As my car is dying and there are lots of leases out there, some friends have suggested leasing is sometimes a good option. We only drive about 5000 miles/year, so no problem with high mileage.
We have never leased and could easily afford to buy outright or lease and would love to hear what folks who have leased thought of pros & cons.
usually, mileage charges are the biggest concern…many of the lease deals are unrealistic mileage per year, that’s how they “get” you. In your case, sounds like you have that covered though.
We’ve done both. We recently leased a car for my DD and I was surprised at the high insurance rates, so maybe look into if insurance is higher on a leased car? (She was driving an owned clunker before so it was a big jump). I think the general financial summary is that it’s best financially to buy a car and drive it for as long as possible; which it sounds like you have done. Is this your typical pattern? Leasing might be better for those who truly want, and get, a new car every couple of years.
In researching the lease for my DD, I was interested to find that the cars that tend to be more expensive to buy (non luxury, like I’m talking Hondas as the example) are cheaper to lease than less expensive brands (Hyundai, Kia) because their residual value is higher at the end of the lease. Also, lease specials are most easy to find on a car manufacturer’s top sellers; the common cars, if you are looking at a more specific less common car, you won’t get those good national lease deals. We found a great lease deal on a Nissan Sentra that was cheaper than Toyotas, Kias, Hyundais (Honda was having a weird shortage of the car we wanted to it fell out of the running).
I suppose another option is how likely you are to get little scrapes or fender benders…if that’s not uncommon for you, then know that you’ll pay for it at the end of your lease.
I think the devil’s in the details when it comes to leasing. It’s a more complicated process than just buying outright, IMO. Make sure you read and understand all of the paperwork.
I won’t lease because I’d be spending thousands of dollars with nothing to show for it in the end. It’s like a very long-term car rental.
@HImom it sounds like you keep your cars for a LONG time. In my opinion…leasing really only works well for those folks who want to get the latest and greatest every three years when their lease is up.
Look at how sales tax is handled also. Typically it is charged on your monthly lease payment so you are paying sales tax on the interest element of the lease. On the other hand you never pay sales tax on the residual value if you give the car back, so that can be quite a saving, if the interest rate is low. But if you did buy out the car at the end of the lease you end up paying more tax than you would have done otherwise.
Owning a car for over 10 years has been very costly to me. I feel like I overpaid to have things fixed by the car dealer service centers. After the first four years there are so many repairs needed to maintain and fix the car. Its not just the parts but the labor costs are even more expensive. There are many more costs than regularly changing the oil and filter. If you dont have a trusted reliable mechanic the costs for fixing cars each year —at the car service dealer or with a repair shop can easily run in the thousands of dollars each year. Some of the larger expenses I encountered in fixing my car were the timing belt, driving belt, brake pads, racks, pinon, struts and sway bars, leaking break master and brake booster,air filter, engine, tires, spark plugs, replacing cracked or corroded parts, etc… In contrast, I have leased cars at 3 or 4 year intervals and have had no costs other than replacing the oil and filter and an occasional tire. So if you can get a good deal like zero down payment, a leased car can be considerably cheaper than owning a car. Every three or four years you get a new car without having to worry about the hassles of lots of unexpected repair works, parts and labor costs.
Well…yes…but you also get a car payment…forever.
We purchase our cars usually paying cash…or we finance for three years or less. We keep,our cars a long time. But after three years, we have NO car payments…At all. $1000 a year in maintenance isn’t a lot compared to $300 a month in car payments.
We have also had cars that truly needed very little in maintenance for many years.
I think it’s a different stokes for different folks thing.
We know people who love leasing for just the reasons you describe. They seldom have big repairs, and are always driving a newish car.
You have to be very careful with the condition of the car when you lease if you do not plan to keep it. Parking lot dings can cost you a lot at turn-in time. I would research the dealer carefully for complaints about how people were treated.
Yeah, I am concerned about parking lot dings and so far the leases currently being advertised do not seem attractive at the moment. We do tend to keep cars but I’m open to learning about leasing as some folks have been quite pleased with it.
I have leased for about 12 years now. I first decided to because of having a newish, dependable vehicle without having to worry about breakdowns as I was working full time in a job where I had to be there. Secondly, I drive my car pretty much only locally thereby putting on very few miles overall.
Now that I am retired however, I am going to purchase a vehicle here in the next few weeks as I turn in my second Chevy Volt. I will pay cash for another vehicle. I no longer have to worry about having to leave a vehicle for repairs.
I do both – lease and purchase.
First mileage. Many of my leases where high mileage leases. Why? Because I commuted a long way and just wanted to turn the car in loaded with miles rather then deal with trading in or selling. I paid for the miles up front, which is cheaper as it just reduces your residual value.
Maintenance. When I buy, I usually get vehicles with 100,000 mile warranties. Then we drive them for 7-10 years. The warranty has saved me several times. Once the vehicle hits 100,000 miles, we usually get a new vehicle.
Use. Business use, I would favor leasing. It’s easier and you get a fresh car every few years. Personal use, I like to hold on to the cars and skip a few years of payments.
Quality. If you buy a quality car, then you lease costs can be reduced by residual values that hold up. If you go a less reliable route, or a say a new model, leasing can be good because you are eventual able to just turn in the lemon.
In your case @himom, you have extremely low miles. You could by a nice car, and keep it “forever.” Even if you finance, your payments would end. If you lease, then you’ll have a perpetual payment. It’s really a tomato, tamato decision. Good luck.
Leasing calculation is very easy.
You have the purchase price, which should be negotiated whether you are buying or leasing, and then there is the residue value (value of the car at the end of lease). Your monthly payment is calculated based on (Purchase Price - Residue Value), lease interest rate., and leas term (# of months). If your car has high residue value then your monthly payment will be lower. As an example, if you lease a 45K BMW with a residue value of 30K for 36 months then you would be financing 15K for 36 months @ X% interest rate. If you lease a 30K Subaru with a residue value of 15K for 36 months then you would also be financing 15K for 36 months @ X% interest rate. Another word, you could be paying the same monthly payment whether you are driving a BMW or a Subaru. Most higher end cars have much higher residue value than lower end cars, and that’s why it doesn’t cost that much more to lease a more expensive car.
Now, if you think you may want to keep your car longer than the lease term, you are not giving up anything by leasing first then buying it later. Just do the math and you’ll see what I mean.
The only time leasing doesn’t make sense is if you think you may be driving more than agreed annual allowable miles and you want to return the car at the end of lease because you would need to pay for additional miles. On the other hand, if you are going to keep the car then it really doesn’t matter.
I wouldn’t be concerned with dings on leased cars. Most lease companies do not penalize you for any dings smaller than the size of a quarter and for normal wear and tear. I have always leased and rarely have I paid for any damages (a resident of greater NYC area).
You also do not pay more insurance if you lease. Cost of insurance is usually driven by value of car, probability it gets stolen, cost of repair.
When you use cash to buy car, you are also losing investment income, so it is not exactly free. Current lease interest rate is around 2-5%. You need to figure out what is your portfolio return. Another thing to keep in mind is when you are leasing you are not financing the full cost of a car. You could be driving a 50K car by only financing 15-20K over 3 yr period. You always have the option of buying the car at the end of lease @ residue value.
@oldfort very true.
In our case…we don’t drive $50,000 cars…and we tend to buy ours when just off lease. Our last three cars were three years old or less when we purchased them.
It’s been very nice not having a car payment for years now.
We are looking at a new car purchase within the next 6-12 months. BUT with the very high mileage (25,000 to 30,000 a year) on the car we will be getting…a lease would probably not work. We’ve crunched the numbers…and the added mileage costs are pretty high.
@HImom doesn’t drive many miles. For her, leasing might be fine.
@trackmbe3 , What kind of car did you own that gave you that much trouble? We have a 1997 Lexus ES300 with 210k miles that has been fairly low maintenance, and a 2009 Honda CRV with 127k miles that has only needed tires and oil changes… not even brakes! I recently changed the spark plugs and had my mechanic change the brake fluid.
My one and only lease experience was fine until we turned the car in. When I signed the lease I was concerned about being “nickel and dimed” on damage at turn-in, so the dealer manager told me there was a $1500 allowance for damage when we turned the car in. Problem was, the fine print said 3 instances of $500 each. So when we turned the car in the inspector found “hail damage” on the roof. It was acorn damage, but what difference did that make? I wasn’t concerned because I thought $800 was well within my $1500 limit. They insisted I owed them $800. We went back and forth for months and they turned it over to collections and PUT IT ON MY CREDIT!!! I finally settled for 1/2, $400, but they left it on my credit. I am not anxious to try again with Honda Finance (It was an Acura). On the bright side, they said the tires were ok after 35k miles.Many folks have to buy new tires when they turn the car in at the end of a 36k mile lease.
We were driving a 2002 and my mother’s 1992. With old cars, not only were we paying about 1500-2000/year in maintenance (some years, on each,) but every time we went further, we rented a car. Nothing like not knowing if/when an old car might break down. Never knowing if it would start, in our own driveway or when away, stop on a highway, or coming home later at night.
The lease on a Chevy was a whopping 126/month for 2 years. Great. Enough miles for our driving patterns and maintenance covered. If we had purchased and financed, it would have been much more/month, even at 6 years- and that would have exceeded the warranty. No dings when I turned it in. We leased again.
I don’t want the uncertainty. At this point, I don’t care about owning. If you keep a purchased car long enough, there’s no resale or trade-in value to speak of. And you get stuck in that repair cycle.
But Himom, the question is how far from home you drive, if a trusted service place is local enough, and if you have someone savvy enough to advise you on repairs. I had a great repair shop, but as the costs added up, I was fed up.
If it’s a no brainer, go ahead and buy. Maybe a good used car is enough. I’m thinking the next car will be used, but with a warranty upgrade. I never heard of a 100k warranty.
Hyundai and Kia had 100,000 mile warranties, I believe but now they have 5 year warranties and 100,000 only on drive train, I believe.
I went with a lease on my Lexus. I decided I don’t want to drive a car until it drops anymore. We are at the point in our lives where getting a new car every three years with the lastest safety features is important to us. This is the car I drive, but the one we take on the road when we go out of town or just out together locally. H insisted we get 15k miles even though I never put more than 10k on a year (and the first year only had 8k.)
We also got insurance coverage for interior of car (like ink stain on white seats, for example.) That increased the monthly cost, but I am good with that, too.
H drives a 2013 Honda Accord we bought used several years ago. He has a quick 15 minute commute. We will keep that until maintenance issues become a PITA.
My insurance went up a little because I’m driving a more expensive car then my old Lexus (bought used.) It went up $50/month iirc.
Our lease is pricey ($480/month) but we can easily afford it.
We have leased 2 vehicles in the past, and I didn’t like it from an emotional perspective - just never felt like the car belonged to me.
I own one car over 10 years old, that doesn’t handle very well in the rain or frost, it has 150,000 miles on it but has not been any trouble, I also wouldn’t trust it for a long distance drive.
I also lease a car for a very low payment, I know it’s reliable and I don’t have to worry about expensive maintenance. So every 3 years I get a brand new reliable vehicle.
When my old clunker does die I don’t know what I’ll do.