Car purchase vs lease

[slash2k]

@epbrown01

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…

Maybe I’ve just had extraordinarily bad luck with cars. I’ve spent rather more than two grand in the past year, and probably well north of twelve grand in the last decade, trying to keep older cars going. Transmission, ball joints, struts, tie rod ends, alternators, water pumps, some more struts. a drag link or three, another transmission, and on and on and on. (And no, I never go to the dealer unless it’s a dealer-only part or I think I can talk them into coverage under warranty.)

For example, I put some serious (for me) money into front end work on an older Taurus. Then the car got rear-ended at a stoplight and totalled. Sure, the other guy’s insurance had to pay out. On an older, high-mileage vehicle, however, they didn’t have to pay very much. With receipts for the recent work, I argued them up some from their initial offer, but by nowhere near enough, and they knew that I couldn’t afford to take them to court over $500 or however far we were apart, nor could I afford a long drawn-out argument. I had to take the money they offered and get a replacement quickly so I could get to work.

See, I think that illustrates that you, epbrown01, are looking at this from the perspective of somebody who always has ready access to money, rather than from the perspective of somebody in financial straits. For example, if you’ve got liability only, what happens if you run into a deer out on the highway some night, or you get storm damage, or you have an at-fault accident? If you’ve got enough money sitting around in another account to be able to just go out and buy another vehicle, I’m happy for you, but if you walk away from the Dakota and use your "repair’ fund to buy another cheapie, what are you going to do if the new one needs a tranny or a front end, or gets stolen, before you’ve had time to build up a reserve again?

A decade ago, I had a fully-paid-for older vehicle and a healthy repair reserve. One at-fault accident and a few episodes of bad luck later, I have no vehicle, only a modest reserve, and bills I’m still paying on a vehicle I no longer own. Sure, I can spend my reserve paying cash for another car, but it will take many months to build a reserve again, and based on my personal experience, there is a very good chance I will have a big repair bill before that is achieved. I need to break the cycle.

(If you want to know why I spend so much on front-end & suspension repairs, see part of my daily commute. Beautiful, scenic, and hasn’t had a lick of repairs since the google van went through more than two years ago.)

[GreasyJack]

@slash2k

Maybe I’ve just had extraordinarily bad luck with cars. I’ve spent rather more than two grand in the past year, and probably well north of twelve grand in the last decade, trying to keep older cars going. Transmission, ball joints, struts, tie rod ends, alternators, water pumps, some more struts. a drag link or three, another transmission, and on and on and on. (And no, I never go to the dealer unless it’s a dealer-only part or I think I can talk them into coverage under warranty.)

Honestly, yeah, it does just sound like you’ve had some bad luck. Things like alternators and struts are things you’d expect to replace on an older used car, but barring some sort of abuse transmission failures are just plain bad luck.

Another option that I’m kind of loathe to suggest is you could do option #2 but buy the car from someplace like CarMax that’ll sell you an extended warranty on it. Extended warranties usually aren’t great bets financially (and plus you’re already paying more for the car at someplace like CarMax), but if you want a car with a good relatively long warranty that’s probably the cheapest way to do it.

[epbrown01]

@slash2k

See, I think that illustrates that you, epbrown01, are looking at this from the perspective of somebody who always has ready access to money, rather than from the perspective of somebody in financial straits. For example, if you’ve got liability only, what happens if you run into a deer out on the highway some night, or you get storm damage, or you have an at-fault accident? If you’ve got enough money sitting around in another account to be able to just go out and buy another vehicle, I’m happy for you, but if you walk away from the Dakota and use your "repair’ fund to buy another cheapie, what are you going to do if the new one needs a tranny or a front end, or gets stolen, before you’ve had time to build up a reserve again

I’ll concede it’s not an option for most folks for various reasons, but if something happened to the Dakota tomorrow I’d spend some of the reserve on something cheap with two wheels, likely an old motorcycle, in truly dire straits an old scooter. I rode a
$700 1978 Honda CB400T for two years, year round, in Chicago before I moved to Ky got the truck. So I’d ride until I had money for a replacement and rebuilt my reserve. (Or, based on my current actual situation, I’d sell my CBR600RR and get a cheap bike I could ride year round -damn, the CBR sucks when it’s icy out! - and still have money left for something nonriders would call sensible.)

I’ll admit I’ve probably been as lucky as you’ve been unlucky. I drove a Porsche 928S for years without a lick of trouble and most people consider those ticking time bombs. Before that I had a Porsche 944 with 150k on it, no problems. But it’s not just me - my brother is driving a '95 Accord with 290k that hasn’t missed a beat, and for the last year it’s had front-end damage from a hit and run he never fixed.

Still, I’ve got the same issue as before. Okay, something happens to my truck and I use my reserve to get anothe truck and something happens to that, too. if I can’t afford another beater, where am I getting the money for a nicer car and the full coverage insurance that will protect me if something happens to that?

[Beelzebubba]

If you qualify for a special lease offer (which usually requires a FICO score of at least 700+), leasing a car like a Honda Civic can be a great deal. For example, you can lease a 2015 Civic LX 4-door for $0 down, $0 due at lease signing and payments of $210/month for 38-months (39-month lease). That includes 12k miles per year.

Honda is one of the few companies that offer $0 Down leases. You want to minimize the down payment (technically called the ‘Cap Cost Reduction’ in lease-talk) on any lease. If you put down $3000 on a lease and the car was ‘totaled’ the next day, you’d be out $3000. The required (and very useful) GAP insurance would pay off the lease balance, but you won’t recover a down payment.

Mazda is also offering $0 down/$0 due at signing leases. A 2016 Mazda3 i Sport 4-door is only $209/month for 39-months. A mid-size 2016 Mazda6 i Sport 4-door is only $239/month for the same term. Both allow 10k miles/year and require no money up front.

[Really_Not_All_That_Bright]

If you’re going to be doing more than 10,000 miles a year, leasing is probably not for you. The excess mileage charges can be a killer (though typically the yearly maximum is 12,000).