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What Are the Pros and Cons of Leasing a Car?

Moms View Message Board: General Discussion: Archive July 2006: What Are the Pros and Cons of Leasing a Car?
By Kate on Thursday, July 20, 2006 - 09:32 pm:

The title says it all! Pros and cons of leasing a minivan, please! TIA!

By Pamt on Thursday, July 20, 2006 - 09:38 pm:

Bad financially because you aren't paying towards anything. It is just a long-term rental of a vehicle. The only *pro* is that you might be able to afford a monthly payment for a nicer car if you lease it than if you buy it, but after paying all of that money you have nothing to show for it. I personally think it is yet another *easy gratification* consumeristic black hole and can't see why anyone would ever lease. But then again, I'm of the don't-buy-what-you-can't-afford and own-what-you-have school of thought. I'm sure others feel differently. :)

By Hol on Thursday, July 20, 2006 - 09:54 pm:

Well from what I know (I have never leased, mind you), it is a better deal for the dealer than the customer. You are paying a monthly fee to "rent" a car for a certain term, most are three years. It enables you to get, maybe a nicer vehicle than if you were buying. Those are the pros.

The cons are, that you usually have to pay a large amount up front that isn't refundable. I think it's for sales tax, registration, etc.. You still have to pay the insurance, maintenance, etc. as if you had purcahsed it. The biggest CON is that you have a maximum number of miles that you can reach for the term of the lease. If you go over that, you pay another lump sum at turn in time. You are also penalized for any body damage.

At the end of the term, you have the option of purchasing the vehicle outright. However, you now have a three year old vehicle, which has depreciated, and yet you have a large amount owed to own it outright. OR...you can start all over, leasing another vehicle again.

The dealers love it and promote it (we had a dealer once HOUND us about it).They now have a low mileage used car in good condition that they can sell AGAIN. You, on the other hand, have been making car payments with nothing to show for it at the end of the term. No equity, no car.

Some people like leasing because they don't have to worry about an old car breaking down. They esentially always have a new car. The car is under warranty, so there are no major, expensive repairs.

I, personally, like to own something when I am through paying for it. Cars are so well engineered today, that even if you pay for it for five years, you can easily get another five years out of it with no car payments. Just make sure you change your oil, and do other routine maintenance. Also, if something happens to your income; if you are at the end of your loan, you might be able to scrape up some money to pay it off, and you now own your car. If you can't make the lease payments, or you can't afford to lease again, you have no vehicle.

I was told by a financial planner that leasing is better for businesses than private owners because they can write off the lease payments, and don't ever have to worry about disposing of an old car.

By Reds9298 on Thursday, July 20, 2006 - 10:09 pm:

Ditto Pamt.

By Vicki on Thursday, July 20, 2006 - 11:03 pm:

The cons have been listed pretty good. The only other pro I can think of is if you are someone who likes new cars and you don't keep cars more than 3 to 4 years. If you buy a car today and make your regular monthly payments, chances are if you want a new car in 3 years, you won't get what you owe on it for a trade in. You get into what they call negative equity. With a lease, you just drop it off and start over with no balance due so no negative equity going into the new car.

By Ginny~moderator on Friday, July 21, 2006 - 05:56 am:

Pam and Hol said it very well. The April 2005 Consumer Reports has an extensive article on car leasing: Leasing (the link may not work for you - I have a CR online subscription), and in the article provides some helpful links:

"Learn more. Before stepping into a dealership, visit www.leaseguide.com and www.leasetips.com , and read the Federal Reserve's consumer leasing guide at www.federalreserve.gov/pubs/leasing ."

One thing CR points out is that most car leases have a mileage limit of 10,000-15,000 miles per year and you pay a per mile fee for any overage. I remember lawyers at one firm who were near their limits and went through all kinds of maneuvers about whose car they'd take to avoid the mileage charge.

All in all, it is not a good financial deal.

By Ginny~moderator on Friday, July 21, 2006 - 05:59 am:

P.S. If the monthly payment is an issue for you, CR suggests you negotiate a longer term loan. You will have a vehicle you will own, and avoid all the stated and hidden leasing fees.

By Kittycat_26 on Friday, July 21, 2006 - 07:18 am:

I'm just curious what is thought about leasing knowing that you would be able to stay under the mileage limit.

My DH and I are considering leasing my next car. We don't need the credit as we've purchased at least three cars with car payments over each of our lives. We own and pay a mortgage on our house.

For my car, it is just my run back and forth to work, daycare and the grocery store really. In the two years since I purchased my current car, it only has 13,000miles on it. We use my DH's car for long trips and family driving.

Just starting to gather info.

By Mrsheidi on Friday, July 21, 2006 - 07:26 am:

Didn't read the other posts...

But, with life, your goals should be to pay off any debt. So, we've worked it so that we will have both of our cars paid off by the time DH gets back from Afghanistan next April. Then, we can put those monthly payments towards other things like retirement, savings, college tuition, etc. (It will free up about $800 a month.)

With a lease, the pros are that you can get your car fixed under warranty and that you always have a reliable car. However, they always want a certain amount up front and your money isn't really buying anything but security.

But, if you don't have a car payment anymore, you should be able to save up enough money in one or two months for something that needs to be fixed.

We save for house and car fixes anyway, even though we are paying off our cars right now.
Hope this helps...

By Karen~admin on Friday, July 21, 2006 - 07:34 am:

Ditto the mileage - my sister has been leasing a car, the year is half over, her lease is not up, and she is already over her miles.

By Breann on Friday, July 21, 2006 - 11:50 am:

Again, ditto the mileage. We just got new neighbors that have a really pretty white car in their garage. But, they always drive the old clunker car, even if they are going somewhere nice. I asked her the other day howcome they don't ever drive their white car. She said because it's a lease and they are already over the miles. They have 8 months left on their lease. AND, they are still having to make the monthly payment on it obviously. So, they are basically paying $300/month for the car to sit in their garage.

By Mommmie on Friday, July 21, 2006 - 05:01 pm:

I leased without mileage issues, still, I wouldn't lease again.

PROS-
-you can drive a car you wouldn't otherwise be able to afford

-you can avoid putting any money down if you have a trade-in to give them

CONS-
-you have to worry about mileage, even if you don't think you will come close, life happens, circumstances change - your car may all of a sudden be the car that has to go back and forth to DH's work or you may have to move or make a bunch of unexpected road trips

-you worry about cosmetic damage to the car (do you have kids?) that you might have to pay for at the end of the lease

-you have no car to work with as a trade-in if you are going to buy a car after the lease

-while lease companies make it easy to pick up your new car, the drop off place may be 40 miles away like mine was

-you always have debt (this is really the most important thing)

-if you come to hate your car, you're stuck for the term of the lease

It's just a very expensive way to have transportation bec ideally you want to pay a car off and then drive it a couple or more years without a payment.

By Cocoabutter on Friday, July 21, 2006 - 05:55 pm:

Well, one pro is that if something goes wrong with it, you are not responsible for fixing it. At least, that's how my grandparents have it set up. His car's battery died last week, and he called his leasing agent and got a new one. It must be included in his lease terms.

The biggest con is that you pay every month and in the end you don't actually own anything.

By Mommmie on Friday, July 21, 2006 - 06:32 pm:

Well, your car is under warranty for a certain period of time whether you buy or lease through the manufacturer. Ideally you lease for the exact life of the warranty. It's the same warranty either way.

Oh another CON is you have to turn it in with a matching set of still good tires.

By Hol on Friday, July 21, 2006 - 08:58 pm:

WOW! I didn't know about the tires! Just another good reason NOT to lease.

By Kate on Friday, July 21, 2006 - 09:12 pm:

Thanks everyone. We've decided to BUY. :)

By Ginny~moderator on Friday, July 21, 2006 - 09:49 pm:

Tires - I have read that some people take the tires off the leased car, buy and put on a new set of good tires (because the tires on the leased car may not be really good ones), and have the tires that came with the car put back on just before they turn it in.

By Amecmom on Saturday, July 22, 2006 - 05:15 pm:

I guess I am the odd one out. I love leasing. I have a new car every three years. I am always under warranty. I don't have to worry about selling the car I want to get rid of. When you buy a new car it depreciates in value very much during the first three years, so it's never really worth what you've paid for it.
When you lease with a good buy out at the end, it's just like making car payments if you chose to keep it. If leasing it for business a certain amount is tax deductable.
I don't think I'll ever buy a car again - unless it's the buy out on my Quest if we decide we want it at the end of the lease.

Ame

By Amecmom on Saturday, July 22, 2006 - 07:46 pm:

Oh, and your car is always up to date. I bought a new Nissan Maxima in 1994. The car, 12 years old, runs beautifully and is fully loaded in excellent shape. However, the coolant they used then for the ac is no longer available, so I can't recharge it with C4. It's either no ac now, or change the entire cooling system. When a care gets old there are going to be problems that are more costly than what you would have spent in interest or lease payments.
Ame


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