Cars, The Sequel

UVMLauren · August 14, 2006, 9:51am

I personally will not buy a used car, so the idea of buying the previous model year for the same amount as leasing doesn’t fly with me. Unless I know who owned the car and am sure that they took good care of it, I won’t buy used. I take excellent care of my cars and I don’t want to take one on that hasn’t been cared for that way from the start.

Certified pre owned is a great way for dealerships to make money but it doesn’t mean squat. Leasing is great for people who need or want to have a new car every few years or always want a car under warranty. It’s not so great for people short on cash, who drive a lot, or can get by with another type of car.

if your D can afford the lease payments on a BMW, then she can certainly afford to make a car payment on a “lesser” car that actually might be better for her needs.

For example- she wants to lease a GTI.

A well-equipped GTI will have a purchase price of $26,865. These are hot cars right now so the dealer will probably not come down a whole lot on the price. So assume you pay about $25,000. The lease offer on that car is $309 monthly over 36 months, for a total cost of $13,583 (including the down payment), assuming there’s no over mileage or damage fees. The car would at this point be turned in.

The car payment on the same car over 60 months (two more years) is $396 at a rate of 7%. In the first 36 months, the car will cost $14,256. you can drive it as much as you want, modify it, do whatever you want with it. At the end of 60 months, the car is yours cold, and you can turn around and sell it, probably for about $12,000. For less than $1000 more over the first 36 months, you can be well on your way to owning the car. You can pay more money when you can and own it in even less time, for less overall dollars since you’ll be out of the loan sooner.

BUT: Instead of looking at a midrange GTI at $26,000, why not look at the fully loaded Rabbit hatch instead? Fully loaded with every option, the rabbit tops out at $21,870. You loose the turbocharged engine but gain two more doors (more utility) and better gas mileage. The lease cost on this car for 36 months is currently $229 with $2300 down (might be a little more for the fully loaded version, but the same goes for the GTI). The total cost over the 36 month life of the lease will be $10,544. You won’t have DVD navigation, but you’ll gain some other features the rabbit has (including its great fuel efficient 5 cylinder.)

To buy the rabbit in 5 years, the monthly payment would be $297. The total cost over the first 36 months would be $10,692. A hundred dollars more will get you on the way to owning the car, and overall you’ll save $5000 over getting the midrange GTI.

(By the way, car payments are figured on 7% interest and $5000 down for both cars)

Just a thought. The lower end models aren’t so bad for someone just out of college and you’ll be thankful when money is tight somewhere.

I’m not clear on who is actually buying a car- you? your daughter? both of you?

EDIT: I read your other thread and it sounds like you’re looking for a car for you- I just wanted to throw a suggestion out there. I know you’re looking for a fast, sporty, “cool” car and were into the luxury models, but may I suggest the Scion tC? It’s a touring coupe, and while it’s not going to have the horsepower of a 5.7L Hemi in the charger, but it is one of the hottest cars on the market today. The average time on the lot for one is currently 4 days. They are hugely in demand but pretty rare cars and I personally love my Scion. For what you’d pay for a charger you could buy two! I encourage you to check it out. It’s all toyota under the hood. The resale value on these is insane (many are selling for MORE than they paid). The gas mileage is great (24/30) and it’s a very sporty car with european styling. If you want more information about it, I’ll be more than happy to tell you what I know.

calmom · August 14, 2006, 10:31am

I suggest looking at this web site:
<a href=“http://www.epa.gov/emissweb/midcar-06.htm[/url]”>http://www.epa.gov/emissweb/midcar-06.htm</a>

You can buy smart. It is 2006 and in many parts of California gas is more than $3.50/gallon, and given the situation in the mideast it is only likely to go up. You can buy with fuel economy and reduced emissions (do your part to cut down on global warming) – and you have a number of excellent cars to choose from. (I chose the page with the midsize cars to link to, but you can browse models in all sizes on this site)

If I was going to buy a new car this is the list I would start with. Over time you will be very glad if you prioritize fuel economy. So look for an EPA “SmartWay” certified vehicle.

UVMLauren · August 14, 2006, 11:32am

Those lists definitely aren’t complete. My car gets 32/40 and is an ULEV vehicle and doesn’t appear anywhere on the list, even though most of those cars are ULEV.

I have to say, the horsepower tradeoff is way worth the $25 a tank at the pump.

roshke · August 14, 2006, 11:49am

latetoschool, Here’s an interesting article on the hidden costs of leasing

<a href=“http://www.edmunds.com/advice/leasing/articles/102826/article.html[/url]”>http://www.edmunds.com/advice/leasing/articles/102826/article.html</a>

And another very useful site for comparing the real costs of owning one vehicle versus another!

<a href=“http://www.edmunds.com/apps/cto/CTOintroController[/url]”>http://www.edmunds.com/apps/cto/CTOintroController</a>

latetoschool · August 14, 2006, 12:00pm

Thank you very much for those links Roshke, that will be VERY helpful, especially as costs over time are going to be a serious consideration.

Calmom, thanks for that; gas here is climbing too, and I don’t see any end in sight, and our driving is going to increase too - no real way to cut it back.

UVMLauren, thanks for your detailed post, I appreciate it. I’m taking those numbers to my daughter. She did look at the Rabbit and I believe insurance coverage costs are lower with 4-doors v. 2-doors.

We are both buying new cars - I don’t need one, I simply want one because I don’t really like the new car I bought last year. She really needs one though - she’s driving my old Ford Taurus - '95 with 120,000 miles on it, beginning to seriously fall apart, plus the ac stopped working, which, is fairly miserable. ($1,000 to repair.)

UVMLauren · August 14, 2006, 12:51pm

The insurance costs will be lower overall for the rabbit as opposed to the GTI since the rabbit is at this time not as associated with theft and bad driving as the GTI is- and you are correct, a 4 door will be lower in cost, insurance wise.

Sometimes it can be helpful to look at the overall financial picture instead of the monthly payments- and if she’s a recent college graduate, a car payment will help establish good credit with large sums and may help her obtain a mortgage later on- and that’s definitely worth the extra $50 or $100 a month. A lease payment won’t benefit in the same way.

A better investment for her (sounds like she wants a hatchback type car) might be a similar car from toyota or honda. The repair costs and purchase prices will be lower over time. She may be hooked on VW, but my little Scion (toyota) hatchback was $14,120 off the lot brand new, and about $500 in custom options later (cruise, security, and satellite radio were added aftermarket). It’s not going to be as fast as a GTI, but the gas savings are pretty substantial (I pay $24 a week at the pump, for a whole tank) and the purchase AND lease costs on a car like that (or the toyota yaris, honda fit, nissan versa, etc) would be much lower.

I believe the prices quoted to me on my Scion xA were $309/month with $2400 down for 48 months or $239/mo for 36 months with $2400 down on a lease. For the same cost as leasing the GTI she could own the Scion in 4 years, just one more year than leasing, and put down less money up front, and at the end of it own a car that’s good for three or so more years since a toyota will easily crank 100k plus without issue. With the same $5000 down as the previous cars, she could own the car in the same 36 months as the GTI lease, for just $316 a month. She could even participate in the “Release Series” and purchase one with special features which would be one of 2500 in the country, seriously boosting the resale value over the GTI.

all things to think about as she ventures off into the world.

As far as a car for you, since you were looking in the luxury bracket, I’ll rescind my previous suggestion of the Scion tC (though it is a fantastic car and probably the best out there at a $16,000 starting price) and highly reccomend the new Lexus IS250. It’s really a masterpiece of design and engineering. I drove one while I was shopping before I decided to go small and inexpensive, and it was simply fantastic. They’re great tough cars with good resale value and the new IS is a really, really stylish car, especially in the sporty red. A true Lexus sports car with luxury car appointments.

Cars, The Sequel

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