ha?! - question about lease and mileage
03-05-2007, 02:39 PM
#1
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ha?! - question about lease and mileage
Just a few minutes a go my friend put a bitter chill in my body when he said "You end up paying penalty for the extra mileage on a leased car, even if you purchase it after the lease is over"
I'm almost certain he's wrong, but I'm getting scared as he sounded so confident.
Please tell me he's wrong!
I'm almost certain he's wrong, but I'm getting scared as he sounded so confident.
Please tell me he's wrong!
03-05-2007, 02:47 PM
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Originally Posted by LuvMyTSX
Yeah, you're screwed!
Haha, just kidding, I have no idea. I've never leased.
What does it say in your contract?
Haha, just kidding, I have no idea. I've never leased.
What does it say in your contract?
All I remember is being fully certain that purchasing your leased car means "NO MILEAGE PENALTY"
03-05-2007, 02:53 PM
#4
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Originally Posted by synthetic
No idea. I don't have it with me here, and I don't remember anything.
All I remember is being fully certain that purchasing your leased car means "NO MILEAGE PENALTY"
All I remember is being fully certain that purchasing your leased car means "NO MILEAGE PENALTY"
03-06-2007, 08:13 AM
#6
Originally Posted by CGTSX2004
If you purchase the car, they do not inspect it and therefore, the mileage is irrelevant.
If you don't purchase the car, prepare to get ass-raped because the mileage fees add up fast...
If you don't purchase the car, prepare to get ass-raped because the mileage fees add up fast...
03-06-2007, 08:36 AM
#7
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The mileage fee in my contract is 6 cents per kilometer (about 10 cents/mile)... My brother in law has a Sorento collecting dust in his garage waiting for the end of his lease because he's already over his mileage... if he continued driving it, he'd have to pay $1200 per month in penalties... 
I'm 90% sure I'll buy the car back at the end of the contract, so it won't matter...
I'm 90% sure I'll buy the car back at the end of the contract, so it won't matter...
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03-06-2007, 11:18 AM
#9
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Originally Posted by TinkyWinky
So what was the point of leasing the car in the first place?
03-06-2007, 12:48 PM
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Originally Posted by derbaff
^^Lower monthly payment? Although if you buy a leased car, don't you end up paying a lot more for it in the end?
Not neccessarily.
From a financial point of view, leasing makes perfect sense under the following conditions:
1. Car has a great resalve value
2. Lease rate is less than 4%
3. The money saved thru lower monthly payments is directly invested into programs paying higher than 4%
What people don't realize is that when they BUY the car, they are paying for both the value of the car at the end of the finance term + the depreciation cost. Leasing eliminates the first item leaving you the option of doing something better than holding a depreciating asset with your money.
03-06-2007, 08:46 PM
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Originally Posted by synthetic
Not neccessarily.
From a financial point of view, leasing makes perfect sense under the following conditions:
1. Car has a great resalve value
2. Lease rate is less than 4%
3. The money saved thru lower monthly payments is directly invested into programs paying higher than 4%
What people don't realize is that when they BUY the car, they are paying for both the value of the car at the end of the finance term + the depreciation cost. Leasing eliminates the first item leaving you the option of doing something better than holding a depreciating asset with your money.
From a financial point of view, leasing makes perfect sense under the following conditions:
1. Car has a great resalve value
2. Lease rate is less than 4%
3. The money saved thru lower monthly payments is directly invested into programs paying higher than 4%
What people don't realize is that when they BUY the car, they are paying for both the value of the car at the end of the finance term + the depreciation cost. Leasing eliminates the first item leaving you the option of doing something better than holding a depreciating asset with your money.
2. Correct me if I'm wrong, but you're still paying interest, just a few percentage points lower than finance.
3. This is assuming you have money to invest in other higher interest accounts (CD, Stocks etc), which may not necessarily be risk-free.
Leasing is like a pre-paid cell phone plan. You need to estimate with very high certainty how many miles you will drive per month. If you don't drive THE EXACT number of miles, you are guranteed to lose money.
03-06-2007, 09:17 PM
#13
Originally Posted by TinkyWinky
Leasing is like a pre-paid cell phone plan. You need to estimate with very high certainty how many miles you will drive per month. If you don't drive THE EXACT number of miles, you are guranteed to lose money.
The beauty of leasing is that it offers flexibility. On a car like the TSX, which retains its value well, leasing can be managed effectively to the advantage of the lessee.
For example:
A lessee leases the $27000 car for $0 drive off and takes on a lease payment of about $420/month. After about 30 months, the lessee decides he wants to get rid of the car for something else so he checks his payoff and discovers that it is about $19500. A quick check on Edmunds and he discovers that the vehicle has a trade-in value of $20,500.
If he trades his car in, when the dealership pays off the lease, there is still $1000 of equity which can be applied towards the lease or purchase of the next vehicle, effectively knocking the price down.
Or, if he is significantly under the typical mileage, the vehicle may be worth more, increasing the amount of money the individual could apply towards the next vehicle.
Of course, if he is over on miles, as long as the mileage deduction doesn't exceed the $1000 difference in between the payoff and trade-in values, the individual is still not losing any money, necessarily.
Now, if someone in a 36 month finance situation will have thrown about $24,500 at the car during the same timeframe whereas the lessee will have only thrown about $12,600 at the same car.
An effective money manager would be able to take that rather large monetary difference and invested it into something that could easily have made the leasing worthwhile.
Of course, this is contingent upon someone wanting to change cars frequently. For someone who holds onto their cars for 5-10 years, leasing won't make any sense at all. However, for someone who is looking to get a new car every 2-3 years who doesn't drive enough to use up all the mileage will benefit significantly from the lower payments.
03-06-2007, 09:43 PM
#14
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My main argument against leasing is that most cars don't hold their value well enough to make that the case.
This TSX is a rare exception to that rule. If I weren't so sure I will be keeping the TSX for some time, I would consider leasing it as well. Most other cars... it wouldn't be for me.
This TSX is a rare exception to that rule. If I weren't so sure I will be keeping the TSX for some time, I would consider leasing it as well. Most other cars... it wouldn't be for me.
03-06-2007, 10:02 PM
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Originally Posted by CGTSX2004
Of course, this is contingent upon someone wanting to change cars frequently. For someone who holds onto their cars for 5-10 years, leasing won't make any sense at all. However, for someone who is looking to get a new car every 2-3 years who doesn't drive enough to use up all the mileage will benefit significantly from the lower payments.
Now let's say you have $10,000 extra cash to spend because of a lease and you invest in something that is guaranteed (zero risk) and will mature in 3 years. Let's take, for example, a CD at 5% apr compounded monthly. You will have made $1,615 in 36 months, but you still have to pay taxes on your gains.
In fact, you will have to pay sales tax every 2~3 years, which for the TSX is about $2000~2500. Moreover, there are states that collect property tax on automobiles that is loosely based on the current KBB value. Not only are these prices inflated, as we all know, cars with high-resale values (e.g., TSX) are DP'd.
So at the end of a 3-year lease, you would still have your $10,000 but no car to drive. You could drive your TSX for 5 years and still sell it for more than $10,000.
When you look at a period of 3 years, there is no significant difference in cost between lease and finance/purchase. If you look 20 years down the road, a lease makes less and less sense. (No pun intended)
03-06-2007, 11:03 PM
#16
Originally Posted by TinkyWinky
Interesting points. So the resale value is adjusted if you drive less than the agreed upon mileage. Hmmm...
Now let's say you have $10,000 extra cash to spend because of a lease and you invest in something that is guaranteed (zero risk) and will mature in 3 years. Let's take, for example, a CD at 5% apr compounded monthly. You will have made $1,615 in 36 months, but you still have to pay taxes on your gains.
In fact, you will have to pay sales tax every 2~3 years, which for the TSX is about $2000~2500. Moreover, there are states that collect property tax on automobiles that is loosely based on the current KBB value. Not only are these prices inflated, as we all know, cars with high-resale values (e.g., TSX) are DP'd.
So at the end of a 3-year lease, you would still have your $10,000 but no car to drive. You could drive your TSX for 5 years and still sell it for more than $10,000.
When you look at a period of 3 years, there is no significant difference in cost between lease and finance/purchase. If you look 20 years down the road, a lease makes less and less sense. (No pun intended)
Now let's say you have $10,000 extra cash to spend because of a lease and you invest in something that is guaranteed (zero risk) and will mature in 3 years. Let's take, for example, a CD at 5% apr compounded monthly. You will have made $1,615 in 36 months, but you still have to pay taxes on your gains.
In fact, you will have to pay sales tax every 2~3 years, which for the TSX is about $2000~2500. Moreover, there are states that collect property tax on automobiles that is loosely based on the current KBB value. Not only are these prices inflated, as we all know, cars with high-resale values (e.g., TSX) are DP'd.
So at the end of a 3-year lease, you would still have your $10,000 but no car to drive. You could drive your TSX for 5 years and still sell it for more than $10,000.
When you look at a period of 3 years, there is no significant difference in cost between lease and finance/purchase. If you look 20 years down the road, a lease makes less and less sense. (No pun intended)
And sales tax is applicable for both leased and financed cars along with property taxes, so that's not really a factor.
03-07-2007, 02:15 AM
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The way i look at leasing is this, and this is why i do it.. I can have a new car every 3 days, i get bored very easy, if i was to buy a car, i would pay it off for at least 5 years and by then ill wanna sell it anyway and finance another car for another 5 years..So either way your paying payments all the time for a car, why not just do it while not paying for problems with the car and getting a brand new one every 3 years? =)
03-07-2007, 08:51 AM
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The way i look at leasing is this, and this is why i do it.. I can have a new car every 3 days, i get bored very easy, if i was to buy a car, i would pay it off for at least 5 years and by then ill wanna sell it anyway and finance another car for another 5 years..So either way your paying payments all the time for a car, why not just do it while not paying for problems with the car and getting a brand new one every 3 years? =)
The mileage fee in my contract is 6 cents per kilometer (about 10 cents/mile)... My brother in law has a Sorento collecting dust in his garage waiting for the end of his lease because he's already over his mileage... if he continued driving it, he'd have to pay $1200 per month in penalties.
03-07-2007, 09:56 AM
#19
Still Lovin my 06
Originally Posted by CGTSX2004
Not necessarily...
The beauty of leasing is that it offers flexibility. On a car like the TSX, which retains its value well, leasing can be managed effectively to the advantage of the lessee.
For example:
A lessee leases the $27000 car for $0 drive off and takes on a lease payment of about $420/month. After about 30 months, the lessee decides he wants to get rid of the car for something else so he checks his payoff and discovers that it is about $19500. A quick check on Edmunds and he discovers that the vehicle has a trade-in value of $20,500.
If he trades his car in, when the dealership pays off the lease, there is still $1000 of equity which can be applied towards the lease or purchase of the next vehicle, effectively knocking the price down.
Or, if he is significantly under the typical mileage, the vehicle may be worth more, increasing the amount of money the individual could apply towards t$he next vehicle.
Of course, if he is over on miles, as long as the mileage deduction doesn't exceed the $1000 difference in between the payoff and trade-in values, the individual is still not losing any money, necessarily.
Now, if someone in a 36 month finance situation will have thrown about $24,500 at the car during the same timeframe whereas the lessee will have only thrown about $12,600 at the same car.
An effective money manager would be able to take that rather large monetary difference and invested it into something that could easily have made the leasing worthwhile.
Of course, this is contingent upon someone wanting to change cars frequently. For someone who holds onto their cars for 5-10 years, leasing won't make any sense at all. However, for someone who is looking to get a new car every 2-3 years who doesn't drive enough to use up all the mileage will benefit significantly from the lower payments.
The beauty of leasing is that it offers flexibility. On a car like the TSX, which retains its value well, leasing can be managed effectively to the advantage of the lessee.
For example:
A lessee leases the $27000 car for $0 drive off and takes on a lease payment of about $420/month. After about 30 months, the lessee decides he wants to get rid of the car for something else so he checks his payoff and discovers that it is about $19500. A quick check on Edmunds and he discovers that the vehicle has a trade-in value of $20,500.
If he trades his car in, when the dealership pays off the lease, there is still $1000 of equity which can be applied towards the lease or purchase of the next vehicle, effectively knocking the price down.
Or, if he is significantly under the typical mileage, the vehicle may be worth more, increasing the amount of money the individual could apply towards t$he next vehicle.
Of course, if he is over on miles, as long as the mileage deduction doesn't exceed the $1000 difference in between the payoff and trade-in values, the individual is still not losing any money, necessarily.
Now, if someone in a 36 month finance situation will have thrown about $24,500 at the car during the same timeframe whereas the lessee will have only thrown about $12,600 at the same car.
An effective money manager would be able to take that rather large monetary difference and invested it into something that could easily have made the leasing worthwhile.
Of course, this is contingent upon someone wanting to change cars frequently. For someone who holds onto their cars for 5-10 years, leasing won't make any sense at all. However, for someone who is looking to get a new car every 2-3 years who doesn't drive enough to use up all the mileage will benefit significantly from the lower payments.
i see your argument for leasing, and i would agree that it's a good deal in very rare cases, but for most people, unless you can predict your mileage rather accurately, it doesn't seem worth the headache to me.
i'd have to avoid numerous roadtrips or sucker friends into driving if i leased, so i know it doesn't work for me. but i do see how it would work for some people that don't drive much.
03-07-2007, 10:24 AM
#20
Originally Posted by bradykp
i'm not sure how you get that a 36 month finance situation spends 24,500 as opposed to the 12,600. i financed the 2006 tsx for around 27,000, as in your example, and after 36 months, i'll have paid 450/mo * 36 = $16,200.
i see your argument for leasing, and i would agree that it's a good deal in very rare cases, but for most people, unless you can predict your mileage rather accurately, it doesn't seem worth the headache to me.
i'd have to avoid numerous roadtrips or sucker friends into driving if i leased, so i know it doesn't work for me. but i do see how it would work for some people that don't drive much.
i see your argument for leasing, and i would agree that it's a good deal in very rare cases, but for most people, unless you can predict your mileage rather accurately, it doesn't seem worth the headache to me.
i'd have to avoid numerous roadtrips or sucker friends into driving if i leased, so i know it doesn't work for me. but i do see how it would work for some people that don't drive much.
Even in your situation, which I am assuming is a longer term loan, you probably put money down, which I am saying would not be the case in the instance of the lease.
03-07-2007, 01:30 PM
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my fathers view on leasing is that only 3 types of people do it
1. rich people
2. poor people
3. if you are neither of the above then you're a dumbass
my view isnt quite so extreme, but to some extent it makes sense
1. rich people
2. poor people
3. if you are neither of the above then you're a dumbass
my view isnt quite so extreme, but to some extent it makes sense
03-07-2007, 01:57 PM
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Originally Posted by FBPaCCord
my fathers view on leasing is that only 3 types of people do it
1. rich people
2. poor people
3. if you are neither of the above then you're a dumbass
my view isnt quite so extreme, but to some extent it makes sense
1. rich people
2. poor people
3. if you are neither of the above then you're a dumbass
my view isnt quite so extreme, but to some extent it makes sense
Views are many times just like opinions........and we all know what opinions are like
Sorry, couldn't help myself.
03-07-2007, 04:41 PM
#24
Originally Posted by FBPaCCord
my fathers view on leasing is that only 3 types of people do it
1. rich people
2. poor people
3. if you are neither of the above then you're a dumbass
my view isnt quite so extreme, but to some extent it makes sense
1. rich people
2. poor people
3. if you are neither of the above then you're a dumbass
my view isnt quite so extreme, but to some extent it makes sense
03-07-2007, 05:30 PM
#25
There is also another advantage to leasing: inflation.
Money today will not be worth the same three years down the road. So, in effect, you are purchasing your leased vehicle at the agreed-upon residual value when the contract was signed.
Let's say that you lease your TSX today with the current offer ($299 a month, $2139 down, total monthly payments of $10,764.00, and an option to purchase at lease end for $17,831.20.). So, you pay your $299 a month and in three years you can purchase your car for $17,831.20, which is probably less than the car would actually be worth (a 2004 TSX with 45000 miles, traded in today, three years later, would get about $18,900 and has a suggested retail price of $24,000). Not only would you be purchasing your car at a discount, but that $$$ you're spending is worth LESS in three years than it was worth today because of inflation.
It's a very smart thing to do if you are talking about a high-resale value car.
Money today will not be worth the same three years down the road. So, in effect, you are purchasing your leased vehicle at the agreed-upon residual value when the contract was signed.
Let's say that you lease your TSX today with the current offer ($299 a month, $2139 down, total monthly payments of $10,764.00, and an option to purchase at lease end for $17,831.20.). So, you pay your $299 a month and in three years you can purchase your car for $17,831.20, which is probably less than the car would actually be worth (a 2004 TSX with 45000 miles, traded in today, three years later, would get about $18,900 and has a suggested retail price of $24,000). Not only would you be purchasing your car at a discount, but that $$$ you're spending is worth LESS in three years than it was worth today because of inflation.
It's a very smart thing to do if you are talking about a high-resale value car.
03-08-2007, 07:32 AM
#26
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Originally Posted by TSXEd05
Wow, $1,200 per month in penalties? He must be WAY over his mileage! At 10 cents a mile even going over by 20,000 miles will only cost you 2 grand at the end of your lease. $1,200 per month sounds crazy, are there other penalties included in this cost?
... just kidding. The $1200 figure came from my brother-in-law directly. I clarified the costs with him. With his new work, he drives roughly 1600km (1000 mi) per week, or 6400km (4000 mi) per month. His lease is for 24,000km/yr, or 2000 km (1200 mi) per month. He decided to buy a Jetta TDI and let the SUV collect dust/rust in his garage... Here's the breakdown of the additional costs:
- $300/month of leasing penalties (6400km - 2000km allowance = 4400km/month @ 0.06/km --> $264/month
- Gas on the SUV (that's the big one that swells the price to 1200, compared to the Jetta). 6400 km @ 16L/100km @ $ 1.00/L = 1024$. Gas on the Jetta for same distance is $330. Difference $700/month
So, the moral of the story is to make sure your situation meets the requirements of the lease before jumping into it... A change of situation, and that great lease deal becomes a nightmare...
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