kymbakitty

This board is not very active. Perhaps it is the newness of this particular model. But when someone posts a thread about their awesome lease deal, the replies are pages long.

I don't get it. But I also understand that there could be a whole new way of thinking or dealing these days and maybe I need to relearn something I thought was one of the worse business decisions ever documented.

Every financial advisor I know states leasing a car as one of the top three worst decisions you can make...right next to whole life insurance. And right before borrowing against your 401! What has happened to leasing that has changed this landscape? I'm thinking clearly, these folks are not your average bears and are not leasing these cars because it is the only way to get something they could not otherwise afford (i.e., shouldn't be driving the car then). But in three years (or whatever), they walk away from ZILTCH....they own nothing. I do understand there is a small group where leasing is makes sense...owning a business and using it as a write off. But that is not the majority.

So are there new rules that I have just completely missed the boat? Is there something that is new about leasing where that is now the way to go? Lexus 350 owners do not seem like the typical group of people that would make awful financial decisions in droves likes this....you have to have excellent credit scores, I'm sure. And they are probably not young kids because there are different kinds of cars available besides a $50k+ Lexus with 306 HP (haven't seem reports of leases on the 467 HP).

What am I missing?

Pearlrider

iTrader: (1)

Guess I'm not the only one that has questioned this logic.

tfischer

What has changed is the inability of many to understand financial transactions, coupled with an unrestrained desire to drive a swell car that they really cannot afford.

jowsleyyy

iTrader: (1)

I never understood why leases were so popular here either. Made me think like a minority when I bought my RC.

tfischer

New car buyers should read the chapter in Dave Ramsey's book about car ownership. He explains pretty well the economics of car loans and auto leases, and shows why the best deal is the cash purchase. After all, that's what the guy you are leasing it from is doing, and he's making a living from such deals.

dchar

A major factor in leasing rather than buying is the ability to change cars every few years without going through the hassle of selling or trading in the car. Since cars and tech are constantly changing, it's nice to be able to drive a car for a few years and simply return it to get a new one. Who doesn't like that new car smell Sure there are mileage restrictions and wear-and-tear stuff that need to be fixed before return, but it's not that bad. You also don't have to worry about not having a warranty. Also, if you get in an accident with your car, the resale value significantly drops. So when you lease, you can just turn it back in and walk away. Is leasing really that bad...since investing money in cars isn't the best due to depreciation. Unless you plan to keep a car longer than 5-7 years, then why not have a lower payment and drive a new car every few years. Leasing is basically just paying the portion of time you use the car anyways. Take for example, if you finance a $36K car, you'll be expecting payments ~$1000+ a month for several months where if you lease a $36K car, you'll be expecting payments ~$200-300 a month for a few years. I mean, if you can pay for the full amount in cash, then that's great...but people are getting close to the "cash" amount for discount in leases. Gone are the days where dealers give major discounts on customers who pay for their car in cash.

tfischer

The question you need to answer is the value of the "hassle of selling" a car you own, since you value that as less than the value of the ability to change cars every few years, an "ability" that everyone has.
If you value a "lower payment" so greatly, why not pay cash, because then your payment is 0.
Any analysis of a lease or purchase decision needs to include the time value of money and missed opportunity costs, as well as an estimate of future value, which many people don't factor in, just as they do not know how to compute the cost of a lease from delivery to surrender. It's complex and time consuming, which is why an analysis based on "it's nice" and "simply return it" are incomplete, subjective and lead to no useful conclusion.
I'm just paying for the portion of time I use the car is not an answer, it's the question; am I paying too much for that time?
Finally, a car is not an investment, it is the purchase of a depreciating asset. (Anyways!)

AZSkippy

I can afford to buy the car, I just choose not to.

I'l admit, I have ADD when it comes to cars. I love the new styles, technology, etc.. For YEARS I've always ended up with negative equity after only 3 years of car ownership. It sucks. I'm tired of dealing with sleazy dealerships and the hassle of trading in a used car.

I've leased my last 3 cars and haven't been happier. The funny thing is, I will have gotten 8 years worth of 3 brand new cars for the same amount that I would have paid 5 years on one car. Would I own it at the end? Sure. but at the end of 8 years, a 30k car is going to be worth around what, 9-10k? Take into account I will have put two sets of tires at almost 2k, and paid probably another 1k in service, and I'm down about 6k overall during that 8 year period. I've lost more than that in one day in the stock market, and that's not nearly as fun as driving this thing.

Leasing isn't for everyone.

kymbakitty

Very interesting....this one kind of makes me chuckle.


I guarantee you--the "hassle" of selling a car will never push me over the edge and lease!


It's not like you can't trade it in (or even go to CarMax for that matter).


We are selling our 2006 Toyota Solara. It's in excellent shape and I already had three offers and I haven't even put it up for sale yet. Not going to until the RC is in our garage!


It seems to me leasing is a good idea for folks that have a business for a write off, OR, people that have a pretty great nest egg/retirement fund/income where it doesn't need to make sense financially and spending a lot of extra money to have a nice new car every couple of years is just a perk they can enjoy given their financial landscape.


Unfortunately, the majority of us don't fall into that category. So leasing doesn't even almost cross my mind. For me, my category, it would simply be getting a car that I could not afford. Both Dave Ramsey and Suze Orman are fine with loans for vehicles, just not exceeding 36 months (basically, if you need more than 36 months, you can't afford car).


But thank you for the posts....it made me realize I had not missed the boat on the topic of leasing and it is still an awful financial decision to make--other than the small percentage of people mentioned above (income not needed for retirement and/or business write offs).


Thanks!

tfischer

I think you can consider leasing a Luxury item, in that you are paying someone to buy the car for you, own it while you drive it, and then sell it when you are tired of the car. That someone makes a nice profit on that transaction, and makes it simple for you. If you did those things yourself (own the car while you drive it), you would save the transaction costs. It's like having a car butler: expensive, but very convenient.

DzNutz

Totally agreed! "Business write off" or "Employer pays for it" for me.

yok3dIS

To be honest, I want the new car smell and the feeling of driving a new car every few years, that's about it.

And yes, I can afford it.

GregCanada

I noticed the same thing when i signed up for this forum after purchasing a GS350... i don't get it. Also, i don't get how or why people upgrade from a 2013 to a 2015... seems like a waste of money to me.

kymbakitty

This may be just me. But if I leased a car, every time I got in it to drive, I would have the eerie feeling that I'm borrowing someone's car. Plus, I never want to have to worry or think about mileage. Of course, I would because that just goes with borrowing someone's car.

Plus, and I know this sounds awful, I would feel like a fraud. I wouldn't want people to know I was leasing my vehicle. I'm not sure why. It's a stigma that is probably not deserved. It reminds me of people trying to keep up appearances on the outside, but two checks away from bankruptcy. And obviously, we have people on this board that probably lose more money on the horses than I make in a year.

It is my frame of reference....might need some tweaking.

Thanks for some great posts. Food for thought.

Dawn

FleeingFox

In my opinion.....

1) leasing enables you to get more car for your money. Paying $400 a month for a purchase = nice camry, leasing $400 a month = BMW, Mercedes, etc.

2) Not everyone is aware of their financial security or their timelines for work, moving for work, etc, and as such a two-three year lease is more reasonable than a five-six year purchase.

3) Many people (such as myself and family members) are given incentives to lease - my work gives $200 a month to the lease and $500 towards the down, but if you don't have a car payment - you don't just get free money. In this case, it means that some of us can drive a luxury car for ~150 a month after employer compensation.

4) cars are considered assets but they will NEVER appreciate. Unless its a vintage Ferrari or some other rare, exclusive car, it will never gain in value.

5) the older cars get the more likely that the issues will present themselves. Some of us do not care to deal with a 6-7 year old car that has transmission issues, an 8 year old car that has no AC, a 10 year old car that needs an engine revamp.

6) Technology is rapidly changing in cars, and things like fuel economy, user interface, power delivery, are getting better every year. See: 2014 IS 250 v. 2016 IS 200T. The person who leased the 2014 IS is now going to step into a nice new IS200t and experience a lot of great benefits, the person who purchased that IS still has a few years of payments before they can consider the possibility of jumping.

7) For many people, appearances matter, as a law student and professional IT director for a medical corporation, I can rightfully inform you that people in Los Angeles will indeed actively judge you based on your ride. In that an attorney with a 9 year old car "probably" hasn't won cases in a while, and a doctor without a newer Porsche "probably" got a divorce and lost most of their money to the spouse. (IRL my friend that I work with is a doctor who got divorced and went from a Maserati at $1200 a month to a Honda Accord and all our social work circles knew something happened and 9/10 times the question was "what happened to the car!?"\

Some people want to enjoy their success and find that getting a new car every few years is a great way to do it.

Some people think that paying cash for a car that drops 20% in value once you drive it for a week, and drops 40-50% within 4 years (worse for German cars) is the dumbest "investment" of money one can imagine.

In summary, to each their own, but people do have serious and legitimate reasons for leasing.

Personally, as a car enthusiast - I find leasing the most appealing. I could never imagine keeping a car out of warranty, not to mention 8+ years. I hate the feeling of paying for something that will technologically be inferior in just a few years, I like having the option to quickly shift into a new car if my needs change (for school I got a sedan because it was also going to be the weekend family outing car, but my family just purchased a new family car - so now I can switch into a coupe. If I get married relatively soon I can switch from Coup back to Sedan, and when I have kids I can switch to a small CUV - and for most of that time I will have gone through two totally new cars with new features and new tech and that lovely new car feeling, for less than the person who bought the car (who is still paying) paid).

TL;DR - People have their reasons and those reasons should be respected.