To lease or not to lease?

meeklo062704 · ‎01-13-2015

I'm getting ready to buy another car in the next few months. The car I'm looking at will be $25,000-$30,000. My fako is in the 630-645 range according to the free score sites over the last few months. It will be going up as my wife and I have acquired a couple credit cards each, then added each other as authorized users, and I'll be paying off my medical connections within the next 6 months. My plan was to get the car on a long term contract for the lower payment, then refi after 12-18 months when my score is in a more desirable range.

I've been seeing some great lease deals lately, with really low payments. Most are sceptical about leases, but I plan on having the car for a long time, so buying it up at the end will be an easy decision. So it gives me exactly what I wanted. Very low payment, with better credit when the time to buy comes, but in a brand new car instead of used.

Does this seem to be sound logic? My only concern at this point is qualification. I'm hoping auto enhanced will help as I paid off a car in August with 36 never late payments. Also I have 3 years on a job that gives a free apartment, so my debt to income is pretty good. How tight are dealers with leases on new cars?

Anonymous · ‎01-13-2015

It's an interesting idea to lease for lower payments waiting for your scores to go up. Usually leasing is used when you're the type of person that wants a new car ever 2 or 3 years. However, for some insane reason, it tends to be harder to get a lease than straight financing. I don't know why, but that's the way it is.

Now, you said you're sceptical about some of the lease deals that you're seeing, and you should be. Let me give you a quick tour of the gotchas. Some of them are obvoius. Here's what sounds like a good deal.

http://www.islandlincoln.com/specials/lease

You see the $349 a month in big print. But in slightly smaller print you see $2589 due at signing. Keep that number in mind. Now read the really small print. Taxes, title and license fees extra. OK, license, not too bad, neither is title. But still, add $150 to $200 more due at signing. But taxes. Depending on how your state figures taxes on leases, this can be a big number. They just changed it here in Illinois, but unitl the first of the year you paid full sales tax on the entire purchase price of the vehicle. If you lived here in Chicago that sales tax would be about $3600. Add in the deal prep and doc fees and all of sudden you're over $6K due signing. They'll be happy to roll that $6K back into the lease. But now that cheap $350 lease is now an expensive $500+ lease.

One top of that, the city of Chicago is going to sock you for another $30 a month or so with their lesae tax. If your state does it the right way, as Illinois just changed to, you'll pay sales tax based on the overall cost of the lease. That will save you about half. And of course, few places are as bad as Chicago for sales tax.

And all this is for a vechicle without a single option. With a lease you can usually figure about $30 a month for every extra $1000 you add on. And that particular lease has the security deposit waived, but not all do.

And this one doesn't say it, but it likely has a 12K miles per year limit. Now, you may think that doesn't matter because you're going to buy it at the end of the lease. Read the paperwork carefully, and good luck finding it in there. Some leases force you to fulfil the lease, including the mileage clause before you can buy the car. And what happens if things change 3 years from now and you don't want to keep the car. Those miles can really bite you in the ass.

You also need to be honest about how you treat a car. If you get to lease end you have to pay for excessive wear and tear. That includes dents, paint condition and the interior. Do a lot of highway driving and paint chips from rocks, that's gonna cost you. Get a lot of door dings from parking lots, more $$$. Have a spouse that likes to scratch rims when parking, there's more.

I'm not one that's automatically against leases. I've leased 3 cars and was very happy with them. I just think it's important to know what you're really getting into.

SamsungHDTV · ‎01-13-2015

@meeklo062704 wrote:
I'm getting ready to buy another car in the next few months. The car I'm looking at will be $25,000-$30,000. My fako is in the 630-645 range according to the free score sites over the last few months. It will be going up as my wife and I have acquired a couple credit cards each, then added each other as authorized users, and I'll be paying off my medical connections within the next 6 months. My plan was to get the car on a long term contract for the lower payment, then refi after 12-18 months when my score is in a more desirable range.

I've been seeing some great lease deals lately, with really low payments. Most are sceptical about leases, but I plan on having the car for a long time, so buying it up at the end will be an easy decision. So it gives me exactly what I wanted. Very low payment, with better credit when the time to buy comes, but in a brand new car instead of used.

Does this seem to be sound logic? My only concern at this point is qualification. I'm hoping auto enhanced will help as I paid off a car in August with 36 never late payments. Also I have 3 years on a job that gives a free apartment, so my debt to income is pretty good. How tight are dealers with leases on new cars?

If you plan to keep the car awhile (assuming a long while), its best to purchase and refinance as soon as your credit improves. Leasing with intent to buy at the end of the lease doesn't make sense financially. The only benefit is the lower payment, but if you pay no rent and debt to income is good, then I'm assuming you really don't need a lower payment.

Bottom line, you should really just buy the car instead of lease.

meeklo062704 · ‎01-13-2015

I plan on keeping it for years. The reason for the lowest payment right now is due to a payment arrangement with the irs. I got pretty deep on my previous job where I was a 1099. The lease would give me a lower payment on a new car than I would get on a used one. The used ones can be difficult due to the high chance of abuse. So new would be more desirable. I'm trying to avoid a high payment just because I can. My wife has an upcoming surgery that might put her on disability, so I want to make the decision on a long term instead of short term. It's been a long struggle digging out of our bad credit, so I'm trying to stick with the most comfortable options. I'm trying to pull the trigger because the car is discontinuing after this year, so the value will be going up.

Anonymous · ‎01-13-2015

@meeklo062704 wrote:
I plan on keeping it for years. The reason for the lowest payment right now is due to a payment arrangement with the irs. I got pretty deep on my previous job where I was a 1099. The lease would give me a lower payment on a new car than I would get on a used one. The used ones can be difficult due to the high chance of abuse. So new would be more desirable. I'm trying to avoid a high payment just because I can. My wife has an upcoming surgery that might put her on disability, so I want to make the decision on a long term instead of short term. It's been a long struggle digging out of our bad credit, so I'm trying to stick with the most comfortable options. I'm trying to pull the trigger because the car is discontinuing after this year, so the value will be going up.

Huh? What car do yo think is going up because it's being discontinued. That almost never happens. Also As SamsungHDTV says it makes very little sense to lease a car that you plan on keeping for a long time. Generally that is the exact opposite reason to lease a vehicle.

Anonymous · ‎01-13-2015

Just be careful and make sure you understand the fine print on those leases. Lots of advertising of low lease prices, but then it says $x,xxx due at sigining. I've seen that as high as $5K. Then, to get that rate, you also need to add tax, title and license. Those last 2 are no big deal, but tax can be a lot. Some states make you pay tax on the full purchase price of the vehicle. Best case you'll pay tax on how much you'll pay over the life of the lease. This can easily add a few more grand you need to come out of pocket or roll into the quoted lease price.

And check the city you live in. Here in the city of Chicago they add their own monthly tax to leases even though they're already charging an extra 1% on sales tax. I think on my last lease it was about $26 a month for that.

And all lease prices advertised are without any options and usually for the cheapest model. Rule of thumb on a 3 year lease it the monthly payment goes up about $30 for every extra $1K.

Don't ignore the mileage limitation just because you plan to buy at the end of lease. First, you might change your mind. Lots of things can happen in 3 years. Second, some leases are written so you have to finalize the lease before you can purchase the car, meaning you'll have to pay the over miles fine first. It's not common, but you have to be careful. And don't trust the F&I guy to give you the full story. You'll have to actually read the contract.

Bottom line, you can expect your monthly payment to be between $80 and $100 less for a lease than for a straight purchase. If you're thinking it will be more than that I think you're going to be surprised.

meeklo062704 · ‎01-13-2015

The point of the value of the car is due to its discontinuation. A 20 year old Toyota supra is still $30,000 in decent condition. The same thing is going to happen the Mitsubishi evo. I saw one from a dealer go up in value by a lot a month after the announcement. The 2015s are a little different, so people are snatching up 2014s. I'd like to have a new one because I'd know it wasn't beat by the previous owner, but I don't want a massive payment on it. The better it is, the more it'll be worth if and when I decide to sell it.

I'm definitely not running blindly to a lease, I know they'll slip in what they can. I'm about 3 months out from purchasing, so I'm doing my homework now and weighing the options.

Anonymous · ‎01-13-2015

@meeklo062704 wrote:
The point of the value of the car is due to its discontinuation. A 20 year old Toyota supra is still $30,000 in decent condition. The same thing is going to happen the Mitsubishi evo. I saw one from a dealer go up in value by a lot a month after the announcement. The 2015s are a little different, so people are snatching up 2014s. I'd like to have a new one because I'd know it wasn't beat by the previous owner, but I don't want a massive payment on it. The better it is, the more it'll be worth if and when I decide to sell it.

I'm definitely not running blindly to a lease, I know they'll slip in what they can. I'm about 3 months out from purchasing, so I'm doing my homework now and weighing the options.

Good luck with that is all I can say. Cars are discontinued and changed generally for one reason and that's improvement in the newer models. That does not lead to the older versions value going up. The exact opposite happens but I wish you the best.

meeklo062704 · ‎01-13-2015

Happens to most, but not all.

Anonymous · ‎01-14-2015

I disagree. Leasing can make perfect sense if you know what you're doing. I know several people who leased, then purchased the car. Either with a low monthly payment for the buyout or paid in full & kept the car. We just leased a new X3. They had a great plan & we were sure to read the fine print & make sure they didn't throw anything in there we didn't want. All repairs & oil changes are covered. No expenses out of our pocket except gas. And if we want to keep it, the buy out is very low. And it also works the other way as well. If you plan on changing cars every 2 yrs, that's the way to go. Our son-in-law got stuck with a pick-up he doesn't really like because he just kept changing cars every 2 years with no money down. Now he's stuck for 84 months with something he doesn't want! Just be careful and congrats on your future new car!