Did you Lease or Buy ?
04-21-17, 08:28 PM
#16
This is the number one reason i am against leasing. I can't imagine paying a fee each month the rest of your life for a vehicle you don't really own and for a vehicle that you have mileage limitations. Then there is the worry of losing your job, having to pay for the car. As for renting your home in place of buying it, I can't it's a good idea.
04-21-17, 09:26 PM
#17
people ask about anything and everything they want, not sure why this particular question would annoy you.
funny thing is years ago i was the only one among friends and corworkers to lease, they didn't understand. but after years of saying the same thing and changing few cars, now a lot of my friends and coworkers say lease is the way to go.
funny thing is years ago i was the only one among friends and corworkers to lease, they didn't understand. but after years of saying the same thing and changing few cars, now a lot of my friends and coworkers say lease is the way to go.
04-22-17, 07:16 AM
#19
Lexus Fanatic
It's all a state of mind. "Ownership" vs not. I want to have a new car every 3-4 years, and the least costly way to do that is to lease. I don't want to tie up a bunch of money in a car, and my money earns better returns invested than it costs me to borrow money to buy cars.
Cars go down in value, in general a home does not. There are also intangible benefits to owning a home, for instance if you want a single family home or town home in general you have to rent from a private owner, there's instability there, what if the owner sells the home or wants to move back to the home, I have to leave. I also can't do improvements to the home if I'm renting.
I am in the real estate business and I will tell you, some times for some people you should rent and not buy real estate. If you anticipate a big change in your housing needs in the next 1-4 years you should rent. I have people who call me all the time and they bought a home 2 years ago or last year and they have to sell, and they are hosed. It's not that their home has lost value, it's that it costs 7-7.5% to sell it, transfer taxes, brokerage fees, closing costs. So that means their home needs to have gone up in value 7-7.5% before I can sell it and break them even.
The point is, not every piece of advice serves every person. The adage "always buy a home don't rent" doesn't always hold water, just as for every person and every set of needs and circumstances "pay cash for a car, never lease" doesn't always make sense. It would make no sense for me to buy vs lease because always when I get to year 2-3 I have the itch. Even now, I'm 2 years into the LS a car I've always wanted and assumed I would buy out of the lease...and I'm looking. It's just how I am, and I work hard to be able to afford to be this way.
Life isn't all about doing everything as cheaply as possible. You have to live also. I love cars, my car is a huge focus in my life and I spend a lot of money on it, but not so much that it impacts my family financially...so...who is anybody to say anything about it? Should I buy a used car and drive it forever and be miserable always looking at other cars I want? Why?! People belong to country clubs, they have boats, they have second homes, they take lavish vacations, I don't do any of those things, my thing is my cars. So, how am I wrong and they aren't? I have a buddy that isn't a car person and he doesn't understand why I spend so much money for a car. I remind him he spent $70,000 to join and spends $700 a month to belong to a Country Club he walks into twice a month if he's lucky. I spend several hours a day every day in this car...but I'm the overspender? LOL.
"What if you loose your job?" If you're smart you and your financial planners have prepared for bad things that can happen to you. And, even if you haven't you can sell the car, trade the car, etc. Might be upside down but if you really got into bad trouble, and couldn't sell it...just stop paying for it and give it back. Hurts your credit but if you are that bad off that this car is causing you not to be able to eat, your credit is probably ruined anyways.
Cars go down in value, in general a home does not. There are also intangible benefits to owning a home, for instance if you want a single family home or town home in general you have to rent from a private owner, there's instability there, what if the owner sells the home or wants to move back to the home, I have to leave. I also can't do improvements to the home if I'm renting.
I am in the real estate business and I will tell you, some times for some people you should rent and not buy real estate. If you anticipate a big change in your housing needs in the next 1-4 years you should rent. I have people who call me all the time and they bought a home 2 years ago or last year and they have to sell, and they are hosed. It's not that their home has lost value, it's that it costs 7-7.5% to sell it, transfer taxes, brokerage fees, closing costs. So that means their home needs to have gone up in value 7-7.5% before I can sell it and break them even.
The point is, not every piece of advice serves every person. The adage "always buy a home don't rent" doesn't always hold water, just as for every person and every set of needs and circumstances "pay cash for a car, never lease" doesn't always make sense. It would make no sense for me to buy vs lease because always when I get to year 2-3 I have the itch. Even now, I'm 2 years into the LS a car I've always wanted and assumed I would buy out of the lease...and I'm looking. It's just how I am, and I work hard to be able to afford to be this way.
Life isn't all about doing everything as cheaply as possible. You have to live also. I love cars, my car is a huge focus in my life and I spend a lot of money on it, but not so much that it impacts my family financially...so...who is anybody to say anything about it? Should I buy a used car and drive it forever and be miserable always looking at other cars I want? Why?! People belong to country clubs, they have boats, they have second homes, they take lavish vacations, I don't do any of those things, my thing is my cars. So, how am I wrong and they aren't? I have a buddy that isn't a car person and he doesn't understand why I spend so much money for a car. I remind him he spent $70,000 to join and spends $700 a month to belong to a Country Club he walks into twice a month if he's lucky. I spend several hours a day every day in this car...but I'm the overspender? LOL.
"What if you loose your job?" If you're smart you and your financial planners have prepared for bad things that can happen to you. And, even if you haven't you can sell the car, trade the car, etc. Might be upside down but if you really got into bad trouble, and couldn't sell it...just stop paying for it and give it back. Hurts your credit but if you are that bad off that this car is causing you not to be able to eat, your credit is probably ruined anyways.
Last edited by SW17LS; 04-22-17 at 07:21 AM.
04-22-17, 07:25 AM
#20
I am in the real estate business and I will tell you, some times for some people you should rent and not buy real estate. If you anticipate a big change in your housing needs in the next 1-4 years you should rent. I have people who call me all the time and they bought a home 2 years ago or last year and they have to sell, and they are hosed. It's not that their home has lost value, it's that it costs 7-7.5% to sell it, transfer taxes, brokerage fees, closing costs. So that means their home needs to have gone up in value 7-7.5% before I can sell it and break them even.
The point is, not every piece of advice serves every person. The adage "always buy a home don't rent" doesn't always hold water, just as for every person and every set of needs and circumstances "pay cash for a car, never lease" doesn't always make sense. It would make no sense for me to buy vs lease because always when I get to year 2-3 I have the itch. Even now, I'm 2 years into the LS a car I've always wanted and assumed I would buy out of the lease...and I'm looking. It's just how I am, and I work hard to be able to afford to be this way.
04-22-17, 07:51 AM
#21
Lexus Fanatic
Originally Posted by Och
In NYC it almost always makes sense, even for a short term. Even if you only break even, just think how much you've saved on rent.
Let me give you a scenario I see all the time. Younger person comes and wants to buy a $400,000 small property, a condo or a TH or a small house or something like that. Let's say they could rent a similar property for $2,500 a month. They own it a year and they have a baby or something and need something bigger. Let's say the house has gone up in value 2% over that year. They will have lost 5-5.5%, so let's call that $20,000.
Now at first glance you would say well rent would have cost $30,000 so they're ahead $10,000. Not so fast. They paid a ton of interest in that year and almost no principal, because that's how amortization on a loan works. So let's say they spent $24,000 in interest. Then they paid taxes, let's call that $4,000. Then they have the closing costs they paid to get in, which are about $12,000. Assuming they put no money into the property in terms of improvements it's cost them nearly $40,000 to live there that year, then they loose $20,000 when they sell after a year, all of a sudden the own vs rent cost is $60,000 vs $30,000, or owning cost them $30,000 vs just renting for that year.
This person would have been way better off to rent.
04-22-17, 08:01 AM
#22
Where it is has a huge impact, and what you can do with it when you're done with it has an impact also. Can you rent it to cover the carry cost to give the property time to appreciate and the loan time to get paid down some?
Let me give you a scenario I see all the time. Younger person comes and wants to buy a $400,000 small property, a condo or a TH or a small house or something like that. Let's say they could rent a similar property for $2,500 a month. They own it a year and they have a baby or something and need something bigger. Let's say the house has gone up in value 2% over that year. They will have lost 5-5.5%, so let's call that $20,000.
Now at first glance you would say well rent would have cost $30,000 so they're ahead $10,000. Not so fast. They paid a ton of interest in that year and almost no principal, because that's how amortization on a loan works. So let's say they spent $24,000 in interest. Then they paid taxes, let's call that $4,000. Then they have the closing costs they paid to get in, which are about $12,000. Assuming they put no money into the property in terms of improvements it's cost them nearly $40,000 to live there that year, then they loose $20,000 when they sell after a year, all of a sudden the own vs rent cost is $60,000 vs $30,000, or owning cost them $30,000 vs just renting for that year.
This person would have been way better off to rent.
Let me give you a scenario I see all the time. Younger person comes and wants to buy a $400,000 small property, a condo or a TH or a small house or something like that. Let's say they could rent a similar property for $2,500 a month. They own it a year and they have a baby or something and need something bigger. Let's say the house has gone up in value 2% over that year. They will have lost 5-5.5%, so let's call that $20,000.
Now at first glance you would say well rent would have cost $30,000 so they're ahead $10,000. Not so fast. They paid a ton of interest in that year and almost no principal, because that's how amortization on a loan works. So let's say they spent $24,000 in interest. Then they paid taxes, let's call that $4,000. Then they have the closing costs they paid to get in, which are about $12,000. Assuming they put no money into the property in terms of improvements it's cost them nearly $40,000 to live there that year, then they loose $20,000 when they sell after a year, all of a sudden the own vs rent cost is $60,000 vs $30,000, or owning cost them $30,000 vs just renting for that year.
This person would have been way better off to rent.
04-22-17, 08:11 AM
#23
Lexus Fanatic
Not everybody can do that though, and not everybody is the sort of person that is well suited to that. One whole side of our business is property management and investment analysis and leasing. We call these people "accidental investors", and often it does not go well. They may want to buy a bigger property and be unable to while still owning this property. They may not have the financial security to be able to weather potential vacancies while still meeting the carry, the possibility of a non-performing tenant, realities of repair costs etc.
Being a landlord is not for everybody lol.
Bottom line is for some people renting just makes more sense, and the overall reason is time horizon. In general owning real estate is a long term investment, and in the short term it doesn't work as well unless you're flipping, or just really in the right place at the right time (ie people who owned a house for 3 years and made $200k during the crazy pre recession bubble).
It's not unlike cars...if you're going to keep it for longer than 5 years it's cheaper to buy. Less than 5 years? May be cheaper to lease. I tell real estate clients 5 years in general in our marketplace too. After 5 years I can generally get you out breaking even.
Being a landlord is not for everybody lol.
Bottom line is for some people renting just makes more sense, and the overall reason is time horizon. In general owning real estate is a long term investment, and in the short term it doesn't work as well unless you're flipping, or just really in the right place at the right time (ie people who owned a house for 3 years and made $200k during the crazy pre recession bubble).
It's not unlike cars...if you're going to keep it for longer than 5 years it's cheaper to buy. Less than 5 years? May be cheaper to lease. I tell real estate clients 5 years in general in our marketplace too. After 5 years I can generally get you out breaking even.
04-22-17, 08:25 AM
#24
Not everybody can do that though, and not everybody is the sort of person that is well suited to that. One whole side of our business is property management and investment analysis and leasing. We call these people "accidental investors", and often it does not go well. They may want to buy a bigger property and be unable to while still owning this property. They may not have the financial security to be able to weather potential vacancies while still meeting the carry, the possibility of a non-performing tenant, realities of repair costs etc.
Being a landlord is not for everybody lol.
Bottom line is for some people renting just makes more sense, and the overall reason is time horizon. In general owning real estate is a long term investment, and in the short term it doesn't work as well unless you're flipping, or just really in the right place at the right time (ie people who owned a house for 3 years and made $200k during the crazy pre recession bubble).
It's not unlike cars...if you're going to keep it for longer than 5 years it's cheaper to buy. Less than 5 years? May be cheaper to lease. I tell real estate clients 5 years in general in our marketplace too. After 5 years I can generally get you out breaking even.
Being a landlord is not for everybody lol.
Bottom line is for some people renting just makes more sense, and the overall reason is time horizon. In general owning real estate is a long term investment, and in the short term it doesn't work as well unless you're flipping, or just really in the right place at the right time (ie people who owned a house for 3 years and made $200k during the crazy pre recession bubble).
It's not unlike cars...if you're going to keep it for longer than 5 years it's cheaper to buy. Less than 5 years? May be cheaper to lease. I tell real estate clients 5 years in general in our marketplace too. After 5 years I can generally get you out breaking even.
04-22-17, 08:47 AM
#25
Lexus Fanatic
Well, with real estate it depends on the market, but in general buying real estate is a solid investment. But back on topic of cars, I just don't see any reason to buy them. Even long term, continued depreciation plus cost of maintenance and repairs will make cost of ownership more or less the same as leasing, but you're stuck driving an old car.
04-22-17, 09:07 AM
#27
Lexus Test Driver
Originally Posted by Och
How long of a term are we talking about? If its 10 years, maybe, but then you're stuck driving a 10 year old car, and I doubt todays turbo charged engines can even last 10 years.
04-22-17, 09:15 AM
#28
Lexus Fanatic
This is the number one reason i am against leasing. I can't imagine paying a fee each month the rest of your life for a vehicle you don't really own and for a vehicle that you have mileage limitations. Then there is the worry of losing your job, having to pay for the car.
And, of course, one of the keys to that, if possible (I know that can be difficult for some people) is to keep a good enough bank-account that one does not have to apply for a car-loan, and not to buy a vehicle that one cannot afford.Leasing is also not a particularly good idea for those who regularly drive long distances, people with messy kids in the back seat causing stains, those without garages/carports, those who live in areas that regularly get severe storms, those who regularly park or drive in conditions that can cause body-damage......kids with bikes/skateboards hitting it, landscape contractors in condos with their high-speed gas-powered mowers and blowers tossing debris into it, trees dropping hard nuts that can ding the sheet metal, winter-abrasives or stones/gravel on the road that can be kicked up by trees and damage or crack glass and cause pitts on the body, careless people with snow-shovels next to your car that bang the shovels into it and cause body/paint damage. Not all of that, of course, will violate the wear-and-tear clause.....it depends on the details of the contract, how closely they inspect the car with you return it, and how much they are willing to look the other way if they want your repeat-buisness. You can also (at extra cost) buy an extension for the mileage-limit so that you aren't penalized if you drive too many miles.
Last edited by mmarshall; 04-22-17 at 09:22 AM.
04-22-17, 09:34 AM
#29
Lexus Fanatic
Leasing is more expensive than buying and keeping a car a long time. No question. Point is, we don't care lol
I always find it funny that people who buy used and keep cars a long time are always trying to convince those of us who lease we are wrong, but we don't seem to feel the need to convince them they are wrong lol. If you're happy driving older cars and owning them for a long time great, good for you. I'm not.
Leasing doesn't work if your car might be damaged? I have insurance lol. My van is leased, the kids mess wipes away.
I always find it funny that people who buy used and keep cars a long time are always trying to convince those of us who lease we are wrong, but we don't seem to feel the need to convince them they are wrong lol. If you're happy driving older cars and owning them for a long time great, good for you. I'm not.
Leasing doesn't work if your car might be damaged? I have insurance lol. My van is leased, the kids mess wipes away.
Last edited by SW17LS; 04-22-17 at 09:38 AM.
04-22-17, 09:39 AM
#30
Lexus Champion
As usual, this current discussion of leasing vs. buying shows it just boils down to personal preference for the most part. Kind of like the regular vs. premium gas discussions.