New Car - Lease or Buy?

I’m sure this has been done a hundred times here, but I figured what’s once more between friends?

My old POS car is on it’s last legs and now that I’ve started a new job and have a 25 mile commute each way every day it’s time to start thinking about a replacement ride. I live in the city and parking is an issue, and when I’m not commuting to work I use my car sparingly.

I’m looking to spend between $20 and $30k and want something reasonably nice. There isn’t a car on the market right now that really excites me so I’m feeling a little lost on what to buy. A new Focus or Cruze would probably be the practical choice but that doesn’t excite me at all. If I’m going to plop down $23k for a new car I’d like to be a bit more enthusiastic about it and I’d like it to be something that won’t be a dime a dozen in a couple years.

I have a big chunk of change to put down, but obviously the less I spend the better.

In my shopping the car that’s got me the most interested is the Audi A4. New it’s simply too expensive but I can get a 2009/2010 for just under $30. That’s pushing it on the price, something closer to $25k would be more comfortable, especially for used.

That got me to thinking, is it really wise to buy a new car? Would it be smarter to lease? Pretty much everything I’ve heard says that leasing is a terrible choice, and up until now I’ve kept cars until they die. My current POS is 13 years old and I’ve owned it for 11 of those years. Dollar for dollar, that’s the best value, but I’m also a little less sure of what my circumstance will be 2 years from now. There’s a 50-50 chance that next summer my new company will relocate downtown eliminating my commute altogether.

Should I consider leasing? Is it a waste of money? Is a 50 mile commute 5 days a week going to be too many miles to tolerate for a lease? What factors should I consider?

It’s a pretty open ended question and I probably need to narrow down what I want, but I figure this is a good place to start. Hit me with ideas.

I have been thinking about the same thing. I was leaning toward leasing, since I suspect there may reasonably priced electric cars on the market in 5 years on so, I don’t wan’t to commit to driving my next car for over 12 years like my current car.

That’s over 12,000 miles in one year. Assuming a 30k mileage cap over 3 years, IF your job moves downtown next year, you’ll be safe. If it doesn’t, then you’ll be sitting the car after 2 1/2 years in order to avoid going over the max.

Of course, if you’ll be taking mass transit over the next 3 years, that kind of defeats the purpose of having a cool car, no?

Personally, I’d wait until I got a better handle of what my average commute is going to be before I locked myself into a lease.

Leasing only works, financially if:

  • You intend to only keep the car for 2 or 3 years.
  • You are prepared to keep the car for the full term of the lease, absolutely no more, but also no less.
  • You do not drive outside the mileage limits or are prepared to pay a higher price for a higher allotment.
  • You understand the terminology of leasing (capitalized cost, residual value and money factor) and are able to use it to negotiate.

Most of those are a matter of will, stability, and spending an afternoon reading about the business. But your daily commute distance is already going to put you up against typical mileage caps, and that’s not including any personal travel. Without a negotiated higher allotment (which will cost you, perhaps substantially if you go into a luxury model) you’d never be able to take this car on a weekend trip or a summer vacation and you’ll be watching the odometer every time you go to the nicer grocery that’s a bit further away or are asked to run someone to the airport or take a turn taking a few kids home from an after school event. And if your company relocates the office even five miles further from your home, you’re even more screwed, unless you move. And moving houses in order to meet the terms of your car lease is kind of silly.

Buy a considerably older used car until you know what your company is going to do. Or keep your car limping along. Do you seriously think you’re going to blow $25g on repairs between now and the time your company makes up its mind?

Because you mention “excites” it shows that you’re using your emotions rather than your brain (and there’s a lot to be said for that; we all do it). Just… let your brain interject for a bit until you know what’s going on with your job.

On the subject of “emotion” versus “brains,” yeah, I’m going to be in the market for an Expedition XL as soon as this assignment is over. Or a Fiesta, if the brain wins. :wink:

Well, this is an excellent post and I really can’t add anything to it. But I’ll try.

I think there are two different ways to think about an amount spent on a car: the first way is to consider the amount spent as buying an asset, and the second way is to consider the amount spent as part of a montlhy outlay for transportation.

So, if you buy a car and keep it forever, and you think about the amount you spend as part of a monthly outlay, then you will see that you spend a lot initially, then not much at all (after you’ve paid off the car), but then at some point you will spend some on repairs, and you have the risk of having to spend a lot on a big repair.

With leasing, on the other hand, the initial amount you spend is lower (sometimes much lower), but you are still spending that amount during the years that you otherwise would be spending nothing if you bought a car (of course, by then you’d have a different new car). And you keep right on spending that same amount without having to worry about a large repair coming up (and the headaches that come with that).

So, bottom line is that leasing and buying are both perfectly legitimate things to do depending on how you want to organize your life. Lots of “financial gurus” rail against leasing, but it’s not a scam or bad deal if you do it for the right reasons.

If you’re not excited by a car, I see no reason to buy new unless the cost of used cars in your area is prohibitive.

(This is actually true for the car I’m trying to buy – I like the older models better, but so does everyone else!)

But seriously, it seems like you hardly do any driving except for commuting and you live in a city where bad things happen to new cars. Buy something practical and boring used, and then in a couple of years you find a car you’re excited by, you’ll still have the scratch to buy it.

The answers about leasing options are similar to what I’d expected. I can’t find mileage limits listed on any web sites but I gather it’s negotiable and the average is something like 15-20k per year. I’m almost a 100% certain that I’d be below that number even with my commute since I can telecommute a lot and really won’t use the car for any road trips or much weekend driving, but buying something lightly used is probably a much better value.

I just can’t see myself springing for a used Fusion or Camry. I know that the value is there and they are reliable, but after 10 years of driving a pretty mundane car and watching it slowly deteriorate I figure I can justify being a little impractical. If my office moves downtown and I choose to sell the car, well that’s no big deal. It’ll have served it’s purpose.

The chance of my commute going away pretty much ensures that I won’t buy a new car. The depreciation over the first couple years is so steep that I’d be a fool to sell it if my company moves. Buying a 2008/2009 means I’d probably not lose quite so big a proportion in 2 years.

Now the trick is deciding what used car to get. The smart money is of course buying something really reliable and really common (cheap) but after struggling with such a bad car for the past few years I really want to treat myself, as much as you can for $15k-20k buying a used car.

I keep going back to the Audi, I’m probably a sucker here but I’ve always been drawn to them. The difference in price between a 2008 and 2009 is huge due to a new model debuted in 2009 and if I choose to go down that road it’s tough to decide which one to pick, the 2009 has way more features than the 2008 but they are sometimes 8k more expensive. Not sure a new sound system and console and 2 inches extra rear legroom is worth that much money, though i would get it back on resale.

No, it’s closer to 12k per year max. To get to 15k you’re gonna pay a premium. You’re never going to get to 20k, unless it’s very long term lease. They’re getting the car back and will be reselling it, they don’t high mileage on a leased car because that lowers the value to them on the far end.

I’m in the same boat only my car is 15 and my job is closer. Audi is my fav car right now too (especially the TT) but I’ve all but settled on the new Hyundai Veloster. Brand new it is in your price range, it has a good warranty, and I drove one last week and I thought it was quite fun. I wouldn’t be able to pay for AND fix a pricey used car so it is a good compromise between boring and frivilous for me.

Leasing is no different to a car loan, really. It’s just that somebody else borrows the money, and charges you a bit extra on top. You do save the future cost of selling the car, and maybe for some people it’s easier than getting credit. But it’s still just a loan.

I don’t get what you mean when you say “You do save the future cost of selling the car…” Selling something isn’t a cost. It’s an asset.

Strictly speaking, the financially prudent thing to do is to buy a used car. It depreciates significantly once you drive it off the lot. But if you want to avoid having to pull maintenance, etc., a lease can be an attractive alternative.

Omniscient, you really do need to call and ask about mileage allowances. I think you’re way off. My sister-in-law leased a BMW and had to park it in the driveway for the last 5 months of her lease because she was going to go over the mileage allowance. Her commute to/from work was less than 15 miles.

My 8 year old van has ~70,000 miles on it and I work part-time (3 days per week) and my commute to work is less than 3 miles.

Selling a car costs some amount of time or money. You can “sell” it to the dealer as a trade-in, but they won’t pay much for it. That, in a sense, is a “cost” of selling. Alternatively, selling it yourself can be a fair amount of time and hassle, and you can still incur significant costs along the way (i.e. paying someone to detail it, or going to the mechanic to get rid of annoying-but-not-serious vibration).

Well, okay. I just subtract that cost to get to my net profit.

I’ll tell you this: I have heard many people, including myself, say “boy, leasing was a terrible thing to do; I wish I’d bought the car instead.”

I have never heard anyone say the opposite.

To my mind, leasing is a bad deal…unless you need a new car every 3 years. If you want to lower your per mile cost, the cheapest way to go is:
-buy a two/three year old car will low miles. You will save 30-50% of the cost of a new car
-or, buy a new car, and drive it into the ground
Leasing results in high costs because:
-you are limited to 12-15,000 miles per year
-you must carry full collision insurance on the car
-you face a big penalty at the lease termination, if the value of the car is less than the lease specified

What? I’ve never heard of a lease working this way. I’ve only heard of it working where you hand the keys back to them at the end of the term and walk away–the value of the car at that point is the leasing company’s problem.

The problem is actually the other way–you have no way of recouping any excess of the value of the car over what the leasing company thinks it’s worth. Certain companies (BMW for one) have a hybrid program where the owner can sell the car at the end of the term and pay the leasing company the agreed-upon residual.

Maybe he’s talking about scratches and dings.

Ah, OK, that makes sense.

Once in a great while a car manuf will have a fantastic lease deal. Other than finding one of those (and great purchase deals are far more common- 0% financing, cash-back, etc), it’s always better for a individual* to buy.

And in todays market,* if you have good credit,* it’s better to buy new. With new you can often get 0% financing, and little or no down. With used you need a larger down and pay a rate as much as twice as high. You also lose out on a good part of the warranty.

As other have said, it’s good to buy new if you are going to keep the car for a significant period of time, at least 5-6 years.

The whole “buy a late model used car as a new car depreciates a bunch once you drive it off the lot” meme is outdated. True, it does. But that only effects how much the dealer will buy your one year old used car for. It has little effect on how much the dealer SELLS a one year old used car for. If you don’t believe me, look at the prices for a new vs a one year old used at a dealer. That 20% depreciation is NOT passed on to the “late model used car” buyer.

Go to Edmunds, check out the incentives and rebates:
http://www.edmunds.com/car-incentives/

  • there are tax reasons that sometimes makes a company go for a lease instead, esp if they only want newer cars driven by their employees.