Suze Orman says lease it

[Chris679]

Well that isn't how we calculate apr or MF when comparing buy vs lease.

Maybe your score went up 70 pts maybe it didn't, doesn't matter. You claim to know the formula for FICO (total BS) and that each lease will raise by 70 pts (also BS).

[Dj4Money]

 I will defend the OP's statements -

 Firstly dealers are jacking up the cost of used cars. You can really see this in Uber's Xchange Lease program. Dealers in the program are reluctant to lease a CPO to qualified Uber drivers because they lose upwards of $2,000 on each one.

 Why? Because Uber is who really owns the car and as such their is no mileage limit because ride share just like other industries that require the use of a personal vehicle can easily exceed any of the reasonably priced retail leases available from captives and most banks.

 I'm faced with a fairly tough decision. While I like my Hyundai, I am performance oriented. One possible answer is to buy a cheap performance car. However besides my former car (Neon SRT-4) there aren't many choices available especially when I prefer it to be turbocharged from the factory and be around $5,000. I was going to trade my Neon SRT-4 in on a Caliber SRT-4 because it was lacking some creature comforts like cruise control.

 The only Caliber SRT-4's available not exceeding 90,000 miles are nearly $15,000 as it a fairly rare car; only produced for 1.5 years with about half the cars produced in it's final year compared to it's first year (2008-2009).

Leasing offers me two upsides -

 I can get a work vehicle and a personal vehicle for about price it would cost me to pay for and insure a second car, especially if the car was over $10,000. I would finance about half that and since interest rates are higher on used cars no matter your FICO score.

 I don't even have to use Uber's lease program, I think it's possible to get a extra mileage lease and just turn the car in a year or so early for another one for as long as I do ride share, which actually will be this year and maybe one more as I transition back to being a business owner and properly fund it.

 I can use a lease to help build my business credit file. As soon as my credit reaches a certain level, I can use my own credit as a personal guarantee either through a captive, bank, lease company or Uber as it would be registered under my business name.

 Current car payment is $345 for 48 months (42 payments left).

 According to some rough math a 2016 Fiesta ST base model (no options, standard colors) would be about $268 a month, 36 month lease @ 12,000 miles a year.

 I can reduce it more because I used a Truecar purchase price of $19,316 but I know of three dealers in the country that will sell me the same car $16,900-$17,700 after rebate, before taxes.

 As with car purchases getting the lowest price possible on a lease is just as important. By the time this would happen, my 10 day payoff should be around $12,000 and most dealers will give me about $10,000 for my car. I can roll the rest of it into the lease and it woudn't add very much to the final payment, especially if I can get the car lower than the Truecar price (about $1,600).

 Also Ford is offering larger rebates if you lease the car ($1600 for a lease vs $1,000 for purchase)

 That said I may put down some money, especially if I can make a large or multiple security deposits which some leases allow.

 I think it's very possible to save $100+ a month by leasing the car I want vs buying it when compared to my current payment.

 I can't do ride share with it, at least not much longer than a year. I could use that year to either make sure my business is profitable enough to not need to do ride share anymore, save to buy a older hybrid for $8-9K (Honda Insights don't hold their value that well) or lease a car via Uber Xchange program.

 Maybe not a hybrid and I don't know if I can get a weekly payment under $150.  Somebody was able to get a Honda Civic for that, but he mentioned it had 30K on it when he did the program.

 My guess is that he did that early in the programs roll out and dealers didn't fully understand the impact yet. Like I said they are almost exclusively selling new cars for this program.

 The cheapest cars would be the Nissan Versa sedan, Versa Note Hatch, maybe a base Toyota Yaris.

 So maybe $430 a month. I'll have higher insurance rates because I currently don't qualify for CA's Good Driver discount, but Metromile is less than my current Mercury policy though they don't know I'm doing ride share and I don't have the additional coverage. For the rates they would charge for that, I could move both cars over to Metromile and pay about the same.

 $430 - Uber Car (business)

 $245 (Lease payment target)

 About $380 a month extra over my current car. Fuel cost wouldn't go up much as it would just transfer to the Uber car. My personal car would mainly see use on weekend days and all day Sunday. That's fine since most automotive related activities (Cars & Coffee, Caynon Runs, Auto X, HPDE's, Drag Strip Test-N-Tune/Grudge, Dyno Days, etc) happen 95% on weekends.

 Looked at another way, if I got a used performance car, put down $5,000 and financed $5000 + TTL, my payment would be roughly $150-$160 a month + my current payment  = $495

 About $180 dollar difference, no warranty on the used peformance car. I can do most repairs myself but with a work schdule that I currently have, most work lwould be paid for.

 I don't pay for maintance on the Uber car (if gotten through the xchange lease program).

 I also could take my personal lease down to 10,000-10,500 a year to save a little more money.

 You can walk away from the Uber lease anytime after 30 days with two weeks notice and only pay $250 to get out of it. It cost $250 to start.

 If the OP is truthful about the 70 pt bump from a 3 year lease, I can see that being more valuable than carrying a bunch of Net 50 accounts to a business. Most businesses need a car, not 20 boxes of printer paper...

[Anonymous]

I don't think anyone is arguing that leasing is bad for a business, or that it's a bad way to personally use a car for 3 years. The problem is the 3 year assumption.

You mentioned you are "performance oriented", which I assume means buying/leasing is not primarily a financial decision for you. That's fine. But it needs to be explicit that you're assuming you'll replace your car frequently.

Op's most recent post cited the down payment as a negative of ownership, but then used 0 down assumption to compare monthly payments as another negative. Tsk tsk.

More importantly, OP is using a 3 year time frame and monthly payments to compare financials. This is the oldest trick in the dealer book.

I can't speak for MyFico, but my life expectancy is more than 3 years. As such, I am interested in the lifetime costs of buying a car every 10-15 years vs. leasing every 2-3 years. And I'm pretty sure that $0 payments for 4-9 years (roughly 28,000-65,000 according to OP's questionable numbers) after the loan is paid, plus having residual value even in a 10-15 year old car, will quickly swallow whatever "cash equity" OP built leasing. Repeat every 10-15 years and multiply by how many cars your household will own at any given time and it adds up quickly.

For a businessowner, this goes out the window, because who knows if your business will last 6 years? And if you're driving people around then you can't do it in a 10+ year old car without pouring in a ton of money, and you get tax advantages, and you better match your revenue and expenses, and you can invest the cash flow into your business to earn better returns than the market, etc. 

[Anonymous]

When you say "we" on calculating APR or Money Factor, who are you referring to? Ninth graders. It was an example.

I never claim to have figure the formula for FICO, I simple stated a strategic tool to help raise your installment credit score. Ignorance is Bliss

[Anonymous]

I've done this more than 3 times myself. Use leasing as strategic tool to get the most out of the money you have availible. I never claim to lease a vehicle for the rest of your life, use it as an affordable means of short term financing to secure installment credit points. When you increase your credit score then your APR and Money Factor rates decreases, and then you can dictate your own rates.  

[Anonymous]

Your last  paragraph was the smartest thing you have said.

[SMikulski49]

My fiancée and I just went through the whole purchasing a car and leasing a car. She was looking for a vehicle and we were wondering if we should buy or lease. This is just my example and how we went about this situation. We ended up leasing the car. 

1. The car was 19,000 plus taxes and fees, it came out to around $21,000 don't remember exactly. She leased it for 36months. (no money down)
2. Her monthly payments came out to $250 a month so in 36 months she will end up paying $9,000. 
3. At the end of the lease the value of the car they guarantee is around $12,000 so she pretty much breaks even as she came to the same price going from $21,000 - $9,000 = $12,000. 
4. At the end of the lease she has option to turn the car in for a new one - and if the car has less miles then 36,000, if she takes care of the car, there is always a chance that the car could be worth more than they are predicting it to be. In which case she could use the difference towards a new lease and lower her payments that way. Maybe she will get into an accident and it will lowerthe value of the car beyond the $12,000 that they are predicting it to be, than she can just give them the keys and walk away from it all. 
5. She also has the option of buying the carfor $12,000. This way she is only finances $12,000 and not the original $21,000. If she takes care of the car and doesnt put a lot of miles on it, the car again can be worth a lot more then 12K. At that point she could purchanse it for 12K and have a car that is worth 15K (just an example) At least during the first three years she can drive around, see if she even likes the car and how it handles, and see if there are any major issues with it. At this point she can make up her mind and say YES I love this car I’m keeping it. She can also say screw it I hate it I want out of it and she hands them the keys and walks way. 
6. If she were to purchase the car for 21,000 with 1.9% because that’s what it was, for 60 months, she would be paying about 360 a month.  And at the end of the 3 years she would have paid close to $13,000. That is a 4K difference that she can take at the end of her lease put towards the car if she decided to keep it and only finance 8K or maybe at that time just buy the car for 12K cash. 

Now with what I mentioned above how is leasing a car a bad thing? Am I missing something? You have so many choices at the end of the lease and you are not losing anything. The numbers are not exact but they are very close enough to get the idea of what I am trying to say. 

[Anonymous]

You made the right decision

[Anonymous]

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@SMikulski49 wrote:

My fiancée and I just went through the whole purchasing a car and leasing a car. She was looking for a vehicle and we were wondering if we should buy or lease. This is just my example and how we went about this situation. We ended up leasing the car. 

1. The car was 19,000 plus taxes and fees, it came out to around $21,000 don't remember exactly. She leased it for 36months. (no money down)
2. Her monthly payments came out to $250 a month so in 36 months she will end up paying $9,000. 
3. At the end of the lease the value of the car they guarantee is around $12,000 so she pretty much breaks even as she came to the same price going from $21,000 - $9,000 = $12,000. 
4. At the end of the lease she has option to turn the car in for a new one - and if the car has less miles then 36,000, if she takes care of the car, there is always a chance that the car could be worth more than they are predicting it to be. In which case she could use the difference towards a new lease and lower her payments that way. Maybe she will get into an accident and it will lowerthe value of the car beyond the $12,000 that they are predicting it to be, than she can just give them the keys and walk away from it all. 
5. She also has the option of buying the carfor $12,000. This way she is only finances $12,000 and not the original $21,000. If she takes care of the car and doesnt put a lot of miles on it, the car again can be worth a lot more then 12K. At that point she could purchanse it for 12K and have a car that is worth 15K (just an example) At least during the first three years she can drive around, see if she even likes the car and how it handles, and see if there are any major issues with it. At this point she can make up her mind and say YES I love this car I’m keeping it. She can also say screw it I hate it I want out of it and she hands them the keys and walks way. 
6. If she were to purchase the car for 21,000 with 1.9% because that’s what it was, for 60 months, she would be paying about 360 a month.  And at the end of the 3 years she would have paid close to $13,000. That is a 4K difference that she can take at the end of her lease put towards the car if she decided to keep it and only finance 8K or maybe at that time just buy the car for 12K cash. 

Now with what I mentioned above how is leasing a car a bad thing? Am I missing something? You have so many choices at the end of the lease and you are not losing anything. The numbers are not exact but they are very close enough to get the idea of what I am trying to say. 

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Yes, I would say things have been missed.  You or your fiance have a healthy appetite for risk.

Have you accounted for the bump in your car insurance costs?  You do realize most leases require gap coverage?  Have you really studied what the dealership will feel meets the standard of "maintaining the car properly"?

What about her and or your careers?  Do you feel the field of work you or your fiance is in meets stability needs to you/she having a low risk for a layoff? 

I'm obviously in a minority of loving a life without monthly payments.

[SMikulski49]

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@Anonymous wrote:

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@SMikulski49 wrote:

My fiancée and I just went through the whole purchasing a car and leasing a car. She was looking for a vehicle and we were wondering if we should buy or lease. This is just my example and how we went about this situation. We ended up leasing the car. 

1. The car was 19,000 plus taxes and fees, it came out to around $21,000 don't remember exactly. She leased it for 36months. (no money down)
2. Her monthly payments came out to $250 a month so in 36 months she will end up paying $9,000. 
3. At the end of the lease the value of the car they guarantee is around $12,000 so she pretty much breaks even as she came to the same price going from $21,000 - $9,000 = $12,000. 
4. At the end of the lease she has option to turn the car in for a new one - and if the car has less miles then 36,000, if she takes care of the car, there is always a chance that the car could be worth more than they are predicting it to be. In which case she could use the difference towards a new lease and lower her payments that way. Maybe she will get into an accident and it will lowerthe value of the car beyond the $12,000 that they are predicting it to be, than she can just give them the keys and walk away from it all. 
5. She also has the option of buying the carfor $12,000. This way she is only finances $12,000 and not the original $21,000. If she takes care of the car and doesnt put a lot of miles on it, the car again can be worth a lot more then 12K. At that point she could purchanse it for 12K and have a car that is worth 15K (just an example) At least during the first three years she can drive around, see if she even likes the car and how it handles, and see if there are any major issues with it. At this point she can make up her mind and say YES I love this car I’m keeping it. She can also say screw it I hate it I want out of it and she hands them the keys and walks way. 
6. If she were to purchase the car for 21,000 with 1.9% because that’s what it was, for 60 months, she would be paying about 360 a month.  And at the end of the 3 years she would have paid close to $13,000. That is a 4K difference that she can take at the end of her lease put towards the car if she decided to keep it and only finance 8K or maybe at that time just buy the car for 12K cash. 

Now with what I mentioned above how is leasing a car a bad thing? Am I missing something? You have so many choices at the end of the lease and you are not losing anything. The numbers are not exact but they are very close enough to get the idea of what I am trying to say. 

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Yes, I would say things have been missed.  You or your fiance have a healthy appetite for risk.

Have you accounted for the bump in your car insurance costs?  You do realize most leases require gap coverage?  Have you really studied what the dealership will feel meets the standard of "maintaining the car properly"?

What about her and or your careers?  Do you feel the field of work you or your fiance is in meets stability needs to you/she having a low risk for a layoff? 

I'm obviously in a minority of loving a life without monthly payments.

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1. Why do you say healthy appetitie for risk? Yes we looked into how much it would cost to get her on the car insurace before buying (buying or leasing we would need to pay that, even if we pay cash up front we would need to pay insurance).

2. The lease came with gap coverage at no extra cost.

3. Yes we did discuss it with dealer about what shape we need to bring it back in if we decide not to buy it or not lease a new one. (our intent is to lease and buy the car at the end unless there are major problems with the car (engine, transmission, etc.)

4. We do not worry about our careers, we both have good jobs and even if one of us gets layed off we have enough savings to last us a while. Plus I do not see any problems with finding another job within few weeks for either me or her. 

5. She needed a car to get to work, and most of the questions you are asking have nothing to do with leasing vs financing. My post was not about if we can afford the car, it was more towads leasing or purchasing a car. We could have paid cash for it but why spend 21K up front when you can lease/finance and build your credit portfolio. Spending 21K up front or paying monthly you still spend 21K (little more if you finance depending on % and how long it takes you).