Lease or Buy?

Rico · July 04, 2007, 06:40:45 AM

It looks like I will be getting a new car tomorrow, but I still haven't 100% decided to lease or buy it. I've never leased a car - always bought. But I'm leaning to leasing this next one for a few reasons. One - the car is quite a bit different than I am used to driving. I love it, but it is different. Second - leasing is obviously a bit cheaper month to month - at least in the short term. Third - the car would be completely covered under warranty during the entire lease time.

I've always liked owning things I get. Leasing just kind of seems like renting, but I can see the advantages. One big thing I'm unsure of if after the lease period is up and I want to buy the car, is the price to buy it negotiable? I know on the lease agreement it lists the residual amount after the lease is up but if you want to buy it then is that amount open for discussion? I know buying a car outright is better overall for cost - usually.

So I've got the next day or so the decide. Opinions anyone?

Geekyfanboy · July 04, 2007, 09:29:05 AM

I have always bought my car outright (not that I have ever bought a "new" car)...it's like renting a car and at the end of the day you have to give it back or pay huge amounts of money to buy it. But my step dad leases all the time and I asked him why he leases.. He said he likes changing cars and never gets bored with the same one for to long. So he leases cars one after another never buying them. He told me he would never lease a car if he planned on buying it at the end because you do pay more in the long run. After the lease is up, it's like buying a "used" car but at a higher price then it would be. I don't know if the price is negotiable once the lease is over but leasing a car always seemed like a poor idea.. at lease in my opinion.

Ktrek · July 04, 2007, 01:35:57 PM

I've only leased on vehicle and that is my Ford Explorer. My payments were less than they would have been for three years on the lease but when the lease ended it was going to cost me around $1500.00 to walk away from it. Since we liked the vehicle we refinacned the balance and still own the SUV. On our vehicle the price was pretty much non-negotiable but they were willing to drop the $1500.00 fee if we were to lease another vehicle from them. All in all in the refinance I don't think I paid more than an additional $500.00 over the terms of the lease and the note. I'm happy and now I own the SUV outright because I paid it off asap once I refinanced.

Kevin

wso32 · July 04, 2007, 01:51:25 PM

Hey Rico. I think, in general from a financial standpoint, you're almost always better off buying vs. leasing. If you think you will get another vehicle in 3 years or less, I think it would be ok to lease it otherwise I would just buy it. I use to listen to a consumer talk show with a guy named Clark Howard. I listened to him when I lived in the US. He always advises people against leasing. You can find more info at www.clarkhoward.com Here are a few points from his website on leasing. Good luck and hope you enjoy your new car!

It's harder to compare prices on a lease, and the financing costs built into a lease are very high.

Leasing may seem cheaper than buying, but you're mortgaging your future when you lease. After a few years of leasing a vehicle and making payments, you own nothing.

Manufacturers and dealers like to use upfront fees to create ultra-low monthly payments that mask the actual cost of a lease.

Most leases allow you to drive an average of 15,000 miles per year. If you exceed the limit, you have to pay a penalty of 8 to 15 cents per mile.

Before you turn in a leased car, have it detailed inside and out and make any needed repairs. Then find out what company is officially responsible for determining that the car is in acceptable condition.

A four- or five-year lease is a recipe for disaster. Many customers end up married to a vehicle they hate or end up paying severe early termination penalties.

If you lease for five years and your car is totaled in an accident, you could be responsible for a giant gap between the amount the insurance company will pay and the stated residual in the lease.

Rico · July 04, 2007, 05:38:11 PM

It's a tough decision. I've gone back and forth on it several times now. Currently I think buying is winning out! ;)

Bryancd · July 04, 2007, 06:29:09 PM

Buy, leases are designed to favor the house, ie the manufacturer, not you. I used to be in the car buz, trust me, put as littel down as possible and finance it through a purchase.

Rico · July 04, 2007, 07:20:01 PM

Bryan do you know if at the end of a lease if that residual value/buy out amount is negotiable? Seems like the dealer would be strongly inclined to sell a car being turned in.

Dan M · July 04, 2007, 09:09:24 PM

I had to make the same decision a month ago. I did some research on the Net. It came down to one impartial site which said that it is always more expensive to lease and then buy than to just finance the purchase outright. My research was done there, because I knew I was buying the car to last at least 7 years.

It can definitely be cheaper to lease if you only plan to keep the car for 2-3 years, depending on the terms you negotiate. If you get the dealer to set the residual value to be quite high, then, since your lease payments are for the difference between that and the sticker price, you can do well.

But if you're planning to buy the car at the end of the lease, just buy it now.

Bryancd · July 05, 2007, 05:11:54 AM

Quote from: Rico on July 04, 2007, 07:20:01 PM
Bryan do you know if at the end of a lease if that residual value/buy out amount is negotiable? Seems like the dealer would be strongly inclined to sell a car being turned in.

No the residual is set, that's the only way they can establish the payment. Often dealers will sell an off leased car or send them out to rental car services.