can be very low in a lease through a variety of means. Third is the final negotiated sales price. The closer the sale price to the residual, the cheaper the lease, as a lease is simply Sales Price - Residual * Money Factor. In other words, you are paying the estimated depreciation for the number of years and number of miles you are allowed, plus some finance charge. That's it.

The 'leasing company' is generally the manufacturer of the automobile. Those costs you list are baked into their prices.
OK - this is, basically, the math that makes sense to me. Could be wrong, but I thought the "leasing company" was commonly not the manufacturer of the leased car. I do know that one large, area credit union once had a leasing program - BUT got out of it because they lost money (or did not make any) on their own leasing program.

Maybe others might have some input.

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