Is it better to purchase or lease a new car?

[SamsungHDTV]

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@Mshellt wrote:

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@ohvrolla wrote:

I'd just like to say that just because a car is new in no way means it's more reliable. Case in point, my 276k mile F150 has been more reliable than a coirker's Ford Focus which has left him STRANDED twice with transmission issues on their new DCT automatic, while I've only had to replace the serpentine belt tensioner in the last three years. A $50 part that I changed myself, only other repair in five years of ownership has been an exhaust manifold gasket at the tune of under $20. 

On the other hand if you purchase a car at the end of five years it doesn't automatically become one step away from the junkyard, which seems to be the way some proponents of leasing portray it.

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I would be very ok with purchasing a very old car (the older ones are MUCH prettier in my opinion!!) but I'd feel a little safer in a newer vehicle because they come with a warantee--The Hondas come with a SEVEN year warantee, which seems pretty amazing to me. Another possible perk to leasing a car is that you can purchase the car at the end of the lease if you like it ...I do not know yet how much of a financial loss is involved in buying that way, but it might be a good way to really get to know a car before being committed to purchasing it.

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I'm a big fan of Hondas. I always see a lot of old Hondas on the road. Then again, I might be biased and only seeing them because I own one. 

[ohvrolla]

I'd definitely agree with you on Hondas, and I'd throw the Corolla in the mix of used cars you can generally trust. Personally I'd trust a used Civic with 100k miles more than a new Dodge Dart.

[Kevin5974]

It is sad to me how misunderstood leasing is. It is the ONLY smart way to buy a new car.

Example One:

Buyer A purchases a 2015 Ford F150 and Buyer B leases the same truck. Regardless of payment, Buyer A inadvertently bumps into Buyer B. Both have insurane and fix vehicles to new condition. When Buyer A and Buyer B returns after 36 mmonths and look at values of vehicles, Buyer B flips depreciation loss to Ford. Buyer A, if ever wanting to sell vehicle, has to absorb the loss from the Carfax.

You don't have to care about the miles. If you're going to purchase the vehicle at the end, the miles won't matter.

When Buyer A buys a $30k vehicle, he incurs sales tax on that immediately. On a lease, you pay the sales tax monthly which is one of the reasons the payment is lower.

Hope this helps someone..

[EddieK]

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@Mshellt wrote:

I would be very ok with purchasing a very old car (the older ones are MUCH prettier in my opinion!!) but I'd feel a little safer in a newer vehicle because they come with a warantee--The Hondas come with a SEVEN year warantee, which seems pretty amazing to me. Another possible perk to leasing a car is that you can purchase the car at the end of the lease if you like it ...I do not know yet how much of a financial loss is involved in buying that way, but it might be a good way to really get to know a car before being committed to purchasing it.

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Honda's are great(have an Accord that won't let me get a new car), but any new ones only come with a standard 3yr/36K mile warranty.  Of course you could buy an extended warranty to get you covered for 7 years, but you don't need one on a Honda, IMO.

[Hoya08]

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@Kevin5974 wrote:
It is sad to me how misunderstood leasing is. It is the ONLY smart way to buy a new car.

Example One:

Buyer A purchases a 2015 Ford F150 and Buyer B leases the same truck. Regardless of payment, Buyer A inadvertently bumps into Buyer B. Both have insurane and fix vehicles to new condition. When Buyer A and Buyer B returns after 36 mmonths and look at values of vehicles, Buyer B flips depreciation loss to Ford. Buyer A, if ever wanting to sell vehicle, has to absorb the loss from the Carfax.

You don't have to care about the miles. If you're going to purchase the vehicle at the end, the miles won't matter.

When Buyer A buys a $30k vehicle, he incurs sales tax on that immediately. On a lease, you pay the sales tax monthly which is one of the reasons the payment is lower.

Hope this helps someone..

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Leasing is a method to BUY a new car, not "the ONLY smart way to buy a new car".

If you intend to keep the car, but can't afford a traditional finance plan, then lease to buy.  This may keep the payments managable, but you will pay more in the long run.

In the scenario above, it appears Buyer B returns the car at end of lease instead of a buying it out.  In that scenario, Buyer B is without a car at the end of the lease. 

Moreover, the method in which taxes are applied differs: some states apply taxes to the leased amout (all upfront or per month) while some levy taxes on the gross auto price of the lease. 

In addition, after 36 months, when Buyer B returns the vehicle to the dealer, "Buyer B flips depreciation loss to Ford"?  Buyer B does not flip any depreciation.  When you lease a vehicle, you're lease payments are depreciation payments (plus taxes & interest).  The only "loss" to the dealership is if they miscalculate the residual.  in this case, they get hit with a depreciation loss... most likely a minor loss.  For example, after 36 months, they forecast a 55% residual, but it actually ends up at 52%.  On a 30k car, that's a $900 loss to the dealership.  If Buyer B does not buy the car, he/she may get hit with mileage and wear and tear fees which most likely will cover the $900 loss.

As for Buyer A, if he/she chooses to sell after 36 months, he/she must come up with the difference between the NADA/KBB value and loan balance owed.  So on a 4%, 60-month, 30k car note, after 36-months, Buyer A has a balance around $12,722.  If the residual is 52%, the car is valued around $15,600.  Buyer A will not have to put any money down to sell to a private party in this siutation.  On a trade-in?  Most likely.

However, everyone's situation is unique.  Leasing may or may not be in your best interest when all factors are know (Money Factor, finance APR, keep or not to keep car, expecting a new family member, etc).