Pros and Cons of Leasing a Vehicle?

[OldSchoolYoungin]

Well, I'm going to be moving very soon here thanks to my business taking a bit of a nose-dive; need to find a regular job for security and continue business on the side.

Me Jeep Cherokee has had a good run, but it seems like little minor problems are starting to sprout up constantly and it's future isn't looking so great as a daily commuter. I may still keep it, but I'm really looking into leasing a car as inexpensively as I can.

However, I've done a little reading and leasing sounds all well and good for my situation, but I really wanted some personal feedback from people about any little hidden BS they may be hiding. I don't want to get down to the Volkswagen dealership and spend a boatload of time going over something only to find out that I'm about to get screwed.

Here's a little info about me:

- 25 years old.

- Virtually flawless driving and insurance record.

Anything else that may be pertinent, just let me know.

What exactly should I look out for? Have you had good experiences with leasing? Are there hidden costs that I should be wary of? What are the pros and cons?

Thanks in advance

 

[Uncle Erik]

Leasing can get you into a vehicle at a lower price, but there are some drawbacks. There's always some trickery at the end of the lease. If you go over the mileage limits, it takes a bite. They often charge you for wear and tear, sometimes other stuff. There will also be heavy pressure to roll it over into a purchase, which will end up costing you more than buying outright. My biggest problem is that you end up with no equity - you're back at zero when the lease expires.

I think it makes more sense to buy. You'll get arguments about depreciation, etc., but you still have a running car (hopefully) at the end of the loan. Having a car without payments is huge. I tend to run vehicles for 150k-200k miles (longer if possible) so those years without a payment are wonderful. Insurance goes down and if you have a reliable car, maintenance costs are low.

If you really want to maximize value, buy a two or three year old car. You'll miss the depreciation hit and have low payments similar to a lease. If you buy from a dealer, you can often get a warranty on a used vehicle.

Another route to take is buying a classic/collectible car. Something like a 1967 Mustang is reliable, easily and cheaply serviced, you can upgrade it with modern brakes and suspension, and much else. Most importantly, it will probably appreciate and can be sold in a few years for more than you paid. I also think that C4 Corvettes are a great deal right now as well as some US trucks from the 1950s and 1960s. Old vehicles aren't for everyone, but they're the only way you won't lose money.

Anyhow, I'm not a big fan of leases. The dealer always finds a way to wrench a few more dollars out of you at the end. You also have to carry a hefty insurance policy, which must be factored into the total cost.

 

[Barbash]

+1

My finance was in a lease when we first meet and when she took it back they hit her with so many different penalties and for the last 4 months she owned the car she had to park it a lot of time because she was about to go over the alloted mileage.

I agree that you should look into a car that is a few years old with low mileage.

 

[KarthVader]

Buy used. Also, buy a car that gets good gas mileage.

 

[rm71]

I've had no experience with leased cars, but I'd go down the 1 -2 year old used car road. Look at fuel consumption, reliability and servicing costs.

 

[auk1124]

With a lease you pay and pay and at the end of the term you turn the car in, usually pay some more, and have nothing to show for it. With a financed purchase you pay and pay but at the end of your payments you get to keep the car.

Unless you need a company car for a business or have plenty of money and just want the convenience or something, I don't understand why anyone would lease.

 

[dklaiman]

I've leased in the past--I needed to through work. If you don't drive a lot, it might make sense to do so. You may want to look at a 39 month lease rather than the typical 3 year lease. That may result in a significant savings. You'll just need to do the math and see the real cost of the lease, including taxes, upfront costs, etc. You should also compare those costs to putting repair money aside and then into your current vehicle. I'm willing to bet that even those constant repairs are less than the true cost of a lease or a new/used vehicle. This link may be a good place to start your research:

http://www.edmunds.com/advice/buying/articles/47079/article.html

-Dave

 

[Commander Quan]

A vehicle depreciates the most over the first 2 years, so subtract the value of the car at the end of the lease from what it would cost new and that is what you are paying the dealer plus some. I would try to fine a 2 or 3 year old vehicle that has just come back from a lease. These will have lower miles because of the restrictions, and be it better shape.

 

[damooshki]

Many people, myself included, refer to leasing as fleecing. Dealers make the highest profit margin from leased vehicles even if they don't sell it to you after the term of the lease is over. Not to mention the "deposit" or "down payment" or whatever else they call it, but it's usually $2000.00 + or - up front charge that never goes toward the purchase of the vehicle. Then they try to sell you a car with not only no equity, but actually negative equity. The only thing worse than a lease would be to rent a car for two years from a rental company (which is basically what a lease is). I will echo what everyone else has said. Purchase a 2-3yr old vehicle with low miles that has a reputation for value and low maintenance. My wife has a 2005 Toyota Carolla she bought used nearly 3 years ago with 36K miles for nearly $10k less than new (almost half price) and zero problems with the car.

 

[mankini]

I agree a pre-owned dealer certified program car a couple of years old is a way better deal than a new car. Leasing is a great way to stay in a new car every 3 years. Additionally you do not pay tax on a leased vehicle. At the end of your car loan you are out of warranty and now own a 5-6 year old car. The repairs will surely come along.

I bought a program car which is now out of warranty and will be paid off in about a year. Its a great car (VW Passat) with a lot of life left in it. It needs a little work and is starting to rattle here and there (7 years old) but with the sound system turned on that is a mute point.

My gf leases her VW, what I like about that, is, like a rental car you never worry about a repair bill and normal wear and tear is allowed, just like renting an apartment. We take care of our things so are not worried about being hit for stupid fees at the end of the lease. Besides you carry insurance for the unexpected. At the end of the lease you can walk away, buy for the residual price or get a new leased car.

You have to pay something to drive a car either a loan or pay for repairs as they come along. Safety is first for us and whatever you drive be sure it is rated well from a safety perspective.

Do the math, bottom line spend your $$ how you see fit.

 

[BCatl]

Try your best to keep the Jeep Cherokee. How much would it really cost to fix it? Personally, that is the math I would be doing.

 

[jtb]

Try your best to keep the Jeep Cherokee. How much would it really cost to fix it? Personally, that is the math I would be doing.

I agree with the above. what would it really cost you to fix the Jeep? would it cost less then having monthly payments for a few years? There is nothing like having no car payments.

A few years back I needed to get a car to get around town and back and forth to work. I opted for an old 1997 saturn, paid cash (3k) and have only had to have minor work done including getting new tires. overall I might have put 500 into it. So I've paid about $20/mo (minus gas and oil).

No a new car is nice, but I'm purely a utilitarian when it comes to cars now in my old age (47).

I have leased before and it was very painful upon returning it. I had a truck and they even tried to charge me for a scatch or two in the bed! It's a pickup truck!!!

Anyway, I would definitely fix what you have or get a reasonable used car.

Good luck!

 

[BCatl]

+1 I'd say most cars could be fixed for only 4 months worth of car payments (or lease payments).

A paid for vehicle gives you freedom no matter what your age. Freedom to leave a bad job for instance. It may not give you pizazz to drive around in an older car, but pizazz is often overrated!

If I thought I REALLY needed another car, I'd try to buy a good used one. Leasing can work, but rarely in my experience.

 

[andrewckellogg]

How long will you keep the car for? If you want a car for a large number of years, it's nice to buy new, know the car has been properly maintained it's whole life and not have a payment after the first few years.

 

[Desdinova]

leasing is not bad.


those who are quick to denounce it know nothing about it.


You pay for what you use. That's it. Now this does make it easy for salespeople and such that will write-off what they use, but that is not the only benefit.


The car depreciates quickly in the first 3 years. Now let's not talk retail. Let's talk the reality of your trade-in after 3 years. On many cars you may only get 40% of what you paid when you trade it in. Cars are depreciating assets/expenses. They do nothing but cost you money. I bought a car in 2007 for $40k. Asked the dealer about returning it after 2-1/2 years to get something larger. The trade-in was $17k. AFTER 2-1/2 YEARS!!! Now the delaer would in turn sell the same car for $25k, So on paper, the car shows better than 60% residual after 30 months, but the reality in cost to the owner is closer to 45% DO NOT use the higher number in your calculations on lease vs purchase. SO in my case, if this vehicle were leased, I would have saved money.


So if you do not rack up a lot of mileage and like to have a new car every 2 or 3 years, leasing makes a lot of sense.



As far as getting hit on the back end, that is the fault of the lessee. Not being honest with yourself on yearly mileage or realizing that you are responsible for significant damage to the vehicle.


So if you put on a lot of mileage or beat the snot out of your car and don't care where you park it, then purchase it.


I have leased cars in the past and never had issues with end-of-lease costs. If halfway through you are driving more than planned, you can buy more miles at a cheaper rate than what they cost at lease end. Every car maker let's you do this. I don't abuse my cars and I am very cognizant about where I park. My cars don't get key scratches and excessive door dings.


It's like renting anything. Someone else still owns it and you are to treat it as such.



Purchasing works. Leasing works. But each depends on the individual situation. Do the math both ways to find which is the better option.

And above all, DO NOT listen to anyone who is gung-ho set on one versus the other without proving it to you with financial calculations. It's a lot of money to spend so don't do so on uninformed opinion.

 

[Obsessed]

If you decide to lease, try to put as little down as possible - preferably nothing more than the first month's payment.

 

[Desdinova]

+1 I'd say most cars could be fixed for only 4 months worth of car payments (or lease payments).

transmission is 3-4k. so if your payment is $1,000/month this may be true. For everyone not so.

Electronic climate control? $1500

Automatic 4WD systems? $2000

What about wear items?

Timing belts $500-$1000 depending on make

New tires $1000

New brakes on all 4 corners $1000

tie rods/ends and ball joints $1000

flush and fill every on-board fluid $500

not to mention if your area has a "drive clean" program that may require emissions system repairs.



After 4 years you could very well be spending 4 or 5k just on wear items.

3year walk-away lease you don't have to pay for any of that.

 

[Desdinova]

I have leased before and it was very painful upon returning it. I had a truck and they even tried to charge me for a scatch or two in the bed! It's a pickup truck!!!

but you still scratched it.

did your lease say that the truck had to come back with no scratches? I'm sure it did. If you knew you were going to use and scratch the bed you should have used a bedmat or boxliner.

Again, someone else owns the truck and wants it back the same as when it left the lot. Just as you would not leave a lot of holes in the wall or stains on the carpet of an apartment you rent.

 

[Go West Young Man]

If you think you'll want to get a new car in a few years, leasing makes sense. You give back the old car, probably get deal on a new one because the leasing company wants to keep you as a customer. You get no equity for your investment, but you're also not stuck with a 3 or 4 year old car that's worth pennies on the dollar you paid for it.

 

[jtb]

but you still scratched it.

did your lease say that the truck had to come back with no scratches? I'm sure it did. If you knew you were going to use and scratch the bed you should have used a bedmat or boxliner.

Again, someone else owns the truck and wants it back the same as when it left the lot. Just as you would not leave a lot of holes in the wall or stains on the carpet of an apartment you rent.

I got them to eventually drop the charge as "normal wear and tear". Yes, they do want it back in reasonably the same state, but that will never happen since it's been driven. Tires, slight dings from road debris you name it.
Leasing is fine for some people, not for me though. If I lease a car/truck and pay $400/mo for 36 months at the end I've just dumped out 14k and have nothing. Yes I've driven the car/truck for three years but now I just have to start all over. I don't even have a trade in.