Leasing a car

[Tomsecks]

A friend of mine is looking to lease a car. Anybody currently doing this? Pros / Cons?

Here's what it sounds like:

Wants a new 09' Civic, doesn't want to spend more then $300 a month on a payment or to put down more then like 1k - 2k. The lease would be like $290 a month for 36 months, at the end, could buy the car for ~ 13500. All told, would have $10440 in the first 3 years, then whatever the finance on the remaining $13500 if she chose to buy it. So all told, about $25k - $26k over 6 years, instead of about 23000 upfront. Not too bad I think, yes not the cheapest route, but close to the same really over the time span.

Thoughts?

[69camarokid]

civic?
BOO!

hahaha I went with a freind to help her buy a car... she got a Carolla... i was sad.

[Tomsecks]

Not a Civic fan??? Didn't think those existed. I have one that's got 265k on it, so maybe I'm bias too.

[Desert68]

I would only consider what's known as a subvented lease. The manufacturer is involved. It's the only way, in my exerperience, you get good terms. The entire lease needs to be read and *all* the terms need to be understood. Lots of info on the internet - do some research.

[claytonisbob]

From what I've seen with leases; if its a car that has a really low depreciation then it can be worth it. Otherwise it seems like you can get a better deal by just buying. Dealers are more willing to cut deals if your buying, you can do whatever you want to the car without having to worry if it is going to cost you too much later, you won't worry every time you make a long trip if you're using miles you may need later into the lease. Going over your agreed miles gets expensive.

[bigvegan]

Have him look into buying it initially. I can't imagine a 5 year note would be more than the lease you're describing.

[castine917]

i leased once and paid 2500 to turn it in at the end of the lease. would have cost more to sell it than turn it in because of depreciation. mileage overages are costly.

[Vegas69]

It really depends on if he is looking to buy a NEW car of a USED car. In many cases it makes more sense to lease a car than buy a car if it's brand new. Now if he was to buy a 1 or 2 year old car that is a whole new ballgame. I lease a brand new car every 3 years due to the business I'm in requires reliable transportation. I don't put any money down except for the first payment. I'm not just pulling this out of my butt either. You can look at the depreciation of the model you're interested in by looking at KBB.com. How much does and 06 civic go for today? Do the math...it's really that simple. Just don't forget mileage limitations and wear and tear your liable for. The good news is after your lease is up....you're not upside down like you would be buying a new car.

[GetMore]

Don't forget the down payment in the calculation of cost.

[vp23271]

From what I've seen with leases; if its a car that has a really low depreciation then it can be worth it. Otherwise it seems like you can get a better deal by just buying.

I agree with Clayton. Do a side by side comparison and decide if a lease works better for her. If she drives a lot of miles or has a long commute, she might be better off buying. If she tends to want a new car every 3-4 years, maybe a lease might work better for her.

Keep in mind that EVERYTHING is negotiable, even with a lease.

When you buy a car you generally negotiate 2 things. The final sales price of the car and also the interest rate of the loan.

For a lease you negotiate 3 things. The final sales price, the residual value and money factor (aka loan rate). The residual value is what the lender/dealer guesstimate the car will be worth when you turn it back in. For a lease, your payment is mainly based off of the depreciation of the vehicle. If her credit score is high enough, she would generally be better off getting her loan directly thru Honda.

Another thing to know is that at the end of your lease, shop the car around and decide which dealership to turn the car back into. If the car was well taken car of and is under miles, DO NOT JUST hand it over to the dealership! When the sales person leased you the car, the bank was most likely conservative with the residual value. They expect the car to come back to them with some wear and tear. If you paid $$ for 15k miles per year and did not use them, let the dealership know and ask them to make you an offer. If the car was taken care of you could be getting some money back. About 30 days before I turned my car in, I went in for my final inspection and visited 3 local dealerships and turned it in to the one who offered me the most $$ and I did not buy another car from the dealership. This was just strictly turning in a lease.

[Chad-1stGen]

So Civics now cost 23K?

Wow

[JJSmitches]

Check out this link for info/suggestions on leasing a vehicle.

http://clarkhoward.com/shownotes/category/5/124/28/

[streetk14]

It really depends on if he is looking to buy a NEW car of a USED car. In many cases it makes more sense to lease a car than buy a car if it's brand new. Now if he was to buy a 1 or 2 year old car that is a whole new ballgame. I lease a brand new car every 3 years due to the business I'm in requires reliable transportation. I don't put any money down except for the first payment. I'm not just pulling this out of my butt either. You can look at the depreciation of the model you're interested in by looking at KBB.com. How much does and 06 civic go for today? Do the math...it's really that simple. Just don't forget mileage limitations and wear and tear your liable for. The good news is after your lease is up....you're not upside down like you would be buying a new car.

I'm with Todd on this one. If it is a car that holds it's value very well ( Honda, BMW, etc.), it can be a very good deal vs. buying. This is more true if you are the type of person that wants/needs to get a new car every few years. This is the catagory I fall under. I tend to get bored with my cars and am always looking for the latest and greatest.

So buying for me isn't the best option. My current car will hold it's value extremly well ('08 M3), but if you were to buy a new GM product for example, you would be upside-down on your loan in a hurry. The problem with leasing cars with poor residual values is that the payments will be higher (than a car with a stronger residual) due to the fact that the car will not be worth much when it comes time for the lease return and re-sale of the car.

So..... it comes down to the numbers. Tom, if your friend really wants that Civic, is it something she wants to keep for a long time? If so, buying it would be better. If she is unsure, a lease isn't a bad idea. The thing about leases is that the residual values are determined in advance. They try to predict where the used car market will be in a few years, which can be tough to do. If she does do the lease deal, keep an eye on what these cars are selling for when it starts getting close to lease return time. Sometimes the cars are actually selling for more than you can buy it for, sometimes less.

For me it's an easy decision; I get the BMW employee lease deals

[jackfrost]

I leased my 05 Hemi Ram back in Dec 04. At the time, I couldn't afford the big payments of buying, and I couldn't find anything else I could stand driving. so I leased it for 39 months @ $325/mo (purchase price was about $32k after rebates). to buy it, it would've been over $600/mo. at the end of the lease I bought it and my payment is now $430/mo for 4 years. yes, it sucks to have payments on a car for 7 years.

here's my advice - if she's planning on keeping it, and doesn't mind the payments for a long time, go for it. however - negotiate with the dealer like you're buying right up to the moment you sign the papers. they try and play numbers games with leases to try and squeeze as much out of it as possible. I emailed all the dealers in my area with what I was looking for (ordered it) and one came back and gave it to me at invoice. I walked in and placed the order. six weeks later I walked in signed the papers. no hassle whatsoever.

if I were I to do it all over again, I wouldn't buy a new car. I'd get one 2-3 years old. unless she's really specific on what she wants and can't find it, I'd encourage her to get something slightly used.

[GetMore]

streetk14 has some good info. Something else to think about is sometimes you get a better price if you add options. That's because they pump up the residual value. Things like sunroof, upgraded audio system, heated seat, and the other amenities make the car worth more than they themselves cost when the lease ends. This means the lease payments should be lower.