Leasing A Car

[Corpsmaide]

Thoughts. Good bad. Never ever payed attention to what this actually is. Experiences please.

 

[James331]

After working the line, never bought new, never done a lease.

 

[Corpsmaide]

After working the line, never bought new, never done a lease.

So, used the year before?

 

[Gsxrpilot]

Leased once, never again. If you always buy new, and never drive it more than two years before trying to sell/trade up to new again... then leasing might be for you. Otherwise, no. And the best plan is to check the bank account and buy whatever you can with what's sitting there. That's worked best for me.

 

[ClimbnSink]

Honda was advertising $39 a month think it was 2,000 grand down and 12k miles a year. You would also be on the hook for full insurance. Never leased myself, obviously they make money doing it though seems it might work well for some. Have noticed lease deals seem to vary greatly by locale.

 

[German guy]

Leasing as a private person IMHO only makes sense if you want to have a new car every two or three years.

If you want to drive it longer, shop around and buy new. The costs for younger used cars are so high, that a good deal on a new car is very close to what most dealers ask for a 1 - 2 year old used vehicle. Just search Autotrader for the lowest price of a certain new vehicle within 500 miles and compare it with the used car prices of your local dealers.

If you prefer to buy local, you can at least use these offers as a lever for your negotiations.

 

[Mason]

I've been buying 2-3 year old lightly used cars for years. Last year, my 1989 Saturn was showing signs of becoming unreliable even though it had only 50k miles on it. Died on me twice on the freeway, mech couldn't figure out the problem...intermittent electrical probs.

Looked for a 2-3 year old car, geez, they are almost as much as a new car! Ended up with a really good deal on a new one that will probably be my last car.

Under current tax law, I have never leased a car and probably never would.

 

[James331]

So, used the year before?

Used is just a legal term, after you sign the paper in the F&I guys office it's used.

Brass tacks, you buy "new" drive off the lot in a used car.

But a certified pre owned, get a killer warranty, plus the factory one, pay less and get the same car.

A car with 20k or less on the clock is the same as a new car.

 

[John221us]

It makes sense if you depreciate it through a business (the whole payment is either interest or depreciation, since the residual reflects the remaining value), but otherwise it probably doesn't, unless, as mentioned above, you only keep cars for two or three years and like to buy new.

 

[Theboys]

I've tried the lease. Lowers your payment some and if you intend to use the buyout clause at lease end is not a terrible deal. However, saying that, for me, it didn't work very well. I bought it without talking to my wife first. 40,000 pickup. She was pi$$ed. Was such a row I wanted nothing more than to take back and pretend it never happened. But, having signed a 3 year lease, that wasn't happening. On top of it I really didn't care for the truck. To get out of the lease early was going to cost a fortune so that was out of the picture. Ended up keeping for the 3 years, then buying it and reselling it right away. Almost as bad a decision as joining the army in 1973. Guess where my travel and meet new people plan was too!

 

[DaveA]

Lessors will use their historical data to determine what the retail value of a vehicle should be at End-Of-Term. This is a best guess that depends on the market, (will there be a glut of used iron or a shortage?) and uncontrolled events like the cost of oil going thru the roof or the floor at that time. I stated 'retail value' because despite your best efforts at negotiating a one vehicle retail lease at the dealership level, there's not a lot of give. The company issuing the paper (owning the car and letting you borrow it for x months at x$/mo) has some pretty tight parameters that can't change much or the deal could stink for them in x months when they get the car back and dispose if it, hopefully at a profit, which makes the whole thing worthwhile to them in the first place. We started all our 'walk away' truck lease rating at our cost of acquisition, then made the contractual agreed value at least 15-20% higher when doing the paperwork. Then our agreed monthly depreciation credit was typically 5% less than what we'd be writing it down for ourselves, so that we were always keeping a 15-20% spread on agreed value vs our book value (we didn't want a competitor to buyout our leases and take the customer unless they were going to Pay Us Bigtime for the privilege).

IMHO if you can live with the mileage and return condition requirements then it's ok I guess. I put too many miles on my stuff- the 05 F150 has 345k right now and ain't totally dead yet. You can get a Maserati GT right now for I think like $1k/mo for 36 mos and $77k residual and the usual 12k mileage cap/yr...up front I think was $12 grand- which is usually upfront profit and sales commisions.

Glad I'm not in full service truck leasing any more. Don't miss it.

 

[JCranford]

Renting, I mean leasing, a car is THE most expensive way to use a car. Do the math yourself. If it was such a great deal leasing companies would be out of business.

 

[ktup-flyer]

I've been buying 2-3 year old lightly used cars for years. Last year, my 1989 Saturn was showing signs of becoming unreliable even though it had only 50k miles on it. Died on me twice on the freeway, mech couldn't figure out the problem...intermittent electrical probs.

Looked for a 2-3 year old car, geez, they are almost as much as a new car! Ended up with a really good deal on a new one that will probably be my last car.

Under current tax law, I have never leased a car and probably never would.

Yep. Let someone else take the depreciation hit, then swoop in and get a deal. Leasing privately doesn't really make sense, and neither does buying new, unless it's an exotic or something.

 

[Rigged4Flight]

Leased once, never again. If you always buy new, and never drive it more than two years before trying to sell/trade up to new again... then leasing might be for you. Otherwise, no. And the best plan is to check the bank account and buy whatever you can with what's sitting there. That's worked best for me.

This.

Renting, I mean leasing, a car is THE most expensive way to use a car. Do the math yourself. If it was such a great deal leasing companies would be out of business.

And this.

Just the fact that I put a ton of miles on anything I drive alone makes leasing not worth it for me.

 

[AggieMike88]

A car with 20k or less on the clock is the same as a new car.

And has any significant issues found and fixed. I agree with buying used cars that have a good track record for reliability and have already suffered their depreciation.

From a respected money advisor:

A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.

During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.

Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.

People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car.​

 

[N747JB]

As our resident new car dealer, I will make my comments on leasing:
1. We only lease 2-4% of our new sales, so it is not big in my market or my dealership.
2. Long term leases, 48+ months are almost never a good idea, maybe for a business, but still not a good idea in most cases.
3. Shorter term 24-36 month leases can be a good deal, IF you like new vehicles fairly often, you seldom ever pay a vehicle off, your driving habits are consistent with the mileage offered by the lease.
4. Manufacturers captive leasing companies usually offer the best lease payments as they are incentivized by the manufacturer, similar to 0% interest.
5. Manufacturers push leasing as a way to get you to buy new every 2-3 years, and for folks who normally do that anyway it CAN be a good way to go. But, it needs to be done with open eyes as to the lease end valuation and your options at lease end.
6. From a personal perspective, I am only a fan of leasing when it works out to a much cheaper payment vs buying. Ford has some great lease offers on the 2015 F-150 and it makes them a good bit more affordable versus a 60 month buy.
7. Be aware of the tax laws in your states, Georgia is very lease un-friendly, the sales tax of 7% is charged on the price of the vehicle vs the monthly payment and it really jacks up the lease payments.

I am sure some will pick this apart and that's all fine and dandy, just thought I'd throw out my perspective.

 

[AggieMike88]

John, with today's electronic speedometers and odometers, is there a way for the new car dealerships to tell that the lease customer (or trade-in customer) has "clocked" the vehicle with a replacement instrument cluster?

I will get phone calls from customers requesting instrument clusters for vehicles within 4 years of current model with the requirement of "it must be 'x' miles or less". While I will make the deal/sale if I have the item, I've always been suspicious of their need.

 

[Sac Arrow]

As stated, if you rarely drive it, and you absolutely, must, have a new car every 2 years, then I suppose it makes sense.

Me? I buy new, and then drive them to the ground. I keep them at least ten years, and put at least 200,000 miles on them.

 

[N747JB]

Mike, I am not sure if we can tell by the car. Carfax, not my favorite company, does a pretty good job of recording mileage on service records and they will show if there is a suspicious reading. I had a customer many years ago that would pull the fuse on the speedometer cluster/transmission and drive ton of miles pulling freight trailers. We caught him and tossed him out of the store, I think he's still doing it with a different brand of trucks.

John, with today's electronic speedometers and odometers, is there a way for the new car dealerships to tell that the lease customer (or trade-in customer) has "clocked" the vehicle with a replacement instrument cluster?

I will get phone calls from customers requesting instrument clusters for vehicles within 4 years of current model with the requirement of "it must be 'x' miles or less". While I will make the deal/sale if I have the item, I've always been suspicious of their need.

 

[Henning]

Thoughts. Good bad. Never ever payed attention to what this actually is. Experiences please.

If you are a private individual with no business use for the car and drive it frequently, I have not seen a lease deal that works financially. Where it normally goes wrong is mileage penalties, those suck. Basically you are the one who absorbs all the depreciation on a vehicle just in time to give it back to a dealer at it's highest profit potential (low mile 1-3 years old).

If you can use that write off to greater effect, then a lease is nice way to eliminate the hassles of ownership and always drive a fairly new car under a simple payment process.

One place people forget to look for "leases" though is Hertz and Avis. You can get a competitive (sometimes cheaper even) deal from them on long term rental, and even be able to change out vehicles, plus have full on roadside assistance where they just bring you a new car when the old one breaks down. You can even trade them in when you get on a flight and have one at the other end on your contract price.

If you are a 'normal' person though with a family, house and a job or business, financially the best way to deal with a new car is to buy the deluxe version fully loaded and sell it 10 years/250,000 miles later, or drive it all the way to the junkyard, excuse me, Auto Recycling Facility, where you will still get good money for it because of all the accessories that people are looking for.

 

[N747JB]

I just had my next door neighbor in buying a 2014 used truck, he's my age, 51 and it's his 3rd vehicle in the last 25 years, all used, all from me. But, he buys 2-5 new work trucks every year for his business, he just doesn't worry too much about what he drives.

As stated, if you rarely drive it, and you absolutely, must, have a new car every 2 years, then I suppose it makes sense.

Me? I buy new, and then drive them to the ground. I keep them at least ten years, and put at least 200,000 miles on them.

 

[Henning]

John, with today's electronic speedometers and odometers, is there a way for the new car dealerships to tell that the lease customer (or trade-in customer) has "clocked" the vehicle with a replacement instrument cluster?

I will get phone calls from customers requesting instrument clusters for vehicles within 4 years of current model with the requirement of "it must be 'x' miles or less". While I will make the deal/sale if I have the item, I've always been suspicious of their need.

There's ways around it, but you lose cruise control.

 

[Henning]

So, used the year before?

2-3 years old is typically the best buy, but sometimes year old deals can be found that are good. Most people are upside down in their cars for the first 3 years though, 4.5 with the 7 year financing now available.

Really, when dealing with personal cars, the differences are pretty irrelevant. You drive what you want and buy the year you can afford.

 

[Henning]

Honda was advertising $39 a month think it was 2,000 grand down and 12k miles a year. You would also be on the hook for full insurance. Never leased myself, obviously they make money doing it though seems it might work well for some. Have noticed lease deals seem to vary greatly by locale.

You need a 790 or better score on the credit check to qualify is what they don't enumerate in the ad. My mom would have rocked that deal though, she scored an 830 and I'm driving her 97 Passat and it now has 36,000 miles on it, her 73 Mercedes had 120,000 miles when she traded it in on it, and we drove that around the country a few times on family vacations.

There is no one "best" way to do it, everyone's situation is different.

 

[Henning]

Used is just a legal term, after you sign the paper in the F&I guys office it's used.

Brass tacks, you buy "new" drive off the lot in a used car.

But a certified pre owned, get a killer warranty, plus the factory one, pay less and get the same car.

A car with 20k or less on the clock is the same as a new car.

Yep, your car depreciates 30% the minute you drive it off the lot.

 

[James331]

2-3 years old is typically the best buy, but sometimes year old deals can be found that are good. Most people are upside down in their cars for the first 3 years though, 4.5 with the 7 year financing now available.

Really, when dealing with personal cars, the differences are pretty irrelevant. You drive what you want and buy the year you can afford.

Depends on the car and how smart the buyer is

I've seen plenty of people be OK and not upside down at all buying pre owned toyota, Honda, lexus, Acura, Vette, wranglers, etc.

When I sold cars if someone came in with a somewhat new ford car or Mitsubishi and wanted to trade it in, it was near impossible to dig someone out of a focus or lancer.

 

[Henning]

Yep. Let someone else take the depreciation hit, then swoop in and get a deal. Leasing privately doesn't really make sense, and neither does buying new, unless it's an exotic or something.

Even in exotics there is a gamble to buying new, some hold value, some sink like rocks.

 

[Henning]

Depends on the car and how smart the buyer is

I've seen plenty of people be OK and not upside down at all buying pre owned toyota, Honda, lexus, Acura, Vette, wranglers, etc.

When I sold cars if someone came in with a somewhat new ford car or Mitsubishi and wanted to trade it in, it was near impossible to dig someone out of a focus or lancer.

I mean trying to get it used from the new buyers, they are typically upside down in the first 3 years. If you walk into a dealer and give the minimum down and the financing package you are offered to walk out the door minimum out of pocket, you will be upside down for 2/3rds of the loan period in most cars.

 

[AggieMike88]

Yep, your car depreciates 30% the minute you drive it off the lot.

It's an event that still baffles me to no end.

We Americans spend lots and lots of time looking for an opportunity to spend some money and generate a positive return.

But then we so readily sign an purchase contract for a vehicle that loses a massive amount the second we put our name on the dotted line.

 

[flyingron]

Leasing is rarely a good deal. It preys on those who want to drive new cars for short terms and don't have the money for a down payment. In fact, you can almost always do better structuring a loan with the backend balloon and do the same thing at a better price in today's marketplace.

About the only time it makes any sense is in certain business situations where it becomes preferable to purchasing capital outright.

 

[Jim_CAK]

As our resident new car dealer, I will make my comments on leasing:
1. We only lease 2-4% of our new sales, so it is not big in my market or my dealership.
2. Long term leases, 48+ months are almost never a good idea, maybe for a business, but still not a good idea in most cases.
3. Shorter term 24-36 month leases can be a good deal, IF you like new vehicles fairly often, you seldom ever pay a vehicle off, your driving habits are consistent with the mileage offered by the lease.
4. Manufacturers captive leasing companies usually offer the best lease payments as they are incentivized by the manufacturer, similar to 0% interest.
5. Manufacturers push leasing as a way to get you to buy new every 2-3 years, and for folks who normally do that anyway it CAN be a good way to go. But, it needs to be done with open eyes as to the lease end valuation and your options at lease end.
6. From a personal perspective, I am only a fan of leasing when it works out to a much cheaper payment vs buying. Ford has some great lease offers on the 2015 F-150 and it makes them a good bit more affordable versus a 60 month buy.
7. Be aware of the tax laws in your states, Georgia is very lease un-friendly, the sales tax of 7% is charged on the price of the vehicle vs the monthly payment and it really jacks up the lease payments.

I am sure some will pick this apart and that's all fine and dandy, just thought I'd throw out my perspective.

Good information.
Thanks John.

 

[Henning]

Leasing is rarely a good deal. It preys on those who want to drive new cars for short terms and don't have the money for a down payment. In fact, you can almost always do better structuring a loan with the backend balloon and do the same thing at a better price in today's marketplace.

About the only time it makes any sense is in certain business situations where it becomes preferable to purchasing capital outright.

If auto leases were true leases, that would be true, however most auto leases require a significant down still.

 

[Henning]

Depends on the car and how smart the buyer is

I've seen plenty of people be OK and not upside down at all buying pre owned toyota, Honda, lexus, Acura, Vette, wranglers, etc.

When I sold cars if someone came in with a somewhat new ford car or Mitsubishi and wanted to trade it in, it was near impossible to dig someone out of a focus or lancer.

When I sold new in the late 90s it was easy, you could roll all their upside down goodness right into their next loan so they could pay for their old and new car at the same time at twice the interest rate.

 

[PeeGee]

We leased a vehicle once, and we came out OK. I got a great price on the purchase, the lease terms were good, and we traded the vehicle in on her current vehicle for more than the buyout, so we walked away with a grand or two extra and didn't pay the return fee or replace the cracked windshield. Would I do it again? Probably not, but I don't think you can make some of the blanket statements you see around these parts about all leases are bad. I'm sure there are scenarios for some people where it's the way to go for them.

 

[Henning]

It's an event that still baffles me to no end.

We Americans spend lots and lots of time looking for an opportunity to spend some money and generate a positive return.

But then we so readily sign an purchase contract for a vehicle that loses a massive amount the second we put our name on the dotted line.

The best way to drive new cars is to total them on the way home, the dealer gives you a loaner for two weeks while things settle then sells it to you and you can total it on the way home. the manufacturers would love to sell you 26 cars a year, insurance might get a bit pricey though.

 

[Jimmy cooper]

Leasing is rarely a good deal. It preys on those who want to drive new cars for short terms and don't have the money for a down payment. In fact, you can almost always do better structuring a loan with the backend balloon and do the same thing at a better price in today's marketplace.

About the only time it makes any sense is in certain business situations where it becomes preferable to purchasing capital outright.

To get a decent lease you need excellent credit. You also need to, in many instances , come up with a substantial down payment if it's a luxury car. We like new cars, we are always under warranty and don't drive high miles. It would not work if I were on the road racking up high miles. We also have good driving records. It all adds up.

 

[Henning]

To get a decent lease you need excellent credit. You also need to, in many instances , come up with a substantial down payment if it's a luxury car. We like new cars, we are always under warranty and don't drive high miles. It would not work if I were on the road racking up high miles. We also have good driving records. It all adds up.

Exactly, you just have to figure what you want and see what is the best deal for the position you are in. For you leasing makes sense as if you want a new car under warranty all the time, don't drive much (the last decent deal is at 18,000 miles a year, 12,000 gets some pretty good rates really), and have excellent credit, then leases can work pretty well indeed vs other methods of attaining the same result. Typically you can buy out at the end and sell it making back your down payment, or save yourself the hassle and turn it in for new and walk away from it letting the dealer make it selling it on the used lot. Depending on the circumstances at the dealer, you may get them to roll some of the margin into your new lease down payment, especially if you came in under 10k miles a year. If you come in just before payroll date is when you get the best deals, usually the 12th or 27th works well.

 

[N747JB]

To get a decent lease you need excellent credit. You also need to, in many instances , come up with a substantial down payment if it's a luxury car. We like new cars, we are always under warranty and don't drive high miles. It would not work if I were on the road racking up high miles. We also have good driving records. It all adds up.

Typically to get the advertised lease payment you need a certain amount down, I think 10% is the highest you can advertise in Georgia. The difference in payments is almost dollar for dollar the amount of the down payment divided by the number of months. I don't encourage big down payments, it's really fooling yourself. You are paying up front vs paying it monthly.

 

[Henning]

Typically to get the advertised lease payment you need a certain amount down, I think 10% is the highest you can advertise in Georgia. The difference in payments is almost dollar for dollar the amount of the down payment divided by the number of months. I don't encourage big down payments, it's really fooling yourself. You are paying up front vs paying it monthly.

If you have the credit to get what amounts to "0%" financing deal, then yes, the down is a negative, however if you sign one of the 6.6% deals or whatever, then the down money eliminates that much interest paid.

 

[orange]

Here's why leasing works for me:
1. I like to drive a new car every few years
2. I don't drive more than 12k/year
3. I don't want the hassle of having to sell the car when I get tired of it.
4. I get warranty and free maintenance for the life of the lease (36-39 months)
5. I have never had any issues with wear and tear (and I park on NYC streets)--this one tends to be overblown by people who just don't know any better
6. I like the lower payments and no money down on a lease
7. No depreciation risk when returning (I beat the **** out of it for 3 years and move on)
8. I can afford it

When I get older and decide to drive one car longer, I will still lease it and then buy it out at lease end to minimize the risk of buying a lemon. You know the type that just didn't come out right and is constantly in need of some repair.

If the car is a lemon, I can get out of it at lease end and be done with it. Some years ago, my father bought a Chevy (this is about 20 years ago). Within about a month, it was in the shop for some small repair. And it was in and out of the shop the whole time. After the warranty ran out in 3 years, he was paying out of pocket on that lemon. He had to have the tranny overhauled just after the factory warranty ran out, just past 3 years. Cost him like 2 grand. Imagine selling a car like that, you'd take a beating.

I would like to clear up some misinformation in this thread. Somebody made a comment about the residual value (cost to buy the car at lease end):

At lease end, there is usually an option to buy the car. This residual price that will be charged is not some random number of what the dealer thinks that the car will be worth. And it's not based on oil/gas prices. I don't know where that came from.

The residual is set by the manufacturer, it's usually around 60-65% for a 3 year lease. The other 35-40% is what the lessee pays throughout the lease term plus interest (interest is not excessive like somebody mentioned. My current lease is about is 4.5%). After 3 years, a new car is not worth more than 60-65% of the original value.

For example, look at my current lease (6th lease in last 18 years). I got a super deal, the numbers are usually not this favorable. Toyota Highlander XLE.

MSRP is 42k.
My lease is 449/mo, no money down, all fees, acquisition, taxes, DMV all rolled into the lease. (All othe dealers quoted me 509 or more)
Total payments for 39 months are $17,511
The residual is around $27,000 (I don't have the lease contract here).
Total is $44,500 (If I wanted to buy the car at lease end, I'd pay sales tax on the 27k, about $2400), so about $47,000 total.

If I would have bought it new, it would be $42,000 + tax, or $45,700, a WHOPPING $1300 savings.

Again, my deal this time was really good. My others have not been as good and would have cost me $3-4k more if I bought the car at lease end.

My point is that it's not as bad as people say.