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Lease or Finance, very undecided


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My wife and I are contemplating trading her 2005 Altima in on a new vehicle.  At this point we are very open to purchasing used, leasing or financing new.

 

Last night we test drove an Chevy Equinox, Chevy Orlando (Canada only), Santa Fe, Mazda CX-5, Ford Escape SEL, would consider a Ford Edge used.

 

No matter which vehicle, leather/heated seats and remote start are a must. 

 

I am a GM guy through and through, the Orlando handles like a small car, but even with the 170hp 2.4L it has absolutely no get up and go, struggled to pass someone on a 4 lane highway.  Also the gentle wind at high speeds really was noticeable in the vehicle.  So we axed that one.

 

The loaded Equinox was nice, the tester only had the 2.4L which is also way under powered.  My parents have a 2011 Equinox with the 4 cyl and it too needs to be floored in order to pass someone. 

 

Santa Fe didn't really do it for me, the new ones seem a bit big.

 

Mazda CX-5 has very nice styling, but the motor too is weak.

 

Ford escape, SEL, 2.0L ecoboost.  260hp, decent accel, decent mileage and fully loaded. To be honest, we both fell in love with it, comfortable ride, attractive, and peppy, leather heat roof etc.  The tech is a bit over the top, and pissed me off.  Takes 5 minutes to speak to the computer to change temp, when it takes a microsecond to hit the button.  Still a neat feature, just not my cup of tea. 

 

 

So, we figure we have about $6,000 for the trade in value on her car.  Going through Ford, we get a $1000 Costco rebate, as well as Employee Pricing at the moment. Purchase Price is $35,500 after employee pricing.

 

To lease, we are looking at $0 down, 36 year lease 25,000km mileage for $365/month with a $19,500 buy back. 

 

To Finance, we are looking at 0.99% 5 year purchase, $5000 down payment, for $510/month.  

 

At the end of year 3, the vehicle will be valued at 19,500. 

Lease will be up, and our total invested is a $6000 car + $13,140 = $19,140.

Financing will be 60% complete, our total invested will be $6000 car + $5,000 dp + 18360 = 29,360  (We will owe +/- 10,000).

 

So at the end of year 3, we will have paid an extra 10K towards the car (finance vs lease), but have 10K in equity (value 19,000).  In my mind is a net zero after 3 years.    During those 3 years, the 5K down payment used for financing can be saved for either around the house expenses, or to put towards building our next house, all of which will earn us some interest in savings.

 

On a 3 year plan, the leasing seems to be the much more attractive solution.  The kicker is "what about year 4, year 5, year 7".

 

The concensus seems to be to simply keep upgrading every 3 years and settle with a consistent monthly payment forever.  

 

Or buy new, pay off in 5, and keep for 8-10?  5 years of no payments could be viewed as a "savings" of +/- 30K + the quity after 10 years, say 5K.  Put you well ahead after 10 years. 

 

I have always bought used cars before simply because i could usually work on them myself and figured i would let other handle the depreciation. 

 

Any advice/help?  Thanks!

 

 

 

 

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i have never leased a car and it seems the only reason i ever read to lease vs. buy is if the owner has to get a new car every 3 years.  I would think my deciding factor would be depends on how long you plan to keep the car.  To me, if greater than 5 years, I'd buy/finance

 

off topic, I will be in Ottawa next week for work in the Kanata area.  Anything I should see when I am in town.  Never been to Ottawa before.

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Really depends on your budget and what the intentions are for the car. I always recommend buying if you can swing the payment. 

 

Also, If you plan to do ANY modifications... don't lease. 

 

Financing to buy is always nice b/c at the point its time to move onto your next car you have (hopefully) something of value to use as trade or sell for the down. 

 

On a lease you'll essentially be burning money, of course less per month, but at the end of the lease you're left with really nothing. 

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i have never leased a car and it seems the only reason i ever read to lease vs. buy is if the owner has to get a new car every 3 years.  I would think my deciding factor would be depends on how long you plan to keep the car.  To me, if greater than 5 years, I'd buy/finance

 

off topic, I will be in Ottawa next week for work in the Kanata area.  Anything I should see when I am in town.  Never been to Ottawa before.

Parliament Hill definitely, free tours.  Canadian War Museum is very cool, We have Canadian Science and Tech, Canadian Civilization (gatineau, quebec) and Canadian museum of Nature.   Thursday nights are free nights.   Check out the byward market for some awesome bars/restaurantes.  Another bustling spot with good eats is Preston Street.  Would recommend Heart and Crown for nice pub food.  Since you're here, the Rideau Canal is very nice, you can rent a bike and cycle it. 

 

Kanata is about 25 minute bus/car ride into the downtown core.  The national arts center is popular for great concerts and shows, not sure what the schedule is like next week.

 

School is back, so Carleton University and University of Ottawa will be swaming with students, ie scandelously clad young ladies everywhere.   People watching downtown is great this time of year :)

 

Kanata has some nice golf courses and of course Canadian Tire Center (where the Leafs beat the Sens last night).

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Really depends on your budget and what the intentions are for the car. I always recommend buying if you can swing the payment. 

 

Also, If you plan to do ANY modifications... don't lease. 

 

Financing to buy is always nice b/c at the point its time to move onto your next car you have (hopefully) something of value to use as trade or sell for the down. 

 

On a lease you'll essentially be burning money, of course less per month, but at the end of the lease you're left with really nothing. 

Yeah, that's my big dillema. 3 years from now we may have a kid or 2 and the escape may not be big enough.  Still looking at used car options, but the monthly ends up to be nearly identical, less warranty, but overall less cost, and in 2 years would be paid off.

 

Ultimately it does come down to getting paid every month and what we can reasonable afford to spend every month.  Which sometimes makes the big/longterm picture cloudy.

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No harm in leasing if your cashflow doesn't allow for a big monthly expense IMO. 

 

The smart thing to do though, is to take some of that money you're saving on the monthly payment and stash it away over the life of the lease. Then at the end of the lease you have a nice nestegg to either buy out the lease from the dealer or to put down on a new vehicle. 

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Completely away from your actual question but where are you looking to purchase from? My girlfriend and I just picked up a 2014 Explorer XLT with 4 miles on it for $30k USD, which is just under $31k Canadian. A quick check shows that you may be able to save a few grand by going that route.

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Parliament Hill definitely, free tours.  Canadian War Museum is very cool, We have Canadian Science and Tech, Canadian Civilization (gatineau, quebec) and Canadian museum of Nature.   Thursday nights are free nights.   Check out the byward market for some awesome bars/restaurantes.  Another bustling spot with good eats is Preston Street.  Would recommend Heart and Crown for nice pub food.  Since you're here, the Rideau Canal is very nice, you can rent a bike and cycle it. 

 

Kanata is about 25 minute bus/car ride into the downtown core.  The national arts center is popular for great concerts and shows, not sure what the schedule is like next week.

 

School is back, so Carleton University and University of Ottawa will be swaming with students, ie scandelously clad young ladies everywhere.   People watching downtown is great this time of year :)

 

Kanata has some nice golf courses and of course Canadian Tire Center (where the Leafs beat the Sens last night).

thanks Ryan for the detail!  I wish I could bring my clubs but will be in all day meetings from Tues-Thurs.  Friday is the only day I can get out as I don't fly out till 6pm so I think I will head to downtown

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The key thing when leasing a car is STAYING under the calculated mileage. Shop price and incentives! ..... Mercedes Benz has some crazy low lease rates on high end models so a lot has to do with the price and manufacturer promotions of the car.

I have leased cars and trucks when I was in business because all I was looking at was price per month then returning them at the end of term...... This WAS a great business decision in my case HOWEVER, I would not do this in my personal "fleet" because I want to be payment free for a few years because I drive over 20k. miles per year and maintain them so I get over 175 k. miles and I love to modify my cars. (EG: 2008 Charger R/T with 80k, 2005 Ford Expedition with 168k, 2000 Ford Crown Vic with 275k, 2003 Ford Ranger with 195k and I have NO Payments on them and they are all in excellent condition for their age PLUS they are detailed in and out with Adams Products)

Getting slightly off topic: I find the BEST deals around are on newer "used cars" with under 6k. miles on them...... Let some other chump or dealer eat the depreciation so look around for a model you like.

Want to get in on this used car thing by leasing? Search out a dealer and see if they have a demo and do the deal on a dealer demo or left over from last year...... these dealers sometimes have loaded models that they have to get rid of and they will do a great leasing deal on them. Don't let a dealer demo car scare you off because some of the loaded models are driven by managers only so they get a feel for the car they are selling.

REMEMBER!! THE DEALER IS NOT YOUR FRIEND and avoid the free sodas and coffee when doing the deal because they get your heart pumping...... Walk away and they will chase after you to make a deal (be patient) just be ready to pounce when they do the FAMOUS "last day of the month, I gotta get rid of inventory" rap. Trust me on this one! the best deals are at the last few days of the month.

Hope this helps!

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Well, personally, I financed and leased before and I can tell you that leasing IS the better and smarter solution from my own point of view. Here's why:

 

  1. With leasing you can simply sign and drive, zero out of pocket and boom you have a brand new, reliable car with no mechanical problems and lower monthly payment than finance. 
  2. With leasing, if you decide not to replace the car after the end of your leasing term, you can simply buy the car and "finance" the residual value
  3. Now the money that you would save by not putting ANY money down, can be invested in your 401K plan or any other investments (brokerage account?) and that should earn you in this bullish market an average of 8-10% percent depending on your risk level. To me this is a much smarter decision than throwing money in a moving, depreciating object.
  4. As far as mileage, to me it's the same thing, you lease a car, you go over mileage you will pay the overage and move on (unless you are leasing a new vehicle from the same dealership and in this case they will eat the mileage difference or melt it in the new payment). When you finance, and you go over the national average of 12K miles/year, your financed car will take a hit when it's time to trade it in (probably by the same amount of money you would have paid for the mileage overage). So, no matter how you look at, it's all math at the end and because it's math, it MUST make sense.

The only way I see myself financing is if I buy something like the C7 or another Camaro. Now with those cars, understandably you would wanna modify them somehow, maybe replace the exhaust, tint the window, etc... in this case leasing is not the best option for you. Also the money factor and residual value used for leasing sports car are terrible so you're better off financing.

 

Hope this helps

Edited by Fierce5
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Here is my opinion.  I always buy new and usually keep them around 11 years.  I'am a stickler on maintenance and don't abuse my vehicles.  It also makes it easy to get the options that I want and the color without spending a ton of time waiting for one to come up that interests me.  Yeah, there is some depreciation when you drive it off the lot, but if you plan on keeping it and not trading it in in a year your not going to lose.  One thing that I would suggest is staying away from all those car incentives with the deep discounts.  The market gets flooded with them and then they aren't worth anything in the end to anybody, but yourself.  Dodge IMO is notorious for this. Notice this link there isn't one Chrysler vehicle in the list.  My wife at one point was thinking about getting rid of her Charger, but ran into the issue of it not being worth anything, except to her.  

 

http://content.usatoday.com/communities/driveon/post/2012/04/edmunds-new-list-of-best-vehicles-for-holding-value/1#.Uj2WyRbEPzI

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Well, personally, I financed and leased before and I can tell you that leasing IS the better and smarter solution from my own point of view. Here's why:

 

  1. With leasing you can simply sign and drive, zero out of pocket and boom you have a brand new, reliable car with no mechanical problems and lower monthly payment than finance. 
  2. With leasing, if you decide not to replace the car after the end of your leasing term, you can simply buy the car and "finance" the residual value
  3. Now the money that you would save by not putting ANY money down, can be invested in your 401K plan or any other investments (brokerage account?) and that should earn you in this bullish market an average of 8-10% percent depending on your risk level. To me this is a much smarter decision than throwing money in a moving, depreciating object.
  4. As far as mileage, to me it's the same thing, you lease a car, you go over mileage you will pay the overage and move on (unless you are leasing a new vehicle from the same dealership and in this case they will eat the mileage difference or melt it in the new payment). When you finance, and you go over the national average of 12K miles/year, your financed car will take a hit when it's time to trade it in (probably by the same amount of money you would have paid for the mileage overage). So, no matter how you look at, it's all math at the end and because it's math, it MUST make sense.

 

 

Here is my opinion on 1 and 2.  Yeah, you have a lower payment and no out of pocket, but if you decide to keep the car then your paying on it for 6 or 7 years.  And somebody is making money, and it isn't you.  I don't have any issues with any of the vehicles that I have owned when it comes to mechanical problems.  It all goes back to how you drive and maintain them.   

 

In regards to 3, how is it smarter to constantly have a car payment?  Most need a vehicle for transportation purposes.  But this ties back into 1 and 2 where you always have a car payment and are there is money always going out the door.  Although it may be slightly lower than a finance payment.  It is a payment that never ends.  If your wanting to invest your money, wouldn't be smarter to drive that car for another 5 years with no payment and invest that money your not putting out into a lease/finance payment?

 

And number 4.  I don't like to worry about how many miles I put on a car.  I bought it to drive it.  Not to worry about going over mileage, and having to pay penalties for it.  Now if your going to use it for business purposes, a lease may be a smarter option.  But for the everyday person IMO it isn't worth it.

 

Not trying to be argumentative, just my perspective and something to think about.  

Edited by LFairbanks
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I'm with Fierce 5.  I decided a LONG time ago that I like new cars and I was always going to have a car payment.  Several cars back I started leasing.  GREAT decision.  For me.  For what I want, it was a good thing.

 

Now the bad part... When I got my Camaro, I wanted to buy, not lease.  That meant getting out of a lease that wasn't yet to term.  What a horrible, expensive thing that was.  I love my Camaro, but wow.

 

Short version: I love leasing, as long as you are not getting a "legacy" vehicle or one that you will mod.

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Just leaving this here...

http://www.youtube.com/watch?v=BKyV8CTHeJ0

 

Interesting video.  Looks good on paper, but in the real world, and the vehicles you can get for between 11K and 18K I would prefer to go my route which is to buy new (what I want) and keep it for 10 or more years.  And if I can't pay it off on a 5 year note, forget it.  Not sure where he comes up with the interest rate of 9.6% for the average car loan.  I haven't paid over 3% in several years.  My truck (Duramax) is financed at 0% on a 5 year note.  With a 0% loan it is better to make the monthly payment and keep your money making interest somewhere else.   

 

A diesel at about 18k, with almost a 100k in miles and it is a Ford??  No Thanks.  (just a random search)  I also look at some cars in this price range and the miles that I drive each year.  I don't drive as much as some, but some of these cars would have over 50K miles after a  year of ownership.  A car may only be worth so much to the outside world, but to me and knowing the up keep and maintenance has been done is worth a lot.  And knowing that it hasn't been abused.  I prefer to buy new knowing that I'am not buying someone else's problems.   

Edited by LFairbanks
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