Leasing a car… anyone have any experience?

posted 3 years ago in Money
Post # 3
Member
209 posts
Helper bee
  • Wedding: September 2015

I’ve leased before. My suggestion is to buy if at all possible.

You have to understand all the factors that go into a vehicle lease:

1. Price of the vehicle.

2. Residual amount– the % of MSRP that the vehicle is worth at the end of the lease.

3. the money factor– the interest rate at which you’re borrowing the lease $$.

4. the allowed mileage.

When you see those ads for something like a Honda Civic for $149 a month, those are usually super low mileage leases- 10k or 12k miles a year, and they usually require about $3000 down.

A few words of advice:

When leasing, don’t get your heart set on one make and model of car, or even trim level of a particular car. For example, in June, these were the lease rates for a Honda Civic:

2013 Civic Sedan 15k miles 55% 0.00074 LX MT
2013 Civic Sedan 15k miles 60% 0.00074 LX AT
2013 Civic Sedan 15k miles 60% 0.00074 EX AT
2013 Civic Sedan 15k miles 58% 0.00074 EX AT w/ NAV
2013 Civic Sedan 15k miles 58% 0.00074 EX-L AT
2013 Civic Sedan 15k miles 56% 0.00074 EX-L AT w/ NAV

In this case you’d want an LX or an EX, and would pay more $$ to lease the other trim levels because the residual is lower. You want to lease the car that has the highest possible residual with the lowest possible money factor. 

by the way, on a Civic Sedan EX, these numbers translate to: 

MSRP: 21605, residual 60% = 12963 MF = 1.76%

Let’s say you negotiate $600 off the price (pretty reasonable for a Civic right now), and your sales tax in your state is 5% (no idea what it actually is), then your numbers come out as follows:

$281.61 per month. This is obviously not the same number as the ad on TV, because that assumes you pay roughly $2500 of your total $8042 payments up front, which would obviously reduce the payments.

 

A few things about leasing:

1. You never want to put money down on a lease. You will probably not be able to do a $0 drive off lease, because you will have to pay the first month’s payment on the spot. Any funds over the first month’s payment plus any required security deposits, should not be put down. The reason for this is that if you were to crash the car tomorrow, you do not get any of your down payment back– the GAP insurance pays off the difference to the leasing company, and you just made sure that they had to pay less. Don’t put money down on a lease.

2. Mileage and damage cost money. There is an expected amount of wear and tear, anything above that you will be charged for when you turn in the lease. The same issue with the miles– if you turn in a car that is over miles (more than 45000 miles on a 15k/36 mo lease, for example) you will be charged a per-mile fee usually .15-.25 per mile.

3. you will be required to carry full coverage insurance and it will have to have a particular deductible (I think Honda doesn’t allow more than a $500 deductible). If the vehicle is damaged, you won’t have the option not to fix it before turning it in. 

4. Leasing is the most expensive way to own a car, generally speaking. There are some exceptions, for particularly good-deal leases where the car ends up being worth even more than the residual at the end and you can buy it out, trade it in, and make back some of your lease payments. Don’t expect this to happen. 

5. Think of leasing as a long-term rental.

 

Generally, if you can live with it, buying an inexpensive, reliable vehicle new and driving it until the wheels fall off is your best way to own a vehicle affordably. For example, if you were to buy a Honda Fit for $17105 and finance that with just the taxes and fees down (assume $1500) for 60 months, your payment would be $307. At the end of 36 months, you will have a car with 45k miles on it that you only owe $6800 roughly, that will probably be worth more like $9500. As opposed to paying all that money and just giving it back to Honda and going to lease another one.

Post # 4
Member
3222 posts
Sugar bee
  • Wedding: April 2015

I’ve carried two back to back leases. My parents bought me my first car at 16, and it was leased. At the end of four years, I decided to buy back the car for about $8000, and sold it for more than that (Honda Civics retain their value really well). My second car was also leased, but it was a lease takeover from someone that had already paid 2.5 years of a 4 year lease. He paid me a lease takeover bonus that dropped my luxury car payments to the price of my Civic payments. I drove it until the lease ended, and dropped it off. Leasing was important to me because I knew I wouldn’t be driving the same car for long, and that I only wanted a car while it was under warranty. I wanted new cars that would have little maintenance and no worry, so it worked out well! If you want to be financially savvy, a 0% financing plan might be a better idea.

@wntrwhte:  wow, that’s comprehensive!

Post # 5
Member
1465 posts
Bumble bee
  • Wedding: January 2015

@gingerbreadlady:  If you are the kind of person who likes having new cars, driving new cars, and not spending more than a few years in a car, leases are good.

If you are the kind of person who has a car, then keeps it until it is run into the ground and on its last hours of life before you junk it, leasing (then buying when the lease is up) is not a wise option.

Post # 6
Member
3222 posts
Sugar bee
  • Wedding: April 2015

This is the lease takeover website I used: http://www.leasebusters.com/en/lease-takeover-weekly-specials.asp

I don’t know if there is something comparable in the States, but I looked for a car that had a good downpayment (so lower monthly payments) and less that two years until lease expiry. Also double check the buy back amount with used car sales to see if paying payments + buying the car at the end is a good deal. 

 

Post # 7
Member
217 posts
Helper bee
  • Wedding: May 2014

My fiance has a leased car and we ALWYAS have to be careful about mileage, and yet we are still over what it should be. We have decided that at the end we will just pay the extra fee, but its still an extra fee. Very inconvient. 

Post # 8
Member
209 posts
Helper bee
  • Wedding: September 2015

@letigre:  I know! but I hear a lot about people who go to the dealership hearing that $149 a month special and leave having paid way too much because they didn’t understand how to choose a lease and calculate the deal or not. Easier to give a detailed example to explain my point.

 

I believe leasing makes more sense on a more expensive vehicle where the maintenance/repair costs are a lot higher. On a reliable, inexpensive car that holds its value well, buying is almost always better. I would likely not lease a Civic, but I would lease a BMW 3-series that has a subverted lease incentive rather than paying $700/mo for 5 years to own something with $3000/yr repair costs, kwim?

Post # 9
Member
3570 posts
Sugar bee
  • Wedding: September 2011

My mom has leased for years and loves it.  Currently she drives a RAV5 and pays $140 a month.  Try to get 15K miles per year, if you can.

Post # 10
Member
9137 posts
Buzzing Beekeeper
  • Wedding: November 2013 - St. Augustine Beach, FL

@gingerbreadlady:  Watch your mileage, they love to tack on the extra fees for going over.  That means no roadtripping in the leased car.

Also, make sure to put away $100-200 a month to cover the downpayment on your next car.  Whether you lease or buy, there is usually a downpayment.

Post # 11
Member
509 posts
Busy bee
  • Wedding: August 2013

I had a lease and hated it.  I always had to watch the mileage.  And I hated giving it back after 4 years and having nothing to show for it.  Now I buy cars, pay them off, and keep them until they need too much work for it to make financial sense to keep them anymore.  I like not having car payments!  Plus, insurance premiums are a lot lower.

Why not look into getting a slightly used Honda or Toyota? We bought a Honda Civic with 35k miles on it a long time ago for $6k.  That car lasted for a long time…I think I finally traded it in around 150k miles.  And I still got a little bit of money for the trade in value.

Post # 12
Member
209 posts
Helper bee
  • Wedding: September 2015

Oh, also, NEVER lease for more than 36 months or the length of the factory bumper to bumper warranty, whichever is shorter.

Post # 13
Member
1549 posts
Bumble bee
  • Wedding: June 2013

yea, don’t do it.Its a waste of money. The ONLY way you don’t get screwed is if you buy out the car at then end of the lease and even then you are still paying more for the car then you would have.

If I were you I’d  just buy a used car. Car payments SUCK and new cars end up loosing so much value just by driving off the lot. If you need a loan then look at the total price of the vehicle, not the per month cost… Thats  how they screw you.

 

Post # 14
Member
2620 posts
Sugar bee
  • Wedding: June 2012

try looking into car rentals places- they sell their cars that are over the the rental  milage–thinking its 15 thousand miles or so–they are relativily new cars but the rental places cant have them anymore.. we boughten our last two cars that way.

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