The board has had multiple threads on this topic, but I haven’t seen one in awhile, so I’d like to ask whether opinions have changed.
Background: I don’t have a car at the moment–the last one met its death in a freak accident, and because I still owed money on it the total loss settlement was less than I would have hoped. My city doesn’t have good public transit, and I need wheels, but I have a relatively short commute and don’t take lots of long trips, so maybe 10-12K miles a year. Finances are really tight right now, and may or may not be better in a few years. I am not utterly lacking in mechanical ability, but I’m no expert and I don’t enjoy working on cars.
In my price range, the options I am considering are:
Lease a brand-new Toyota Corolla / Honda Civic / Hyundai Elantra / similar for three years; or
Finance the purchase of a used model of something similar, probably in the 5- to 8-year-old range with ~75-100,000 miles; or
Buy a cheap used car for cash, which likely means a 15-year-old car with ~200K miles.
Option 3 I have pretty much ruled out, because I can’t afford big repair bills. I have never before really considered leasing, thinking it suitable only for people who had to have a new vehicle every two years, but now I’m leaning towards it.
My reasoning is that the best vehicle I could afford to buy right now would already have some age on it, and by the time I was finished with car payments I’d have a car around 10-12 years old and with enough mileage that expensive repairs might not be too far away. On the other hand, by leasing a new vehicle I’d have a fixed and predictable transportation expense. Depending on how the next few years go, I might be in a position to buy the car at the end of the lease, and I’d know exactly all of its quirks and how it had been driven. Exceeding the mileage limits of the lease probably wouldn’t happen, and wouldn’t matter anyway if I bought the car.
Is my reasoning sound, or am I overlooking something obvious?
If you lease a car, you’ll never pay own it, whether it is in terrible or perfect condition.
In general, cars are so much more reliable today that a car with 100,000 miles on it is not something that I automatically chalk up to needing a lot of expensive repairs. Yes, there may be some things that need to be done that can be costly, like replacing a timing belt or something.
But if you spend, say $7,000 on a used car, odds are quite good that you can use it for the next five years or more, and maybe you spend another couple thousand on repairs - maybe. If you were to lease a car, the cost of ownership is going to be at least $12,000 for a $200 a month lease for the same period of time.
In my part of the world, though, I’m not going to be spending only $7K. A five- or six-year-old Corolla is running at least $8K from a private party, and more like $10-11K from a dealer (those are sale prices–sticker prices are even higher). There’s a 2010 Civic coupe on Craigslist from a private seller–it’s got a rebuilt salvage title and he still wants $7900, and has a pretty good chance of getting it.
Say I spend $9K on the car and $2K on repairs, compared to $159/mo. to lease a new car (the current Toyota offer). At the end of five years, I’ve spend $11K to own, versus $10K to lease. Sure, with the purchase I would end up owning the car, but by then it’s an older car with a lot more miles and a lot lower trade-in or resale value.
If the car doesn’t need many repairs, of course, I’d be ahead to buy. If the car ends up needing something expensive, though, while on its way to 150,000 miles I’d be in deep trouble.
I haven’t shopped for cars recently, but I’d suggest you look at something other than Toyota and Honda. They are usually very reliable, true, but the reputation for reliability is so strong that they command a significant price premium. Meanwhile there are many other similarly reliable cars that don’t have such a strong reputation. I can’t give any specific suggestions for small, reliable, 2008-2010 cars, but Consumer Reports periodically puts out a list of used cars that are good choices for value and reliability.
Sounds like the lease is best for you. You can get more car for the money, and have no worries about repairs. And the option of buying it at the end of the term, or walking away. Win-win.
I’d really only consider the lease if you are 100% absolutely breakdown averse (or being seen in a not-quite-brand-new car averse) which it doesn’t sound like is the case. Buying a cheap used car in the 100k mile-ish range is going to be the point where you might start getting niggling little things like alternators and batteries dying. Those don’t really add much to the overall cost of ownership, so if you’re not going to get fired for being late to work once or twice a year who cares? Your total payments are probably going to be about the same as for a 3 year lease, but at the end you’ve got a car worth several thousand dollars versus shit-nothing after the lease.
A lease is almost certainly the *least *economically efficient thing to do.
It is simple. It is predictable. And it is expensive because you’re paying for those two features.
Another vote that Toyota and Honda are now premium-priced for what you get. Their late model used cars are extra-especially premium-priced versus what you get. If money is tight I’d no more recommend a Toyota / Honda than I’d recommend a Jaguar.
After thinking a little more about the last time I shopped for cars I decided to throw some half-ass suggestions at you:
The 2008-2010 Ford Focus should be a very reliable choice. Those years were the end of that generation and were at the end of a period where Ford managed to seriously increase their reliability. Though it is a rather boring car and you probably want to skip the goofy Sync infotainment thingumy.
I recall that the Hyundai Elantra also had good reliability, though I’m a little less sure about which model years are best.
I’m less enamored of the Mazda3 since I’ve had some obnoxiously expensive repairs recently, but that’s no substitute for you looking up actual reliability data.
Any of those will cost $1000-$2000 less than a Honda or Toyota of comparable age and mileage.
What I am adverse to is repair bills. My last car was a 7-year-old, 80K mile Hyundai when I bought it; as noted, it died an unnatural death before I’d finished paying it off, and although I waved goodbye to the car last month, I will be paying the bills for earlier repairs for some time to come. (It turns out I am not good at picking solid used cars.)
That’s the real appeal of a lease to me: the security, the insurance of knowing repairs are Somebody Else’s Problem. If I buy a “good” used car that turns out to need something big, I’m dead in the water. Being late for work once or twice is no big deal, but a series of unfortunate events have left me financially precarious, and another $2500 bill to the transmission shop is just not something I can absorb readily.
Personally, I’d rather own than rent, and I’d rather spend less than have a fancy car with bells and whistles, or a famous marque on it. I started this search looking for something to buy, and have come around to looking at leasing only because I’ve been so disappointed/disgusted at what’s for sale.
Re-reading what I write, I can’t decide whether I sound like I’m trying to talk myself into something.
I wonder where you got the idea that leases include cost-free maintenance. They don’t. Yes, some stuff is included because the car is new and still under warrantee.
But there are still lots of ways for you to get a big bill for something expensive. For sure if you crash it or someone crashes into it there’ll be a big bill with your name on it.
With a Toyota lease, e.g., the first few oil changes and whatnot are all included in the purchase price, and the lease expires at the same time as the bumper-to-bumper warranty. What kinds of expensive repairs could it need that would NOT be covered by warranty or insurance?
Sure, an accident could be very expensive, which is why I have good insurance and gap coverage. I’m talking about engines, transmissions, water pumps, electronics, … – all of the stuff that can simply go wrong.
Thanks for the suggestions. I really liked the Hyundai I used to own, although I can’t say its reliability was all that great. Mazdas I just haven’t seen very many of locally, so it hasn’t really been on my radar. I know some people who really like the Focus, so I have been watching for a good one of those. (When I test-drove an '08 Focus a few weeks ago, the sunvisor whacked me in the head and then landed in my lap while I was driving–the salesman said, “oh, it does that sometimes” as he tried to reinstall it while I was still driving. :smack: Not a dealer to whom I shall return. )
Before you make your decision, I’d advise you to check with your insurance company - the liability on a leased vehicle can be much more expensive than on an owned one, since you’re insuring to protect the leasing company’s interests as well as your own. Maybe that’s changed since my mom leased a car in the 90’s, but it’s something to check into.
Ask yourself what the car dealers are pushing, leasing or buying?
If they want you to lease, the dealers are making more money off of you by having you lease the car from them. If the dealers made more money when you bought the car from them, they would be trying to get you to buy.
Car dealers always want to maximize profit. (Not that there is anything wrong with that.)
Oh, I get that part. They’re pushing leasing, which means they make more money that way. It’s a lot better for them if I lease.
What I have to decide is what’s better for me. If I buy an older car and have only modest repairs, I’m much MUCH better off to buy. The problem comes if I buy an older car and then have an expensive repair. I’ve had too many things go wrong over the past few years–medical bills, home repairs, blah, blah, blah. If the car needed a big repair at a bad time, I might not be able to pay the bill. What then? If I’m late to work once or twice nobody cares, but if the car is parked in the driveway for weeks because I can’t come up with the money to make it go, things will get ugly fairly quickly.
That’s a worst-case scenario, I realize, and I have a bad tendency to imagine worst cases as more common than they are, which is in part why I’m seeking countervailing opinions. A lot of people find good solid used cars. I bought a Hyundai last time because I thought it would be really reliable without the Toyota/Honda markup, and I was wrong. I can’t afford too many more mistakes like that.
My own concerns about buying a used car have to do with how well the previous owner(s) maintained it. If they can show you records for regular oil changes and such, that’s great. Also, how did they drive - some people are a lot harder on cars than others.
And speaking as a Hyundai owner, we just did the 95K mile oil change and we haven’t had any non-routine maintenance issues at all. According to our car guys, a while back, Hyundai had a bad reputation for reliability, but they’ve gotten lots better. Chances are when we decide to replace this one, it’ll be with another Hyundai. YMMV, of course.
I would add to this-buy a used car with as few options as possible-a base model will be much more reliable, and hand cranked windows don’t break. also, avoid Toyota and Honda-you can but just as good a car (of another make) for much less.
You need a loan and can’t get the loan any other way. (no withdraw from home mortage, no personal loan with someone else - their home - as guarantor … )
You are worried about moving … there’s a good chance you need to sell the vehicle, eg due to work moving you or your PR visa coming through, or your overseas parent is about to die, or something.
There’s a third case where there is a tax benefit in the vehicle being under lease and therefore a company asset and therefore a business expense, and all the servicing and repairs are tax deductions… (well don’t about about why they are a tax deduction, just that the lease was required to get that…) But basically the lease interest rates would require that the vehicle do more miles than a long distance air liner … in a year… to get the benefit… basically doesn’t happen.
I see this all the time on car forums and I just don’t get it. I’m driving a 1997 Dodge Dakota with 200k, almost exactly what you cite. It cost me two grand, insurance is $50/month (liability), it runs fine. If, instead, I’d bought something newer with fewer miles, I’d be paying say $250/month for 3 or 4 years, plus full coverage insurance, and still deal with any repairs or maintenance that comes along. Over 3 years, I’d pay $9000 for the car, let’s say an extra $1500 for insurance (another $500 a year) and nothing goes wrong with it. There’s literally nothing that could go wrong with my Dodge Dakota that would make spending an additional $8500 sensible. I could replace the engine, transmission and all four tires and not get there. I could replace the vehicle itself for less! I could get a second one to drive if this one breaks down and still come out ahead. Unless your used car is a Maserati Quattroporte, Audi S8, or BMW 7-series, I don’t think these repair bill worries are reasonable if you avoid a dealership (where no one should go unless their car is under warranty).
There can be good reasons for avoiding a high-mileage beater - safety features improve, fuel economy has gotten better, emissions, but there’s a reason the frugal just cycle thru old cars rather than buying newer ones. They really are economical, even among horror stories of $1000 repair bills (four car payments). The real issue is the money saved on them is typically spent on something else, rather than set aside for possible repairs. Traditionally, I’ve kept two grand set aside for repairs (why? it’s the amount BMW wanted for an extended warranty on a used 325i I bought ten years ago). I’ve owned five used cars since then counting my truck and never touched it. Of course, if I ever do spend it…
One of the things I like about current late model cars are some of the safety bells and whistles. There are three things on my current car that I will not be without in any subsequent car; blind spot monitor, rear camera coupled with cross traffic monitor, and forward obstruction warning. I also really like the radar controlled cruise control, must it is not a must have. If you get an older model car, it will be less likely to have these.
Now I am getting a bit older (65), so these may be more important to me than you, but once one of these has saved you from an accident (or even a near accident) you will likely feel the same way. I wish they were standard on all cars.
