To purchase a new car or lease?

[binici]

Hi guys!

I have had my Honda Accord '96 since I bought it off the lot with only 12 miles.

It is now time to part ways with it and join the millions who have newer vehicles. I would like the opinions and comments from you all on the pros and cons of leasing?

I have about a $600 monthly budget and have a few choice of cars:

Ford Flex
Ford Fusion/Hybrid
BMW 1 Series (135i)
Audi A4

I plan on test driving them and making my purchase or lease (depending on the circumstances by the end of January or mid February).

Thanks for you help in advance!

 

[TB]

Moved to the Automotive section.

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If you're planning on keeping this vehicle as long as you did your last, I'd for sure go the buy route.

Also, the Flex really doesn't fit in with the others. At all.

 

[McLaren]

The leasing program through BMW is great if you become a regular customer. However, it's very strict on what you can & can't do, so if you plan on modding anything beyond cosmetics, be known that they will start to give you grief for it & won't cover the part any more. And depending on what you change, it can get awfully expensive with the labor fees.

With the 135i and your monthly budget, you're looking at having payments for 4+ years. I priced one sometime back w/ $3,500 down & 0.9% APR (their current financing special) for 4 years & it priced at $660/month. If you do pick the leasing route, do not go more than 36 months. That is the sweet spot for BMW's leasing program & where you can get the best deal, as these cars are a lot easier for the dealer to move off their lots afterwards.

BTW, the 135i as of right now is still under Finance & Lease Specials. The finance depends on you, but the lease offer is good for $469/month for 3 years & no down payment w/ the Holiday Credit & $469 due at signing (first month basically).

 

[Danoff]

I've looked into leasing quite a bit, and always shy away from it. It is possible to make out ahead on a lease, but you have to be more correct about the depreciation of the vehicle than the dealership is, strike a hard bargain, and be comfortable with the use restrictions leasing puts on your vehicle. Leasing is most effective in a corporate scenario where it is easier to manage for tax purposes. Companies lease vehicles for employees because buying them and holding them as company assets involves additional red tape.

Almost all leases are ridiculously more expensive than buying. In almost all cases, you'd be better off buying, and then selling to carmax after 3 years. Just as easy, warranty still covers everything, less expensive, and no usage requirements. Try to estimate the minimum value of the car after 3 years and 36k mi. Compare the cost difference between the new vehicle and that price against the cost of the lease (don't forget the initial and final lump payments). Even with sales tax I'd bet you'll be surprised at how much less it costs to buy.

 

[McLaren]

I've looked into leasing quite a bit, and always shy away from it. It is possible to make out ahead on a lease, but you have to be more correct about the depreciation of the vehicle than the dealership is, strike a hard bargain, and be comfortable with the use restrictions leasing puts on your vehicle. Leasing is most effective in a corporate scenario where it is easier to manage for tax purposes. Companies lease vehicles for employees because buying them and holding them as company assets involves additional red tape.

Almost all leases are ridiculously more expensive than buying. In almost all cases, you'd be better off buying, and then selling to carmax after 3 years.

Besides the fact that you spend money on a car you don't get to keep in the end, how do you figure it to be more expensive, besides in the long run?

In the case of the 135i for example, the current lease offer entails that you will pay in $16,884.00 after 3 years at $469/m. If you try to buy the car in 3 years, with the same offer, it'll run you $953/m with $2,500 down. I save $20,000 in those 3 years, but granted, I can't do everything I want with it because it won't be mine.

The only lease deals I've seen that are more expensive are ones where you're practically paying for the car's entire MSRP over the course of 3-4 years, but you don't get to keep it. People who fall for that deserve to throw their money away. I'm honestly just curious.

 

[Keef]

With a lease you don't get to keep the car, obviously. You have to get a new car. If you're a lease freak then of course you'll have to pay on another car that you won't get to keep. You'll always be paying on a car.

If you buy it you can keep it. Pay it off after 4 or 5 years, then keep it for another 4 or 5. You won't be making payments on the car at all when you keep it. Your buddy who likes to lease everything has had monthly payments drawn from his bank account every month for the last 10 years, while you only dealt with it for 5.

Buying is cheaper than leasing in the long run. The payments may be more in the short-term, but after the payments are gone you get some freedom with the car, plus the freedom you've already had by avoiding lease restrictions. And since it's likely you'll live for 80 years, you need to focus on the long-term cost of things more than the short-term savings. It's similar to the difference between buying a house you love and paying it off after 30 years and living in apartments for your whole life, but the benefits aren't quite as profound.

Companies like BMW wouldn't offer these "excellent" lease deals unless they were bound to make more money off you in the long run. The catch to their deal? You're enticed to become a customer for life. You're paying on cars for life. Of course they're gong to offer you fantastic lease deals if you'll keep taking ithem for the rest of your life! If you buy a BMW and pay it off, BMW is no longer making money off of you for the rest of your ownership.

 

[Joey D]

Leasing only works if you don't drive more then 12,000 miles per year and if you negotiate a good deal. There are a lot of lease programmes which are a waste of money. The BMW deals seem to be pretty good here in the states if you catch them right as McLaren has pointed out, same goes for MINI too. The only reason I didn't lease my car is I drive 20,000+ miles per year...it just doesn't make sense even though I like a new car all the time.

Another option is to lease it and then buy it out right at the end, if you work out a good deal you can save yourself quite a bit of money. I know a couple people who've done this and have been pretty happy. You really really really need to crunch number though.

 

[McLaren]

Companies like BMW wouldn't offer these "excellent" lease deals unless they were bound to make more money off you in the long run. The catch to their deal? You're enticed to become a customer for life. You're paying on cars for life. Of course they're gong to offer you fantastic lease deals if you'll keep taking ithem for the rest of your life! If you buy a BMW and pay it off, BMW is no longer making money off of you for the rest of your ownership.

And you get your moneys worth if you stay with them & want to avoid any of the problems that come with some of the cars once the warranty's gone.

With the past 2 BMWs I leased, I probably got them for same amount of money it took someone to finally finish buying 1 of a similar model. Probably even in the same amount of time. Granted again, he gets to keep it, but he's the one who covers all the extra fees.

Sure, if you remain a long time customer like me, you'll continue to give them money, but it's not like I'm leasing a car right off a GM or Toyota lot every few years. It's a BMW & for me, I feel I get my money's worth every 3-4 years. At the end of my current 3, I'll only be spending around $20K for a $36,000 car. That's a good bargain considering most other companies, including Audi, will want close to MSRP when leasing making it rather pointless. Note-wise though, not everyone is this lucky with their own deals, so maybe that's part of the reason I keep returning. But, again, do I get to keep the car or sale it? No, but BMW will & they make great money off these as CPOs, so they throw you a bone when you pick 36-month leases. They told me my 5 was only worth in the low-mid $20,000's. They sold it for $29,600 if I remember correctly. Did the same with the 330.

Ultimately, it comes down to what you want. As most of us are car enthusiasts, we choose to keep our cars in hopes of improving them in the long run, improvements you can't normally do under a lease. For those like me though, who would like to get into a new car every so often, leasing provides a better option rather than attempting to buy out the car, use it, & then sale it on your own within the same amount of time. All you have to do is be smart about it & and know how to haggle these people.

The deal I just cut for buying out the TL resulted in me spending almost no more than if I purchased it new, maybe only $2-$3,000 more because I now have to pay taxes & registration on it. In the end, it probably wasn't worth the effort with the bank, but I didn't know I'd actually want to keep it at the end & I still got a great deal on it that left me with the option of being able to re-sale it & gain an extra $5,000 in profit off it.

 

[binici]

Wow! I have learned so much about leasing and buying from you all. McLaren, you seem to know your stuff and gathering information, I think I am ready (financially and also a car lover) to swap to a new car every three years (seems the norm).

I think I just need to verify the incentives through BMW and test drive the 135i.

If it is not possible to go with that selection, then I'm thinking the Fusion Sport would be nice.

Makes sense financially for me to lease a car since I don't plan to mod anything exterior and interior wise.

I guess you just have to meet the requirements and guide lines of the deaers.

Thanks!

 

[Danoff]

In the case of the 135i for example, the current lease offer entails that you will pay in $16,884.00 after 3 years at $469/m. If you try to buy the car in 3 years, with the same offer, it'll run you $953/m with $2,500 down. I save $20,000 in those 3 years, but granted, I can't do everything I want with it because it won't be mine.

You're forgetting equity in the loan. Let's pretend you're buying or leasing a $30,000 car. Let's also suppose you pay off your loan in 3 years, and that the total cost to buy (including interest) was $40,000. Now let's suppose you could have leased for that 3 years and only spent $15,000. The difference is $25,000 that you didn't have to shell out over 3 years.

Here's the catch. If your car is 3 years old, and has 36,000 miles on it, you can sell the car for $25,000. That makes the two scenarios even-steven financially. You paid the same, and have no car in the end (but never out of warranty) in both scenarios.

I don't think I need to tell you that depending on the interest rates, lease rates, downpayments, depreciation, etc. you can end up on either side of financial fence. Sometimes by a lot. Every time I've run the numbers leasing costs ~$5k extra.

 

[McLaren]

Wow! I have learned so much about leasing and buying from you all. McLaren, you seem to know your stuff and gathering information, I think I am ready (financially and also a car lover) to swap to a new car every three years (seems the norm).

I think I just need to verify the incentives through BMW and test drive the 135i.

If it is not possible to go with that selection, then I'm thinking the Fusion Sport would be nice.

Makes sense financially for me to lease a car since I don't plan to mod anything exterior and interior wise.

I guess you just have to meet the requirements and guide lines of the deaers.

Thanks!

My biggest advice mate is to just listen to them & what kind of deal they're offering on the car. They're not all the same & not everyone can get the sort of deals I've gotten (same goes for me).

Whether or not it makes sense financially (& some will argue it never does) is just up to you & the offer on the table. It all comes down to researching & number crunching with them, and finally deciding what option is right for you at the best possible deal. There's no issue with buying the car even if you don't plan to do anything to it. The upside is that you'll be the sole owner, not the dealer.

You're forgetting equity in the loan. Let's pretend you're buying or leasing a $30,000 car. Let's also suppose you pay off your loan in 3 years, and that the total cost to buy (including interest) was $40,000. Now let's suppose you could have leased for that 3 years and only spent $15,000. The difference is $25,000 that you didn't have to shell out over 3 years.

Here's the catch. If your car is 3 years old, and has 36,000 miles on it, you can sell the car for $25,000. That makes the two scenarios even-steven financially. You paid the same, and have no car in the end (but never out of warranty).

I don't think I need to tell you that depending on the interest rates, lease rates, downpayments, depreciation, etc. you can end up on either side of financial fence. Sometimes by a lot. Every time I've run the numbers leasing costs ~$5k extra.

I see your point, now.

I suppose again, I've just had somewhat better luck than others with the option. I've never put a down payment on any of the bimmers, & I'm sure BMW Financial offering to wave my last 1-2 month payments if I agree to get another car has been very helpful. For a while I was also dealing with the same salesman through 2 cars (P. Griffin), who knew what I could & couldn't afford.

Either way, I feel my money hasn't been completely thrown away & I've gotten great cars out of it. If someone else thinks that's stupid, then I guess .

 

[McLaren]

Damn. Meant to copy & paste that....