Greetings!

I've been doing some research online, just getting some background info.
In my lifetime, I've owned each car (12 up to now), and it always seemed like the right way to go.
Now, I am thinking of getting a new car again. In the past 14 years, I've never owned a car longer than 3 years before renewing.

So my question is, it generally better to lease, or buy? I realize everyone has different needs, both financially and otherwise, but what are some of the common bonuses/negatives involved in leasing/buying?
Leasing is a new concept for me. I've always thought I want to own what I have.

What are your experiences with this? Love to hear from both sides from the forums here.

Let the games begin..and thanks!

Financially the best idea is to buy a used car (that is a couple of years old and still in good condition) and driving it until the doors fall off. That's the best decision for you if you're only interested in getting the most bang from your buck. At the same time, though, the goal for anyone who works for money is to increase their happiness with the money they earn from work. If buying a new car every 3 years, then go for that.

For someone who only holds on to cars for a couple of years, leasing is a better idea - although there would be a lot of assumptions in there like normal rates of depreciation and a normal sized down payment.

I used to Sell/Lease cars for over 4 years. Here are a few tips for you.
1. Only lease a car that has/will have good resale value (such as Honda/Toyota compared to Ford/Chevy)
2. If you know you are gonna buy it eventually then lease it first. You will have lower payments/down payment and your not worried about milage because you will eventually buy it and you have the best used car you can get because you are the previous owner and know how the car has been taken care of.
3. If you know you are NOT gonna buy it then make sure you will drive under or near the milage allowed per lease terms.

Leasing is great if you want lower payments to get into a car you will eventually own, or for someone who changes cars every 2-3 years and doesn't put too many miles on it per year. If you drive a ton then don't lease.

Bottom Line: ONLY LEASE A CAR THAT HAS GOOD RE-SALE VALUE.

Here is an excerpt from Dave Ramsey's site about auto leasing...


Leasing stinks. Here’s why. Take a 2001 Honda Civic? Sells for $18,000. If that car in four years loses 60% of value it would be worth $11,000. You've lost $7,000 in value. If you lease this Civic and bring it back to the dealer in four years and you have not paid them $7,000, then they have lost money. You have to pay them the depreciation value or they lose money. They aren’t in the business of losing money.

They make the depreciation up and a profit, mostly in interest on the loan. You can’t even get close to a cash transaction. If you could lease a car for less than it goes down in value then it would make sense. You’re letting someone else take the hit. That’s when renting makes sense. “Someone has got to lose money, and it ain’t them.”

Food for thought: Smart Money Magazine says the number one most profitable thing on the car lot is the financing contract. Number two is the repair shop. Number three is the extended warranty. Number four is the sale of vehicles. What kind of business are they in?! Buy a slightly used vehicle and you can get it for 25% off sticker. You’ll always in this way.

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Buy a slightly used vehicle and you can get it for 25% off sticker. You’ll always [w]in this way.

Does this apply to buying used anywhere? Like Carmax? Or just dealer pre-owned?

I think it also depends on the company and/or dealer. I know that my friend leased an '04 BMW M3. I took care of it for him for a while and brought it in one day for a service They slapped new tires on it, fixed a blown speaker, new wipers, tune up, break pads etc.

My father also leased a BMW, and he had great luck. I know that he skipped out on certain taxes like gas guzzler and a few others. Their service was phenomenal though. I wouldnt expect the same from Ford. He paid close to 0 dollars in maintenance for his three year lease.

However my sister leased a Jetta a while back and i don't remember hearing any positives about that one.

I've seem some lease deals that are hard to pass up recently.

Jettas have lousy resale value compartively. That's the key, find a vehicle with great resale value and only go with a short-term lease. 24-36 months max. There are always horror stories on leases as well as long-term purchases and extended warranties. Leasing used to be terrible years ago. They would have undisclosed residuals. You wouldn't know what the final buy-out payment would be and when it came time to turn in or buy you would get screwed. That ancient way of business (now obviously forbidden by the lender) torched the whole reputation of leases for years and even now. It was a common objection I regularly had to overcome to close deals.

Joel has it right!
Car companies make up to three times more money by leasing a vehicle over selling it outright.

IMO the only legitimate reason to lease a vehicle is if you own your own company and you need to shelter or dispose of money into a "write off". Then have at it, lease a BMW or Porsche pay the premium, and have the company take the write off.

If you are buying a car every three years, then buy a good car coming off of lease.

You lose the greatest percentage of depreciation within the first two to three years on the vehicle.... so let someone else eat it.

buy a rtn from lease drive it, enjoy it and flip it later.

In the past and also being a bit younger knew I always wanted a newer model vehicle, therefore about ten years ago I decided to lease a Mitz eclipse. I did a three year contract with them. After the the three years was up I dropped it off on their door step and walked away. I walked accross the street from that dealer and leased a Volvo for a four year lease. when the contract was up on that I again dropped it off on their door step and walked away.

There are a few catches to a lease however, If you decide to refinance the vehicle after the contract is up it is not worth it as stated before due to the loss of value. Also by contract you are given X amount of miles for the extent of the contract, if you go over that you have out of pocket expense at turn in, and if you have any damage to the vehicle its also out of pocket or ins. cost before turn in. If you decide to pay for the car outright at the end of the contract you end up with a big balloon payment. If you do as i did in staying within the allowed miles, kept the vehicles appearance and performance up in the end i dropped it off and that was that I cant complain about my experiance with my leases but its not for everyone.

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Originally posted by Chris Alexander:
Joel has it right!
Car companies make up to three times more money by leasing a vehicle over selling it outright.

Having worked at a dealership I can assure they don't make much more on a lease , no way 3x. In fact they don't care if you lease or purchase just as long as you don't write one check and pay it off before you walk out.
I agree a good way to go is to buy a 2-3 yr old reliable good car which exactly what I've done with my last car. But I have leased as well and it's not really that much cheaper or more expensive than a traditional purchase, It's about a wash.

I always lease. Never have to worry about a thing (except for miles).
You never have to resell, worry about out of warrany shit...Synthetic oil twice a year and forget about it.

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have any damage to the vehicle its also out of pocket or ins. cost before turn in.

Thats not true.

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Having worked at a dealership I can assure they don't make much more on a lease , no way 3x. In fact they don't care if you lease or purchase just as long as you don't write one check and pay it off before you walk out.
I agree a good way to go is to buy a 2-3 yr old reliable good car which exactly what I've done with my last car. But I have leased as well and it's not really that much cheaper or more expensive than a traditional purchase, It's about a wash.

Buy-$30,000 * 6% int & 8% tax 34,300 = $575/60mo
Lease-$30,000 * (the amount of the car you use) 40% = 12,000/ * 3% & 8% = 13,000/24mo.

I think the math works. So, for the time you are paying the loan, the lease is actually cheaper. It all depends on how long you keep the car you buy.

Also, if you total a car you lease, you lose the down payment you put on it. Make the down payments very small.

For me leasing is the way to go i am in business for myself so it is a write off.I guess it depends on ones personal needs.

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Originally posted by SHEEPSHEAD BAY:
For me leasing is the way to go i am in business for myself so it is a write off.I guess it depends on ones personal needs.

+1

also, I tend to get fed up of cars after rather fast.. so a 2 year lease is not only 100% deductable for me, but is short enough to satisfy my thirst for newer and faster cars

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Originally posted by salibas007:

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Originally posted by SHEEPSHEAD BAY:
For me leasing is the way to go i am in business for myself so it is a write off.I guess it depends on ones personal needs.

+1

also, I tend to get fed up of cars after rather fast.. so a 2 year lease is not only 100% deductable for me, but is short enough to satisfy my thirst for newer and faster cars

In your guys' case it makes total sense to lease short term. Many also have a thirst to change vehicles frequently. The average person keeps vehicle for 2.75 years so if you choose the right lease terms it works.

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Buy-$30,000 * 6% int & 8% tax 34,300 = $575/60mo
Lease-$30,000 * (the amount of the car you use) 40% = 12,000/ * 3% & 8% = 13,000/24mo.

You've left quite a bit out there. You have resale value, what happens when your lease runs out (i.e. you can keep the car you buy for as long as you want), there can be tax benefits from car purchases, loans amortize... and so on and so on.

Seriously, realistically the most economical way to go is buying a slightly used car for the vast majority of cases. You do have the problem of assymetric information, but if you do your homework you can be fine. Remember, most millionaires accrue wealth not by earning a ton, but not by spending a ton.

You buy a new car and the salesman tells you that you are buying a vehicle that is gold bullion and you are stealing it from him because of the price he made for you.

You bring back the car for a trade in and he tells that it is a piece of sht and points to all the dings, scratches, smudges etc.

I like to lease a new car for safety & reliability reasons. The brake pads & rotors make it that long. I buy one set snow tires, I may need to buy a second set of summers, and I change wipers twice a year (winter wipers/summer wipers), I'll pay for the sceduled maintenance but not the big items near the end of the lease.

Then after the lease is up I say to the salesman. Here's your POS.

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I like to lease a new car for safety & reliability reasons. The brake pads & rotors make it that long. I buy one set snow tires, I may need to buy a second set of summers, and I change wipers twice a year (winter wipers/summer wipers), I'll pay for the sceduled maintenance but not the big items near the end of the lease.

Then after the lease is up I say to the salesman. Here's your POS.

Exactly.

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You've left quite a bit out there. You have resale value, what happens when your lease runs out (i.e. you can keep the car you buy for as long as you want), there can be tax benefits from car purchases, loans amortize... and so on and so on.

I did leave a lot out but it covers the basics. That formula assumes you keep on leasing.
There are also insurance breaks on new cars that you won't get on used. And what happens when the warranty ends on used stuff? I never want to deal with that again lol.
I had a fuel injector clog on an 98 Grand Prix. Out of warranty of course. $1,000 for a new top end to the engine. I went to Acura right after that and leased a TSX.

Ozz1113-

sounds like you unfortunately learned the hard way; In the vast majority of cases; Don't lease American cars. American trucks maybe; Ford, Chevy full size OK. Once again reliability usually affects resale value positively. Acura's cars are some of the best vehicles to lease because they hardly have MAJOR problems if maintained properly. Grand Prixs, Malibus, Explorers, etc tend to have more problems after a few years AKA when your lease is usually up and all this effects resale value.
I'm positivie your TSX (awesome car BTW) didn't/won't need $1000 worth of engine work when the lease expires.