Lease vs Buy?

... for him, not for you.

In addition to miles, how many years do you normally keep a car? Short timers will almost always pay more in depreciation than long timers.

 

+1

 

Do you plan to keep it more than 3 years? Do you put more than 12k/year on the ODO? If "yes" to either, do not lease.

The only reason I leased was to hold me over until the '16 came out. I try to keep my cars a long time, and after my '05 was creamed I didn't want to buy a '14 knowing that the next generation was right around the corner. Gen4 is out now and still early in its lifecycle.

I don't plan to lease again, and there were other options that would've been smarter from a purely financial standpoint.

 

If that is already close to 'about dead ' on my Prius, I'm going to be highly disappointed.

After dumping my '86 Accord at 23 years & 235k miles (and still in use six blocks away, with 300k+), I was somewhat disappointed that my '97 Subaru was not economically repairable at 17 years / 175k. My spouse's daily driver is now at 28 years, though admittedly is what some folks can legitimately label as beyond its service life.

 

chip off the ol' block.

 

You need to sit down with either a spreadsheet (or piece of paper) and have the side-by-side figures of "PAY CASH" and "LEASE".

Leasing could mean that you have spare cash which you "could" invest. My observations are that the investment doesn't happen too often, but it gets spent on other things. Also, check how much the end of lease $$$$ payment (sometimes referred to as balloon?).

The other thing you need to do is ask your bank (or finance company) for a comparative figure - I'd suspect it would be cheaper than the one through the car dealer. The other thing that might happen is that when the dealer realises you're looking elsewhere, he will reduce his interest rate.

Put simply, leasing is basically the reverse of Hire Purchase. With hire purchase, you pay a deposit - and then monthly payments for x years, with the last payment, your dealing with the financier is over. With a lease, you pay monthly payments for x years, and effectively pay the deposit at the end, called a balloon payment here. The vehicle effectively belongs to the finance company at the end of the lease - but paying the "balloon" payment changes the ownership to you. Commercial leases often don't have balloon payments - you just return the car, end of story. [There are other differences too in the fine print, it can be 10 pages long].

 

I have never liked the idea of leasing. I feel like the residual at the end is always way overpriced, where if you were going to trade in that same car they would say it was worth 40% less. The only people I could see a lease working for are those who don't drive very much (so they have no chance of exceeding the max miles and less chance of "damaging" the car) and those who buy their cars so often they always have a car payment. If you always had a car payment because you don't keep them long enough to pay them off and don't pay cash for them, a lease would probably have a lower car payment than if you bought it. Depreciation wouldn't matter as much in that case because you always are making a payment so you kind of lose the feel for the hard numbers, and you would get a new car every 3 years and never have to worry about out of warranty maintenance. But admittedly I am not a financial expert or anything so this is just my opinion

 

The other thing I meant to say is that it could be worth checking if you can fund it another way. Here, interest rates on mortgages are far less than car finance or leases. In the past, I approached my bank, requesting $x.000 be added to my home mortgage, and used that to fund my car. The bank here was pleased to work that way, but that's 15-20 years ago since I did that. So I had CASH (to be repaid as part of the mortgage).

 

Note that this terminology is foreign to American consumers. We are easily confused

Few American lease customers are planning to buy the car at end. Most go into the lease expecting to simply return the car. The normal 'balloon' would be the charges for excess mileage and excess wear.

 

How much time was left on the mortgage? In the US if you've got a HELOC (separate credit line based on the equity you have outside the mortgage) that's an option, or if you were already planning to do a cash-out refinance at the same time.

But I wouldn't want to add 20k to my mortgage and pay it off over 20+ years instead of 3-5. And there are often closing costs associated with refis. You probably did the math and found a set of circumstances that worked, but as general advice too many people fail to realize that the interest rate isn't everything.

Right now, I wish my mortgage rate was as low as my car loan.

 

Ok - that's probably not an option over there then - Mortgages are roughly between 4 and 4.5% here, and car loans between 8 and 12% here. I had about 20 years left at the time, but I just increased my payments which worked out considerably cheaper than car loan payments. It was done via what sounds similar to your Credit Line.

 

Bankrate.com will show public retail rates for the US loan types. New car loans are around 2.5% and mortgages around 4%, assuming excellent credit.

My December '15 mortgage rate was 3.5% for 360 months, and my June '16 car loan was 1.99% for 60 months. I took the car loan independently so I could pay cash to the dealer and take Toyota's cash rebate, which paid for more than the interest over the life of my loan.

 

I don't disagree that leasing is the best way to go if you want to drive a new vehicle every 3 years with the least amount of hassle. The sales person, dealers, and the auto industry in general will prefer you lease as it is as close to a guarantee that you will be in the market for another vehicle at the end of the lease. That's why they push it and make it as easy as possible.

I look at leasing as a bet by the bank that the value of the vehicle will depreciate by less than the amount of the lease. They will have some built-in margin to ensure they do not lose money plus administrative fees to assess the vehicle and return it to salable condition after you return it. They have a slew of bean counters to calculate all this so there is little chance you can make it out ahead financially with a lease versus a buy. My sister did make out like a bandit on her $119 Nissan Leaf lease. She had a residual of $19,000 when the car was worth maybe $9000. I admit, it's not impossible.

The main problem I have with a lease is getting rid of it. I would like to say I will be employed tomorrow. But if I am not, I don't want my emergency funds to be spent on a leased car. I would like to say I drive 12,000 miles a year but life is unpredictable.There's also a big hole in my bumper after running over a ladder someone lost on the freeway. This causes me little strife as it seems mostly cosmetic. If this were a lease? I'm looking at a $3000 repair or going to insurance with increases in my premium.

 

We have been leasing the Prius for a while now. Started doing it because we wanted a reliable new car since we were raising a young child and were car stupid. Lately have been getting the cars with no down payment at about 296.00 a month. We do less than 36000 miles a year. If we go over mileage we just turn it in early. We have been investing the difference in an emerging market bond fund that has been bringing in a yield of 5% plus some small capital gains. This may not work for everybody but has worked well, I believe, for us.

XT1080 ?

 

Oops. Meant to say less than 12000 miles a year.

XT1080 ?