Leasing a Car

[zzzmanwitz]

Hey guys,

I'm graduating college in a couple weeks and am looking to get a car. I haven't really decided if I want to buy or lease, but in order to make that decision, I need to find so price quotes for leasing. Finding buy quotes are easy. Any advice on finding these? other than going to the dealerships themselves.

 

Thanks

[jwill535]

Leasing is like renting only you are limited in the amount of driving. If you are going to drive alot then dont lease, on the other hand if you arent going to be driving that much just buy a used car that will last you longer then the lease will run. I guess to sum it up, you are better off buying a car that you can turn around and sell then renting one from a dealership.

 

As a college student i am pretty sure Ford or Chevy offer deals for college students.

[zzzmanwitz]

ok, good to know. I guess i was just under the impression that leasing would give me cheaper monthly payments for a while, until I get my foot in the door with some job opportunity. Maybe I am wrong about this, I just am very new to this whole car buying experience.

[logan82]

Depends on how long you want to keep the car. I prefer to buy and keep the car until it dies so I have many years without payments. If you plan on flipping your car everytime the payments are up I would go for a lease. I see leasing as dropping a bunch of money into someting for a few years and having nothing at the end. Just coming out of college I would say buy something less expensive to start with and once you get some money saved up get a better car.

[1992casey]

Try this google search.

 

This is one of the links: Lease vs Buy? Car Leasing versus Buying Explained

 

Here's a brief summary from that link:

So, which is better, lease or buy?

It depends on what's most important to you. All of us have different lifestyles and priorities - in cars and in finances. Car lease-versus-buy decisions must be made with your own lifestyle and priority attributes in mind. What's right for one person can be totally wrong for another.

LEASE - If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about building ownership equity, have a stable predictable lifestyle, drive an average number of miles, properly maintain your cars, are willing to pay more over the long haul to get these benefits, and understand how leasing works, then you should lease.

BUY - If you don't mind higher monthly payments, prefer to build up trade-in or resale value (equity), like the idea of having ownership, like paying off your loan to be payment-free for a while, don't mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, expect lifestyle changes in the near future, and don't like the risk of possible lease-end charges - then you should buy.

But before you make your buy-lease car decision, read the next few topics. There's still more to it.

[decktard]

I had good luck leasing my car... but I might have been a little more practical about it than other people. To start things off I was leaning towards buying it out in the end so that was heavily in my mind. Yes... I did wind up paying slightly more over the long haul but it ended up being ~$500. I leased it for 3 years and now I'm paying it off to own in 5 years (I'm making payments to pay it off early though... in about 4 years give or take a month). So over those 7 years of payments I basically paid an extra $70ish a year vs. buying it outright. I'm ok with that. I would've had a hard time affording a NEW car had I just tried to buy the new car outright. So I got to have a new car... now I get to own a used car that I know EXACTLY how it has been treated.

 

I can't tell you what would work best for you... but I'm pleased with how it turned out for me... but here are some tips that *I* used. Might not be the best for you.

 

1. I bought a reasonable car that wasn't really out of my means. I bought a Civic. Now... I probably could've afforded the lease on a BMW... but my aim was to get something practical that would last and that I could possibly purchase when the lease was up.

2. I looked at cars that had high resale values. The point here was when the lease was over I would have a car that was worth more than my cost to buy (this is called the residual* look below for tips on the residual). I don't remember the exact figures here but just to illustrate my point. My Civic cost me ~$9,000 to buy my lease out at the end of term. Equivalent Civics blue booked for quite a bit more and used civics were selling for a few thousand more. So I could've bought my civic off of lease for $9000 and sold it for say... $12000 and netted $3000 cash money in my pocket after the lease was up. Not bad... obviously I had to pay the extra lease money to "rent" the car... but remember while you're leasing it the car value is also depreciating... so if you buy it after the lease is up you may come out in ok shape if your car is one that holds its value. If you turn it in at the end well... it is more like a rental at that point I guess.

3. If you decide that leasing is the way to go... when you're negotiating the price ALWAYS REMEMBER you're negotiating against the purchase price of the car. Always keep that number in mind. Even though they'll try to change the subject feel free to ask whatever monthly number they come back with what the total price is for the car that the number is coming from.

4. This one is more fun than helpful... don't let them charge you extra for cool floormats, touch up paint, etc. Once you're about willing to accept an offer... tell them you'll accept it if they throw in... whatever... floormats, whatever extra crap they might try to push on you.

5. Don't listen to people who say leasing is dumb and just a rental. If you play your cards right you end up with decent value. Also... don't listen to people who advise you against used cars or buying new for whatever reasons. You can make anything work... but there are pitfalls to everything. Used cars could need repair work... buying new is expensive...

 

* residual = the cost of the car that is left over after the lease is up. This is figured out at the time of lease. This is generally where the price to purchase your car comes from. The residual may be negotiable if the residual is MORE than you car is actually worth on the open market. If the residual is less than the car is worth that is good in the case you wish to buy it... at that moment you'd be paying less for your own used car than it would be to buy an equivalent used car of the lot.

 

When I get a new car I'm not sure what route I'd take... but after I did the math I think I came out ok. I certainly wouldn't eliminate leasing as an option.

[jwill535]

Make sure that you dont go over your miles limit. If you are going to drive a good distance to work then leasing may not be the way to go.

[decktard]

You also may want to use a couple tools just to check the facts and figures... maybe stop at one dealership and get an idea on the lease cost and go back home and do some math.

 

bankrate.com is a good site where you can figure out how much a loan actually costs you.

 

http://www.bankrate.com/brm/cgi-bin/apr.asp

 

1. To help me reach my decision I put in the purchase price of the new car - my down payment. Once you punch in your interest rate and the loan term it'll come back and say what the monthly payments are and what your TOTAL cost is of the loan. Add that total amount back in with your down payment. This is the money it will cost you in the end to own the car.

 

2a. Now take your monthly lease amount you got from the dealership and multiply that by 36 (for a 3 year lease we're figuring). Add in any down payment you had to make at lease time... sometimes you do this, sometimes you don't. Be clear if you're paying a down payment or a deposit. A deposit you get back... a down payment you won't. Ok... so once you do that multiplication you have how much it cost you out of pocket to lease the car.

 

2b. Also from your dealer get the RESIDUAL value. Remember the residual might be negotiable at buy time. Now use the bankrate tool to figure a loan... 4 or 5 years or whatever... that is up to you.

 

Now take that total cost to loan and add that in to your lease amount. (2a + 2b). That is your lease to own cost.

 

so (2a + 2b) - 1 = the extra amount it has cost you leasing to own vs. buying it outright from the start.

 

Maybe you're ok with that number... maybe you're not.

[decktard]

Make sure that you dont go over your miles limit. If you are going to drive a good distance to work then leasing may not be the way to go.

 

Yes... definitely. If you turn your car back in they'll get you on that. 12,000 miles per year is how most leases are figured. Dealerships also try to get you to pay for extra miles ahead of time... like a 15,000 mile per year lease. These generally aren't good value if you're going to lease to buy. If you're just planning on turning the car in... well that is up to you.

 

Also... if you buy out your lease you aren't charged for the miles overage. Just something to think about.

[Thurston Fluff]

It should also be mentioned that the way you use a car is also a factor. If your car get's dings or wear that gets charged to you. Think of it as renting with a security deposit that can be withheld for a dirty carpet when you leave.

[decktard]

It should also be mentioned that the way you use a car is also a factor. If your car get's dings or wear that gets charged to you. Think of it as renting with a security deposit that can be withheld for a dirty carpet when you leave.

True... but he'll want to find out for sure what the charges are and what exactly they're for. For example; they might not charge for a ding that can be covered up by a dime or something. All that stuff should be written in to your lease and be clear to you.

 

[Team Canada]

Good suggestions in decktard's initial post. As he said, good resale value and buying less than you can afford are very smart moves. Don't waste your money on an expensive car.

 

My philosophy is to get a decent car that's a couple years old. Both of ours we've paid off over a couple years, and will be payment free until the next time we need a car. Hopefully years from now.

[craigharmann]

Don't lease a car! That's my advice. I moved to Wisconsin 3 years ago and in that process, needed a new car. I decided to lease, as opposed to buy. I've had to pay to put new tires on the car, pay for all the maintenance on the car, and when I buy it in a year and a half, will have to pay over-mileage charges. It's not worth the time, or the waste of the money. Buy a decent used car that's about 5-6 years old and drive it until the wheels fall off.