NBR, talk to me about leasing a car

[jennyinheaven]

So my car is having major issue on top of major issue, I think we are done putting money into it. We are thinking of possibly leasing our next car because I work locally part time and then just use it to take DD out, for errands etc. so not tons of milege. Advice, thoughts, experiences? Never leased before so anything is appreciated.

[mary97]

I do know that car insurance on leases are usually higher since you are basically renting a car. Wouldn't hurt to call your insurance agent before hand to see what the rates could be on the cars you are interested in. Leasing isn't a bad deal for those who don't put on a lot of miles or don't keep cars long. Downside to leasing, it's basically renting a car, you might get nailed at turn in on any damage to the car, no trade in value.

[Deleted]

Leasing is great if you don't want to put a lot of money down, but you need a lower car payment.

A few years ago I had a 2003 Chevy Trailblazer with a lot of issues that needed to be fixed.. I was able to trade it in towards a 2013 Equinox lease, only getting about $2500 for it, but still my lease was $300/mo through Ally (formerly GM bank).

Typically, a lease is for 39 months these days, so given that, you essentially are leasing out at a rate similar to if you had signed a 60 mos finance agreement on a purchase, but only with 3 years worth of payments.

At the end of the 39 months, you can simply turn the car in or you can purchase the car at fair market value. If you are purchasing at fair market value, typically you will end up having paid, in the end, a little bit more than you would have all those years earlier, but if you don't have a lot of money to put down for a purchase, sometimes it makes more sense if you have a strict monthly car budget. ie. paying $300/mo for a lease instead of $550/mo for a purchase.

Example of lease to own breakdown:

$2500 down
$300/m for 39 mos = $11,700
fair market value = $16,300
= $35,500 (edit: total paid toward a car that was listed at about $25,000)

If you decide to pay out the fair market value at the end of the lease, you can turn around and finance that as well, making the car payments for a purchase more affordable in the long run, than if you had financed to buy at the beginning.

If you don't want to buy, a nice thing about leasing is you can often lease a much nicer car than you could have had a budget to buy right off the bat.

Things to know:

Whether financing or leasing, you must have full car insurance coverage on the vehicle.
If leasing, you are typically allotted between 10,000-12,000 miles per year and if you go over at the end of the lease period you have to pay a penalty.
Depending on credit, you may have to put down an additional security deposit, to be refunded at the end of your lease.

+++

My personal experience was totally fine, but I was paranoid about any wear and tear on my equinox, so after a year, I traded it in at Carmax towards a 2011 honda pilot. I feel weird that I traded away my Trailblazer only to have a car for a year and then never see that cash again but lessons that I learn.

I probably wouldn't lease again but I can see why some people like doing it.

[Deleted]

Feb 16, 2015 8:32:49 GMT -5 mary97 said:

I do know that car insurance on leases are usually higher since you are basically renting a car. Wouldn't hurt to call your insurance agent before hand to see what the rates could be on the cars you are interested in. Leasing isn't a bad deal for those who don't put on a lot of miles or don't keep cars long. Downside to leasing, it's basically renting a car, you might get nailed at turn in on any damage to the car, no trade in value.

This is actually untrue -- it's the same if you are financing a car. Because the bank owns the title, you are required to have full coverage insurance so that in the event of any damage, the car is more likely to be repaired. They're protecting their investment.. 

[jennyinheaven]

Thanks all, you have given me some more things to think about/look into

[meggypoo1]

Feb 16, 2015 8:34:51 GMT -5 @bunannie said:

Leasing is great if you don't want to put a lot of money down, but you need a lower car payment.

A few years ago I had a 2003 Chevy Trailblazer with a lot of issues that needed to be fixed.. I was able to trade it in towards a 2013 Equinox lease, only getting about $2500 for it, but still my lease was $300/mo through Ally (formerly GM bank).

Typically, a lease is for 39 months these days, so given that, you essentially are leasing out at a rate similar to if you had signed a 60 mos finance agreement on a purchase, but only with 3 years worth of payments.

At the end of the 39 months, you can simply turn the car in or you can purchase the car at fair market value. If you are purchasing at fair market value, typically you will end up having paid, in the end, a little bit more than you would have all those years earlier, but if you don't have a lot of money to put down for a purchase, sometimes it makes more sense if you have a strict monthly car budget. ie. paying $300/mo for a lease instead of $550/mo for a purchase.

Example of lease to own breakdown:

$2500 down
$300/m for 39 mos = $11,700
fair market value = $16,300
= $35,500 (edit: total paid toward a car that was listed at about $25,000)

If you decide to pay out the fair market value at the end of the lease, you can turn around and finance that as well, making the car payments for a purchase more affordable in the long run, than if you had financed to buy at the beginning.

If you don't want to buy, a nice thing about leasing is you can often lease a much nicer car than you could have had a budget to buy right off the bat.

Things to know:

Whether financing or leasing, you must have full car insurance coverage on the vehicle.
If leasing, you are typically allotted between 10,000-12,000 miles per year and if you go over at the end of the lease period you have to pay a penalty.
Depending on credit, you may have to put down an additional security deposit, to be refunded at the end of your lease.

+++

My personal experience was totally fine, but I was paranoid about any wear and tear on my equinox, so after a year, I traded it in at Carmax towards a 2011 honda pilot. I feel weird that I traded away my Trailblazer only to have a car for a year and then never see that cash again but lessons that I learn.

I probably wouldn't lease again but I can see why some people like doing it.

All of this.

We needed a second car with DD so we chose to lease. We chose this option because the monthly payments are cheaper which is good because we don't have the money to buy right now. Also, we are probably moving in 3 years and we won't know how long it would take me to find a job so that's one less bill to worry about. It scares me that we will have to pay for all this "damage" when we turn it in. We never did the leasing thing before we got the coverage that will protect us against this damage but I am still scared because I don't even know if that was the right thing to do!

Most I talk to love leasing. I don't know if I would do it again and that's mainly for the "damage" that they may find and make us pay for at the end of the lease. I hear it can be like $5,000 bucks!

[bliz1712]

I am currently leasing my car, and it's my first lease so I don't have a lot of experience. My lease was 39 months and I only had to come up with $500 down. The thing that enticed me was that I traded in a car that I owed more than it was worth. With a lease my payments were going to be significantly lower than me getting a loan. Also, the salesmen talked about how if I didn't want the vehicle after the lease was up, or even sooner, I could turn it in. Which essentially they "ate" the excess loan on my car. I'm sure it's figured into my payment somehow but not as bad as a loan would have been. I always say I'll keep my car for a long time but inevitably I get a different one every 2-3 years so a lease actually might be best for us.

And my insurance didn't change one bit because I went from a loan to a lease. The only downfall I have right now is I can't add any extra features without going through the dealership. EX. I wanted to add an electric start for the winter. But unless I do it with the dealership I think it could cause issues with my lease agreement. And paying a dealership might be more money then it's worth.

[mamarazziof3]

I am leasing my current vehicle. DH has a company car and when he got it he told them we were considering one of the vehicles they had in the future, and they offered him a great deal on leasing one, so we went with it. It's the second time I have leased a car, and I have liked it for the most part. The only thing I don't really like is that I totally stress out about damaging it, AND I lost both of the button things to unlock the doors (I don't even know what they are called), and I am pretty sure it's going to cost me a small fortune to get them replaced... My lease is up around t the end of the year and we are debating whether or not we want to:

1. Lease again (a different vehicle)
2. Purchase the vehicle I have been leasing
3. Purchase another vehicle with low mileage.

It IS really nice not to worry about car payments, and if you decide you don't really care for the car it makes it easy to know you really don't have to have it for very long.

[letal316]

We will be leasing our next vehicle. We own one and when we have another kid we're getting a second car and it will be a lease. The pros have all been said by pp, but the big thing for us is the lower cost monthly payments, that it's under warranty, and that you aren't tied to it for too long. I like new cars and this gives us the option to be in a new car every 3-4 years.

[britab]

Most financial advisors say don't do it! That's about all I know.

[sisterjanet]

I'm trying to remember why financial advisers say not to lease. Hmm. When you lease, you might be stuck leasing if you're not saving up to buy a car after your lease expires. When you lease, you're not going to own the car (unless you do lease to own, or buy the car after the lease is up). If you're leasing because you can't afford to buy that specific car, then you maybe can't really afford the car or you're putting more money than you need to into transportation. (That last one is an approximation; I might've got it a little wrong, but something like that.)

Personally, I've never leased. I don't like the idea of the car not really belonging to me, and I don't like some of the newer features anyway, and I have a really good and trustworthy mechanic (and my car has actually provided at least two learning opportunities for them of things they had never seen before since apparently people don't usually have Neons that are 15 years old and closing in on 200,000 miles). I like the quirks and oddities of a thoroughly worn in car, and feel like I'm learning interesting mechanical things every time something goes awry. I also feel like I'm spending less on insurance, tabs, and maintenance/repairs than I would on a newer car.