OT: Car Leases

[bryce]

So I totaled my car this week and now am looking at car-shopping. I'm considering a lease this time around, but have always purchased in the past, so I turn to the FOFC braintrust for any tips on leases.

But to start things off, my main question is how do lease negotiations work? Do you come to a purchase price and residual value, and then work backwards to get the lease payment? This is what I assume, but just making sure.

Thanks in advance.

[Franklinnoble]

I can't stomach the thought of making a car payment, losing equity, and being bound to a certain small number of miles I'm allowed to drive per year.

Buy a used car. Save on the depreciation. Don't lease.

[Ksyrup]

What he said.

[Radii]

I have never considered leasing myself, but as I do for most financial type matters, I turn to the Motley Fool to see what articles they have on the subject:

Buying vs. Leasing a Car
http://www.fool.com/News/mft/2004/mft04012010.htm

And:
Buying a Car
http://www.fool.com/car/car.htm

[Kevin]

Better still, get a lease back car. You can usually get great deals on these cars that are turned in after a 12 or 24 month lease with low mileage. You don't have to pay for the huge first year depreciation hit, plus you will often have lots of warranty left. I just bought a 2003 Intrepid with only 30,000 kms for two-thirds the price of a new one.

[rkmsuf]

Just don't end up with the Family Truckster when you really wanted the Sport Wagon...

[Aylmar]

You think you hate it now...but wait 'til you drive it.

[bamcgee]

leasing allows me to spend stupidly on cars I have no business driving. Which is kinda fun. So if that's what you're after, go for it.

[Desnudo]

So I totaled my car this week and now am looking at car-shopping. I'm considering a lease this time around, but have always purchased in the past, so I turn to the FOFC braintrust for any tips on leases.

But to start things off, my main question is how do lease negotiations work? Do you come to a purchase price and residual value, and then work backwards to get the lease payment? This is what I assume, but just making sure.

Thanks in advance.

If you want a new car every three or four years, lease. If you want a car that would be out of your reach financially, lease. If you drive more than 15,000 miles a year, buy. If you want a car for the next 5-10 years, buy.

[Draft Dodger]

our last car was a lease - but it was exactly the right deal for us.

-we knew it was short term, as we were planning to have a child at some point and need something larger. this summer we traded in in and bought a minivan
-we only drive about 6,000 miles a year.
-the price was very good

you can get screwed either way - the car before that we had bought used, but we paid way too much for it, and ended up taking a bit of a bath on that one. Or current car, the minivan, we bought, because we plan to have that for more than just a couple years.

I would definitely lease again if the circumstances allowed it.

[Franklinnoble]

If you want a new car every three or four years, lease. If you want a car that would be out of your reach financially, lease. If you drive more than 15,000 miles a year, buy. If you want a car for the next 5-10 years, buy.

If you want to have a contract telling you how far you can drive, and like throwing your money away in perpetuity, lease. If you want to actually own the vehicle at the end of three or four years, buy a used car, and take good care of it.

[Swaggs]

IBasically, the premise behind leasing is that you (and the dealership) are anticipating how much the vehicle you choose will be worth after the term you lease it for, with you paying the price between that value and its sale price. You must have very good credit to lease a vehicle. If there is any chance that you will go over the allocated mileage, do not lease, as you will get absolutely destroyed by the penalty. Do not lease for more than 36 months, or you may as well buy the vehicle.

As far as negotiations, you will have no say in what the residual value will be. They are "booked out" and change frequently. Since you have no trade in due to the total loss of your previous vehicle, you will only need to negotiate the sales price and/or the monthly payments. Again, be wary of a long-term lease--they can really bury you for a long time.

[timmae]

I agree with Swaggs in that you should try to stay away from a longer lease. As mentioned above, a lease has certain advantages and disadvantages. I think they were outlined fairly well. However, mileage doesn't matter as much as you may think. If you are way over on your mileage you can shop around 6-8 months before your lease is up and have a dealership 'buy' your business by giving you both a good buy-back on your current vehicle and a decent lease price on your new vehicle. Never pay the mileage penalty. Just have the dealership where you get your new vehicle deal with it. I was in your same exact position just over 2 years ago. I totalled my 1991 Chevy Corsica, which had 178,000 miles on it was going strong (dammit), and had to get a new vehicle pronto. I chose a Ford Explorer with a 3 year lease and had an extra 3,000 miles a year thrown in on it. I have 45,000 miles to use over the 3 years. I have over 54,000 miles with a bit over 10 months to go on the lease yet. I have already begun to talk to different dealerships about handling the buyout on the Explorer if I lease a new vehicle from them. Corsica-Explorer-Denali/Escalade or Expedition will definately work for me. Another notable clause is that some car companies will do aoutomatic buyback with no questions asked. Chevy did one a while back and allowed people to sign new leases for no penalty at all...

[BigJohn&TheLions]

HA HA HA! You suckers! Spending money on cars!!! HA HA HA! Living in NYC is the best. I don't have a car, don't need a car, don't want a car!

As far as the lease/purchase thing. Only buy what you can afford to buy outright. Don't pay interest rates, that's where you get ripped off.

[Bubba Wheels]

Better still, get a lease back car. You can usually get great deals on these cars that are turned in after a 12 or 24 month lease with low mileage. You don't have to pay for the huge first year depreciation hit, plus you will often have lots of warranty left. I just bought a 2003 Intrepid with only 30,000 kms for two-thirds the price of a new one.

This is a very good option, as lease-back vehicles have had the depreciation taken off, but have been well cared for (if not the leaser gets charged for it.)

[Bubba Wheels]

HA HA HA! You suckers! Spending money on cars!!! HA HA HA! Living in NYC is the best. I don't have a car, don't need a car, don't want a car!

As far as the lease/purchase thing. Only buy what you can afford to buy outright. Don't pay interest rates, that's where you get ripped off.

Yes, why lease a car when you can live in a place the size of a closet and ride public transportation, all for the price it would cost you to actually buy 2000+ sq ft waterfront property anywhere else!

[The Afoci]

If you want to have a contract telling you how far you can drive, and like throwing your money away in perpetuity, lease. If you want to actually own the vehicle at the end of three or four years, buy a used car, and take good care of it.

Actually leasing can be a great option for people who have a second vehicle and are just looking for a vehicle to have that won't be drove huge distances. You can get really cheap payments on very nice vehicles. But if you drive more than 12-15k a year with the vehicle, leasing isn't for you at all.