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)
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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.
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.
@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.
@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.
@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?
@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.
@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.
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.
@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.
@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.