Lease or buy?

I'll just add to what Stream mentioned above, since it seems you are predisposed against leasing and have zero intention of providing any non-biased information (since you're not wanting to accept any of it).



Clark Howard, Dave Ramsey and Suze Orman might have MBA's but they are not accountants. They are financial advocates that do research and discuses the best ways to remain finically stable. They expose scams and make recommendations on ways to save money.

I also have my MBA, and a minor in finance. Still, doing research and simple mathematical calculations when you have all the data, you can see what best works for you and your current lifestyle. I won't do what a "financial advocate" says I should do, but I'll take what they say as additional information to use.


A lease contains many built in fees in addition to the APR. A lease will always cost more.

Like Stream said, what 'many built in fees' are there? The lease inception fee is the only additional fee for a lease and can be negociated. When you lease a car, you're still "buying" the car in a similar way, just under a different contract. But the fees are no different than a standard purchase, all of which can be negociated.


If you plan on buying the car after the lease you have to gamble on the residual value of the car? What if you were in a bad accident caused by someone else?

The residual value is set by the manufacturer, and holds true towards both a lease and purchased car.

And as Stream said, you can walk away from the car at the end of the lease, even if it's been in a huge accident and professionally repaired, per the dealerships specifications. But either way you look at it, the car was still in an accident and does not have the original body panels and paint on parts of it.

If you own the car and it got hit and repaired, good luck selling it later on when you want to get rid of it (unless you are a shady seller and fail to disclose that information to the buyer).


You are stuck with a preset of about of miles. What if lose your job and have to take a new job that requires double the millage?

With any financial service company (TFS in this case), you can always call them and ask them what price/deal they can give you if you want to purchase more miles while you are still in your current lease. They'll be willing to work with you. With my BMW, it is $.20 per mile if you go over. But if you call before the end of the lease and buy more miles, it costs anywhere from $.10 to $.12 to purchase, almost half the price.

Worse case, there are options like swapalease and lease trader, both of which I've used in the past and are very easy to use with very little risk. And the financial services dept will also recommend these options as well. Or, you can always sell a leased car. You'll want to find out the current payoff amount, as that is what's owed to buy the car and get the title. Even Carfax will buy a leased car if you really want to get out of it. And if/when they offer less than your payoff amount, it won't be any different than if you financed the car and they offered you less than what you owe on your current loan (thus you would be upside on the loan).


Your view of standard maintenance might be different the lease company. You might have to pay for new brakes or new tires at the end of the lease. If you spill coffee on the carpet it might cost you $1,000 when you turn the car in. Or other little things like those 4 dings on the door. I hear about lease nightmare all the time.

Unless the brakes are really worn down, or the rotors are warped, you're not going to have any problems as the dealership will replace those when they CPO the car to resell it. For the dealership, changing brakes is much cheaper than replacing the tires.

You can find used tires that people sell when they upgrade their wheels, and put those onto the car. Or, like any lease contract will say (you should read your contract before signing), you just need 4 of the same tires. You can then purchase any new set of tires and put them on. The lease inspector will just want to see the tread and make sure they're all the same size & brand/model.

In most cases, if you spill coffee in your car, you would immediately clean it up. Even if you need to have it cleaned professionally, it may cost you around $100 or so, but definitely not $1000.


Another thing really bad about a lease is the way the dealer roles all those expenses you get when you return the car into your new lease. They make it hassle free for you but not your wallet.

What's the difference if you have bald tires, need new brakes, and have coffee stains on your carpet when you own the car and decide to sell it? Obviously the buyer is going to use those against you and negociate a lower price for the car.

Likewise, what happens if you buy & finance a car, and you go to sell it or trade it in at the dealership? Most likely, you're going to be upside down on the current loan unless you paid a lot on your down payment (which you can then kiss that money goodbye since it didn't help in the equity of the car). Then when you're upside down on your current loan, the dealership will make it appear "hassle free for you but not your wallet" when they roll that over into your new loan.

 

I`ll add my view, but it may not be worth much.

We made the decision to do a lease-to-buy. It made more financial sense for us because of low resale values. Our previous car was a cash buy.

The price of the car was split into 4 equal parts. The first 3 were split into 5 years worth of "lease" payments and the remaining final part is either a flat payment at the end of the 5 years, or left unpaid if we decide to change to a new car. The mileage limit was flexible, but set at the beginning - we set it a bit over the mileage of our previous car at 5 years as I don`t see us going much over that - especially as our circumstances have changed toward less driving compared to that period. If we go over, there is a small fee for every block of so many km.
Interior cleaning and small stain removal was included in the regular fees for the lease - and I find it hard to imagine that the car will become any dirtier than our previous... Our son is much larger now, plus we`ve never been much for eating/drinking in the car so the level of dirt in our previous car was all under the level considered "normal use" and would have been covered under this lease. The rest of our responsibilities are just regular maintenance and retaining original parts should we change out anything (other than parts expected to be changed during the 5 year lease period).

Chances are, we`ll just pay the final payment (minus 70% of "lease fee" as it will cease to have been a lease) after the "lease" period ends - but the additional fees for the extended period of low payments and the peace of mind in knowing that should the car have issues or something massively better comes along we will be able to change are well worth it in my book.
The estimate of how much we`d make selling the car used is the same or below how much the final last payment is - even counting the fees. So we would be not be losing money if we do make the trade in. If we choose not to, we simply had a longer loan the we paid off the tail end of a bit early.

There is supposedly an option to either get an extension to the lease (add 2 or 3 years on to it) or to get a loan for the final payment after the "lease" period ends, but those would be a huge loss of money and seem quite silly to me. The fees for the loan extension, and the interest on top if you took out a loan would be in no way worth it - especially with how low the remaining amount would be. If you plan to buy the car but can`t come up with the remaining 4th over 5 years of low monthly payments... You probably should reconsider buying a car. If you don`t plan to buy and just want to extend the lease, then why not just change over to a newer car?

 

Judgeless isn't so judgeless.