Lease or Buy a new car?

[Ozzie]

Simple enough of a question right?
If you do buy a new car, do you prefer to lease or buy (cash or finance)?

Leasing gets you much lower car payments than financing, but I've never done one because:
a) I don't like to have limits on how much I drive a car.
b) Doesn't seem like it would feel like your car, kind of like renting vs purchasing.
c) Actually a subset of above, you can't "mod" a leased car, unless you can reverse it later.
d) It seems like once you get on a lease, you seem to be incentivized to renew a lease.
e) Penalties imposed upon returning a lease if you exceed miles, or for tire wear.
f) I like to hang on to my cars for a while.

What are your pros and cons?

[Cory W]

I sold vehicles for a spell about a decade back, when I was trying to figure out what I wanted to be when I grew up :) This is not an exhaustive list, nor is it meant to sway one way or the other. Some examples may contradict others. The situation can change from vehicle to vehicle.

Pros:
-Leasing is great if you can write any of it off. Got a side business?
-You have a cable bill, a gas bill, electric bill. A lease is a "car" bill
-Drive new more often
-I'm not sure about down there, but when you lease here, you only pay the sales tax on the Capitalized Cost (your monthly payment obligations), as opposed to the sale price
-Leases are usually written to keep you under New Vehicle Warranty (and roadside assistance!) for the duration
-Again up here, "Gap Protection" is included in major leases......
What's Gap Protection?
Also called Gap Insurance, if the car is written off at any time during the lease, and you owe more than its worth, the Gap protection steps in and covers it. You're not left on the hook for the remainder.
-Some situations allow you to drive more car for the same price. Better option package, or next model up. Check the payments.
-You can often write a lease for anticipated mileage, and avoid charges at the end. It's ALWAYS cheaper to do this up front.

Cons:
-Buy it out and you just paid more than if you bought it in the first place.
-Repairs and maintenance must bring it back up to saleable factory spec. You can change your own oil (keep receipts!) but you may not get away with new house brand tires upon return.
-Check your residual value (usually a % of MSRP). Lower residual = higher monthly payments; you may pay close to the purchase payment.
-Tied to above, sales tax is often extra in advertised lease payments. Once added, how close is it to the purchase payment?
-No equity. It's a monthly bill, like utilities.
-Be prepared to reverse any and all modifications. Pretty much stick to wheels and tires. If body panels are mismatched for colour, you may get dinged for assumed accident repaint.
-Things have been known to happen from vehicle dropoff at a dealer, and the auction. Sometimes, people have been billed for "excess wear & tear" at that point. Go over the vehicle with a dealer representative and video record if at all possible just in case.

[sean]

I've always bought/financed. So IMO, buy. I know most cars take a huge hit once you drive them off the lot but you can also get some great deals buying the outgoing models.

[08087]

A lease just does not work for me at this point in time (write off). I've always purchased my cars, some new some lightly used.

If you buyn the outgoing model yr. you save big money as mentioned above, if you buy slightly used in the right market you can save a ton. 06' Corolla for 10K private sale with less then 40K miles, almost half price (cash). Bought the Nissan in 04 almost with Nissan's money .9% rate made it hard to pass up on a 6 yr. loan.

If you've got great credit you can do pretty well for yourself.

[Totally 80s]

We work jobs we hate
To buy shit we don't need
To impress people we don't even like.

My vote is to buy a used car for $5000.

[SamHill]

We work jobs we hate
To buy shit we don't need
To impress people we don't even like.

My vote is to buy a used car for $5000.

Yep. There used to be a valid reason to lease: in Virginia in the 80s, you got a break on the personal property tax. They took that away after a year or two. There's really no good financial reason to lease, and if you care about being thrifty, I don't know why you'd do it.

[Ozzie]

So, yeah most are you are saying what I've believed and practiced for many year, buy/finance over lease.

Thing is, here in SoFL, it must be the lease capital of the US. Nearly everyone I know with a new Merc or BMW has it leased. They claim they are saving money with a lease over purchase, but I just can't compute how because they're just regular slugs like me, that is, on a payroll, not a business owner or anything like that. In fact, I think it's more like "Totally 80s" wrote, people get into the Mercs or BMWs because they couldn't other than with leases, and not necessarily because they appreciate the performance or technology of these cars, but more for implied status of driving one.

[louielouie2000]

If you like to drive new cars with factory warranties and don't hold onto them longer than 3-4 years, a lease certainly makes more financial sense than buying. The payments are about half vs buying & there is no possibility of negative equity at trade in, etc.

Leases don't work for people who hold onto cars longer, drive more miles a year than the average commuter, those who don't take good care of their cars, etc. Leasing certainly isn't for everyone, but neither is buying. It's nice to have options.

[TheDutchTexan]

Buy if you keep on keeping it for years and years, lease if you want to drive the newest model.

To me there is something nice about owning last years model. There is less interest in your car, and the people don't see you as a Richy Rich.

When my 05 was current for 4 years (got it new) you wouldn't believe the snobby people looking at the car. What is a punk driving a brand new mustang for they must have thought. Now, I can finally be free of that.

30k service did not cost me more than intended either. With a brand new car you can write the history. Keep up with maintenance, and you'll be driving happily for years. Unless you bought a lemon. But there are laws for that.

[DMCMW Dave]

The payments are about half vs buying & there is no possibility of negative equity at trade in, etc.



That's because you have no equity at trade-in, it's calculated up front and you are paying interest on it all through the lease. There is a risk on leases of being charged for excessive wear and/or mileage so it's not 100% risk-free.

[louielouie2000]

That's because you have no equity at trade-in, it's calculated up front and you are paying interest on it all through the lease. There is a risk on leases of being charged for excessive wear and/or mileage so it's not 100% risk-free.

That's why I prefaced by saying leasing makes sense for those who want a new car every 3-4 years, or those who need to get rid of negative equity. People who trade cars every 3-4 years almost never have any sort of positive equity to put towards their next car anyway, and in fact, end up rolling in negative equity into their purchases over & over again. Leasing works for some circumstances very well- but obviously isn't for the majority of drivers.

[stevedmc]

That's why I prefaced by saying leasing makes sense for those who want a new car every 3-4 years, or those who need to get rid of negative equity. People who trade cars every 3-4 years almost never have any sort of positive equity to put towards their next car anyway, and in fact, end up rolling in negative equity into their purchases over & over again. Leasing works for some circumstances very well- but obviously isn't for the majority of drivers.

I've never understood leasing a vehicle. I'm starting to not understand financing new cars either. There isn't a single new car out there I want other than the $200k gullwing Mercedes.

Just save up three or four thousand dollars and pay cash for a nice convertible from the 80s.

[Dangermouse]

We have never leased car either but prior to our last car-change we looked at it, partially because it seemed that all our neighbors were leasing.

But talking to the leasing guys at the car showroom it seemed to be a shell game, starting with "how much can you afford per month sir" which paid for the basic model. Using the actual car that we wanted drove the lease amount up exponentially. We can be a bit rough on our DDs so we decide to go down the bought used car route. We took the $400 a month our neighbors were paying for their cars and spent that on nice vacations with the kids instead.

[ssdelorean]

Don't lease or buy a new car. Let some other person take the hit on depreciation and purchase a 1 year old model car that was turned in from someone else who leased it the 1st year.