sailorman

I've always been the type to buy a car...keep it for 5-10 years. The last car I "bought" was a 2001 S80T6 Volvo that I bought after the lease was over and have just recently given it to my 17 year old son. I got an RL a few weeks ago at $569/month...zero down...12,000miles per year....WHAT A GREAT CAR AT A GREAT PRICE. I haven't had so much fun with a new car since my first car in 1970, a German Mercury Capri. This car is way ahead of most cars on the road...and it's styling and quality fit just right. Now I'm beginning to wonder if it pays to buy or lease a car like this...with so many features and hi tech toys. Once it is off warranty...it's going to be awfully expensive to maintain and repair. Does it make sense to pay a little extra and always have the newest and most reliable by leasing...or buy the car off lease if it has proven to be dependable. I know you can get an extended 100,000 mile warranty for about $2000...but after 100,000 miles...this car could get awfully expensive. And I forgot to say...I can easily do about 20,000 miles a year unless I rotate the car with my wife. But why would I not want to drive this car all the time? I bought Acura because I know it has the quality and resale value. What to do?

vp911

You can get 120k warranty, and Honda/Acura cars are generally very reliable - you are unlikely to face major problems and costs with the car.

1HOT NSX

Most of the time you are better off buying than leasing with few exceptions. Buying or leasing a new car is a losing proposition anyway - you get a lot of enjoyment but this costs you lots of money. I would not buy an extended warranty and never have, because as reliable as Acuras are you can be pretty sure that you will not have major problems with the car after the regular 4/50 warranty expires. I leased my last 2000 RL because it was one of those good deals at the time - with a heavily discounted lease by Acura at the end of the model year. I put in 75K miles on that car and sold it for $20K four and a half years after I bought it. Nothing!, absolutely nothing went wrong with it - just like my NSX, it was the most reliable machine ever!

I'd say buy or lease but keep the car for a long time so you can lose less money than most people lose when they switch to new cars every couple of years. I'd bet your new RL, and mine, will go for 100K miles without a hitch and we'll still be able to get $20K at the end of 5 years - 20K that we can use to amortize the new RL or whatever we are ready to buy then.

nicolasj

To me it's simple: if you are leasing and trading in every 3 years, for instance, you end up with a car payment for the rest of your life. I like cars but I think it's a better idea to invest $600 a month somewhere else rather than in a car lease, perpetually. And I would hardly call buying a car an investment, anyway. Plus, I already have a mortgage to pay off for the next 15 years, why have a car payment as well? If I'm buying a car this month, I'll put 70% of the price down (this is just me), and finance the rest. When I'm done, hopefully within a year, I hope I'll keep the car for 10 years at least.
I see people leasing as people who cannot afford the car they are "buying". Plus when you lease you never get the feeling you own the car, why, because it's not even yours, period! You're renting it. That totally sucks to me!
If you can really afford a car, you pay it cash, it's a simple as that.

Nocturnal

I thought leasing mostly makes sense if you can either write of or expense the payments. For private car owners it's typically not a good deal. Then again it's easy to do the math and compare the numbers. If you think you can do better than the lease or loan APR by investing the cash then you should lease the car or borrow the money to pay for it. Yes the car won't be yours but who cares? Ok, you just said it sucks to you :-)

I paid cash because I don't want to headache of wondering if my investments will do well or poor. I just bought a depreciating asset and plan to enjoy it.

Not everyone has that kind of cash laying around but they can comfortably afford the monthly payment. Nothing wrong with that.

nicolasj

True, if you can afford the monthly finance payments you're fine... But to me it's people who keep trading in when the new model comes out that I don't understand. Basically they pay for a car all their life...
To each his own I suppose. Nocturnal you are right, I also bought a "depreciating asset" (a 2006 M45) and I plan to enjoy it. I hope the enjoyment will make me forget the depreciating part somewhat ;o)

Nocturnal

Got to pay to play nicolas-j

Enjoy your car. Sell it if it provides more worries than enjoyment. There's always the Toyota Echo to get us from A-B for cheap if all else fails.

sailorman

Yes...if everything works...and all you do is the regular servicing and tuneups...but what's going to happen when those NEW hi tech systems like the GPS map and swivel headlights and SH-AWD and keyless remote and voice commands and ......start going and the repairs are $1000 and up per visit...when you start doing the math over a 5-10 year period...those types of repairs can more than make up for the $ savings of having bought the car and not "rented" it. Maybe I'm wrong...but I've had a little experience with my Volvo S80-T6...my Bonneville SSE...and those repairs in years 5 and up can drive you crazy.

NorCalRL

I totally agree.

Leasing works if you can guarantee exactly what you financial situation will be for the term of the lease. That's almost impossible unless you are already independently wealthy.

I have had friends who have both increased their incomes substancially and others who have lost their jobs with a moments notice.

The friend who was unexpectedly successful went back to the dealer after 18 months of a 36 month lease on a Civic to upgrade to an Accord. The dealer told him he would have to pay the 18 remaining payments immediately to be released from the lease. There was simply no way to upgrade without paying off the entrie lease. If he had been making payments he could have sold the car for about what he owed and made his upgrade at his convenience. Of course there are websites where you can post your lease to try and get someone to take it over. But why would anyone want your 18 month old car when they can get the same or better lease rate on a brand new model?

If you lose your job tomorrow, the leasing company will not let you renegotiate the term of the lease or the monthly payment. However, if you are making payments toward the purchase of your car you have the option of selling your car or renegotiating your loan for a longer period to reduce your payments.

I have heard the argument that you should lease depreciating assets and purchase apreciating assets. If that's true, how many of those people are leasing the carpet in their houses? I can't imagine an asset that depreciates faster than carpeting.

Just my ,

Dave

vp911

Dave - You can always trade-in your leased car. The dealer would just use the buy-out the lease. We are considering doing this on the Lexus we have leased.

hothonda

Leases have payoffs just like coventional installment loans..

Generally on a lease you pay very little down so the payoff
will likey be more than the car is worth. That said, many
leases today are subsidized with low interest rates/money
factors and high (inflated?) residual values by the manufacturers to keep the monthly payments low. Most leases only make sense if you ride it out till the end. The benefit is that you can drive a lot of car for very little money and walk away at the end. There are some great
deals out there on leases!

If you leave early you pay the difference on what the payoff is and what the car is worth. In rare circumstances
the car could be worth more than the payoff....

Nocturnal

It's simple. Do the math in a spreadsheet and figure out what works best for you. If you're risk averse, go with the 100% cash (provided you have it). If you can stand some risk, lease or borrow. In both cases you have obligations to the bank that are independent of what the car is really worth. As you know the RL has dropped rather quickly so the collateral (car) can't back up the loan anymore.

kgd

The finance company has all the risk in a lease. If the value of the car is substantially less than the residual value at the end of the lease, you just give it back and the leasing company takes the loss. If the value is higher than the residual you by it and you have a good deal.

A few years back I leased a suburban that had a high residual value. I ended up offering the leasing company about $5,000 less than the residual, which was around wholesale. I ended up with a great deal and could have just gave the car back at the end and purchased a used one for $5,000 less if they had not accepted.

There is some risk if you lose your job and you still have to make your monthly payments, but if you are out of work for a long time, your car will be the least of your worries.

taitando

Hey, nothing's guaranteed in term of a stable economy or the job market. If you lose your job and can't make the monthly payments, either way, you're going to get that car repossessed regardless if you're leasing or buying. As someone else mentioned, the only way to make sure that doesn't happen, is to pay straight up with cash. But how many people are able to do that? It's definitely not the majority.

Anyhow, leasing isn't for everybody. You need to have good credit to qualify for the best money factor (interest rate). Some people go through negotiations to find out monthly payments won't be so low because of their poor credit. Leasing works for people who are "used" to always having a car payment. Could they spend that money investing? Sure, but 90% of the people in this country don't think that way, otherwise there would be more people financially independent. Leasing is also for those who like the latest and greatest in the driveway every 3 years or so. It's for folks who like the idea of having a car always within the manufacturer's warranty and who don't want to deal with the hassles of getting rid of a used car. If you don't drive more than 15k miles a year, then leasing could be for you. Someone else mentioned, it gets you more car for your money as well (i.e. what could have been a monthly payment on a TL, now gets you into an RL). And for those who feel they need to have ownership, you can always buy out at lease end. The residual value is still negotiable, and everyone knows the bank doesn't want to hold onto a used car.

In any case, it's what you as the consumer, would feel most comfortable and happy in doing. Regardless of what anyone says, cars invoke our emotions and all we want to do is "feel good" about our decisions. The car buying process was never a good case for Investments 101. Whether you lease or buy, you are losing money.