7 year car loans can be a very good idea (payments, credit, mortgage)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Using those rates posted above you get $409.93 for 7 year.
The salesman helpfully suggests a lease. He has a lease available for only $410 per month, so that you can turn the car in 36 months or you can purchase it for the residual value of $18,200. You just have to agree to bring it back with only 36,000 miles with 15 cents per mile and in clean condition with no scratches or more serious damage.
CHALLENGE: Why are you being ripped off? Why is the 7 year loan a much better deal than the lease?
If you don't know how to calculate residual value of a loan, the balance on the 7 year loan after 36 months is $18,159.
Normally, people go to a forum to get information. Personally, I see leases as basically 7 year loans with a mandatory buyback program on terms which are favorable only to the dealer.
But I presume that millions of people who go into leases don't bother to check the loan payment, or the balance of a loan on a 7 year note. They just don't consider this option at all. IMHO, no one should ever choose a lease as it offers no advantages to the consumer over a long term loan.
Quote:
Originally Posted by mysticaltyger
ICK, NO!!! The challenge is to compare a car loan to paying cash. If you decide having a car/lease payment is normal, natural, and inevitable, you'll be right every time.
I offered a CHALLENGE in my original post, and not one person even made an attempt. Almost every single post was just an exhortation to spend less money and finance less.
I'm glad I'll never have to make such a narrow and fiscally unsound "choice."
No kidding.
Plus, you can't compare every purchase with every lease.
Some leases are extraordinarily bad ideas that make no sense.
And then others are like basically a free car for a few years (my friend leased her Honda Accord - brand new good family car for $211 a month very nicely loaded...we were all like, WTF?! why would you EVER buy that car?!).
And then others are like basically a free car for a few years (my friend leased her Honda Accord - brand new good family car for $211 a month very nicely loaded...we were all like, WTF?! why would you EVER buy that car?!).
Thank you for the example. As leases go, this one is much more attractive than most. But let me use an advertisement for this year's model ($219 month).
Quote:
Originally Posted by Honda Accord Advertisement
Offer valid from 5/1/2013 through 7/8/2013
$219.00 per month for 36 months. $2,399.00 total due at signing.
Includes down payments with no security deposit.
Excludes taxes, titles and dealer fees. For well qualified lessees.
Closed end lease for 2013 Accord Sedan CVT LX (CR2F3DEW) available from May 1, 2013 through July 8, 2013, to well-qualified lessees approved by Honda Financial Services. Not all lessees will qualify.
Higher lease rates apply for lessees with lower credit ratings.
MSRP $23,270.00
(includes destination, excludes tax, license, title, registration, documentation fees, options, insurance and the like).
Actual net capitalized cost $20,734.26. Net capitalized cost includes $595 acquisition fee.
Dealer contribution may vary and could affect actual lease payment. Total monthly payments $7,884.00.
Option to purchase at lease end $13,962.00.
Must take new retail delivery on vehicle from dealer stock by July 8, 2013.
Lessee responsible for maintenance, excessive wear/tear and 15¢/mile over 12,000 miles/year for vehicles with MSRP less than $30,000, and 20¢/mile over 12,000 miles/year for vehicles with MSRP of $30,000 or more.
See your Honda dealer for complete details.
Because this finance rate is so low on the lease, a seven year payment would be higher. Subtracting the $595 acquisition fee in the ad, and using 3.99% in the Credit Union example the monthly payment is $275.19 a full higher $56.19 than the FREE car. So you pay 36*$56.19=$2,022.73 more over the three years.
Why would you consider paying the higher payment? For starters at the end of 3 years into your 7 year loan you owe $10,327 loan balance instead of the $13,962 optional purchase price on the lease. That is lower by $1,771.88 . That difference alone almost makes up for the higher monthly payment. In addition most people who turn in a leased car and pay less than $300 in excess mileage charges consider themselves lucky.
So now instead of paying a fee, and all the closing costs for a new lease, you have some money to help you with your new purchase. In addition you have all the benefits I previously mentioned like the ability to negotiate if you have kept the car in pristine condition whereas extra care is worth nothing if you have a lease.
Is the lease good (for a lease). Yes, it is certainly designed to sell cars and lots of high profit options.
Is it FREE? Not at all. I still think you would better off with a 7 year note.
================
PLEASE DO NOT POINT OUT that you could save even more money with a 5 year note, or by paying cash, or by buying a used car. Those points are easily understood.
Last edited by PacoMartin; 06-14-2013 at 11:35 AM..
I think you also have to factor in things outside the obvious finances such as the fact that with the leases, you have zero repair costs and often zero maintenance costs, as well.
I don't know about $10,000k as the norm on a 1 year old car with only 12k miles. But I have seen a lot of posters mention that used cars have become more expensive lately so I went and looked at the more recent model of my car and there was still a pretty hefty discount (probably closer to $7k) for a used vehicle 1-2 years old (and this was a certified preowned whatever they call it to make you feel better). The sweet spot seemed to be the 2 year old car with low mileage, around 20k miles.
Well, we've done it three times now. We talked them down about $2000 - $3000 less from the listed price (about $7,000 - $8,000 less than new). It was usually in November, so at that point the cars were almost two years old, but my point remains: if you simply must have a "better" and "safer" car, but can only pay XX a month for it, then buy a used one. We have never paid more than $20,000 for a car and they have all been the nicer editions with about 12,000 - 13,000 miles on them. There is no need to lease or pay out over seven years to get a nice, safe car.
Another advantage to buying used is that if something happens to the car, you are a lot less likely to be upside down on it. We got in a bad accident and my Mariner was totalled after we had it for about 20 months. We ended up getting MORE than what I had paid for it two years previously. It's a lot tougher to get a good price on used now because more people are buying used, but even 2 years ago when I had to replace my totalled Mariner I still got a really good deal on a used Escape.
I realize this thread is more geared towards deciding whether leasing is better than financing new for seven years, but I just wanted to point out that there is a third and (IMO) much better option between those two.
It's always better to BUY a car rather than lease it.
After 7 years, you own the car. NO MORE PAYMENTS.
I've owned my car for 17 years and still going.
I only had a 5 year car payment, but look at all the years I haven't
had a car payment at all.
DUH.
It's always better to BUY a car rather than lease it.
After 7 years, you own the car. NO MORE PAYMENTS.
I've owned my car for 17 years and still going.
I only had a 5 year car payment, but look at all the years I haven't
had a car payment at all.
DUH.
Ssaluuuut!
Agreed. Still driving the vehicle I bought new in 1990. Runs great because I took care of it.
I think you also have to factor in things outside the obvious finances such as the fact that with the leases, you have zero repair costs and often zero maintenance costs, as well.
The crux of my argument is that when you purchase the car on a long term loan you have the option of trading it in at three years. In general, you are in a much better negotiating position than if you have an expiring lease. At the very least you can come back next month or go to a different dealer and make a 37th payment. With an expire lease you can't normally extend your decision without some negotiation.
In this case, you are maintaining the car for the same 36 months. It shouldn't make a difference if you have
Thank you for sticking to the topic and not diverting it to any thought that wanders through your head..
Well, we've done it three times now. We talked them down about $2000 - $3000 less from the listed price (about $7,000 - $8,000 less than new). It was usually in November, so at that point the cars were almost two years old, but my point remains: if you simply must have a "better" and "safer" car, but can only pay XX a month for it, then buy a used one. We have never paid more than $20,000 for a car and they have all been the nicer editions with about 12,000 - 13,000 miles on them. There is no need to lease or pay out over seven years to get a nice, safe car.
Another advantage to buying used is that if something happens to the car, you are a lot less likely to be upside down on it. We got in a bad accident and my Mariner was totalled after we had it for about 20 months. We ended up getting MORE than what I had paid for it two years previously. It's a lot tougher to get a good price on used now because more people are buying used, but even 2 years ago when I had to replace my totalled Mariner I still got a really good deal on a used Escape.
I realize this thread is more geared towards deciding whether leasing is better than financing new for seven years, but I just wanted to point out that there is a third and (IMO) much better option between those two.
I did the same when I bought my car many years ago, so I wasn't disagreeing with your point, just that I didn't want people to write off your post if your numbers aren't the norm. I think a couple years old with relatively low mileage for a generally reliable type of car is the sweet spot for price.
Quote:
Originally Posted by stan4
I think you also have to factor in things outside the obvious finances such as the fact that with the leases, you have zero repair costs and often zero maintenance costs, as well.
You're right that you should take all the costs into account, just make sure to spread those costs over the ownership of the car.
I realize this thread is more geared towards deciding whether leasing is better than financing new for seven years, but I just wanted to point out that there is a third and (IMO) much better option between those two.
Leases are heavily promoted particularly towards women. While not trying to be sexist, I think women are still much more intimidated by the problems of dealing with old cars. To be fair, the thought of being stranded somewhere with a dead car is more frightening to most women than it is to most men. Men are more concerned with the annoyance factor than the danger factor.
Given the choice of two options: (A) Leasing a car for 36 months, or (B) Purchasing a car for an 84 month loan at usually a much higher rate with the goal of trading it in at about 36 months, the majority of people won't even consider (B) under the belief that it is far more problematic than (A) and probably less financially savvy.
In reality, IMHO they are victims of a massive oversell. In almost all cases (B) is the better option.
Now I realize there is a giant gradient of feelings out there about how to purchase cars. From people who avoid all car loans like the plague, and people who still feel that anything above a 5 year loan is morally repellent. There are people who correctly believe that leases are a way to seduce people into buying cars that are probably too expensive for them. I also know that there are die hard fans of used cars. Frankly, most of those used car fans are not women.
Unfortunately, the thread was overwhelmed by these posts.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Leases oversold to women
