Car Lease vs. Buy: Not Always Straightforward

[DoubleDown]

<tl;dr> Leasing cars can be a very cost effective choice depending on where you live, check out the options before ruling it out

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I know most of us have probably been educated/conditioned to believe that car leasing is for suckers, but I wanted to put out there that it's not nearly that straightforward depending on the lease terms. Sometimes leasing, believe it or not, can be just as cost effective as the usual strategy of buying a significantly older used car and driving it into the ground.

Now, I will say that every single lease "deal" I've ever seen offered by a dealership is pretty close to highway robbery, so your chances of making out well there are probably none. However, I learned only last year that at least in large cities like NYC or maybe the Bay Area, there are 3rd party companies that offer leases at ridiculously lower prices that illustrate just how much profit the dealers are making. It turns out that if the lease terms work out for you (e.g., no more than 12,000 miles/year), then you could end up paying the same amount to constantly drive around a brand new car than you would spend to buy an older, used vehicle and drive it into the ground.

You'll have to check out the math on any particular buy vs. lease choices you're considering, but you might find that you can lease for the same amount as buying used, or maybe paying slightly more, but in return getting the greater "peace of mind" of having the new car under warranty with all the latest safety features and bells and whistles, with no ugly high-expense repairs.

In my case, I leased a new Honda from a lease dealer in NYC that was about 40% less than the dealerships here (DC area) offered for the exact same car. Which once again just goes to show how the dealers afford their nice showrooms and service waiting areas with coffee and donuts. I estimate that I'm likely paying about $50/month more in total costs (lease fee, collision insurance, etc.) leasing the new car than the total amortized costs of buying a comparable but used "beater" car (no collision insurance but repair costs, etc.). Car depreciation is a bitch, as are large and unexpected repairs.

That $50/month of course is not insignificant, and you could certainly decide it's not worth it for you, but it's a choice and expense I'm happy with for now. And that amount is an estimate -- it could vary wildly if the used car never had a significant repair cost (which I deem unlikely), or if it turned out to be a lemon that costs far more than expected in repairs over its lifetime or crapping out early (also unlikely). In some respects the additional $50/month could be seen as insurance against any unexpected large repair costs (and being stranded), smoothing out the amount paid over time to a fixed and known amount.

Anyone else find any reasonable lease deals, or willing to reconsider that it's not necessarily as evil in all cases as we're led to believe?

[totoro]

You don't present the math to support your statements.  Makes it difficult for people to have any comments or provide analysis or consider what you have said properly.

[prodarwin]

I think your math is suspect.

You live in the DC area?  In NOVA, just the PPT on a newer car is going to run >$50 a month alone.  For me (and many others)  the difference between liability and full coverage is going to be another ~$50 a month.  So right there, its approximately $100/month over the cost of a "beater" without accounting for any depreciation.  What are your leasing costs?

Or, lets ignore taxes/insurance.  What does your lease cost per-mile to drive?  Lease payments + gas cost / miles driven.  My DD costs me $0.15.  The only leased vehicles I've found that can come even close to that number are the new electrics - but the PPT/Insurance pushes them back up to near double the cost.

[kikichewie]

You're obviously stuck in the monthly payment mindset, which is the antithesis of buying a car and driving it into the ground.

[velocistar237]

I would be interested in seeing some example numbers and contract terms, or at least the name of one of these companies.

[Jamesqf]

In my case, I leased a new Honda...

There's your problem right there, NEW.  Sure, it may not cost much more (or even less) to lease a new car rather than buy one, but either cost is way above the cost of a reasonable used car.

[SnackDog]

If you buy new cars frequently and return them in good shape, leasing will save you, for sure, especially on sales tax since in many states you will only pay tax on lease.   Be sure you get a great deal on the price of the car and on the lease money factor - the former is very negotiable and sometimes the latter as well.   Another appealing factor for some who lease is this: if the actual residual is higher than forecast, you win because you can sell the car privately and pocket the difference (although you will have overpaid sales tax in that case); if the actual residual is lower, you win because you just hand the car back to the dealer and they swallow the loss.

As many will point out, buying or leasing new cars sets one up to pay a small fortune in depreciation, which is generally not very frugal.   However, leasing a new Honda Civic every three years $150/mo or $1800/yr) could be cheaper than buying a used Cadillac for $20,000 (tax included) and driving it into the ground ($2000/yr for 10 years); not to mention maintenance and headaches on the used car.

[totoro]

If you buy new cars frequently and return them in good shape, leasing will save you, for sure, especially on sales tax since in many states you will only pay tax on lease.   Be sure you get a great deal on the price of the car and on the lease money factor - the former is very negotiable and sometimes the latter as well.   Another appealing factor for some who lease is this: if the actual residual is higher than forecast, you win because you can sell the car privately and pocket the difference (although you will have overpaid sales tax in that case); if the actual residual is lower, you win because you just hand the car back to the dealer and they swallow the loss.

As many will point out, buying or leasing new cars sets one up to pay a small fortune in depreciation, which is generally not very frugal.   However, leasing a new Honda Civic every three years $150/mo or $1800/yr) could be cheaper than buying a used Cadillac for $20,000 (tax included) and driving it into the ground ($2000/yr for 10 years); not to mention maintenance and headaches on the used car.

Am I the only one who finds this a bit odd?

Why would you compare buying a used Cadillac to leasing a new Honda Civic?   Since when are those the comparison points for reasonable analysis by a purchaser who is carefully evaluating cost vs. benefit as part of expense reduction - like readers here. 

If you are buying a $20,000 used Cadillac you are probably not reading this blog.

If you are comparing buying a used Mazda 5 or Honda Civic to leasing a new one this makes sense.

[gecko10x]

I think the problem that most people on this board will have is this: about the cheapest lease you'll ever find is $150/mo ($1800/yr); this is STILL higher than many here are striving for. It's just too much money, no matter what you're getting for it.

[prodarwin]

I think the problem that most people on this board will have is this: about the cheapest lease you'll ever find is $150/mo ($1800/yr); this is STILL higher than many here are striving for. It's just too much money, no matter what you're getting for it.

Smart car is $99/mo  http://www.smartusa.com/models/pure-coupe/overview.aspx

[ToeInTheWater]

leasing will save you, for sure, especially on sales tax since in many states you will only pay tax on lease. 

i don't think this is completely accurate.  when you trade that new car in a few years later, you'll only pay sales tax on the difference between the new purchase price and the trade in value.  pretty sure that's how it works in Indiana

b

[Bank]

I agree that theoretically you could have a lease make more sense than buying a used car.  It's all dependent on the parameters you build into your model. 

However, most mustachians intend to drive their cars a veeeerrrrry long time, because they don't drive them very much.  An $8K Scion could easily last 10-15 years.  As far as I know, there is no way a lease payment on a new car is going to beat that.

[Rickk]

I am confused.  So are you suggesting that there is some leasing company who's business model is to lose money?

That would be what is suggested by saying a lease is better then buying your own car.
They buy a car, lease it to you, then sell it at the end.  This is the same thing that happens when you do it yourself, except you get to keep the management fees - thereby saving money.

[gecko10x]

I think the problem that most people on this board will have is this: about the cheapest lease you'll ever find is $150/mo ($1800/yr); this is STILL higher than many here are striving for. It's just too much money, no matter what you're getting for it.

Smart car is $99/mo  http://www.smartusa.com/models/pure-coupe/overview.aspx

Wow. Maybe I'll lease one of those ;-)

[prodarwin]

I think the problem that most people on this board will have is this: about the cheapest lease you'll ever find is $150/mo ($1800/yr); this is STILL higher than many here are striving for. It's just too much money, no matter what you're getting for it.

Smart car is $99/mo  http://www.smartusa.com/models/pure-coupe/overview.aspx

Wow. Maybe I'll lease one of those ;-)

I wouldn't blame someone for leasing one of these, especially if they have no idea how to maintain a vehicle.  Or the Fit EV, possibly a Leaf.  Those are the only leased cars IMO that come close to the cost of ownership of a used vehicle.  They come very close in cost to many used cars... just not very close to my super-cheap used car rates.  Both are under 0.30/mile for depcreciation + fuel.  And the FIT EV includes insurance in that number as well.

[MrsPete]

Are the only two options 1) leading or 2) buying a beat-up old car that'll require lots of upkeep?  If those are genuinely the only two options, then your premise might be true, but I suspect plenty of other choices are available. 

Personally, we've chosen to buy either new or late model used cars, and we've found that in every situation the car lasted well past its pay-off date and in every situation lasted about two years longer than we expected.  The point: we've had many years of "free driving", and that's something you'll never get from a lease. 

[DoubleDown]

Here are the numbers I'm using if it helps. Don't get me wrong, I think the typical advice to buy a reliable, used car (if you need a car at all) is excellent. I was just surprised when I discovered these non-car-dealer companies that lease new vehicles, and when I did the comparison, it was not nearly as much of a difference as I would have thought.

Here's what I leased, and some of the other total costs. I'm going to leave out any factors that I think would be the same regardless of leasing vs. buying, since I'm assuming you'd get a similar car either way (i.e., not comparing a Civic to an SUV). For example, mileage would be about the same, so it can be ignored:

Leased 2012 Honda Accord (family of 5, so I wanted a decent-sized sedan)
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-Monthly Lease: $190 ( 3 years, 12,000 miles/year allowed)
-Upfront costs, any amount due upon return of the vehicle, etc.: $0
-Expected Annual Maintenance: $150 (about $12/month) - everything is under warranty
-Collision/Comprehensive Coverage: $35/month

Total cost of "ownership" amortized monthly: Approx. $240/month

Buying a decent used, mid-sized sedan
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- Cost of vehicle: $7,200 - If I assume this car would last 10 years as an average and then be pretty much worthless, that would be $720/year or $60/month

- Expected annual maintenance -- highly variable, I estimated an average of $130/month (you could go years with just oil changes and minor repairs, but then have to replace the transmission and tires at a very large cost)

- Collision/comprehensive coverage: $0 -- Now I don't know how to factor this in, because if your car is totaled and you can't collect from an insured, at-fault driver, then you're screwed for your entire replacement cost. So maybe an unfair advantage here, but let's leave it at $0 to be generous

Total cost of ownership amortized monthly: $190/month

Additional Cost to Lease = $50/month ***

*** I completely understand there are assumptions baked in here, which I think are a necessary part of the equation. There are unknowns such as how long the used car will really last, how much repairs will really be, how much of your value you would lose if the car was damaged, and so on. And that's kind of my point -- in this case, having a completely warranty-covered, insured, super-safe with full curtain airbags etc., won't likely break down in the middle of nowhere, kick-ass new vehicle is worth $50/month to me. I'm all for buying used, but it does come with some uncertainty not knowing how well it's been cared for, when parts will give up the ghost, and so on.

Once this lease expires I might buy used for my next car. I was just surprised you could actually lease a brand new car at a pretty low cost comparatively speaking

[SnackDog]

In the case of a Honda Accord, for $7200 including sales tax you are looking at a car 8-10 years old with over 100,000 miles.  After ten years you would be in a 20 year old car, versus one 3 years old with modern safety.

[Jamesqf]

Are the only two options 1) leading or 2) buying a beat-up old car that'll require lots of upkeep?  If those are genuinely the only two options, then your premise might be true, but I suspect plenty of other choices are available.

Where I see the real problem here is the assumption that the older car is going to require a lot of upkeep.  This is false, at least if you buy good-quality brands such as Honda or Toyota.

First, you really need to do routine maintenance on a new car from day 1.  Yeah, you can skip it, but the car will just wear faster, and maybe break down sooner.  (Hey, maybe you're the one responsible for all those beat up used cars?) 

Second, the non-maintenance related breakdowns are fairly random events.  Your new car may suffer a catastrophic failure, just as your older one might.  But FWIW, I'm driving a 2000 Honda (bought in '03) and an '88 Toyota pickup.  Like my previous cars, they just require routine maintenance.

[matchewed]

50 dollars a month for about three years huh. That's an $1800 difference in that time frame. If you were to buy used and keep putting that 50 a month away for the next 8-10 years you'd have enough to buy another used car quite easily.

[frugal_engineer]

I think you are discounting the cost of normal wear items on an owned vehicle when compared to the lease DoubleDown describes.  Any car that makes it to the 150-200k mile range is going to need several sets of tires, probably 2-3 sets of shocks / struts, 1-2 sets of brakes, an alternator, wheel bearings, maybe an a/c compressor.

Some of those are things that you'd only replace if you're interested in comfort, but $130/month over the life of a vehicle for maintenance with no major breakdowns isn't unreasonable if you can't do these types of maintenance yourself.

The described lease seems like an interesting prospect when compared to a nice used car, less so when compared to a beater.

[prodarwin]

1) $130/month is a crazy high maintenance cost for an 8-10 year old Accord.  I'd actually be surprised if it were half that.
2) For those of us in areas that charge personal property tax, the difference between a $7200 Accord and $25K accord is quite significant.
3) Most importantly, after 10 years of ownership, a $7200 Accord is not worth $0.  Given that you are driving less than 12k/year, thats a max of 120k miles.  Right now a 20 year old Accord in good working condition with >200k miles is still worth around $2500

[Jamesqf]

I think you are discounting the cost of normal wear items on an owned vehicle when compared to the lease DoubleDown describes.  Any car that makes it to the 150-200k mile range is going to need several sets of tires, probably 2-3 sets of shocks / struts, 1-2 sets of brakes, an alternator, wheel bearings, maybe an a/c compressor.

Tires, yes, and maybe 1 set of front brake pads if you ride the brakes a lot.  That's what, maybe $30?  The rest?  Sure, sometimes things break on any car, but not all that often.  They're not normal wear items.

[gooki]

I think the problem that most people on this board will have is this: about the cheapest lease you'll ever find is $150/mo ($1800/yr); this is STILL higher than many here are striving for. It's just too much money, no matter what you're getting for it.

Smart car is $99/mo  http://www.smartusa.com/models/pure-coupe/overview.aspx

Wow. Maybe I'll lease one of those ;-)

Until you read the fine print, and realise the amount you will actually pay is closer to $200 a month.

[prodarwin]

I think you are discounting the cost of normal wear items on an owned vehicle when compared to the lease DoubleDown describes.  Any car that makes it to the 150-200k mile range is going to need several sets of tires, probably 2-3 sets of shocks / struts, 1-2 sets of brakes, an alternator, wheel bearings, maybe an a/c compressor.

The rest?  Sure, sometimes things break on any car, but not all that often.  They're not normal wear items.

Unfortunately many people think this way about suspension components.  Shocks/struts ARE wear items... most people just never replace them :(

Until you read the fine print, and realise the amount you will actually pay is closer to $200 a month.

How do you get that? 

Total payments equal $4,858

  4858/36 = $134/mo  Did I miss some gigantic fee in there? 

Cost of ownership with gas included ends up being right around 24 cents per mile, which is pretty damn low.

[DoubleDown]

I am confused.  So are you suggesting that there is some leasing company who's business model is to lose money?

That would be what is suggested by saying a lease is better then buying your own car.
They buy a car, lease it to you, then sell it at the end.  This is the same thing that happens when you do it yourself, except you get to keep the management fees - thereby saving money.

I'm sure these leasing companies are not losing money. They make money, but probably just not the huge profits auto dealerships are making when they lease the cars. I think the only explanation for the large difference in price going with a 3rd party leasing company is that it just shows how much profit the auto dealerships are making when they lease new cars. And of course for people that buy the car at the end of the lease, they end up paying top $ for it, no discounts or sales incentives whatsoever.

[corcoran]

So your conclusion is leasing a car costs $50/month MORE?

That doesn't really support your case since buying the used car over the leased car offers $8650 savings over 10 years.

Additionally doing the maintenance yourself,  is going to save you on your calculated $130/month cost further increasing your 'stashe. Ride a bike and it goes down even further.

I understand you may have trouble convincing your other half this is the right thing to do; however...
Consider the face punched.

[Jamesqf]

Unfortunately many people think this way about suspension components.  Shocks/struts ARE wear items... most people just never replace them :(

OK, just about anything will wear out eventually, but the wear interval is pretty long, and is overridden by the random failure rate.

[DoubleDown]

So your conclusion is leasing a car costs $50/month MORE?

That doesn't really support your case since buying the used car over the leased car offers $8650 savings over 10 years.

Additionally doing the maintenance yourself,  is going to save you on your calculated $130/month cost further increasing your 'stashe. Ride a bike and it goes down even further.

I understand you may have trouble convincing your other half this is the right thing to do; however...
Consider the face punched.

I'm cool with my decision and the idea that you might choose instead the $8650 over ten years (not that I plan to lease for 10 years).

[grantmeaname]

Until you read the fine print, and realise the amount you will actually pay is closer to $200 a month.

How do you get that? 

Total payments equal $4,858

  4858/36 = $134/mo  Did I miss some gigantic fee in there? 

I ran the estimator for me, here, for the pure coupe and it estimated $131 a month and a down payment that worked out to $68/mo over the life of the loan.

[frugal_engineer]

Unfortunately many people think this way about suspension components.  Shocks/struts ARE wear items... most people just never replace them :(

OK, just about anything will wear out eventually, but the wear interval is pretty long, and is overridden by the random failure rate.

Shocks are usually good for about as long as a good set of tires if driven nicely, around 50k miles.  Like podarwin said, these are supposed to be replaced, its totally normal and not random.  Shocks have a finite number of cycles they can withstand.  Driving with worn shocks increases tire wear rate, decreases comfort, and is a safety issue since the car is more easily unsettled by bumps, especially while braking or in turns.

Most people simply don't notice that their shocks are bad since they wear out so slowly and have no finite point where its clearly time to replace.  When they get a new set however, its night and day.  So again, a properly maintained vehicle is more expensive than youre assuming.

[newideas2013]

Cars need more routine maintenance then 5k oil changes

My $4000 truck has cost me a fortune in things go wrong with it. My old $5000 car before it had a number of things go wrong too, used cars are a gamble. Maybe MMM can do o2 sensors and water pumps and fuel pumps and a number of other things that have gone wrong with my vehicles (wheel bearings, tie rods, control arms, shocks, parking brake rotted through, etc) but most vehicle owners can't.

With my cost of maintenance on older cars in the past 3-4 years, yeah maybe I would have been better off leasing the most fuel efficient cheapest car on the lot.

MMM's numbers are run in such a way that he makes a series of assumptions, one being that you are buying this immaculate used vehicle with full service records for 7-8k, two being that nothing will really go wrong with it, you will rarely drive it, it will last you 10-12 years and all it will need are oil changes (and maybe tires). Sorry, that's just not how cars work.

[SnackDog]

Cars are dirt cheap in America. Cheaper than anyplace else on earth. If you don't want the hassle and/or cost of repairs, stick with newer or more reliable vehicles. Just be aware of depreciation.

[The Money Monk]

*** I completely understand there are assumptions baked in here, which I think are a necessary part of the equation. There are unknowns such as how long the used car will really last, how much repairs will really be, how much of your value you would lose if the car was damaged, and so on. And that's kind of my point -- in this case, having a completely warranty-covered, insured, super-safe with full curtain airbags etc., won't likely break down in the middle of nowhere, kick-ass new vehicle is worth $50/month to me. I'm all for buying used, but it does come with some uncertainty not knowing how well it's been cared for, when parts will give up the ghost, and so on.

See to me, this is one of the problems with this forum, car spending is one of the 'sacred-cow" type topics here. Even though you repeated state that you KNOW it is more expensive, but that you choose to pay $50 a month for comfort and security, you still get excoriated.

Nobody says anything when people say they spend $50 a month on pet expenses for their useless dogs and cats because that is important to them, but spending $50 extra for some other issue of preference is ludicrous.

I agree with the OP here, and think it is surprisingly low for the amount of pain in the ass you could save.

Here's the thing with the two calculations:

The $240 a month for the lease is set. It will be that price guaranteed, and you can budget for it.

The $190 for the used car will have tons of variance. You may get a great used car and end up only paying $100 a month, or you could get a lemon like some of my family members have and end up paying way more to constantly repair a shitty used car, AND have to deal with major inconvenience of breakdowns, etc.

Buying a used car is like self-insuring. Averaged out over many years and many people, it is cheaper per month when amortized, but if you are one of the outliers then it could be catastrophically expensive. And the used car costs don't come as a $190 monthly payment, they come as $2000 blown transmissions, etc. That variance can hurt a lot of people who are just starting out saving. And even if it never happens simply having to WORRY about it happening sucks. Especially if you still have to work, et. Missed days or appointments aren't factored in. However the typical cost of leasing a car makes it STILL a better deal to buy used normally, even accounting for these things, because normal leases are SO expensive. But if, like the OP says, you can get a lease for only $50 a month more than (the AVERAGE) monthly cost of buying a used car, that totally could be a great way of 'insuring' against the crazy scary variance of used car costs.

[secondcor521]

Just thought I'd throw my actual numbers in here for comparison.  I probably won't join the argument.

Bought a 1995 Toyota Corolla new for $14K.  KBB is now $2.5K.  Depreciation of $11.5K over 18 years works out to $53.24 per month.

Repairs have been $1,000 over that same 18 years.  $4.62 per month.

Collision/comp is $0 per month.  I haven't carried it for at least 10 years, because I own it and I've got cash in the bank to buy a new one if I for some reason totaled this one.

Total cost of about $57.86 per month.

[Rural]

2003 Kia Rio bought 12 months ago for $1,200. Current KBB value with 190,000 is $2,600. I've changed the oil three times at ~20 and put on new wiper blades. I think they were $13. Insurance is slightly under $300 a year, but I don't have it handy to look up since I've moved recently, so let's just assume the full $300, though I know it's an overestimate. That puts cost of ownership so far at $-85.58 per month.

The key to deals like this is to own an extra beater so you never have to buy a car in a hurry. That's if you live out like we do. If you're somewhere with public transit, you can do the same thing without the extra beater.

[Mr Mark]

It's about cashflow mainly. Assuming same maintenance costs and running costs... (and ignoring tax and  inflation)

Person A buys a sensible used car, MMM style. Let's say 10k. After 10 years it's worth 2k.  You've paid a lump sum, hence losing circa 7% per year, compounded.  Plus lost almost all of your capital, $19671. Less the 2k you get back, 17671 bucks. That's 147 dollars a month, amortized over 10 years.

It's easy to see how a smart lease deal, if the contract offers sufficient buy back guarantees, and your mileage is low anyhow, could match that, as they will have lower than 7% financing costs, plus the manufacturers are almost giving them away at marginal vs total cost.

This is without considering lower maintenance costs and possible increased fuel efficiencies.

The ability to self insure a car you own vs forced comprehensive insurance on the lease may be the decider. This will be very state dependent. YMMV

[Mr Mark]

2003 Kia Rio bought 12 months ago for $1,200. Current KBB value with 190,000 is $2,600. I've changed the oil three times at ~20 and put on new wiper blades. I think they were $13. Insurance is slightly under $300 a year, but I don't have it handy to look up since I've moved recently, so let's just assume the full $300, though I know it's an overestimate. That puts cost of ownership so far at $-85.58 per month.

The key to deals like this is to own an extra beater so you never have to buy a car in a hurry. That's if you live out like we do. If you're somewhere with public transit, you can do the same thing without the extra beater.

+1

You'll see the simple calculation is very sensitive to the initial purchase price.

If you buy a beater ( our families solution)  for 2k, then even with higher maintenance costs ( not very though... some of you are exaggerating the risk a lot. If it's a critical interview, take a taxi. If it's a big mess, buy another one. )  no way a lease on a new car is cheaper. No way.

[Rural]

Person A buys a sensible used car, MMM style. Let's say 10k. After 10 years it's worth 2k.  You've paid a lump sum, hence losing circa 7% per year, compounded.  Plus lost almost all of your capital, $19671. Less the 2k you get back, 17671 bucks. That's 147 dollars a month, amortized over 10 years.

It's easy to see how a smart lease deal, if the contract offers sufficient buy back guarantees, and your mileage is low anyhow, could match that, as they will have lower than 7% financing costs,

You're forgetting you still have the lost opportunity cost on the lease payments, too.

[SnackDog]

Safety is a key consideration for us. Anyone aware of the death and injury toll on the road should feel the same. $50 or $100 month savings is not worth the risk of dealing with any injury for the rest of your life or putting family at risk. A 2003 Kia Rio, a great frugal buy, had abysmal side impact ratings. A car with 20 year old braking systems screeching to a halt behind a new car is probably going to hit it.

[frugal_engineer]

Just thought I'd throw my actual numbers in here for comparison.  I probably won't join the argument.

Bought a 1995 Toyota Corolla new for $14K.  KBB is now $2.5K.  Depreciation of $11.5K over 18 years works out to $53.24 per month.

Repairs have been $1,000 over that same 18 years.  $4.62 per month.

Collision/comp is $0 per month.  I haven't carried it for at least 10 years, because I own it and I've got cash in the bank to buy a new one if I for some reason totaled this one.

Total cost of about $57.86 per month.

You left out how many miles you drove it.  Even still I have a hard time believing the $1000 maintenance bill over 18 years.  Tires are only good for around 6 years or so regardless of treadwear (ie. may explode at any moment due to normal deterioration of the rubber).  If you only drive like 3000 miles a year this might be believable.  In that case, you are an outlier in car usage, even among mustachians I'd think.

[Mr Mark]

Person A buys a sensible used car, MMM style. Let's say 10k. After 10 years it's worth 2k.  You've paid a lump sum, hence losing circa 7% per year, compounded.  Plus lost almost all of your capital, $19671. Less the 2k you get back, 17671 bucks. That's 147 dollars a month, amortized over 10 years.

It's easy to see how a smart lease deal, if the contract offers sufficient buy back guarantees, and your mileage is low anyhow, could match that, as they will have lower than 7% financing costs,

You're forgetting you still have the lost opportunity cost on the lease payments, too.

No. That's the comparison. An invisible amortization at around 150 a month over the 10 years. Vs whatever the monthly cash payment is for the lease.

[prodarwin]

Here's some more comparison numbers.

My daily driver is a 1998 Saturn SL2 (not a complete beater either... auto, AC, sunroof, leather, etc.)
I purchased it in late 2011 for $3000 (admittedly overpaid), with 100,500 miles on it.
I have driven it 28,319 miles and change (number is from last fillup).
I have spent approx. $964.54 on repairs.  Most of these were approx 100k mile service issues that I was anticipating.  I expect the long term repair cost to be much lower than this... I'm very familiar with these cars.

As it sits right now, the car is worth about $2500-3000.  Lets take the lower number.

So, depreciation + repairs = 1464.54.
Divide that by miles driven, and you end up with a depreciation + repair cost of 0.05/mile.  OR about $77.05/month and falling.  I'm betting this number will be well under 50 a year or two from now.

So, $77/month vs $240/month

If you want to include personal property tax, I've paid about $150 in taxes on this car so far.  There is tax relief on more expensive cars, but based on some more expensive vehicles I've owned, I bet that car is around $500/year.  So $791 in 19 months.  Insurance costs are surprisingly low at only $240/year difference... so $380 in 19 months.  That makes the total difference from these two things approx:  $61.63/mo, bringing the total difference between my car and a leased Accord to.... $224.58/month

[gooki]

Safety is a key consideration for us. Anyone aware of the death and injury toll on the road should feel the same. $50 or $100 month savings is not worth the risk of dealing with any injury for the rest of your life or putting family at risk. A 2003 Kia Rio, a great frugal buy, had abysmal side impact ratings. A car with 20 year old braking systems screeching to a halt behind a new car is probably going to hit it.

But a 2003 ki Rio isn't the only car available at that price point. I also refer you to this article.
http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/

[Mr Mark]

Safety is a key consideration for us. Anyone aware of the death and injury toll on the road should feel the same. $50 or $100 month savings is not worth the risk of dealing with any injury for the rest of your life or putting family at risk. A 2003 Kia Rio, a great frugal buy, had abysmal side impact ratings. A car with 20 year old braking systems screeching to a halt behind a new car is probably going to hit it.

Ha!  We roll a 1990 Chevy suburban. it's basically carved from solid detroit steel. Those in sleek light hyper- engineered smart cars might want to reread the laws of momentum. And avoid pulling out in front of me.

Some lady rear-ended the car when we were stopped at a stop sign 5 days ago. I think she scratched the towbar. Her car, meanwhile, looked like a total mess.

Old doesn't always mean less safe.

[secondcor521]

Just thought I'd throw my actual numbers in here for comparison.  I probably won't join the argument.

Bought a 1995 Toyota Corolla new for $14K.  KBB is now $2.5K.  Depreciation of $11.5K over 18 years works out to $53.24 per month.

Repairs have been $1,000 over that same 18 years.  $4.62 per month.

Collision/comp is $0 per month.  I haven't carried it for at least 10 years, because I own it and I've got cash in the bank to buy a new one if I for some reason totaled this one.

Total cost of about $57.86 per month.

You left out how many miles you drove it.  Even still I have a hard time believing the $1000 maintenance bill over 18 years.  Tires are only good for around 6 years or so regardless of treadwear (ie. may explode at any moment due to normal deterioration of the rubber).  If you only drive like 3000 miles a year this might be believable.  In that case, you are an outlier in car usage, even among mustachians I'd think.

So far, I've driven it 192K miles over those 18 years.  That works out to ~10.6K miles per year.

As far as the second part goes, I distinguish between repairs and maintenance.  Repairs - where something has broken and I've paid to fix it - has been $1,104.75 - actual Quicken numbers.  Maintenance - where something needs to be done because something wore out or needs replacing, such as tires, oil changes, windshield wipers, car washes, radiator coolant, etc. - has been $1,029.30 - actual Quicken numbers.

Those two numbers are since December 2006.  Before that I don't have good numbers for you, but I will say that the repairs were an additional $250 or so, and maintenance was probably about the same or somewhat less.

So a better repairs number would be about $1,354.75, or $6.27 per month.  If you want to include maintenance, then say $1029.30 x 2 / 18 / 12 = $9.53 per month.

So an adjusted total for you is $69.04 per month ($53.04 + $6.27 + $9.53).

As far as tires go, my records show I've bought 2 tires since December 2006, and paid $232.35 for them.  That number is included in the maintenance total.  Before that time, I think I bought a total of 6 tires, so I've replaced the tires a total of twice.  I buy tires from places that include free rotations, and I have them rotated every 10K miles.  They usually last me about 60-80K miles, so yeah, about 7 years or so sounds about right.  I don't do leases, so I don't know how the maintenance like tires is handled in those situations.

Whether you believe the numbers is up to you.  I believe them because I've kept meticulous records in Quicken.  Mid-1990 Toyotas are dirt cheap to own and maintain.

[randymarsh]

Ha!  We roll a 1990 Chevy suburban. it's basically carved from solid detroit steel. Those in sleek light hyper- engineered smart cars might want to reread the laws of momentum. And avoid pulling out in front of me.

Some lady rear-ended the car when we were stopped at a stop sign 5 days ago. I think she scratched the towbar. Her car, meanwhile, looked like a total mess.

Old doesn't always mean less safe.

It's a common misconception that old cars are extremely safe because they're "solid steel". Modern cars are supposed to look like shit after a collision, even a small one. They're engineered to channel energy across a larger area - hence crumple zones. You also see this in the trend towards unibody designs. They're harder and more difficult to repair, but safer than body on frame construction.

https://www.youtube.com/watch?v=emtLLvXrrFs

https://www.youtube.com/watch?v=joMK1WZjP7g

90s SUVs also were not designed for collisions with smaller vehicles. Ford redesigned the F150 a few years back, in part, to better comply with crash testing "compatibility" guidelines across different vehicle classes.

More weight is generally safer it seems, but I'm not sure at what point better engineering and technology surpass it. I have a better designed (safety wise!) car, advanced airbags (I don't think 1990 Suburbans have any?), side airbags, and seat belt pretensioners, and a shorter stopping distance. You have more weight. I honestly don't know which one I'd prefer to be in.

[SnackDog]

Older cars are nearly uniformly less safe both due to automaker advances and safety regulations. Additionally, they become disadvantaged over time when driven on road with vehicles with increasingly better brakes, for example. When you swerve to avoid that small car with four wheel ABS in your SUV tank you may roll it and kill yourself.

[Rural]

Older cars are nearly uniformly less safe both due to automaker advances and safety regulations. Additionally, they become disadvantaged over time when driven on road with vehicles with increasingly better brakes, for example. When you swerve to avoid that small car with four wheel ABS in your SUV tank you may roll it and kill yourself.

It is not possible to roll a 1990 suburban unless you roll it off a cliff. Just saying.

(Former owner of a 1991 diesel Suburban)

[SnackDog]

It is really easy and I had a friend killed in one that rolled in Texas on a rural highway, mid day, dry conditions.  He reportedly passed a truck, moved in front of it, over-shot, popped right tires off the road edge, flipped and rolled.