Pros/Cons of leasing

[ikhoudvanu199]

Hey there. So my 2000 Insight is on her way to the grave

I need to start looking for a new car. I am on a very limited budget. But I am used to making car payments, since I had been on my Insight for years.

I have been hearing a lot about leasing, and was just wondering if anyone could share their views on the pros/cons of leasing a vehicle, as opposed to buying one.

Thanks!

[freezin4]

Originally Posted by ikhoudvanu199

Hey there. So my 2000 Insight is on her way to the grave
.....just wondering if anyone could share their views on the pros/cons of leasing a vehicle, as opposed to buying one.

Sorry to hear about your car.

As far as lease vs buying, it is a highly personal decision.

Some things to consider:

- The cheapest way to go is to save up cash and buy the car outright. (No interest payed to the banks.)

- If you use your car partly or entirely for your business, lease payment may be tax deductible. The disadvantage is that you may be restricted to 12K or 15K miles per year, or face extra fees for going over these limits.

- If you must finance, you may get a subsidized deal from the car manufacturer.

- If monthly payments are the biggest or only consideration, then leasing is a good option.

- If you need to plan ahead for a few years then buying is the way to go: you will have more equity in the car and will eventually be without car payment when owning the car lien-free.

In most cases, fixing your existing car would still be cheaper than getting into a new car. (lower insurance too)

[ikhoudvanu199]

Originally Posted by freezin4

- The cheapest way to go is to save up cash and buy the car outright. (No interest payed to the banks.)

- If you use your car partly or entirely for your business, lease payment may be tax deductible. The disadvantage is that you may be restricted to 12K or 15K miles per year, or face extra fees for going over these limits.

- If you must finance, you may get a subsidized deal from the car manufacturer.

- If monthly payments are the biggest or only consideration, then leasing is a good option.

- If you need to plan ahead for a few years then buying is the way to go: you will have more equity in the car and will eventually be without car payment when owning the car lien-free.

In most cases, fixing your existing car would still be cheaper than getting into a new car. (lower insurance too)

i forgot to mention that i am still making loan payments on my insight. i never want to be in another situation where i am stuck making payments on a car, yet it is breaking down on me. with the tranny on its way out and the IMA dead, it is not cheaper to fix my insight, sadly. it has ~186000 miles on it.

saving up enough to buy a decent car in cash is not an option. if i were to buy a car with cash it would have to be an old, used car. i dont have a lot of income and not much room for saving in my budget.

since i wouldnt have a lot of money for a down payment, i would think leasing would be a good option for me. then i could get a decent car with about the same monthly payments i am making now.

i am wondering what the conditions of leasing a car are, since i have heard so many different things. what happens if there is a mechanical break down? what about maintenance? insurance?

[Cobb]

Your are still paying on your old car? If you ahve good credit and do not care about where it goes, Id just buy the car you want and forget paying hte old bill for 6 months, then they should be able to forgive part of it if you may some payment.

Its my understanding lease is another word for "rent to own".

In all seriousness, Id check craigs list, ebay and your local classified sections of the paper if you are someone cartelligent. A 2 thousand dollar Honda will be worth 2 thousand with a few more thousand on it. Lots of people with money problems are selling their second and in some cases primary cars.

[ikhoudvanu199]

i am really looking for exactly what leasing is. what restrictions are there on a leased vehicle. is it better than buying a car if i dont need the equity down the road? i just need something reliable, with little to no down payment, good gas mileage, and about $200 a month.

would my best option be to lease?

[BrianZ54]

There are some determining factors that make leasing either a good option or no option at all.

If you will be planning on driving the car less than 14 or 15K miles you can consider it. If this is your only household vehicle I'd cap your planned mileage at 12K because things can change over the course of the lease.

Without a down payment of any size you'll be hard pressed to keep your monthly payment near $200. I would expect it might be closer to $300.

There aren't a lot of restrictions beyond mileage and condition of the car upon return. You must keep collision and theft insurance up. You can't modify the vehicle.

Before you take this idea any further, why not consider a used vehicle you could afford to buy. If you find a used I1 you'll have a parts car already in your retiring 2000. I picked up an '02 with 46K on it in late '09. When I spoke to my credit union about a loan for part of the purchase price they offered me up to 48 months. I could have gotten into the car for $195 a month even if I financed the whole thing. Give it some thought, a lease doesn't really fit everyone.

Brian

[Cobb]

I think you should visit a credit union or small bank and see about a personal loan to pay off your previous Insight and money to buy a used car. I guess if you are still paying on it your interest rate may not be that great. If you are married or have someone with excellent credit, you may see if they can get the loan and let you use the money after you sign a contract to pay it back.

Leasing varies with the deal. Some are rent to own, some you return the car when its up, but pay for its up keep and insurance the whole time. Leasing is great if you want to deduct the car for business or taste the good life that could not be afforded. Lets say you want to own or drive a benz, lexus, bmw or some other vehicle. I doubt doing this with a hybrid would make an finanical sense and for the most part those os us with excellent fuel economy have heavily modded our cars.

[circa1986]

Originally Posted by freezin4

- The cheapest way to go is to save up cash and buy the car outright. (No interest payed to the banks.)

It really depends, but with all of these low APR offers, it's rarely true anymore. If you have excellent credit, you should be able to beat inflation. Even if you are able to pay for a car 100% with cash, you are better off financing for zero or low APR interest rates and investing that cash in the stock market or mutual funds, etc.

[circa1986]

Originally Posted by ikhoudvanu199

i am really looking for exactly what leasing is. what restrictions are there on a leased vehicle. is it better than buying a car if i dont need the equity down the road? i just need something reliable, with little to no down payment, good gas mileage, and about $200 a month.

would my best option be to lease?

Leasing is working great for me, but you need to be very careful when shopping for a lease. It's easy to get ripped off. I am leasing because I really don't plan on keeping my Insight beyond the lease period, and I drive a relatively small number of miles. I also don't want to tie up my money unnecessarily and at 3 years (term of lease) I would probably be underwater on a car loan anyway.

If you drive more than 15k miles a year or so, I'd say leasing isn't for you, because by the time you finish your lease, you will have already exceeded the warranty period, and will be responsible for repairs on a car that you do not own. Although overage fees are quite modest ($0.15-0.20/mile). If you consider this overage over the entire period of the loan, for most people it only ends up being a few bucks a month. People don't realize that on a car that you own, you pay for excess mileage in the form of lost equity!

For Honda, you will have to pay a $595 bank fee (IIRC) that's amortized over all the lease payments. On top of that, in some states you will have to pay sales tax up front on the entire market value of the vehicle. This is on top of the first monthly payment!