Why is leasing a car a bad idea?

[disneysteve]

Originally Posted by maat55

Dave uses the 12% figure based on the lifetime average of the stock market. There are many Stock Mutual Funds(DS approved) that average this over the long term.

Yep, we've had that discussion before. I think I posted a partial list of funds that have done so. Of course, in reality, very few investors actually achieve a 12% return for a variety of reasons. Most folks aren't 100% in stocks. Even if they are, not all funds earn 12% or more. Just a handful of the over 9000 mutual funds do so. You'd have to be rather lucky to happen to have all of your money in those select funds, but it certainly is possible.

I own at least 4 funds that have long term averages of over 12% (from 13.26% to 17.64%) and the S&P 500 fund is off that pace by a bit at 11.36%. And I have a fifth fund with a 10-year average of 21.88%. I haven't achieved those exact returns personally because of how long I've been in each fund, but I've gotten over 12% from a couple of them and over the next 20 years, I hope to get it from all of them.

[aida2003]

DS, where can I find your post with your 'approved' mutual fund achievers? Just curious to take a look because I never came across it.

[disneysteve]

Originally Posted by aida2003

DS, where can I find your post with your 'approved' mutual fund achievers? Just curious to take a look because I never came across it.

I'll have to try and find where that discussion was. It was a couple of months ago. maat, do you remember?

By no means was I "approving" anything or recommending any specific funds. I was just trying to show that 12% returns are possible. I still think DR using 12% as an expected portfolio return is overly optimistic. I'd stick with 8% when doing any planning.

[maat55]

Originally Posted by aida2003

DS, where can I find your post with your 'approved' mutual fund achievers? Just curious to take a look because I never came across it.

In case you are refering the (DS approved) I put earlier in this thread, that was refering to putting Stock in front of mutual fund. I was advoiding one of Steve's pet peeves. I can't remember when we had that discussion, but we did have it quite a while back.

[disneysteve]

Originally Posted by maat55

In case you are refering the (DS approved) I put earlier in this thread, that was refering to putting Stock in front of mutual fund. I was advoiding one of Steve's pet peeves.

That went totally over my head, maat. I get it now.

aida, I tried to search back and find that discussion, but I have no idea how long ago it was, or what the topic of the thread was, so I couldn't come across it. All I had done, essentially, was scan the performance numbers from a few fund companies and pointed out that there are numerous funds with 12% or greater long-term returns. It isn't hard to find that kind of data.

For example, Vanguard has 5 funds with 10-year averages over 12% (the highest is 26.48%).

[aida2003]

I was curious that's all. I'll check Vanguard.

Thanks

[soul_schizm]

I don't know...I'm considering leasing very seriously. I guess it depends on how you feel about your car.

People always tell me, you will *OWN* your car after 5 years!! You will OWN!!

OK, sure, that is nice. I've owned my truck for 11 years. Let me tell you, it's no picnic. Every few months, there's a suprise 1,500 - 2,000 repair bill. That equals out to a few months of payments on a very nice car lease. And guess what? My 10 year old car is absolutely not great to drive, not a real good experience anymore. And the repairs are a major hassle. Not fun.

So yes, you will OWN after paying off your car. But guess what you will own? An old, outdated model that nobody wants and nobody cares about. Even dealers. They will penalize you for the miles and the wear & tear, just like they would when you turn in your leased car.

Think about that very seriously. You aren't going to get away with anything just because you owned your vehicle. Any buyer or trade-in dealer is going to penalize you unless the car was kept in tip-top condition.

Cars are not all numbers and statistics. It's how you feel about them. Nobody can "prove" to you that you did the right or wrong thing based on a statistics sheet. If you feel good about what you did, that's all that matters.

If you are going to be 7 years into this thing, and hating the fact that you are driving an old piece of crap while everyone else is tricked out on the latest and greatest, then you should absolutely not buy. Cars are never a good investment. Period. They are a pure commodity. There's defintely value in having someone else deal with the ownership details.

Just saying. Leasing isn't all bad. I'm a long-term owner, and leasing sounds pretty good to me right about now. So that's the other side of the story. Don't believe that everyone thinks owning is a great thing, because not everyone does.

[photo]

Originally Posted by soul_schizm

I've owned my truck for 11 years. Let me tell you, it's no picnic. Every few months, there's a suprise 1,500 - 2,000 repair bill. That equals out to a few months of payments on a very nice car lease. And guess what? My 10 year old car is absoultely NOT NICE. And the repairs are a MAJOR HASSLE. Not fun.

It sounds like you have a lemon. Our cars are much older than that, and other than regular maintenance, we've paid almost nothing for major repairs. We take good care of them. If you do your homework and look at the history of repairs for a specific model, you can come out way ahead owning a vehicle.

However, if you simply prefer to lease and are financially responsible, then there's nothing stopping you from doing that.

[nitemarecooper]

Originally Posted by momof1in150

You do realize that if you lease a car you need to perform the routine maintenance of the car. You need to turn in those service records as part of the final inspection. Just because you lease a car doesn't mean you don't take care of it. The final inspection of the car can cost you a lot of money when you turn the car in. We had to replace 3/4 tires, the windshield and pay for a touched up scratch. It cost well over $1000 to do this.

I am glad someone mentioned this. I've never even considered leasing a car but that is what I understood too, that all regular maintenance had to be done just like purchasing.

[krantcents]

Leasing when you are driving that many miles has to be very expensive! From your description, you had 2 years leases. A lease is made up of a money factor and depreciation. The car depreciated a great deal based on the miles you drove and you paid for that in your payment. Buying the car for cash is the absolute least expensive way to buy a car, next comes financed and then a lease. Unless you were writing it off for business, you paid for it.

[greenskeeper]

leasing is good if you need (WANT) to have a new car every 2 or 3 years, or are not mechanically inclined.

financing a car and then trading it in before the end of the loan (to finance another car) is financial stupidity.

I pay cash for 5+ yr old cars and drive them into the ground. I am handy with a wrench so most of my repairs are only the cost of the parts involved.

[snafu]

I'm guessing soul s has bought into the marketing that equates your 'ride' with status, etc. When maintenance costs escalate, it's likely time to get a newer car, possibly 2 yrs old, depreciated, returned lease with a decent consumer report. The Lemon Aid series of books offers details to help your decision making process.