Leasing vs. Buying...?

[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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[csalvato]

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.

Ah gotcha! That makes a lot of sense now.

 

[jon.a]

Okay here's an option.
Government fleet vehicles.
City, County, State.
Sold at auction. Should be well maintained. But, high mileage.
I've never done this, but I would.

 

[csalvato]

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.

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.

Okay here's an option.
Government fleet vehicles.
City, County, State.
Sold at auction. Should be well maintained. But, high mileage.
I've never done this, but I would.

Good idea. Unfortunately, the auction is held on Dec 13 and I can't make that date because of the move. They hold them "at least once a month" and I can't really plan for an auction on Dec 20 since it's not listed anywhere that I can find.

 

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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.

 

[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]

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.

 

[csalvato]

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.

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.

 

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[jon.a]

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.

Which long term solution for your short term problem are you going with?

 

[csalvato]

Which long term solution your short term problem are you going with?

Like @Kak, I'm going to be leasing, because this is the option that I feel is right for me, right now.

I think all of the information from each side of the issue here is useful to anyone else in the future.

If it turns out my wife and I happen to need a second car as a runaround, I'll probably just get a $350 20 year old car.

Three years ago, if i needed a car in Utah where I walked most places, the points here would push me to definitely get a beat up piece of crap to just get myself from point A to B.

Just hope this helps someone else make their decision in the future.

 

[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.

 

[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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[Amber]

Go to a used car lot with cash in hand, if you dont know anything about cars take someone with you that does (I dont). Once you check out the vehicle and know its going to be an awesome value offer them a cash price. I bought a beautiful 97 mustang convertible that runs great and has never let me down for $1900, the sticker price was $2800. I drive it everywhere and deliver pizza in it. Less than 2 months on the job paid for my car.

Btw, I've owned 3 mustangs in my life, none of which have ever let me down, and I think if you know a brand that is dependable and you want to buy something as your only and daily driver you may want to stick with that brand. But one of the mustangs I owned was an 04 model, with a car PAYMENT, at which I suffered for years to pay, and to this day still has not been paid off, but my moms vehicle had just broke down so I offered her to take the car and the payment so its off my back. Even though I paid nearly $20k for the car in payments over the years I was willing to let it go. She took it with 2 years of payments left and I was happy to get rid of it and pay cash for my older model.

It was alot of money but well worth the lesson. I will never finance a vehicle again in my life. The car I bought was $10k and turned into $25k after payments. I am out to make myself rich, not some cheesy car salesman.

 

[Amber]

Next stop cash for a Mercedes!

 

[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.

 

[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]

Now if you are currently making money from a job I would buy a $4000 car cash. Totally different scenario.

 

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[csalvato]

Now if you are currently making money from a job I would buy a $4000 car cash. Totally different scenario.

I'm not - but why do you think that changes things? I'm cash flow negative but my campaigns are trending upwards.

 

[Kak]

Just trust me, it's a no for you right now.

 

[csalvato]

Just trust me, it's a no for you right now.

What am I missing?

 

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[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]

Let me preface this first. My wife and I have a healthy 6 figures in net worth, even with being slightly cash flow negative for the past few months.

My first two years in business for myself, I made $20k profit each year, on top of living expenses. Not great, but not terrible. We have saved a lot of money.

In other words, I don't have a habit of making shitty fiscal decisions.

That said, the decision we made is to lease.

Now, I respect your opinion more than others here for two reasons:

1. Several people here have confirmed for me that you are a legit successful business owner [whereas most people on this forum have a question mark next to their name]
2. You are normally a proponent of leasing

So since you seem to be on the opposite side of the fence, I honestly feel like I am missing something and am trying to educate myself. By you saying that if you explain it to me, I won't learn anything, I am just left more confused. I am trying to learn what I am missing so I can make better decisions now and in the future.

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

My goal at the moment is to hit cash flow positive again. I have made a living from my businesses for 3 years, and this is what I consider a "hard time", which is why I am cash flow negative.

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.

I've determined leasing gets me closer to that goal; and as shown above, I normally make pretty good financial decisions. The fact that you are on the other side of the fence worries me, because I feel like I am missing something if it really isn't a good decision.

I'm not trying to be right, I am trying to understand. After your comments, my wife and I had a conversation about it, and we both are confused how leasing moves us further from our goal.

We actually think leasing moves us closer to our goal because:

1. I will have more liquid assets within the next 12-24 months to invest in my business.
   1. If I lease instead of getting a $4800 car, I essentially have 12 months until I completely lose that $4800, instead of losing it instantly ($400/month lease * 12 months = $4800)
   2. If I lease instead of getting a $10,000 car, I essentially have 24 months until I completely lose that $9600, instead of losing it instantly ($400/month lease * 24 months = $9600)
2. I won't have to worry about unpredictable repairs that will steal more liquid capital, time and energy from my business.
3. I can make a rapid decision once I touch down in my home. Same day I land, I can go to 5 dealers, and pick out the best lease terms and have a car within 24 hours, and get back to work on my business (rather than putzing around driving all over the state to look at cars, then get PPI done, etc.)
4. It will light more of a fire under our asses. If we don't turn around and make more on that capital within the first 12 months, we will have failed. If we have a car and "Don't need to worry about it", it lends itself to comfort.
5. I truly and honestly believe in myself and my wife to turn our cash flow around within a few months (as I have proven I can do in the past). If I am cash flow positive, then it sounds like your line of logic changes. By investing capital in a used, unpredictable car, it is, to an extent, admitting a sense of doubt that we won't make this happen.

Show off later.

As I hope I illustrated, this isn't about showing off. I honestly could give a shit less what other people think of the car I drive. Every other car I have ever driven has been a car I ran into the ground. My decisions here are made from a fiscal perspective only.

So what am I missing? I have obviously taken your advice and input seriously, and am curious to see where you think my logic has fallen apart.

 

[Kak]

I think you are probably fine then. I figured you were one of the 3-4 fig net worth people that still haven't figured out how to pay the bills when you said cash flow negative.

You could do a mixed deal and just lease a cheapo. How about a Nissan versa?

 

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[csalvato]

I think you are probably fine then. I figured you were one of the 3-4 fig net worth people that still haven't figured out how to pay the bills when you said cash flow negative.

You could do a mixed deal and just lease a cheapo. How about a Nissan versa?

Interesting option.

We were looking at compact SUVs because we wanted a little more space. Honda CR-V or Hyundai Tuscon, for example. We have driven a shitty car (the cheapest you can get in the UK) for the past 3 years:

We'll have a look at a dealer when we go check out the Nissan Rogue. At that price point (~$12,000), the Versa might really be a winner.