Overhaulin'

Can anyone tell me what happens leasing a car? Buy vs Lease - why lease versus why buy?

Public Comments

1. When you lease a car there are rules so to speak, like you can't go over a certain milage in the car or you'll be stuck with it. it's like renting an apartment, you spend all that money but you gotta give it back in the end so you've spen t all that money on a car that's not even yours
2. Leasing is an alternative form of financing. Both have fixed terms and payments. With a purchase you finance the whole price of the vehicle and pay that amount, plus interest, back to the finance source. With a lease you also finance the full price of the vehicle, and pay all the interest. You only repay part of the principle of the loan. A lease has an estimated value of the vehicle at the end of the lease term. (Residual value) This is deducted from the principle and you only pay the difference in your monthly payments. For example: Assume a vehicle that costs $30,000 and a trade in worth $5000. Also assume you are financing, or leasing the vehicle for 5 years. A final assumption is that at the end of the 5-year period, the vehicle is worth $7500. With a purchase you would pay back $25,000 plus interest over the period of the loan. You would own the vehicle (worth $7500) You can keep it, or trade it in on a new vehicle With a lease you pay back $17,500 ($25,000- $7500 residual value), and the interest that is charged on the $25,000. Your payment is less, but at the end of the term you have nothing! With a lease there is a limit on the number of miles you can drive and a per mile charge after that. You are also responsible for any and all damage to the vehicle. At the end of the lease, when you turn the car in, you will have to pay for any and all damage and over miles charges! With both a lease, and a purchase, you are responsible for all maintenance. Some leases, but not many, may have a maintenance program, but that does cost extra, and will increase your monthly payment.
3. It's all about your own finances and projected income in the next few years. Leasing is like a long term rental (usually 1-4 years). If you like changing your car every 3-4 years then leasing is better then buying. But if you want to buy a car and keep it over 4 years (or as long as it runs) then buying is better. You have to assess your decision for the long run - will you be making more money in 3 years? will you want to keep driving that same car? will you get married and need a bigger car? will you be going to school and not making any money? Dont just look at today, look at all the numers. Here are a few things most people dont know or realise (I know because I've owned an auto brokerage for 5 years and I practice dealer fraud as an attorney now): 1) When you buy a car you pay tax up front. That means if you buy a car and sell it 2 years from now you loose that tax money plus all the depreciation. Instead, if you lease a car you pay tax monthly. Which means when 2 years into your lease you sell your car you will probably have paid only 30% of the tax on the purchase price. 2) When you lease a car you have mileage limitations that could actually be good for you. Take a person who drives very little and changes cars every 2-3 years. If that person buys their car they will loose 100% of the tax they pay. If you lease a car you pay only a minor fraction of the tax and 2-3 years in to the car if your car has low miles then you have built in equity in your car which you can cash out! 3) Lease the best car! Yes that's right! Lease the best looking car with the cool options. Here's why - if you lease a regular car 2 years later your car is nothing special, no one will want to buy it and you'll have to return it at the end of the lease. BUT! If you lease a car that stands, out 2-3 years into the lease you can sell it at a profit. Here's an example of what I did - Leased an audi for $400/mo with all all the neat options. 2 years into the lease I put my car for sale. It was the only car for sale in LA with the nice options! I sold the car for $3,000 more then the payoff amount. So my actual cost on the lease came out to about $250/mo on a car that everyone else pays $400/mo! I can go on an on but perhaps you can just ask me if you have specific questions.
4. Unless you have a business to write the car off at the end of the year, don't even bother leasing! Waste!
5. It's not true that leasing is only good for businesses. It's a common misunderstanding by people who don't understand how leasing works. I've been leasing all my personal and family vehicles for many years, and it works for me. But it doesn't work for everyone. You have to understand how it works and how to determine if it'll work for you. Here's a web site that might help: http://www.leaseguide.com/index2.htm .