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I think a lot of people do finance a new vehicle and then sell it once the loan is paid down. There are many 3-5 year old cars listed for sale by private sellers. I plan to sell mine at 100k miles which is perfect timing because that's when the warranty is up.
For the last 15 years I've bought a used car about every 4-5 years. I try to keep it under 6yrs old with less than 60kmiles for under $10k. I will usually put on about 150kmiles in the 4-5 years I have it. I take whatever I get for the old car and put it down on the new one and I keep my payments around $150/month. Because I drive so much, I like larger sporty sedans for their comfort. I do my own maintenance and I have rarely ever had to spend more than a couple hundred in parts for a repair.
I can afford a new car if I liked but why if im only going to commute in it.
What do you think is the reason that car companies spend hundreds of millions of advertising dollars of their own money pitching the lease instead of the purchase? Because it is good for YOU, or good for THEM? When people pay good money to tell you about something, guess who stands to gain from it.
Ok but what if you planned on getting rid of the car the second you paid it off after 60 payments? In my scenario you're left with trading in, or selling privately, a vastly depreciated, 5 year old, 100k mileage car. If you go the "I'm going to buy and rack up the miles on this baby" route. Imo in this case you were better off just leasing for 3 years with a negotiated higher mileage limit. At the end of a 3 year lease you still have the option to buy if you want. So again high mileage in itself does not make buying better than leasing except maybe in your case where you plan to keep a car for 10 years.
That's exactly what I did last week,after thinking about it.
I did buy a car and put 100,000 miles on it in 2 years, but guess what? The engine went. I planned on driving the car to 150,000 miles. I always went the the dealerships to get it maintanenced according to the schedule. Unfortunately,it broke down after the 100,000 mile warrenty was up. The car was only 5 years old.
Most cars don't make it to 200,000 miles. Face it.
The cost of repairing an engine ot tranny is the same as putting the down payment on a new lease.
I now have a leaseed Nissan with free maintanence,18,000 mile a year limit and for 36. Months.
Last edited by jerseygal4u; 11-20-2012 at 10:56 PM..
This is not about leasing vs buying or used vs new...this is about why high mileage would influence your decision either way IF you're not planning on keeping a car for years and years anyway. Low mileage is irrelevant. A car does not depreciate LESS from high mileage just because you bought it instead of leased it and if you did buy it you're stuck with a high mileage car that is already out of warranty possibly before the end of the 3rd year. For the people that still think buying is automatically better than leasing whatever the numbers have been crunched on this time and time again and it always shows that leasing is smart for people that don't keep a car very long. jerseygal4u - yeah that example pretty much sums it up.
This is not about leasing vs buying or used vs new...this is about why high mileage would influence your decision either way IF you're not planning on keeping a car for years and years anyway. Low mileage is irrelevant. A car does not depreciate LESS from high mileage just because you bought it instead of leased it and if you did buy it you're stuck with a high mileage car that is already out of warranty possibly before the end of the 3rd year. For the people that still think buying is automatically better than leasing whatever the numbers have been crunched on this time and time again and it always shows that leasing is smart for people that don't keep a car very long. jerseygal4u - yeah that example pretty much sums it up.
One of the issues you are running into is that most people don't know how flexible leasing can be. All they are exposed to are the ubiquitous manufacturer rebated leases that offer low payments for 36k miles over 36 months. The fact is that you can lease for just about any time period and driving scenario one could think of. Of course, leasing over more 'creative' periods of time also tends to require higher credit scores and perhaps going through a third party company to complete the deal.
An easy resource is to look at leasecompare.com where you can place in all of the variables on new and used cars (yes, you can lease a used car) and it will return you the estimated monthly pricing by term for both buying and leasing.
What you will tend to find is that a 5 year and 100k mile ownership period results in a lease payment that is around $10-$20 less on a $30k vehicle with a $4k residual versus buying on a 60 month loan. Where it gets complicated at that point is the fact that the buyer could actually end up paying less overall then the lessee if they financed for 72 months and then traded in the car at 60 months where it would roughly be a break even, maybe even a little ahead.
Example, using lease compares numbers on a $30k Lexus CT200h:
I used a 750 credit score, with $2,000 down and mileage of 20,000 per year. The 60 month lease rate was $505 per month with a $5k residual. The 60 month financing was $520 per month at 2.80%. The trick here was that if we stretched the payments to 72 months, the monthly payment went down to $463 or $42 less then leasing. In this scenario the 'cheaper' option for that ownership period would be to buy for 72 months and then trade the car in at 60 months and you should be roughly even on the trade-in.
What does this tell us? It tells us that each scenario is unique and people need to pick the best option for them in their situation. Just because you drive a lot doesn't mean that leasing won't work or that it isn't the better option. For instance, our payment on the car above would be $583 per month on a 36 month lease at 20k miles per year with a residual around $12k. With that shortened period of ownership, there is no buy option that would work out better then the lease.
Someone above mentioned the manufacturers pushing leasing because it is "good for them". Well, it is and it is also good for a lot more consumers then take advantage of it. Far too many people want to put no money down, roll everything into the loan, tack on some negative equity and nab a low payment. For those people, financing is really the only option. The savvy consumer would weigh all of their options before either leasing or buying and pick the best for their unique situation.
Manufacturers like leasing and incentivize them because it let's them move inventory more rapidly and also creates piles of high margin CPO used cars that the dealers love. However, the fact that it can be a positive for the manufacturer and the dealers doesn't mean it's an instant negative for the consumer.
Leases do not cost more than buying outright. In a lease you are only buying part of the car (hence the lower payment). Certainly cars are cost prohibitive to own out of warranty, cross that 36K/48K/50K mark and then the 3K a/c repairs, 2K air suspensions etc start to break. Add these other costs back into your cost of ownership and you will quickly see why people turn in the leased cars just before the warranty expires.
Manufacturers often "subsidize" leases to get people to buy their cars (this benefits the consumer greatly). Usually it is a new model, a less popular model or simply a bunch of unsold inventory. I will give you two examples that I leased and easily beat the guy that bought the same car.
1. 1995 Acura Integra LS - $249 mo. including tax- 30 months/30K miles/zero down. Payment to buy that car was $83 a month higher. So the lease was $7470 and I was done. The $83 difference gave me $2500 in my pocket (to essentially put down on another car). Had I bought the car, the payoff would have essentially been the value of the car so I would have spent $83 a month extra with no return at the end. Why? The car was leased in August, lease ended in Feb essentially making it a 3 year old car at lease end. I changed the oil once in that car, dealer did it free the first time and it needed an oil change when I returned it.
2. 2004 Audi A8L- 83K sticker price- Lease for $1039 month including tax-zero down 39 mo/48K miles (15K year lease essentially). Buy price at the end of the lease was over 50K! Real market value was 30K. Audi inflated the lease end buyout price with the intention of lowering the monthly payment to attract buyers. The deal breaker for them was the VW Phaeton (similar to the A8, but VW badge). The VW TANKED in the resale market and dragged the A8 down with it (since it was made in the same factory, same parent company). Audi lost 20K on every A8 they leased in 2004/2005.
Domestics aren't heavily leased for a few reasons:
A. People buy and keep them (old people buy Buick/Cadillac and barely use them for example).
B. Pickups get abused, used for work and run into the ground. Nobody is going to "baby" a truck for 3 years to prevent scratches in the bed with the fear the lease company will charge them for the bed use.
C. Camaros/Mustangs have cheap enough MSRP's that people can afford to buy them. Leasing is designed to allow you to drive a better car than you can afford!
You're wrong and obviously don't understand how a lease works.
First of all, you're assuming that a car with 36K or 48K miles will become a "money pit". This is FAR from the truth and you're trying to bolster your point which has no leg to stand on. Most vehicles will exceed the 100K mile mark before any major systems start failing and if something fails before 100K miles, it's highly likely that it'll be within the first year of ownership. Modern vehicle components are built to withstand enough abuse and strain that only 1% of them would ever have a major system failure before 100K miles. Your first assumption is false.
The vast majority of leases are NOT "unpopular models" or "unsold inventory", the vast majority are POPULAR vehicles from the likes of Mercedes, Audi, BMW, Lexus, Cadillac, and Infiniti which offer vehicles that are usually cost-prohibitive for many average people to buy outright so they succumb to the leasing scheme. People are not buying average, inexpensive vehicles with leases but are normally buying higher-end, luxury vehicles that they can't afford to finance. Your second assumption is false.
You rarely, maybe 1/2 of 1% of the time will come out ahead by leasing a vehicle. Why do you think manufacturers advertise so heavily the "great leases" they're offering? Do you think they're dumb? Do you think they're advertising leases because they lose money on each lease they offer? NO, they sure as hell know what they're doing otherwise they wouldn't be trying to get more and more people into the leasing scheme. I've started seeing Mercedes advertisements for Christmas and of course, the ads are pushing how cheap their leases are. Mercedes is in the business of making money, they'd be out of business if leasing was such a great deal for the consumer.
Besides leases usually stipulate:
A downpayment (usually a few thousand dollars)
X number of miles (with HUGE mileage overage penalties)
X number of months (usually between 30-36; so YOU are paying the initial depreciation)
Damage penalties
Condition penalties (normal wear and tear)
You don't come out ahead by leasing a vehicle, pure and simple. To think otherwise is simply illogical.
You're wrong and obviously don't understand how a lease works.
First of all, you're assuming that a car with 36K or 48K miles will become a "money pit". This is FAR from the truth and you're trying to bolster your point which has no leg to stand on. Most vehicles will exceed the 100K mile mark before any major systems start failing and if something fails before 100K miles, it's highly likely that it'll be within the first year of ownership. Modern vehicle components are built to withstand enough abuse and strain that only 1% of them would ever have a major system failure before 100K miles. Your first assumption is false.
You're wrong and obviously don't understand how a lease works.
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You don't come out ahead by leasing a vehicle, pure and simple. To think otherwise is simply illogical.
You're wrong, too. I'm leasing my '11 MINI Cooper and I'm only paying for the part of the car I'm using. I put almost nothing down (enough to do tax and registration), and have fairly generaous condition clauses (though I tend to keep my vehciles in nice shape). Leasing is more advantageous for me than the buying and selling I was doing to keep a new car in the fleet (I want one in the fleet that my wife can drive that has the latest in tech, safety, and fuel economy wihile still being fun to drive and covered by a warranty so *I* don't have to work on it). I'm paying less than if I purchased it, and am not stuck with it.
I've purchased cars outright, financed them traditionally (my Mustang is) and now leased them. There are situations like this where leasing is in fact the lower cost way of doing it.
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