Getting a new car: lease vs. own

[geekette]

aaacccckkk, BUSTED!!! I am retireewannabee on another internet msg bd.

I thought I made up Whop Finkle. Will check with my siblings as it maybe came from Dad or elsewhere in childhood. My mother was 2nd generation Austrian/Ukranian, but I doubt it came from her as she is still living, I would still hear it periodically.

It just means I don't give a crap but is more fun to say and seems slightly less vulgar (you know me, Ms Sensitivity!)

Will try to figure out where I got it as I plain ole don't remember.

 

[Mosca]

Trying to figure out if there is a financial advantage to lease a car. We have not bought a used car in 20 some years so I am not sure if I want to start now. A little more info, the current car I am driving is 8 year old and we tend to keep the car for a minimum of 5 years. Of course if it makes financial sense, I would like to drive a new car sooner than that.

Add up the sum of the payments over 3 years, and subtract out any taxes and fees. If it is close to the projected depreciation over that time, then you can feel comfortable that the lease isn't a bad deal monetarily. That doesn't necessarily make it right for you, but it does solve one of the variables that you'll want to consider.

You can get estimate the depreciation by using NADA online. Check the list price of a similar vehicle from 3 years ago. Then the estimated wholesale value of that vehicle today, using the right mileage and equipment. Then figure out a percentage. Then compare the ratios. You don't have to be exact, just rough; you're estimating whether the potential benefits are worthwhile, not figuring out rocket trajectories.

 

[ScoopKona]

I think one of the questions should be "do you like to drive?"

I used to enjoy driving. And I bought new cars. Now, not so much. It's just another chore to me. So I own a used truck with a very low operating cost. (It runs on methane, which is currently $2.50 per gallon equivalent.) I'll drive it 'til it falls apart, and then get another low operating cost vehicle.

 

[LUVourMarriotts]

I personally always purchase new, mostly because of my bad experiences with used cars when I was in high school/college.

I actually just purchased a new car at the end of March. It was probably the worst and best experience I've had purchasing a new car. I initially went to one dealer, right up the road from me, and they were extremely deceptive. But I didn't realize this until after I gave them my $500 deposit. Once I realized, about 4 hours later that night, I started looking around. The next closest dealer had the car I wanted too (actually better color) and I started talking with them. In the end, I unintentionally got the two dealers competing against each other pretty ferociously. Sticker on the car was $34,800, and I got the car for $23,600. I got down to that number because of their battling back and forth. I did trade in a car, which according to all the sites, was worth about $2500 trade-in.

I asked the salesman that I did but the car from how they got to that number, because it seems they lost a lot of money. He said, "when you said we were competing with the other dealer, we kick it into high gear. That and, we are having the best month ever at this location, so we used one of the vouchers that we get from the manufacturer to give you a much better price." I don't know if that is all true, but whatever it was, I got what I feel is a very good deal. Lots of people say that end of month is the best time to go to the dealer. I guess that worked out for me. :whoopie:

 

[geekette]

I personally always purchase new, mostly because of my bad experiences with used cars when I was in high school/college.

I actually just purchased a new car at the end of March. It was probably the worst and best experience I've had purchasing a new car. I initially went to one dealer, right up the road from me, and they were extremely deceptive. But I didn't realize this until after I gave them my $500 deposit. Once I realized, about 4 hours later that night, I started looking around. The next closest dealer had the car I wanted too (actually better color) and I started talking with them. In the end, I unintentionally got the two dealers competing against each other pretty ferociously. Sticker on the car was $34,800, and I got the car for $23,600. I got down to that number because of their battling back and forth. I did trade in a car, which according to all the sites, was worth about $2500 trade-in.

I asked the salesman that I did but the car from how they got to that number, because it seems they lost a lot of money. He said, "when you said we were competing with the other dealer, we kick it into high gear. That and, we are having the best month ever at this location, so we used one of the vouchers that we get from the manufacturer to give you a much better price." I don't know if that is all true, but whatever it was, I got what I feel is a very good deal. Lots of people say that end of month is the best time to go to the dealer. I guess that worked out for me. :whoopie:

YAY!!!

I do love A Good Deal!!

May I ask how you uncovered Dealer #1 deception?

 

[PigsDad]

I think one of the questions should be "do you like to drive?"

That's absolute nonsense. The car being newer does not mean you will automatically enjoy driving it more than an older vehicle.

Kurt

 

[ScoopKona]

That's absolute nonsense. The car being newer does not mean you will automatically enjoy driving it more than an older vehicle.

Kurt

No, but it does mean I no longer really care about what I drive. I'm not concerned with horsepower, styling, or "new car smell" (which in my mind is the most ridiculous reason to get a new vehicle).

As long as it's functional, clean, and has a low total operating cost, I'm good to go as it were. If I were still a car enthusiast, my metrics for what constitutes "value" would be much different.

 

[PigsDad]

Lots of people say that end of month is the best time to go to the dealer.

I think there is something to that. In my very first vehicle purchase on my own (I was in college), I was dealing on a used Honda Accord. I walked into the dealership about 6:30 in the evening and the initial offer was $8900. At about 9:30, I was signing papers for $2500.

It was the last day of November, and they wanted to get out of there (the dealership officially closed at 8:00)

Kurt

 

[PigsDad]

No, but it does mean I no longer really care about what I drive. I'm not concerned with horsepower, styling, or "new car smell" (which in my mind is the most ridiculous reason to get a new vehicle).

As long as it's functional, clean, and has a low total operating cost, I'm good to go as it were. If I were still a car enthusiast, my metrics for what constitutes "value" would be much different.

Ok, I misinterpreted a bit. I agree.

Kurt

 

[carl2591]

i have not leased a vehicle or bought one new since 1976 when i got a VW rabbit.. dont remember how much is cost but do remember it was a dud.

Over the most recent years we got a 95 Suburu with 23K miles in '97. it was a non smoking rental car that went to 176K when we traded in on 2002 chev impala LS in '05 with 24K and paid 13K for it. Ran that to 130K and traded in on 2008 Impala LTZ with 13k miles in nov 08.

car was made in march 08 and put for sale in nov 08 with 13K from hertz managers fleet cars. I paid 16K total for a 29K car with low miles.. looking to run it to 130K and trade in on hyundai Elentra which may be in 5 or so years.

so i am not a leaser, i like to buy good used cars with low miles for bottom dollar.

 

[SDKath]

I have always purchased cars and held them for about 10 years but 5 years ago my tax guy told me I could now deduct a lease for my business. So I started leasing cars then and have never looked back. I never lease longer than the warranty, which means I never have to spend a penny on maintaining the car (except the occasional $39 oil change).

Also, I am able to afford a nicer car on a lease than when I bought them.

I also don't have to worry about what happens at the end. I don't have to hassle about trying to sell a 10 year old car, etc. I just turn it in and walk away. This is especially useful given what happened last week with the accident! If I owned my car, I could have easily been stuck either trying to sell it or getting it fixed and driving it another 7 years. Blech.

Finally, I am finding that the technology these days is changing fast inside a car (not so much under the hood anymore). For example, my newest car has an ipod plug so that I can control my iPod from my steering wheel, including playlists and shuffling songs, etc. Incredibly cool and used every day during my commute. The map systems are much better now than even 3 years ago. The sound systems also take big improvements with each new car I have. Not to imply that I switch out my cars every year but timing it so that I do every 3-4 years, I find that the upgrades are well worth it! But then again, these things matter to me. Some people could care less about these features.

One downside: you need to get used to making monthly payments pretty much in perpetuity if you plan on leasing and swapping cars. In the past I would buy and pay for the whole car and have no payments again for the life of the car. Now I pay monthly and unless I plan to buy out my car at the end of a given lease period (which I never do), I will keep having payments. Given that I am able to deduct some of this from my taxes, I don't mind. But my mindset until recently was always that you should buy and pay off everything right away.

I can tell you that my parents, who have this traditional mindset, think I am crazy to drive a new car so often (their cars are over 10 years old). But, they easily have sunk in $50,000+ up front into their costs of purchase and at least $10,000 in repairs over the years. I have just managed to spread out my costs instead via monthly payments, while enjoying a worry and expense free drive and newer models.

Katherine

 

[DazedandConfused]

Interesting as my daughter needed a new car.

We started out looking for a used toyota Corolla or camry, but decided on a lease takeover.

We used leasetrader . com and found a 2011 Corolla with 28 months to go (out of 36) and paid no money down and now pay $199/mo

One thing that helped me decide was that I own a Infiniti M35 with 58k miles. I took the car in for the 60k service and also needed new tires. The repair bill was $2,300.

Thus, my repair bill on my 2008 car was almost 1 year of payments on her new car.

I think there is something to that. In my very first vehicle purchase on my own (I was in college), I was dealing on a used Honda Accord. I walked into the dealership about 6:30 in the evening and the initial offer was $8900. At about 9:30, I was signing papers for $2500.

That only tells me that the dealer was grossly overinflating the price, not that you got a great deal. These days of Internet deals, sometime the price is the price and no negotiating.

I asked the salesman that I did but the car from how they got to that number, because it seems they lost a lot of money. He said, "when you said we were competing with the other dealer, we kick it into high gear. That and, we are having the best month ever at this location, so we used one of the vouchers that we get from the manufacturer to give you a much better price." I don't know if that is all true, but whatever it was, I got what I feel is a very good deal. Lots of people say that end of month is the best time to go to the dealer. I guess that worked out for me. :whoopie:

Although you got a good deal, dealers are not in the business of LOSING money. That is similar to Timeshare sales reps that tell you that the price is going up tomorrow and you got the last good deal and you got a once in a lifetime price.

Timeshare sales and auto dealers are some of the most deceptive business people in the world.

 

[Mosca]

Interesting that you would know this, not having been there and just from reading a post on the internet.

It is very probable in both cases that the customer got a great deal. Dealers price the cars high precisely because customers won't buy unless they get a discount. If the price was set at $2500 to begin with, customers would turn up their noses until they got the price down to $1500. Complain all you want, but it won't change until customers change.

Additionally, in the first case, if the customer is credit challenged, the dealer might have to pay a large acquisition fee to the finance source to get the deal funded, a fee which they can't pass to the customer.

In the second, sometimes manufacturers run "stair-step" incentives to the dealers. Toward the end of the month the dealer might dip into the incentive even if it isn't earned yet, in the anticipation of earning it retroactively to the first cars sold that month. It is like taking a bet where the odds are [# of cars sold/1] that you'll win; if you sell 100 cars, you're risking that $1000 that you'll get $100,000 in stair-step money.

That only tells me that the dealer was grossly overinflating the price, not that you got a great deal. These days of Internet deals, sometime the price is the price and no negotiating.



Although you got a good deal, dealers are not in the business of LOSING money. That is similar to Timeshare sales reps that tell you that the price is going up tomorrow and you got the last good deal and you got a once in a lifetime price.

Timeshare sales and auto dealers are some of the most deceptive business people in the world.

 

[Sandy VDH]

I have been operating as a sole proprieter for over 7 years now. This year because of my income I have decided for tax reasons to become an LLC, and opt to get tax like an S Corp. I am just about to do this, I needed to get my divorce finalized and 2011 taxes done before I wanted to do this.

I have generally been a used car purchaser and holder. My current 2003 Lexus has 128000 miles on it. When I do have to get a repair every 2 - 3 years it has been expensive 2 -3K each time.

So I think I will keep my car until I need the next big repair job and at that time I will consider Leasing, as I could write off the car against my LLC.

Tax wise this actually makes much better sense for me, I think.

Does that make sense, is my logic correct?

(Yes I know you can only offer opinion and not tax advise for all those lawyer types).

 

[PigsDad]

That only tells me that the dealer was grossly overinflating the price, not that you got a great deal. These days of Internet deals, sometime the price is the price and no negotiating.

No, I am quite positive I got a good deal. I ended up driving that car for about a year and a half and then selling it for almost $2K more than I paid.

But thanks for the little condescending note anyway.

Kurt

 

[Passepartout]

We're lazy. We hate logging and separating business mileage from personal on DW's car. Even though she is a sole proprietor and could easily qualify, it's just too big a PITA, so we choose to buy and hold.

As to the maintenance issue, her Prius just turned 7 y.o. and other than oil changes and a set of tires hasn't cost a dime. We enjoy not having a car payment and the fact that when trade time comes along, it will reduce the out-of-pocket cost of the next one. Yes, it will be another Prius.

Jim

 

[SDKath]

I have been operating as a sole proprieter for over 7 years now. This year because of my income I have decided for tax reasons to become an LLC, and opt to get tax like an S Corp. I am just about to do this, I needed to get my divorce finalized and 2011 taxes done before I wanted to do this.

I have generally been a used car purchaser and holder. My current 2003 Lexus has 128000 miles on it. When I do have to get a repair every 2 - 3 years it has been expensive 2 -3K each time.

So I think I will keep my car until I need the next big repair job and at that time I will consider Leasing, as I could write off the car against my LLC.

Tax wise this actually makes much better sense for me, I think.

Does that make sense, is my logic correct?

(Yes I know you can only offer opinion and not tax advise for all those lawyer types).

Yes, that is exactly what I am doing as an S-corp.

 

[ScoopKona]

No, I am quite positive I got a good deal. I ended up driving that car for about a year and a half and then selling it for almost $2K more than I paid.

But thanks for the little condescending note anyway.

But that doesn't negate the fact that car salesmen are not far removed from timeshare salesmen.

I bought my last truck from the city. It was six years old. It had 60,000 on the odometer. It runs on natural gas. And it was $6,000 less than blue book. The only salesmen at that venue were the people buying cars in order to resell them at their dealerships.

 

[Mosca]

But that doesn't negate the fact that car salesmen are not far removed from timeshare salesmen.

I bought my last truck from the city. It was six years old. It had 60,000 on the odometer. It runs on natural gas. And it was $6,000 less than blue book. The only salesmen at that venue were the people buying cars in order to resell them at their dealerships.

THIS lifetime car salesman takes pride in his profession. It is interesting how people like to use jobs to denigrate others.

 

[ScoopKona]

THIS lifetime car salesman takes pride in his profession. It is interesting how people like to use jobs to denigrate others.

So the only jobs we're allowed to have issues with here are timeshare salesmen?

Let's face it, many people would rather have a root canal than spend an afternoon negotiating over a car. The entire industry is full of misinformation, bad information, and myths.

The process is predicated by the fact that the customer does not know what the best possible price is. Even learning real invoice price can be complicated by manufacturer incentives. The goal for the seller is to separate the customer from as much money as humanly possible. And the product loses much of its value as soon as the paperwork is signed. Not very far removed from timeshare sales, indeed.

This is my favorite article about car dealers: http://www.edmunds.com/car-buying/confessions-of-a-car-salesman.html

 

[LisaH]

Wow, thanks everyone! I didn't expect 5 pages of replies in just two days. Given what I know now, I wish I owned a business so I could have deductions on some of the expenses.

I will explore the lease options when I am ready for a new car. We usually do not pay cash so making monthly car payment vs. lease payment is no big difference to us. Will consider the cost difference and go from there...

 

[Mosca]

So the only jobs we're allowed to have issues with here are timeshare salesmen?

Let's face it, many people would rather have a root canal than spend an afternoon negotiating over a car. The entire industry is full of misinformation, bad information, and myths.

The process is predicated by the fact that the customer does not know what the best possible price is. Even learning real invoice price can be complicated by manufacturer incentives. The goal for the seller is to separate the customer from as much money as humanly possible. And the product loses much of its value as soon as the paperwork is signed. Not very far removed from timeshare sales, indeed.

This is my favorite article about car dealers: http://www.edmunds.com/car-buying/confessions-of-a-car-salesman.html

If you are comfortable painting us all with the same brush, I don't mind. It says nothing about me, after all.

 

[Ken555]

Wow, thanks everyone! I didn't expect 5 pages of replies in just two days. Given what I know now, I wish I owned a business so I could have deductions on some of the expenses.

I will explore the lease options when I am ready for a new car. We usually do not pay cash so making monthly car payment vs. lease payment is no big difference to us. Will consider the cost difference and go from there...

I know some people who lease and are unable to deduct the payments. They do this for the financial benefit, since they can buy a more expensive vehicle than regular payments would cover (as Kath mentioned in an earlier post), and when the lease ends they purchase the car and their payments at that time are much more reasonable. Of course, if you are comfortable with a used car and wish the same benefit (more expensive car for less monthly out of pocket) you can purchase an off-lease vehicle for about the same amount with a manufacturer's warranty. Many tax/financial advisors I know recommend buying a car that is ~3 years old and has ~30,000 miles on it. Similar to timeshares, the initial huge depreciation of the value of the car has been paid by the original purchaser.

Good luck!

 

[Ken555]

If you are comfortable painting us all with the same brush, I don't mind. It says nothing about me, after all.

I've been lucky enough to buy cars from intelligent salespeople who treat me with respect, understand my perspective, and that I value service, speed of the transaction, and of course competitive price. You may very well be one of those whom I would have no problem buying a car from.

I wanted to purchase an Audi last year and found the perfect car, which the salesman said would be a great buy as it was one of the last 2011's, etc. When we sat to start discussing price, he started from retail and expressed surprise when I said that was a nonstarter. An absolute total waste of our time and I walked out and bought a different car instead from a salesman who did the opposite.

There are great and poor sales staff at most organizations. I'm sure we all have similar stories. If only the auto industry had higher standards and less price negotiations needed, I think most consumers would be more pleased with the car buying experience, which I think most of us would admit is a laborious chore that we try to avoid whenever possible. This is why I thought using carwoo.com was a great help for me last year (it directly saved me ~$1200 over the course of my current lease as it proved to the dealership that I could buy the same car elsewhere for less, and they matched the offer and I was able to buy from my local dealership, which I wanted to do). We shouldn't need these services, and it should be a more up front and honest transaction, but it simply isn't.

 

[ace2000]

If you are comfortable painting us all with the same brush, I don't mind. It says nothing about me, after all.

I wouldn't worry about it. Some on here like to display how insecure they are by hiding behind an anonymous login on a public forum attacking others. I think we all know who I'm talking about.