# Car Leasing



## Mortgage u/w (Feb 6, 2014)

The subject keeps coming up in conversations, and I was always one against leasing. However, I've had a change of mind in the last couple of years or so. 

Now I know that dollar for dollar, leasing works out to be the most expensive option. But is it really that more expensive?

For starters, I leased my first car ever this year and I am enjoying it - no regrets. As much as I like it, I don't think I would want to keep it long term. My biggest worry is maintenance costs.

So for anyone who has shopped a new car recently, you would have noticed that even the base car models will come fully equipped with electronics such as; parking sensors, wiper sensors, light sensors, tire sensors, back-up camera with sensors, lane change sensors, blind spot warnings, GPS, heated this and that, sensors for sensors and all those nice things that sound amazing.

The 'base' models I remember no longer seem to exist. So maintaining even a base model could cost thousands should a simple sensor malfunction. If an iphone needs to be replaced after 2-3 years, imagine what these new cars will need.

I guess the debate I am opening up is, am I the only one thinking this way? I mean, maintaining a recent car once the warranty is out will cost more that it would to maintain an older car where all this technology did not exist. For that reason, does it not make total sense to rent the damn thing and keep replacing it every 3-4 years until a car is no longer needed? If you do it right, you can even get away from changing the brakes and tires. 

I really can't picture someone paying top dollars for a car of the year (2018-2019) and keeping it for 10 years+. I think the car industry has done a great job at marketing their cars and turning over more and more inventory. It seems the more people grasp on, the more they limit the cars' lifespan. Soon, we will subscribe to our cars as we do with our smartphones. When its time for an upgrade, you simply trade everything in.


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## nobleea (Oct 11, 2013)

If one is intent on buying a new, particular model, depending on the finance/lease rates, there if often no difference between the two.
You're paying for the depreciation in both methods. In the purchase scenario, you are amortizing that loss over your ownership period. In the lease, you are amortizing it over the lease period. At 0-2%, is there really that much difference?
Of all my friends, I would say about a quarter are in the buy a new car and drive it for 10+ years. New vehicles these days, on average, don't have a lot of maintenance required in the first 100-120K. Even 180K for some brands. Tires for sure, maybe brakes depending on your driving style. 10K+ oil changes are pretty common for manufacturer recommednations. Spark plugs can be lifetime models. Many of the fluids don't have to be touched for 100K.

Most of the doohickeys that are added are not required things. I know many people who have older vehicles that have these things. Or at least had them, if they've gone on the fritz, they don't get repaired and the vehicle functions just fine.

I guess I'm rambling. If one is intent on having a new vehicle, then I don't think there's a substantial difference in lease vs buy. If one buys used, then for sure it's going to be cheaper long run, even if there is a lot of maintenance required.


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## Mortgage u/w (Feb 6, 2014)

But that's my point - today's cars are not the same as yesterday's cars. Yes, ball joint greasing and carburetor tuning is a thing of the past and in theory, there is much less maintenance on a recent car. My concern is with all the electronics that are put in today's cars. Repairing electronics can be very costly. And the fact you can drive off with 0 down and rock bottom monthly payments, why go through the hassle? 

Here's my math: $500/mth lease gets you access to the majority of cars out there. That's $6000/year. 10 years will cost you $60000. On a finance, you have to hope your $50k-$60k car is driven at least 10 years with no major repairs. On a lease, you'd be on your 3rd new car and not have to worry about repairs.


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## OptsyEagle (Nov 29, 2009)

My problem with leasing is not the financing method. I doubt leasing is anymore expensive then loan financing, but it becomes more when used to buy a car. You see, almost no one I have met seems to be able to calculate what a car actually costs when the dealer gives you the monthly lease payment. If it were a loan payment, probably 40% of Canadians could work the math backwards but with leasing it is probably less then 5%.

With that in mind one would think that all they have to do is a refresher course in lease calculations and their problem would be solved. The problem with leasing is not the math, the problem with leasing is the dealer believing you will never understand the math and robbing you blind. Even when you understand it, they tend to prefer to have you walk away then re-adjust their incorrect figures, they used to steal a couple thousand more. Their boss would prefer to hear "the guy was just a tire kicker" then "I couldn't get that extra $1,500 because he figured it out and wouldn't pay it".

So for a guy like me, that speaks just about any math language the world might come up with, I only have 3 choices::

1) Lease a Car - That will require me to overpay for the car by letting the dealers rob and steal by lying and messaging the lease numbers and me knowing but basically being forced to agree with it.
2) Not buy a car.
3) Buying it some other way then leasing.

Obviously number 3 is the one I select. I know many people lease cars and are quite happy with the deals they got, but I would say that is only because you did not follow the pea, under the shell, very closely. I could be wrong, but that would require an honest car salesperson and unless it is his/her first 2 weeks on the job, that salesperson does not exist. Because after about 2 weeks the honest ones are let go due to unacceptable results.

I would also add that leasing allows the dealers to make money from you twice, whereas cash and loans, only once. The dealers obviously play their money making games when you buy the car, but with a lease they get to go at you again when you return it. They will walk around it and make up all kinds of costs to charge you (in other words, put your money in their pocket) but always offer you the opportunity to avoid those costs if you allow them to put more of your money into their pocket by leasing another car from them. Keep that money making scam going on for ever. Look, we can make all the bad numbers disappear with this lease program. Again, they are not letting anything money disappear. You can actually get a lower monthly lease payment and still end up paying more for the car, by simply changing a few details ... and not explaining them to you. Leasing is complicated. Anyway, not a good idea to allow them two kicks at you when you could have reduced it to only one. That gets very expensive over a lifetime.

By the way, I would have no problem buying a car today and planning to own it for 15 years. That will be the cheapest way to own a car over the next 15 years, barring buying a used one right from the start.


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## Speculator (May 9, 2018)

Cars are a depreciating asset. If you want new then lease IMO. I have done it lots with no regrets. It's expensive but for that you are renting out the best 3 years of the vehicle and hopefully not have any problems. In 3 years you can turn it in in case you hated the vehicle but thought you would have loved it. You also get a chance to keep up with technology and always drive a new car. For this privilege you pay up for it. If you buy you are possibly stuck with a ride you are sick of. Lease your ride if you want to drive new and only buy used to save your money. Buy what appreciates and lease/rent what depreciates. My opinion!


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## nathan79 (Feb 21, 2011)

I'm skeptical that very many if any sensors would fail within 10 years... depends on the vehicle, I guess.

Leasing is great for people who don't want to worry about anything, though.

$6K a year.. damn I don't even spend that much including insurance, gas and repairs on a 15 year old vehicle.

I actually paid 6K for my car used, owned for over four years and spend about $500 a year on repairs. Total investment 8K.. over four years that amortizes to 2k a year, plus $3500/yr for gas and insurance. Total $5500 a year, and the car still has residual value (3-4K).


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## Speculator (May 9, 2018)

nathan79 said:


> I'm skeptical that very many if any sensors would fail within 10 years... depends on the vehicle, I guess.
> 
> Leasing is great for people who don't want to worry about anything, though.
> 
> ...


To be fair you have to compare leasing to buying new. We all know buying a used clunker is cheaper. I just bought a 2009 Ford Crown Vic but I've leased lots of new rides.


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## Prairie Guy (Oct 30, 2018)

Mortgage u/w said:


> Here's my math: $500/mth lease gets you access to the majority of cars out there. That's $6000/year. 10 years will cost you $60000. On a finance, you have to hope your $50k-$60k car is driven at least 10 years with no major repairs. On a lease, you'd be on your 3rd new car and not have to worry about repairs.


$60k in 10 years is $180k in 30 years.

Here's my math: Buy a 3 or 4 year old car for $20k (or less). Drive it for 6 years and then sell it for $5k. Add about $3k for repairs. Total is $30k in 10 years. Invest the $30k saved in the 10 years over your method. In 30 years you have invested $90k rather than spending it on a car and with modest gains now have well over $100k, but possibly at the inconvenience of a car in the shop a few days a year. But, $100k can make up for a little bit of inconvenience.


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## OptsyEagle (Nov 29, 2009)

Speculator said:


> To be fair you have to compare leasing to buying new. We all know buying a used clunker is cheaper. I just bought a 2009 Ford Crown Vic but I've leased lots of new rides.


I don't think his point was about leasing but more about whether owning an older car is so expensive, as the original poster had alluded to. It is not.


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## Prairie Guy (Oct 30, 2018)

Speculator said:


> To be fair you have to compare leasing to buying new. We all know buying a used clunker is cheaper. I just bought a 2009 Ford Crown Vic but I've leased lots of new rides.


A 3-year old car is almost exactly the same as a new car, the difference is negligible. A 10 or 12-year old clunker is entirely different, though.


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## Synergy (Mar 18, 2013)

If you want a brand new car every 3 yrs and don't drive a ton of km's then leasing is a really good option. Personally I'm on the fence, leaning towards leasing my next car.

Repairs can add up. At around 80,000 km on our 5 1/2 yr old F150 the dealership put in $6-7000 worth of warranty repairs - new timing chain, this pump, that pump, etc. One thing after another. And this vehicle was very well maintained with relatively low km's for it's age. The dealer felt bad as the truck was in every other month for a while - the dreaded service engine light. I was lucky, we had less than 30 days left under warranty. Just the other day I had to replace the lousy ford lug nuts. The bill was over $300 - including the winter tire swap. Mechanic mentioned that the Ford nuts are crap and you typically get around 4-5 yrs out of them before they start to split, swell, corrode, etc.

From the calculations I've done in the past, purchasing generally works out to be the best option financially. That is when the vehicle is kept for 4+ yrs. A lot of factors to consider - type of vehicle, usage, finance charges, cash deal, etc.

For me it's a business expense and reliability is the number one priority. If I was retired I'm pretty sure I'd be purchasing (new or used).


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## Synergy (Mar 18, 2013)

Prairie Guy said:


> A 3-year old car is almost exactly the same as a new car, the difference is negligible. A 10 or 12-year old clunker is entirely different, though.


. A 

Age has very little to do with it. It's more about the km's, how well it was maintained, where it was stored, how it was driven, etc. A 3 year old car with 60,000+ km on it is far from a new vehicle IMO. Maintenance and problems start around that point.


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## Longtimeago (Aug 8, 2018)

There really are various issues that this thread touches on and each is a topic in and of itself.

Regarding sensor maintenance, there really is little likelihood of that being a problem. Remember, you are talking about something that has no moving parts and basically either it works or it does not work. Most electronic products are put through a typically, 96 hour 'burn in'. Statistically, those that are going to fail will fail 99.9% of the time, in that time period. It does not eliminate the eventual failure rate after a 'normal lifetime' of use but it weeds out the defective, up front. It's called a 'bathtub curve'. The component starts out with a high failure rate that rapidly falls over time then goes through a long 'normal lifetime' time period before eventually you get to a rising 'old age' failure rate. So the curve looks like a bathtub. The only question then would be what can you expect in terms of the 'normal lifetime' and that certainly isn't anywhere near 3 years, more like 10 years plus. Basically, they either fail in the beginning or they work for a long time before eventual failure. So your concern re the sensors in cars beyond 3 years old, really is a dog that won't hunt.

In fact, it is the older technology that is more likely to fail rather than the newer digital technology. A windshield wiper motor for example is more likely to fail (moving parts) than the 'automatic rain sensor' that controls it. 

As for buying (meaning financing) vs. leasing from a mathematical/financial perspective, I view that differently perhaps than some people do. I have a hunch but feel free to disagree, that one of the reasons people lease is because they can't afford to buy. When I see cars today being advertised with 7-8 years financing, what that says to me is the automakers (it isn't the dealers who decide these things you know) realize that the payments that would be needed to own a car after 3 years (as was the norm in days gone by), are simply too high for the average car buyer. So they have gone to longer terms to keep payments affordable. Leasing payments are in line with that same guiding principle. 'You can't get people to pay more than they can afford to pay. But, you can stretch out the payment period to whatever is necessary.' Why do you think they advertise now for 'two week' payment periods. It is to keep the number they show you looking like you can afford it. In fact, a 2 week payment period lets them divide the annual total payment over 26 2 week periods instead of 12 1 month periods. It drops the number per payment, but not per year. It 'looks' better but in fact is not.

So leasing to be blunt, lets people 'drive' not 'own' a car that in fact they cannot afford to buy for cash. Financing a car over 7 years also allows people to 'drive' and eventually 'own' something worth very little after 7 years, that they cannot afford to buy for cash. Both are not an investment (unlike a house and mortgage), they are simply an expense.

Simple logic then should tell us that really, if we were going to be smart, we would only ever buy for cash. Paying interest on a depreciating asset makes no sense whatsoever. It is not as I said like a mortgage where you also pay interest but on an appreciating asset. So why don't we just buy what we can actually afford to pay cash for? 

Well, the answer to that of course has a lot to to with image and vanity etc. I notice a couple of people on this thread have already referred to 10+ year old cars as 'old clunkers'. What does that term really refer to? I drive a 2006 Kia. It has no rust, no dents, the paint is bright and shiny still, the interior looks as good as ever. In other words, it pretty much still looks 'as good as new'. Mechanically it is well maintained and reliable. No real issues there either. So why would anyone refer to it as an 'old clunker'? That is intended as a derogatory comment after all. In fact, the only thing that would make someone refer to that car as an 'old clunker' is its age. 'Old clunker' does not necessarily have anything to do with whether it is rusted out or won't start in the morning, etc. Things that might matter. It just doesn't fit the 'image' they want people to have of them. Instead, they want to drive a car on lease or long term financing that in fact they actually can't afford on their income but it gives off the right 'image'. Unfortunately, most people subscribe to the cultural norm in that regard.


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## Prairie Guy (Oct 30, 2018)

Synergy said:


> Age has very little to do with it. It's more about the km's, how well it was maintained, where it was stored, how it was driven, etc. A 3 year old car with 60,000+ km on it is far from a new vehicle IMO. Maintenance and problems start around that point.


I don't know what you're driving, but a 3 year old car with 60k is barely broken in. Most vehicles will easily go 150k with no problems.


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## Synergy (Mar 18, 2013)

Prairie Guy said:


> I don't know what you're driving, but a 3 year old car with 60k is barely broken in. Most vehicles will easily go 150k with no problems.


My point was that there will be a lot less maintenance and problem with vehicles that are 0-60,000 km than there would be with vehicles that have 60,000 - 120,000 km. Hard to argue that. After 60,000 km the brakes, rotors, tires, etc. start to get close to the end of their life. I've owned a variety of vehicles and always kept of log of every service, repair, etc. And, I've already mentioned up thread that purchasing generally makes the most financial sense for the average person. Leasing is a good option for some.


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## Mortgage u/w (Feb 6, 2014)

I still think car manufacturers are no longer building cars with longevity in mind - same as a home appliances. 

Car prices have shot up quite high. I'm convinced that the payment on a 3-4 year lease covers the total cost of the car. Taking back the car and reselling it is just extra gravy for the dealer and manufacturer. And I'm also convinced that the excess inventory which is not sold ends up in a scrap yard or sitting idle in a huge open lot. With so many new cars on the road, I cannot believe that the 3-4 year old lease returns all get re-sold. 

So whether you buy or lease, old or new, the consumers gets screwed no matter what.

Its no longer a question of which option is more frugal. The car industry has changed.


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## OptsyEagle (Nov 29, 2009)

Mortgage u/w said:


> With so many new cars on the road, I cannot believe that the 3-4 year old lease returns all get re-sold.


You believe that a 3-4 year old car, that is in good working condition, because if it was not the dealer would make you pay until it was, is worth only it's scrap metal.

Man, would I like to buy a car from you.


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## Mortgage u/w (Feb 6, 2014)

OptsyEagle said:


> You believe that a 3-4 year old car, that is in good working condition, because if it was not the dealer would make you pay until it was, is worth only it's scrap metal.
> 
> Man, would I like to buy a car from you.


I think you are misunderstanding my point.


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## Prairie Guy (Oct 30, 2018)

Synergy said:


> My point was that there will be a lot less maintenance and problem with vehicles that are 0-60,000 km than there would be with vehicles that have 60,000 - 120,000 km. Hard to argue that. After 60,000 km the brakes, rotors, tires, etc. start to get close to the end of their life. I've owned a variety of vehicles and always kept of log of every service, repair, etc. And, I've already mentioned up thread that purchasing generally makes the most financial sense for the average person. Leasing is a good option for some.


Of course there will be more maintenance after 60k to 120k...but the people who buy a car at 60k have let the previous owner take the 40% depreciation hit and the maintenance required up to 120k will only be a small portion of that.


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## nobleea (Oct 11, 2013)

Mortgage u/w said:


> I still think car manufacturers are no longer building cars with longevity in mind - same as a home appliances.
> 
> Car prices have shot up quite high. I'm convinced that the payment on a 3-4 year lease covers the total cost of the car. Taking back the car and reselling it is just extra gravy for the dealer and manufacturer. And I'm also convinced that the excess inventory which is not sold ends up in a scrap yard or sitting idle in a huge open lot. With so many new cars on the road, I cannot believe that the 3-4 year old lease returns all get re-sold.
> 
> ...


Absolutely all lease returns get sold. Whether it's through the primary dealership, or a wholesale, or at auction to a used car lot, or an individual.... I don't know what the percentages are, but I would think a lot of people buy the vehicle out at the end of the lease and either keep it themselves, or sell it as a private sale.

I think cars in general are lasting longer than ever before. And are more reliable. Used to be that an automatic transmission would be good for 100-160K max. Nowadays 250K+ isn't unheard of. 10 yr powertrain warranties? Any manufacturer would be crazy to offer that 20, 30 yrs ago. Now its pretty common.


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## ian (Jun 18, 2016)

I bought a new full load Camry in 1997. Drove it for 17 years. 435 plus kms on it. My son packed it in last year. Only one non mtce item in all that time. Had to replace the ignition key assembly.

Our 2006 Accord and our 2007 Solara are in fine shape. No plans to retire either. Their resale value may be low but their replacement value to us is high!

And if we did have to replace, the only stores that we would go into would be Honda/Acura or Toyota/Lexus.

I looked at leasing years ago when I was writing my car off for business. It was not advantageous from a tax perspective. I very much doubt that leasing would be advantageous without a write off of some sort.


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## Synergy (Mar 18, 2013)

Prairie Guy said:


> Of course there will be more maintenance after 60k to 120k...but the people who buy a car at 60k have let the previous owner take the 40% depreciation hit and the maintenance required up to 120k will only be a small portion of that.


No question, buying a used 3-4 yr old car is more economical. My point was that a 3 yr old car is not "almost exactly the same" as a new vehicle. Way off topic - my apologies to the OP....


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## OptsyEagle (Nov 29, 2009)

Mortgage u/w said:


> I think you are misunderstanding my point.


Then what was your point. What you said was wrong so what did you mean then. It seems to me that you are working very hard to try to justify buying a brand new car via a lease.

There is nothing wrong with saying:

"I know buying a brand new car is way more expensive then buying an older model but I don't like the hassle of repairs so I don't mind paying more, in advance, to avoid that. You have to spend your money on something and I have decided to spend it on that. I know a lease requires two appointments with salespeople who all intend to make a four figure commission from me, each time, but I don't mind because it is financially easier. I don't notice the money they are taking and hence why should it bother me."

Just be honest.


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## Mortgage u/w (Feb 6, 2014)

OptsyEagle said:


> Then what was your point. What you said was wrong so what did you mean then. It seems to me that you are working very hard to try to justify buying a brand new car via a lease.
> 
> There is nothing wrong with saying:
> 
> ...


I think I already admitted that leasing the the most expensive option. See my first post. 
Before jumping to conclusions, you should begin by understanding what may not be clear for you.

Where you are missing my point is that I see lots of new cars out on the road and less used cars. If the majority of people are leasing and trading in 3-4 years later, I don't see how the minority are picking them all up. It may be my illusion cause I have no facts. But you don't seem to have any facts either.

I know of an auction site where they have hundreds of thousands of cars sitting on a huge acreage - no exaggeration. They are all neatly parked in an organized fashion. We already know that dealers only keep a very small percentage of lease returns and the others end up here. And I'm pretty sure there are tons of other auction lots just like this one. 

If all the lease returns are indeed being resold, how efficiently can such huge inventory be turned over?


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## Longtimeago (Aug 8, 2018)

Prairie Guy said:


> Of course there will be more maintenance after 60k to 120k...but the people who buy a car at 60k have let the previous owner take the 40% depreciation hit and the maintenance required up to 120k will only be a small portion of that.


Absolutely right. My 2006 now has around 240k on it. As it happens, I was talking to my local garage guy who services it and saying I had been thinking of buying something newer but had no real justification for doing so. He looked up on his computer, just how much I had spent on it over the last decade and the average was $800 a year. That includes 2 timing belts (required every 100k) which ran $1000 per time. 

If you take a used, paid for vehicle and can maintain it for $800 per year, I don't see how anyone can try to suggest that buying or leasing a new one every 3 years is going to result in you spending less per year to run a car. If we consider a 12 year timespan (of a 3 year old vehicle to begin with) which is not difficult to get out of a vehicle these days, it would look something like this:

Year one purchase of a 3 year old used vehicle $20k.
Year 2 through 12, $800 x 11 = $8800
Total cost for 12 years, $28,800
Cost per year, $28,800/12 = $2,400

That's $200 per month. What kind of car does $200 per month let you lease or purchase new AND drive for 12 years without spending any more money? Buying or leasing a new car never makes the most financial sense over the longer term. Buying used for cash and maintaining the vehicle properly always makes more sense FINANCIALLY. As I said earlier on this thread, it isn't about financial sense, it's about image and that's what keeps people buying over and over again.

By the way Synergy, maybe you should consider what people are saying about 'domestic' vs. 'foreign' vehicles and the difference in quality and reliability. Your F150 experience may well have led you to believe maintenance costs over 60K would be a big factor if you kept a vehicle but in fact, your sample size is not only too small, it is based on a vehicle that has never been known for quality and reliability. 

Almost every 3-4 year or older Ford, Chevy and Dodge pickup truck you see has rust around the rear wheel wells. Take a look in a supermarket parking lot next time you are in one. I just had my KIA vehicle in for a manufacturer's recall. What did they do? They undercoated all the frame and also sprayed in all the cavities. Why? I guess because they weren't happy with some vehicles which must have had an issue. Now wait for it Synergy, they were doing this on my near 13 year old KIA. When is the last time you heard of Ford recalling F150s to spray rust protection because they weren't happy with how soon some were rusting? LOL


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## OptsyEagle (Nov 29, 2009)

Mortgage u/w said:


> I think I already admitted that leasing the the most expensive option. See my first post.
> Before jumping to conclusions, you should begin by understanding what may not be clear for you.
> 
> Where you are missing my point is that I see lots of new cars out on the road and less used cars. If the majority of people are leasing and trading in 3-4 years later, I don't see how the minority are picking them all up. It may be my illusion cause I have no facts. But you don't seem to have any facts either.
> ...



There's knowledge and there is common sense. Since I don't have the former, I am using the later.

As I said, a 3 -4 year old car, in fairly good condition, is worth a lot more then its scrap value. That worth is entirely in its ability to take a person and their stuff, from point a to point b, using our roads. If you are not noticing these cars, I believe it is because they are in such good condition, after 3 or 4 years of use, that they look almost brand new...and they do.

When a person decides to lease a new car every 3 or 4 years, what they are actually saying is that they find the benefit of driving the most up to date car and not dealing with as many repair issues, is worth paying almost twice for that privilege. Leasing makes it appear that the cost is not that high, but it is, especially with the increased cost paid to deal with the many trips to the dealership the lease requires.

That is my point. There is no wrong answer, just individual answers.


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## Prairie Guy (Oct 30, 2018)

OptsyEagle said:


> As I said, a 3 -4 year old car, in fairly good condition, is worth a lot more then its scrap value. That worth is entirely in its ability to take a person and their stuff, from point a to point b, using our roads. If you are not noticing these cars, I believe it is because they are in such good condition, after 3 or 4 years of use, that they look almost brand new...and they do.


Also, depending on when model changes were made, a 2015 may be virtually indistinguishable from a 2018 model as they can have the exact same body. There is no way of telling just by looking at it.


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## nobleea (Oct 11, 2013)

Longtimeago said:


> If you take a used, paid for vehicle and can maintain it for $800 per year, I don't see how anyone can try to suggest that buying or leasing a new one every 3 years is going to result in you spending less per year to run a car. If we consider a 12 year timespan (of a 3 year old vehicle to begin with) which is not difficult to get out of a vehicle these days, it would look something like this:
> 
> Year one purchase of a 3 year old used vehicle $20k.
> Year 2 through 12, $800 x 11 = $8800
> ...


You need to include depreciation in that calculation as well as that is a true cost of owning. A 20K used car might be worth...4K after 12 years? So that's an extra $111/mo in depreciation costs. So now you're at $311/mo in total costs. One could also include the lost opportunity costs of having the initial $20K tied up rather than investing. If you did, that would probably add another $20 in monthly 'costs'. What's the monthly lease on a car that would sell for $20K used after 3 years? That's probably a 32-33K car new. A monthly lease with $0 down is probably going to be around $400/mo. So it's about $60/mo extra to lease compared to buying used. Obviously many people say that's worth it to have a car that is, on average, only 18 months old, on full warranty with the latest gadgets. They're not driving a 10yr old car, and if they have a business, the full monthly cost can be written off (depending on personal use). Of course, you'll have things like oil changes and windshield repairs that are required regardless of the ownership method. And $60/mo is still $60. But in terms of 'throwing money away', the two options are not that different.


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## m3s (Apr 3, 2010)

With a given budget, I can pretty much always find a better deal used

Especially if you know what models are good deals used. For example luxury cars that are bought by people who tend to always upgrade to new are a steal used

Leasing is paying for convenience of laziness and lack of car knowledge


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## Mukhang pera (Feb 26, 2016)

nobleea said:


> You need to include depreciation in that calculation as well as that is a true cost of owning. A 20K used car might be worth...4K after 12 years? So that's an extra $111/mo in depreciation costs. So now you're at $311/mo in total costs.


If you say the total cost for 12 years was the price of the car ($20,000) plus repair costs of $8,800, for a total of $28,800, it seems to me that depreciation has been taken into account. The calculation offered suggests the car has been written down to $0 after 12 years. Or is there some depreciation factor I am missing?


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## Mortgage u/w (Feb 6, 2014)

m3s said:


> Leasing is paying for convenience of laziness and lack of car knowledge


That's quite a bold statement. Care to elaborate on how you determined that people who lease have a 'lack of car knowledge'?


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## nobleea (Oct 11, 2013)

Mukhang pera said:


> If you say the total cost for 12 years was the price of the car ($20,000) plus repair costs of $8,800, for a total of $28,800, it seems to me that depreciation has been taken into account. The calculation offered suggests the car has been written down to $0 after 12 years. Or is there some depreciation factor I am missing?


Ah, right you are. I missed the addition of the capital cost.
So then it would be a $150-180/mo net cost difference.


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## m3s (Apr 3, 2010)

Mortgage u/w said:


> That's quite a bold statement. Care to elaborate on how you determined that people who lease have a 'lack of car knowledge'?


To get a decent deal used you need to do some due diligence and research like anything. Leasing is paying for the convenience of not having to know anything, because it's not your problem

I don't see why someone with car knowledge would lease. There's so many good deals out there on used cars, especially higher end comparable to leases

Basically given the same amount of money, you get a better car buying. With some knowledge of parts, you can easily make it even better


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## Mortgage u/w (Feb 6, 2014)

m3s said:


> To get a decent deal used you need to do some due diligence and research like anything. Leasing is paying for the convenience of not having to know anything, because it's not your problem
> 
> I don't see why someone with car knowledge would lease. There's so many good deals out there on used cars, especially higher end comparable to leases
> 
> Basically given the same amount of money, you get a better car buying. With some knowledge of parts, you can easily make it even better


I get what you're saying. But you can't stereotype by saying people who lease have no knowledge of cars. Does eating out make all people less knowledgeable on cooking? Maybe, getting "a deal" is not really a priority for everyone - it doesn't always have to be about saving money and getting the best deal.

The point of this thread is not to argument which option is cheaper - I think we all agree that buying used and holding on to it long term is the most frugal option, when comparing dollar-for-dollar.


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## Synergy (Mar 18, 2013)

^ Aren't you glad you started this thread! Good luck...


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## Longtimeago (Aug 8, 2018)

nobleea said:


> Ah, right you are. I missed the addition of the capital cost.
> So then it would be a $150-180/mo net cost difference.


You have just shown how the automotive industry sells you on buying a new car nobleea. You say, 'it would be a $150-180 net cost difference.' That's true and it may not seem like much in the greater scheme of your life, but it is also true that it is a $150-180 x 12 x 12 difference over the 12 year term. THAT is a difference of $21,600 to $25,920 !!!! 

You also mentioned depreciation and what it costs (even though I had covered it) but let me ask you to now think about the opposite in a sense. If you are spending $150-180 per month more than in my example, you can see what it means in lost capital but what about the 'lost income'? If you invested $150-180 per month at 3%, for 12 years, just how much income would that generate on top of the $21-25k capital gain? 

If you started with $150 at 3% monthly interest and continued to deposit $150 every month for 12 years, instead of just the $21,600 capital growth, you would end up with $26,242 thanks to compound interest. If you started with $180 it would end up at $31,490. https://www.nerdwallet.com/banking/calculator/compound-interest-calculator

Now tell me nobleaa. Does having that spot on your new car centre console where you can just sit your smart phone and have it charge, rather than my having to plug my phone in to the cigar lighter socket to charge it, justify paying/LOSING $31,490 ?

As I have said, buying or leasing a new car cannot be financially justified vs. a used car. Not if the objective is simply safe, reliable transportation. Buying or leasing a new car is not about making the right financial decision, it is about IMAGE. At the end of 12 years, I am up $31,490 while you have enjoyed 12 years of projecting the image you want to project. 

I'm not trying to bash anyone who just wants to drive a new car and doesn't care if it doesn't make sense financially. I can't get my own son to not do just that. He buys a new car for cash every couple of years and what's worse, he buys 'domestic' brands. But it's his money and he can spend it as he wishes. All I am saying is no one should attempt to justify buying or leasing a new car on financial grounds. It simply isn't financially justifiable.

For 15 or so years, I was driving as my everyday driver, a classic car. Classic cars can in fact actually be an investment rather than a depreciating asset. Of 3 I owned and drove as my everyday driver, I made money on one and lost nothing on the other two when I sold them. So you can make a case financially for driving one AND you can have the 'image' you might want. You just can't expect there to be a spot for your smartphone on the console. LOL

So instead of losing $31,490 driving a new car for 'image' why not consider something like say a Porsche classic like this one:
https://www.kijiji.ca/v-classic-cars/moncton/porsche928/1388634261?enableSearchNavigationFlag=true

Now plug that $22,800 into our calculations above and come out with both image and $31k in your pocket at the end of 12 years, PLUS the possible appreciation of the car in the classic car market on top of that. Or do the math if you started with this one for $8k. https://www.kijiji.ca/v-classic-car...al/1400927972?enableSearchNavigationFlag=true

The only problems with driving a classic car as your everyday driver are reliability and service (finding a good mechanic that can work on them). It's like a thoroughbred racehorse vs. a farm horse that pulls a plough. The one takes more care than the other. LOL But the point is you can have 'image' and have it make financial sense with a classic. It does take a more knowledgeable buyer though as m3s tried to explain in saying why buying or leasing new can appeal to buyers with 'a lack of car knowledge.'


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## ian (Jun 18, 2016)

When I was looking at lease vs buy I sought advice from the acct. I wrote off part of my car. Depreciation expense, interest expense if any, right down to car washes. As I recall part of the analysis was based on financial and partly based on my car buying habits/lifestyle. Turned out that buying was the better after tax option in years 2 forward (only 15 percent depreciation in year 1 for tax purposes) for me. The guy next door could have a different result.

When given a choice between a company provided lease car, with standby/personal use tax adders, or my own vehicle with monthly allowance and mileage reimbursement proved more advantageous from an after tax persspective for me to provide my own vehicle and write it off. Part of that decision was my personal taste in vehicles and how long I kept them or at least moved them over to my spouse after they were written down by a fair amount.

I bought a car for my spouse part way through a lease that a friend had. After doing the NPV of the payment stream and buyout it was more advantageous to assume the lease and buy it out 18 months later than it was to buy a similar vehicle on the lot. Plus I knew the history.

I do not know if there is a hard rule of thumb. It really comes down to both a financial decision and a lifestyle decision. My former boss turned two cars over on lease every three or four years. It was a personal preference. It may not have been a wise choice financially for many people but for him, their lifestyle, and their financial situation it was just fine. They were well aware of the financial options/consequences and made their decision accordingly.

One thing is for certain...I would not blindly go into a lease without a clear understanding of the T's and C's. Especially any km caps/surcharges as compared to my projected kms. Signing off without reading and understanding the t's and c's is a recipe for disaster.


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## doctrine (Sep 30, 2011)

Does anyone have personal stories, good or bad, on being hit with repairs or costs at the end of a lease that were significant? I think this is the biggest unknown in the equation of lease vs buy new.


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## Synergy (Mar 18, 2013)

doctrine said:


> Does anyone have personal stories, good or bad, on being hit with repairs or costs at the end of a lease that were significant? I think this is the biggest unknown in the equation of lease vs buy new.


Yes, this is a big risk with leasing. I've had a few friends get burnt at the end of their lease - not surprising IMO - too many km's, not taking good car of their cars, etc.. Other than my corporate / business vehicle I've always purchased 3+ yr old vehicles, did the majority of the maintenance and repairs myself and sold them privately after 3-4 yrs. Worked out well for me but I'm becoming a little less frugal as I get older. We did have one lease in the family many years ago - Toyota Rav4. Turned out very well for us. We where very low on km so we did a road trip out west before giving it back to the dealership.


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## OptsyEagle (Nov 29, 2009)

If you are forced to go to the dealer twice, then expect to pay twice in commissions. They intend to make money when you buy the car and when you return it, when you utilize the lease option. There is very little you can do to avoid this.

Most people do not have night sweats about that process because the dealers will attempt to make the scam go away, if you buy another car from them. Obviously the dealer just buries the second profit/commission into the new car lease and relishes in the fact that they get to do this to you again. Probably for the rest of your life.

Remember you are obligated to return the car "in good condition". What does that really mean? It's open for interpretation and more their interpretation then yours. They have you contractually bent over and they have no morals. This is simply business to them. Their main attempt is to get you motivated to buy another car, under lease. In that new lease they can steal the money they want easier then with the "car in good condition" scam and they ensure they get to do this to you again at the end of this new lease.

Understanding what they do and how they do it can save you some money but it creates a major amount of aggravation. Ignorance is bliss when it comes to leasing. The cost of $1,000 poke at you is maybe $20 a month in a lease payment that is probably in the plus $500 range anyway. Plus they feel better thinking they helped you out with your problem then just creating one for you, as they will at the start of this return process. Maybe you will even send them a referral.

Your other option is to buy out the lease. They will try to cheat you there as well. If you ask a bank how much you owed on a 4 year loan that you have paid installments on for 9 months, they would give you a number that would be exact to the penny. If they didn't, they would need to hire 11 people to run around the bank and find out where that error has taken place, in their accounts. Car dealerships are not banks. They know the number you owe. Whether at the end of the lease or somewhere before that, but they do not always feel it necessary to give you that number.

I leased once in my life and decided to go the route of buying out the lease at the end. I knew the exact number I owed. It was around $14,300 or so. They came back at $15,990 something or other. So I had to ask them to break it down. They made 5 errors, ALL in their favour that I had to correct. Every time I pointed out each error the guy would get mad and say, "I have been in the lease business for over 20 years", like that was supposed to prove that 2+2 = 5, and that I must somehow be the one that is wrong. They even continued to debit my bank account another lease payment, after I bought it out, that I had to go after them again, to get back. This is what a car dealership calls "another day at the office". Stealing is so routine they don't even call it stealing anymore. It's just business. Don't assume anything they say or show you is correct. I got my buyout at the number I originally had before I even called them but it took probably 3 or 4 aggravating days for a process that should have taken an hour. 

Anyway, the point here is that were trying to steal money even during a simple buyout at the end of the lease. I always wondered how they would adjust their books, after that theft, if they had of succeeded. Obviously the dealership's owner must condone this behaviour, because they would be in charge of those books. One or two others would be involved as well. Some of the others may not know why these adjustments are being made but the owner and the guy I was dealing with certainly would.


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## ian (Jun 18, 2016)

Leasing is a business. The big risk to the business is post lease residual value. From time to time they back a bath. A number of years ago Ford took a huge bath on their leases. It was so serious that they opened company stores in the US to dump the inventory and to reduce the red ink. Mostly Taurus I believe. In an effort to reduce the monthly they increased the residual. 

There are some cars, according to an acquaintance who managed a well known leasing firm, that the leasing companies do not want to touch because the residual/auction value is questionable. One year I had a Lincoln as a company car. He told me that the leasing companies were taking a bath on those leases because the vehicle depreciated much faster than anticipated. They were major lemons. Some people who unwittingly decide to by 'junk' end up winning with leases simply because the vehicles depreciate at a much faster rate than anticipated. Hence the trade in value/resale value is awful.


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## ian (Jun 18, 2016)

Five years ago I was looking at sales inventory for a very large leasing company. The exec was a friend of mine and brought up a list of the inventory in Western Canada.

I showed interest in one vehicle that happened to be at their Vancouver site. My friend called the Vancouver office for info prior to having the vehicle moved to Calgary. He immediately told me to forget about it. The car, a high end import, had been leased to the RCMP undercover drug folks. His comments....you definitely don't want that one.

If you do not know where the vehicle has been it is the standard buyer beware.


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