Car lease advice

[dukebound85]

What is the downside to this? Honda is offering 0 down 0% on car leases. I can get a honda civic for 160/mth for 3 years with the option to buy at the end

is this a no brainer? what is the downside?

i ask as my 20 year old car is costing me alot to maintain recently, 1200 in 2 months in repairs and need another grand or so done

http://content.usatoday.com/communi...amazing-lease-deals-take-a-whack-at-toyota-/1

As Toyota ratchets up incentives to combat its recent bout of negative publicity, Honda has entered the end of its fiscal year with an aggressive incentive in the form of a new lease program.

How good is it? How about a Honda Civic for $159 a month, with no down payment, no security deposit, no first month's payment and nothing due at lease signing. Even the Insight, the new compact hybrid that was eaten alive by Toyota Prius before it got sucked into the unintended-acceleration scandal, is offered at $240 a month.

 

[sfwalter]

my biggest issue with leasing is mileage. If you drive more than 15k then you should buy instead of leasing. Otherwise they will charge you about 15 cents a mile that you go over the allotted mileage.

On a 3 year lease your are allotted about 48,000 miles.

 

[Surely]

^^ Is that standard? Can't it change depending on the lease?


I guess it would depend on what the buying price will be at the end and if you want to buy it or not.

If you plan on just making the payments for 3 years and handing the car in at the end, I'd say go for it if it's what you want and you can afford it.

If you want to buy it after 3 years and it's a high buying price, your purchase payment may end up being more than what the car is worth at that point.

 

[renewed]

Lease Guide

 

[heehee]

Something is wrong with that article, it's missing something for sure. This is the special on Honda's website.

The article might be talking about the DX version, I'm not sure. DX doesn't even have A/C.

 

[Gregg2]

Car dealers used to only sell cars. Then someone came up with the leasing idea. Do you really think they'd do that if it made them less money?

 

[Jaro65]

^^^^
Of course, leases are more profitable for the car manufacturers than an outright sale. As such, they are generally not a great deal for the end user. However, under some circumstances, leasing is the way to go. If you have a business, for example, you can deduct the full cost of the lease and so it makes sense from the tax perspective.

As far as the Honda lease deal, Surely is raising a good point....

 

[notjustjay]

My only problem with leases is that an unscrupulous dealer can play games with you at the end of the lease. Mileage is certainly one factor, but then so is damage, and even other things you might not expect.

When my Toyota RAV4 lease was up, I decided not to buy it out, but instead return it in favour of shopping around and buying a smaller used car instead. I was careful to stay under the mileage limits, so that wasn't a problem. There were a few dings and scrapes as one might expect after an SUV has been driven and taken on camping trips for 4 years. One dealer I visited was going to be pretty forgiving about that -- another wanted me not only to pay for the dings, but said the brakes needed work and wouldn't accept the car back until I had them fixed!

Both dealers also said my tires were bald (they were right) and that the car wouldn't pass provincial safety inspection until they were replaced.

I was kind of shocked at the proposition that I had to pay for new tires and brake work just so I could give the car back to the dealer.

Then the other shoe dropped: If I was going to buy another Toyota, they promised, they would take care of everything. Uh-huh.

So I'm now driving another Toyota, one I'm less happy with, and I will not be leasing another Toyota vehicle again unless I plan to buy the car at the end of the lease (in which case -- why bother leasing?)

If I could go back in time and do it again, I would have just bought the RAV4 at the end of the lease. I miss it.

 

[yg17]

One dealer I visited was going to be pretty forgiving about that -- another wanted me not only to pay for the dings, but said the brakes needed work and wouldn't accept the car back until I had them fixed!

I thought non working breaks were a standard feature on Toyotas

 

[notjustjay]

I thought non working breaks were a standard feature on Toyotas

Oy.. talk about walking into that one..

 

[Synchromesh]

This all depends. I would much rather just buy a used car and keep it for while. That way there is no mileage limitation and no dealer involvement (unless it still has warranty) altogether. My personal experience tells me to avoid those blood sucking $#$#%^... ermmm, I mean dealers altogether. If you shop smart and buy a fairly recent Honda/Toyota without excessive mileage and abuse signs chances are it will run for a long time and your cost per mile is going to be less.

 

[sdsvtdriver]

renting a car long term is never makes financial sense unless one has a business to write off the expenses.

people try to justify with reasoning (lower monthly payment, "I like to get a new car every x years", "I don't like a car without a warranty", etc), however those rationalizations do not change the fact that renting or leasing a car puts one at a disadvantage financially. One can sell a car at their leisure, one can not return a leased car early without penalty (unless repeating the mistake for a new lease), nor extend for a few months if needed.

 

[puma1552]

Car lease advice? Here's some advice: unless you are a business and can write it off, don't.

Leases are set up to make the dealer money. The customer loses 99% of the time, roped in with attractive cheap payments. They get you at the end with mileage, balloon payments, and nicks or scratches, anything they can. Then they try to lock you into their company by forcing you into another lease with them, with the alternative being a nasty balloon payment to buy the vehicle, costing you far more than the vehicle even stickered at. Not to mention, nothing like leasing a car for 2-4 years and then getting stuck with a 3-5 year loan to buy it out AFTER that...imagine how much interest you pay when paying for upwards of 9 years on the car. Nobody in their right mind would take a loan for more than 5 years to purchase a vehicle, so why would anyone do that in a lease+buy situation?

You know what a lease is? It's a way to put someone in a car they actually can't afford. If they could afford it, they'd just buy it outright.

I remember a couple years ago BMW had a lease special of $299/mo for a 325i. I could've afforded that. But could I have afforded the $35k price tag on a new one over five years on a standard loan? Absolutely not. At the end of three years, I would have either been without a car and nothing to show for it, with a car and paying out the ass for it, paying in excess of $35k, or trapped with another lease.

Don't do it.

 

[hayduke]

There is an old expression -- Caveat Emptor.

In fact, it is so old that it pre-dates leasing so there is no equivalent for your situation except -- Caveat Leasor.

 

[notjustjay]

The one situation where a lease might make sense is to take over someone else's (which is what I had done with my RAV4 experience posted above). I assume this is possible in the States -- all the lease takeover sites I seem to be finding on Google are Canadian.

Ideally you find someone who has put in a good sized down payment, is about halfway through their lease (or more) and now wants to get rid of it. Then you take over the lease, make the remaining payments, and then buy out the car for, hopefully, less total paid than you would have by buying one off the lot.

 

[H00513R]

I would not get the lease. You could easily buy a newer, similarly used car and get close to those payments. My grandfather sold cars for 40 years, and he always told me to buy a used car in the 1st or 3rd years because of depreciation.

 

[Gregg2]

renting a car long term is never makes financial sense unless one has a business to write off the expenses.

people try to justify with reasoning (lower monthly payment, "I like to get a new car every x years", "I don't like a car without a warranty", etc), however those rationalizations do not change the fact that renting or leasing a car puts one at a disadvantage financially.

Well, yeah, but if someone is going to get a new car every three years anyway, it may very well cost more to buy them. I don't really know how valid that "lower monthly payment" is though.

The age old axiom is "The cheapest car you'll ever own is the one you currently own." I would add to that: The cheapest way to own a car is to pay cash for it.

 

[Synchromesh]

I would not get the lease. You could easily buy a newer, similarly used car and get close to those payments. My grandfather sold cars for 40 years, and he always told me to buy a used car in the 1st or 3rd years because of depreciation.

Your grandfather lived in the time when average car's life was significantly shorter than today's. Providing warranty isn't an issue the optimal choice now is a lower mile 3-5 year old car.

 

[codymac]

I remember a couple years ago BMW had a lease special of $299/mo for a 325i. I could've afforded that. But could I have afforded the $35k price tag on a new one over five years on a standard loan? Absolutely not. At the end of three years, I would have either been without a car and nothing to show for it, with a car and paying out the ass for it, paying in excess of $35k, or trapped with another lease.

One side note about buying a BMW is that when it comes time to sell it, used auto loans may be more expensive for a prospective buyer than leasing a brand new BMW. I ran into this when I got ready to sell mine - sure, my car was cheaper than a new one but BMW's lease deals made leasing a new one cost about half as much as getting a loan for my used car.

Net result? My car was very difficult to sell and I ended up having to wholesale it just to get rid of it. I was unpleasantly surprised - the car was in excellent condition, loaded, average miles, and had a 3" binder in the trunk with every receipt from the window sticker to current!


For a car as cheap as a Civic, I'd recommend just buying it. It will last far longer than any new car loan you can get today, even if you abuse it. If you can't swing new, I'd recommend a late-model used one (preferably with some warranty remaining) financed through a credit union.

 

[QCassidy352]

renting a car long term is never makes financial sense unless one has a business to write off the expenses.

people try to justify with reasoning (lower monthly payment, "I like to get a new car every x years", "I don't like a car without a warranty", etc), however those rationalizations do not change the fact that renting or leasing a car puts one at a disadvantage financially. One can sell a car at their leisure, one can not return a leased car early without penalty (unless repeating the mistake for a new lease), nor extend for a few months if needed.

What you say is true, but I wouldn't say that reasoning is trying to "justify" it. The fact is that leasing does allow you to have a higher end car than buying, and for many people's budgets, the ability to pay monthly matters more than the overall cost (same with cell phones, which the phone makers obviously know, hence the subsidy model).

Personally, I have always owned and never leased because I don't want to worry that I'm going over the milage or hurting the car in some way the dealer will give me grief for - I like it to be mine. But I understand why people lease; the overall cost is not always the main issue.

Also, if you're taking out a loan to buy the car, you may be losing any benefit you'd have over leasing. I don't know; it would depend on what terms you could negotiate. If you could pay cash then of course that will be cheaper than either a loan or leasing - but even there, you have to consider the opportunity cost (i.e. what else could you be doing with that $20,000? Investing it profitably?).

I generally agree with the sentiment in this thread, but I don't agree that you should dismiss leasing in its entirety, out of hand. you have to see what lease terms are available as compared to the rate on a loan.

One more thing - while it's true that dealers invented leasing because it's better for them, that doesn't mean every lease will screw the customer. Dealers know that in some cases, a low-payment lease is the only way they're going to make that "sale" at all. So the choice for them isn't sell it or lease it out, it's lease it out or it sits on the lot. If that's the situation they're facing, it's not unreasonable for them to offer pretty decent terms.

 

[Synchromesh]

What you say is true, but I wouldn't say that reasoning is trying to "justify" it. The fact is that leasing does allow you to have a higher end car than buying, and for many people's budgets, the ability to pay monthly matters more than the overall cost (same with cell phones, which the phone makers obviously know, hence the subsidy model).

But that the thing! If you can't afford to be driving an expensive car - don't! A lot of people buy cars because of the image (this is especially true of BMW in general) and not because they need this actual car. But it's one thing when you can actually afford it and entirely another when you become a slave to those car payments. And what happens if you lose your job or something? This is how many ruin their credit. And this is why I don't believe in getting loans for cars. I'd rather just save up some cash and own the car outright than be bank's bitch for the next few years.

 

[puma1552]

But that the thing! If you can't afford to be driving an expensive car - don't! A lot of people buy cars because of the image (this is especially true of BMW in general) and not because they need this actual car. But it's one thing when you can actually afford it and entirely another when you become a slave to those car payments. And what happens if you lose your job or something? This is how many ruin their credit. And this is why I don't believe in getting loans for cars. I'd rather just save up some cash and own the car outright than be bank's bitch for the next few years.

I was with you up to the last sentence or two--I agree, it's a terrible thing for a customer (and the dealer's dream) to walk in with a target monthly payment; the dealer loves this, because the customer has monthly payment in mind and seems to care a lot less about the actual price of the vehicle with/without interest--this is how dealers screw people pretty bad--joe blow walks in looking for a $300 payment no matter what, and the dealer makes a $300 payment happen even if it's at the cost of a longer loan or a higher interest rate or what have you. I agree though, if you can't afford to buy the car on a five year loan, then you can't afford the car and leasing is again just a way to put someone in a car they actually can't afford.

But as for your last part, I'd never part with the cash to buy a car...I'd MUCH prefer to finance the car at 0-5% (through a credit union) and invest my $20k banking it in an investment yielding 8%-10%. Money in the bank is power, and I'd feel pretty sick parting with a chunk of $20k+, personally especially when it could be invested elsewhere yielding more money than I'm paying in interest.

 

[Gregg2]

If you could pay cash then of course that will be cheaper than either a loan or leasing - but even there, you have to consider the opportunity cost (i.e. what else could you be doing with that $20,000? Investing it profitably?).

But as for your last part, I'd never part with the cash to buy a car...I'd MUCH prefer to finance the car at 0-5% (through a credit union) and invest my $20k banking it in an investment yielding 8%-10%. Money in the bank is power, and I'd feel pretty sick parting with a chunk of $20k+, personally especially when it could be invested elsewhere yielding more money than I'm paying in interest.

Both of those lines of thought are short term. In the long term, you're better off paying cash. Invest the money that doesn't go out each month. Eventually, you come out ahead.

As for 0% interest loans, typically you're also give an option of paying less for the car. Take it. You come out better than making payments, even with no interest. I was all set to take one of those loans once, then my bank ran the numbers and proved that paying cash was better.

 

[sushi]

The only time I would consider a lease, is for a business.

Usually much easier for management and taxes.

Personally, I usually purchase used cars. Saves money that way. Plus it gives me peace of mind. I never worry about dings, dirt, etc. like I do with a new car.

i ask as my 20 year old car is costing me alot to maintain recently, 1200 in 2 months in repairs and need another grand or so done

Okay, so you spend 2,400 fixing your 20 year old car.

If it lasts for two more years, that's 100 per month -- which is cheaper than the $160 per month leasing fee.

 

[dukebound85]

The only time I would consider a lease, is for a business.

Usually much easier for management and taxes.

Personally, I usually purchase used cars. Saves money that way. Plus it gives me peace of mind. I never worry about dings, dirt, etc. like I do with a new car.


Okay, so you spend 2,400 fixing your 20 year old car.

If it lasts for two more years, that's 100 per month -- which is cheaper than the $160 per month leasing fee.

True true but that's assuming nothing else fails in the meantime as well. And who doesn't like new cars but yes, I see your point