Leasing vs. Buying

Flyn

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Hey lease guys, can you edumucate me on why a lease is better than buying a car now?

This is an offshoot of my daughter's subcompact/compact SUV thread. Is it better for her to lease a new car rather than buy a 1 or 2 year old one? Looking at Edmunds, she'd probably save about $100-$150 a month on the payment by leasing and she'd get a new car to drive instead of used.

Thanks everyone!
 

tinfoilhat

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All about how much she drives.

You go over mileage and it gets expensive very fast and your savings go down the shitter.
 

Knowklew

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as long as you are okay with a permanent car payment, a lease is okay. also watch your mileage as stated above.
 

snakebyte

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All depend on mileage and how well she can take care of the car. In my wifes case, who is a stay at home wife we did a lease. Worked out in our favor and she gets to upgrade every two years.
 

Dave M

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And with a lease you only pay sales tax for the time you have the vehicle, vs. paying it all upfront on a purchase. You can also get a nicer trim level car for a lower payment since nicely equipped cars generally have a better money factor and residual.
 

GTPpower

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I wish Dave Ramsey would update some of his info on leasing. I do agree with him in the aspect of, it's probably the most expensive way to obtain a vehicle.
 

N20GT

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I wish Dave Ramsey would update some of his info on leasing. I do agree with him in the aspect of, it's probably the most expensive way to obtain a vehicle.
How so? If you drive under 12k miles a year, and keep your vehicles 5 years or less (like many people do), I can just about guarantee you'll be better off leasing every single time
 

N20GT

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Main points that I have:

1. Leasing can very easily be the better option if you want a new vehicle, don't want to deal with maintenance, and drive under 12k a year. If you drive 15k+, leasing won't work well

2. The math is slightly more complicated on a lease so the moron salesman that never learned basic algebra, and who assumes everyone is as stupid as he is, will try and hide all kinds of shit in the payment. Make sure she doesn't get screwed

3. Lease prices seem to vary wildly depending on incentives, so make sure to get a good deal. For example, my friend just went in to get a lease quote on a VW atlast and it was $750/month for a $46k SUV, which is ABSURD. A GMC acadia with the same sticker price and same mileage was $470/month. The Atlast must be selling well so the lease incentives suck, whereas nobody likes GM so you can get a good deal on their heap SUV's. He's a smart guy too, he beat them up pretty good on the price, but VW would not budge. Moral of the story: shop for the good incentives.
 

GTPpower

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You had me curious.




Payment for leasing for 39 months - $10,998


Cash price - $20,450
Estimated Trade-in price in 3 years (nada clean) - $13,625
Cost for owning it 3 years - $6825


Difference in 39 month lease vs 3 years of ownership -
$4173


I'm not sure, but I think registering it every year would be the same cost either way. Someone correct me if I'm wrong there.

I believe you only pay sales tax on a lease for the lease period. Correct me if I'm wrong here as well. Figuring 7%...this will obviously vary.

Lease sales tax for 39 months - $769.86
Purchase sales tax - $1431.50


With that included, our totals:

39 month lease - $11,767.86
3 year ownership - $8256.50
Difference - $3511.36
 

GTPpower

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As you pointed out, lease deals vary a lot. So, I'm sure you could find a better deal than this as well.
 

N20GT

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You had me curious.




Payment for leasing for 39 months - $10,998


Cash price - $20,450
Estimated Trade-in price in 3 years (nada clean) - $13,625
Cost for owning it 3 years - $6825


Difference in 39 month lease vs 3 years of ownership -
$4173


I'm not sure, but I think registering it every year would be the same cost either way. Someone correct me if I'm wrong there.

I believe you only pay sales tax on a lease for the lease period. Correct me if I'm wrong here as well. Figuring 7%...this will obviously vary.

Lease sales tax for 39 months - $769.86
Purchase sales tax - $1431.50


With that included, our totals:

39 month lease - $11,767.86
3 year ownership - $8256.50
Difference - $3511.36
Internet advertised deals also aren't the best way to determine the best value, plus, there is NO WAY that thing will be worth almost $14k in 3 years. if it's worth $11k at that time I'd be shocked.

It'd probably be worth $14k after one year, best case
 

Yaj Yak

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You had me curious.




Payment for leasing for 39 months - $10,998


Cash price - $20,450
Estimated Trade-in price in 3 years (nada clean) - $13,625
Cost for owning it 3 years - $6825


Difference in 39 month lease vs 3 years of ownership -
$4173


I'm not sure, but I think registering it every year would be the same cost either way. Someone correct me if I'm wrong there.

I believe you only pay sales tax on a lease for the lease period. Correct me if I'm wrong here as well. Figuring 7%...this will obviously vary.

Lease sales tax for 39 months - $769.86
Purchase sales tax - $1431.50


With that included, our totals:

39 month lease - $11,767.86
3 year ownership - $8256.50
Difference - $3511.36
there's a lot more to it though of course. but a few quick things...


you may have maintenance paid for if you lease the vehicle, whereas if you purchase you likely wouldn't.

does the 39 months/3 years of ownership take into account mileage driven?

i don't think you took into account the cost of financing the purchased vehicle- which if someone is contemplating leasing/buying, i doubt they are thinking of buying the vehicle outright with cash.

so tack on 2-5% loan rates, maybe 6-8 if your credit is sketchy?

past that, im wondering if you chose different insurance coverage on a leased vehicle vs a purchased one.

i have state farm on my truck because they pay to fix vehicles correctly, use good parts, and pay better amounts to perform the work.

on a leased vehicle, that im handing back in, fuck it, i'll insure it with bob's discount insurance bullshit company, not give a fuck if they bondo every panel ever, spot spray shit back in, and use horseshit rated aftermarket parts where the bondo doesn't stick.

finally- IMO the lease is "safer" in that you know you're getting out of the vehicle in 3 years at x amount.


who knows, someone could buy a brand new truck, gas prices could triple, and boom that truck is worth half 3 months after being purchased.

in a lease situation, who gives a shit, the company is taking that hit on the vehicle.
 

Yaj Yak

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gah it even goes past that.

the figure you are coming up with (nada) you're not going to get from a dealer on a trade, you're going to have to work to (hopefully) sell the vehicle for that price.



i don't see the value personally for my personal situation in leasing, but i 110% understand where it makes sense for FUCKTONS of people.

because it really does.
 

Yaj Yak

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Internet advertised deals also aren't the best way to determine the best value, plus, there is NO WAY that thing will be worth almost $14k in 3 years. if it's worth $11k at that time I'd be shocked.

It'd probably be worth $14k after one year, best case
i don't think that's far off.

maybe on dealer trade, sure, but selling outright, i think a 3 year old escape with under 36k miles on it could go for 14k ish.
 

boostedguy05

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Main points that I have:

1. Leasing can very easily be the better option if you want a new vehicle, don't want to deal with maintenance, and drive under 12k a year. If you drive 15k+, leasing won't work well

2. The math is slightly more complicated on a lease so the moron salesman that never learned basic algebra, and who assumes everyone is as stupid as he is, will try and hide all kinds of shit in the payment. Make sure she doesn't get screwed

3. Lease prices seem to vary wildly depending on incentives, so make sure to get a good deal. For example, my friend just went in to get a lease quote on a VW atlast and it was $750/month for a $46k SUV, which is ABSURD. A GMC acadia with the same sticker price and same mileage was $470/month. The Atlast must be selling well so the lease incentives suck, whereas nobody likes GM so you can get a good deal on their heap SUV's. He's a smart guy too, he beat them up pretty good on the price, but VW would not budge. Moral of the story: shop for the good incentives.

probably because he caught the atlas when there we no deals going on with it. i remember hearing not too long ago leas deals for the atlas at around 200. but im sure a lot of that was price shock to get you in the door to then tell you, you do not qualify for all the incentives.
 

N20GT

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i don't think that's far off.

maybe on dealer trade, sure, but selling outright, i think a 3 year old escape with under 36k miles on it could go for 14k ish.
It's very difficult to sell cars like that outright. Sports cars, muscle cars, trucks, etc are all relatively easy to sell outright. Vehicles predominantly purchased by women...near impossible. I ended up selling my wife's '17 ES350 to a dealer for $29k (trade value) despite having it posted online for ~$1k over trade-in value for 2 months
 

Yaj Yak

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It's very difficult to sell cars like that outright. Sports cars, muscle cars, trucks, etc are all relatively easy to sell outright. Vehicles predominantly purchased by women...near impossible. I ended up selling my wife's '17 ES350 to a dealer for $29k despite having it posted online for ~$1k over trade-in value for 2 months
right, selling "non-enthusiast" vehicles isn't the most fun or easy thing to do.
 

GTPpower

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there's a lot more to it though of course. but a few quick things...


you may have maintenance paid for if you lease the vehicle, whereas if you purchase you likely wouldn't.

does the 39 months/3 years of ownership take into account mileage driven?

i don't think you took into account the cost of financing the purchased vehicle- which if someone is contemplating leasing/buying, i doubt they are thinking of buying the vehicle outright with cash.

so tack on 2-5% loan rates, maybe 6-8 if your credit is sketchy?

past that, im wondering if you chose different insurance coverage on a leased vehicle vs a purchased one.

i have state farm on my truck because they pay to fix vehicles correctly, use good parts, and pay better amounts to perform the work.

on a leased vehicle, that im handing back in, fuck it, i'll insure it with bob's discount insurance bullshit company, not give a fuck if they bondo every panel ever, spot spray shit back in, and use horseshit rated aftermarket parts where the bondo doesn't stick.

finally- IMO the lease is "safer" in that you know you're getting out of the vehicle in 3 years at x amount.


who knows, someone could buy a brand new truck, gas prices could triple, and boom that truck is worth half 3 months after being purchased.

in a lease situation, who gives a shit, the company is taking that hit on the vehicle.
I get all that. It's possibly safer. It also costs more.
You're basically paying about 17% interest on a lease, versus the 5% or whatever on a loan.

Chances are pretty good that maintenance won't affect the bottom line any significant amount.
 

GTPpower

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Internet advertised deals also aren't the best way to determine the best value, plus, there is NO WAY that thing will be worth almost $14k in 3 years. if it's worth $11k at that time I'd be shocked.

It'd probably be worth $14k after one year, best case
You could be right. Dealers here have always been very close to the trade-in value for me.
 

cdh027

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right, selling "non-enthusiast" vehicles isn't the most fun or easy thing to do.
TCG'ers have no worries then. We only buy exotics and fuck models. :rofl:
 

GTPpower

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I just want to make it clear, I'm not trying to start an argument here. I know very little about leasing. By all means, if I'm wrong, I'd love to find that out.

But from a rough math standpoint, leasing looks to be significantly more expensive.
 

Yaj Yak

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I get all that. It's possibly safer. It also costs more.
You're basically paying about 17% interest on a lease, versus the 5% or whatever on a loan.

Chances are pretty good that maintenance won't affect the bottom line any significant amount.
it really might not cost more, we can't say that 100% definitively one way or the other, there is way too many factors as ive mentioned- plus whatever the fuck im forgetting.

and yes, maintenance could change the bottom line significantly.

36k miles could have 7 ish oil changes, at $60 a pop at a dealer? maybe more?

that's $420... we've had vehicles at my work need front or rear brakes in the first 36k miles of their life... we've also had trucks need tires in that amount. i doubt any lease would cover tires, but maybe brakes if they are needed? that at a dealer's going to be minimum of what? $750?

could be significant enough to effect the bottom line.

not to mention the "peace of mind" handing the car right back over gives.
 

Yaj Yak

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You had me curious.


Payment for leasing for 39 months - $10,998
Cash price - $20,450
Estimated Trade-in price in 3 years (nada clean) - $13,625
Cost for owning it 3 years - $6825
Difference in 39 month lease vs 3 years of ownership -
$4173
I'm not sure, but I think registering it every year would be the same cost either way. Someone correct me if I'm wrong there.

I believe you only pay sales tax on a lease for the lease period. Correct me if I'm wrong here as well. Figuring 7%...this will obviously vary.

Lease sales tax for 39 months - $769.86
Purchase sales tax - $1431.50
With that included, our totals:
39 month lease - $11,767.86
3 year ownership - $8256.50
Difference - $3511.36
39 months lease as you said= 10998 + tax of 769.86, (license/doc fees will be the same i'd think so lets not tack those on for the example.)

11767.86 but your example left out the initial 2802 due at signing.... so that's 14569.86- initial payment, monthly payments, and tax paid at 7% for duration of lease? if that's how taxes are figured, im unsure, i ran with what you guessed at.

to get a similar 282$ payment after the 2802 down payment- on a 20450 vehicle- you need to go 17648 financed across 6 years/72 months at 4% goes to 276 a month (might be higher rate because it says on the website to get 20450 price, you must use ford financing, and their financing rates are quite attrocious to get that price so low)

so 17648 financed at 4% after 2802 at signing, plus paying 1431.50 in tax, is 14997.50 spent at the 39 month mark and you still owe $9107 on the vehicle.

so maaaaaaaaaaaaybe you have a grand or two in equity? but how quickly did that get wiped out by oil changes, other maintenance and now you have a vehicle that's out of bumper to bumper warrantly, and running out of powertrain.

but at the 39 month mark- the buyer has spent more money out of pocket than the lessee (sp)
 

GTPpower

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Chances are really good that a base model escape driven by your average chick is not going to need brakes or tires anywhere close to 30k miles. Sure, it might happen, but it's unlikely. Even if it does, it's still cheaper to buy. We are talking a $3500 difference here.


Even if you find a good deal where the numbers are close to even, the whole point of a lease is for the dealer to win even more than they do with a purchase. A lease is sold as a cheaper way to have a new car.

It's also a steady check each month for the dealer though, likely for the rest of a person's life. That's the biggest downfall to it. Without a significant lifestyle change, the person leasing will most likely not have the money to buy the vehicle at the end of the lease. They wont have money to pay cash for a vehicle, and aren't going to want to "go backwards" in their lifestyle with a used vehicle. At that point, leasing again is the most attractive option. If a person keeps renewing that same lease for 30 years, on this $282 escape, that's $101k. Purchasing would have cost in the neighborhood of $85k. (The difference will likely be greater as vehicle prices will increase with inflation.)
Looks like an easy win for the dealer.
 

Yaj Yak

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Chances are really good that a base model escape driven by your average chick is not going to need brakes or tires anywhere close to 30k miles. Sure, it might happen, but it's unlikely. Even if it does, it's still cheaper to buy. We are talking a $3500 difference here.


Even if you find a good deal where the numbers are close to even, the whole point of a lease is for the dealer to win even more than they do with a purchase. A lease is sold as a cheaper way to have a new car.

It's also a steady check each month for the dealer though, likely for the rest of a person's life. That's the biggest downfall to it. Without a significant lifestyle change, the person leasing will most likely not have the money to buy the vehicle at the end of the lease. They wont have money to pay cash for a vehicle, and aren't going to want to "go backwards" in their lifestyle with a used vehicle. At that point, leasing again is the most attractive option. If a person keeps renewing that same lease for 30 years, on this $282 escape, that's $101k. Purchasing would have cost in the neighborhood of $85k. (The difference will likely be greater as vehicle prices will increase with inflation.)
Looks like an easy win for the dealer.
dude, read my example, it's not a $3500 difference.
 

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