Leasing vs. Buying

[Anonymous]

Anonymous wrote:

Anonymous wrote:Buy a good used car coming off a 3 year lease with 20,000 miles on it. Be sure it’s certified pre-owned by the dealer which usually means an extended warranty.

it depends on the car, some lightly used CPOs cost almost as much as new and the financing is almost always worse. Just looking at Honda pilots (my car and I was curious), the only CPOs that fit your criteria knock about 3k off of MSRP. Dealers are actually advertising new for less with online pricing. YMMV with make and model

Plus 1. Used good cars aren’t much cheaper these days. And often lack incentives.

[Anonymous]

Anonymous wrote:I hate leasing bc i feel like I’m “borrowing” a car. You have to be extremely careful with. If anything happens (damage, accident), you get dinged. And it really sucks to have to return a car you like. Did it once, but now finance cars.

You have the same damage issues on a car you own rather than lease. Any accidents and you’re going through insurance to fix. One difference may be you are willing to live with more minor damages if you own it and you will have to get them fixed to turn in a lease. If you really like the car at the end of the lease then you have the option to buy.

I agree though that it feels like borrowing when you know there is an endpoint.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What about leasing for an older person who wants to turn a car over every few years?

I think that's a reasonable scenario to consider leasing, though it really depends.

If it is someone who drives low miles (let's say 5,000/year) then leasing is still going to be more expensive. The cost of the lease has you effectively paying for 10-12,000 miles/year which you'll never use. In this scenario, I'd lean towards buying a new ultra-reliable car with lower depreciation (e.g. Toyota/Lexus) and it'll be so easy to keep it maintained and running for a while without headaches.

Also, some cars "lease well" in that manufacturers structure their lease programs to make lease offers fairly attractive alternatives to buying. BMW does this, and nowadays well more than half of BMW sales in the U.S. are leases. Other cars do not lease well. So you need to consider the car in question.

For an older low-ish to moderate mileage driver, I think buying is generally the smarter financial move and it offers more flexibility as long as it is a relatively reliable car that doesn't drop like a rock in value. Pandemic happens and you stop traveling so no longer need two cars? Well you can just sell it. Decide to travel much more than you anticipated? No need to worry about being charged for excess miles. Health conditions change and you drive fewer miles one year? You're not stuck in a lease where you've pre-paid for 10,000 miles whether you use them or not. At some point is it no longer possible to drive? You can sell it without having to wait out a lease or deal with the complexities of selling a leased vehicle. Older drivers also typically have fewer maintenance issues because on average they don't thrash the car around and are more timely about keeping it properly serviced at the right intervals. Does an older driver really need to switch vehicles every 24-36 months? I would only lease in that scenario if I was very confident I'd be driving 10k miles/year for the next 3 years and was going after a fun, gorgeous and expensive to fix german car, and I had the finances to do so comfortably.

The bolded is another way of saying that sometimes the best deals require that you lease. My rule is that if my monthly no-money-down pre-tax lease payment is 1% or less of the pre-tax MSRP, then the lease is a very good option if the annual miles allowed are a match for how many miles you drive. You can get hurt trading in your old car for a lowball price, however, which actually is another benefit of leasing — not having to sell your car. Of course, if you end up leasing a $100,000 car (that you can’t afford to buy) for $1,000 per month, then that “wouldn’t be prudent.”

[Anonymous]

Anonymous wrote:Buy a good used car coming off a 3 year lease with 20,000 miles on it. Be sure it’s certified pre-owned by the dealer which usually means an extended warranty.

Good luck finding a 3 year old car with only 20,000 miles