BS: Leasing a car - Pros & Cons?

Subject: BS: Leasing a car - Pros & Cons?
From: Little Hawk
Date: 05 Aug 03 - 05:02 PM

This is something I know little about, so I thought I'd toss it out to the community for discussion.

Example: A new Mazda MPV minivan costs about $35,000 (Canadian) to buy, at zero % financing over 4 years...meaning you pay $718/month over 4 years.

You can lease the same vehicle over 4 years for $463/month (again, Canadian), so over a 4 year period you would pay $22,224. That's $12,776 less to pay over the 4 years than if you buy, but you don't own the vehicle when it's all over.

So which is the better way?

I can definitely get 10 to 14 years of good use out of a new car, because I'm easy on cars. Now let's say just ten years for a $35,000 car...that comes to $292 per month...but...you've also got to service it, and I figure roughly $1,000/year for that (although less in the first 3 or 4 years)...so maybe add another $85/month in upkeep...so maybe it costs about $377/month over that ten years.

But when you lease, you've always got a quite new and (one would assume) reliable vehicle, and I know this: a car is NOT an investment, it's an expense.

Hmmmm? Whaddya think? Buy or lease? Which is the better way? Bear in mind that I am located in Canada. Things may be different elsewhere, such as in the UK, for example.

- LH

Subject: RE: BS: Leasing a car - Pros & Cons?
From: NicoleC
Date: 05 Aug 03 - 05:21 PM

LH, if you plan to keep it, don't lease. When you think of a lease, think of RENT. When you buy it, you may be paying interest but a good portion of that is paying yourself because eventually it's paid off and you can get some of that money back either by not making payments of selling.

When you lease, NONE of the money you pay is recoverable unless you buy it out at the end of the lease. Depending on the lease, that buyout price can be good or bad depending on how much of your monthly lease goes toward the price. If you don't buy it out at the end, that money is gone. Period.

Don't forget, unless it's included in your lease, you have to upkeep a leased vehicle even more so thatn one you own. Failure to do so can be costly at the end of your lease. Don't think you will necessarily walk away at the end of your lease owing no money even if you do -- it really depends on the car company and the appraiser, but you can get hit for a lot of cash if you have "too many" door dings, etc.

So in general, there are a lot more costs associated with a lease than it seems, and dealers will push them hard because they are more lucrative for the dealer and the leasing company. It's not a wise idea to lease unless you really want to have a new car all the time, or just can't afford to buy something outright.

Subject: RE: BS: Leasing a car - Pros & Cons?
From: Little Hawk
Date: 05 Aug 03 - 09:12 PM

Iteresting info, Nicole. It's not that I have to have a "new car" all the time, I just thought it might be a relief to have a relatively new car rather than drive an older one that's getting a bit dodgy and undependable.

However, all this is strictly theoretical right now. I'm not in need of another vehicle in the near future. I've got a '92 Subaru which still feels like a new car, and almost looks like one...it's truly a great car. When it will begin to lose its pazzazz I don't know, but it's showing no signs of doing so yet.

The lease I was looking at did include the option to buy after 4 years, but I'm not sure of the details. I was over at the Mazda dealer just checking out what is possible to do right now...out of curiosity. I have a very high opinion of both Mazda and Subaru (not to mention Toyota and Nissan as well). Darn good cars. I like the MPV when it comes to minivans, and have been using my father's old '92 MPV for years now for the occasional cargo carrying job (business stuff) or musical trip. Phil Edmonston (Lemon-Aid) seemed to be disappointed with more recent MPV's up until last year...I don't know what the problem was, though. They seem to have got their act back together since 2002, according to him. The old one is rear-wheel drive (hell on slippery winter roads), the newer ones are front wheel drive, a good idea in this climate.

My solution to expensive cars for the last 20 years has been to buy used cars privately from reliable owners whom I knew personally. I have saved mucho dinero by so doing, I can tell you!

But I got curious about the leasing thing.

It's incredible what a new car costs these days. I am reminded of the old spiritual tale of the master who pointed out to his students a man leading a cow along by a rope. He said, "See that? There is a man tied to a cow." The man overheard and was quite upset. "I'm not tied to this cow!" he objected. "Yes you are," said the master. "You must feed the cow, provide it with water, guard it from thieves, keep it safe from illness and harm. If you are not tied to the cow, then simply release it!" "I can't do that," said the man, "I might lose the cow." "Exactly," agreed the master. "You are tied to that cow."

I figure it's best to think carefully before tieing a rope onto the financial equivalent of a blue whale... :-)

- LH

Subject: RE: BS: Leasing a car - Pros & Cons?
From: hobbitwoman
Date: 05 Aug 03 - 10:19 PM

I leased the car I have now. It seemed like a good idea at the time. But it got nerve-wracking, worrying about every little scratch. Plus, I had restricted mileage and there were times when I wouldn't go somewhere because I'd be over on mileage and that was a royal pain. Finally I just decided I would buy the car at the end of the lease period and quit worrying about it. Then the bank called and offered me a good interest rate to buy it 6 months early, so I did. It probably will wind up costing me more in the long run than if I'd bought it outright at the beginning, but you live and learn, right?

I wouldn't do it again. Next time I will go back to buying cars that are a year old, like I used to. The mileage is low, usually you get the balance of the warranty, if not all of it (here in PA anyway) and you don't suffer the big depreciation of a new car.

Just my experience!

Annie

Subject: RE: BS: Leasing a car - Pros & Cons?
From: GUEST,.gargoyle
Date: 06 Aug 03 - 12:03 AM

Pay CASH for EVERYTHING -

NEVER be beholdin' to the man

If you got to scrape a little more today, .............................................and do without tommorow, ...................................................t is ALWAYS best to live within your means................................................................................ and NEVER borrow money............................. from the "Lenders in the Temple" .

Some of our ancestors sold seven years of their best-years for a passage to the New World.....You are willing to sell yours for a bauble or a toy?

Walk, catch public transit, car-pool, take another job and SAVE....but don't let the money lenders and their hook-fingered friends into your life!

Sincerely, Gargoyle

Subject: RE: BS: Leasing a car - Pros & Cons?
From: Little Hawk
Date: 06 Aug 03 - 10:55 AM

Right on, Gargoyle. That's the creed I follow, with a couple of small exceptions...I did two or three short-term things where I paid on time for precisely this purpose: to establish a good credit rating. All ya gotta do is borrow, then pay 'em back promptly (ahead of time). Bingo! You have a wonderful credit rating. It never hurts and it can come in handy for certain situations.

But my main rule in life about this dovetails with yours right down the line.

Annie - Thanks for the good info. I was already beginning to suspect some of the very drawbacks to leasing which you have mentioned.

It appears that my old solution is still the best: Buy a used vehicle in good condition. If it's got a little scratch here and there, you won't worry so much about getting another one.

By the way, did you guys know that most of (maybe all of) the Canadian car dealers are now offering 48 months financing on a new car at ZERO percent interest? Why are they doing this? I believe they are attempting to deliver a body blow to the used car business. Ha! I wish them no luck in that endeavour.

- LH

Subject: RE: BS: Leasing a car - Pros & Cons?
From: KateG
Date: 06 Aug 03 - 11:09 AM

The ZERO interest is a scam!!! Notice that if you're willing to pay some interest, you get a cash rebate? In other words, they are just building the interst into the upfront cost of the car. And I have a feeling that all these so-called "deals" on new cars are putting pressure on the used car market, so you can probably get an even BETTER deal on a newish used car.

Subject: RE: BS: Leasing a car - Pros & Cons?
From: NicoleC
Date: 06 Aug 03 - 12:16 PM

Zero interest is not necessarily a scam, but you do have to have almost perfect credit and if you take the zero interest option none of the other incentives apply. It's not just in Canada -- dealers here are offering it, too. Actually, it's the car manufacturers desperately trying to move inventory; car sales are in a big slump/

The way I look at it -- you may not own the car for the entire lease. Therefore, you may not pay all the interest anyway. If you take the rebate instead, you know you've got the money no matter what happens to the car.

Subject: RE: BS: Leasing a car - Pros & Cons?
From: Little Hawk
Date: 06 Aug 03 - 04:51 PM

Ah hah! I see. Well, it figures, doesn't it? Those guys are not in the habit of handing out incentives due to an innate spirit of generosity are they? I believe the price of used cars is down quite a bit lately.

- LH

Subject: RE: BS: Leasing a car - Pros & Cons?
From: Hrothgar
Date: 08 Aug 03 - 06:33 AM

If you do lease a car, have it set up so that the payout price to buy it at the end of the lease is relatively small, and certainly less than the anticipated resale value at that time. It increases your monthly payments, but effectively reduces the interest you pay. Then, if you buy it at the end of the lease, you have an opportunity to re-sell it and make a lump sum profit.

Never, ever, ever set it up so that the buyout value at the end is more than the projected market value! It can lead to all sorts of complications.