Leasing a vehicle?

General Discussion

  1. 340wedge

    340wedge Well-Known Member

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    Having bought new and used cars all my life I am thinking of perhaps leasing a vehicle. Other than the obvious you are renting a car essentially and not owning I was wondering what everyone's experiences have been, the good, bad and ugly...Thank you!
     
  2. 67Dart273

    67Dart273 FABO Gold Member FABO Gold Member

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    I don't see ANY economic advantage, unless you want a new car and like paying for one.
     
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    • 66fyssh

      66fyssh Don't Stop Believin' FABO Gold Member

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      When I met my wife in 1996 she had a lease. Cost her a couple grand to turn it in at the end of the lease. They charged her out the azz for every little thing they could find wrong with it. Oh, and she was over allowed mileage but she said the salesman told her not to worry.

      I didn't think we knew each other enough for me to give advice. After it was all said and done she could have bought the car for a little more than she paid to turn it in.

      I will NEVER lease a vehicle.
       
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      • Bodyperson

        Bodyperson Pedal to the metal

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        I think the advantage to leasing is when you own a business and a fleet. It might cost you more but you just hand it over and get another one. Better tax write off too.
         
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        • Slowswinger

          Slowswinger Well-Known Member

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          I don’t know any accountants that lease vehicles.
           
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          • Bodyperson

            Bodyperson Pedal to the metal

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            I don't know any accountants that own fleets of vehicles. Fleet owners pay less in monthly payments than outright buying. Lower maintenance bills and fuel mileage is always going up on new vehicles
             
          • 64DartGTinAZ

            64DartGTinAZ FABO Gold Member FABO Gold Member

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            And expense vs. capital (immediate write-off vs. longer depreciation schedule for business use - though they've had a deal for years for trucks over 6000 lb unloaded, I think, that lets you expense them - ok, this link has more detail - https://www.gettaxhub.com/tax-deductions-for-vehicles-over-6000lbs/)
             
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            • C130 Chief

              C130 Chief Mechanical Genius

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              You might be surprised. I know two accountants that lease vehicles, and both of them lease Acuras (I'm not sure if I know more then two accountants). Here's the thing with Honda and Toyotas, the street value is generally higher then the lease residual value. So if you sell it before the lease is up, you will end up with more then the payoff amount. Roll that extra into the down payment on the next lease, rinse and repeat. One of these guys says he's basically driving for free after the 4th trade. He leases for three years but sells the car after two. For this to work, you need to chose a car based on resale value, which usually doesn't mean the most fun to drive. Also in both cases, their "business" is leasing the car not them personally. Not for everyone, but if you're the type who generally trades cars in every two years it makes sense. Otherwise most accountants will tell you that cars are horrible investments and generally just holes in your driveway that you shovel money into. They'll suggest buying the cheapest used car that will last, do the minimum of maintenance and run it until it is totally worn out.
               
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              • oldkimmer

                oldkimmer FABO Gold Member FABO Gold Member

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                I have leased a few vehicals. What they don’t tell u is that they expect it to be in brand new shape when u return it. Meaning that tires have to be new condition when u return it. I had to get a lawyer involved as they wanted everything as new. But when u return it with let’s say 40,000 miles stuff gets worn down, tires, brakes etc. U r paying to lease the car and it can’t be expected as new after that many miles. Many parts are just normal wear items. U r paying for the wear and tear as this is now a used car. If the windshield is cracked u need to replace it. If it has body damage, it needs fixed. U get the point. Ask many questions and get the answers in black and white. Cause they will want to rail road u in the end. Kim
                 
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                • YY1

                  YY1 Well-Known Member

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                  Be aware that you normally pay several thousand dollars "up front" and another several thousand when you return it, plus the trend has been towards "low mileage" and "ultra low mileage" leases where you pay a per mile charge (which adds up quick) for any mileage over the specified amount. (I'm not sure what qualifies as "low" or "ultra low").

                  That just doesn't make sense to me.

                  I tend to buy newer cars that are between 2 and 3 years old (but still under factory warranty), pocketing the several thousand dollars versus the "new car price", and then drive them until they aren't worth $1000 anymore (typically about 12-15 years).

                  I do however, have a maintenance fund that I contribute to (although not nearly what I would pay for a car payment), so that If I need it it's there, and if I don't.....hey, I have an extra $xx,000 in the bank!

                  This also allows me not to have "full coverage" insurance.
                  (which is really there to protect the bank, and not you)

                  I don't mind paying for someone else's car or doctor if I case damage, but I'll use that maintenance fund to fix mine if necessary, and again pocket the difference.


                  Now, if I were the type that buys a new car every 3 years and was accustomed to losing that $xx,000 every time.......
                   
                • 75slant6

                  75slant6 Well-Known Member

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                  I know “Dave Ramsey” is like a swear word to some people, but here’s a very good explanation on the subject.

                   
                • abodyjoe

                  abodyjoe Well-Known Member

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                  many financial guys will say never buy something that depreciates like a vehicle...

                  low mileage lease is usually about 10,000 miles a year. some say take the low mileage lease over paying for extra mileage up front. seems like most are about 20 cents a mile over agreed mileage.. it can be cheaper to pay for over miles then it is to buy higher mileage upfront.. what's 10,000 miles at 20 cents a mile?? $2000?

                  you don't have to put money down upfront (credit factors in also). if you want those dirt cheap payments they advertise then yes you need to put money down. on our GMC we paid the tax upfront to lower the payment to where we wanted after negotiating the price upfront.. you'll save in tax with a lease also. now if you just turn the lease in at the end you may have a fee. if you turn the lease in and get another (buy or lease) there is usually no fee and many will forgive overage miles. if you are way over on mileage and maybe have some damage you can always just trade the vehicle in on something else and avoid any of those turn in fees but it will be treated like a trade in value wise just like any other used car.

                  we lease the truck we tow the camper with. you should never put money down upfront. if needed put a minimum down on a lease. if that bitch is totaled driving off the lot you'll never see that money again. so put nothing down if possible. truck will always be under warranty, won't have to put tires, brakes or any of that stuff on it. basically just paying for oil changes over the 3 years we will have it... if its a pile of shit we aren't stuck with an expensive paperweight, if we decide we are done with the trailer we can sell the trailer and easily get out of the truck and the biggest thing is these damn trucks are so damn expensive and seem to be rusty within in 7 years no matter how good you take care of it in this area...

                  in the end it really depends on what you are leasing. something like a toyota tacoma is an awesome vehicle to lease because they hold value so well.. something that doesn't hold value isn't a smart lease. i drive 22,000 miles a year in my daily driver so a lease isn't a smart decision there. jamie bought her car too because she was driving a lot for work so it was smarter not leasing but then covid hit and she has been working from home (only has 4000 miles on it since march) so we could have leased her car or even kept her 130k mile mini which would have easily lasted.. :)

                  is a lease for everyone? hell no. is a lease the best choice for many? yes. just do the homework before hand and see what is best for you..

                  there is a ton of information out there on how to negotiate and figure out leasing. it seems a lot don't really understand them so some research will help a lot.. lucky jamie is an accountant and understands all that numbers shit better them myself. she drives those poor salesmen and finance managers crazy because she sits there with her laptop and wants to know where every cent is on that paperwork. with the GMC she drove that guy crazy for over an hour for a $7 difference .,.lol the sales girl looked at me and i said, hey. i pick out what i want. she says if we can afford it or now...:)
                   
                • mbaird

                  mbaird mbaird

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                  Finally someone who understands leases ! C130 is spot on !

                  When you lease a car or truck you need to know what the residual and money factor is . Then you need to have an idea of what the historic resale has been and does thst leasing company have turn in fees. Generally the disposal fees are between 250-500$ and that is only if you give it back . Damage and wear items are no different than you owned it ....you would get less money selling it without repairing said items... right ?

                  Vehicles like Acuras , Hondas , Toyota SUVs tend to outperform the residuals thus giving you equity at lease end . Those companies also dont nitpick you at lease end for repairs etc .

                  What kind of car are you looking to get ?
                   
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                  • mbaird

                    mbaird mbaird

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                    Sorry... had to get ready for work .

                    So a lease is nothing more than a short term loan with a balloon payment at the end. The residual is the balloon ... you can either pay the "balloon" and keep the car or give the car back so the lender can sell it and keep the proceeds.

                    Money factors. A money factor is an interest rate % converted into a decimal point factor . Such as 6% = .0025
                    The reason for this is that on a lease you are not paying the loan down to zero... you are paying it down to the residual . So your average daily balance is higher .....This is why knowing the money factor is so important . If the loan % and the lease money factor are the same you will be paying more dollars in interest on the lease . Which is ok if the other advantages of the lease out weigh the extra interest paid . But if the money factor is 3% higher than the optional loan rate do not lease ! Because you will end up paying way more in interest .

                    Have to go to work now. I will post more later.
                     
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                    • R4Sedan

                      R4Sedan Larry FABO Gold Member

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                      Yep, I used to be a Finance Director for a car dealer. I always leased my wife's cars. It really just depends on your driving
                      situating,credit,and finances. All leases are closed end now a days. I wouldn't be scared. And yes put as little down as you can
                      if possible.
                       
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                      • YY1

                        YY1 Well-Known Member

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                        Let me correct post #12 just a bit-

                        Never finance a depreciating asset.
                         
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                        • abodyjoe

                          abodyjoe Well-Known Member

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                          with interest rates at .09% like we bought jamies subaru at you would be nuts not to finance it. keep your money in the bank/invested and make money on it instead of dropping it on a car.
                           
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                          • mbaird

                            mbaird mbaird

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                            That is a good point . Loan rates are super low right now . I am not sure if lease factors are staying competative. I built a Ram 2500 online the other day and the lease option they presented afterwards was at 5% . No way I would do that ! It appears to be a residual driven lease... in other words they inflated the residual to drop the payment. Problem with that is you are kinda screwed if you need to get out early or if your life situation changes and you end up miling out the vehicle you will have a huge mileage penalty at the end.
                            I think many manaufacturers have no incentive to have aggressive leases right now because of limited availability . I left the car biz after 35 yrs this spring and do not have a firm pulse on the market.

                            To sum things up.... leasing is not nessesarily a bad thing. You just have to know the details of the lease and the market. Find a salesman/dealership you can trust and stick with him . I have advised many previous customers on vehicles they are buying elsewhere because I didnt represent what they wanted.
                             
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                            • H22A4

                              H22A4 Does anyone read this?

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                              Yup, and at 0% it’s a no brainer to finance it and keep your money in the bank. If you can get a return greater than 0% or 0.1% investing the money yourself (instead of having it depreciate in a car) you’re going to be making money.
                               
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                              • 75slant6

                                75slant6 Well-Known Member

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                                Or buy a 4-5 year old car (that’s already taken it’s 70% depreciation hit) outright, and invest that full car payment amount every month and really set yourself up for the future.

                                Now, I’ll admit, I was young and stupid and didn’t do that. Instead, we got suckered into the sales pitch and bought a brand new Chrysler 200 in 2016. It now has 102,xxx miles on it, is worth a third of what we paid for it, and I kick myself for it all the time. We did pay it off last December (2 years early) though, and I’ll never again buy another vehicle that I can’t pay cash for outright. In fact, I just bought a 2007 Ram 1500 with 107k miles for $8,500 cash. Best feeling ever. Never going back.
                                 
                                Last edited: Oct 12, 2020
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                                • YY1

                                  YY1 Well-Known Member

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                                  That's very similar to what I was trying to say.

                                  Buying my 2-3 year old cars and running them until they're not worth anything and not carrying full coverage on them has allowed me to invest decent sums into the market where I average 7% cash return (counting dividends only, not counting the compounding when I buy more dividend stock with the 7%) and into real estate where we average somewhere around 20%.

                                  If I was making $500 car payments and $500 insurance payments, there's no way I could have done that.
                                   
                                  Last edited: Oct 13, 2020
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                                  • diymirage

                                    diymirage HP@idle > hondaHP@redline

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                                    i keep full coverage on the paid off vehicles too
                                    because it is MY vehicle that is covered, and needs to be replaced if something happens

                                    i think last time i calculated it, it was 25 dollars a month extra, thats 300 a year
                                    and the way the wife drives, im gonna cash in on that sooner or later
                                     
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                                    • YY1

                                      YY1 Well-Known Member

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                                      I have five vehicles on my policy.

                                      Adding full coverage doubles it.

                                      I started putting the difference (when I only insured 2 cars) in a separate account back in 1995.

                                      That also helped me to pay cash (or pay off in less than a year) for several of those 2.5 year old cars.
                                       
                                    • YY1

                                      YY1 Well-Known Member

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                                      Insurance and investing are both calculated risks.

                                      Only you can determine what your risk/reward comfort level is.

                                      Personally, I would rather pay myself to be quasi-self insured for possible damages to my own property with the potential reward being a fairly large sum of money earning decent interest and available for a major purchase (potentially without financing) or an emergency, than pay an insurance company, just in case or a financial institution to borrow money.
                                       
                                    • ir3333

                                      ir3333 Well-Known Member

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                                      many advantages for the dealer.
                                      expensive along the way and at the end of the day it's usually
                                      a high interest loan that basically traps the client for life!
                                      ...You don't see it because it's hidden.
                                       
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