about to lease a new 2010 Prius... need help

My advice.

1. Go to at least 3 dealers.
2. DO NOT BUY ANYTHING during the visits to the three dealers.
3. Go home and make your choice there.

 

Here's a few things: In Phoenix, you can lease a Prius II for $175/mo right now, so stick with the lower payment and let me let you in on a few things, as a person who's on their 7th Prius (I own a hotel and we use them for shuttles as well) and have had nothing but fully-loaded models until now... and will never get a fully-loaded model again. Here's my reasoning:

1) Leather - skip it... the leather they use costs about 1/4 of what the cloth seats cost, per yard of material. It's terrible leather, doesn't breathe, and gets dirty really quickly.

2) Bluetooth... get this bluetooth car kit, it works better than the built-in Prius bluetooth system, and I absolutely love it! It has its own speaker or goes through the stereo, and nobody can tell I'm on a handsfree system - oh, and it works for my iphones music, navigation, etc., etc:

http://www.amazon.com/dp/product/B000WTM552?tag=priuschatcom-20 Navigation: never, ever, ever buy a built-in navigation system. You can get a standalone system for $69 these days, but I use the navigation on the Turn off signatures in Tapatalk TomTom and it has built-in traffic, etc., etc. and the maps update for free, and it works fantastically well. Using the bluetooth kit above, it's the perfect tri-fecta!

4) the best phone holder for any phone is the ClipHanger... Cliphanger Lets You Hang Your Phone or iPod Anywhere! - I stick the holder right by the volume control for the stereo and my iphone is now perfectly mounted - couldn't get any better.

So, for $60 for Navigation on your iphone and $60 for the hands-free car kit, you've got the best system ever, better than Toyota offers, and you've saved thousands of dollars.

Just my two cents. And don't forget gap coverage on your leased vehicle... I learned that the hard way!

 

any reason you want to lease versus buying or financing?

 

I had the MotoRokr T505 in my old Lexus and it sucked. People couldn't even understand me. The Bluetooth in both the '04 Prius and the '10 ES350 is much better.

In terms of the lease, its just impossible to say. Toyota has subsidized leases on the car right now, and provided you can live with the low mileage they can be a great deal.

You need to do a lot of research into leasing before you do it. Its very complicated and its very easy for you to get screwed. You need to know what a money factor is, what capitalized cost is, what the residual is. You need to be able to calculate lease payments out longhand while you're sitting there at the dealer. Its not for everybody.

I just leased the Lexus and it was incredible the kind of bullshit leases the dealer would pull out, until I started doing the math longhand, asking what the money factors were and converting them to interest rates. Once they realized I knew what I was doing...suddenly everything got a lot cheaper.

You need to negotiate the price first, then start on the lease. Generally putting a downpayment down on a lease isn't a good idea because if the vehicle becomes totalled you loose that money since you aren't the recipient of any insurance proceeds.

All Toyota Motor Credit leases include gap insurance.

Also bear in mind with really low interest rates...it may be only a few dollars more per month to buy once you add on some miles.

 

FWIW, when I leased my Prius June 2009, GAP insurance was not included in the TFS lease, so either it's included in Lexus leases only, or they added it since I got my car.

From memory, the dealer wanted something like $450 for GAP, and I got it added to my Allstate policy for $25 / 6 months, or $150 over the 3 year lease term.

 

Leasing is a bit more complicated than purchasing, and unscrupulous dealers will use that to their advantage, so you need to understand the moving parts to avoid having it turned into a shell game.

Attached below is a spreadsheet I put together a few years ago when I helped a friend lease a car (the inputs required are highlighted in red). As pointed out by SW03ES above, once the dealers realize you understand the process, the negotiation becomes much less frustrating.

 

All financial advocates do not recommend leasing cars.

 

Buying a house is the largest purchase most people make. Buying a car is usually the second. Buying or Leasing a new car ever three years is the worst thing you can do. You are eating most of the deprecation the first 3 years over and over.

The Prius has been around since 1997. It has not changed that much over that time period. Each gen had small advancements.

If you purchase a car you can get better tax breaks than with leasing. Leasing just makes it a little easier.

 

If you buy the car and sell it in 3 years, your financial loss won't be as massive as leasing a car. Technology isn't changing for this prius at least for 6 years (when the new model comes out). Toyotas are built to last. If you are interested in just saving gas mileage and not buying a car to last, i'd suggest you consider leasing an insight or something else. It will be less of a financial loss.

Like i said, if you want a new car in 3 years, sell your car, or trade it in. There are so many things that can go wrong with leasing.

Good luck!

 

Wow, really? Yeah all the TFS leases on the Lexus I was offered included GAP...

Like what?

 

Leasing a car just gives more money to a dealer. You'd be better off getting a 3,4 or 5 year loan, and selling it in three years...

You would spend less money, and you'd gain good credit rating to boot.

Everyone looks at the Low Monthy payment on a Lease.

Look at the total COST and the end of a lease..

Plus at the end of 3 years. You don't have a car!

Spend 100 more amonth and after three years you have a car to trade in on the new one.

To me the only reason to get a lease car, is in a business if you don't want any want Assests and depreciation to take care of.

With Prius 3 year warrenty the only thing you will spend on is 3 oil changes?

 

But you ignore the MASSIVE payment difference between a 3,4, or 5 year loan and a lease. I mean...unless the financing is 0%...even the 5 year loan is a big difference.

A lease shows up on your credit just like a loan, in fact typically when you look at your report you can't tell if an account is a loan or lease. No difference in how it effects your credit.

I did...and the lease was cheaper. Significantly cheaper. Isn't always...but often is.

If you were going to trade the car after 3 years, who cares?

A car you still owe money on. $100 more per month is going to be a 60-72 month loan. You can put the $100 a month into a money market savings account and have $3,600 plus interest after 3 years to put down on the car. You'll be lucky to have that much equity halfway through a finance.

Which makes it very attractive to lease...

 

You lose your job and you’re stuck in a lease.

You can get a new job that makes you drive more than 15,000 miles a year.

Financial advocate Clark Howard from CNN has a large list of things that can wrong if you lease. He strongly recommends you stay away from leasing a car and extended warranties.

SWO3ES you have a complete opposite view of money then I do. You promote wasting money on extended warranties. You recommended leasing. You recommend people buying pre paid maintenance. You probably would recommend that people get the interior and exterior Teflon treatment and buy life insurance on their lease.

All that is like tossing your money in the garbage can. Everyone is different. I like saving money anyway I can.

 

SW0ES I was wondering why anyone would recommend leasing, extended warranties, and pre paid maintenance. It hit me. You must work for a dealer. Am I correct????

 

If you plan to mod the car, leasing is not an option for you -- especially if you are DIY type of person.

 

You loose your job you're stuck in a loan. You can sell the leased car just like the car with the loan.

I don't have a job...I own a company so thats not going to be likely to happen to me. If you just have a job and can't deduct a vehicle as a business expense, to me that does away with a big benefit to leasing.

But, then just pay the mileage penalty. You pay a penalty anyways in that higher mileage depreciates the car at a greater rate. You can also buy the vehicle out of the lease and convert it to a finance...at any time. Should this happen you want to look at your projected mileage, calculate the overage charge and compare that to any costs incurred from converting the vehicle to a finance.

A lot of companies will eat the mileage penalty if its not huge provided you lease another car through them. TFS does this all the time.

But you do make a valid point, if your mileage is in any way variable...leasing may not be for you.

Good for him. My financial advisor disagrees, and he knows my specific finances a lot better than "Clark Howard".

Why does everything with you have to be a confrontation? Can't we just have a discussion like adults? You won't succeed in trying to bully me into an argument about anything other than leasing.

And for the record I have NEVER, EVER suggested anyone buy a pre paid maintenance package. All I have ever said about warranties is that I personally have done well with the extended warranties I have bought and that my 12 year history with and ownership of 5 Toyota cars has not shown them to be 100% trouble free. Leasing is right for me, and it may be right for others. I would never tell anyone that leasing was or was not right for them because I don't know them.

And no, paint protection packages and life insurance to cover loans and mortgages etc are a waste of money IMHO.

Unlike you I offer my opinions, I don't denigrate others who disagree or try and tell people what to do. If you want to respectfully discuss leasing, a topic I am extremely well educated in, I am extremely happy to do this. If you want this to become a pissing match where you call me names and I call you names...I'm a grown up and that doesn't interest me.

Again, for the record I have never recommended a pre-paid maintenance package.

And no, I do not nor have I ever worked for a dealer, or in any capacity for the automobile industry at all.

Look, the bottom line is nobody can tell some person on an Internet forum whether or not leasing is a good option for them. Not me, not you, not "Clark Howard" or whoever. It depends on the individuals asset base, their tax situation, their personal situation, their goals, and their aversion to risk. Leasing isn't right for you...it is right for me. Your opinion is valid and you are obviously an intelligent person. My opinion is valid and I am an intelligent person.

This is very true. The DIY though, in terms of maintenance is fine as long as you keep good records.

 

I thought I would look into this Clark Howard.

These are excerpts from his website pertaining to auto leasing. He makes some good points, some not so much.

This is true, the other issue is there are no legal requirements for disclosure on a lease like there are on a finance contract. You have to demand to see all the particulars in writing. Once you know what they mean though...comparing and calculating is about a 6th grade math level.

As for finance charges, they will always be higher on a lease than a purchase, its riskier for the lender because there is no equity build, much like an interest only or low down payment mortgage is inherently riskier. They provide the finance charge in a decimal called a "money factor", you multiply that decimal by 2400 to get to a normal APR rate you can compare. Will they try to screw you? Yes. Knowledge is power.

Thats kinda the point...

Yes they do. The payments you see on TV? BS. Again...don't let them do this to you. Make it very clear (I will pay nothing but first month's payment to drive off). Once you can calculate the payments you can tell if they are sliding something in. Will they try and screw you? Yes. Don't let them.

I agree 100%. You don't want to keep the car out of warranty, why would you want to pay for repairs to someone else's car?

Yes, if you are stupid enough to lease without gap insurance.

And look at this! Clark Howard RECOMMENDS a great leasing deal!:

Honda rolls out leases that are a real deal on clarkhoward.com

 

I don't think the APR is directly comparable to one you would use for financing. To calculate the "interest" part of the lease, money factor is multiplied with Capitalized Cost + Residual. How does that make any sense ?

I've tried to compare buy vs lease for Nissan Leaf (which is a little bit more difficult since we don't know the residual and then there are complications about tax credit etc). The method I used is to compare the total payment for lease & buy - under two cases of buyout after lease and selloff.

We could also try to calculate a true NPV to get better comparison.

Coming back to original discussion, Lease is just a form of financing the car. Individual lease & financed buy need to be compared to figure out which is better. There is no hard & fast rule. "Lease is always bad" is a lazy & incorrect thumbrule.