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You don't understand how leasing works. You're basically financing the depreciation. Had you friend purchased the Ridgeline with cash, then sold it after 3 years, he'd be out about the same amount of money.
Leasing sometime makes sense, sometimes it doesn't. It's just math. However, it's not accurate to say leasing never makes sense. Leasing, buying with cash, or getting a loan can each be the best option depending on the terms.
Yeah, it's more just that buying a new car every (typically three) years is just expensive. Whether you lease the use of the first three years or buy it and then trade it in and buy a new one it's just expensive.
For instance, I've had my car for just under two years and almost no equity in it (about $1,000 at trade-in) even with a $5,000 down payment on a cheap car (purchase price was $20,400). Leasing I could have put about $3,000 less down and then another $2,000 from lower payments. Even after $4,000 in excess mileage fees I would have come out slightly ahead on a two-year lease over buying and trading in at two years. It's just expensive however you slice it.
I bought rather than leased because I intended to keep the car for a long time. Now I'm applying for a job where I'd drive 15,000 miles a year less. If I get it, I'd probably eat the cost and get a different car. That job would be ideal. I can rent a spot in a garage with big spaces where people aren't in and out bashing into it whereas now I just jam myself into whatever I can find. Bay Area parking garages are packed and tiny. I've folded in my mirror parked practically touching the car next to me and climbed out the passenger side as it's the only spot left many times. At two years old both sides have door dings and I recently picked up some pretty nasty scrapes on both front and rear bumpers from people who don't know how to drive hitting the car when parallel parking. Having something you don't particularly care about getting beat up helps a lot with where I have to park right now. With the lower mileage and not having to worry about the car getting hit by people that don't know how to park I'd be looking at something more like either another S2000, used Cayman, possibly an Alfa 4C. Not sure why but I really like the Alfa 4C. Since my commute would be about 10-15 minutes and I wouldn't be worried about where I parked it something like the 4C would become doable as a daily driver.
We put about 16K a year on our newer car. Lease would never work for us; we plan to drive this car into the ground.
A carpenter friend had a beautiful white Honda Ridgeline that he leased. In the last few months of the lease, he was trying not to drive it much, because he was running out of miles. Then, one day, it was gone. Now he doesn't have a Ridgeline anymore, after having put 3 years of payments into it.
No thanks. Better to own than rent. Bad enough that I'm renting my house at the moment
Most people who lease a car do it only once.
They discover that after making 36 payments they have....Nothing.
The best deal in a car is to buy a lease return from a private lease and keep it for at least 10 years.
I am thinking of leasing because I don't drive that far to work (10 mins, some days) and I just want a reliable car, with a set payment amt. and no "surprise repairs"
After what I've been through with used cars, I think I would be happy never owning a car again. why bother? If there's a problem, I would just take it to dealer and let them handle it.
That's exactly why I'm currently leasing. I always owned my cars but dreaded the surprise repair bills that pop up after 4,5 years and the hassle of selling a really old car. I still have one other vehicle that I own. Needs $6000 in repairs right now.
My leased vehicle is so much less hassle. $240 a month and if something goes wrong, hello dealer, warranty repair!. Also didn't tie up $46000 cash instantly like my other one.
Uh, no. you're just completely out of the norm. Most people don't spend (assuming 65 mph) 150+ hours a month (40 hours a week) driving. Between work and sleep that means you do pretty much nothing but work, drive, and sleep. That's HIGHLY irregular. The only people that normally drive that kind of distance is maybe truck drivers.
That's when I drove 10K/month. Work commute was 200 miles one way six days a week.
I don't see how most people feasibly lease a vehicle with 10K-12K/yr mileage restrictions unless they:
- Work from home.
- Are a retiree who just uses a vehicle to go to the grocery store every weekend.
- Live in a city with public transportation and just use the vehicle for short trips.
I drive 2K miles a month and feel as if I barely go anywhere. 10K a month used to be the norm for me.
What about people that already own a vehicle that they plan to continue using along with the leased car? I have several friends who take advantage of subsidized lease offers (when they're available) and use an older vehicle to commute two or three days per week.
If someone leases a car with a 10k or 12k per year mileage limit, there is a penalty typically ranging from $0.20/mile to $0.30/mile or more. Luxury brands and/or higher priced cars tend to have the highest mileage penalties. If a person leased a car with the expectation of only driving it 12k miles per year and, due to a change in circumstances or because they underestimated how much they actually drive, there are two options. They can pay the mileage penalty OR they can purchase the vehicle for the residual value stated in the lease agreement.
My best friend leased a BMW 3-series for 36 months with 36k miles allowed and a $0.30/mile penalty. Near the end of the lease, he called me in a panic because he had almost 55k miles on it and would be at 57-58k when the lease expired! At 58k, he would be 22k miles over the limit and the penalty would be $6,600!!! I took a look at his lease contract and the residual value (or purchase price at lease end or similar terminology may be used in the document) was about $4k less than the car was actually worth (even with the higher mileage). So he purchased the car (avoiding the $6,600 penalty) and traded it for a new Lexus several months later. He got $3k more in trade value than he actually paid to buy it at the end of the lease. So he avoided the extreme mileage penalty and had $3k in equity to apply toward his new car.
The above scenario is rarely ideal from a financial (total cost) standpoint, but it is a feasible option for a lot of people. If driving a high-end car is important to you or you feel it's important to your professional image (like most of the real estate agents I know), leasing allows you to drive a more expensive car that would be difficult (or impossible) for you to purchase. If a person knows that his/her financial situation will be substantially better at the end of the lease (mortgage or student loans will be paid off, etc.), leasing allows them to pay lower payments for a few years then purchase the car at the end of the lease when they can afford it.
I've been driving for 25 years and I leased a car for the first time earlier this year. There are two drivers in my household and we already own two cars (a 2006 Mazda3 and 2012 Mazda CX-9, both paid off). A local Volvo dealer had a leftover 2015.5 Volvo V60 wagon that had been sitting on the lot for 10 months. It was an 'odd-ball' (or 'lame duck' as some dealers refer to them) because it was the top-of-the-line, high-performance model (V60 T6 R-Design Platinum) with every conceivable option including navigation, high-end Harman Kardon audio, Xenon headlight, Adaptive Cruise Control, Lane Departure Warning, Blind Spot Monitor and many other features ....except for heated seats! I asked them if that was why it had sat unsold for so long. They avoided the question, but the sales manager ultimately admitted that the lack of heated seats was a deal breaker for all the previous customers who were interested in the car. Apparently, I'm in the minority, but I've owned three cars with heated seats and the only time I ever used them was when I visited my best friend in Pittsburgh. Otherwise, I park in a heated garage and the weather here in GA makes them unnecessary, IMO.
They advertised it for $3499 down and $389/month for 39 months (odd lease term, I know) with 39k miles allowed (12k per year). It took over three weeks to get them to agree to my terms, but I got it for $499 down ($1k 'Conquest Cash' applied) and with 15k per year for $375/month plus tax. I pay $402/month with tax for a car with a sticker price of $51,400 and change. The money factor (interest on a lease) is essentially 0.1%, which was also part of the negotiation. The residual value was inflated by about $2,700 to make the numbers work. So I probably won't be buying it after the lease because the price may be more than market value. I also don't know if I want to own a European car after the warranty expires. In the meantime, I get to enjoy the car for less than the monthly payment on a new Honda Accord and they also include all scheduled maintenance for the length of the lease.
So....there are options for lessees who drive more than 10-12k miles per year. The mileage allowed in the contract may be negotiable (as it was in my case). There is also the option of paying for more miles up front (for instance, the lease would be written with 15k or 20k miles per year). The two potential drawbacks of paying for the miles up front are that you would pay interest (and possibly) tax on the higher lease amount AND if you didn't use all of the miles, you'd lose them at the end of the lease.
I have a few final thoughts on the subject, then I'll shut up (for now). First is that you should pay as little as possible down at the start of the lease. The monthly payments will be higher, but if you 'total' the car or it is stolen during the lease, insurance will only pay off the lease and you won't recover any of your down payment. Most experts agree that $0 to $1k is ideal and anything over $2k should be avoided. Second, and possibly the most important, is the importance of GAP (Guaranteed Auto/Asset Protection) coverage (commonly called GAP insurance or GAP protection, the latter being redundant since the P in GAP stands for 'protection'). All lease contracts require GAP coverage and some require it be included in the lease payment and purchased from them or their preferred provider. But many leases give you the option of purchasing GAP from the dealer or through your own insurance company. If you have the option, the cost of buying from your insurance company is roughly 30-35% of what the dealer will charge. FYI- GAP is also a very good idea if you buy a new car and finance more than 70% of the car's value.
I don't see how most people feasibly lease a vehicle with 10K-12K/yr mileage restrictions unless they:
- Work from home.
- Are a retiree who just uses a vehicle to go to the grocery store every weekend.
- Live in a city with public transportation and just use the vehicle for short trips.
I drive 2K miles a month and feel as if I barely go anywhere. 10K a month used to be the norm for me.
I put less than 12K miles a year on my leased vehicle. I only work two days a week and my job is 4.4 miles away. My gym is 20.6 miles round trip and I go three times a week. Plus I do the usual shopping like many women do. If someone lives in a small town it is very possible they don't put a lot of miles on their vehicle.
When we were working, we would drive 27K a year and that's just back and forth to work.
We could never afford to lease a car (to many miles over the lease).
Now that we are retired, I have considered leasing, but I also understand that if I start leasing then I would be stuck leasing for the rest of our lives. A constant monthly payment where as now I have none.
So even in retirement, leasing may not be the best idea. If I buy a new car, at least in 5 years or so I'll still have a new car with very few miles on it, but I will not be making payments any more. And the advanmtage is that we have built some asset value in the car.
So, no I will never lease.
BTW I know several people that have filed for bankruptcy at some point in their lives and leasing was the only why to get a new car. So when I hear some one thinking about leasing I first thing, oh their having money problems.
I've been told many times you have to have better credit to lease than to buy.
The average American drives 12-13k miles per year. So before someone leases, they should really see how many miles they drive per year. Those over-mileage charges on leases are expensive! Also, you might take more road trips or vacations 1 year, and go way over your "average," so that is something to look at also.
The problem is that as well as you plan, things change.
In you lease a car in 2016 knowing that you drive 12k miles a year, you have no guarantee that you will have a job change in 2017 that adds 10-15k to your annual driving. Then you have a leased car with 55k miles when you only paid for 36k.
They discover that after making 36 payments they have....Nothing.
The best deal in a car is to buy a lease return from a private lease and keep it for at least 10 years.
That's not correct, a lot of people lease serially. They are not supposed to have anything at the end of the lease, because the only thing they paid for is depreciation.
And yes, "the best deal" is to drive a car long time, but that has nothing to do with leasing vs. buying. Leasing is to be compared to buying and having the car short term.
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