5 Car Lease Myths

Mark Solheim over on Kiplinger thinks leasing cars has a bad rap, and that more people should be doing it. “If you know what you’re looking for and negotiate smart—and get over the five myths below—leasing can be a good deal.”

  • Myth 1: Buying is cheaper than leasing — as a rule, this is usually true only if you “keep a car well past the day the loan is paid off (or you paid cash to begin with).” If you trade in the car before the loan is paid off, leasing may be a cheaper route.
  • Myth 2: It’s nearly impossible to negotiate a good buy — in fact, you can negotiate a better deal if you learn some of the basic terminology (like capitalized cost, money factor and residual value) and ask the dealer to show you several deals from different banks.
  • Myth 3: Only businesses get tax breaks — Solheim says individuals can get them, too: “In most states, you pay sales tax only on the monthly payments, not the sale price of the vehicle.” The exceptions: Arkansas, Maryland, Minnesota, Texas, and Virginia.
  • Myth 4: You may have to pay hefty fees when turning in the car — Solheim just says that you can negotiate a higher monthly fee for a larger mileage limit if you need it “and still save money.”
  • Myth 5: If you want out early, you’re stuck — there are now websites where people who want out of leases early meet up with people who want short term lease, so everybody wins!

Read the full article at Kiplinger.

“Five Myths on Leasing a Car” [Kiplinger]
(Photo: Getty)

Comments

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  1. sven.kirk says:
  2. ssaoi says:

    You win until you pay $600 a year in property tax. Boooo.

  3. Illusio26 says:

    #1 alone should show you buying is better than leasing. If your trading in your car every 2-3 years, you either have lots of disposable income or are financially stupid.

  4. DJC says:

    Spellcheck: Texas, not Teas

  5. Corydon says:

    “keep a car well past the day the loan is paid off (or you paid cash to begin with).”

    Honestly, I can’t understand why would wouldn’t buy a car and drive it into the ground. Leasing only makes any sense if you buy into the auto maker’s propaganda that you need a new car every two or three years.

    Meanwhile, I’ve been driving the same vehicle since 1999, and haven’t had to worry about a car payment since 2002. The biggest expense so far has been a rebuilt transmission—far less than what the payments would be on a new car.

    And the great thing is, by not making a payment now, that money goes into savings instead so that when it finally is time to get something new, I’ll be paying cash.

  6. DeltaPurser says:

    OK… but what about the fact that after all those payments you have NOTHING, NADA, NIENTE, ZIP, ZILCH, NICHTS… Renting vs. Owning. Only one way to look at it for me.

  7. privatejoker75 says:

    the people who are against leasing fail to realize that cars are DEPRECIATING ASSETS.

  8. snoop-blog says:

    @privatejoker75: not everyone looks at a car as an investment. if you are the original owner of a car that is 15-20 years old, it’s safe to say you don’t care how much your car is worth, it’s just something dependable that gets you around.

  9. privatejoker75 says:

    @DeltaPurser:

    Back in the day I leased a 2002 Subaru WRX for 0 down and $300 a month for 36 months. 3 months before my lease was up I found a buyer. My buyout was $12,000. He bought it from me for $14,500 (only had 25,000 miles on it). I recouped about 8 months of those 36 months of payments. Not bad for having NADA, ZILCH, NADA etc.

  10. nweaver says:

    No, we realize cars ARE depreciating assets, and then when 1/2 of the depreciation is in the first 3 years, but it actually has real usable value for 10+, paying 3 years of depreciation every 3 years SUCKS.

    Yeah, I could “afford” a cheap BMW if I had leased it instead of buying the Mazda hatch. But after 3 years, I’d have had to turn back the BMW in. The Mazda hatch is paid outright, and should be good for another decade before I replace it.

  11. privatejoker75 says:

    It’s not about leasing something better because you can’t afford the payments. For me it’s piece of mind. I’ll pay $300 a month for the rest of my life in exchange for never having to worry about repairs and being able to thrash the hell out what is basically a rental and getting something new every 36 months.

  12. econobiker says:

    Sarcastically I ask: ” Why is it called ‘leasing’ versus ‘renting?’

    The problem is that people looking for the cheapest deal get shafted on leases. These are not the people who would be reading Kiplingers or Consumerist. Funny to read the article and see the comments below.

    And item #5 is a complete cop out.

  13. snoop-blog says:

    the best advice, (i work in used car biz) is to find a car that you like so much, you wouldn’t mind driving it for the next 10 years or more. if you can’t see yourself driving it for 10 years, don’t buy it. sure there will be new model version of the car you bought, but quit camparing. you’ll never fully be able to keep up with the industry anyhow.

  14. Keter says:

    @PRIVATEJOKER75 – Yes, cars are a depreciating asset. So why on earth would I want to pay for the topmost part of that depreciation when I can buy used and let some other sucker pay it for me???

  15. econobiker says:

    @privatejoker75: And you have made the exact arguement I was thinking about why NOT to buy a leased car.

  16. snoop-blog says:

    cars are more of a status symbol nowadays. it’s all about the image. if you are worried about what other’s think of you, maybe getting a new car every 36 months is for you. but to me, as long as my car is quiet, and runs good, i could care less how new it is.

  17. sir_eccles says:

    Buy used!

    Or Pre-owned or slightly soiled or whatever the latest euphemism for it is.

  18. ClayS says:

    @Keter:

    Because some people consider a car to be a status symbol, even a reflection of their own self-worth. Car dealers absolutely love these folks. They need to be driving a new vehicle every three years. For them, leasing may be the best option. They probably aren’t reading The Consumerist though.

  19. johnva says:

    @privatejoker75: If you buy a dependable car, and take good care of it, then this “peace of mind” factor is not a real issue. It’s possible that your car will give out, yes. But in that case you can either fix it for much more cheaply than buying a new one or you can just buy a new one. If you can’t get your car to last more than 5-7 years, you’re doing it wrong somehow. Either that or you are one of those people who drives a ridiculous amount of miles per year.

  20. snoop-blog says:

    @ClayS: thief! just kidding. my post above yours says exactly what yours did.

  21. Geekybiker says:

    For people who already trade in their car every 2-3 years I think the only real thing against leasing is its complexity. That is there seem to be alot more places where a dealer can change the numbers just a little bit to make a bad deal sound like a good one.

  22. copious28 says:

    The comments on the Kiplinger site really detail out the pros and cons. I think this is definitely different for everyone. In Texas, we dont get the sales tax break AND we drive high miles. I can honestly say that I am not the best with taking care of the outside of the car (mechanically, no probs), so buy and hold is my strategy.

  23. snoop-blog says:

    i don’t like being told how far i can drive it. (which is the way i look at it when you stipulate how many miles i can drive.)

  24. JackAshley says:

    Do a cost analysis of leasing vs. renting. Say leasing saves you 150 a month. If, for the 36 month least, you actually put away that 150 a month, you now have $5400 dollars. If you invested it, you might even have 6000.

    Thinking this way, if you lease 36 months, you then have the down payment needed to buy your next car :) (did this myself, had the money i “saved” by not buying put into a mutual fund, then bought a car after the 36 months is up).

  25. ClayS says:

    @snoop-blog:

    I know, when I hit the return key to post it, yours was a couple of posts ahead of mine. Apparently, I type too slowly.

    Anyway, my Honda snowblower is worth more than my Honda Accord. I bought the snowblower new.

  26. privatejoker75 says:

    @Keter:The average american keeps a car for 5-6 years. What’s the difference if i use the first 50% of the depreciation or the last 50%? My 50% is warranteed

  27. snoop-blog says:

    @privatejoker75: most new cars have excellent warrantees.

  28. Parting says:

    I still prefer my 6K car, that I will use for the next 5-6 years. It will serve as good, and with good care, even with repairs it will be MUCH more cheaper than leasing. (Though it’s a Civic, and these ones last a looong time.)

  29. friendlynerd says:

    Another place you get hosed on leasing is insurance. If you keep your car past the point it’s paid off, you can set much higher deductables or do away with collision/comprehensive entirely. With a lease you can’t ever do that.

    This, of course, is assuming you are a driver who doesn’t tend to crash.

  30. johnva says:

    @privatejoker75: Because the depreciation is steepest in the beginning?

    The main financial gain from buying vs. leasing occurs, as the article says, when you get the keep driving the car long after you are no longer paying for. A lease might well be cheaper if you are buying a new car all the time, since you would be making payments anyway.

  31. winstonthorne says:

    From a guy who used to sell cars – this article is spot-on, EXCEPT: if you drive more than 18,000mi/yr, the additional mileage charges will turn the equation on its head (even when you factor them in up-front) and buying is the way to go. I’ve done many, MANY workups with this and in every case, without exception, 18,000 seems to be the magic number for extra annual miles on your lease. Under 18K, lease. Over, buy.

  32. winstonthorne says:

    @winstonthorne: CORRECTION: not “extra” annual miles, just annual miles. When I’m at work I’m motivated to type faster than I think.

  33. snoop-blog says:

    depriciation is sometimes helpful, if your vehicle is used for you business. mega tax break.

  34. mopha says:

    Long time lurker, first time poster.

    Much has been said about the “image” people are trying to set, but I have to disagree on that part. For me, safety is #1. If I know that my family has a better chance surviving a crash in a recent model car then an older one, I do not see, that getting a new car is all that bad. I rather have a lease payment (and with our local car dealer, free maintenance for life), then saving a few bucks. Like a poster above said, cars are depreciable, and in my opinion, the worst and unavoidable investment anyone can make.

  35. snoop-blog says:

    i have a hard enough times keeping track of the minutes i use on my cell phone, i don’t want to have to do the same thing with my car also.

  36. Illusio26 says:

    @winstonthorne:

    I don’t think your math quite works out. With a lease, you are always paying. When they lease is up in 3 years, time to lease again. You have nothing. When you buy, the car is yours until you get rid of it.

    My last car I drove for 7 years before someone smashed into me. I paid about 8k for it. Paid it off in 4 years. Thats 3 years with no car payments. (numbers are estimates here) I paid around $200 a month for 4 years= $9600. Which means over the next 3 years I saved around $7200 by driving a paid off car.

    If I had leased a car for those 7 years, say for $150 a month, over the course of 7 years, I would have spent $12600.

    No matter how many miles I would have driven it, I still made off better financially.

  37. mac-phisto says:

    i would say lease an audi, buy a honda.

  38. JustAGuy2 says:

    @darkjedi26:

    Again, that’s fine, if you want to drive a 7 year old car. For someone who wants to drive nicer, newer cars, leasing can be a good deal. Certainly, buying used and keeping a long time is the most cost-effective way to get transportation, just as living in a studio apartment is more cost-effective than living in a one-bedroom, and buying groceries is more cost-effective than eating out. Question is always, what do you want to spend the money on?

  39. @snoop-blog: “the best advice, (i work in used car biz) is to find a car that you like so much, you wouldn’t mind driving it for the next 10 years or more”

    Or just don’t care what you drive as long as it goes. :) Not only do I not care what my car looks like or what name is on it, I kind-of can’t figure out what’s wrong with people who DO. (Like, oh, my husband.)

    The only reason I can see changing cars before this one is dead as a doornail would be if we had a pretty large family before my car dies (unlikely), as I drive a compact.

  40. bbbici says:

    You cannot “thrash the hell” out of leased cars– they have to be returned in nearly mint shape, with decent amount of tire tread, no significant dings, window cracks, etc. Also, they have to be maintained according to schedule. Before they are re-sold they are brought back to tip-top shape.

    i sold mercedes a few years ago, and i can tell you that modern cars with all their electronics are not something you will want to fix with your own wallet. Electronic issues are pernicious and tenacious and will drive you mad.

    You only lease a new car for the length of its comprehensive warranty, no longer.

    Lease rates are also usually a lot lower than finance rates.

    I’ve done the math many times folks, considering many variables. Leasing two new cars over 8 years is about 0-10% more expensive than a 60 month loan to buy one car and keeping it 8 years.

    by the way, it is predicted that most large consumer items will be leased in the future, as it gives companies incentive to design better products or design them for easy disassembly and recycling.

  41. balthisar says:

    People don’t purchase cars just because of finances, otherwise we’d all be driving tiny little cars. Also, many of us make all sorts of changes every year: New dinnerware. Different wall art. New drapes. Why should you dump on someone because they want to drive a new car over 2 to 3 years? And c’mon, it’s not all status, we’re talking VW’s and Hondas and Fords for most of us, not Porsches or Mercedes.

    (My paid off car is 6 years old.)

  42. whirlybird says:

    I leased a car in South Carolina, where auto sales tax is capped at $600. When I moved to Texas, several years later, I had to pay Texas the full sales tax on the value of the car when I leased it (less the $600 I paid in SC) before they would issue a registration.

  43. snoop-blog says:

    @bbbici: so if i bought a NEW mercedes, it wouldn’t come with a warantee that covers the electrical system?

  44. coan_net says:

    My wife was one of those people who felt like she should always be paying a car payment. A couple of year ago, she started to tell me that we needed to go car shopping. I ask why? She said because her car is almost paid for so it is time to get a new one.

    What I say? Well a newer car will be under warranty and stuff like that.

    Well I finally got her to believe that we did not need a new car – we own both our cars, and we should drive them into the ground before we get a new one. And for the past 2 years, no car payments – and probable a total of $500 for engine work that probable would have been covered under a warranty if we had one – but 2 car payments that we no longer make covered that cost pretty quickly.

    Car Lease? Even after reading the above, it still makes no sense to me why it would be better then buying. (except for those few who like to always be driving the newest thing) – but I would hate to see them lose their income, and then all of a sudden lose their car too since they can’t make the lease payment…. if they bought it, at least they would still have a car….. probable those same people who decided to risk their house payment on a non-fixed rate loan and are now crying about it waiting for the government to bail them out of their own mistake.

  45. snoop-blog says:

    @balthisar: drapes, wall art, dinnerware, its still mostly about status.

  46. snoop-blog says:

    @balthisar: also nobody leases drapes and dinnerware, although maybe wall art….

  47. spanktastic says:

    Ask for the exact calculations on how those lease payments are calculated. Check to see if you’re actually being charged more based on how much cash you put down. Leases have got a bad rap deservingly so.

  48. Illusio26 says:

    @balthisar:

    Keeping up with the Jones’.

    Thats pretty much why debt is running rampant in our country.

    And getting new drapes or dinnerware isn’t something most people would finance over the course of a few years. Your talking about making a commitment to continue spending thousands of dollars every year. I’d love to have a new car every few years, but financially, it just makes zero sense.

  49. mac-phisto says:

    @bbbici: i would lease a mercedes. they’re not fun to get fixed. but then, i would never drive a mercedes. personally, i think they’re crap. bmw makes a much better vehicle for less. i would buy a bmw (if i had $40,000 to blow on a car, which i don’t).

    your “prediction” is interesting…i wonder who exactly came up with that – the consumers or the manufacturers?

  50. Curiosity says:

    I have to say I really like not having car payments. The question is one of practically versus image.

    Why do most people have a car? So that they can feel better about themselves? Or is it to get around?

    Personally I was always a fan of finding an honest good mechanic (hard to do) and buying a classic car like an AC COBRA perhaps a bit modified (or even a practical car is good).

    Sure you forego things like GPS, but then I actually know where I am, and can install better than manufacture components if I want to upgrade (can you say nitro?).

  51. MrEvil says:

    Do you know how much money you aren’t spending keeping a paid off car? First of all, no payments, second you can drop to pure liability insurance. Your regular expenses after that are gas, tires, and oil changes.

    Changing cars as often as one changes wardrobes is for those lazy bastards that can’t be bothered to pop the hood, let alone check the oil and fluid levels.

    My current daily beater is my ’98 Ford Crown Victoria Police package. I bought it at auction for $1449. Costs like $15 a month extra on my insurance. It’s still got under 100,000 miles on it. If I make sure its happy with plenty of oil, regular oil and filter changes, good coolant, and transmission fluid. I could probably get 300k out of the thing. Yeah sure, one major thing goes wrong on the car and I’ll probably spend more in mechanics’ bills than I paid up front for the car. However, any repair bill from a reputable shop will be less than the interest on a new car.

    @bbbici: Of all the newer EFI cars I’ve owned with complicated ECUs and all that jazz, the electronics seem to be the most reliable parts on the car. The parts that end up having to be replaced are the typical mechanical parts. My ’92 Ford Explorer has 220k on it and probably the worst problem I’ve had to worry about on it was an over-fueling issue that took no more than $200 in parts and a Saturday to replace my fuel pressure regulator, plugs and wires, and thermostat. I’ve never ONCE had to touch the ECU on that truck. In fact I’d say that these modern engines are a slight bit better at telling you what’s wrong through their ECUs. And O’RLY and Auto Zone will read codes off any OBDII car for free.

  52. StevieD says:

    My 7 year old, 66,000 miles, classic American brand car is running quite well. Wanna bet I make it to 100,000 miles?

    Why trade it in every 2-3 years? Hells Bells at that point the new car smell is hardly gone.

  53. GearheadGeek says:

    @darkjedi26: I’d be willing to bet you that LOTS of people who redecorate frequenty (new drapes, dinnerware, etc) “finance” their purchases indirectly (e.g. by not accelerating the pay-off of their car, credit cards, house, student loans.) It’s all connected.

  54. erratapage says:

    I leased a car back in 1996 with a three year term. The car was worth about $13,500 when the lease began. I paid about $214 a month for the duration of the lease. I then negotiated a $5,600 purchase of the vehicle. The end result was that the total cost of ownership ended up to be significantly less than had I paid cash for it in 1996. I then drove the car for another five years, before selling it for $2,000. It is still on the road today.

  55. GearheadGeek says:

    The lease for consumers is a way for people to always have a new car without having to THINK about how much they’re spending on it. They become numb to the monthly car payment, and probably increase it a little every new-lease cycle. They pay the “lease inception” costs with that “free money” they think they’re getting from the IRS and always have something shiny and new.

    I’m hoping to keep my Legacy GT Wagon for 8 or 9 years, since they’re not selling any more in the US.

  56. mac-phisto says:

    @MrEvil: the problem is even working on newer cars. tried to do a tune-up on an ’06 grand am for a friend last weekend after she was quoted ~$200 by a mechanic. now i know why he was charging so much…3 of the plugs were on the backside of the engine waaaaaay down w/o any room for a standard socket wrench. seriously, pontiac put them about 4 inches from the bottom of the engine block. plugs/wires on my 99 toyota? 20 minutes tops. this job took me 3 hours (& i popped a half-bottle motrin that night for my back).

    i always look for early 90’s vehicles in good shape…it seems most of the manufacturers shifted their designs in the mid-90’s making it virtually impossible for your shade-tree mechanic to do his/her work.

  57. Illusio26 says:

    @GearheadGeek:
    Yes, and we all know how smart that is…

  58. privatejoker75 says:

    @bbbici: they look for superficial wear and tear, they don’t look at the fact that i act like every red light is a 0-60mph test

  59. privatejoker75 says:

    @whirlybird: Texas has no state/local wage taxes. That means that if you itemize your deductions come tax time you can deduct the sales tax on EVERYTHING you bought during the year provided you keep your receipts

  60. privatejoker75 says:

    @mac-phisto: that pontiac engine has been around since the early 90’s. It’s never made sense to me. you basically have to tilt the engine back to get those other 3 plugs out…on certain models like early ninties grand prixs

  61. WV.Hillbilly says:

    Leases are a way for people to drive a car they couldn’t afford to buy any other way.

    Kind of the subprime part of the auto world.

  62. AD8BC says:

    I don’t really like car loans, if you don’t have the money saved for a vehicle you can always get by with an older car and save up until you do — drive a beater and pay yourself the car payment each month and you will be amazed how fast you can save up and pay cash for a nicer car…. That being said, I hate the idea of leasing even more. Unless I am renting a car (which i do frequently for business) I don’t like to drive something which I do not own. For one thing, if you like to beef up the audio system you will have to revert it to OEM prior to returning the lease. I usually install one or two ham radios in my cars and that sometimes involves drilling holes and adding wiring, another no-no for leases.

    My truck, which I own outright, hardly gets driven 6000 miles a year (being as I travel so much) so I would never get my mileage out of a lease… and my wife drives so much for her job (she does home health care) that she puts 20-30K on her car in a year easy (it’s nice that she gets reimbursed for mileage). So leasing would be way out of her league as well.

    I really enjoy the video at this link: [www.daveramsey.com] it’s from Dave Ramsey and it outlines how well you can do buying cheap used cars and saving the payments for yourself… it’s worth a look!

  63. AD8BC says:

    @WV.Hillbilly: A great analogy!

  64. selectman says:

    @JustAGuy2: My thoughts exactly. Enough with the “you are an idiot if you [lease | buy new | buy used]” arguments.

  65. barty says:

    @privatejoker75: That only matters if you’re the type that’s trading in a vehicle every few years. If you keep them till the wheels fall off, resale value doesn’t matter.

    If your primary concern is the initial depreciation, buy a vehicle that is a year or two old and pay cash. Save those $300 a month car payments for the next car or to repair the one you’ve got. 100k miles is just breaking a car in today, you’re not likely to run into any expensive repairs for another 60-70k miles if you maintain your vehicle properly.

  66. bbbici says:

    @snoop-blog:

    Yes, the warranty covers electrics on a new car. That is my point. If you BUY a car, you will be responsible for repairing annoying, mysterious, and hard to fix electronic issues when the warranty expires. If you LEASE a car while it is under warranty, then you never worry.

  67. bbbici says:

    @snoop-blog:

    actually, people do lease furnishings. even carpet.

  68. mac-phisto says:

    @barty: that’s what i do. had an 89 toyota camry that finally retired at 480K. bought an 85 toyota corolla for $400 & ran that to 175K before “extensive brake work” made me junk it. bought a 93 honda accord with 148K on it & ran it to 288K before i parked it into the back of a pickup truck. wish i hadn’t – i loved that car. now i’m running a 99 toyota solara that i bought at 88K…i’ve got 150K on it now & it’s still purring. still tear up every time i see an accord though.

  69. bbbici says:

    @mac-phisto:

    My “prediction” about many consumer items being leased in the future is not a prediction, it is already happening. Interface leases office carpeting, telephones are leased, Germany is mandating home appliance leasing, etc.

  70. AD8BC says:

    @mac-phisto: My favorite was my 89 Ford Festiva. I abused that car — I moved back and forth to school four times a year and loaded it until it couldn’t clear speed bumps. Bought it for $3000 in 1994, it had 30K miles on it. Paid off the loan early and just after that I hit a deer. A big one.

    Deer: 1. Festiva: 0.

    But boy I loved that car.

  71. Notsewfast says:

    @WV.Hillbilly:
    I disagree with that sentiment. I leased a BMW 3 series for 36 months a few years ago. I could have afforded to buy it, but I went with the lease for the simplicity. They called me whenever it needed service and at the end of the period, I got to walk away. My monthly payments were reasonable and I knew that I had a promotion coming in the next 30-36 months and would want a new car. The 3 Series was not a car I saw myself keeping for an extended period even if I had purchased it, so I went for what made sense.

    When I bought my A8L, I decided to buy it because I’m pretty sure i’d like to be buried in the damn thing.

  72. Pancakes?? FRENCH TOAST!! says:

    Arkanasa.

  73. trujunglist says:

    Thanks for the advice. I’m trying to figure out what to do about my current car situation and need all the options and help I need. My car is a ’00 but is definitely showing the signs of imminent failure; just last week I was turning on the dome light and the whole assembly basically exploded, spraying parts all over the car and leaving me completely bewildered as to what had happened for about 10 seconds while I sat there in shock. 1 day later, the entire inside lighting goes out. Probably just a fuse, but still. That, combined with what a mechanic described as “6 months before it dies” leads me to believe that I’d better figure something out soon.
    I want a 2008 Dodge Challenger… guess I can always dream.

  74. snoop-blog says:

    @bbbici: people who lease furnishings?! not practical people. maybe rich, or very stupid……probably both.

  75. ethanrik says:

    I’d never buy a car…I get bored too quick. Give me a 36 or even a 24 month lease anytime.

  76. burninator says:

    One reason I felt leasing might have been a option (I ended up buying) Is we are on the cusp of a automotive revolution. For those of us driving a long distance, the next 10 years of automotive fuel development will be crucial. If a plugin Hybrid becomes available that would save me a lot in commute cost, it would be nice to be able to purchase that and 3 years from now seems the right timeframe for that to happen. Being stuck in a 10 year purchase is less desirable in this situation

  77. SuperJdynamite says:

    @privatejoker75: “Back in the day I leased a 2002 Subaru WRX for 0 down and $300 a month for 36 months. 3 months before my lease was up I found a buyer.”

    I bought a 2002 Subaru WRX with 3000 miles on it for $19k. With $3000 down I paid $446/month.

    “My buyout was $12,000. He bought it from me for $14,500 (only had 25,000 miles on it).”

    $12k? Edmunds.com says my WRX (with 42k miles on it) is now worth $11k.

    “I recouped about 8 months of those 36 months of payments. Not bad for having NADA, ZILCH, NADA etc.”

    I still have my car and if my calculations are correct I’ve had it roughly three years after you cashed yours in. If I sold it today for $10k I’d recoup about 22 payments.

  78. Silversmok3 says:

    Bunk.
    Heres why :
    Without using ‘special math’, or weird financial calculations,heres a comparison of lease vs buy using IDENTICAL interest rates and loan terms:

    When you finance a car,at the end of the loan term, you keep the car.
    When you lease,to keep the car, you must finance it again. Needless to say you pay more by financing twice than just once.

    Not to mention the inherent risk of financing something that technically doesn’t belong to you.

  79. privatejoker75 says:

    @SuperJdynamite: the difference is my total cash outlay was about $10,000 and i got $2,000 back. $8,000 over 3 years

  80. snoop-blog says:

    @burninator: hybrids aren’t the answer. they are just a scratch in the surface. if you went out and bought a hybrid today, in another 3-5 years there would be something even better than that. what they don’t tell you about the hybrids is what you need to be worried about. sure you hear the gas milage and think, wow that would save a lot of money, but those 6 or more batteries in the thing, are about $1000 a piece, and batteries aren’t ever lasting, they can only be charged “x” amount of times before they are useless. also, who is going to work on your hybrid? not your local shop (unless its minor work). screw the hybrid. hold out for the hydrogen powered car.

  81. mac-phisto says:

    @ad8bc: really any deer compared to a festiva is a big deer, no? lol.

  82. DeltaPurser says:

    @privatejoker75: You lucked out… Most people I know of don’t have the same “luck” but end up upside-down on their cars when the lease is up… Also, don’t forget the charges per mile over 10,000 per year… Talk about rip offs!

  83. swalve says:

    @mac-phisto: Why are you putting spark plugs in a 2006 car? The plugs in it would have lasted a good 100,000 miles.

    My curiosity about leasing is, what’s in it for the dealers? Why would the car makers do it if it was less profitable for them?

  84. JustAGuy2 says:

    @Silversmok3:

    Bunk.

    Gotta compare apples to apples. To do this, you need to assume that, if you buy the car, you’ll sell it after the same period as the lease runs (i.e. if you’re comparing to a 36 month lease, you need to assume you’ll sell a purchased car after three years).

    In this apples-to-apples comparison, the only real difference between leasing and buying is that, with leasing, you get to turn in the car and walk away, while with buying, you take the risk that the car is worth less than had been anticipated when the lease was started, in which case you’d be in the hole.

    Basically, a lease is just like buying, except that, after three years (or 2, or 4, or whatever), the car company is agreeing to buy back the car from you for a predetermined price, if you choose to do so.

  85. privatejoker75 says:

    @DeltaPurser: most leases i’ve seen are 15,000 miles per year. I average less than 1,000 miles per month.

  86. kelrod says:

    About 2½ years ago I bought a 1996 Honda Civic EX Coupe with 130,000 miles on it – for $1500. At 160,000 miles now, it still runs like a charm and Blue Book value is $3K. You leasers can keep your fancy new cars.

  87. quail says:

    @bbbici: People lease furnishings, even carpet? I know of some businesses that do because it was easy on their startup capital and the costs are taken off of their taxes. (Some people in politics do this but they know how to move the burden of payment.) But people who lease furniture are the ones going to Rent-A-Center. Definitely not cost effective.

  88. Silversmok3 says:

    @justaguy2

    While your reasoning is correct, it implies that youre getting rid of the car after the term’s over.
    If youre planning on driving a car into the dirt, my original comment still stands.

    Besides, why would you dispose of a perfectly good car after 3,or even 5 years?It makes little financial sense to finance a perfectly functional car, discard it ,and finance again for a shinier,replacement.

    And you don’t need advanced mathematics to understand THAT.

  89. burninator says:

    @snoop-blog: You pick the technology, May it be Hydrogen, Plugin, full Electric, CNG, LNG, etc… Things are changing from just petrol based automotives (the point of my post) And that consumers might find cost savings for being in the right position. Also plugin Hybrid could be very valuable to those making many short trips. Batteries will come down in price as they are mass produce. And a mechanic shop that fails to keep up with current automotive technologies will soon be out of business. (

  90. bdslack says:

    Oh Kiplinger – the meca of truth in money advice.

    Let’s get one thing straight – Leasing is a fool’s game for people without money that want to pay the most they can to operate a car. Anyway you slice it I would really like to find out why this website finds it necessary to publish such bad financial advice as “how many credit cards do I need” and “why it is better to lease a car”///

    Oh Kiplinger – the mecca of truth in money advice.

    Let’s get one thing straight – Leasing is a fool’s game for people without money that want to pay the most they can to operate a car. Anyway you slice it costs more.

    About the terminology – ask the dealer how you actually SAVE any money renting (and it really is renting) a car?

    Myth 1: Buying is cheaper than leasing – BULLSHIT – run the numbers anyway you want – mile for mile it cost MORE.
    Myth 2: It’s nearly impossible to negotiate a good buy – On a lease you are the customer with the lease amount of money. That is the setting for a bad deal. The person with cash gets the best deal.
    Myth 3: Only businesses get tax breaks – I know idiots that depreciate their leases like assets, it is by far one of the worst tax ideas in the American tax code.
    Myth 4: You may have to pay hefty fees when turning in the car – Well you are screwed when you turn it in – because it’s a rental.
    Myth 5: If you want out early, you’re stuck – Like you are really going to “win win” when you find that guy across country that wants your crap car.

    Get lied to more by reading the full article at Kiplinger.

  91. mac-phisto says:

    @swalve: it wasn’t my idea to do the tune up – i just offered to help her with it, but i don’t think it was a bad idea. she has about 70k on the car already & was noticing a reduction in performance.

    i don’t think plugs, wires & a fuel filter are gonna help – her engine was immaculate – but what does <$50 in parts hurt?

    with my experience with pontiacs (& grand ams in particular), i think she has some computer issues on the horizon that are starting to manifest themselves.

  92. Charles Duffy says:

    @snoop-blog: Hydrogen? Meh. I think pure-electric (think Tesla Motors) has much more of a future, particularly after ultracapacitators get to a point where they’re in use for production vehicles.

    That said, for pure electric cars, I think leasing the batteries (like the business model used for the Think) makes a great deal of sense — that way, it’s not the customer with the financial interest in having the best bang for the buck in terms of battery life — even if it’s in the customer’s interest to own the vehicle itself.

  93. bdslack says:

    @mac-phisto: They say if you buy a 2 year old car and keep it for 10 years your entire life – you will save 500,000 over the average joe!

    Congrats on being .5M richer than everyone else!

  94. UASteph says:

    I can’t lease, as I drive too many miles. I spend 2-3 hours per day in my car, on average. Sorry, but I’d rather be comfy than spartan. I didn’t splurge on my car (I drive a Hyundai) but I’m also not going to feel guilty for only driving my previous car for 6 years.

    And yes, I could move closer to work, but what I’d save on gas and car payments would more than be eaten up by increased housing costs. There’s a reason so many people live in the suburbs and commute, and the desire for a McMansion isn’t always it.

  95. Boberto says:

    @trujunglist: Wow, you’re ready to trash a car because of a dome light? And who says 6 months? Maybe you should get a second opinion on that. I really feel that we spend as much as we do on cars because of the intrinsic sense of vulnerability, both mechanically and financially.

    Leasing works for dealers because it is far too complicated for most consumers to comprehend. Ever hear about selling a car for over sticker? It happens every day when people lease.

  96. mac-phisto says:

    @bdslack: if only. then maybe i could afford having a car worthy of a garage.

  97. failurate says:

    $100 worth of detailing is cheap way to get rid of the “I need a new car” itch.

  98. WindyCityGigi says:

    @DeltaPurser:

    What you own, DeltaPurser, is the $2000-3000 a year you didn’t make in payments.

    I’d much rather have the money than a car with a loan payoff that exceeds the cars value.

    But then, this mindset only works if the consumer has the discipline to lease the car he/she can afford to buy instead of upgrading to a nicer leased car for the cheaper car’s purchase payment.

  99. doctor_cos wants you to remain calm says:

    Myth #5 is just plain stupid. If you buy a car and “want out early” you’re just as stuck, no?
    @bbbici: “it is predicted” by whom? I read an article on some web site? I predict that most people will continue to do stupid things regardless of what anyone else predicts.
    @ad8bc: A Festiva? And you miss it?? :)

  100. john_nyc says:

    I’ve leased all of my cars except for my first two. I personally prefer leasing to buying because by the time the warranty runs out, the lease is done and I’m in a new car with a new warranty. I’ve leased 4 BMW’s and now that we live in the ‘burbs, my wife has one too. I’ve never felt like I was being shafted financially. Granted it’s not for everyone. If you drive 100 miles to work each day, it’s not for you. If you have a sense of “pride in ownership”, it’s also not for you.

    The way I see it, cars are a consumable. They don’t last forever (unless you’re a collector or crazy cat lady). Even if you drive a car for 15 years and put 200k miles on it, it still wears out. A car that’s been driven into the ground is going to have nearly zero residual value. So, for all those years that you’ve been denying yourself a new car, you’ll need to have been socking away that money so that when you buy your next car you’re not financing the bulk of the cost.

    Also, even on a car that’s been paid off for 10 years, you still have to pay for maintenance and repairs. You have to factor that in to the annual cost of ownership. Older cars have a tendency to have higher emmissions and lower gas mileage, as well. Also needs to be factored in.

    I also don’t put anything down on the lease when I start it. The monthly payments are higher, but if the car gets stolen or totalled, I don’t lose out on the advance rent I’d have paid on the car ahead of time.

    For someone that enjoys driving new cars and not having to worry about fixing them and who’s driving pattern fits within the mileage and wear and tear limitations on a lease, leasing can be a great fit. I’m not even a year into the lease on my Z4 3.0si and I’m already looking forward to the next one when they drop the twin turbo engine from the 335 into it.

    Like spandex pants, leases aren’t right for everyone. But they can be really right for some.

  101. snoop-blog says:

    if your leasing bmw’s, your probably not as concerned about saving money as some of us. your idea of saving money is leasing bmw’s. my idea is being more frugal and driving a cheap domestic, thats cheaply maintained, and driving it till the wheels fall off. then give it to a family member who can put the wheels back on and let them drive it.

  102. cerbie says:

    I don’t get what the fascination is with new cars. If it saves you a hefty cost in fuel, and you plan to run it a few hundred thousand miles, then it makes some sense.
     
    But, why pay over and over because, “you get bored,” or some other similar reason?
     
    @kelrod: Hear! I don’t know how I’d like a Honda, but that’s the way to go. By the 90s, the Japanese were up to the European standards of the body rusting away well before the rest of the car would give any trouble. Even at 10+ years old, many of these cars are in great shape, and not too expensive. Even if you only do normal maintenance, and then ditch it after a few years, you haven’t done badly.
     

    Even if you drive a car for 15 years and put 200k miles on it, it still wears out.

    @john_nyc: well, the interior will get a little worn. Mine will be in the $3-4000 range when I’m done (I only got it a wee bit under book), and the driver’s seat foam will then be the most worn out part on it…at 16 years old. It should be able to run forever. If it doesn’t run forever, I’ll be happy as long as it goes out by keeping its occupants from harm.
     
    Getting a car new just seems exceptionally wasteful, if you aren’t planning to drive it basically forever. Leasing then costs even more, basically just to have something shiny and new. That yours, in particular, is a new BMW, leased, makes me think, “has plenty of money.”
     
    But, I see a car as a necessary tool to get from A to B. The minimum cost to get good ride quality, mechanical reliability, and acceptable safety, is needed.

  103. john_nyc says:

    @snoop-blog: That’s kind of my point. What’s right for me may not be right for you, and vice versa. Leasing is neither inherently good nor inherently bad. It’s not like the dirty secret of car leasing is that before they give you the keys you have to get reamed by someone named “Bubba” or that you are assured eternity with 27 hot virgins.

    You just get a car for a certain period of time with little upfront expenditure that you don’t have to pay to maintain and you don’t have to sell when you’re done with it. At the same time you can’t drive it that much or put dents in it with out a penalty.

    Regarding saving money, it’s all relative. I may care less about that than you do, but I certainly care more than the guys in my town that drive around in Bentleys and top end Porsches.

  104. john_nyc says:

    @cerbie: Well, I’m not going to apologize for enjoying driving a new car or for the type of car that I prefer. With the exception of 1.5 years, I’ve used public transportation to get to work for the entirety of the 25 years I’ve been in the workforce. I put gas in the car once a month or less. For me, a car is a means of enjoyment and a convenience. I could still earn a living with no car and I can walk or take a bus go and buy stuff. I choose not to.

    I didn’t say that people like you are cheap, so why should you say that people like me are “exceptionally wasteful”? Compared to those living in poverty, your frugal lifestyle could be said to be exceptionally wasteful, too. After all, you have a car, don’t you?

  105. trujunglist says:

    @boberto:

    To me, and this is just from my experience with other electronic/mechanical items, the dome light exploding and taking out the lights inside my car means that the rest of the car is going to go the same route shortly. One parts which hardly ever get worked start exploding, then I can only imagine what the parts are doing that are getting put under tremendous stresses every day.
    Still, since I can’t possibly afford a new car at this point, I’ll have to take my chances.

  106. trujunglist says:

    @cerbie:

    There’s an easy answer. Some of us here are young and unmarried. We need cars that aren’t old beaters to impress the shallow portion of the opposite sex (99% of the population). Unfortunately, that is the way the world works, and although we can all wish it wasn’t so, we still have to look good to get pussy.

  107. banmojo says:

    yeah, either one has sick money and is into cars (no one can fault another for a hobby now, can they?) or one pays off their car and keeps it for minimum 10 years. anything in between is stupidity. My brother leases BMWs, getting a new one every 12 to 24 months, and he takes a hosing on the costs (I guess part of it is a tax break as it is an ‘office’ car, but even if it’s 100% tax break he’s still paying 2/3s of that out the window). meanwhile my Lancer is paid off and should give me at least another 5 years of driving bliss, and it looks good and drives well so who cares if it’s not a BMW? Not I, not I.

  108. JustAGuy2 says:

    @bdslack:

    Great logic there. By the same token, anybody who finds a deal to buy a LCD TV for $1500 rather than $2000 is an idiot, since he should just watch a 19″ black and white TV, and anybody who buys lamb chops at Costco rather than a grocery store is a moron, since he shouldn’t be eating lamb as well.

    You have to compare apples to apples. Certainly, leasing three cars for three years each will cost you more than buying the first car and keeping it for nine years. By leasing, however, you’re never driving a car that’s more than three years old.

    The question really is: if you want to “acquire” a new car, and keep it for three years before getting rid of it, should you lease or buy? And the answer is, naturally, depends on the terms – leasing can certainly be the better option.

  109. cerbie says:

    @john_nyc: I fill up at least once a week, sometimes twice, and could not get to work without a car.

    @trujunglist: 24, unmarried. I don’t intend for my car to be a beater, and have every intention of selling it in better shape than I acquired it. But, that’s because I want to get the best I can out of it. Who knows–I may end up liking it enough to keep for a few hundred thousand miles.

    “‘The more stitches, the less riches.’ Isn’t that right? Mending’s anti-social.”

    I’ll stick to the remaining half of one percent. Too much time around that 99% is depressing.