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Leasing or Buying a Car - Which is better?

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I'm planning on buying a new car. Anyone have experience with leasing? Is it better than buying? This is not for business purposes, just personal. I know there is a mileage limitation on leasing, which is the most restricting aspect. But I'm curious what the financial comparisons are.

Thanks for your opinions.

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I'm planning on buying a new car. Anyone have experience with leasing? Is it better than buying? This is not for business purposes, just personal. I know there is a mileage limitation on leasing, which is the most restricting aspect. But I'm curious what the financial comparisons are.

Thanks for your opinions.

The rule of thumb I hear all the time is that if you plan on holding on to the car for more than 5 years, then buy it. Less that that, a lease can make a good deal of sense -- especially if you can list it as a business expense.

Of course one has to keep in mind that the recession and the Cash For Perfectly Fine Cars fiasco have shifted the used car market's price structure substantially. That has to be a factor in this decision, though I have no idea how to factor it in.

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A lease would not give me the joy of ownership; I would not want someone else involved in my relationship with my pride and joy. However, if a car is simply an appliance for transport, then depending on local tax considerations, it may pay to lease for a limited time.

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It's not just tax considerations. Let's say I pay $350 per month for 3 year lease for a $25,000 car. Then I get another brand new car after 3 years. No repair costs. That's about $4200 per year. If I buy a $25,000 car and pay $350 for 6 years, I've spent $4200 per year and have a 6 year old car (with some selling value, maybe $5000) which will increase in repair costs as the car gets older.

A major factor is that leases restrict how much mileage you can drive: typically 12,000 or 15,000 miles per year over 3 years.

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A little over three years ago Sharon and I decided to lease our first vehicle (which was a Cadillac) when we traded in her Tahoe. After looking over our past car history, for the most part, we recognized that we had only kept one car for more than 4 years. Every other time we traded our cars in when either our values changed or something with newer technology and or style came out.

There are a lot of options that can be written into the leasing contracts of today compared to 10 or 20 years ago, to include how much mileage you are allowed, how much money you put down, if any. For example, we included all our service cost and general repairs (outside of the warranty) for just 15 extra dollars per month. In Las Vegas two synthetic oil changes per year will cost me more than the 15 dollars per month extra. And if we decide to lease or buy another GM product we can turn the lease in six months early with no penalty. Of course we take care of the car like I would any car that I am spending money on, which is very well. There are penalties if the car is returned with more wear and tear than is expected for the term of the lease such as tears in the leather of which we have none.

Overall I would say that the lease has been a good option as we do not intend on keeping this car (the Mercedes-Benz is different) and look forward to a new car in about six months time with all the benefits that come with a new car.

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A little over three years ago Sharon and I decided to lease our first vehicle (which was a Cadillac) when we traded in her Tahoe. After looking over our past car history, for the most part, we recognized that we had only kept one car for more than 4 years. Every other time we traded our cars in when either our values changed or something with newer technology and or style came out.

There are a lot of options that can be written into the leasing contracts of today compared to 10 or 20 years ago, to include how much mileage you are allowed, how much money you put down, if any. For example, we included all our service cost and general repairs (outside of the warranty) for just 15 extra dollars per month. In Las Vegas two synthetic oil changes per year will cost me more than the 15 dollars per month extra. And if we decide to lease or buy another GM product we can turn the lease in six months early with no penalty. Of course we take care of the car like I would any car that I am spending money on, which is very well. There are penalties if the car is returned with more wear and tear than is expected for the term of the lease such as tears in the leather of which we have none.

Overall I would say that the lease has been a good option as we do not intend on keeping this car (the Mercedes-Benz is different) and look forward to a new car in about six months time with all the benefits that come with a new car.

I've always kept my cars for 10 years or more. Only a few have lasted less time. I stopped buying new cars when the prices soared, but leasing presents a possible alternative to buying used cars again. I'll just have to get used to not becoming attached to my car in the way I'm used to. The prices of used cars have become just as outrageous. $18,000 for a four year old car with 50k miles is not something that I really want.

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I'm planning on buying a new car. Anyone have experience with leasing? Is it better than buying? This is not for business purposes, just personal. I know there is a mileage limitation on leasing, which is the most restricting aspect. But I'm curious what the financial comparisons are.

Leasing is better if you value having a new reliable car a greater percentage of the time. It depends on your preference of new vs old.

Obviously, this will cost more, since you'll get a lease on another car once your lease ends. You will be driving a brand new car, whereas a car owner would probably keep his car and extend its value per year to him.

If you are okay with owning an older car and possibly paying for repairs, then I wouldn't recommend buying new in the first place. Buy a two year old car and drive it for a long time--that's probably the easiest on your finances.

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It's not just tax considerations. Let's say I pay $350 per month for 3 year lease for a $25,000 car. Then I get another brand new car after 3 years. No repair costs. That's about $4200 per year. If I buy a $25,000 car and pay $350 for 6 years, I've spent $4200 per year and have a 6 year old car (with some selling value, maybe $5000) which will increase in repair costs as the car gets older.

A major factor is that leases restrict how much mileage you can drive: typically 12,000 or 15,000 miles per year over 3 years.

My philosophy regarding car purchases is to buy what I love, and then look after it. My current Saab is 17 years old and with 200,000 km on it, it is still like owning a new car. Amortising the cost this way denies the leasing company it's profit - and they must profit off you or go out of business.

This picture was taken just over a year ago. I have a new 2010 Audi Quatro arriving next month after a 5 month wait for a factory order, not that I need it, but because I want it. This Saab will be kept because it owes me nothing and no one would pay what it is worth to me. If the new Saab 9-5 arrives near me, and I like it, I will trade the Audi, not the old Saab.

3000510545_706304bbe7_b.jpg

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It's not just tax considerations. Let's say I pay $350 per month for 3 year lease for a $25,000 car. Then I get another brand new car after 3 years. No repair costs. That's about $4200 per year. If I buy a $25,000 car and pay $350 for 6 years, I've spent $4200 per year and have a 6 year old car (with some selling value, maybe $5000) which will increase in repair costs as the car gets older.

A major factor is that leases restrict how much mileage you can drive: typically 12,000 or 15,000 miles per year over 3 years.

My philosophy regarding car purchases is to buy what I love, and then look after it. My current Saab is 17 years old and with 200,000 km on it, it is still like owning a new car. Amortising the cost this way denies the leasing company it's profit - and they must profit off you or go out of business.

This picture was taken just over a year ago. I have a new 2010 Audi Quatro arriving next month after a 5 month wait for a factory order, not that I need it, but because I want it. This Saab will be kept because it owes me nothing and no one would pay what it is worth to me. If the new Saab 9-5 arrives near me, and I like it, I will trade the Audi, not the old Saab.

3000510545_706304bbe7_b.jpg

Beautiful car! I'm used to keeping cars for a long time also. My 1998 Accord has 240,000 miles on it. My 1996 Volvo, which I'm currently selling, has 191,000 miles on it. As much as I love keeping my cars for their useful life, when the repair costs are more than a new car, it's no longer enjoyable. I never have had a problem with the Accord, and the Volvo has been trouble-free until this past year. Putting $4,000 repair costs into a car worth $2,500 becomes something that I don't enjoy doing.

Also, I don't mind someone profiting off of me as long as I profit too.

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Paul,

It seems like you are answering your own question. Buy a car. From what you state it seems like you take good care of your cars and do not value as highly the new technologies and styles that come with new cars. I would offer that if you want to get a good car without paying for the mark-up and taxes of new cars, then try something like CarMax. CarMax has a 100+ point check-up on all the cars they sale. And although they will buy almost anything, they do not sale everything they buy at their dealership.

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I'm planning on buying a new car. Anyone have experience with leasing? Is it better than buying? This is not for business purposes, just personal. I know there is a mileage limitation on leasing, which is the most restricting aspect. But I'm curious what the financial comparisons are.

Thanks for your opinions.

How long do you want to keep the car? When I buy an auto I go for very long term ownership. I have a 1995 Honda Civic which still runs beautifully. I plan to keep it as long as I can get an inspection ticket for it and the repairs are not prohibitive. I have a 2006 Scion XB bought early in 2007. I plan to keep it as long as it lasts and is affordable to maintain and repair. In previous cars I have owned I have held them for something like 10-12 years before they died or became too expensive to repair.

Bob Kolker

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I agree that under your circumstances you should buy. You expect to keep it for 10 years and are concerned about mileage limitations under a lease, which presumably has financial penalties for exceeding the limit. That puts you far into the realm where it is better to buy.

But there are other considerations on top of that. Be sure to buy a car with a reputation for reliability and longevity, like Bob's Honda or most Toyotas (despite the current scare). Some cars are more fun to drive but don't have the reliability.

Second, there is a huge depreciation reducing the value the minute you drive it off the lot. You should look for a used car with low mileage and fairly recent (cars deteriorate over time even if not driven much), which also seems to fit your plans of avoiding high new car prices. If you buy a Toyota or Honda with about 20,000 miles it will be barely broken in and will cost a lot less than a new one.

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Well, I decided to lease a new 2010 Honda Accord, EX-L, 4 cylinders, fully loaded, GPS, Bluetooth phone, navigation system. The principle reason is the price of new cars and used cars. I couldn't afford a $30,000 car and $500+ monthly payments for 6+ years, and I didn't want to pay $15 - $18,000 for 4 - 6 year old cars. I wanted a comfortable car with modern conveniences. It's been about 20 years since I've had a new car, and it is VERY NICE INDEED. Now, for $330 per month, I have a new car for 3 years, I know what price I will pay if I want the car after 3 years, I know who the driver of the used car is and how he took care of it :D, and if I don't want it, I can get another brand new car for another 3 years.

Since this is my first lease, the only issue concerns the 45,000 miles over the 3 years. That's about what I've averaged most of my life. And if I go over the mileage and I buy the car, I don't have to pay a penalty. So it's something to consider but not a complete negative.

And I still have my 1998 Honda Accord with 240,000 miles on it (almost to the moon). It's a race to see which lasts longer!!

I appreciate everyone's comments and suggestions. They were helpful.

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Now, for $330 per month, I have a new car for 3 years, I know what price I will pay if I want the car after 3 years, I know who the driver of the used car is and how he took care of it :D

What will it cost to buy it on top of the $11,880 in lease payments?

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Now, for $330 per month, I have a new car for 3 years, I know what price I will pay if I want the car after 3 years, I know who the driver of the used car is and how he took care of it :D

What will it cost to buy it on top of the $11,880 in lease payments?

Just over $15k.

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Congratulations, Paul, I hope you enjoy your new car.

Thanks, Ray. So far, I enjoy it very much. It rides very smoothly and is pretty quiet inside. The Navigation system has a few shortcomings (it doesn't appear to be as good as Garmin's) but I love the Bluetooth system, being able to call and receive and talking "to the car" without picking up the phone. I'm waiting for my first fill-up to see my mpg.

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