The pros and cons of leasing a vehicle.

[DABSGT]

Years ago wife and I leased new vehicles for her to drive, Buick, Volvo, 2 Chevy Suburbans and a Lincoln. During that time I drove the same ford bronco, had it for close to 25 years loved that truck. I was lucky to be able to buy at the end of the lease then sell for a profit to cover the cost of the next vehicles down payment. My wife enjoyed a new vehicle every 3 years and this worked best for us at the time more car for the money. We purchased my wife's new car and my truck cash this last go around, my wife's car is now 4 years old only has 5,500 miles since she retired it spends most time sitting in the garage.

If you are going to keep the vehicle long term I would purchase, if you plan on new every 2 to 3 years lease may be the way to go. Check on the local property tax some manufactures would pay them in the past not sure about now. They say that taxes are included in the payment but may only be sales tax.

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[smstonypoint]

I'm sure your article is awesome, but I'm too cheap to pay the 39 bucks. Any chance we can get the cliff notes free?

As the great man said:

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

As I don't get any of the $39, I'll spill the beans.

Some auto leases state a specific price at which the lessee can purchase the auto at the end of the lease -- others state that the lessee can purchase the auto at the end of the lease at its fair-market value. The first type of lease has an embedded call option that can be valued (using standard capital budgeting tools) if information on the cash flows for both types of leases is available.

Steve

 

[The Suburban Farmer]

Years ago wife and I leased new vehicles for her to drive, Buick, Volvo, 2 Chevy Suburbans and a Lincoln.... If you are going to keep the vehicle long term I would purchase, if you plan on new every 2 to 3 years lease may be the way to go. Check on the local property tax some manufactures would pay them in the past not sure about now. They say that taxes are included in the payment but may only be sales tax.

Ha! Dabsgt -- looks like you and I were posting the exact same thing at the exact same time. I should have just waited for your post.

 

[DABSGT]

Ha! Dabsgt -- looks like you and I were posting the exact same thing at the exact same time. I should have just waited for your post.

Have to keep the wife's happy! If it isn't a new car they think of something.

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[smstonypoint]

Just curious. For those who have leased recently, are lessors requiring you to purchase gap insurance? Are the premiums included in the lease payments?

Steve

 

[Bird]

Elderly next door neighbor leased a Toyota pickup for 3 years, went to turn it in last year, and said they offered him a deal he couldn't refuse, so he bought it. I remember a time, many years ago, one of my wife's brothers did the same thing with a Nissan pickup. One of our daughters recently turned in her leased Toyota Camry for a new one, also leased.

Personally, I've never been able to see how I could come out ahead by leasing, but obviously it's good for some.

And I guess it may have been before some of you were born, but there was a time when fleet management for the police fleet was part of my responsibilities. In those days, our police cars were costing the city a total of $0.51 a mile. And of course some young officers thought that was too high, sometimes were not happy with work done by our mechanics, and sent a memo to the chief that we should just lease the police sedans. Naturally, it came to me to investigate. The cheapest lease I could find for police sedans was $1.50 a mile; almost 3 times what it was costing us to own the cars.

 

[s219]

You honestly have to run the numbers for yourself to make a decision. I did one lease which worked out very well financially, but it required me to learn about the lease process and make a fairly complex spreadsheet in order to determine if it was a good decision. I also spent some time in the sales manager's office negotiating the sale price of the vehicle down quite a bit, which made the lease even more compelling. Many people just see a canned lease offer and take it, but in reality you should be understanding the effective sale price of the car built into the lease and then factor in everything else to make sure it's a fair deal compared to financing.

When I came to the end of that lease, I liked the car (Honda S2000) enough to want to buy it, but that time around it was a better deal (in my opinion) to negotiate a deal on a brand new model and buy it with cash rather than to buy out the lease on the old car with cash.

 

[Will_C]

As had been previously posted, I think leasing makes sense for many business situations. My cousin, who owns a large acreage farm operation, leases large, 150k+ John Deere farm tractors. This allows him to spread the cost of purchase over many years- he has a 1998 tractor that he leased for 3 years and then purchased. He got the tax advantages up front from the lease, and then was able to further deductions from depreciation.

That does not happen for us leasing passenger cars and trucks. My sister went to graduate school 100 miles from home, and literally was busy between work and school 80 hours a week. Dad, my brother and I were not around to look after her car. Her leased car was fully warranted and had complimentary maintenance for the duration of the lease-it proved to be a good choice for her at that time.

Personally, I would never lease- of course I am the kind of guy who is happy with my 10 year old truck, and paid cash for the car I bought last year. I'll run the truck as long as it is reliable, and the car is destined for a 10 year career.

Will

 

[smstonypoint]

And I guess it may have been before some of you were born, but there was a time when fleet management for the police fleet was part of my responsibilities. In those days, our police cars were costing the city a total of $0.51 a mile. And of course some young officers thought that was too high, sometimes were not happy with work done by our mechanics, and sent a memo to the chief that we should just lease the police sedans. Naturally, it came to me to investigate. The cheapest lease I could find for police sedans was $1.50 a mile; almost 3 times what it was costing us to own the cars.

Bird,

Just curious. How many miles did your officers typically put on their squad cars during a year? And how many total miles did they put on their cars before replacement?

The $0.51/mile cost is interesting. The IRS is allowing $0.575/mile as the business mileage rate for 2015.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil.

New Standard Mileage Rates Now Available; Business Rate to Rise in 2015

Steve

 

[smstonypoint]

As had been previously posted, I think leasing makes sense for many business situations. My cousin, who owns a large acreage farm operation, leases large, 150k+ John Deere farm tractors. This allows him to spread the cost of purchase over many years- he has a 1998 tractor that he leased for 3 years and then purchased. He got the tax advantages up front from the lease, and then was able to further deductions from depreciation. Will

Wow -- two opportunities for shameless self-promotion in one thread in one day!!!!!!!

Here's a link to an Agricultural Finance Review article that I wrote back in 2001 that deals with the lease versus purchase decision for business situations -- http://www.emeraldinsight.com/doi/pdfplus/10.1108/00214830180001124.

Steve