To buy or to lease?

MeadowsLane

Thu, Mar 24 2011, 8:29 pm

my DH is in the business of leasing and selling new cars. His advice is if you can buy at a very low rate (right now Toyota is offering 0% on certain models, not sure if Sienna is one of them) then buy it. If you decide to sell it at the end of three years then you still have equity in the car and can usually sell it for more than the 'option to buy' at the end of a lease. also when you lease they mark the sale price up and the financing is higher than if you had just bought the car.

BusyBeeMommy

Thu, Mar 24 2011, 8:38 pm

Thanks meadows, that's super helpful advice that I would have never thought of on my own. I always thought that if I would buy then I'd get a used car, but it's interesting to know I'd be paying with 0% financing for a new car that I could technically sell after 3 years. Do you know if the warranty covers most repairs?

Also, I heard from a friend that car insurance can be lower on a new car than an older one because the older ones need more repairs. Is there an truth to that?

SorGold

Thu, Mar 24 2011, 9:01 pm

Financially...it never pays to lease. You lose the money you put down or else you pay higher per month if you put nothing down. Insurance is also higher on a lease. I don't remember the exact figures, but when we priced buying versus leasing there was a several thousand dollar difference. You can buy new or certified preowned and then sell or trade it in after you have finished financing.
If money is not an issue...leasing is easy and fun.

wtvr

Thu, Mar 24 2011, 10:46 pm

When we were looking for a car, (could it really be 3 1/2 years ago) this is what we came up with.
Our car had died two weeks after putting $1500 into it.
We needed a very reliable car, and we drive a lot.

For new vs used: We looked into used, specifically newer used or certified-pre-owned, and found that if you make a calculation of price divided by the amount of years the car should last, IT WAS NOT CHEAPER than buying brand new. (Don't take my word for it, as obviously it depends on pricing etc., but do the math yourself). Sure it was cheaper upfront, but the price per year of ownership was basically the same, with the extra 2 years of hassle free ownership included. (Cars don't usually make trouble the first 2-3 yrs. Once you're buying s/o else car, things will go wrong sooner). I strongly believe that "it loses value as soon as it drives of the lot" is a myth or just something that was true in the past, (maybe before leasing was an option)
Also, keep in mind, that anything older than 1-2 yrs old, is usually a car that came off lease. People who lease generally do not keep up their cars as well in terms of maintenance, oil changes, etc, b/c it's not theirs so they don't care.

For lease vs. buying. Again, do the cheshbon yourself, but for us, the difference in monthly payments was about $50/month, but we drive tons, so we would've for sure went over mileage. If we pre-bought miles (20,000/yr) the difference got even smaller. The total cost of the car lease for 3 yrs, and if we would've bought at the end was more expensive than if we bought and financed for 5 yrs, and our monthly payments were really pretty much the same (albeit, we are paying for two more years). There was also a bank fee with leasing, which with buying we didn't have. We're not the type of pple who need a new car every 3 years, so the idea of giving it back and being able to get something new was not something that attracted us.

So we bought a brand new car. At 3 yrs, we were over 60,000 miles, so really it was our only option. Again, we do a lot of driving.

In short, see what your needs are, and take out a calculator to crunch your own numbers.

Also, if you do end up buying new, see if your insurance offers Mechanical Breakdown Insurance. (Geico does). It's much, much cheaper than purchasing an extended warranty.

If you made it this far, good luck with your decision!