Buying a Car - Is it Better to Buy or Lease?

  • Posted by a hidden member.
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    Jan 07, 2015 5:13 PM GMT
    I'm looking for a new car that will be primarily used for my business. I hear so many arguments over which is better financially speaking. I'll probably get a new car every two to four years anyway so that isn't a factor. Plus I tend to rag my cars out pretty fast. Speaking strictly from a financial/taxes point of view, anyone know which option is the best? Only interested in hearing truly informed opinions please.
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    Jan 07, 2015 5:22 PM GMT
    I'm personally not aware of any tax breaks that you can get for leasing a car. Then again, I don't really know if there are any for buying.

    I think if you're solely looking at short term (getting a new car every 2-4 years), then go for a lease. The biggest downside to a lease is that you have a monthly payment....forever. If you're making enough money to pay a lease payment every month, why not try to save up a bit and buy something so you at least no longer have a monthly payment? (whether you finance or just buy outright).

    My guess is that auto insurance is cheaper on a vehicle that is already purchased (my insurance rates went down a little bit when my truck was paid off).

    Another factor you should look into is how much mileage you're going to put on it. leases have penalties for going over the mileage amounts when you turn it in.

    I guess the biggest question you should ask yourself is, "do I want something that I can truly call my own? or do I want something bright and shiny every couple of years?"
  • Tig3r

    Posts: 139

    Jan 07, 2015 6:01 PM GMT
    I recently financed a new car to own. My father always told me that it is better to buy then to lease as I want to own it after my payments are up. However, my father also instilled the values in me that a car is a long term adventure so I will have this car for quite a while.

    Since you said that you are looking to get a new vehicle every 2-3 years I would advise that you just lease. Every couple of years you get a new car and never have to really worry about your car/truck getting old, maintenance warranties on the Lease, and you will never have to own it. (Unless you want to finance after your lease is up, but it's not always possible)

    Personally I would not do a lease because I want to own the car afterwords.
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    Jan 07, 2015 6:10 PM GMT
    If you are using a that car for business purpose only , so lease it thru your business and deduct it from your corporate taxes ..
    If you are buying a car under your own name , you better with buying it , even if you are trading it every 2 or 3 years ..
  • Destinharbor

    Posts: 4433

    Jan 07, 2015 6:38 PM GMT
    The other big factor on a lease is the mileage limitation/penalty. Also for returning it in poor condition. Check those provisions carefully because they are direct cash fees you pay if you're in violation at the end of the lease.
  • tj85016

    Posts: 4123

    Jan 07, 2015 6:50 PM GMT
    pay cash for a used car

    financing a depreciating asset is a fool's game unless you can write off the entire business portion
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    Jan 07, 2015 7:32 PM GMT
    Depends on your circumstances. Some people, especially in business situations, do extremely well with a lease. And who don't exceed their annual mileage limits. Exceed those and you get fried with penalties at the end of the lease period.

    The depreciation value of a given model can also be a factor, and how long you will keep a car. It's always been my family's habit to buy a car for cash and own it until the wheels fall off. Although to my discredit I've violated that tradition on too many occasions. icon_redface.gif

    I've had friends who ended up paying much more to lease a car than if they had financed the purchase. My husband is one. When I met him I couldn't believe how much he had paid to lease his car, way more than it was worth or for which it could have been financed.

    I bought him a better new one, cash, no payments, that was worth thousands more, and it has cost us thousands less overall. And we still have it, because the wheels haven't fallen off yet. icon_wink.gif

    Those savings have allowed us to afford a whole lot of other personal indulgences otherwise out of our reach had I tied up our money in a much more expensive car with payments, lease or finance, since our income is modest. Yeah, buy a luxury car and then sit at home admiring it, because you can't afford to go anywhere in it.

    My husband said it's the cheapest car to own he's ever had, plus his favorite, does everything we need. And if it blew up tomorrow he wouldn't feel cheated - it's paid us back for what we paid for it.

    But the trap of some leases is that you're tempted to buy a car outside your means, over your head. If you can't afford to buy it cash, or nearly most of it, then maybe you should look at something more in your price range, until you've got the ability. Which you'll have sooner if you don't saddle yourself with car payments that rob you of savings.

    But if you've gotta have a flashy new car fairly often, and don't want the hassle of trade-in or private sale where depreciation will make you cry, a lease can work. Just watch that annual mileage limit you contracted for, and keep the car in tip-top shape.
  • Posted by a hidden member.
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    Jan 07, 2015 7:40 PM GMT
    When you lease a car you are simply paying the depreciation on it for the period of time you are using it. In addition to paying the depreciation, you also pay a finance charge because it is technically speaking a loan (they give you the car without requiring payment in full for the depreciation).

    If you can pay cash for a car up front you avoid the finance charge. If you can't pay cash then the theoretical cost is the same for the first few years whether you buy or lease: the amount of depreciation. That's why leasing can make sense if you know you don't want to keep a car beyond a couple of years.

    The rate of depreciation slows down after the first few years and eventually the amount of car payment (assuming you're buying it) exceeds the depreciation so you start to have equity in the car. And if you pay off the whole debt you own whatever residual value is in the car free and clear. At that point all you pay for is gas, maintenance, and insurance. So if you want to hold onto one car for longer than a few years as I like to do and then use it until the cost of maintenance exceeds the cost of a new car, it makes more sense to buy. Otherwise you would be continually incurring the highest level of depreciation.

    I currently drive a 16 year-old BMW that has proven to be extremely reliable and fun to drive ... I plan to keep it until it becomes economically unfeasible unless something else catches my eye in the meantime.
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    Jan 07, 2015 7:51 PM GMT
    Everything about a car lease is negotiable, including the annual mileage, the over-mileage rate, and the length of the lease.

    (I'm only talking about well-qualified lessee...credit rating 700+)

    Lease for a year, if possible, just to see if that is how you want to go.

    Why not think about taking over a lease?

    http://www.leasetrader.com/

    Check out some of the deals they have near you.

    Sometimes, the lessee will pay you $$ to take over their lease (subject to Lessor's approval)
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    Jan 07, 2015 8:46 PM GMT
    my experience is that leasing companies do not appreciate you to "rag" on their car, and there in lies the problem I have.
    It's not your car it's theirs; bring it in now for service or we'll spam you're phone insistently, theirs.
    I also found we would not drive it on bad days for fear of scratching the precious; long trips? for get it--Miles...
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    Jan 07, 2015 10:00 PM GMT
    dustin_K_tx saidmy experience is that leasing companies do not appreciate you to "rag" on their car, and there in lies the problem I have.
    It's not your car it's theirs; bring it in now for service or we'll spam you're phone insistently, theirs.
    I also found we would not drive it on bad days for fear of scratching the precious; long trips? for get it--Miles...


    Yep. And if you go over the mileage you pay a penalty. My brother rents a car and he is at least 10,000 miles over the maximum allowed under his lease. Each overage mile costs $.10, so he owes at least $1,000 at this point. But at least he gets free car washes!
  • Posted by a hidden member.
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    Jan 08, 2015 5:51 PM GMT
    As long as you can write it off for business, lease. Try to find the shortest term you can, and try for no money down. All they can say is no, but it worked for my last leaseā€¦ 24 months with 0 down on a Chrysler 300.
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    Jan 08, 2015 5:58 PM GMT
    I lease my daily divers and take wonderful care of them, but I use for business and it simplifies tax time.

    Luxury car leases are generally subsidized so you really do get a deal. However, every once in a while, such as the last car I leased, the G8 GT, the resale value was about $10,000 higher at lease end than the residual. So hell yeah they wanted me to just return the car and lease another. If the Chevy SS had been available at the time that might have worked. Ended up just buying the car out of the lease at lease end and still have it.

    It's been a really great car with only a burnt out fag lamp bulb and key fob that's needed replaced. That poor key fob had to be dropped I bet 10,000 times.
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    Jan 12, 2015 3:42 AM GMT
    I think I'm just going to buy. I am curious about something though.....I remember my dad getting huge discounts for paying for his cars in cash. I tried the same thing the other day and they told me there would be no difference in the price. What happened?
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    Jan 12, 2015 5:02 AM GMT
    A couple of years ago when looking for a new car I went to a Honda dealership, all the flags fluttering. They wouldn't deal on cash either. They want you to use their Honda credit financing. I ended up with a Mazda and been quite happy with it.
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    Jan 12, 2015 6:55 AM GMT
    Radd saidI think I'm just going to buy. I am curious about something though.....I remember my dad getting huge discounts for paying for his cars in cash. I tried the same thing the other day and they told me there would be no difference in the price. What happened?


    the profit margin on 'entry level' cars is low. You might save a few grand paying cash for a luxury brand. Likely not, as people who want luxury/import brands will pay for them regardless of the price.
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    Jan 12, 2015 9:36 PM GMT
    Radd saidI think I'm just going to buy. I am curious about something though.....I remember my dad getting huge discounts for paying for his cars in cash. I tried the same thing the other day and they told me there would be no difference in the price. What happened?

    There are programs with some credit unions (and maybe Costco), where you can get a discounted, no haggling price for a new car. Investigate.

    Also, heard a program recently on NPR's This American Life, about the hassles of being a car dealer and having to deal with Detroit's rebates/bonuses/incentives. The radio show people spent several days with the dealer's people, recording conversations, etc. The upshot was, if you go into a dealership in the last couple days of that month's car billing cycle, you can get incredible deals, because the dealer will even sell cars at a loss, even for thousands of dollars less than the week before, if they have not yet met their quota, just so they can make that month's quota and keep their incentives. The problem would be in learning exactly when the sales cycle ends for that manufacturer in the area you are buying in.
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    Jan 13, 2015 1:12 AM GMT
    hairyandym said
    Radd saidI think I'm just going to buy. I am curious about something though.....I remember my dad getting huge discounts for paying for his cars in cash. I tried the same thing the other day and they told me there would be no difference in the price. What happened?


    the profit margin on 'entry level' cars is low. You might save a few grand paying cash for a luxury brand. Likely not, as people who want luxury/import brands will pay for them regardless of the price.


    This was on a Land Rover which I personally consider a "luxury" car, but maybe I'm wrong.