Leasing!!!

[alwi228]

So, I want this forum to be as active as other forums and nothing adds a little spice into the conversation like financial advice from strangers!With that being said, this isn't actually the standard "lease vs. buy" convo, although feel free to make it one!My issue is, cars are my thing. I don't travel globally, I don't drink expensive beers, I don't care what clothes I have on, and I don't eat out unless it's an occasion. Point is, I don't waste...in other areas. So I have an order for a 2019 Limited with ramboxes due in July/August. And my question is, I have had a 2014 Sahara Unlimited I did great on trading in for a 2015 Overland, and now im ready for an upgrade and a truck. I think as i trade in my overland now, I will have spent about as much owning it over the years as I would have leasing it, BUT if my lease was up right now I probably wouldn't buy it out. My goal is to not be switching cars so often, I'd like to have a nice truck and keep it 10 years. But history has proven otherwise. I worry about this being a completely new model, so would leasing this truck for 3 years be the worst decision, with the intention to buy it after? I'll try to explain my thought process more. My JCO has been great, I enjoy FCA products and realize they dont have a sterling image for reliability. If I lease this truck for 3 years, and then have the opportunity to see if it was overly problematic, or I decided I wanted something else, then turn it in. But HOPEFULLY, it's problem free and I buy it afterwords. I expect I'll lose a couple grand this route which I am at peace with. There would are no issue of getting a loan after the lease it up, I'd either by cash for the truck when it's done or move on to something else. What are yalls thoughts?

or has anyone had experience buying out a lease after, or leasing a truck in general. Like I said, attractive part is to own the newest without out committing to potential issues. It's not chasing a lower car payment, the money that would be spent buying the car doesn't go to any other fund, it just waits and lets the truck make the decision.

 

[nerdrock]

I leased mine. My justification is "leasing isn't like it used to be decades ago" and buying out your lease winds up costing you a not very massive difference compared to just buying in the first place. My reasoning is that I came from Silverados, wanted to check out a Ram, and got into this one as a kind of a '3 year preview'. If it treats me well, my plan is to upgrade then. I'm giving e-torque that 3 years to mature and see how it goes, and if it's well received, a much more decked out trim, with e-torque,

 

[alwi228]

That's exactly how im looking at it. A 3 year preview. I dont have the etorque, but the Limited comes with so many gizmos, all I did was add ramboxes. Like I said, my goal is to love this truck as is and buy in a few years, but the peace of mind of "previewing a new model truck" is very attractive. I've never leased before but go through cars for my wife and I pretty quick and always end up buying. I'll have to look over Edmunds forums and other truck leasing forums to better prepare. Thanks for the reply!

 

[I Love Grits]

If you're the kind of person to change cars every few years (typically less than 5 years), and as long as you are able to stay under the mileage restrictions, a lease will be a better decision financially vs buying.

A few years ago I found a write-up from someone on a forum discussing leasing vs buying. I actually saved a copy of the text because I thought it did such a good job of breaking things down, and I used it to explain the situation to my wife. I'm unable to find the source now to give them their due credit, but here's the text I saved:


<woltlab-quote>Option 1. Finance a 38k Regal (let's keep it simple no trade, no tax, $2k down), so $36k for 60mos at 1.9%
Payment: $629/mo

Option 2. (using my real numbers here, rounded) Finance a 38k Regal (same deal, no trade, no tax, $2k down), so $36k for 39mos, 12k mi per year, with a residual value of $17k
Payment: $416

================================================== =======

Now, let's fast forward 39mos and say the Regal held its value well and has a trade-in value of $20k.

Option 1. Based on simple amortization (http://www.amortizationtable.org), we can estimate that you still owe $13k on your loan, so you would get $7k toward a trade. However, you have spent $24.5k in payments up to this point, so you are net negative $17.5k

Option 2. No amortization necessary here. The payoff is $17k so I get $3k toward trade but I have only spent $16k in payments so I am net negative $13k. The lease is cheaper.

================================================== =======

Let's do a different outcome... what if the Regal does not hold its value well and is only worth $15k at trade:

Option 1. Same amortization here, you owe $13k. Net $2k on trade but you have spent $24.5k in payments, so overall net negative $22k.

Option 2. The residual payoff is higher than current value so I do nothing but hand them the keys and walk away, $0 toward trade. Total spent on payments is the same $16k so I am net negative $16k. Once again, the lease is cheaper.

This difference will be even more dramatic if the car's value is worse... if the car is only worth $10k then a loan has negative $3k equity while a lease is still at $0.

================================================== =======

Finally, one last example... what if I want to dump my car early, before the lease is over. Let's say I want to get rid of the car after 2 years and the current value is $20k

Option 1. Same amortization table, you still owe $22k so you are rolling $2k negative equity. However, you have spent $15k after 24mo so you are net negative $17k.

Option 2. I still owe remaining payments of $416 x 15mos = $6k + residual payoff of $17k, so I owe $23k total. That means rolling $3k negative equity. So, while I am rolling $1k more negative equity, I have only spent $10k after 24mos, so I am net negative $13k.</woltlab-quote>
So if the truck ends up sticking around as long as your other vehicles have, (let's be honest - 3 years from now there could be some nice improvements that make it hard to not upgrade) your decision to lease was the right one financially.

 

[mikemcfarland]

leasing is essentially renting with a larger buy out in the end or return- usually with a penalty (or less of negotiating power). your income should depict what you can afford.if you can wright off the payments leasing can be a good option. - not so good if can't. how much you drive is a heavy consideration. - what i know is a great example. i run a successful business with a partner. neither of us care about stature. i drive 30,00 kms a year. (20,000 miles?) the buy back on lease would KILL me. plus i have no problem driving a vehicle for 5 years etc.thus i finance. my business partner drives 8000 kms a year (5000 miles ?) and thus no issues with his lease. (every 3 years). in summary - over the last 5 years- i financed my truck for 5 years and paid it of in march- will sell for around $15,000 to an employee.(nice guy rate with now 166,000 kms -102,000 miles) my partner. leased 1 year ago (same payments due to inflation) and will get nothing in the end. because we own a company and can wright of full amount(lease only) or wright off depreciation (financing) its not so bad if your paying AFTER TAX $- too each their OWN.

 

[alwi228]

Great responses and experiences. I do get that having a business advantage would be great, buttt it wouldn't overly work in my situation. The "twist" of this post wasn't to compare on a spreadsheet which one is a better investment (my other main forum is bogleheads.....whose heads would explode at such a topic....unless they're buying 100k Teslas) as I do understand that owning and keeping a car for 10 years + would be the best....ideally a Camry. I anticipate 1k a month for the next 30 years for my "this is why I work" fund (all retirement accounts maxed out! Not what this post is about) Just getting a feel for the leasing THEN owning or leasing in general. I completely agree with someone in your work situation on the car purchases tho, you get the best of both worlds buy getting the newest and selling.

 

[ryelinek]

I leased a Lexus once and never again will I lease. Lexus ROYALLY f’d up when it was time to turn in the car with personal property tax bills from the state. I paid everything off the second I would get a bill but Lexus messed up where my final payments went somehow for property tax and the lease end charge. I had threats of going to collections from their automated services that they COULD NOT STOP but knew I actually over paid and was due a refund. The automated collections would not stop until the state responded and would tell Lexus they overpaid with my money I had sent in. The state said this would take a few months to remedy, which it did.

Let alone while all this was going on my wife and I were building a brand new house. Last thing I needed was my perfect credit score being smashed to pieces by being sent to collections for a bill that never existed. It’s hard to explain the full aspect of this situation but it took about 6 months AFTER the car was turned in for this to fix itself. I typically treat myself to a new car every three years but never again will I lease.

 

[Jared B]

Ive traditionally been pretty against leasing but there are also a lot of other examples where it makes sense. If you typically get a new vehicle every few years and don't put on more than the mileage limit it can make sense. Or if you're a business owner and can write off a lease.

 

[Jared B]

I leased a Lexus once and never again will I lease. Lexus ROYALLY f’d up when it was time to turn in the car with personal property tax bills from the state. I paid everything off the second I would get a bill but Lexus messed up where my final payments went somehow for property tax and the lease end charge. I had threats of going to collections from their automated services that they COULD NOT STOP but knew I actually over paid and was due a refund. The automated collections would not stop until the state responded and would tell Lexus they overpaid with my money I had sent in. The state said this would take a few months to remedy, which it did.

Let alone while all this was going on my wife and I were building a brand new house. Last thing I needed was my perfect credit score being smashed to pieces by being sent to collections for a bill that never existed. It’s hard to explain the full aspect of this situation but it took about 6 months AFTER the car was turned in for this to fix itself. I typically treat myself to a new car every three years but never again will I lease.

Wow that sounds like a nightmare. That also reminds me of a time when my dad leased a Silverado years ago, at the end of the lease he bought it out but the leasing company put it down as a repo. He only found out a few months later when he went to trade it in on a new Dakota, it took a lot of fighting with them from what I remember to get that corrected.

 

[ryelinek]

Wow that sounds like a nightmare. That also reminds me of a time when my dad leased a Silverado years ago, at the end of the lease he bought it out but the leasing company put it down as a repo. He only found out a few months later when he went to trade it in on a new Dakota, it took a lot of fighting with them from what I remember to get that corrected.

Honestly it got to the point to where I took detailed notes on every call I made to them for months for my records and I made sure they recorded every call. I had numerous Lexus reps tell me I had more notes in their system under my name than any customer they had ever seen and every person agreed that I never did anything wrong and it was their fault. I never got anything for my trouble which is kinda crazy. I always kept my cool since it does no one good cussing out someone making 15 bucks an hour answering phone calls but dear lord was that stressful. About two years ago and I remember it all like it was yesterday hah.

 

[firecadet613]

I drive way to much to lease....about 30,000 miles per year, mostly for work. The better half drives less than 10,000 miles and could lease..but she'd much rather have no payments so we went that route.

 

[alacombe]

I like leases.

Reason being is that YOU can build a lease however your want it. For example: You can make a lease 3,4, or 5yr lease. You can also increase or decrease the yearly milage allowed. Also, if you want a high end trim package with a lease the monthly payment will be a lot lower then purchasing the truck initially. You can also get great incentives for doing a lease too.

At the end of the lease you can give it back or buy it out.

I drive approx. 8,000 miles a year so leases work well for me.

 

[Mopar21222]

We lease the wife's SUV on a 3-yr cycle and buy my trucks on about a 4-yr cycle, rolling-over the 15-18K in equity into each purchase. With the lease, obviously you put a little down, have a smaller payment and walk-away at the end with no equity. In a 3-yr Amorization cycle, the purchase payment (assuming starting at the same 0 point as a lease), you will have generated some decent equity.

Also, I found that the amount of lease interest paid generally is more during the same period. Money Factor on a lease is NOT the same as an APR, when you break down it down in an Amorization Schedule; with our Toyota lease some years back, it worked out to be significantly more.

 

[alacombe]

Leasing is all about the cars "Residual Value" at the end of the lease depending on how long you plan on leasing it. MAKE SURE YOU DISCUSS THIS WHEN LEASING. Most dealers won't even mention it and research this term online before going to the dealership.

 

[alacombe]

We lease the wife's SUV on a 3-yr cycle and buy my trucks on about a 4-yr cycle, rolling-over the 15-18K in equity into each purchase. With the lease, obviously you put a little down, have a smaller payment and walk-away at the end with no equity. In a 3-yr Amorization cycle, the purchase payment (assuming starting at the same 0 point as a lease), you will have generated some decent equity.

Also, I found that the amount of lease interest paid generally is more during the same period. Money Factor on a lease is NOT the same as an APR, when you break down it down in an Amorization Schedule; with our Toyota lease some years back, it worked out to be significantly more.

With leases you do not have to put money down. You can but dont have too. You can have the dealer add the money down into the lease. This can ALWAYS be done.

 

[devildodge]

this is some very interesting information that I did not realize.

Thanks for the info and discusion.

 

[alacombe]

this is some very interesting information that I did not realize.

Thanks for the info and discusion.

Learn from my mistakes.

 

[Slim]

Isn't a lease better with no money down? If the car is totaled the insurance company will pay off the lease but you would lose the money you put down?

 

[alwi228]

I've tried to look into the "losing money if you put any down" concept. People seem to say. I dont think it's guaranteed that you'll lose the money down, the issue is more the insurance company will write a check for what the truck is worth, which is obviously a few grand less after taking it off the lot. I could be COMPLETELY wrong, but there are a lot of posts on other forums about companies pre-paying leases and IF the car is totaled or stolen, the only part truly lost is the difference in what people get GAP insurance for. So, 3 grand down, probably gone. 20 grand down, you'd probably be out 5 grand?

 

[alwi228]

I guess, in short, everything I read suggest exactly what you said lol, sorry for the rant. To minimize risk of losing that money, most say put nothing down