Cars, The Sequel

latetoschool · August 12, 2006, 10:23pm

O.K., so, we’re getting somewhere, I think. We’ve narrowed things down a bit - I’m split between a Dodge Charger and a BMW; D very badly wants a VW GTI, and thinks I should have a Passat. But I’ll wake up tomorrow and want a Hummer, so…no matter, D is solidly sold on the GTI.

But all that’s beside the point. She is pitching me heavily re leasing, not buying.

I’ve never leased a car, and would not consider it. Usually. My philosophy has always been to buy the car, take excellent care of it, and then have a period of time where there are no car payments - enjoy that stretch of time where the vehicle is paid off, and in terrific mechanical condition. You own it, and can do anything you want with it.

But the people at VW have told her the $$$ works out better with a lease, and they’re telling her that she’s going to be tired of a car in three years anyway, so she can turn it in for a new car. I see lots and lots of potential problems with leases - mileage limitations, maintenance choice restrictions, etc.

Does anyone here lease, and if so, can you share your experience - I would love to hear comments, and financial implications.

kwtortoise · August 12, 2006, 10:36pm

I have one anti-lease opinion…I put 20,000 miles on my car the first year I had it. That definitely would not have worked our for me with a lease. Leases are great for people who enjoy new cars, don’t like maintenance issues, and drive less than the 10-12,000 miles a year as stipulated. My dad leases cars only as he fits that profile.

No opinion on the models you stated. I like the Toyotas or Hondas for reliability reasons myself. The VWs are very stylish though!

northeastmom · August 13, 2006, 9:22am

Our family has only leased for a long time. We pre-purchase extra miles at a much cheaper cost than at the back end. I pre-bought an extra 15,000 miles over the 3 year lease, and H will put 80-90,000 miles on a car in 3 years, so he pre-purchases miles. Believe me, at the end of 3 years, he does not want to own his car. We don’t want the repair hassles. The negative on leasing is that we have a neighbor who was asked to pay $700 at the end of the lease for some scratches. He did get out of it, but it was not that simple.

latetoschool · August 13, 2006, 9:57am

Thanks, I’d be interested to know also what are the maintenance non-negotiables with a lease? For example, I like to go to small, neighborhood mechanics to get things like routine maintenance - they’ll faster, less expensive, better quality work, fewer instances of staff turnover, and the ones where I have relationships are open on Sundays or other times when I have a few minutes to drop off a car and go do shopping or other things while the car is being serviced. Plus I simply have more trust in the people I know.

Do leases require that all maintenance be done at the dealership?

northeastmom · August 13, 2006, 10:23am

I guess you need to ask, and more importantly, read the fine print. I have my regular maintenance done in a garage that has nothing to do with the dealership. My H goes to the dealership b/c he does not waste any work time. They take him right away, and they give him a loaner. If I call for an appointment, they cannot take me for 2 weeks, they have no loaners available, etc. This is the men/women double standard. I take my business elsewhere and there are no hassles. I have not had any problems with the lease or dealership, and I have been leasing for 20 years.

bullwinkle · August 13, 2006, 1:40pm

Lease vs. buy? Also depends on programs being offered at this time APRs and all; and, what can you deduct given your personal tax situation. Miles you’ll put on is also critical. Is it a car you want to keep down the road is also a major factor. What will the residual be on the car-very important I think too in deciding to lease or buy and potential resale value vs. residual.

Of the cars you have mentioned, dodge charger will probably take enormous hit in resale value, VW less of a hit and the BMW will certainly have the best resale value in the future.

One car you might also want to consider is a Mini-Cooper. If you’re not familiar with 'em, they are made by BMW, have amazing performance, great interior room. They look small, but are wider and higher than a 3 series BMW, just ‘shorter’ cause the engine is mounted “sideways” and no full trunk- but back seats fold down for amazing storeage room and otherwise 4 adults can fit in easily. And, the resale on these cars has been amazing. Tremendous car to drive in city traffic, open highway-really any conditions. We bought one in 2002 and sold it in 2004, getting most all our money back and upgraded from the standard cooper to an “S” model, which we still have.

BTW, most dealers push leases. It is easier to qualify people, less downpayment, etc. They also just want to get cars on the road since most dealers make their money in service not sales.

latetoschool · August 13, 2006, 4:23pm

Thanks Bullwinkle, I wondered if why the VW dealer pitched D so hard on the lease v. buy. She said they have some sort of “college graduate” special financing program that gives the graduate better APR - she didn’t tell me numbers, but, apparently if she’s within four months of graduating she qualifies - something about the financers call the college to confirm graduation, etc.

I thought, wow, as if colleges didn’t have enough to deal with. Now car dealer financial arms are calling them up too.

Can you tell me why you think the charger will take the biggest hit resale value, particularly over VW?

Northeastmom, thanks, it’s good to know at least with your specific contract you can use any maintenance you like. I know what you mean about loaners - I used to have a sweet arrangement with my dealer where I could drop of my car anytime and drive away in a loaner, and bring it back whenever convenient for me. It was cool because I got to drive all different sorts of newer cars. But then the service department management changed and I lost my loaner priviledges - they still offered loaners, just not to me, or I guess customers in my category, whatever that was.

fendergirl · August 13, 2006, 8:09pm

A lot of dealerships pitch college students on lease vs buy… honestly I think they do it because they think college students are fools… however, that’s my own personal opinion.

I personally hate leases and when a car saleswoman was trying to talk my boyfriend into a lease i flat out told her she was full of you know what. She shut up and started talking about purchasing the car in about 2 seconds.

The thing that I hate is, you make payment after payment after payment, have to stay within a certain mileage, etc and at the end, you still do not own the car. But wait - you can purchase the car! That’s right, after you spend a ton of money leasing a new car (of which you can almost always find the same car a year old used and buy it for the same price as leasing a new car and actually own it at the end of making payments) you can purchase said car for the going value! (This is exactly what happened to my uncle)… It would be one thing if they said Okay… well, if you were to buy the car in the first place it would have cost you 28,000 and over the past three years you have paid us 19,000 so you can now purchase the car for 9,000 dollars. It doesn’t work like that. They say okay, the value of this car is now 13,000 so you can gladly purchase it for that. So if you do decide to buy the car, you just paid 32,000 for a car that would have cost you 28,000 to buy in the first place. If you do not choose to buy the car, well you just spent 19,000 to borrow something for 3 years which you have to return and will never own and the dealership can now re-sell it for a pretty penny since you kept the milage low for them. Chances are when you went to lease that brand new 2006 car for 249 a month you could have bought a used 2005 of the same car for 249 a month.

Anyway, they know that college kids are graduating, most likely have loans, and they know they are looking for the cheapest option at the time - which on a new car, is a lease. They also know that most college kids have not had experience with purchasing new cars, and may not know exacty how it works and they will end up making a pretty penny on that car if it is leased - either when you decide to purchase it after the lease is up, or after they re-sell it for a nice amt since you kept the car clean and the milage down for them… so of course they perfer to lease you the car. They also assume that within a few years after graduating (we’ll go with 3 years since the OP used a 3 year lease for the example) the college graduate will be more settled, making more money, and want to purchase a better car… thus allowing the student to return the car to them so they can re-sell it for a pretty penny.

that’s the end of my rant on leasing… please keep in mind that is all my opinion

latetoschool · August 13, 2006, 8:55pm

Fendergirl, I’m with you; that’s pretty much been my thinking all along but I wanted to hold out for opposing viewpoints.

My approach pretty much is buy a car new; take excellent care of it, get all the scheduled maintenance and then some, and then, you get a few years of driving a car in excellent condition with no payments.

Or, if you’re tired of the car and want something new, then, you can keep it as a back up car or sell it outright etc. But at least you own a car, vs. a glorified rental arrangement.

But, I am not sure if that logic works for a 22 year old - for example, what is the likelihood a 22 year old will want the same car for five, six, seven years?

fendergirl · August 13, 2006, 9:07pm

i want to keep my car until it no longer functions, and i’m 23. :)

i’m not a fan of buying cars brand new because they loose so much value the moment you drive them off the lot. i say look for a slightly used car - 1 or 2 years will do. you get the same car (unless the car didn’t exist in past years or there were major changes between the years, for example this method wouldn’t work for the new mustang if you really wanted that style of mustang… however you could always wait till next year to buy it) and you get the balance of the factory warranty, without the huge markup on brand new cars.

i bought an 02 mitsubishi in 04 with 12k miles, still had 3 years left on its original warranty, for about $8000 after taxes… (it had been previously reposessed so I got a really good deal on it) it was literally like getting a brand new car for 1/2 the cost. I put some money down, got $500 for the trade-in of my old car, and my payments on a 4 yr loan are $160 a month, however I plan on paying my car off in full this october (at the end of my second year of ownership). i have every intention of keeping my car until i can come up with a darn good reason not to. (ie, it dying)

latetoschool · August 13, 2006, 9:33pm

Fendergirl, I agree totally with your logic, but, weren’t you concerned about buying a car that was repossessed? Seems like I heard it’s wise to avoid such cars because the owners defaulted for lack of money, therefore they probably also didn’t bother with things like oil changes, other routine maintenance, etc.

Did you Carfax it or get the maintenance records?

We’d like to get demos or just-slightly used as well, but we’re hearing that the GTI has only been out for one year, same with the Charger, so (supposedly) there isn’t going to be much available in terms of demos (that logic sort of doesn’t work well with the goal of grabbing one with <10,000 miles or so).

newmassdad · August 13, 2006, 9:33pm

As some have hinted here, there is no quick answer regarding which is cheaper, leasing or buying. It depends on purchase price, residual value, money cost (lease talk for the implied interest rate) miscellaneous fees and so forth.

Leasing became popular because when you lease a car for busniess use, the cost can be tax deductible, and it does not tie up capital. Not may new grads will use a new car for business use, so dismiss this consideration.

Next, car dealers pitch leasing because it is often an easier sale AND generates repeat business (you gotta come in at the end of the lease…lets talk…) It is an easier sale because the monthly payment is lower.

Most of the time, the math is not favorable toward leasing, but sometimes there are deals that make it so, but you can often get a similar deal for purchase if you push.

Your best bet is to do some homework. Try starting ay your local library and looking at any of a number of new car puchase guides that explain in more detail. You can also probably find on line calculators that will help.

Now, w/r/t what to buy, watch out for maintenance and repair costs. It is unfortunate that some of the otherwise attractive german brands, including VW, BMW/Mini Cooper have hideously high maintenance and repair costs. Worse, your likelihood of needing repair is greater than with other brands.

case in point: my 5 year old 60,000 mile Passat needed a new starter last winter. Only the dealer can do the work well, as they are tricky to worrk on. The bill? alomst a grand. That’s about 3x what it cost for a new starter for an older Toyota camry, just to use an example.

latetoschool · August 13, 2006, 9:36pm

Ouch, Newmassdad, thanks for that. Seriously. My daughter has been pestering me to consider the Passat, instead of the Charger that I want. You just put that idea to rest, permanently.

Thanks too for the background on leasing.

fendergirl · August 13, 2006, 9:42pm

latetoschool, yeah i had the carfax which the dealership gave me for free, and the owners manual was in the glove compartment with all of the maintenance records written in. Whoever owned the car before me took good care of it for the 12,000 miles that they owned it. I also had my uncle who is a mechanic look it over and he told me it was solid and that i should get a good 200k out of it as long as i take good care of the car.

The dealership I bought it from sells a lot of used mitsubishi’s and they have this aftermarket package that you can ‘purchase’ when buying a used car from them - spoiler, custom pin striping, and american racing wheels for $450. I was a bit hesitant at buying the car (not because it was reposessed, but because $8000 was a lot of money for me at the time), so they threw that package in for free. I was a happy camper and signed the papers.

So far it’s been almost two years and I haven’t had one squeak or rattle and i’m up to 42k miles.

latetoschool · August 13, 2006, 9:45pm

Fendergirl, congrats, you made a terrific decision, and got a great deal.

fendergirl · August 13, 2006, 9:53pm

Yeah… i just think people should really search around before purchasing a car… so many people make impulse purchases or don’t research all of the alternatives.

another example, my little sister always wanted a honda civic but she only had $4,000. all of the civic’s she was finding for 4k had like 200k miles on them, or had problems with them. finally, she found one for $6,000 dollars with decent milage that had been keyed on the lot so the dealership marked it down to $4,000. Other than having a scratch on the side, the car’s in perfect condition and is fully loaded… even has a 6 disc cd changer and aftermarket speakers… she bought the car, and now this summer took it for an estimate and is getting it repainted for about $600… so I’d say she made out pretty well too… the blue book retail value of the car in good condition at the time of purchase was $6600 and after her repainting she’ll have paid $4600

fendergirl · August 13, 2006, 10:16pm

yeah, the GTI got a new facelift this year (I personally liked the old ones better… but that’s just me) so there probably aren’t many new ones lying around slightly used… but there must be a used one out there somewhere if she’s willing to go that route (she seems to be pretty set on leasing a new car)

NJres · August 14, 2006, 12:09am

We leased for the very first time just 2 months ago. Our strategy was always to buy for cash and drive the wheels off. This time the lease made sense for a couple of reasons. I don’t know if we will want this car (our first SUV) 3 years from now. If gas is $10/ gallon we will just dump this pig and buy something else. I also think cars in general might be cheaper 3 years from now if the Chinese are given access to our market. I didn’t want to put $30k into a car when I will have 2 kids in college next year. So, keeping in mind all of the above, wife gets to drive new luxury SUV for now. As my friend told me, “Happy wife = happy life.” :)

calmom · August 14, 2006, 1:20am

Buying is better than leasing if you want to keep the car, especially with a model that holds resale value well. The previously owned vehicle I bought for my daughter 2 years ago has a blue book value today within $1000 of what we paid for it. Leasing can also result in very expensive end-of-lease costs because of excess mileage or to repair problems – so you could find yourself paying hundreds of dollars to fix a car that you aren’t going to have any more.

Leases may be better in the following circumstances:

<ol>
<li>Self-employed individuals who want or need to be driving a late model car, and are using the car mostly for business. Most of the costs of leasing can be written off as business expenses, and expensive repairs can be avoided by always driving a car under warranty. In some professions, individuals feel that it reflects badly on their abilities if they are driving a beat up or older car.</li>
<li>Individuals who only need a car for the period of the lease, such as someone who has temporarily relocated for a job but does not want keep a vehicle after they move back, especially if their home city is very far away (such as someone who lives overseas). </li>
<li>Individuals who really need a car with certain characteristics but simply can’t afford a down payment, but will definitely be able to keep up lease payments – monthly lease payments generally are less. So, for example, a parent with too many kids to fit in a sedan may opt to lease a minivan, not because it is sound decision financially, but because that is the only way the family can possibly afford the larger vehicle, and leaving the fifth kid on the sidewalk is not an option.</li>
</ol>

Maybe there are some other reasons, too – but the bottom line is that leasing is almost always much more expensive in terms of total costs, but under some circumstances individuals are better off paying as they go and avoiding long term obligations of ownership.

For a student graduating from college: no way. The best thing the student can do is purchase a car that has a good reputation for reliability and low repair costs over time, so that the car does not become a drain on finances - and if and when the student is ready for a newer car, the first car can be sold or traded in. Financing a car over 3 to 5 years is also an excellent way to build credit, and the finance companies often offer excellent interest rates as incentives to buy. When it comes to making a decision as to leasing vs. buying, the car dealer is not your friend: dealers probably like leases because of the high turnover. They typically will contact lease holders near the end of the lease with incentives to roll over into a new lease – and they often will offer similar trade-ups even earlier in the lease period. I used to lease a minivan, and I had 2 – the second one when the dealer pretty much offered to trade up at no expense to me, so I got a newer car at no extra cost, the dealer got sales commissions on two vehicle from one customer in two years.

So basically, people who lease cars can be counted on to lease a new one every 2 or 3 years. People who buy cars and take good care of them might show up to spend money at the dealership only once every 7 to 10 years.

latetoschool · August 14, 2006, 7:07am

NJres, Calmom, thanks for both posts, I appreciate it.

I now have enough responses on leases now to tell D this isn’t appropriate for either of us, especially with your last two paragraphs Calmom.

Cars, The Sequel

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