Leasing vs. Buying...?

[csalvato]

I am in the process of moving back to US from the UK. So, naturally, I need a car.

Right now, I am cash flow negative, but investing in an education-prep project right now to try and fix that. This venture does require some capital for advertising. Right now, my ads are just slightly below break even, but are trending towards profitability week over week.

Originally, I was planning on financing a used car that was a few years old. That would mean putting in a significant amount of capital to start, and then having a monthly payment.

Then I realized I may be able to lease a new car instead of buying. That way, I don't need to put any capital in up front and can continue to put that into my business.

I am not sure if this is the right way to go. I am doing a lot of reading on how leases work as part of my due diligence, but was wondering if anyone here had an opinion on leasing vs. buying for the entrepreneur who is trying to conserve their capital...?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[jon.a]

I am in the process of moving back to US from the UK. So, naturally, I need a car.

Right now, I am cash flow negative, but investing in an education-prep project right now to try and fix that. This venture does require some capital for advertising. Right now, my ads are just slightly below break even, but are trending towards profitability week over week.

Originally, I was planning on financing a used car that was a few years old. That would mean putting in a significant amount of capital to start, and then having a monthly payment.

Then I realized I may be able to lease a new car instead of buying. That way, I don't need to put any capital in up front and can continue to put that into my business.

I am not sure if this is the right way to go. I am doing a lot of reading on how leases work as part of my due diligence, but was wondering if anyone here had an opinion on leasing vs. buying for the entrepreneur who is trying to conserve their capital...?

@Kak does

 

[biophase]

Why not get an older car?

 

[csalvato]

Why not get an older car?

I can buy pretty much any reasonable, non-luxury car I want outright. New or used. I don't want to reduce my capital any more than I have to at this moment though.

I looked into cars that were older.

4 year old cars don't seem to depreciate much in value compared to the new car (like, $18k used vs $23k new). I wouldn't want to put down $18k or $23k up front, so would have to take out a load even for a 4-5 year old car..porbably in the $15-$20k range which would still mean a monthly payment that is about the same as a lease payment.

Prices on vehicles don't seem to significantly start to drop until they are about 7 years old. Then you have to dump capital into the car up front and be on-guard for when things start to go wrong with the car. We intend to do a fair amount of driving, so safety and wear-and-tear would be working against us.

Compare that to a lease where I can put 0 down and have a payment of $300-$350/month, where the total amount owed would be only a small amount more (~$1000 range) than the depreciation I would experience on a car I purchased new or used.

It just almost seems too good to be true, which raises a red flag...but after talking to a few other entrepreneurs, I'm starting to think it is a really good option.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[csalvato]

Just found this ... @Kak had good insights

https://www.thefastlaneforum.com/community/threads/suprising-cars-of-the-rich.52629/

 

[100000MIL]

Just keep in mind that when leases are advertised for "$0 down" it doesn't really mean $0 down. You still have to make your first month's payment up front, and most of the time you have to pay sales tax, and any registration/documentation fees up front as well.

I don't know if it's different other places, this is just my 2 cents from my experience in automotive sales. I still think leasing is the better option, I'd hate to be making loan payments (plus repairs eventually?) on a 9 year old vehicle. Good luck!

 

[LightHouse]

Leasing, aka long term renting is great if its temporary. But you mentioned doing a fair amount of driving... remember that lessors will be trying to hit you with fees every which way including overage for mileage allowance.

You mention old cars and having to put money and watch out for maintenance and safety. Every time i hear that I think bratty 20 something that just wants a new car( NOT saying this is you AT ALL). The reality is, if you buy right, that just isn't true. Cars aren't made to last 5 years and fall apart unless they are VW's or nissans....

If you buy a toyota or honda... you'll be surprised you have to do just standard upkeep and that is pretty much it.

As with any used car buy, don't ever skip the $100 PPI from a shop before you buy it.


So to me, it depends if you are only going to have the car temporarily, or you are keeping it for a while.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[100000MIL]

^ Good points.

Let's say you sign a 3 year lease that allows 12,000 miles per year. This means that when you turn in the lease, it needs to have less than 36,000 miles (regardless of if you did 12,000 per year or 5,000 the first and second years and 26,000 the last year). That's probably obvious but a lot of people think it's literally 12,000 miles per year, so just throwing that out there. If you anticipate returning the lease with more mileage than that, most lessors allow you to purchase miles in advance for a discounted rate, like $0.15 per mile instead of $0.25 per mile at the end of the lease.

I do agree that Toyota or Honda is the way to go. They last forevvvvvver if you take care of them properly (probably even if you don't).

 

[Shades]

Dont know that theres a right or wrong answer here. Really just depends on the person.

To me leasing gives you a car thats always under warranty so theres less worry there. Always have the newest tech and safety features. Depending on the manufacturer you dont even need to pay maintenance. Toyota is one that offers free oil changes, roadside assistance and stuff the first 2 years. BMW. Payment is less then buying. As long as you can read a agreement and understand everything theres no risk. Throughout the year you will see some really good lease specials.

Never put money down on a lease. It makes no sense. Yea it will lower the payment a bit, but you can probably make better use of that 2k+ in the meantime. If you drive over 15,000 miles a year then you might be better off buying. You can buy cheaper extra miles at the time of the lease. You are allowed normal wear and tear on the car. These things are clearly outlined. Like how many dings and dents are allowed etc... Its pretty unlikely that you will ever have a problem with that when turning in the vehicle.

It comes down to being ok with always having a car payment. If you are ok with just getting a car and driving it into the ground then maybe buying is your best bet. In that case, id say to look for places that sell off lease or former rental cars. You can get great prices on newer models that are just off lease or off rental. A couple places in the northeast I know of are Blue Knob and Simmons Rockwell. And really, the 2 times Ive bought cars like this you end up being able to sell the car after a few years and come out on top. You arent really upside down very long like if you bought a brand new car.

 

[Shades]

^ Good points.

Let's say you sign a 3 year lease that allows 12,000 miles per year. This means that when you turn in the lease, it needs to have less than 36,000 miles (regardless of if you did 12,000 per year or 5,000 the first and second years and 26,000 the last year). That's probably obvious but a lot of people think it's literally 12,000 miles per year, so just throwing that out there. If you anticipate returning the lease with more mileage than that, most lessors allow you to purchase miles in advance for a discounted rate, like $0.15 per mile instead of $0.25 per mile at the end of the lease.

I do agree that Toyota or Honda is the way to go. They last forevvvvvver if you take care of them properly (probably even if you don't).

I feel Toyota is living off past reputation at this point. They are recalling as many cars as anybody. Over the past few years theres been a quality control issue there. Add to that most designs arent up to snuff with the competition. Or tech features. I do find the Prius oddly appealing tho. Just too expensive for what it is.

Honda you really just have to like their designs. Personal preference.

Its really hard to beat Kia and Hyundai right now. For the quality and features you are getting for the cost. Ive read good things about the new Mazdas. Ford has some nice cars. Any of those companies you can lease a real nice car for not a bunch of money. I do like Toyotas Care program tho.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[theag]

negative cashflow.... 18k used car..... $350 monthly lease payment....

Sorry, thats all just stupid. Get a 10 year old car for $1000 (or none at all) if youre broke.

 

[LightHouse]

I feel Toyota is living off past reputation at this point. They are recalling as many cars as anybody. Over the past few years theres been a quality control issue there. Add to that most designs arent up to snuff with the competition. Or tech features. I do find the Prius oddly appealing tho. Just too expensive for what it is.

Honda you really just have to like their designs. Personal preference.

Its really hard to beat Kia and Hyundai right now. For the quality and features you are getting for the cost. Ive read good things about the new Mazdas. Ford has some nice cars. Any of those companies you can lease a real nice car for not a bunch of money. I do like Toyotas Care program tho.

Recalls are great, its the companies that don't put out recalls that suck. Common issues with your car, no recall, you're screwed. Toyota putting out recalls to fix random small issues in cars even if they are 15 years old... amazing support. The reality being, between those recalls, there are FAR less actual maintenance issues with hondas and toyotas to deal with that aren't covered. Thus if you are short on cash and just need a car, an older model toyota or honda is the best bet, even though you will pay a bit more for them.

 

[csalvato]

Sorry, thats all just stupid. Get a 10 year old car for $1000 (or none at all) if youre broke.

Don't presume that:

1. I need your input on the decisions in my life
2. You know the complete circumstances of my life
3. I care about your opinion on what I SHOULD do (considering you don't know me, as in #2)

I'm not broke. I have a lot of liquid assets.

I am smart enough to make my own decisions when I have all the info. That's why I made this post, to get info. Getting straight answers from a dealer/financer/salesperson is hard. Most of them are useless.

Googling only gets you so far...thus I am asking here to get more information from likeminded people while doing my DD.

Just keep in mind that when leases are advertised for "$0 down" it doesn't really mean $0 down. You still have to make your first month's payment up front, and most of the time you have to pay sales tax, and any registration/documentation fees up front as well.

I don't know if it's different other places, this is just my 2 cents from my experience in automotive sales. I still think leasing is the better option, I'd hate to be making loan payments (plus repairs eventually?) on a 9 year old vehicle. Good luck!

Yeah, I understand that. I actually thought the sales tax could be rolled into the monthly payments, but it seems this varies from place to place.

I wouldn't need a loan on a 9 year old vehicle..I could buy that (or any other car) outright.

It's more about conserving capital so that I can more easily dump it into my AdSpend which is currently at about 114% ROI and scaling. It seems like there are no major "GOTCHA!'s" with leases though, which is making me lean towards that decision the most.

So to me, it depends if you are only going to have the car temporarily, or you are keeping it for a while.

Definitely looking at this as a short term thing while my wife and I get on our feet in the US after our move, and while I am dumping money into my positive-trending ad spends...which sounds like you are saying leasing really isn't a bad option in these situations?

Every time i hear that I think bratty 20 something that just wants a new car( NOT saying this is you AT ALL).

LOL I actually felt the same way. I was never the kind of person who wanted to always have a new car. I drove my last car into the ground before moving to the UK and have no problem having a junker.

But buying a used car on the east coast (where people are less honest, in my opinion), you don't really know what you're going to get. Dealers seem to charge a huge amount for used cars less than 7 years old.

So if its a choice between buying a 7 year old car for $5000-$8000 up front, out of pocket or paying $400/month for a lease (around the figure I was quoted for 15k mileage allowance with $0 down) while my ad spend is scaling, the latter just seems more reasonable...unless I am missing something...?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[csalvato]

A couple places in the northeast I know of are Blue Knob and Simmons Rockwell.

Going to look into Blue Knob and Simmons Rockwell now. Thanks!

 

[csalvato]

Its really hard to beat Kia and Hyundai right now. For the quality and features you are getting for the cost. Ive read good things about the new Mazdas. Ford has some nice cars. Any of those companies you can lease a real nice car for not a bunch of money. I do like Toyotas Care program tho.

I had a Honda in the past that I loved. Support is great, cars are well built and built to last.

I am looking at a compact SUV (Honda CR-V, Mazda CX-5, Nissan Rouge). The Honda definitely stands out in the class above all others. Kia and Hyundai make great cars too, but I didn't see much info about them on the web so didn't really gravitate towards them.

90% chance I go with a 2015 Honda CR-V on lease.

 

[the6ixace]

I'd put most of my capital testing your ads and your business. For a car, go to auto trader, select honda, put in max price of 10k and max miles of 50k. Sort by miles and go look at the top 5. This is what I did, got my business up and running and then leased a new car


Sent from my iPhone using Tapatalk

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Phones]

I think you are over-spending. I could get 4 or 5 reliable cars for 20k...

Can't you find a lease/financing on a used or cheaper car? And I don't mean that you need to get the cheapest thing you find. I just have a thing against new cars, you're loosing 20% right when it leaves the lot.

Anyway, if I was spending around 15k, I'd go with either a 3-Series BMW with under 80k KM or go crazy and get a Peugeot RCZ (Around 15k€ used in Europe).

 

[csalvato]

First off, thank you to everyone for challenging me! It has really helped me refine down why a lease is the best option for me right now.

Can't you find a lease/financing on a used or cheaper car? And I don't mean that you need to get the cheapest thing you find. I just have a thing against new cars, you're loosing 20% right when it leaves the lot.

You cannot lease a used car (at least that's what the dealerships I called told me).

The realistic options are:

1. ~$10K car price, $10k paid at sale – 7+ year old car bought outright
2. ~$10K car price, <$5k paid at sale – 7+ year old car purchased with a small loan with $150-400 monthly payments
3. ~$15k car price, $8-10K down payment at sale, 4+ year old car with a loan, costing $150-$400/month [I'd rather just buy a 7+ year old car than ever take this option]
4. ~$25k car price, $1-2k lease signing fees/taxes at sale, then $400/month with a lease on a new car

The way it looks to me is that all of these options require a monthly payment of some kind except option #1, and I would rather have that $10k capital for my ads. Here's why...

At the current total spend/ROI, I would get 6% back (which factors in weeks of losses on feeling out the market). This week so far, I am making 44% on every dollar spent. Combined this week and previous week, its 22%. Week over week, ROI is trending upwards.

If I completely exhaust that $10 on my ad spend in one month, I could expect $2.2k-$4.4k return, vs the amount saved in avoiding a loan.

If I took that $10k and sunk it into a loan, I would be missing out on a potential $2.2-$4.4k return each month (assuming the same ROI).

I think any way you slice that, conserving capital makes the most sense.

Option 4 is the least amount of capital (capital which will likely grow a LOT faster in my ad spend), and the least risk.

But, as usual, if I am missing something I would love to hear your perspectives.

 

[jon.a]

First off, thank you to everyone for challenging me! It has really helped me refine down why a lease is the best option for me right now.


You cannot lease a used car (at least that's what the dealerships I called told me).

The realistic options are:

1. ~$10K car price, $10k paid at sale – 7+ year old car bought outright
2. ~$10K car price, <$5k paid at sale – 7+ year old car purchased with a small loan with $150-400 monthly payments
3. ~$15k car price, $8-10K down payment at sale, 4+ year old car with a loan, costing $150-$400/month [I'd rather just buy a 7+ year old car than ever take this option]
4. ~$25k car price, $1-2k lease signing fees/taxes at sale, then $400/month with a lease on a new car

The way it looks to me is that all of these options require a monthly payment of some kind except option #1, and I would rather have that $10k capital for my ads. Here's why...

At the current total spend/ROI, I would get 6% back (which factors in weeks of losses on feeling out the market). This week so far, I am making 44% on every dollar spent. Combined this week and previous week, its 22%. Week over week, ROI is trending upwards.

If I completely exhaust that $10 on my ad spend in one month, I could expect $2.2k-$4.4k return, vs the amount saved in avoiding a loan.

If I took that $10k and sunk it into a loan, I would be missing out on a potential $2.2-$4.4k return each month (assuming the same ROI).

I think any way you slice that, conserving capital makes the most sense.

Option 4 is the least amount of capital (capital which will likely grow a LOT faster in my ad spend), and the least risk.

But, as usual, if I am missing something I would love to hear your perspectives.

I'd buy (and I currently own) a beater. Keep bootstrapping your cash until the point of diminishing returns then start saving for something better. You're only talking about a few months.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[theag]

90% chance I go with a 2015 Honda CR-V on lease.

Come on man, you can do better than that, at least an entry model BMW 3 series.

 

[MMatt]

Gotta say I'm with @theag on this one. Until I am buying a car for fun and to represent my achievements, it's beaters all the way. A car is a depreciating asset that will always end up less valuable than when you bought it and will be useless pile of metal worth about $300 in scrap at the end of its life.

The math doesn't lie. 10-20yo car purchased with low(ish) miles for 2k and 20 dollar oil changes for a couple years will always be cheaper than a leased/financed multi thousand dollar vehicle.

Not to mention older cars, to an extent, have cheaper parts as long as it's a popular model,and insurance isn't all that bad.

However the question was to lease or buy so I guess my input is useless anyway...

 

[tafy]

My £900 Volkswagen polo is over a year old and I have spent only £50 for a new battery.

It's 15 years old and works great, the only reason I would change is if I had to do long distance driving.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[theag]

http://www.tropicalmba.com/what-it-feels-like-to-have-money/
http://www.tropicalmba.com/entrepreneurmobile/

 

[theag]

My £900 Volkswagen polo is over a year old and I have spent only £50 for a new battery.

It's 15 years old and works great, the only reason I would change is if I had to do long distance driving.

Ha! My ford ka is 16 years old. The exhaust fell of TWICE . Paid €500 + 50 (because he put gas in the tank that morning the value of the car went up 10%). Piece of shit car . Dont want to deal with inspection so next summer I'll buy another one for under 1k

 

[tafy]

Ford ka? I wouldn't have bought that piece of crap lol

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[csalvato]

Good feedback. Thanks guys.

I'd buy (and I currently own) a beater. Keep bootstrapping your cash until the point of diminishing returns then start saving for something better. You're only talking about a few months.

One thing holding me back from doing this is that I need to buy within a few days, or the capital will be going to a rental.

Every time I have heard of someone buying a used car in a rush it has always resulted in problems; especially when they are looking to spend as little money as possible.

If I were going to buy a beater, I feel like it would require a lot more effort and time to make sure I wasn't buying a complete piece of shit. Carfax, meeting up with several sellers, going through PPIs, etc.

This is a significant time investment. Every day I am out spending looking at cars is another day I am away from building landing pages and scripts to optimize my profits, and spending money on a rental.

Gonna have to think about this a bit more though, and see what beaters are up for sale on CL. Maybe I'll get lucky.

 

[theag]

In Germany there are websites that broker leases that are already in place, so you can take them over for the remainder of the lease. So instead of signing a 36 month lease (which is the standard length here) you can often get a fairly new car for, e.g., 12 months for the same monthly lease that you would pay on a 36 month contract. That way you kinda have the best of both worlds. No big capital outlay for a better-than-beater used-car and much less risk for hurting your cashflow because the contract is much shorter.

Dont know if you have sth like this in the US, but that might be a solution that fits your situation.

Just thought about this when I saw this thread again and thought I would provide some value after I bashed you in my last posts :embarrased:

 

[biophase]

The one thing you are not taking into account is that you don't own the car after the lease.

So $10k now and in 2 years you have an $8k car to sell. You have spent $2k.
$2k down and $400/mo lease, in 2 years you have spent $12k and have nothing.

So there is a $10k difference because you chose a new car. So if you're $8k in ad spend can bring you $18k in profits in 2 years, then both decisions break even.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[healthstatus]

I need to buy within a few days

Most dealers are closing out their 2014 lines right now, deals to be had both with purchase and lease, but you have to take what they have on the lot.

 

[csalvato]

Most dealers are closing out their 2014 lines right now, deals to be had both with purchase and lease, but you have to take what they have on the lot.

That's just what I was thinking! Great to have it corroborated.