Vehicle Leasing
- DennisL
- Kirk
- AL_W
- SteveT
- KLR
- DennisL
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» DennisL - Automobile Leasing: Pros and Cons
Over the weekend, I decided to lease a new automobile. This is the first time in my life that I have ever leased a car.Much has been said and written, pro and con, about automobile leasing in recent years because of the rising popularity of leasing.
Perhaps I should have started this thread BEFORE last weekend and making my decision. Nevertheless, I would like your expert opinions regarding automobile leasing.
Some advantages to leasing that I see are:
(1) There is little or no down payment.
(2) You don't have money tied up in an always depreciating asset.
(3) Your monthly payment is significantly less than it would be if you purchased the car on a three-year contract.
(4) Because of (1), (2), and (3), you can have a much nicer car than if you were to purchase.
(5) You always have a car that is three years old or younger, so you probably won't have repairs to deal with. If you do, they're covered by the manufacturer's warranty.
(6) You may be able to write off the lease payments and the car's depreciation on your income tax returns.
Some disadvantages to leasing that I see are:
(1) You never own anything.
(2) After three years, you must get another car or buy your current car, so monthly car payments may never end.
(3) The number of miles that you allowed to drive the car each year is limited by the terms of the lease (usually 12,000 or 15,000 miles). Miles beyond that are charged extra--usually about 20 cents/mile.
(4) You must be careful to keep the car in very good condition. You will be penalized at the end of the lease if the dealer determines that the car is in worse than normal wear and tear condition.
(5) If you must break the lease early, there is usually a stiff penalty.
Your comments and opinions are welcome.
Side note: For those in the San Francisco area who might be interested, the six o'clock news on KRON channel 4 tonight is going to have a segment on getting out of a car lease.
-- posted by DennisL
» Kirk - Re: Automobile Leasing: Pros and Cons
In response to message posted by DennisL:How high is your lease payment?
(Maybe as a percentage of the price of the car)
Did you have to pay an inflated price? Often you can get 20% off if you buy a car that is not in short supply AND you pay cash.
How many years would it take to buy the car given your lease payment?
I like my '94 'vette now about as much as I did when I bought it 7 yrs ago.... and the value left in the car subtracted from what I paid make for a VERY low lease payment to break even...
Cars... drive an old one until you have saved enough to pay cash for what you want. THEN make monthly car payments to yourself for a new car in a SPECIAL ACCOUNT.... I did that after buying my 'vette and stopped yrs ago... the used value of my car plus that money in that account will allow me to buy a new one anytime I want...
Leasing CAN make sense if you have a business and can can run the lease payments thru as biz expense...
Insurance on a 7 yr old car is much less than on a new one....
-- posted by Kirk
» AL_W - Re: Re: Automobile Leasing: Pros and Cons
In response to message posted by Kirk:A car 7yrs old, why that's virtually a new car to me.
My newest is approaching 7 ( in Dec ), the wife drives that. Its a Van and takes all of the trips. With 80,000 on it, it should last another 5 - 7 years. There are less trips taking the kids now that two are in college and only one has to be driven around.
The next is 12, a Honda, and I drive that. It only has 75,000 on it.
The oldest is 22, a Toyota, looks a little ratty after #1 son ( 2 kid to drive it ) scraped it up, but runs fine.
1. I live only 5 miles from work, so I don't wear out a car very fast. I don't need a lot of gas either. I'm convinced that economically, you don't really save anywhere as much money when you live WAY OUT where houses are cheaper. Just add up all the commuting expenses. A $20,000, $30,000 or more car, worn out in two to three years.
2. Annual repairs on all of them combined is a lot less than a single car's yearly $300 a month payment. OK, I do the simple fixes myself, so that helps save a few $. That saves all the big items ( and $ )for the repair shop.
I also make sure the correct maintenance is done..... oil, filters, coolant, transmission fluids, brakes, etc. All three vehicles have the original brake rotors on them. A front brake job on them is just a new set of pads, because they are done before they are worn out and scar the rotors. Doing the correct maintenance save you a pile of money.
3. Insurance is a lot cheaper.
4. Car license is a lot cheaper.
5. And if #1 son ruins the car, as he recently tried, I won't cry about it. But, I don't know where I could find an equivalent replacement ( quality and $ ). The almost ruined cost $200 in parts at the junkyard and two weekend's of work.
6. I too, have kept putting the payment $ in the Credit Union, even though the van is paid off. Hey, CD's written there last spring, are paying 5.8%. Earn some interest instead of paying it. It will be a down payment for the next, or cover any major repairs on these.
What do I do with the $ I save. Tough to do here in expensive SillyCone Valley, but only I work. This allows my wife the time to properly take care of the kids and house. Taking care, so that the kids are properly started in life, is our most important goal.
-- posted by AL_W
» SteveT - Re: Re: Re: Automobile Leasing: Pros and Cons
In response to message posted by AL_W:Al, I like your style. Kirk, good point about leasing maybe OK if you can write it off as a business expense. I never considered leasing, I guess I know to many horror stories. Every one I know that has leased has regreted it. Things like it costing you money to turn it in at the end of the lease period, making a "ballon payment at the end larger than the value of the car.
I did read the book the Millionaire next door. In that book they said most Millionaires buy cars of good quality often a couple years old and drive them until tthe wheels fall off. To me leasing a car is like renting a car long term. When you pay rent, it is like buying a dead horse.
One more thing imo if by leasing you find you can drive a more expensive car than you could by buying it, maybe you can't really afford it?
-- posted by SteveT
» KLR - Re: Re: Re: Re: Automobile Leasing: Pros and Cons
In response to message posted by SteveT:Hey Steve,
Sounds like you have pretty much decided to lease. I saw this which provides links to the top 10 leasing scams which may be of some use in your dealings. Good luck.
Top 10 Leasing ScamsTM
Secret Price Hike
Disappearing Trade
Quote the Factor As APR
Phony Lease/Buy Comparison
The Undisclosed Acquisition Fee
The Payoff Packing Scheme
The Extended Warranty Rip-Off
The Phantom Options Scam
The Single-Payment Rip-Off
Phony Lease Trade-in
-- posted by KLR
» DennisL - Thanks!
Kirk, Al, Steve, KLR,Thanks for your input. If your opinions regarding leasing are representative of the public's at large, it's pretty negative. I hope I won't regret my decision.
What you say about buying a car cash and paying yourself, or paying yourself after you have paid the car off are true. Having a car payment works for me, though, because I had one before (that was actually a little higher than my lease payment) and was still able to continue the same saving and investment program that I have on for so many years. At the end of the three years, if I decide then that leasing is not for me, I will buy the car or another car cash. I already have the money in the bank to do that.
KLR: Thank you very much for the link to leasetips.com. After reading through the site, I went through my lease contract, which is with GMAC. The contract looks clean and kosher. There are an "administrative fee" and a "rent charge" that I may have been able to negotiate had I read leasetips.com first. So be it. Chalk it up to "tuition."
Also, I watched the segment on getting out of a lease on KRON a few minutes ago. It mentioned two Web sites where people can swap leases, thereby bypassing dealers' early termination penalties. The sites are:
Kirk: Thanks again for running this site, which has been a very important source of information for me. I am most happy to click on your sponsor links daily...8-)
-- posted by DennisL
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