Author Topic: opinions on leasing vehicles  (Read 2104 times)

stlbrah

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opinions on leasing vehicles
« on: August 18, 2014, 12:47:44 PM »
I wanted to get some opinions on leasing. I don't need a new vehicle now, but I will next year. I have an 08 audi a4 that i have had for several years. It is nearing end of warranty and at 90k miles.
I do not want to mess w/ a German car that is out of warranty, so I plan to sell. And I don't care about luxury cars anymore, and they're not really worth the extra 20k+ that they cost.

Warranty is over next June. I get $2400 back from not touching the warranty that the previous owner had paid for which is cool. And at that point the car will be worth about or slightly above 10 grand (not including that $2400).

I like altimas or even a sentra. I have more than enough in my portfolio  or savings (~100k total) to buy one outright, but the lease prices are so low that I almost feel like it would be better to cash in the money from the audi, let the investments ride, and just lease one @ about 240/month and 2k down. I have to pay personal property tax and sales tax regardless. Insurance is about $25/mo more which is a negative factor but i probably won't notice since im going from audi to nissan.

My question is opinions on whether I should buy a slightly used economy car that I described, or lease one in my situation and specific reasons of why it would be likely to save me money.

Thanks!
« Last Edit: August 18, 2014, 12:49:51 PM by stlbrah »

MillenialMustache

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Re: opinions on leasing vehicles
« Reply #1 on: August 18, 2014, 01:22:59 PM »
My opinion is to never, ever lease a vehicle. What if it goes over the specific mileage you were allowed? Then it is 20 cents a mile or worse. Also, at the end of three years you have a car with 30,000 (or whatever) miles on it, but you have to give it back. You have nothing to show for all of the payments you made. The goal is to not have a car payment and drive the car as long as you feel safe in it.

ragnathor

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Re: opinions on leasing vehicles
« Reply #2 on: August 18, 2014, 01:26:27 PM »
I would buy the used economy car. I'm not sure how many miles you're thinking, but let's say an Altima with 30k miles on it costs $15,000. Let's say you put 10,000 miles on it.

Option A. Buy the used Altima above, and after 5 years you've paid $15,000 and own an Altima with 80k miles on it

Option B. Lease for 5 years. You paid $2,000 + $240*60 = $16,400. You paid more and you don't own a car.

You can fudge the math a bit, but Option A is almost always going to work out better in the long run.


stlbrah

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Re: opinions on leasing vehicles
« Reply #3 on: August 18, 2014, 01:45:15 PM »
This is the kind of answer I was looking for thanks. The only thing is I am factoring in the interest of the car money sitting and collecting ~7% In an index fundfor the time period. Maybe I am overthinking it. I will prolly just go for low miles used and buy outright.

I will probably really only drive 6k miles /year or so. I get extremely cheap rental cars from my company for road trips

rmendpara

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Re: opinions on leasing vehicles
« Reply #4 on: August 18, 2014, 01:50:45 PM »
Compare the lease costs (and other "expenses") to the "expenses" you would incur if you bought the car outright.

Expenses of owning a car are really just depreciation, as there is a reasonable residual value that you can infer and you have to pay for maintenance regardless (you can add maintenance costs that are covered by the lease if applicable).

Cashing out savings/investments will then give you a cash flow where you can invest ~$240/mo instead of paying that much for lease costs.

Financially, leasing is usually not favorable for an apple : apple comparison (i.e. leasing a Sentra vs buying the same Sentra).

Temporary situations can make it favorable (i.e. you need a car quickly and want to shop for your long-term car in 2-3 years, you will be moving out of country in a few years, you'll be moving into a city or plan to get rid of your car in a few years, etc) to lease vs buy.

You are probably better off buying a slightly used car that you like and would be okay with keeping until 120k+ miles. The first few years after a new car is sold see much bigger depreciation than subsequent years.

frugaliknowit

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Re: opinions on leasing vehicles
« Reply #5 on: August 18, 2014, 02:15:27 PM »
You should either keep the Audi (I would not obsess over the warranty) or purchase a used economy car.  The reason is (less) depreciation.  In the case of the economy car, lower operating and maintenance costs as well.

Comparing your expected rate of return on investments to the financing costs is not "apples to apples".  The savings on finance costs is a zero risk return.  Also, leases tend to have hidden costs such as no discount on the vehicle.

stlbrah

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Re: opinions on leasing vehicles
« Reply #6 on: August 18, 2014, 06:28:22 PM »
ok, i am pretty much convinced not to lease. thanks for the suggestions

I still love my current car and want to keep it as long as possible, but i am afraid of a transmission going out at 120k or something and not be in warranty and cost a ridiculous amount of money. I guess if that happens the car would just be totalled anyway.