Buying vs. Leasing a car (plus New vs. Used)

[disneysteve]

A side discussion started in another thread about the pros and cons of buying vs. leasing as well as the pros and cons of buying new vs. used. Since the discussion was off topic of the thread, let's move the discussion here.

What are your thoughts? Which do you feel makes the most sense? Is there ever a time when you think buying new makes more sense than used? Is there ever a time when you think leasing is a better choice than buying?

I'll weigh in with my opinion but don't have time right now.

[ua_guy]

I can only say what my approach has been, for my own reasons. I prefer new vehicles unmolested by any prior owners, and I see leases as disadvantageous for my needs, so I've always purchased.

My buying strategy has not been to achieve the goal of spending the least amount of money on transportation expense possible. I'm a self-proclaimed automotive enthusiast, so my vehicle expenses have included a lot of discretionary spending at various points. I don't think there is a staid approach--every car deal needs to be considered individually.

[Jluke]

I looked at buying a used Honda Pilot but actually got a lower price on a new one.

I went with the new one.

I've had 5 cars thus far. 4 were new. 1 used. Kept one 15 years.

I will consider used next time but it has to have low miles.

[disneysteve]

I looked at buying a used Honda Pilot but actually got a lower price on a new one.

This is the one case where I'd say a new car is a no-brainer. Years ago, this never happened, but it's a phenomenon that has popped up from time to time more recently due to economic issues and supply and demand. Especially during the recession, car makers were having trouble selling new cars so they kept the prices low which sometimes meant the new models were very similarly priced to the 1 or 2-year-old models. In that case, the new car is clearly the way to go, especially if they were offering 0% financing. All of that is generally an anomaly though.

[Permanent Temp]

I just picked up a lease on a car which is something I wouldn't normally consider but it made sense.

I paid off the car I traded in last year because I was working a fixed contract and knew it would be up soon.

It had had many recalls and repairs and I was starting to worry about it and my safety in it, to boot the extended warranty which I had relied upon to absorb cost of repairs was set to expire this month. There was a hail sale at the dealership that my husband works at and he told me about a really good deal on a lease which meant that I could get the car for two years payment free.

I decided to go for it. The registration fee will increase and the insurance will go up slightly but I was able to unload a vehicle that I didn't feel good about selling privately. The old car covered the amount I had to put down so I have two years to save up the would be car payments. I calculated for car Loan payments because the lease payment which would have been much lower and I wanted to save up a bit more than that.

At the end of this lease I will more than likely not be purchasing this vehicle but I will have many more options than I would have if I kept my old car and tried to keep it running. And I feel a lot safer in this car which is doing the important of getting me to work and back in one piece.

It's sort of a delay I guess but I just couldn't save when I didn't have a job and I was tired of being worried all the time about when she would break down. I loved my old car but it was a matter of dollars and sense. And this deal and chance to get ahead and save money for a car while still in a safe one was just too good an opportunity to pass up.

[ESMonitor]

I think it depends on your circumstances and priorities. When I was younger, I leased a truck for 3 years because my car from college had given me so me mechanical issues...I wanted something new, to show out, but I couldn't really afford the note on top of my student loan payments and the social expenses as a younger man, lots of bar tabs, dates, weekend trips, etc.

The lease worked ok for me. Drove a Tacoma that I really enjoyed driving with zero mechanical issues for 3 years because it was new. That was nice. I did go over on mileage, but they didn't charge me, wanted my business they said, but I ended buying my roommate's truck.

Now I am in my 40s and live a very reserved lifestlye, student loans are paid off I passed on buying a Honda Civic this weekend 2008 with 90,000 miles. BBV was $7,500. She was selling for $9k wanted $8k I made an offer for $6,800 a low ball figure due to the worn tires. If I was more excited about the car I would chime back at $7k counter offer although I feel like she will accept no less than $8k because it is a Civic in excellent condition. The thing about those Civics is they run forever and get cosmic gas mileage. But I felt snug in it so I have decided to pass although I would have bought and driven it for about 4 years or so and kept saving had she been more flexible on price.

In my circumstance I simply don't know how to get ahead paying a car note. I could write out a check, for a new car, but I'm having to save for a 20% down payment on a house and I want to have at least a $10k minimum emergency fund in place on top of a Murphy's Law fund of $5k.

Right now I am driving my old truck, 220,000 miles. Still content to drive it for another year or so as long as it holds up without any more repair expenses.

I think the other thing you have to ask yourself is what if you want a new truck? Those new trucks are nice but $$$$$$$$$$. Unless your are willing to write out a $40,000 check there's going to be some casualties with your financial goals.

One thing to take comfort in is whether car/truck is new / used plan to buy or lease you can always do this:



Walk away from the deal if it's not a deal for you. That's what I had to do with that Civic. Has she said yes to $6.8k for the Civic I would be driving a used Civic right now pressing on with savings plan.

[pflyers85]

As someone that has very little interest in cars and views them merely as tools to get from point A to point B and back, car leases and buying new are a bad deal for me. I view cars and car payments as a hindrance to wealth building. My preference is to buy cars with cash if possible or to use some cash and finance the rest through a small loan from a credit union.

With that said we all have hobbies that cost money. I like golf and fine cigars. Neither are inexpensive hobbies and cut into the amount of my earnings that I can save and invest. Some people value having a new car every 3 years and like the perceived peace of mind not having to service the vehicle as often as an older car. I'm not anti lease for everyone. For the person that values cars and has minimal debt, good credit, and an income to support endless car payments I wouldn't begrudge them for going the lease route. What I do take issue with is when those who lease justify their decision to lease by complaining about maintenance costs on older vehicles. The math almost never works for that argument as monthly lease payments and extra GAP insurance needed to operate a leased vehicle are more often than not going to far exceed the average annual cost of repairs on an older vehicle.

[Fishindude77]

I'm generally a fan of buying low mileage used cars to save a few bucks. Bought a 1.5 year old pickup with 14,000 miles for about $5000 less than a new one. Got a $3,000 vendor discount certificate and bought the wifes car new. We don't borrow for cars.

Leasing is dumb unless you are using it for your job and can expense and be reimbursed all of the costs associated with the lease. Most people are attracted to a lease because they can get a lower payment than buying. Then they find out at the end of the lease they have to turn the car in and have NOTHING for all of those payments. You are almost always going to have a few "extras" to pay when your lease is done also; scratches, dings, too many miles, etc. The absolute dumbest thing to do is to lease a car, then take out a loan and buy it at the end of the lease. Saw an acquaintance do that once. He made payments for the same vehicle for about eight years.

[JoeP]

I never liked the mileage limitations that come with leases. If we want to drive somewhere far, or my commute changes (which is often the case), then we need to be wary of the mileage. We have found that certified used vehicles that also pass my mechanic's muster perform well and have good warranties. We like having clear titles in our possession, so that if things turn financially, we can liquidate them pretty quickly.

[Bob B.]

We try to buy low-mileage used.

Our current family transport vehicle was purchased when it was three years old, and had 33,000 miles when we purchased it. I've assumed it was a turned-in lease vehicle.

My current back and forth to work vehicle was purchased when it was eight years old, and it had 78,000 miles when it was purchased. OK, so not such a low-mileage vehicle.

Our strategy it to make payments on no more than one vehicle at a time. We've been financing vehicles for 36 months, at least we have been as long as I've been a part of this forum.

We did buy a Mazda MPV about 10 years ago. It was one model year old, and still sitting on the lot. We were the first buyers. So, we bought it on a bit of a discount. Unfortunately that vehicle was totaled in an accident a few years ago.

Honestly, the idea of leasing a car never occurred to me after I graduated from college and began buying my own vehicles. I always figured that they vehicle leases were made by people who always wanted a new vehicle, either because they liked new vehicles, or because they were a real estate agent, or someone who routinely drove customers or something like that in their personal vehicle, and it was deemed necessary to their job to have a nice new vehicle.

The idea of having a car that could otherwise not be afforded outside a lease is completely foreign to me. I'm not a car guy. A vehicle is something to get me back and forth to wherever I need to go. I'd like it to get me there reliably 999 times out of a thousand times that I drive it.

I heard on the radio a while back that leasing is now the most common way of obtaining a vehicle. I'm not sure if that means its the most common way of obtaining a new vehicle, or obtaining all vehicles, but I would guess new vehicles. Either way, that seems ridiculous to me. But, I suppose the more people who lease, the more three year old models I can buy for less than 2/3 the price of new.

[Weird Tolkienish Figure]

A side discussion started in another thread about the pros and cons of buying vs. leasing as well as the pros and cons of buying new vs. used. Since the discussion was off topic of the thread, let's move the discussion here.

What are your thoughts? Which do you feel makes the most sense? Is there ever a time when you think buying new makes more sense than used? Is there ever a time when you think leasing is a better choice than buying?

I'll weigh in with my opinion but don't have time right now.

To me there's a huge danger to buying new... you may find yourself underwater on the loan relatively quickly. This is bad for so many reasons. As the car depreciates you may find harder and harder to play catchup.

Leasing eliminates this possibility.

That being said, buying a leased car might be the best of all worlds, only a few years old. Just make sure you check the book value of them.

Other advantages to leasing: you are guaranteeing a payment amount every month in tradeoff for the unknown of major repairs. Plus you get to drive a new car.

Main disadvantage is the mileage limit, although, I would generally have a "mileage car" that you can drive on weekends. Our lease is a work week-only vehicle for the most part.

[disneysteve]

buying a leased car might be the best of all worlds,

I agree. I'm happy that leasing keeps getting more and more popular because it allows folks like me who know better to have a steady supply of lightly used cars at a good price. I'm glad to have the folks who failed arithmetic pay for the first 2-3 years of depreciation so that the wiser folks can then buy the cars with low mileage and keep them for another 10+ years, most of those years free of monthly payments.

[Weird Tolkienish Figure]

I had an experience buying used, I could not get financing, not because I had bad credit, but because the car was too old.

As I said in another thread, the used car market is priced pretty efficient IMO. The better used models will be priced higher. The cheaper models... watch out! One way or another you pay.

You may be able to find attractive deals though.

[corn18]

The math is easy:

2015 Honda Accord LX CVT MSRP $23,725

Buy it for $21,500 cash ($250 below invoice price, pretty good price but you could probably get it for $21,000)
Loan for $21,500 60 mo @ .9% = $22,010 (current Honda deal)
Lease it for 36 months and then buy it = $21,686 (current Honda deal)

At the end of all 3 scenarios, you own a 2015 Honda Accord LX CVT.

Cash = cheapest
Lease = $186 more
Loan = $510 more

The cash and the lease are about the same. And mileage doesn't matter because in all three scenarios, you own the car.

What am I missing? If I hate the car, at least with the lease I can give it back (the mileage limit matters for that). All I see is that leasing is not the devil incarnate and may not be as stupid as everyone makes it out to be.

BTW, I own all my cars. And would not lease one. Until I ran the math and saw the difference is only $186. Seems stupid not to. Heck, the cost of money alone would more than make up for that small difference.

Tom

[Weird Tolkienish Figure]

I agree. I'm happy that leasing keeps getting more and more popular because it allows folks like me who know better to have a steady supply of lightly used cars at a good price. I'm glad to have the folks who failed arithmetic pay for the first 2-3 years of depreciation so that the wiser folks can then buy the cars with low mileage and keep them for another 10+ years, most of those years free of monthly payments.

Actually I had it right the first time, heh. Yes my current car is a former lease, bought it with 18k miles.