Leasing vs. Buying...?

[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.

 

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[SBS.95]

So you said you like the CRV, why not buy a late 90s/early 2000s CRV for $4000. Dead reliable (I've seen them with more than 400,000 miles and still chugging), VERY VERY cheap parts/maintenance, gets 35 mpg, and practically no depreciation.

As someone who does a little bit of car flipping, the resale value on older Hondas/Toyotas is GOLD. You can pick up an older CRV or 4Runner for $4000-6000. Expect one with like 100-150k miles. Drive it for 2-3 years, put some miles on it, then sell it for $4000-6000. You get back most of what you paid, no monthly payments--it's like getting a free car.

I don't get the appeal of new cars. I'd be so anal about making sure it never got scratched or bumped by a shopping cart. Meanwhile, despite my best efforts to take care of it, the car is losing 50% of its value for the first 5 years of ownership. No thanks, I'd rather just own something older outright.

 

[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.

 

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[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...

 

[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

 

[csalvato]

View attachment 8695

Here you go. $200 Cash. Great on gas. Just throw on a poncho when it rains.

I guess I'll throw the dog wife and baby on my shoulders and we can ride around like a circus act. Should be fun to ride that on the Staten Island expressway and NJ turnpike when driving to see my family.

 

[SBS.95]

I think these are great points, and probably apply to a lot of people. Maybe our experience just differs.

I have owned a few cars that were over 7 years old. Older Hondas and Toyotas too. Once a car's age gets to 7+ years, things start to go wrong. Not big things, but you need brakes here, an alternator there, new tires here, transmission there, rotors, air filters, Free-On, suspension, struts, etc.

From my experience, to say it's like getting a free car is a little off, because these are things you need to pay for which add to costs. And taking care of these issues comes at unexpected times, and can be an unpredictable cost ($1000 for a transmission, $2000 for suspension, $200 for rotors, etc.)

To say "you get the car for free" isn't exactly accurate; and the cost of worry, time and unpredictability also has a value.

And the whole time I'm in the car I feel much less safe. Last time I drove a 10 year old Honda Civic on the highway to get my wife from the airport, I felt more unsafe than in our 5 year old, dirt cheap, economy vehicle. I felt like the car was driving me.

If this isn't the option for you, it's not the option for you. I'm not a fan of leasing personally, though I know Kak and a few others think it's the best way to go.

However I will say for anyone interested in my other post that these repair cost numbers are completely off-base, and are especially mitigated if you repair the car yourself. A transmission "here or there" should not be something you have to replace. $2000 for suspension repair? That's like what it costs to replace all-around air suspension in an Audi or a Cadillac. To replace all of the parts of a "normal" suspension system in a car like a Civic, if you're paying more than $600 you're overpaying. That's with labor, doing it yourself it should cost no more than $300.

My outline for driving a "free car" for a few years absolutely works, from firsthand experience. Now if you don't like having older cars, as said above, then I would agree it's probably not the option for you. Personally I'm the opposite, new cars have no character. I've never owned even remotely close to new. My current car is 17 years old and has only failed to start on me 1 time in 5 years.

We need more threads like this. I could talk about used cars all day.

 

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[Rick2010]

My recommendation would be to get an older Toyota. I bought my 97 camry 5 years ago for a little over a grand. In 5 years I have done one repair that was under $300. If-when my camry dies, I will be buying another old Toyota, however, I do not foresee that happening for a long, long time.

My 2 cents.

 

[Kak]

Leasing is what I do. Why? Because it is easy.

Now, I don't lease Mercedes and BMWs like a douche. I lease large 4 door cars in the 35k range. They always tell me I qualify get the 80k car or whatever. Jackasses. As long as I can keep getting cars for 329, sign me up.

People like to spend money. I like to make it. My lease is always taken care of, it is like leasing a home. There are no projects for you. Just gas it up and drive.

To put this in perspective my last vehicle was a Nissan SUV and it had so many miles that it was costing 200-300 a month in just repairs... I laugh when my payment goes through, it is basically free.

Some good cars to look into:
Dodge Charger, Subaru Legacy, Toyota Avalon, Buick LaCrosse, Chevy Impala, Ford Taurus, Chrysler 300, VW Passat, Hyundai Azera. These all can probably be had under $400/month.

 

[Kak]

Ask yourself the following with any big decision:

What is your goal at the moment? For you it should be making a living from your business. This is a good first step.

Then you need to ask yourself if your new car lease gets you closer or farther away from that goal...

The answer is farther. Get a cheapo. Show off later.

 

[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.

 

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[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.

 

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[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.

 

[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

 

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[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.

 

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[theag]

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

 

[tafy]

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

 

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[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:

 

[100000MIL]

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

Just wanted to clarify that I wasn't saying you couldn't. You mentioned that you didn't want to drop $18k on a used car so you would need a loan. So when I said I wouldn't want to be making payments on a 9 year old car, I meant I'd hate to finance a 4 year old car for 5 years and still be making payments (in the 5th year) on a (at this point) 9 year old car.

 

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[LightHouse]

Great reply.

I think I am missing something. $10k difference over 2 years. So wouldn't I need to make $10k in net profits on the original principle of $8k? I am not sure where $18k came from, and have been racking my brain to try and reverse engineer that back down to the 10k difference.
.

18k is the 10k difference + the 8 k cash you had before you spent it on ads.

 

[csalvato]

18k is the 10k difference + the 8 k cash you had before you spent it on ads.

Ah I see. I wasn't calculating it that way. Makes sense now.

 

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[Deleted17784]

Here you go. $200 Cash. Great on gas. Just throw on a poncho when it rains.

 

[csalvato]

However I will say for anyone interested in my other post that these repair cost numbers are completely off-base, and are especially mitigated if you repair the car yourself. A transmission "here or there" should not be something you have to replace. $2000 for suspension repair? That's like what it costs to replace all-around air suspension in an Audi or a Cadillac. To replace all of the parts of a "normal" suspension system in a car like a Civic, if you're paying more than $600 you're overpaying. That's with labor, doing it yourself it should cost no more than $300.

My outline for driving a "free car" for a few years absolutely works, from firsthand experience. Now if you don't like having older cars, as said above, then I would agree it's probably not the option for you. Personally I'm the opposite, new cars have no character. I've never owned even remotely close to new. My current car is 17 years old and has only failed to start on me 1 time in 5 years.

We're on the same page, I think.

I definitely think this option is not for me, but that doesn't mean it's bad. I think that if you know how to fix problems in a car really quickly, it's better for you to buy an older model and do that.

For me, it means potentially sitting in shop for hours waiting on repairs. For someone else, that may mean spending hours figure out how to fix their suspension, brakes or rotors themselves. For someone who already does all their own car stuff (like some of my former room mates), it means 45 minutes of work every 6 months.

Sorry if my numbers were off base. I think most of them were accurate, though, as I paid prices in line with $300 for a bearing repair, $400 for new tires, things like that. The suspension one seems to be way off, so thanks for shedding light on that.

Thanks so much for helping me make my decision!

 

[SBS.95]

Sorry if my numbers were off base. I think most of them were accurate, though, as I paid prices in line with $300 for a bearing repair, $400 for new tires, things like that. The suspension one seems to be way off, so thanks for shedding light on that.

Idk how much this will apply to you if you're leasing, but if you ever want to know if a repair quote is accurate just let me know. I sell a ton of auto parts, mostly Japanese and European. So while I'm not a mechanic by any means, I know enough about what things cost to see if a dealership is ripping someone off.

My friend just paid a shop $190 to replace 2 coilpacks. $60 in parts, takes (literally) 10 minutes to install. Not even one of those internet "exaggerate your mechanic skills" things, 10 minutes to install. I just hate to see people ripped off by shops, especially with me knowing that most auto parts can be had waaay cheaper than people imagine.

 

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[ddall]

Felix Denis once said regarding spending :“If it flies, floats or fornicates, always rent it.” If his thoughts apply to driving, I do not know.

 

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[SaskGuy]

Since cash is clearly an issue right now, and even a $0 down lease is going to cost you $1,000 after 3 months, possibly with documentation fees required out of pocket, why not buy the cheapest thing you can find that looks like you won't have to put any cash into for the next 6-9 months until you see what your cash situation looks like?

The problem with the lease is that once you sign, you are committed to make those payments, whether you have the cash or not.