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Leasing vs Financing a Car

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ForzaItalia

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I've heard everyone preach the merits of both so I figured why not see what GAF feels on the issue. What are the pros and cons to leasing and financing a car? Does anyone here lease or finance a car and if so, what expertise can you pass on? I'm just trying to get as much info as possible before making a decision.

Thanks in advance.
 
Only lease if you are incredibly anal (meaning you take good care of your car, and don't drive it very often).


For the REST of us .. finance is the way to go.


I have seen it too many times where someone goes way over on thier miles or they trash the interior of thier car .. and then they are intoduced to something called NEGATIVE EQUITY. Then you will find yourself buying a used Saturn and still paying 400 a month to drive it. (A littel extreme ... just trying to make a point)
 
-_- @ lease haters.

I was originally leasing my Maxima, it's not that hard to keep your car clean. I had the option of trading it in or buying it out - I liked it, wanted to keep it some more and bought it out. It's stupid to pay nearly twice for a finance + bank fees, when you can pay far less if you lease and keep your car clean. If you happen to get some sort of damage on the car, just pay the $ to fix it before you give it back. My uncle's 03 Maxima was beyond fucked up looking...scrapes, scratches, dents, paint chips, dented hood, bumper and fenders. He gave it in to Nissan/Infiniti for a 2005 G35X and they only fined him $1300 for repairs.

My dad and I just signed a new lease on an FX35 and I'll be leasing an Audi A4 B7 next May. Do it, especially if you're a good driver and keep your car garaged or in a good area.
 
No bad experiances but just too much crap trying to keep it in excellent condition Bah!! You buy your car to have fun with. Fuck that shit!!
 
Leasing is great if:

You can write off the lease payment
You don't drive very much
You like getting a new car every few years
You want more car than you can afford to buy


Financing is great if:

You plan to keep the car for a long time
You tend to drive a lot more than a typical person
 
Leasing is an odd bird. On the negative side, it requires extremely good credit (and, as if that wasn't enough, it doesn't help your credit score, so you have to keep it up in other ways), forces you to take care of the vehicle, and adds a surcharge for excess mileage which is nothing but pure gravy for the financing entity. But on the positive side, if you get in an accident and total your car you'll have automatic gap insurance (which means you don't have to cough up the difference between your insurance payout and your loan balance), the payments are about half as much as purchasing to own, and if you get a lemon, at least it'll be under warranty for as long as you have it.
 
Regardless of the comments about payments, and keeping the car clean... the biggest issues is miles... if you drive too much then leasing isn't for you... leasing penalties for over mileage are VERY strict.
 
DarienA said:
Regardless of the comments about payments, and keeping the car clean... the biggest issues is miles... if you drive too much then leasing isn't for you... leasing penalties for over mileage are VERY strict.
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Yup, agreed on the mileage issue. If I get a job back in the city in which I can just use the subway again, I may lease a G35 or a 3 series. 'Cause I am cool like that.
 
Also, financing your car works out saving you a lot of money in the long run, but only if you plan to keep your car for a long time. I don't remember the figures, but it's VERY substantial, even after factoring in things like repairs and upkeep.
 
If you don't mind having a note, want to 'upgrade' to a new car often, don't drive all that far (the average lease is 12k miles and the average American drives 15k+), and are willing to clean and service your car more than you would normally - a lease makes sense.

If you want to eventually own your car and be note free, don't mind driving a 'dated' car after a few years, like to drive pretty much everywhere, and service your car when you think it make sense - financing makes sense.

IMO the biggest difference is between whether or not you want to continually have a note or not. People who don't want a note are definitely financers (because your lease purchase options are usually very poor), whereas people who don't mind a note/renting are good for leasing.
 
Honda Civic Value package, $15,000 for 15 years and say 200,000 miles. What leasing can match that?

That's $83.33/month.
 
i keep hearing people say you have to clean your car often? Why is that? do they do monthly checks or something? Or do you just have to keep it clean in general for when your lease is up?
 
Ninja Scooter said:
i keep hearing people say you have to clean your car often? Why is that? do they do monthly checks or something? Or do you just have to keep it clean in general for when your lease is up?
Click to expand...

The latter. Kind of like renting an apartment, you'll be charged for anything that they consider beyond "normal wear and tear" when the end of your lease is up.
 
Ninja Scooter said:
i keep hearing people say you have to clean your car often? Why is that? do they do monthly checks or something? Or do you just have to keep it clean in general for when your lease is up?
Click to expand...

Because a dirty car will be assessed penalties at the end of the lease..... what HL said.
 
leasing/financing::renting/buying

its that simple. in short, you lease you are throwing your money away. you buy and its yours as well as the ability to sell later. just as when you rent if you screw up the place you pay. you lease and you screw up the car you pay. leasing is pretty dumb unless its for business purposes.
 
leasing/financing::renting/buying
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I disagree. I can make optimal returns on my investments in my 20s by renting a $400/month efficiency and investing another $1000/month into 401k, IRAs, and mutual funds rather than $1400 on mortage. I'm guaranteed my investments to get an average of 10% return per year, unless our economy totally tanks.

With a house, I have to pay for taxes, thousands of dollars in furniture and equipment (refrigerator, washer, dryer, air conditioner), and repairs (termites, roof replacment, lawn care, etc).

Buying a house is throwing away money.
 
Say you spend 30-40 years paying off your house.

In mutual funds, you're money would multiply by 27-81 times in value.
 
:lol thats right. lease away then. leases are made for people just like yourself. renting IS NOT a write off. the interest paid on a house IS. take that tax return and THEN throw it into whatever profit making savings plan you want. as well as MAKING MONEY on the house. rent at $400 a month? where do you live? kansas? if you live in any area where you make enough money to invest, you definately arent paying 400 a month unless you have roomates.
 
teh_pwn said:
Buying a house is throwing away money.
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:lol :lol :lol

nice job at pissing away your own credibility.

teh_pwn said:
Say you spend 30-40 years paying off your house.

In mutual funds, you're money would multiply by 27-81 times in value.
Click to expand...

Well, you're forgetting the fact that by buying a house you can fucking LIVE IN IT.
 
:lol Spending 40 years to pay off your house should be avoided at all costs. Even 30. Make one extra payment each year, and you'll pay it off in just under 20. A house is one of the best investments you can make.
 
teh_pwn said:
I disagree. I can make optimal returns on my investments in my 20s by renting a $400/month efficiency and investing another $1000/month into 401k, IRAs, and mutual funds rather than $1400 on mortage. I'm guaranteed my investments to get an average of 10% return per year, unless our economy totally tanks.

With a house, I have to pay for taxes, thousands of dollars in furniture and equipment (refrigerator, washer, dryer, air conditioner), and repairs (termites, roof replacment, lawn care, etc).

Buying a house is throwing away money.
Click to expand...

http://www.albinoblacksheep.com/flash/you.html

Nathan
 
heavy liquid said:
:lol Spending 40 years to pay off your house should be avoided at all costs. Even 30. Make one extra payment each year, and you'll pay it off in just under 20. A house is one of the best investments you can make.
Click to expand...

thanks for the advice! i'll start that this year!

BTW pwn...unless you are investing strictly in IRAs, not only do you get screwed on your taxes for renting, you'll get screwed when you go to cash out your investments.
 
Well, you're forgetting the fact that by buying a house you can fucking LIVE IN IT.
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So someone can't live in an efficiency apartment?


renting IS NOT a write off.
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But IRAs are tax defferable.

At $400 you spend $4800 per year for living expenses. A typical mortage would consume all of your income. With the efficiency you can invest something like 10,000-20,000 per year.

If you start investing 10k per year into what I've mentioned at age 20, you will have nearly $8,000,000 at age 65. This is a typical 10% interest. It's common. For example Vanguard's wellington fund:

http://flagship3.vanguard.com/VGApp...dId=0021&FundIntExt=INT&DisplayBarChart=false

You're money triples in value every decade. What house does this?

What house is going to increase in value that dramatically? On top of that over the years you've had to pay for tens of thousands of dollars on furniture and appliances to fill up your house.

Thus buying a house is throwing away money in a sense that you're throwing away millions of dollars that you could make in investments.
 
If you make any reasonable amount of money, you will be paying taxes out the ass. If you're renting you will not be able to vent enough of your salary to prevent throwing away 10s of thousands of dollars a year. This is money that can be invested into other things.

Anyone who thinks real estate is throwing money away clearly isn't looking at their entire financial picture.

If a mortgage is consuming all of your income for even a nominal house, then clearly you can't afford to live in a house. People who DO own houses are generally building equity and writing off their living expenses and writing off all of the interest they ar epaying against their own income to get more of their money in their pocket for investment.
 
what happend after the internet bubble? 9/11? people still had houses. people in the stock market didnt. :lol maybe you are single and plan on being single until you are 65. i dunno what family man would cram their wife and kids into a 200sq foot place.
 
I'm saying that it's throwing away money in my 20s. I'm not married yet. I'm not ready to make a commitment to a house.

I'm going to start investments and let them compound during my lifetime and likely buy a house in my late 20s or early 30s.

I see so many people get houses right after graduation and get their asses in debt paying off cars, furniture, appliciances, mortages, etc.
 
Thanks for all the info guys.

Why do some people tell me if you lease a car then the best way would be to put $0 down? I'd figure that putting say $5000 down would lower your monthly payments.

Anyone?
 
what happend after the internet bubble? 9/11? people still had houses. people in the stock market didnt. maybe you are single and plan on being single until you are 65. i dunno what family man would cram their wife and kids into a 200sq foot place.
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Do you understand what mutual funds are? Again, look at the link I gave you. They're a mixture of stocks, bonds, and money market.

The internet bubble would affect high risk tech stocks, not wellington. It's made 11% interest in the past 10 years during that tech bubble.
 
ForzaItalia said:
Thanks for all the info guys.

Why do some people tell me if you lease a car then the best way would be to put $0 down? I'd figure that putting say $5000 down would lower your monthly payments.

Anyone?
Click to expand...

because you are throwing the money away anyway so it doenst matter wether you put a down. its money you'll never see again. just go give it to a bum on the streets. same end result.
 
maybe you are single and plan on being single until you are 65. i dunno what family man would cram their wife and kids into a 200sq foot place.
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I was just using a simply C program to calculate the interest. I was too lazy to stop the investments after marriage.

I plan on getting married, but I'm not going to be one of those people that lives from paycheck to paycheck paying off a house, etc.

I'll start investing about 20k a year until I get married and then go for a house. After your investments reach 200k, it's more a matter of compounding than further investments.

Too many people get the house and stuff first, then in their 40s realize they have shit saved for retirement and the #of years of compounding is not to their advantage.
 
Do you understand what mutual funds are? Again, look at the link I gave you. They're a mixture of stocks, bonds, and money market.

The internet bubble would affect high risk tech stocks, not wellington. It's made 11% interest in the past 10 years during that tech bubble.
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again it may be a good plan if you plan on being single for the rest of your life and dont mind a huge tax hit later on. better off getting a wife/2nd income, buying a house with 1 income, investing with the other, having kids for another write off and not being bored, alone and crammed into a 1 room box for 40 years. hell just rob a bank and hide the money. after the prison time they cant take the money back. atleast you wont have to work and the living conditions are about the same. :lol

I plan on getting married, but I'm not going to be one of those people that lives from paycheck to paycheck paying off a house, etc.

I'll start investing about 20k a year until I get married and then go for a house. After your investments reach 200k, it's more a matter of compounding than further investments
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those people living paycheck to paycheck shouldnt be buying houses in the first place. as far as your 200k, i know someone that has made more than that in the past 2 years in equity on his home. in the years it would take you to make yor 200k, he can already invest his profit in mutual funds if he wanted to.
 
Edit:

ok, saw your edit.

That 200k I invest will be 10 million when I'm 65.

That just goes to show you that investing more early is far more important. Because remember investing 10k EVERY year from age 20-65 yields less.
 
teh_pwn said:
I disagree. I can make optimal returns on my investments in my 20s by renting a $400/month efficiency and investing another $1000/month into 401k, IRAs, and mutual funds rather than $1400 on mortage. I'm guaranteed my investments to get an average of 10% return per year, unless our economy totally tanks.

With a house, I have to pay for taxes, thousands of dollars in furniture and equipment (refrigerator, washer, dryer, air conditioner), and repairs (termites, roof replacment, lawn care, etc).

Buying a house is throwing away money.
Click to expand...


Despite how shocked a lot of Gaffer's might be by this, this strategy is valid - although it is extremely aggressive.
 
Fatghost28 said:
Despite how shocked a lot of Gaffer's might be by this, this strategy is valid - although it is extremely aggressive.
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yes but my point again as many others are is money made on a house can THEN be put toward stock investments while keeping a nice home AND a nice tax write off. again. anyone that has bought a house on the east or west coast metro cities 2 years back or more has already at the very least DOUBLED their money. money that can then be rolled into stock, a bigger house or split between both.
 
Lunar Aura said:
as far as your 200k, i know someone that has made more than that in the past 2 years in equity on his home. in the years it would take you to make yor 200k, he can already invest his profit in mutual funds if he wanted to.
Click to expand...


He didn't really make any money though. While his equity has increased by 200K, if he sold his house today and bought a comparable house in the same area, he'd likely be paying 200K higher price than he would have two years ago.

When you buy a house and live in it yourself, it's not really wise to look at it as an investment. What you're really doing is locking in your cost of housing. If you later on sell and downsize, then yes, you might have more money in your pocket. Or if you manage to sell before the real estate market has another downturn, you could do well. Conversely, if you sell at the wrong time, you could do very poorly.

Generally speaking, home owners tend to do better than investors though, but they tend to do far worse than the actual equity markets. The reason for this is that most investors fall prey to bad decisions in terms of market timing, while home owners have a much higher liklihood to wait out downturns.

In the last 50 years, equity markets in Canada and the US have done close to twice the returns of the real estate market.

That said, owning your own house is a solid, conservative strategy that the overwhelming majority of people would be more comfortable with.
 
Fatghost28 said:
He didn't really make any money though. While his equity has increased by 200K, if he sold his house today and bought a comparable house in the same area, he'd likely be paying 200K higher price than he would have two years ago.
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unless he takes the money and runs like most do. like the stock market goes you sell high. maybe rent for a year while saving then buy a house again. even spliting the profit 50/50 between stocks and a future property is a good idea.
 
I'm not downplaying home ownership in itself. Just that people seem to rush out and get themselves in a situation where they have to live from paycheck to paycheck to pay for everything. And then when they finally pay everything off, they only have so many years for retirement.

I think I wasn't clear on my first post. I should have said something like "for me, buying a home in my 20s is throwing away money."

So my plan in to spend 10 years or so investing heavily into low risk mutual funds through IRA accounts and general mutual funds. 401k too. Then, focus on home ownership. While I'm paying off the house, my investments will make millions.

There's nothing risky about mutual funds like wellington. It's got a lot of conservative stocks and bonds. More bonds than most investors would suggest to someone my age. Tech bubbles and whatnot will not affect it in the long run. Hell, it's average since it's beginning in 1929 is 8.5% per year. If wellington goes down, you're money isn't worth shit.
 
Lunar Aura said:
unless he takes the money and runs like most do. like the stock market goes you sell high. maybe rent for a year while saving then buy a house again. even spliting the profit 50/50 between stocks and a future property is a good idea.
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That strategy relies pretty heavily on market timing. If he sells now, he might fore go a lot of future growth in the housing market - which means his cost of housing would increase and he'd actually be paying more for less house when he finally does get back into home ownership. Equity markets as a whole will likely outpace the real estate market, but his personal investments may not, depending on where and how he invests.

Same would hold true if he increased his mortgage to invest, only with an additional risk of loss if the markets tank/interest rates rise.


Owning a house is a conservative strategy. Renting and investing the difference is more aggressive. Buying a house and flipping it is another aggressive strategy - actually MORE aggressive than just renting and investing, because of all the extra risks involved (interest rates, R/E risks, equity market risks, market timing risks). So actually you should expect that the highest return be made from buying a flipping properties if everything works out right. The danger comes from the market timing required since it would largely depend on just a few transactions in a few specific periods of time.

The conservative home owner and teh_pwn have one thing in common to both their advantage: they are not limited to specific timing, both are in a long term strategy. Flipping properties is a short term strategy and therefore the most risky.
 
I'm going to own a home too, but not until I've loaded some accounts to compound for 40 years.
 
Conservative stocks and bonds run huge inflation risks (i.e. that the amount you make will not keep up with the rate of inflation). The best long term investments will undergo some downturns but the market is generally going up year over year so it doesn't matter in the 30-40 year view.
 
How about putting $200k down on a $1 mil house? 45 years later, it's worth $13.8 million. You've paid off an $800k loan plus interest, so you've actually made about $12 mil. Hmm, not quite as good. OK, what if you put down your $200k on $2 mil of property? 45 years later, it's worth $27.5 mil. Including your loan payoff + interest, you've made about $24 mil. This is just a basic calculation with pretty conservative appreciation, and doesn't even include tax benefits, or rental income if you're not living in the property, or bought multiple properties. It also doesn't account for optimization-- no self-respecting real estate investor would buy $2 mil of property and just let their equity sit for 45 years.
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Interesting, but what happens when I move and change jobs? My investments are fine, but what happens to the money I put into the house and it's not paid off?

I'm not being rhetorical. I honestly don't know.


Again, I'm getting a house, but not until my investments are loaded and ready to compound for my lifetime.

But then if I meet a girl that makes a good amount of money, I'll change my plans, lol.
 
I agree with shogmasters analogy.

You cannot sell what you lease in a pinch, unlike the things you buy the lease you sign for a car is absolute.
 
teh_pwn said:
Interesting, but what happens when I move and change jobs? My investments are fine, but what happens to the money I put into the house?

I'm not being rhetorical. I honestly don't know.
Click to expand...

Depends on if you plan to sell, lease or rent. This is one of the reasons that rental real estate makes a lot of sense. Not only is someone else paying the mortgage, insurance, etc. but when you move you can keep on making money from it. If you're talking about trying to minimize your outlay for rent and like, just get a nice rental and live in one of the units yourself. That is by far the most intelligent way to make a lot of money in a short amount of time.
 
I like financing. I own my car now. It's a big hunk of junk, but it's mine. I'll drive it into the ground then get another one.
 
I live with roomates, the house is under my name, their rent pays my morgage and this is my dining table.
851082side.jpg
 
Fatghost28 said:
He didn't really make any money though. While his equity has increased by 200K, if he sold his house today and bought a comparable house in the same area, he'd likely be paying 200K higher price than he would have two years ago.
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An investor will also be paying $200k more to buy the same house two years after he/she had the chance. Hopefully, he/she was able to double his money during that time. If not, then the investor "lost" money.
 
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