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Car-Leasing basics; what do I need to know?

Posted on 2/17/24 at 5:23 pm
Posted by dstone12
Texan
Member since Jan 2007
30015 posts
Posted on 2/17/24 at 5:23 pm
What are the dos and don’ts of leasing?

I’ve got a company car so I won’t pile up miles on the lease.

How do you determine lease or buy?
How do you negotiate?

Any other pointers?





Since it’s a lease and repairs are their problem, do you lease an electric truck or crossover and save on the gas and let them hammer out the electric repairs?
This post was edited on 2/17/24 at 5:26 pm
Posted by b-rab2
N. Louisiana
Member since Dec 2005
12575 posts
Posted on 2/17/24 at 7:24 pm to
I think I’m in the same boat. Looking to lease a new car for my wife or buy. She would put less than 6k miles on it a year.
Posted by TorchtheFlyingTiger
1st coast
Member since Jan 2008
2111 posts
Posted on 2/17/24 at 8:05 pm to
DO avoid leasing a vehicle.

DON'T lease a vehicle

If you have a company car why waste $ leasing another?
Posted by dstone12
Texan
Member since Jan 2007
30015 posts
Posted on 2/17/24 at 8:48 pm to
quote:

DO avoid leasing a vehicle.

DON'T lease a vehicle

expound more pls.


quote:

If you have a company car why waste $ leasing another?
There's a respect level for the owner of our company. I don't take this thing to the beach or the mountains with three kids. THis is a car with no roof rack or third row.


please go further on how leasing is bad. thanks.
Posted by TorchtheFlyingTiger
1st coast
Member since Jan 2008
2111 posts
Posted on 2/17/24 at 9:30 pm to
In that case, have you considered renting occasionally as needed instead of renting a spare vehicle for 2-3 years?
Posted by dstone12
Texan
Member since Jan 2007
30015 posts
Posted on 2/17/24 at 9:40 pm to
So you think i should pay near 800-1200 a week for an suv vs. way less than that for a month?





Would someone else please chime in since this guy simply refuses to go over the pitfalls of leasing vs purchase?
Posted by LSUtigerME
Walker, LA
Member since Oct 2012
3789 posts
Posted on 2/17/24 at 9:45 pm to
You’ll get a lot of “anti-lease” sentiment here.

There are pros and cons to leasing. Some vehicles also lease much better than others, so the vehicle selection may influence the decision as well.

There’s a couple old threads in the Sticky on Lease vs Buy that I’ve expounded on the topic.

Staying under the miles is important. Mindset/understanding is also critical in knowing you are locked into getting a replacement vehicle at the end of the lease term. This is nearly regardless of the miles, care, or value of the vehicle. You can still capitalize your equity, or keep the vehicle. However, leasing then purchasing can often be more expensive (overall) than purchasing/financing from the beginning.

To determine lease vs buy, I build a calculation that compares the overall cost over the life of the term. A lease is just a pre-agreed contract on the “trade-in” price at the end of the term. So instead of paying more upfront and possibly getting equity on the trade, instead the payment is lower but you have a balloon payment/trade option at the end.

As for advice, make sure you understand all the lease terms, including residual, cap cost reductions, acquisition fees, and money factors. These are a little different for a lease vs financing. Once you know the EXACT vehicle and trim level/options you’re interested in, research the residual and money factor for that specific vehicle and lease term. This is often set by the manufacturer, and may be manipulated by the dealers.

Also understand that you negotiate the sales price of a lease all the same as financing. Some of the incentives may be different between lease vs financing.
Posted by dstone12
Texan
Member since Jan 2007
30015 posts
Posted on 2/17/24 at 10:45 pm to
Posted by CEB
Member since May 2023
36 posts
Posted on 2/17/24 at 11:27 pm to
So at the end of the lease you have nothing!, Zero! Nada! Yes you enjoyed driving a new vehicle but you have nothing less your upfront fees and monthly lease payment.
Posted by Rize
Spring Texas
Member since Sep 2011
15745 posts
Posted on 2/18/24 at 12:22 am to
quote:

So at the end of the lease you have nothing!, Zero! Nada! Yes you enjoyed driving a new vehicle but you have nothing less your upfront fees and monthly lease payment.


Yeah I’m not a lease guy. I prefer to buy them that way if my income changes I can sell them. I have a years of living expenses if I sell my daily drivers to fall back on.
This post was edited on 2/18/24 at 1:00 am
Posted by Twenty 49
Shreveport
Member since Jun 2014
18719 posts
Posted on 2/18/24 at 7:55 am to
I couldn’t live with the thought that at the end of the term the dealer is going to chicken shite nit pick about dings and dents deductions.

Also, I knew a guy who leased a nice BMW and then died. Widow was stuck with the lease for a car she did not need. Finally negotiated a resolution, but you don’t just drop off the keys if the lessee dies.
Posted by armsdealer
Member since Feb 2016
11492 posts
Posted on 2/18/24 at 8:03 am to
look on leashackr, you will see the types of deals you can get.

Posted by LSUtigerME
Walker, LA
Member since Oct 2012
3789 posts
Posted on 2/18/24 at 9:37 am to
quote:

So at the end of the lease you have nothing!, Zero! Nada! Yes you enjoyed driving a new vehicle but you have nothing less your upfront fees and monthly lease payment.

Have you done the math on this?

Yes, this is technically true, but that lease payment is much, much lower than traditional financing (of the same vehicle). So while you are left with “nothing”, you paid much less over the term to “enjoy driving a new vehicle”.

When you finance a new vehicle, you’re paying the bank a fee to drive that new vehicle. As you continue to drive it, it depreciates in value. So at the end of your term, you’re left with “something” of much lower value.

The question, and the one that determines the value of lease vs buy, is what’s the difference in cost/spend between these two scenarios?

Lease: Fees + Monthly Payment
Buy: Fees + Monthly Payment - Value at End of Term

As mentioned, this always assumes equal vehicles and terms. If you start considering used vehicles, or holding onto them longer, then it’s not necessarily the same scenario and leasing is not really applicable.
Posted by LSUtigerME
Walker, LA
Member since Oct 2012
3789 posts
Posted on 2/18/24 at 9:45 am to
quote:

I couldn’t live with the thought that at the end of the term the dealer is going to chicken shite nit pick about dings and dents deductions.

Different manufacturers treat this differently and should factor into which vehicle you decide to lease (another reason some lease better than others).

Honda, for example, gives (or gave in past) you a $500/panel and $1500/vehicle damage allowance. This was nice to ease some of those concerns over normal parking lot dings and scratches. Normal wear and tear is waived by all of them, but many do nitpick on items.

quote:

Also, I knew a guy who leased a nice BMW and then died. Widow was stuck with the lease for a car she did not need. Finally negotiated a resolution, but you don’t just drop off the keys if the lessee dies.

To be fair, what would they have done if the vehicle was financed?

A lease always has a buyout value (same as financed), but it’s not always attractive based on the way payments are structured.

Almost all leases also come with GAP insurance as well. So if you total the vehicle, you are usually covered and released from the lease. This is another reason I advocate to never put a “down payment” (termed cap cost reduction in leasing) on a lease. The way it’s structured, you will never get that back as “equity”, only a lower payment for the term.
Posted by Tifway419
Member since Sep 2022
812 posts
Posted on 2/18/24 at 10:39 am to
quote:

There's a respect level for the owner of our company. I don't take this thing to the beach or the mountains with three kids. THis is a car with no roof rack or third row.
I don’t think leasing in your situation is necessarily a bad thing, but how often do you take vacations to the beach/mountains and need the roof rack or third row? If twice per year, renting for two week long trims will be much cheaper than leasing. If it’s more than twice then you are either taking too many vacations or can afford to buy the car outright.

Why not upgrade your wife/husband’s car to fit your needs.
Posted by fallguy_1978
Best States #50
Member since Feb 2018
48337 posts
Posted on 2/18/24 at 11:56 am to
quote:


I couldn’t live with the thought that at the end of the term the dealer is going to chicken shite nit pick about dings and dents deductions.

Leasing seems to make sense for people that don't drive a lot, take really good care of their vehicles and want a new one every few years.
This post was edited on 2/18/24 at 12:33 pm
Posted by thunderbird1100
GSU Eagles fan
Member since Oct 2007
68289 posts
Posted on 2/18/24 at 1:40 pm to
quote:

Leasing seems to make sense for people that don't drive a lot, take really good care of their vehicles and want a new one every few years.



And most importantly actually have money to burn, because thats pretty much the only people who should be leasing, not people who are in "tight" financial conditions. Continously leasing for a long time is a good way to pay the absolutel most to drive vehicles, because effectively you are paying down the most depreciation on a vehicle every time you lease which is in the first 2-3 years of a new vehicle.

On top of that, the money factors on most leases I've found are astronomically high, this is the "interest rate" effectively. We were looking at a CX-90 (PHEV) from Mazda because the only way you can get the $7,500 tax credit on it is through leasing it, not buying it. Sounds like you'd get a great deal if you can get $7,500 off a ~$50k lease vehicle, but we ran the numbers it just didnt make any sense. The money factor ended up being some absurd amount due to vehicle purchase price at end of lease if we were in fact getting $7,500 thrown our way for this. Money factors can often be VERY high compared to interest rates you'll get on new and even used vehicles when buying...but you just always have to run the numbers.

Also, never put money down on a lease, it makes no sense. Calculate your monthly payment based on 0 down to make all things apples to apples. You might see 1 lease deal for $399/mo but requires $5k down. Another might be $499/mo but requires $1k down. The latter is going to be "Cheaper" if over 36 months despite being $100/mo advertised because the down payment they want is enough less.

In the end, from a financial point of view, leasing is dumb, again because its almost always going to be the most expensive way to own a vehicle since youre paying for the depreciation of the vehicle over the first few years of it's ownership. It only makes sense it would be the most expensive given that scenario.

In the OPs scenario if you just need a larger vehicle "on occasion" like others have said I would just either rent a vehicle or buy a used vehicle thats depreciated a good bit already. You dont need a brand new $50k SUV to go on 3-4-5 trips a year. Buy a $20k-$25k used SUV and use that or just rent something when you need it. That would be the much smarter financial move.

As for the person who mentioned leasehackr, I can say I've visited that site probably 2 dozen times over the years and almost always it's impossible to find something in your area or a dealer willing to do the terms on someone something found. Occasionally you can come across a great deal on a lease but it is VERY few and far between and that site is very dead most of the time I've found. EVs/PHEVs are popular right now due to the $7,500 cash lease companies are willing to pass on to the customer but again have to run the numbers because the "deal" Mazda was offering us for a CX-90 PHEV was still a bit absurd in my opinion with a money factor that was astronomical.
This post was edited on 2/18/24 at 1:45 pm
Posted by fallguy_1978
Best States #50
Member since Feb 2018
48337 posts
Posted on 2/18/24 at 1:59 pm to
We leased a vehicle one time and it ended up being a mistake. The motivation was to write it off as a business expense, but we would have been better off buying the car which ended up doing anyway at the end of the lease.

I'm more of the type to buy it, pay it off as quickly as possible and drive it until it starts becoming a maintenance headache.
This post was edited on 2/18/24 at 3:22 pm
Posted by Im4datigers
Northern Virginia
Member since Oct 2003
4461 posts
Posted on 2/18/24 at 7:50 pm to
A car is an expense, not an asset. Unless you plan to drive the car into the ground, then lease. Smaller note, get a nicer car and at the end of three years you’re not upside down in a car because of the depreciation.

I’ve had a car not since I was 15. At 50 I don’t foresee that changing. So why not find the least expense and lease.

And do the math, putting more down does decrease the monthly payment but the the total of payments over three years about equals the same amount. (More down and less monthly note equals the same total as nothing down and a higher note).
Posted by lynxcat
Member since Jan 2008
24120 posts
Posted on 2/18/24 at 9:35 pm to
quote:

A car is an expense, not an asset.


False. It is an asset that depreciates.
quote:

Smaller note, get a nicer car and at the end of three years you’re not upside down in a car because of the depreciation.


If you want a new car every three years, then leasing is going to be a better scenario.
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