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

[dawnwes]

We always buy. And we have always gotten deals that equal or beat 2 year old
"depreciation."

One deal was because DH's sister works for the company and we got the employee 5% discount.

One deal was fleet pricing online.

The latest deal was to find it online nearby and see if a local dealer would price match. First one said no and that he was SURE it was a scam, the car couldn't possibly have all those extras for that price. So, we called a couple more local dealers and one said, "Sure, we will go pick it up for you (3 hours away) and call you when it gets here." So, we got the deal.

For us, the ONLY way a lease works is if your company is paying for all or most of it.

[disneysteve]

Dealerships do not make the bulk of their money on new cars. The used car business is where its at...larger profit margins. Also...the service department is where they make an absolute killing. Yes they want to make money on every car but the more vehicles they can move the more often customers will be bringing cars in for repair.

So do dealers actually issues leases on which they lose money?

[rennigade]

So do dealers actually issues leases on which they lose money?

Im not sure...I know very little about leasing. I know there are penalties if you go over a certain amount of mileage per year...so they probably rely on that a lot. Not to mention when they receive the car back they can sell it as used.

[disneysteve]

Im not sure...I know very little about leasing. I know there are penalties if you go over a certain amount of mileage per year...so they probably rely on that a lot. Not to mention when they receive the car back they can sell it as used.

Exactly. Plus wear and tear charges. Plus other added fees. Plus, as you mentioned, the service costs.

I find it impossible to believe that they actually lose money on the deal.

[LivingAlmostLarge]

I've a friend who used to sell cars and he said big money was made on trade ins mostly. New cars people push hard but then they make a killing on a trade in. For sure they make money on new cars but the margins I bet are way less.

[Singuy]

Buying and leasing is essentially the same the first 3-4 years. You get charged an interest rate with a buy, you get charged a money factor(aka interest rate) when you lease. You'll most likely lose the same amount of money selling your car after 3 years vs handing your keys in from a lease. You will most likely LOSE money if you TRADE in your car after 3 years vs a lease.

After the 40-50% depreciation hit, then buying becomes the better idea (you can also lease used cars).

Your car provides you with the most value if it is worth 5k (depreciation pretty much stopped) or less and it is mechanically sound no matter how many miles you are putting on it. Before this, your car is always depreciating..so either you pay for the depreciation now(lease) or later(when you sell your bought car)..at the end it doesn't really matter.

This is why they recommend leasing a car when you want to switch it up every 3 years..this allows you to "sell the car back to the dealer" without any of the hassle of dealing with a real sell.

[bjl584]

Exactly. Plus wear and tear charges. Plus other added fees. Plus, as you mentioned, the service costs.

I find it impossible to believe that they actually lose money on the deal.

They might take a slight loss up front, but they will make it back before the lease is up. I'm sure if you comb through the fine print there are buried fees and charges for service, mileage, etc. that they will recoup any loss that they took in the initial transaction.

[tripods68]

I've never lease a car in my life and don't ever plan. I love driving so much that the idea that I have to drive my car below 12,000 a year or 15,000 a year or else pay more is unconscionable. I don't like to be limited that way.


Here's the car I bought new and used over my lifetime:

1978 USED Ford Fiesta for $1000 cash parents (love this car--drove it car from NY to Long Beach, CA) kept it for 3.5 years.

1989 NEW Hyundai GLS $6400 paid cash (drove this car for 5 years until piston went out at 95K miles)

1994 NEW Dodge Avenger ($14,500) financed for 4 years (biggest mistake while attending college), complete loss in accident in 2001

2001 NEW Acura RSX $26K financed - sold it after 3 years for $15K

2003 NEW Nissan Murano SL AWD - $32,500 financed, after 3 years traded for Honday Odyssey

NEW Honda 2006 $32,500 paid it after 4 years (wife currently drives it)

USED Altima 1995 paid cash for $3K - kept it for 3 years

USED Scion 2005 paid cash for $4K sold it for $6K as trade-in (made money)

NEW WRX 2012 - Paid $20,500 net after trading the Scion - Sold it last year for $19.6K plus sold performance parts (separately) additional $1,100

USED 2002 Hyundai Santa Fe GLS AWD $3400 (all cash) - its my current daily car

[disneysteve]

Here's the car I bought new and used over my lifetime:

Wow. You've had a lot of cars.

I am 51. I've been driving since I was 16. My current car is the 5th that I've had and the 1st was a shared family car when I still lived with my parents. So only 4 cars that I've actually owned since 1982.

Edit: Sorry, I wasn't counting my wife's cars. She's had 5 since we've been together. The only reason it's been that many is because one was destroyed by a fire and one was totaled in an accident.

[Permanent Temp]

That is complete and total BS. Do you honestly believe that the dealer would agree to a deal that didn't have a nice fat profit for them?


You should never enter into a transaction that you don't fully understand.

Why are you leasing rather than buying?

Not true. There is a dealership here that sells below MSRP all the time. They are actually closer to invoice.

The only way to know for sure is to shop around. MSRP is right on the sticker for the car. If the place that told you it's less is actually less than other stores you call for a price then they are not necessarily lying.

You just have to be really really careful in the finance room, and when they are doing the pencil. If anything looks off say something. If they gave you one deal and then in the room the deal morphs, then ask them to change it back. If they don't, don't take that crap from them, walk and go to some other place that gave you a higher price. At least they were honest about the best they could do. (But again be careful when they are writing up the deal and in the finance room.)

Now that's all on a new car, the used cars on the lot is where they make beaucoup bucks. They paid half of what its worth or less and they are selling it for the highest they can get for it. Much bigger profit margin than new. Also unless the used car was sitting on their lot a while, the room for haggling is zilch.

Leases also have totally crazy deals than a sale. This is because they know they are getting the car back. These guys quoted you that price but that price is a deal now. But that number won't necessarily a deal in a few years when you hand in the keys. In this case that's where they probably got you if you decide to purchase at that point.

If you decide to go for something else they now can sell that car to someone else as a certified used vehicle and you are in another car probably at their dealership which means they get another car off their lot whether you buy or lease. That's a win-win for them but not necessarily for you.

I personally would prefer a nice used car over a new one but I go for the most cost effective option for me whenever it is that I need to get a new-to-me car.

[disneysteve]

Not true. There is a dealership here that sells below MSRP all the time. They are actually closer to invoice.

That doesn't mean they're losing money. Even if they sell at invoice, they're still making a profit due to factory incentives that the customer doesn't see. Plus if you finance, they make money on that end.

[tripods68]

Wow. You've had a lot of cars.

You can say Japanese cars was my hobby.

[disneysteve]

You can say Japanese cars was my hobby.

My first car was a 1973 Chevy Impala that was my parents'. It wasn't "mine" but I got to drive it.

My first owned car was a 1982 Datsun Maxima bought new.
Next was a 1991 Toyota Camry bought new.
Next was a 1998 Toyota Camry bought used.
Current is a 2006 Toyota Camry bought used.

[tripods68]

My first owned car was a 1982 Datsun Maxima bought new.

I always thought Datsun was a cool car in the 80s.

[disneysteve]

I always thought Datsun was a cool car in the 80s.

I don't think the Maxima had the cool factor, though it did have power everything including sunroof and it talked - door is open, lights are on, etc. That was kind of cool.