Never paid more than 8k for a car, but I haven't bought a car in 15 years either.
New car prices are giving me sticker shock, especially the 1/2 ton 4x4 trucks.
So... Saw a lease deal on SR Tacoma crew 4x4 for $140/mth. But it's like 3k up front. Thought I might investigate with the local dealer on Saturday. My intention is to lease for 3 years as a stop gap until I see the new Tundra and chevy 1/2 tons and maybe the next gen Taco.

So, having never leased a car what so I need to know. I think the same truck with a 12k/yr and nothing down can be had for ~200\mth. That would be my preferred option. Either way, I figure I've got about 8k in 3 years.

Dunno, Dave Ramsey says "don't do it" and refers to it as "fleeced" instead of "leased"

Not sure how many miles per year you put on a car but those miles are severely restricted in most leases. You go over the mileage limit, get your checkbook out. You also don't own the car at lease end.

Never leased.
Put down as little as possible. If you wreck the car after starting the lease, you don't get that money back. Basically you still need to negotiate sale price. You are paying taxes and fees and depreciation with no ownership for 3 years. Pick a low depreciating vehicle. You will have to buy GAP insurance but buy it from you own insurer. Vehicles depreciate the most in the first 3 years. That is one reason it is the most expensive way to drive a new car.
You may be better off buying a cheaper car and selling it in 3 years. Still have the maintenance and tire costs.
My best guess

Leasing can be a smart financial move for some small business owners for tax purposes. Otherwise, not so much for most other drivers.

Think of it like renting vs. buying a house. Yeah, you had a place to live/something to drive, but you don't have anything to show for it after making all those payments.

Leasing is primarily enticing if you're the kind of person who absolutely has to have a new car at all times, and always wants your cars to be under warranty, so would be trading in a car every year or two anyway. Or if you're trying to get into a car that's realistically more than you can afford, and leasing is the only way you can afford the payments. Neither one is a good financial decision, in most cases.

Lease is kinda like long term rental on the vehicle. The residual value is determined at the time of the sale contract, rough example is the vehicle is $20k, residential value at the end of 3 years and 36k miles is $9k
So you pay the $11k in monthly installments.
If you go over the miles, it’s usually 15 cents per mile.

Makes sense for some folks. My mom likes having a new car, doesn't drive that much, and doesn't want to haggle so leasing a new one every three years or so serves those needs well. The cost is predictable, too, which is a plus.

You can modify it, drive 50,000 miles a year .. basically do whatever you want. So don’t think that’s an issue. When the lease is up either buy it or sell it and you won’t get dinged for anything.

The big factors are:

- vehicle price (negotiate as you would with a purchase)

- residual value (very important)

- money factor (aka interest rate)

Don’t put ANYTHING down, if possible.

In short, say the vehicle MSRP is $45,000, the lease price is negotiated to $40,000, and the residual value is 60% of MSRP (36 month lease).

This means the dealer is saying the vehicle will be worth $27,000 at lease-end (60% of MSRP).

40,000 (agreed on price) - 27,000 = 13,000.

This means you’ll be paying 13,000 over the 3 years — so your payment will be $361/mo. + interest and sales taxe — so probably around $400/mo. for three years.


At lease-end you can either:

- purchase the vehicle for 27,000

- sell the car (private party, or otherwise .. just need to get at least $27,000)

- hand the keys back to the dealer and walk away

The only time excessive miles / modifications / damage will be a factor is if you turn the car in and walk away.

I’ve leased two vehicles in my past and on both I was able to sell them for MORE than the residual value .. so I was able to put some cash in my pocket.

Some cars are better leases than other .. the huge factor is residual value.

If the dealer won't willingly provide you with these number walk away:

cap cost - what you are paying for the truck

term: how many months

money factor - the leasing equivalent of APR

residual value - what the truck is worth at the end of the lease term

rebates or credits to be applied

taxes and fees


aileron

Years ago I leased about 6 vehicles in a row over the course of 15 years. Some were 24 and some up to 60 months. I think it was a great deal for me as manufacturers were offering some killer deals on residuals and the money factors. I never paid more than first and last months lease payments at signing. On all but one vehicle, I made money by buying out the lease at the end and selling the car/truck/SUV myself. I also had a good friend that owned a 5 line dealership who tipped me off to great deals.

The finance person at any dealership can craft any kind of deal you want - after you negotiate the best price on the unit. I wouldn't dream of putting big money out up front for any lease.

Watch mileage restrictions, insurance requirements, damage charges for things like door dings, tire wear limitations. My last lease was with Wells Fargo. I turned that SUV back because it was a POS and was worth far less than the residual. They tried to charge me for all sorts of damage that didn't exist on the car. I held firm and settled for about 10% of what they demanded. Typical of that outfit even then.

I lease my vehicles. I never keep one beyond the factory warranty and set up the lease to expire just before the warranty runs out. Since my income is fixed, I dont concern myself with repairs unless I wear out tires or brakes. Other than oil changes, no other costs to me. I make sure the "gap" is covered and I set the mileage at 10K a year. I have not had any problems with damage claims. As others have posted, negotiate your deal just as you would a conventional purchase.

I see you're wanting to get a truck.

FWIW for anyone else, if it's a German car, lease it, NEVER buy a German car.

quote:

Originally posted by Copefree:
You can modify it, drive 50,000 miles a year .. basically do whatever you want. So don’t think that’s an issue. When the lease is up either buy it or sell it and you won’t get dinged for anything.

The big factors are:

- vehicle price (negotiate as you would with a purchase)

- residual value (very important)

- money factor (aka interest rate)

Don’t put ANYTHING down, if possible.

In short, say the vehicle MSRP is $45,000, the lease price is negotiated to $40,000, and the residual value is 60% of MSRP (36 month lease).

This means the dealer is saying the vehicle will be worth $27,000 at lease-end (60% of MSRP).

40,000 (agreed on price) - 27,000 = 13,000.

This means you’ll be paying 13,000 over the 3 years — so your payment will be $361/mo. + interest and sales taxe — so probably around $400/mo. for three years.


At lease-end you can either:

- purchase the vehicle for 27,000

- sell the car (private party, or otherwise .. just need to get at least $27,000)

- hand the keys back to the dealer and walk away

The only time excessive miles / modifications / damage will be a factor is if you turn the car in and walk away.

I’ve leased two vehicles in my past and on both I was able to sell them for MORE than the residual value .. so I was able to put some cash in my pocket.

Some cars are better leases than other .. the huge factor is residual value.

Maybe the first time I've seen leasing explained in simple terms. Thanks for that.

quote:

Originally posted by OKCGene:
I see you're wanting to get a truck.

FWIW for anyone else, if it's a German car, lease it, NEVER buy a German car.

I’ve leased two German cars, bought one, and likely to buy another next month. I leased to move up into a better car than I could afford at the time, but now I can afford to buy. The limitations on leasing (mileage, dinged for any damage, minor or otherwise, etc.) no longer appeal to me. Yes, I know German cars depreciate quickly, but I can live with that.

I agree with OKCGene; It is a good safe way to drive a mid to high end BMW, Audi or similar. These types of cars are awesome, but they will be obsolete in 3-7 years and have very high risk of $$$$ repairs and you don't have to worry about tying to sell or trade it at the end. You already know the worst case #'s. At the end, if you really like it, there is always a buy out # and I've heard you can even negotiate down from that.

Lessons Learned:
o I had a first year A4 quattro. They called it an "Executive Lease" minimal down payment, lease payments were about the same as to finance. I had the choice to walk away after 36/30,000 or make the same payments for 2 more years and keep it. (Sadly it was totaled before the first oil change. The only thing I lost was the sales tax that I eventually got back from the other drivers insurance.

o Leased a new 2007 Z4. Less than a year later, I got called up and deployed, though it over real hard and realized we could not afford to let it just sit for 12-13 months. BMW took it back rather easily. I lost only the taxes. (point being; read the fine print and see what T&C are for getting out).

o Read the fine print and do some research: find out exactly what is expected in terms of condition, maint. etc. When I turned in my Z4, they had a company come out to my office a few days before I dropped it off at the dealer (in tears)... The guy was very professional and open with me. He spent A-LOT of time going over the wheels and tires with a fine tooth comb, took dozens of pictures, measured them 10 different ways, even checked the inner side and rotated them to check the bottoms. (BMWs had/have very fragile and expensive wheels). Next he checked all the glass almost as carefully. He said if the windshield had been replaced and it was not BMW glass (Say Safelight crap), it would have to be swapped out for BMW labeled glass ($$$$). Same for the headlights ($$$). Funny, he went over the paint/body in 30 seconds and maybe 10 seconds for the interior. Mechanical; he started it up put it thru the gears, drove .01 miles around the parking lot and was satisfied.

o If I were to do it again on a high repair/replacement cost car like a BWM/Audi: I would have bought the optional glass and wheel/tire insurance.

o Some states suck: Virginia makes you pay sales tax on basically the full MSRP as if you bought it. I think it was ~$1.7k on my Z4, that came back and bit me in the end. Maybe I could have worked it in the deal, but I was swooping in on one of those rare; as advertised, only one at this price, first come, first serve crazy deals (Brand new Z4: $299/month, 0 down (Only 1st and last payment (+Sales Tax)

I have been involved in 5 leases, 4 Honda's and 1 Subaru. Very happy with all of them. I was given 36000 miles in 3 years and turned them in with 34000 to 35000. You really have to watch that mileage and I'm not one to pay for extra miles. If you feel you will go over the allotted miles maybe it would be better to buy.

Some friends leased a 1995 Honda Odyssey. Leased out at $26,000 cost of vehicle, they expected lease payments to total $14,000 over 2 years. But they had to keep it clean and low miles and had to return it in 2 years or pay the $12,000 to own it outright (something like that, but the numbers are correct).

Thus, they avoided racking up miles, and spent some $ to put in a rug that they could pull out when they returned it so it would be clean etc etc.

My wife liked their car, and after months of waiting for a deal bought the identical car on ad special for $18,000 -cash.

They spent $7000 annually for the privilege of using their car for 2 years. My wife still owns that 1995 Honda to this very day. Both kids have borrowed it for a while and returned it. She has a VW as a daily driver. The identical Honda minivan cost her (gimme a moment to do the math...mmmmm, lets see, 2020-1995 - 25 year? Lord has it been that long? YES it has). The car is likely still worth $4000, so lets say that her cost was also $14,000. If we divide that by 25 we get an annual cost of hmmm, much less?

Calculator says $560.

So if they continued on that path of $7000 annually they would have spent $ 175,000 vs my wife spending $14,000 total.

$175,000 vs $14,000 for the same damned thing. Oh, you say, but when you lease isn't there some tax thing? Sure. Go for the tax thinggy.

$175,000 to lease
$14,000 to buy
-------------------
Difference you keep in the hip national bank: =$ 161,000.

Yeah, I'd rather have the $161,000 in my pocket. But you don't have a flashy new car every few year. Maybe Dave Ramsey is onto something. BTW, I found it interesting that guy collects high end guns. Says he has over 200 at this time. So, think of the guns $161,000 would buy you:-).

Same vehicle, 25 years of car ownership. Lease vs buy. Perhaps not identical oranges to apples, but it's not chump change. BTW, the car has only had regular maintenance costs, nothing has broken. (yet)

Check out lease hacker website.

I generally don't agree with leasing but there are certain vehicles whose residual value is so high that it makes leasing almost a no brainer. I have seen lease deals for 4x4 crewmax Tundras for under $250. Tacoma deals for $175. This is no BS, no big down payments.. etc


You can even sweeten the deal in some cases by selling the car yourself for more than buyout, making the cost of ownership even less..

There are even some lease deals in Cali with the EV incentives where the lease is almost free.

Once again, check out lease hacker for more than you ever wanted to know about leasing.

If you can't afford the car, don't lease the car. People get sucked into these with seemingly low payments, walk away when done, and other gimmicks.
You will be paying for the early years depreciation, the highest cost part of ownership with strict financial terms, mileage limits, etc.
Good cars last a long time today, with decent maintenance.
I was in the business years ago. Leasing is a suckers game for all but a few business situations.

quote:

Originally posted by Bytes:
Not sure how many miles per year you put on a car but those miles are severely restricted in most leases. You go over the mileage limit, get your checkbook out. You also don't own the car at lease end.

this is major

make sure the mileage allowance is realistic. then add another 20%. this is where they 'get you' IMO.

i used to be 'anti-lease' but now i realize -- esp. with the high cost of some even 'basic' new cars -- you can do okay leasing

it's a bill like any other, esp. when you consider that any way you pay for it a car is a horrible depreciating 'asset'

just make sure you are otherwise saving / investing adequately and financially responsible

the problem is the folks who 'lease' in order to 'buy up'. that's a symptom of larger financial issues IMO.

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