leasing a car? Please give your opinion

[emirate25]

Do you guys recommend in leasing a car?

I live in downtown houston and my job is two blocks away.

[musicman]

what are you doing currently for transportation?

[102IAHexpress]

This link has some info on Texas auto leasing

http://www.leaseguide.com/Articles/texas-auto-lease.htm

[TJones]

What will you be using the car for ? How many miles per year do you think you will be driving ?

Edited July 30, 2007 by TJones

[ricco67]

Do you guys recommend in leasing a car?

I live in downtown houston and my job is two blocks away.

Here is my recommendation:

Unless you just wish to trade the car in after 3 years, don't do it.

If you plan on leaving the states in a year or so, then do so.

It just doesn't make any financial sense. But if you do, haggle the PRICE of the car, that is just as negotiable as the SALE of a car.

[TJones]

Here is my recommendation:

Unless you just wish to trade the car in after 3 years, don't do it.

If you plan on leaving the states in a year or so, then do so.

It just doesn't make any financial sense. But if you do, haggle the PRICE of the car, that is just as negotiable as the SALE of a car.

Well, it is not JUST as negotiable, because you usually lose any rebates from the factory when you are doing a lease.

[Mr. Chenevert]

Its actually more negotiable since salesmen make higher commisions on leases than they do traditional finance or cash deals.

[Chamo]

Do you guys recommend in leasing a car?

I live in downtown houston and my job is two blocks away.

Being so close to work I imagine you will be able to limit your miles to the 10,000 - 12,000 - 15,000 miles you can get on a lease before penalties.

I was on a similar situation and leased my first car in 2000. I've been leasing a car since then. If you don't mind the feeling that you are just "Renting" a car for 3-4 years, it is a great way to go (You actually pay for the depreciation). I have changed cars twice since then and given that the ones I leased came with everything included for 4 years - 50,000 miles, my only car expense was Gas.

Since I moved to Pearland and have many more miles to drive per year, I bought a truck to put as many miles as I want and then I have my Leased "Luxury" car for 12,000 miles per year.

Had great experiences with BMW financial services, not as good with MBenz.

[sevfiv]

how much do you think you would drive the vehicle? (since driving to work isn't in the equation)

the obvious drawback to leasing is mileage limits (but you can purchase extended miles) and the possibility of a hefty balloon payment at the end of the term.

i recently bought a new car, and the salesman was trying to get me to lease a vehicle - DaimlerChrysler apparently has a thing where it can end up costing you less per month, and they have a guaranteed vehicle value upon its return. i didn't lease, though, since i plan on keeping the vehicle for a longer period of time.

[Mark F. Barnes]

If you are self employed or contract (1099) labor and need the Tax write-off, it is a better deal tax wise, as long as you don't put too many miles on it, and get into penalties. If you plan on a lot of miles either way it's not a good deal at all. If you are not a 1099 candidate, and you just like changing out vehicles Evey 3 yrs or so and can keep the miles down it can be a good deal also. It can put you in a very expensive car a lot cheaper if you qualify. Saves big down payments and warranty issues.

[houstonmacbro]

Do you guys recommend in leasing a car?

I live in downtown houston and my job is two blocks away.

My sister has leased with Momentum Volkwagen/BMW for many years and is generally very pleased with it. She does a moderate amount of driving, but occasionally has gone over her miles (for which they are quite forgiving).

I drive way too much for a lease, so that option is out for me.

[TJones]

Its actually more negotiable since salesmen make higher commisions on leases than they do traditional finance or cash deals.

How do you figure that ? The gross is the gross, there is no seperate percentage that salesmen get paid for doing a lease over a purchase.

Edited July 30, 2007 by TJones

[jm1fd]

Leasing is sort of a bad deal in Texas because you have to pay sales tax on the full price of the vehicle...not just the depreciation of the 3 years that you have it.

[TJones]

Leasing is sort of a bad deal in Texas because you have to pay sales tax on the full price of the vehicle...not just the depreciation of the 3 years that you have it.

Yeah, but you don't pay the full tax amount in the 24 or 36 months you are in the car either, and nobody who trades out before 60 months on a traditional purchase ever pays the full tax amount either.

A lease gives you 3 options. At the end of your term you can finance the remainder of the balance, you can stroke a check for the remainder, or you can just turn the keys over and say thanks for lettin me drive it, and start all over again. This way you are NEVER upside down if you are in a lease and adhere to the terms of that lease.

Edited July 30, 2007 by TJones

[jm1fd]

Yeah, but you don't pay the full tax amount in the 24 or 36 months you are in the car either, and nobody who trades out before 60 months on a traditional purchase ever pays the full tax amount either.

Huh? You buy a car, you pay tax on it, you trade it in later, and you don't have to pay tax on the value of the trade in. If you lease another car do you get a tax break in the amount of the residual on the previous lease? I don't believe so.

A lease gives you 3 options. At the end of your term you can finance the remainder of the balance, you can stroke a check for the remainder, or you can just turn the keys over and say thanks for lettin me drive it, and start all over again. This way you are NEVER upside down if you are in a lease and adhere to the terms of that lease.

You can be "upside down" with excess wear and tear charges or mileage overages.

[millennica]

I recommend buying a car and driving it until you can't drive it any longer. I'm still driving my 1988 Volkswagen Fox that I paid for in cash when I purchased it new. I'm thinking about purchasing a new car in 2008.

[TJones]

Huh? You buy a car, you pay tax on it, you trade it in later, and you don't have to pay tax on the value of the trade in. If you lease another car do you get a tax break in the amount of the residual on the previous lease? I don't believe so.

You can be "upside down" with excess wear and tear charges or mileage overages.

You really believe you won't be upside down if you try to trade your car in within 3 years if you did a straight purchase for 60 months ?LOL! Not unless you are putting down $10,000. You won't be upside down in a lease if you "ADHERE TO THE LEASE TERMS". If you "ADHERE TO THE LEASE TERMS", you will not have excess wear and tear or mileage overage. Let's compare apples to apples jm1. The BANK guarantees a residual value of usually 45 to 52% of the MSRP of the vehicle. So, yeah you kinda get a tax break, because the BANK is absorbing the amount they guaranteed, even if the bottom falls out of the market on that particular vehicle, i.e Ford Taurus, Kia anything, Hyundai anything.

Here's an example for you: You buy a $30k car, you trade it in 3 years and the car is now worth $12k, you get a tax savings based on $12K, correct ?

The bank has guaranteed a residual of 51% on the same $30k car, so they guarantee the car to be worth $15300, do you think your tax savings on $12k is gonna be enough to overshadow the $15300 the bank guaranteed ?

Edited July 30, 2007 by TJones

[jm1fd]

You really believe you won't be upside down if you try to trade your car in within 3 years if you did a straight purchase for 60 months ?LOL! Not unless you are putting down $10,000.

Of course I really believe it...I've done it 4 times and counting. I've swapped out about 4 cars after owning them for two years or less ....nothing down, had thousands in equity to put in the bank when it was all said and done. The best one was the one that only cost me $450/year in depreciation.

Here's an example for you. you buy a $30k car, you trade it in 3 years and the car is now worth $12k, you get a tax savings based on $12K, correct.

The bank has guaranteed a residual of $51% on the same $30k car, so they guarantee the car to be worth $15300, do you think your tax savings on $12k is gonna be enough to overshadow the $15300 the bank guaranteed ?

Here's another example....the bank hits the residual just perfectly and the car is worth what the "bank guaranteed". OOOOPSIE DOODLES....there goes your supposed advantage. The banks study residuals VERY carefully...they have to. They will lose BIGTIME if they don't get those numbers right. If they missed the numbers as wildly as you claim with any regularity, then they'd be out of business. Hoping that the bank will fat finger the residual is not a smart repeatable strategy.

The best strategy at least in terms of saving money is to buy a car slightly used and then drive it until it dies. Second best strategy woud be to find a great deal on a slightly used car and sell it private party and buy something else every year or two. That's what I've done, it has allowed me to have a different car every year or two, and I've put major $$ into savings every time I turn a car over.

[TJones]

Of course I really believe it...I've done it 4 times and counting. I've swapped out about 4 cars after owning them for two years or less ....nothing down, had thousands in equity to put in the bank when it was all said and done. The best one was the one that only cost me $450/year in depreciation.

I'll call Bullshit on that one ! You buy a car every 2 to 3 years, I buy and sell them everyday.

Here's another example....the bank hits the residual just perfectly and the car is worth what the "bank guaranteed". OOOOPSIE DOODLES....there goes your supposed advantage. The banks study residuals VERY carefully...they have to. They will lose BIGTIME if they don't get those numbers right. If they missed the numbers as wildly as you claim with any regularity, then they'd be out of business. Hoping that the bank will fat finger the residual is not a smart repeatable strategy.

I don't know what kind of math you are using to say you get a tax advantage, .0625 percent on $12000 is $750, and even if you use the lowest residual of 45% the car is still guaranteed to be worth $13500. That's a $750 gain.You are right, bank's look at residual values very closely, and if you stick to their terms, you will come out ahead. BTW, a car being traded in to a dealer and it being worth what the bank guaranteed off the residual is the one in a million shot. So, the "OOOOPSIE DOODLES" theory doesn't hold any water.Let's try to keep it here in the real world, shall we?

The best strategy at least in terms of saving money is to buy a car slightly used and then drive it until it dies. Second best strategy woud be to find a great deal on a slightly used car and sell it private party and buy something else every year or two. That's what I've done, it has allowed me to have a different car every year or two, and I've put major $$ into savings every time I turn a car over.

You have just contradicted yourself cheif. Selling privately wasn't part of the equation, we are talking about trading cars in, which YOU haven't done. APPLES TO APPLES jm1, how come you have such a hard time doing that ? You sell them yourself and YOU aren't saving any taxes now are you.

Edited July 30, 2007 by TJones

[jm1fd]

I'll call Bullshit on that one ! You buy a car every 2 to 3 years, I buy and sell them everyday.

Call bullshit all you like. The truth is the truth.

I don't know what kind of math you are using to say you get a tax advantage, .0625 percent on $12000 is $750, and even if you use the lowest residual of 45% the car is still guaranteed to be worth $13500. That's a $750 gain.You are right, bank's look at residual values very closely, and if you stick to their terms, you will come out ahead. BTW, a car being traded in to a dealer and it being worth what the bank guaranteed off the residual is the one in a million shot. So, the "OOOOPSIE DOODLES" theory doesn't hold any water.Let's try to keep it here in the real world, shall we?

Yes. Do let's keep it in the real world. So...here in the real world, how do banks manage to turn a profit when they're blowing the residuals left and right to the tune of thousands of dollars in favor of the consumer on every car, as you purport?

You have just contradicted yourself cheif. Selling privately wasn't part of the equation, we are talking about trading cars in, which YOU haven't done. APPLES TO APPLES jm1, how come you have such a hard time doing that ? You sell them yourself and YOU aren't saving any taxes now are you.

Could you direct me to the portion of the thread where said "equation" is? Just because I haven't traded in a car doesn't mean I don't know how the math works.

When I sell them myself I get more than (trade offer + sales tax savings).

[ricco67]

Alright Gentlemen, let's calm down.

Jm1fd, the only way you can NOT wind up upside down on a car you owned for less then *3* years is if you have a 3 year note and a high value car, OR had a substantial Down payment.

I'd be VERY anxious to know the terms you put the car out there for.

[dalparadise]

I think one of the points trying to be made is that some cars have high residual values at the end of their lease terms. These end up being a better deal for leasing. Essentially, if you choose a high-demand, high-value car on the used market, like, for instance, a 3-series BMW, you will have comparably low lease payments and more favorable terms than, say, a Lincoln with the same sticker price. There just isn't as big a market for the 3-year-old Lincoln, so the lease terms won't be as good.

So, the key is to choose your vehicle accordingly.

That said, leasing is usually not the greatest deal -- all things being equal. It's really only worth it if you feel like you need to drive a more expensive car than you can afford.

[jm1fd]

Jm1fd, the only way you can NOT wind up upside down on a car you owned for less then *3* years is if you have a 3 year note and a high value car, OR had a substantial Down payment.

Here's the basic outline of how you can do it:

1. Find a model that is popular and doesn't depreciate much after the first year or two

2. Find a clean example of said model with low or average mileage that is at least 2 years old, pay somewhere around wholesale book (yes, it can be done....even at a dealership)

3. Keep it in good condition, and don't a huge crapload of miles on it. Mileage should be right around 12k per year.

4. Sell it private party one to two years after purchase

Steps 2 and 4 require some patience but it is QUITE possible to have equity in the vehicle when it comes time to sell it.

I drove a Lexus for 2 years and it cost $1k/year in depreciation

I had an Audi for 2 years and it cost $2k/year in depreciation

I had a Tacoma for 2 years and it cost $450/year in depreciation

I'm expecting my current vehicle to come in at around $1k/year in depreciation. Conservatively I currently have $4k in equity in it in less than a year's time...and I broke all the rules and bought it new...albeit at a HUGE discount.

Edited July 31, 2007 by jm1fd

[TJones]

LOL! What the?, you even "quoted" me on said "equation" TWICE go back and read your own posts, they are numbers 15 and 18. Selling the cars yourself never entered into the equation, it was all about trading a car in off a straight purchase over turning in a lease. Even selling the cars yourself , I will agree that you might break even on the sale, but think about how much time dealing with the looky loos, energy on advertising, as well as money spent trying to sell that car for your extra $500 to $600 dollars over a trade in.

Tell you what I'll do for you, you can come to my dealership as Joe Schmoe and simply get an appraisal on your car don't tell me who you are, or go to Carmax, they will actually give you the most money, and see just how far off base you are, if you have a 60 month note on your killer deals that YOU purport to make as a buyer. I will then be happy to cash your reality check.

BTW, what kind of make and model and miles are you driving now, that you think you have $4k equity.

Edited July 31, 2007 by TJones

[musicman]

It's really only worth it if you feel like you need to drive a more expensive car than you can afford.

so true.

[TJones]

Oh, forgot to add that BANKS make their profit off the interest rate, because it is a set percentage, no matter if you are Bill Gates or you JM1. There is no haggling over the rate on a lease, so even if the Banks are off by $1000 to $2000 after the return and they sell at the auction, they are already covered. They also will make a little profit off the resale of the vehicle to the dealership who may want to go ahead and take that vehicle to put on their lot.

How do Banks make a profit when 0% is offered on a straight purchase ? They take the rebate you could have chosen and give it to the bank to cover the interest.

Edited July 31, 2007 by TJones

[jm1fd]

LOL! What the?, you even "quoted" me on said "equation" TWICE go back and read your own posts, they are numbers 15 and 18. Selling the cars yourself never entered into the equation, it was all about trading a car in off a straight purchase over turning in a lease. Even selling the cars yourself , I will agree that you might break even on the sale, but think about how much time dealing with the looky loos, energy on advertising, as well as money spent trying to sell that car for your extra $500 to $600 dollars over a trade in.

Hold on just a minute here. You said:

Yeah, but you don't pay the full tax amount in the 24 or 36 months you are in the car either, and nobody who trades out before 60 months on a traditional purchase ever pays the full tax amount either.

How exactly does that work? Do I file for a refund with the state for 3 years worth of sales tax if I only keep the car for 2 years of a 5 year note?

Tell you what I'll do for you, you can come to my dealership as Joe Schmoe and simply get an appraisal on your car don't tell me who you are, or go to Carmax, they will actually give you the most money, and see just how far off base you are, if you have a 60 month note on your killer deals that YOU purport to make as a buyer. I will then be happy to cash your reality check.

Not looking to sell it just yet, and I won't be selling it for wholesale unless the other numbers on whatever I'm trading it for are VERY, VERY strong.

BTW, what kind of make and model and miles are you driving now, that you think you have $4k equity.

Nope...sorry...it is too distinct a vehicle to go about posting that sort of info all over the interwebs. I know how to properly figure out the value of a car, and that it doesn't involve looking it up in a little book.

[TJones]

Ok, I'll type slow for you this time so you can keep up.

You are only paying for basically HALF the car on a lease, the tax amount is included in the purchase amount, are you with me so far ? You are only making payments for 36 months on a lease and that means only HALF of the tax amount is being put into those payments or 49% to be exact if you have a 51% residual. You DON'T pay the full amount of taxes charged in those 36 months. The residual will always OVERRIDE what ever tax savings you think you are getting by TRADING a car in. I gave you the numbers earlier, and showed you how you would still be $750 to the better on a lease over trading in. I will stand by my numbers all day. I will even give you 2 exact cars, mileage and all, and you will still be upside down on a 60 month purchase over a residualized lease. Them's the facts. Oh, btw, you don't pay interest on sales tax on a lease, you do however pay interest on taxes for a traditional purchase.

There are no tax forms to fill out, you said yourself, that " you don't have to pay tax on the value of the trade in..."

This is true when trading in.

The difference is that the residual value is gonna be better than your trade in to the dealership, 99.9 % of the time and will be far great, as I showed, 200% greater than your measley tax savings by trading in.

Edited July 31, 2007 by TJones

[jm1fd]

You are only paying for basically HALF the car on a lease, the tax amount is included in the purchase amount, are you with me so far ? You are only making payments for 36 months on a lease and that means only HALF of the tax amount is being put into those payments or 49% to be exact if you have a 51% residual. You DON'T pay the full amount of taxes charged in those 36 months.

You're saying that the total tax due is (Cost of Car) * (Tax Rate) * (100-(Residual %)), right?

[gwilson]

I haven't read all the responses, but...

Cars are depreciating assets. Unless you plan on owning the same car for 5+ years, then it isn't worth owning. You will take ALL the hit of the depreciation as well as the cost of maintenance.

If you don't need 20k+ miles a year and you don't need to keep it for 5 years, then lease.