I would like to lease a new car - does anyone have any experience in this? Can anyone point me to a good website or packet of info that will help me "hold my own" with the car dealer ppl?

10/11/2006 1:16:17 PM

most people will tell you it's financially retarded.

10/11/2006 1:16:55 PM

For calculated answers to your questions:

http://www.visualcalc.com

10/11/2006 1:18:33 PM

^^finance one instead.

10/11/2006 1:19:06 PM

Quote :

"most people will tell you it's financially retarded."

not if you have done your homework....

10/11/2006 1:27:09 PM

then you should know how to do it already

10/11/2006 1:31:32 PM

that's why i am doing my homework and asking for advice....which no one but 1234chs has given me.

[Edited on October 11, 2006 at 1:35 PM. Reason : asdf]

10/11/2006 1:34:59 PM

My sister used to be a car salesperson, and I think she explained it to me that the only time it really makes financial sense is if you plan on putting a lot of miles on the car (i.e. travelling salesperson or something on those lines) and then getting rid of it in a very short amount of time (like 2 years or so).

I think thats what she said... so basically it makes no sense unless you are one of the very few that plan on putting like 80,000 miles on a car in 2 or 3 years and then trading it in for something new.

10/11/2006 1:40:26 PM

please help me on my homework then..

how can this be a good thing?

10/11/2006 1:41:19 PM

generally if you plan to do a good bit of driving leasing is a bad idea. you're limited to a certain amount of miles per year (usually a very low amount) and you'll pay big for going over. also if you plan on keeping the car for a number of years its not a good idea.

10/11/2006 1:41:52 PM

Ok... maybe I had the mileage thing backwards... very little mileage for a very short amount of time. I looked into it for about 10 minutes when I bought my first car and decided that it was a really crappy deal.

10/11/2006 1:43:31 PM

^putting a lot of miles on a car quickly is bad financially either way you look at it, but you will get killed by the lease agreement b/c they usually limit you to 15k per year (and who the fuck does that?!). I think you can get that raised, but it increases your monthly payments.

10/11/2006 1:45:21 PM

Actually, my current car is a lease, and I haven't even hit my first year's worth of miles after almost a year and a half. Road trip?

10/11/2006 1:56:06 PM

this is why i want help with leasing a car...cause nobody knows what's going on....

10/11/2006 2:14:47 PM

basically you will pay thousands to borrow a car. the only way it's worth it is if you plan on buying at the end of your lease and you don't have the money to pay for it now. (or if you're trying to live above your means)

10/11/2006 2:36:21 PM

Leasing is retarded no matter how you look at it and it only pays off if you can't actually afford a new car or you plan on changing cars every two years with minimal driving done. Some people have great success with it, but its basically renting at a discount.

You're always, and I mean ALWAYS, better off saving a little bit for a down payment and financing through a credit union. Also, if you do this AND stay within your budget, you will save a huge amount of money.

Not the news you want to hear if you want to roll in a shiney new bimmer, but its the truth.

10/11/2006 2:42:14 PM

Leasing is not retarded. It's got a bad rep and so the stereotypical answer is "don't do it."

If you own your own business, it's a steal of a deal. You can deduct each lease payment from your gross income come tax time, which can be huge. Just make sure you don't exceed the yearly milage limits or you'll get burned (like $0.19/mile extra or more). Also, you'll pay lots of $$$ back if you return it when your lease ends w/ tears in the seats, dents, big paint chips, etc. In other words, YOU'LL cover any "oops" along the way not covered by warranty.

HOWEVER, if you get a 3 year lease, your car is always under warranty. Heck, with a BMW, you get free tires, oil changes, and maintaince for as long as you have the car. You're also promised a way out and a new ride after your lease. That's HUGE for some folks. What if you don't like keeping the same ole run down ride for 10 years? Leasing is attractive in that sense.

It's like this: people say "leasing is dumb!!!!" and then go and spend 3+ years in a RENTED HOUSE. It's no different. I purchased a home b/c I want equity, where renting won't give me that. A car is the same deal, except a car NEVER builds equity (original GT500s, Land Rover Defenders, and a few exotics withstanding) so it's easier to lease a car in my eyes. A car's value will plummet, period. So if you don't mind having a $xxx payment every month forever, so long as you have a (relatively) new car that's always under warranty (but you can only drive a certain distance), then LEASE! Just make sure you actually get a great deal on your lease, as there's a TON more numbers involved vs. financing a car or buying outright.

Google for "lease vs. buy" and there's some good sites that break down the tiny, confusing numbers they'll hit you with if you try to lease. And word the wise, it's better to lease an expensive vehicle. BMWs & M-Bs hold their "residual value" MUCH better than Fords/Chevys, so it ends up making your payments a tad lower (comparitively speaking, of course) since your ride is worth more to the BMW dealer in 3 years than some Ford Fusion will be to Capital Ford in 3 years.

Just know precisely what you're getting into when you lease, and be aware of the milage/damage surcharges that can sneak up on you, and if you're cool w/ just paying a monthly rental fee to drive a sweet car that's always warrantied, lease. Otherwise, you should probably buy.

I bought my car because I honestly intend on keeping it 6+ years, but I won't say I didn't think long and hard about leasing.

10/11/2006 2:55:33 PM

wikipedia/howto

10/11/2006 2:59:54 PM

Financially, leasing is a bad idea.

The only time you should be interested in doing it is if you just HAVE to keep up with the Jones' and you're going to be getting a new, expensive car every 2 or 3 years.

About the distance...if you're driving a lot you better find out how much they charge per mile over your lease. If you aren't driving much, then its not a big deal.

Instead, go get a 2 or 3 year old used, but nice car and enjoy it. Don't piss your money away trying to look cooler than you are.

10/11/2006 3:29:36 PM

LEASING IT WAS IT IS. I DID IT AND IT WAS COOL. YOU GET A NICER CAR THAN YOU WOULD FINANCING AND IN 3 YEARS YOU JUST DROP IT OFF AND YOU'RE DONE.


the only thing . . . . i would advise if you do it. get it for the least amount of time possible. i leased a range rover about 6 years ago ... and i went over the mileage. when i turned the car in and purchased a car from the same dealer they waived my mileage penalties. i was 16,000 miles over.

10/11/2006 3:42:05 PM

Just don't tell the sales people you are interested in leasing until *after* you've already negotiated the price of the car. Get the price of the car where you want it, then when you go to do the paper work break out the lease card.

10/11/2006 3:50:54 PM

@SouthPaW12

thank you for the write up. This is the kind of thing I would hope to get when posting the The Lounge. Amsterdam...also, thank you.

I do like the idea of getting a new car every 3 years...i get bored very easily. I have always had cars that break down and need to be fixed and dealing with shady car repair guys aren't very fun. I found a great pdf that breaks down ALL the numbers involved in leasing and you are right, there are a TON.

@Kiwi
I knew I didn't like you for some reason...I just haven't been able to place it. You are a smart ass and unhelpful.

[Edited on October 11, 2006 at 3:52 PM. Reason : i knew there was a reason....]

10/11/2006 3:51:51 PM

Leasing is about the same as renting an apartment...If you can at all afford to buy, do it.

With that said...Buying a new car is very bad finacially no matter what you do. Buy something slightly used that has taken the 1st hit of cost depresiation.

My wife bought a certified preowned 03 BMW 325ci with plenty of warrantee left on it about a year ago. Has been great so far.

I got a slightly used Z71 Tahoe a couple years ago and have since killed any warrantee left but still didn't pay 55k like it would have been new.

If I was giving you advice, not knowing your finacial situation, I would say buy something certified preowned with warrantee. Saves you up front cost plus you still get good service.

10/11/2006 3:55:15 PM

I'm currently leasing my second new car. I like being able to get a new one every three years.

10/11/2006 4:17:47 PM

Leasing is NOT retarded it's most of the people in this thread who are retarded.

Sorry to be a dick, but its a huge pet peeve of mine when people ask for financial advice and people who know absolutely nothing about finances give them incorrect advice.

Would you want someone giving you wrong advice on a major purchase? Probably not, so if you don't know anything about leasing just come out and say you don't know. Don't just throw bullshit at the guy.

Leasing a car is not at all like renting an apartment. In general houses appreciate and cars depreciate. If you don't understand the difference then only God can save you.


I'll throw some math out there even though 90% of the people will have it sail over their heads and they'll just go on stupidly believing that leasing is evil. Think about it, if leasing was such a bad deal why would anyone do it? Don't you understand that markets are always going to seek an equilibrium price?

Quote :

"Suppose you could either buy a car for $17,990 or lease it for $149 per month plus a down payment of $2,800. Which is the better deal financially? If you lease, you pay $149 for 24 months plus the $2,800 down payment which totals $6,376 over the two years. When you lease, you have the option to buy the car at the end of the two-year lease for a specified amount, in this case $14,154. Thus if you lease for two years and then buy the car you will spend a total of $6,376 + $14,154 = $20,530. "

Here is where you dolts come in with your $20,530 >> $17,990 logic. (-$2,540 for leasing)

Quote :

"You are ignoring the present value of the payments that are being made. Money paid today is worth more than money paid in the future. Thus we must use the present-value formula, discounting future payments, to analyze the cost of the lease. In 1996 a car loan had an interest rate of about 8 percent. Because your choice is between borrowing and leasing, using a rate of discount of 8 percent makes sense for evaluating a lease. Using these numbers in the present value formula for a fixed-payment security the present value of the monthly payments is $3,294. Second, the $14,154 paid when you buy the car at the end of the lease must be discounted because it is paid 24 months in the future. It is just a single payment, so its present value is $12,068. Now that we have everything in terms of present value we can compare the cost of the lease with the alternative of buying the car. The total present value of the lease is the sum of the present values of the purchase price, the lease payments, and the down payment, which is $3,294+ $12,068 + $2,800 = $18,162"

So by leasing you'd spend a whopping $172 more (WOW, what an idiot!!!!) in exchange for the following benefits provided by leasing:

- You can drive the car for a few years before deciding whether the car is worth owning.

- You can look at the market at the time the lease expires to see if the car is worth more than the buy-out price (in which case you can buy the car and re-sell it yourself)

- You can get a new car every couple of years


The major disadvantage to leasing as some of you have mentioned are the mile requirements. If you're gonna put more than 20k miles a year on the car then buying it is probably a better option. But people are like "if you drive more miles they will charge you for them oh my god!!!!" but if you buy a car and drive more miles on it then your car is depreciating anyway. The dealer isnt surcharging you to be a dick, he's surcharging you because that specific vehicle has lost value.

Long story short, if you like to change cars frequently and dont do a ton of driving than leasing is a good option. If you don't switch cars often, have long commutes to work, or travel frequently than leasing is not as good of an option.

Moral of the story. Don't listen to stupid people.



[Edited on October 11, 2006 at 4:45 PM. Reason : a]

10/11/2006 4:43:37 PM

thank you

10/11/2006 5:03:41 PM

exactly what i said in the top of this thread in a couple of lines. all dependent on your intended use of the car and financial ability.

10/11/2006 5:03:54 PM

^^
two questions:
1)is that assuming when you buy the car you are paying the entire amount up front?

2)how realistic are those numbers/where did you get the example?

im just curious, im not really trying to challenge you or anything.

10/11/2006 5:18:07 PM

1) This model assumes you are "buying" the car but "borrowing" the money. This is comparing leasing to "buying" when you have to borrow to pay for the car. If you do have the money to just buy the car outright there is probably a wider disparity between the "cost" of leasing a car and buying one.

However, do not ignore the opportunity costs of buying a car outright. Paying the $17,790 up front comes with plenty of cost. It's the same type of thing, money paid today is worth more than money paid in the future. You may very well have been able to make the initial down payment on a new car and invest the remaining ~$15,000 at an 8% (or higher!) rate of return. If you were saving $17,790 for a car while renting an apartment you probably would have been much better off making a down payment on a home and just borrowing the money for the car. Also, do not neglect the lengthy amount of time you had to wait to save $17,790 in order to purchase the car. It takes most people a considerable amount of time to save that much money for a luxury purchase. Is it worth driving a beat up '92 Taurus around for another 3 years just to save a few hundred dollars in the long run?





2) I got the example numbers out of a textbook.

The numbers were taken from a real life example at the time I'm sure...

The numbers/percentages/etc might have changed a little in ten years but simple economics will tell you that the only premium you will be paying is on the ability to decide after 2-3 years if you want to purchase the car or not. To the consumer, leasing's biggest friend is the fact that most people think its such a bad deal. This lowers the premium that dealers can charge for leasing a car. If everyone thought leasing was incredibly attractive, believe me that premium would skyrocket.



This is one of those deals where the consumer surplus (your ability to make a decision on purchasing the car after a few years) doesnt hurt the car dealer. He has you back on his lot in 2-3 years with an expiring lease and he has the opportunity to sell or lease you another car. Turnover/volume is great for dealers because cars are somewhat illiquid and they can add a premium to the sale of used cars because so many consumers prefer to buy a car from a dealer rather than a random person.





[Edited on October 11, 2006 at 5:54 PM. Reason : a]

10/11/2006 5:50:08 PM

Before I bother arguing with anyone that actually believes leasing is a good idea, go ahead and specify your intended purpose for the car. Then I can sit down and run real numbers that will beat any leasing option anyone can come up with.

10/11/2006 6:26:41 PM

most peoples intended purpose for a car is to help them pick up girls

the nicer the car the more frequent the girls

10/11/2006 9:01:12 PM

Quote :

"Before I bother arguing with anyone that actually believes leasing is a good idea, go ahead and specify your intended purpose for the car. Then I can sit down and run real numbers that will beat any leasing option anyone can come up with."

Ok, I want to get a new car every 3 years and I put about 10k miles per year on my car. Let's see those #....

Good job using 8% Martin. I fucking hate it when I read financial shit and they assume 10, or even worse, 12 percent.

10/11/2006 10:17:43 PM

i havent tried to finance a car, but im assuming its less than 8%
i mean my credit card is 8%

10/11/2006 10:27:34 PM

My econ teacher explained it that you were basically paying the change in value of the car from brand new to when you're suppose to return it. Of course it isn't exactly that easy but if it's worth 20K when you get it and 12K when you return it... have it for two years, 8000 loss/24 months=$333.33. Sounds somewhere close to right for just numbers off the top of my head. The car is going to depriciate the same whether you pay $20K for it and then try to sell it two years later for $12K or just pay the dealership the $8K over two years time and essentially be guaranteed them purchasing it back for $12k.

Hell, I just made all that up, but I think the idea is right.

10/12/2006 12:28:39 AM

^^prime is getting up close to 8% last I heard... not sure who you got a credit card thru for less than 8% but good job.

10/12/2006 12:29:18 AM

^^^just skimmed the thread, but i think the "8% or higher" was referring to the opportunity cost (the return you could be getting if you invested the money)

i'm no expert on leasing. it seems to be a bad idea for most people. it does have its place, though. my dad's CPA finally talked him into leasing his cars (i think a lot of it has to do with tax breaks since he's self employed)

10/12/2006 12:39:11 AM

It's rather amusing to read some people who think they know a lot more than they really do.

Quite simply, people are unique and circumstances differ. One size does not fit all. I believe car shoppers should think very carefully before signing a lease, and a lot of people lease for the wrong reasons, but it can be a good choice in some situations.

When I got my current car, I looked at financing and leasing. I built a spreadsheet and compared costs, based on the money factor and loan rates available to me at the time. (The "to me" and "at the time" are important, and go back to avoiding one-size-fits-all answers.) I realized that I could do a lease, put the difference between the lease payment and the car note in a shoe box and, at the end of three years, the money saved in the shoebox would be within $200 of the residual value. I'm putting the difference in a savings account each month (risk free) and the gap will be even less. So in effect, for less than 1% of the negotiated price, I bought the option to walk away from the car after 3 years if there are mechanical problems, my transportation needs change, or I simply want to drive something different. I'm happy to pay that option premium to gain the flexibility.

Running the numbers in a spreadsheet allowed me to compare apples to apples rather than assume.

P.S. I'm 16 months into the lease and I haven't hit 10k mi yet. Again, different strokes...

10/12/2006 12:55:27 AM

Well I guess I should chime in since I run leases on a weekly basis and have probably been through 5 leasing classes. I don't want to get too deep on this but I will if I need to. The major thing about leasing is that it not only gives you a lower payment for a compareable term(24mo lease - 48 mo finance/36 mo lease to 72 mo finance) but it also eliminates the issue of negative equity. Alot of people out there like to get a new car every 2-3 years. When buying a new car unless you put down 20% and financed for 48 months you WILL have negative equity. I see people everyday that are $3000-$13000 upside down in thier cars. With a lease this is somethign that never has to cross your mind. Now with the issue of miles you just need to know roughly how many you want to drive. With alot of leases miles are charged say at .15 on the front end(when you purchase) or at .20 on the back(when you turn it in). Your average car depreciates at .20 a mile if you are financing a vehicle. So the more you drive and know it ahead of time the better off you are. If you drive 60,000 miles a year(and some reps do) you would have to buy say $14000 worth of miles for 2 years, obviously that is going to drive your payment up quite a bit but this is an extreme situation. If you retail financed a $30000 vehicle for 5 years and drove 120k in the first two how much do you think that car is going to have depreciated in that time? A 2 year old car with 120k? Yeah its worth a few thousand at best. And unfortunatly you still owe about $27,000 at that point. If you need more in debth review or you want to know if the numbers the dealer is giving you are fair just let me know. I'll look at the residual and money factor to make sure everything is legit.. what type of vehicle are you looking at anyway?

10/12/2006 8:22:56 AM

Leasing is not a bad idea but im not going to post a long response to educate morons.

10/12/2006 8:34:36 AM

I have a Ford truck now, but I would like to lease something like a Mazada 6 or Civic. I do like changing cars very often (heck i'm 24 and i've had 4 cars so far). I dont like dealing with car repairmen and I probably drive ~9k miles a year.

10/12/2006 9:18:33 AM

im 25 and have 5 cars right now, have had about 15

10/12/2006 11:23:06 AM

Ok. For 9k miles a year it might work out for you but for me and most people I know here at work and personally, the daily commute alone maxxes out the maximum yearly mileage allowance of a lease.

10/12/2006 11:40:36 AM

Do the responsible thing and find someone who can roll the miles back. cough cough

10/12/2006 11:44:03 AM

The premise of whether it's stupid to lease or not hinges on one thing.

If you want to spend your money on new cars, lease.

If you want to spend your money on other interests, buy used cars.

It's that simple. You are fucking retarded to buy a new car, whether in cash or on credit, unless you plan on driving it for more than 10-15 years. Depreciation outweighs the lease price more times than not.


And it seriously warms my heart to see at least a handful of people here actually understand finance enough to know why it's worth looking into.

[Edited on October 12, 2006 at 1:25 PM. Reason : .]

10/12/2006 1:23:57 PM

Ok, I'm thinking of spending $18k on a car.

A car depreciates about 40% in the first few years, so I should be ok if I bought a car about that old (3-5 years), right? And by ok I mean won't continue to crash in depreciation... I only drive 2 miles to work and 2 to the gym so realistically I only drive about 4000 miles a year.

I'd like to buy the car, but it seem as if leasing a car means you pay for the car's depreciataion while you have it. But if I bought a car I'd be doing the same thing, right? So shouldn't I just look at how much I'd pay to lease a nice car versus how much I'd lose by buying a car and watching it depreciate over the term of the pay-off?

I guess at least at the end of paying for that car it'd have more value than the one I have now so slowly I could work up to better ones...

Does that sound right?

10/13/2006 1:53:30 AM

No that doesn't sound right, because you average person finances for 66 months, to afford the payment, by the time the car is paid for the car is worth a very small ammount of money, $500-$3000

10/13/2006 7:57:09 AM

Quote :

"i havent tried to finance a car, but im assuming its less than 8% i mean my credit card is 8%"

I'm pretty sure this was a thinly veiled excuse to brag about the credit card you got at 8%.

I'm pretty sure that you know competitive rates on a car loan are about 8% and that most credit cards are 18% and up.


Congratulations on your credit card. That's what you were looking to hear, right?



^^ Since you don't drive much at all you'd probably be best off buying a car that is 3-5 years old and financing it. Because you don't drive the car very much it won't depreciate nearly as much while you own it. You probably don't want to buy/lease a brand new car if you seldom drive it because I doubt your enjoyment of the car will match its depreciation/costs....

[Edited on October 17, 2006 at 2:15 PM. Reason : a]

10/17/2006 2:12:31 PM

dang, most people need to start getting credit cards in different places then, either that or start paying their bill on time so their percentage isn't so freakin high... 18% is ridiculous and nobody should be paying that, I have 3 credit cards and they are all under 9%... i'm quite positive that "most" credit cards are not 18% and up, and if thats the only kind of credit card you qualify for, you really don't need one in the first place!

10/17/2006 2:42:13 PM

I just went through it a couple of weeks ago. if you have any questions, IM me at breezie4sheezie on aim

10/17/2006 2:44:12 PM