vehicle leasing - pros and cons?

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Originally Posted by Rooskibar03

Ahh the old should I lease a car question. I love hearing the same thing from everyone, you shouldn't buy it if you can't just pay for it. Leasing is stupid you don't own it. Leasing is dumb cause you have mileage limits.

Here are some facts. The average (key word being average) car loan is up to 66 months. The average trade cycle is down to 35-38 months. So guess what? If you financed a car and didn't ride the loan to term, you did the exact same thing as leasing it. But instead of leasing it you paid tax on that entire car, not the monthly lease payment. You paid interest on that entire loan, not the monthly payment, you rolled the dice that the car would be worth what you owe come the time you want to get out of it.

Here is what a lease gives you.

A a fixed monthly and total term cost. You know exactly what you are spending to drive that car for 3 years.
Tax benefit of not paying sales tax on that 50k vehcile.
A fixed exit strategy. You know what the car is worth in the end. If the value isn't there then the bank has to deal with it. You are not obligated to purchase the car.
Generally speaking the car is under warranty the entire time you are making payments.
Normally a lower payment with less cash out of pocket up front.

A car is a tool for most people, a toy for some. Let's face it, like our guns we like toys and a car is no different for some. So if you could have a new toy every few years without the risk of being upside down thousands of dollars, why wouldn't you?

If you plan is to lease and then buy the car at the end, don't. Just buy it up front, it doesn't pencil to go the other way.

A lease requires some upfront thought. Don't take a 10k a year lease when you know you drive 15k. Also don't pay for a 15 if you only do 10k. You won't get anything back if you're under.

You can trade out of a lease at any time, just like a finance. A lease will work for most people, but it depends on the person and their individual circumstances.

OP feel free to PM me with any specific questions, I'm happy to help.

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This^^^^

I like having a new car every two or three years. I like knowing that I have a fixed cost for my vehicle and will never have an unexpected repair as they are always under warranty. I keep my cars in good shape but I do have kids, I drive the cars hard at times and not once have I had to pay for extra wear and tear. I have leased from several manufacturers and they are realistic about usage and they don't expect it perfect upon return. You can specify as many miles per year as you want up front, just be honest with yourself about how many miles you are going to drive and that will be included in your monthly payment and you don't have to worry about how much you drive it. I know upfront that I will never take my car on a long road trip (those are for the wife's car). Lease payments are going to be lower than purchasing the same vehicle. I like knowing that I can change cars in two or three years and will not be upside down in the car. I myself don't look for the equity in something that is going to depreciate fast anyways. Its all worth it to me, just all a personal preference.

Lease=Treating the car as a utility bill
Loan=Treating the car as an asset.

Proceed accordingly.

I know this is not realistic but my grandfather and grandmother NEVER owned a vehicle. I remember all of our homes being near a bus route/stop. We walked and took the bus everywhere! I don't know how they did it, but they made by with what they had at the time.

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Originally Posted by kwando

I know this is not realistic but my grandfather and grandmother NEVER owned a vehicle. I remember all of our homes being near a bus route/stop. We walked and took the bus everywhere! I don't know how they did it, but they made by with what they had at the time.

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I have to say, there's something to be said for city living where a car isnt required. Cars eat up a ton of money between registration, gas, insurance, maintenance, etc.

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Originally Posted by Dave_L

I have to say, there's something to be said for city living where a car isnt required. Cars eat up a ton of money between registration, gas, insurance, maintenance, etc.

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Well, it's money or time, isn't it? Just for example, I could take the light rail to work every day and save a fair amount of money (I've already crunched the numbers.)

What it would cost me, though, is probably 1 1/2 to 2 hours per day in commuting as well as the flexibility of leaving to and from work on my own time rather than on RTD's time. Ultimately like most of us (judging from traffic, anyway) I've determined that my time is worth the money it costs.

A few years back the wife and I took a weekend trip to Glenwood Springs. We decided it would be fun to take the train rather than drive. And it was fun, that's a gorgeous train ride. But the train left Denver at 8:00 AM and we got into Glenwood around 2:30, 6 1/2 hours later.

Driving would have taken 3 hours AND we would have had a car when we were there, as opposed to having to rely on the hotel to pick us up from the train station and being on foot to go to dinner and such (which, in a town as small as Glenwood Springs, isn't that bad.) And of course that doesn't even take into account the fact that we had to get a ride to the light rail station and leave our house by 6am. So what would have been 3 - 3.5 hours in the car became a full day of travel.

It's always money or time. ;)

EDITED TO ADD: We also didn't save any money taking the train, quite the contrary. I want to say it was at least $75 for each of us and of course we had to buy two tickets. Even at $4.00/gallon and driving my gas guzzling Suburban at 15 MPG (IOW absolute worst-case scenarios cost wise) we would have used 24 gallons of gas to drive 360 miles (180 miles each way) which works out to $96 travel costs and obviously that's the cost for both of us and all the crap we can carry.

I guess my point with all of this is that while it's true that cars cost money, what they save us in terms of time, convenience and freedom of mobility is what makes it worth it.

^I agree. I couldn't go without a car. Partly because I enjoy cars as a hobby. Partly because how the heck to you go to the range if you dont have a car?

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Originally Posted by mackbamf

This^^^^

I like having a new car every two or three years. I like knowing that I have a fixed cost for my vehicle and will never have an unexpected repair as they are always under warranty. I keep my cars in good shape but I do have kids, I drive the cars hard at times and not once have I had to pay for extra wear and tear. I have leased from several manufacturers and they are realistic about usage and they don't expect it perfect upon return. You can specify as many miles per year as you want up front, just be honest with yourself about how many miles you are going to drive and that will be included in your monthly payment and you don't have to worry about how much you drive it. I know upfront that I will never take my car on a long road trip (those are for the wife's car). Lease payments are going to be lower than purchasing the same vehicle. I like knowing that I can change cars in two or three years and will not be upside down in the car. I myself don't look for the equity in something that is going to depreciate fast anyways. Its all worth it to me, just all a personal preference.

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I know people who lease for the exact same reasons you listed. It is a fixed line item on a budget; no worries no hassles. The best part is not worrying about being up-side-down on a depreciating asset; when you are done, you are done. For those that want to trade up every two to three years, it is a clean and easy way to go.

Personally, I buy a vehicle I want long term and squeeze every last mile out of it. Since I can do most maintenance myself, I can keep a vehicle going long after the payments are done so my total cost of ownership goes way down by the time I am done. However, I drive 25,000+ miles a year so I would be cleaned out if I put money into new vehicles.

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Originally Posted by MED

I know people who lease for the exact same reasons you listed. It is a fixed line item on a budget; no worries no hassles. The best part is not worrying about being up-side-down on a depreciating asset; when you are done, you are done. For those that want to trade up every two to three years, it is a clean and easy way to go.

Personally, I buy a vehicle I want long term and squeeze every last mile out of it. Since I can do most maintenance myself, I can keep a vehicle going long after the payments are done so my total cost of ownership goes way down by the time I am done. However, I drive 25,000+ miles a year so I would be cleaned out if I put money into new vehicles.

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This is what I do. Pay cash or pay off right away.

My last car I bought near new for $15,000. I drove it 13 years. I traded it in for $3,000. The only maintenance items were oil, batteries, tires, and one clutch (which I did myself for around $400 in parts and tools.).

15,000 - 3,000 + 400 = 12,400
12,400 / 13 = 953
953 / 12 = 79

$79 a month for a car I liked to drive.

You also get a break on taxes/fees as it gets older. I've never understood why the driver has to register a car and pay taxes/fees on a lease. It's not his car and won't be unless he buys it.

The best part is if we lost a job or had a bad month, I wouldn't lose the car.

I think another factor in this comes back to American's saving money. I wonder how many people save the "car payment" each month that dont have one?

The original reason for leases was that the auto industry needed people to buy new vehicles more often in order to keep their production lines going. They came up with leases as a way to keep the monthly payments affordable but improve their profit lines and get people hooked on the idea of changing vehicles fairly often. The write-offs as business expenses were part of the rationalization they made up for people to go ahead with leasing.

Changing vehicles every 3-4 years is fiscally stupid except in very rare circumstances and it makes no fiscal sense to lease unless you change vehicles more often than that.