I've been trying to theorize what's more cost-effective: buying a car, or leasing a car? My immediate reaction is that obviously buying is a better option because you OWN the car. It's not just throw-away money at that point. However, cars depreciate. If the depreciation value is as much as the leasing cost over a period of 3 years, you haven't really saved any money by buying over leasing, have you? And with leasing, you get a new car every 3 years. Does anyone have any thoughts, experience or knowledge on this? Any numbers for me to consider? I imagine the response here will be primarily "Buy", but it'd be good to hear some pro-Lease arguments as well.
Right now lease interest rates (depending on car brand) are much worse than purchase rates and they are hitting residuals very hard so the payments are higher. A quick example: 2011 Jeep Grand Cherokee, lease rate offered was 7.9% and that is with an excellent credit score. Interest rate on purchase around 4%. The lease payment was nearly $200/mo higher. They were claiming it would lose something like 55% of it's value in 3 years. As they say, your mileage may vary. Price it both ways and see.
I always thought it would be a better idea to purchase a practical, efficient, sturdy car like a Civic, Corrola, etc. while leasing a luxury car would be the better way to go after you've paid off the ho-hum sedan and are looking for something more fun with sex appeal but don't want to pay the high maintenance costs.
I recently decided to lease. I liked the thought of having the opportunity of getting a new car in 3 years. I was there for 6 hours negotiating, but ended up with a 2011 Camry for $250/month. One of the things I told them I wanted was 15k miles/year instead of the usual 12k, so I'm not too worried about going over. I've only driven about 2500 miles since October. I was paying $350/month for my 2005 Mazda Rx8, and a good portion of that was interest, not to mention higher insurance and spending more on gas. I suppose that doesn't really matter in your case. One thing to keep in mind when it comes to leasing vs. buying is that when you lease you very rarely have to spend money on repairs. Usually the lease covers the car for at least the first 2 years, not to mention the car is usually new and you have less problems with it. Depreciation is another thing to look at, but in my opinion the first thing you need to ask youself is if you can stay below the mileage limit because that is where they will get you. Another thing to keep in mind is that when your lease is up, you have the option to purchase the car. Pugs
As I said in the other thread, it depends on how long you keep cars. If you get a new car every 3 years and never pay them off, then leasing makes sense. If you plan to keep a car for 5+ years, then it makes more sense to buy. I'm leasing my current car, and my 36 months is up in November. I still haven't decided if I'm going to lease another car, buy a used one, or just purchase my current car. The nice thing with leasing (at least on BMW's) is that all scheduled maintenance is included for the duration of the lease. I haven't had to pay a single cent of maintenance in 3 years, which has been really nice.
Mileage definitely will not be an issue as I live in the city. For example, my 2002 Subaru that I've been driving for 7 years has only 33,000 on it and that includes several trips to/from college a few years ago (which was 1000 miles away). I'd guess I do around 300 miles per month. I suppose a little more context is necessary for what I'm looking at: (1) Car: Likely a BMW 3-series, Lexus IS series, or Audi A4 (I don't know which yet). (2) Location: Inner-city Houston so low mileage. Relevant question: what if I move to, say, Washington state during the lease term? (3) Credit/driving record: Good credit (790), spotless driving record except one ticket going 35 in a 25 about 6 years ago. That said, if I bought, I could make a good chunk of the down payment, if not pay for the car outright so buying wouldn't have much interest. I read in the other thread that Texas taxes on the whole car, too, not just the payments which kind of sucks. Yet, not having to pay for maintenance or worrying about a mechanic screwing you, knowing where to go to get your car maintained, etc. is a huge plus. I hate the hassle of it.
I think Royals Ego nailed it in that other thread. Leasing = renting, and is for the poor or rich. If you have a lot of disposable income and have other priorities squared away (maxing out a 401k, IRA, etc ... no CC or loan debt, easily paying mortgage and bills and a lot leftover), go for it. Then again, if you have that much disposable income each month, you might be better off saving and paying cash for a new car to avoid paying interest. With a lease, there is no end in sight for those monthly payments. That's why I could never do it. But you sound like you might have the means to where $250 isn't really needed elsewhere. The best deal would really to buy a 2-3 year old used car. That eliminates a lot of the depreciation factor, but of course you're not getting the latest and greatest either.
This is just my opinion, but I think you're a great candidate for leasing, especially if you're only driving about 300 miles per month. Even if you drive across the country one month, as long as you're below your 36k or 45k after the 3 years, you're ok. To respond to some of the things you listed: 1) Those are all great cars, but for as little as you're driving, I think I would rather save the $200-$300 (I chose a big range because I really don't know what those would lease for, so I'm basing it on the price I got for mine) and get something more affordable. We all want those top of the line cars, but unless you're going to be out and about to "show it off" quite a bit, I'd rather just stick with something simple, cheaper all around (price, insurance, gas, etc.), and probably just as reliable. 2) I'm not sure what you're asking about moving to Washington State, but I'll take a guess. I would assume they have dealers over there as well, and you can take the car to any of their dealers, not just the one you leased/purchased it from. 3) Your credit seems almost flawless. If you lease you don't have to take out a loan since you're basically renting the car. If you decide to purchase the car once the lease is up, then you may have to take out the loan. One ticket in 6 years is about as good as I've heard. I average about one per year. They come off your record within a few years (I think). I would bet money that that one is long off your record. If you lease, you can also put up a down payment to lower your monthly prices. Keep that in mind. First negotiate a price you like, then ask them what the price would be if you put a certain amount down. Yeah, not having to worry about repairs is a big plus. By going through Toyota they also gave me some extra perks like roadside assistance. They tried to do 2 years, but another thing I negotiated was 3 years so I had it for the full lease. I was also take some little stuff off of my insurance like towing, although it was a very small amount, but I think everyone on here knows I try and save all I can. Pretty much always having a warranty and that roadside assistance really makes a difference, in my opinion. Pugs
Probably not telling you anything that you haven't been told in this thread already, but... If you only keep cars 3-4 years and don't drive them after they are paid off, leasing makes sense. HOWEVER, the issue with a lease is that once it is over, if you want another lease, you have to make another down payment on the new lease (let's say $2k-$4k), so you have to have money saved The way to accomplish this (should you choose to lease) is to find a car that you can afford to BUY. Then, determine what you car payment would be if you bought it. Lease the vehicle, then put the extra money each month (diff between buying and leasing monthly payments) into a savings account to use as your next lease downpayment. Where people get into trouble is that they lease a car that they couldn't afford to buy and pay the max amount they can afford monthyl. All fine and good until your lease runs out...
It sounds like you hardly use your car. I'd probably opt to spend money on things I would spend more time enjoying and spend less on a car that I didn't use that often. As far as car buying, I chose to put as little money down as possible on my current car. I was getting 0.9% so it was an easy call. Not sure what financing is available on the autos you are considering. As for leasing, I've never done it.
