The pros and cons of leasing a vehicle.

[Capricious]

"...don't think this makes sense. Would you pay the same lease rate for a 2,4,6,8,10,12 year-old car as a new car? No, it would be a sliding value..."



Then price a 14 year lease, and compare the cost.

If, however, one wants to trade cars every few years, such as has been mentioned in this thread as one of the advantages of leasing, then my numbers are spot-on


The lessor makes a profit on the deal: Where is that profit coming from?

 

[Capricious]

My car model wasn't listed on the Edmunds page that was linked, but I see they had a lease calculator a page back. I tried plugging in my estimations, and if I trade in my car and lease the latest model year, I have a -$77 payment.

I'm obviously doing something wrong. I don't think they'll pay me 77 bucks a month to lease their car! :laughing:

Probably not.


But a really good car salesman will make you think he is paying you to take his car.

 

[Capricious]

Since the following statement by me was questioned:

"..Why do you think that GM just announced that they are reducing the length of their standard warranty? Because they realized that they were cutting into the dealers' opportunities to make money selling extended warranties. Pure and simple. "Back end" profits. That's where the car dealers are making their money these days..."




...I will post this:

"...selfishly for me, the first thing I thought of was that it will probably help me to sell more extended warranties. We will be able to make more money doing that instead of the factory. stated David Ferraez, who owns a string of Buick-GMC and Chevrolet dealerships in northern New Jersey.

GM Trims Warranty Increasing Need for GMC Extended Warranties

 

[GPintheMitten]

I doubt I would understand much of the analysis that economists like smstonypoint publish, but I admire their ability to do it.

My seat of the pants thinking of the least expensive way to buy transportation is to buy the vehicle 2-3 years old and maintain it well for about 3-4 years then sell it and repeat the cycle. That way you don't suffer the high depreciation but have a relatively dependable vehicle.

I don't always do this, but I think it may be the way to go.

 

[dave1949]

"...don't think this makes sense. Would you pay the same lease rate for a 2,4,6,8,10,12 year-old car as a new car? No, it would be a sliding value..."



Then price a 14 year lease, and compare the cost.

If, however, one wants to trade cars every few years, such as has been mentioned in this thread as one of the advantages of leasing, then my numbers are spot-on


The lessor makes a profit on the deal: Where is that profit coming from?

I'm not worried about the lessor making a profit. The cost-per-mile of having a piece of hardware available for use--that's what matters to my bottom line. I would need to know the cost-per-mile differential between leasing and owning and decide if that is acceptable.

For example, if always driving a late model car was my desire, and it turns out that leasing costs me $0.05 cents per mile compared to owning, but I eliminate the financial risks of ownership and never have much cash tied-up in a vehicle at any one time, maybe leasing makes sense.

For some people the reasons/criteria for selecting the car they buy will change over a 10-15 year period. If you own what has become an unsuitable vehicle for your needs your cost-of-ownership becomes secondary and it is likely you will be car shopping.

Like others have pointed out, the choice depends a lot on what people value in a vehicle and what their personal financial situation is. I guess the trick is to know which applies on an individual basis.

 

[Capricious]

"...I'm not worried about the lessor making a profit. The cost-per-mile of having a piece of hardware available for use--that's what matters to my bottom line..."



If the lessor is making a profit, then it has to be included in your costs.





"..Like others have pointed out, the choice depends a lot on what people value in a vehicle ..."


I agree. 100%

But what people "value" may end up costing them more money. As I have said, my primary concern is my costs. I will compromise on the vehicle before I will compromise on the costs. Because with a limited income, spending more on vehicles now means less money for retirement in not-too-many years.

That may not be something that others worry about.

 

[GolfAddict]

Probably not.


But a really good car salesman will make you think he is paying you to take his car.

No doubt!

I think I see what is up. Since I don't owe on my car, I have a decent trade in number that I got from KBB. Then I estimated about the same depreciation for the new one, and used that for the residual value of the new car after the lease. I took a pure guess that "title, registration, and other fees" would be $4500.

I think what it's showing is that my trade in money is making the lease payments...

 

[Capricious]

I doubt I would understand much of the analysis that economists like smstonypoint publish, but I admire their ability to do it.

My seat of the pants thinking of the least expensive way to buy transportation is to buy the vehicle 2-3 years old and maintain it well for about 3-4 years then sell it and repeat the cycle. That way you don't suffer the high depreciation but have a relatively dependable vehicle.

I don't always do this, but I think it may be the way to go.

The problem I have had is that it is extremely difficult to purchase a 2 or 3 year old vehicle for what I would consider it's "depreciated value." A dealer will be adding his mark-up, and he will get it because he can arrange on-the-spot financing.

And a private party seller cannot sell for depreciated value because he usually owes too much and either doesn't have the extra money to pay-off the lien, or doesn't want to kick-in the money.

In a perfect world, I would be buying 2-year-old vehicles. In reality, I am not seeing them cheap-enough not to just buy new, especially when I can buy a new basic version of a vehicle for less than a "loaded" used version. (I obviously attach little value to most of the options that vehicles have these days.)

 

[Capricious]

"... I took a pure guess that "title, registration, and other fees" would be $4500..."



Don't know about title & registration, but sales tax info is here:


https://dps.mn.gov/divisions/dvs/Pages/motor-vehicle-sales-tax.aspx

 

[GPintheMitten]

The problem I have had is that it is extremely difficult to purchase a 2 or 3 year old vehicle for what I would consider it's "depreciated value." A dealer will be adding his mark-up, and he will get it because he can arrange on-the-spot financing.

And a private party seller cannot sell for depreciated value because he usually owes too much and either doesn't have the extra money to pay-off the lien, or doesn't want to kick-in the money.

In a perfect world, I would be buying 2-year-old vehicles. In reality, I am not seeing them cheap-enough not to just buy new, especially when I can buy a new basic version of a vehicle for less than a "loaded" used version. (I obviously attach little value to most of the options that vehicles have these days.)

But a true comparison would be a used vehicle and new vehicle with same level of options, to what ever option level one wants. But it could be hard to find a lower optioned vehicle used, due to the popularity of well optioned vehicles.

Frankly, I don't think there is any "best" way to buy. Transportation is just plain expensive. We just need to be thoughtful in whatever way we approach it, because they are such big ticket items and the lure is strong.