<p>Just need some opinions on this… in regards to car shopping…</p>
<p>I’ve never been a fan of leasing a car… I’m someone who likes to keep my cars till they die rather then trade it in every 3 years or so and start over again… I love the idea of being payment free…</p>
<p>I love love love my car, but it’s gotten to the point where it is 10 years old and has 115k miles on it (I’m sure it can go more) but it works pretty well. I’ve read that many people keep these cars till 200k which would be nice. I’ve had it paid off for years which has been great. I’ve never had any issues with it to date… however it does have a squealing belt right now that needs to be repaired and I know that’ll cost about 200 dollars. It also has started eating oil a little bit. Not leaking, eating. Every month I find myself putting in another quart or so. I also need to give it a tune up this summer which will probably be pretty cheap since I do them myself (new spark plugs, wires, etc). And it’s paint is starting to fade on the right side… considerably… you can’t even wax it shiny. I guess it’s getting oxidized. It’s in desperate need for a paint job… I’m afraid the paint will continue to fade off and I’ll have rust issues or something. Every month it looks worse then the month before. That being said… I’d hate to spend the money on a paint job for a car that’s 10 years old. </p>
<p>So I’ve just been toying with the idea of getting a new, or newish used car. I hadn’t even contemplated leasing a car till my mom called me this morning. There’s a car I like and I guess it had an ad in her paper today that you can do a 3 year lease for 99 a month and of course after that I’d want to buy it out. My only question on that is, isn’t it almost always more expensive to lease a car for 3 years then buy it out, then it would be just to buy it in the first place? I feel like I could buy a used one just coming off lease for a much cheaper price. I could probably BUY that used car right now for like 180 a month and be done paying for it in 5 years. Just need some advice here. My other thought was that if I leased it for 3 years at 99 a month I could give it back at that point and use the money I saved on the payments in the mean time to purchase a different vehicle… but then I feel like I just threw 4k out the window.</p>
<p>Do you know what the buy out price would be? I don’t know a lot about leasing other than my husband, a CPA, thinks it’s generally a bad idea unless you are doing it through your business and can write it off as a business expense. Particularly, since we keep our cars 10+. I guess if you are the type of person who wants a new car every few years, it might make sense (and that doesn’t sound like you, fendergirl). I’ve always gotten the impression people do leases so they can drive a much more expensive car than they can really afford to buy.</p>
<p>You need to run an amortization schedule on the lease payments plus buy-out vs. just buying it outright and see what makes the most sense financially.</p>
<p>Or you could keep your current car and save the amount of money you would have paid on the lease ($4,000) and then put that down on a new car in three years. That’s what I would advise my son to do.</p>
<p>I just purchased a new car in October finally getting rid of my 1994 Geo Prism. I was amazed how car prices stayed level. My 2010 Hyundai Elantra had about the same sticker price as my 1994 Geo Prism.</p>
<p>I’ve run the numbers a ton of times and from a purely financial standpoint the cheapest option is to buy a used car and drive it until it dies (or at least until the repairs start adding up financially or in the inconvenience).</p>
<p>I would never lease a car. My financial guy calls it fleecing. You are paying continually for an item that is depreciating. Often at the buy out there are additional charges for wear, for being over mileage,etc. Buy a used car you can afford. Likely you will be driving it after it is paid off which is money in the bank. PS I own a business which has several vehicles and follow the same plan there. I don’t buy the leasing as a write off argument.</p>
<p>We only buy cars–no leasing. We used to pay off in 4 years and trade in around 8. We bought D1 a used car and she drove it until it died. Literally. We just bought her an Elantra as the last car we will ever purchase for her. I hope she gets our money’s worth and drives it for the next 7-8 years, maybe more. When D2 came along, we gave her H’s 9 year old car and he bought a new one. Higher payment with no trade in (grrr) so that loan is for 5 years. </p>
<p>My VW bug is 8 years old and going strong. I enjoy paying cars off and then driving with no payment. And with 4 drivers, I can’t handle 4 payments. Leasing, for most families, is not a good choice. </p>
<p>I used to think buying a gently used car was a good idea, as a new car looses value as you drive it off the lot. But that can be tricky. With new cars offering better gas mileage, 60,000 mile bumper to bumper warranties and 100,000 mile powertrain warranties, with 5 year roadside assistance, I think it is better to buy new and hold onto for years.</p>
<p>I only lease. I don’t like to own anything that’s depreciating. Lease payment is calculated based on the difference between cost of a car and its residual value at the end of lease term. </p>
<p>If a BMW’s cost is 45K, and at end of 3 years its residual value is 30K, then you are financing 15K, not the full 45K. To me, you are getting 30K at 0% interest. In 3 years, if I really like the car, I still have the option of buying it for 30K, if not, I have no headache of getting rid of the car.</p>
<p>When you are leasing, a cheaper car doesn’t mean lower payment. We looked into leasing a Subaru once. Because Subaru’s residual value is practically nothing after 3 years, it was cheaper to lease a BMW. </p>
<p>I bought only one car in my life, based on H’s recommendation. It was a Volvo SUV - safe, work horse, and we could drive it to death. I hated it from day one. I paid it with cash, and lost a lot of money when we had to sell it quickly a year ago.</p>
<p>Financially it makes sense to own a car, if you could pay for it full and expect to drive it to death. But if you need to finance it, I don’t see how it is cheaper to buy rather than lease. When you buy, you are financing the full value of a car (more interest payment). When you lease, you are only financing part of the cost of a car.</p>
<p>oldfort, when you lease a BMW, if you want to prepay for extra mileage, do you know how many extra miles they will allow you to buy up front and the cost of each prepaid mile?</p>
<p>oldfort- if you want a new car every 3-4 years leasing is the way to go but I keep a car a minimum of 10 and am not happy if I do not get 12 years. I only finance about 50% of the cost and only if rates are good. On this purchase I get free oil changes for life- that may cost them the same amount I paid them for the car.</p>
<p>northeastmom - we usually go for 15000 miles, but I do not see the value of prepaying for extra miles, it is not that much cheaper. Many years ago leasing companies used to ding you for every scratch, but they don’t do that any more. I have returned cars with dents and scratches, their estimate for repairs have always been lower than what my insurance company would charge me. I will usually negotiate with them on the final cost of extra mile usage or wear and tear.</p>
<p>A friend of mine used to lease BMWs and then wondered why he never had enough money to buy a house - I told him it was because he was wasting his money on essentially renting an expensive car perpetually. He finally saw the light, quit leasing the beemers, and bought a car that wouldn’t saddle him with car payments the rest of his life.</p>
<p>When you lease a car you’re just renting it. You don’t own it. When you do the calculations don’t just think of the carrot they wave in front of your face, i.e. the ‘monthly payment’, think also of the initial down payment as well as any payments due at the end of the lease when you hand them back the car and find yourself in the same situation you’re in now - needing to find a car. Sure, you ould always buy the ‘used car’ you’ve just turned back to them but then you can do that now by buying an off-lease car from someone else.</p>
<p>But I’m not one to buy a new car every few years. I’ve kept my cars for 100K miles plus (current one is a 1998 Durango with 187K miles on it). </p>
<p>Unless you want to evaluate a car purchase primarily form the ‘monthly payments’ perspective and ignore whether one case (buying) it’d be for a fixed number of months and then the car is yours and in the other case (leasing) it’d be inperpetuity since once you’re done you give back the car and need to start again with another, as the car salespeople would like you to, you’re usually better off purchasing a car that won’t be a business vehicle.</p>
<p>But if you really want to drive cars that are never over 2-4 years old and want and are willing to ignore the down payment and residual costs and only look at monthly payment then leasing might be an option. </p>
<p>The bottom line is to do the calculations yourself given a couple of different types of vehicles (including taking oldfort’s point in mind with the effect of differieng depreciation levels) and your preference for keeping cars for 3 years vs 10 years, and see how the leasing vs buying equations turn out.</p>
<p>Try to work it out on a spreadsheet, look at rates for leasing, financing new car vs old car. One thing to keep in mind is even when leasing, always negotiate for the upfront cost of a car(just like you would when purchasing a car), not just the lease payment. Once you are happy with the price then get the best term possible. Your initial price will determine the residual value (% of of initial cost). Lower price will also mean lower lease payment.</p>
<p>My thing with my car is that other then my squeaking serpentine belt and the paint I’ve never had a single issue with it. (knock on wood). Not one repair bill. I love the thing. It gets great gas milage, is paid off, and drives great. It’s ten years old, I bought it used 8 years ago. It’s at 115k and I don’t see any signs of slowing up… except that I’m just really worried about the paint. It’s relatively cheap to replace the belt (supposed to be done at 120k maintenance anyway)… But I don’t want to be driving around in a car that has half its paint peeling off… but it’s hard to justify spending a thousand bucks on a paint job. When I had bought this car, I had been driving a 1992 car with about 115k miles on it. It was in dire need of new tires which was going to run me about 500 bucks and I couldn’t see putting that money into it so I bought something else… however I did have some issues with that car in the past. My mom said she thinks with my car the way it is I’ll be lucky to get $1000 on a trade.</p>
<p>I’m definitely someone who likes to own rather then rent (heck, I bought my own house at 25…), which is why I thought I’d never consider leasing. But if I’m understanding this per what oldfort says, if say the new price is 19000 and after 3 years they think it’s worth 15000 then you’re paying 4000 over 3 years with the option to buy it for 15000 when it’s 3 years old… Right? The MSRP of this car is about 19000. I can tell you this specific car my mother just bought a 3 year old model of the same car with 30k miles for $16,000 which was the best price she found, apparently this car holds its value decently. (That’s what I get for pointing out a car that I like when she is car shopping… she goes and buys it… thankfully we have different tastes in car colors… lol).</p>
<p>Honestly I think if I plan to keep it leasing it and buying it come out about the same price wise, it’s just that if I lease it for 3 years and then at the end buy it and take say a 4 year loan on the residual value then I’m paying for my car over 7 years instead of say over 4 or 5 to begin with if it was a purchase.</p>
<p>I understand what oldfort means though… say it’s a 99 a month lease payment for 3 years then at 3 years you give it back and do a 99 lease payment for 3 years… that’s six years at 99 each month as opposed to buying it originally and paying 250 a month for a 5 year loan. nice thing though is after that year five you are done whereas with the lease you’re back on the drawing board.</p>
<p>I do have some money for a down payment if I decided to buy one… But maybe I’d just be better off keeping what I have until it has any sort of mechanical issues or anything like that. The paint just really worries me.</p>
<p>fendergirl - you got it right. Go shop around. Every car has a different residual value. A car’s residual value at end of 2, 3, 4 or 5 year is also different (% wise). Sometimes you may find a 42 months term is better than 48. A leasing company also offers different rates based on the length of lease.</p>
<p>I’m going to take a walk up to the dealerships and look around. We’ll see. Nice thing with walking around on a Sunday is that they aren’t there to hound me… lol.</p>
I’d think it would be VERY hard to find situations where this works because of one big reason … the second you drive off the lot the car depreciates a ton … so I’d think it would be very hard situations where the overall depreciation after 3 years is about even to the payments you’ve made.</p>
<p>Not all cars depreciate a ton when you drive them off the lot. The car I’m looking at you can buy new for 17-19k. 2-3 years used with some miles on them I’m finding for 14-17k. (14k being a TON of milage). It’s not like driving a chevy colbalt off the lot (well I guess they don’t make them anymore but you know what I mean) and having it be worth half its value the next day. I’m amazed by the 2-3 year old cobalts i’m finding for like 8-9k… and they were close to being about the same starting price as the cars I’m interested in.</p>
<p>Fixing the belt squeak is likely simple. It’s probably either an old and worn belt that’s stretched a bit and hence is slipping somewhat or the idler tensioner pulley needs to be replaced. This pulley is what keeps the tension on the belt. Depending on the car these are pretty easy to replace. Of course, there could be something else causing it like a bad bearing on one of the pulleys it’s wrapped around but this is less likely. If you’ve never replaced the belt on this car then do that first because it’s past time. It usually doesn’t take much skill to do this but depending on the car it can range from easy to more difficult because of accessibility. Most cars have a belt routing diagram placard on the underside of the hood which you can look at to get an idea of what it might be like to replace it and a helpful reminder to make sure the replacement is routed correctly.</p>
<p>It’s hard to say what can be done with the paint since it depends on how bad it is but if you go to a decent auto body place, i.e. not a rip-off or dishonest place, they might be able to give you some options other than a total repaint - like a partial repaint or possibly a rub-out of that area followed by a clear coat spray. Generally a total repaint wouldn’t be worth it for a car this old unless it was more of a collectible kind of car that’d maintain or increase in value.</p>
<p>Residual value is determined by the leasing company, not you. It is also not negotiable.</p>
<p>Another thing to keep in mind when buying a car is cost of insurance. Two similar cars could have very different insurance premium because one may get stolen a lot for parts, or one doesn’t have good safety record. Check with your insurance company first before you fall in love with a car.</p>
<p>That’s a good point on the cost of insurance. Generally a more expensive car, especially a premium European brand, will cost a lot more than a less expensive car that’s produced in higher numbers (like a Corolla or something) but other factors come into play as well like cost of replacement parts, sportiness/power of the car, theft track record, etc. You may need to budget more for the insurance depending on your choise of car. It’s good to check with the insurance company first on this point.</p>