Car lease

daboyz

Anyone here lease? Pro's and con's? Wifey brought it up to me late last night and I was just wondering if anyone has/had experience?

BlueFox

No experience. Everything I have heard over the years is unless someone else (employer, tax write-off, etc.) pays for the lease, it is like renting. In other words, just throwing your money away.

polrbehr

I have leased several vehicles and equipment over the years, couple of simple things to keep in mind off the top of my head.

Business or personal use? Leasing makes more sense for business purposes, though if you enjoy having a new car every 3 years, it's a nice way to be able to do it. Just don't get too attached to the car; I was advised years ago by a salesperson I was well acquainted with to never buy something you plan on leasing first, at least with regard to cars.
Also, you need to have a very good idea of how many miles you will be driving, they hammer you if you go over their limit. Also keep a budget for the end-of-lease payments they hit you with, also plan to have the car detailed before you hand it over (not 100% necessary, but that depends on how the car was taken care of).

You can also sell the vehicle privately at the end of the lease. If the miles are ultra low and the car is worth more than the residual value, it might be worth a shot. It depends on the car, of course, a Mercedes will hold it's value over a Hyundai... but
don't expect any room for negotiation from the dealer, they would rather you just turn it in.

daboyz

It would be under a business. I know the miles are an important part. I haven't really had the chance to research much yet.

tratliff

I am on my second lease. For me they have worked out well.

I was trading cars every couple of years and losing my a$$. This has decreased that cost.

Like has been said you need to have a good handle on how many miles you will drive and get that taken care of up front. Also you MUST take excellent care of the vehicle or your cost at turn in will change your mind.

I am very good with keeping cars in excellent condition. I have a 2015 Lexus IS350 F-Sport with 35k miles that looks just like the day I took ownership of it. Not a door ding, a wheel scratch....

One thing I have found is that you need to get a good understanding of the residual value of the vehicle at the end of the term. This is the biggest factor in the monthly payments. I mostly consider cars that hold a good resale value.

At this point I doubt I will purchase anytime soon. My next will be a lease and so will the wifes. But this means that I will forever have a car payment. If you pay it off and drive it for years then a lease might not be a good option.

heiney9

I would never lease a car longer than the warranty, you are basically renting the portion of the cost of the car you are using. Great thing about Illinois now, is you only pay sales tax on the part of the car you are leasing. Until last year Illinois was one of the few states where you would pay sales tax on the entire value of the car, which was a ripoff.

No equity with leasing. You walk away at the end of the term although now it's common to have a lease termination fee and they are absolute sticklers on condition. They will ding you for anything, like scratches, dents, paint chips, interior wear and tear even if it's what one would consider "normal use". Expect to buy tires or get dinged at the end if you lease 36M or longer.

It can be beneficial if you like having a new car every 3 years and not have to worry about maintenance costs. You don't take that big hit on depreciation when you drive a new car off the lot. You can have more car for your monthly payment. I think that's the big one for most people. You can drive a really nice, brand new car for about 50% the monthly payment about every 3 years.

As others have said the basic lease price you see advertised has a strict mileage allowance usually 7500-10K miles a year. You can opt for more mileage allowance, but the up front cost really start to increase past 15K miles per. Still cheaper to purchase extra mileage allowance up front than to get dinged at the end. Something like 0.60c per mile over your allowance. Driving 5K miles over your allowance = $3K at lease end.

It can be good, just depends on your lifestyle and what car you want to purchase.

H9

tonyb

Depends on the miles your going to put on it, the car, your lifestyle needs. Miles...most have 10-12k a year, not a lot if you do the math but you may not drive that much. They will hammer you for over mileage costs but sometimes look the other way if your a repeat leaser.

As a business, you can write off those costs, but also as an owned vehicle too with depreciation, upkeep. If you don't drive a lot, want to have a newer car every 3 years, don't mind having a car payment for the rest of your life....then leasing is for you.

Ricardo

Leasing for the lat 15 years. I don't go fancy and stay around $300 a month, never spend a dime on maintenance/tires/batteries/anything (Other than oil changes). New car every three years and peace of mind. Don't drive more than 12K/year.

Worth every penny to me.

daboyz

Right now we don't depreciate the vehicle, we write off the miles.

heiney9

Is this for business use? If so, you didn't mention that in the initial post. That changes things.

I know your wife is a Realtor so I'm not sure of the tax implications, but leasing may have an advantage since she is at the very least considered an independent contractor?

txcoastal1

If you are incorporated LLC etc. If you don't drive over the mileage per year or contract then leasing also keeps you claiming the vehicle as an asset and paying the asset tax.

daboyz

We do own rental property so we have a LLC Corp. Who knows when those will start paying off but that's another story. I told her to call the accountant to see what he has to say.

Emlyn

Leasing has benefits and incentives for the dealer as the credit for financing stays internal to the manufacturer rather than going out to a separate bank or credit union. They get points for that money coming in too but they'll still try to sell extended warranties and fabric and paint protection plans!

I have done both leasing and purchasing over the years. For my first lease in the mid-1990s Nissan had a policy of paying the annual personal property tax in Virginia. That saved me about $100 a month. Purchasing would have been more expensive in that case. I eventually bought the car at a low residual after 3 years. In Virginia now there's full sales tax when purchasing or leasing at initial deal, personal property tax every year of a lease or ownership, then sales tax again if the vehicle is purchased at the end of the lease. Of course, if buying a vehicle at the end of a lease there's also the dealer's "disposition fee" or whatever they call it added on.

My advice is leasing vs purchase is situation dependent and it pays to run the numbers and personal preference issues individually at that time. A purchase can be written off on taxes also. If someone always wants the latest technology in their vehicle like Apple Car Play and lane departure and automatic braking systems then they may prefer short term ownership through a lease. Find the vehicle wanted first, negotiate a price on it, then figure out if leasing is better than purchasing.

polrbehr

daboyz wrote: »

Right now we don't depreciate the vehicle, we write off the miles.

Depreciating can be a PITA, but if you plan to own outright it can make sense. Leasing has the advantage but there are still the inclusion amounts that change with each year.
Writing off the miles driven can make sense, but only if you weigh it against all the other factors, such as how much/type of gas you use, oil changes, maintenance, etc.
Using the expense method also allows you to write off the cost of your insurance, at least up to the percentage of business use of the vehicle.

tonyb

Go lease the lady a Benz and be done. If she's in real estate, she needs a classy car anyway....or Suv for those signs. A new Lexus RX350 would be nice.

Toolfan66

Payed my Camaro off in three years did the same with my Tacoma, right now I have no car payment, both purchased brand new..

The Tacoma will last me years, and the Camaro gets driven once in awhile during summer months..

I will take the no car payment for awhile...

mhardy6647

Leasing is pretty much a non-starter for us due to the number of miles we drive per year.

Mrs H's CR-V is the first car we ever financed. We always have just bought 'em and run 'em into the ground. We did finance the CR-V because the terms were so favorable (not zero interest, but it's very low; 1% I think). That said, I don't like the fact that it's not our car -- the lienholder has the title 'til it is paid for.

Obviously, a leased car isn't "yours", either -- I'd say that leasing makes no financial sense for an individual (despite the immense depreciation rate on almost all new vehicles) -- but for a business, it may well be another deal entirely.

afterburnt

You also have to worry about teaing up someone elses car every time you drive it

afterburnt

If you do lease pay nothing up front. Why make a down payment on a rental?

Toolfan66

Toolfan66 wrote: »

Payed my Camaro off in three years did the same with my Tacoma, right now I have no car payment, both purchased brand new..

The Tacoma will last me years, and the Camaro gets driven once in awhile during summer months..

I will take the no car payment for awhile...

Where the h3ll did payed come from?? Paid...

Sometimes I hate typing on my phone..

mhardy6647

Toolfan66 wrote: »

...



Where the h3ll did payed come from?? Paid...

Sometimes I hate typing on my phone..

It's better than trying to call someone on a typewriter, though.
Just to put things into perspective.

tonyb

afterburnt wrote: »

If you do lease pay nothing up front. Why make a down payment on a rental?

To lower your payments. Plus your paying tax on the vehicle upfront, least here in Illinois you do.

To lease a decently loaded car these days, your talking 400-500 a month....more if you want higher end luxury cars. In my state, a 50k car to lease and even if you had zero down, you still have to cough up the 5k in taxes and more for misc. fees.

You can buy the same car, 2 or 3 years old with low miles at almost half that 50k new price, use that 5k you'd normally throw at taxes on a new one as a down payment. At the end, you have something of value once it's paid off.

Your letting someone else take the hit on depreciation basically.

heiney9

tonyb wrote: »

You can buy the same car, 2 or 3 years old with low miles at almost half that 50k new price, use that 5k you'd normally throw at taxes on a new one as a down payment. At the end, you have something of value once it's paid off.

Your letting someone else take the hit on depreciation basically.

Buying a 2-3 year old car for 1/2 is a bit of a stretch Tony. I get where you're coming from and I always buy 2-3 years old to avoid that hit in depreciation, but 50% less than a new car? You'd have to show some examples.

I'm in the market for a new to me GTi -2015 model. New they were $28-33K. Most low mile cars are selling in the $21-25K range, hardly 50% off. Room for negotiation for sure, but if I could buy 2-3 year old cars for 50% of new, I'd be all over it.

H9

tonyb

I bought my Lexus at 3 years old, just about half price because it had more miles on it than the usual leased vehicle. You can find deals, not everybody is going to go that low.

Sometimes they are 4 years old too, people turn them in after a 3 year lease and it sits on the dealer lot for another year before they mark them down. Every situation is a tad different.

badchad

I've leased cars for about a decade now. I like the fact the car is always under warranty and that I get a new one every three years. I've had good experiences with it and will continue to do it.

mhardy6647

The (Golf) GTi models really hold resale value, it seems. Our son was looking for one during his car search earlier this year; any one he could find with a manual transmission was either very high mileage or well above his budget.

Derf

There is a reason dealers push leases--they make way more money on the "fleece" than if you buy a quality used car outright.

With a lease, as many have said, you will have payments the rest of your life. So let's figure out what that lease REALLY costs you. If you invest the $400.00 per month you might pay for a typical lease over the next 20 years, at an 8% rate of return, that $400 per month turns into $237,179.00 at the end of the 20 years. So those leased cars not only cost you the lease payments of $96,000.00 you paid out of pocket, but also the additional $141,179.00 you gave up because you didn't have the use of the money. You can buy A LOT of cars for $200k!

So, as Tony said above, why not buy a good quality, used car (pay cash--another discussion), and use it with the mindset you will take care of it and squeeze as much out of it as you can. The key here is, you also should invest that $400.00 for the next 20 years. At the end of the 20 years, you will have an asset worth something, and you will have $200k in the bank. Even if you have to replace the car after 10 years, you are still WAY better off.

If you lease, you can sleep quietly knowing you made the leasing company wealthy.

mhardy6647

Well... as a corollary -- it is essentially always better to invest money -- in something -- than spend it (i.e., buy something that depreciates) or just put it in a box under the bed.

As long as inflation is nonzero, money in a box just loses value over time (sort of like a car, if not at the same rate).

Something like Western Electric vacuum tubes or loudspeaker drivers or horns are examples of (probably) better things to do with cash than paying for a car or apartment lease, e.g.

Just sayin'.

tonyb

Derf wrote: »

There is a reason dealers push leases--they make way more money on the "fleece" than if you buy a quality used car outright.

With a lease, as many have said, you will have payments the rest of your life. So let's figure out what that lease REALLY costs you. If you invest the $400.00 per month you might pay for a typical lease over the next 20 years, at an 8% rate of return, that $400 per month turns into $237,179.00 at the end of the 20 years. So those leased cars not only cost you the lease payments of $96,000.00 you paid out of pocket, but also the additional $141,179.00 you gave up because you didn't have the use of the money. You can buy A LOT of cars for $200k!

So, as Tony said above, why not buy a good quality, used car (pay cash--another discussion), and use it with the mindset you will take care of it and squeeze as much out of it as you can. The key here is, you also should invest that $400.00 for the next 20 years. At the end of the 20 years, you will have an asset worth something, and you will have $200k in the bank. Even if you have to replace the car after 10 years, you are still WAY better off.

If you lease, you can sleep quietly knowing you made the leasing company wealthy.

Good point on investing that money, but, many don't have the discipline to do that and would rather have a new car every 3 years. To each his own though, we live and die by the choices we make in life, right ?

In my day, you bought a new car, you kept that sucker until the wheels were falling off. Unless you got a lemon that required more repairs than the worth of the car. Like I always say, it's not how much money you make, but how much you keep.

Compound interest used to be the biggest wealth builder, but you can't get that from a bank account anymore. You have to invest it and carry some risk. Leasing to me, doesn't allow for wealth building unless your a business and can write it off. You have to use at least some of your disposable income working for you, not against you. Just sayin'....I'd rather have the 200k in a retirement account than a new car every 3 years, but that's just me.

lightman1

When I get home, I'm leasing a new car. As most of you know, I spend a lot of time on the road in the company truck.
Plus, it's a new model that was only introduced last model year. Bugs and glitches would be taken car of by the dealer at no cost to me. Just your usual maintenence is all that's required of me.
If I feel that it is a car that I can squeeze a few years out of at end of term, I might purchase it.
And it's just one sexyass sedan that makes me more appealing to the ladies.

lightman1

TonyB.....I submit for your approval....