Three years ago, in the market for a new car, I asked around to find out what people thought about leasing or buying. The feedback I received was split, but there were strong feelings on either side.
Taking all of the advice in to account, we decided to buy, and went in to negotiate with the dealer. Several hours later, and following a really good leasing program presentation, we decided to lease. Our decision was based on these factors: the APR was very, very low, we planned to buy the vehicle at the end, it allowed us to keep our money invested for another 3 years.
Here is what I learned from this experience:
- The premise under which we leased the car only made sense if we ended up liking the car--we did not. It was a lemon. I was thrilled to get rid of it.
- If you are going to turn in a leased vehicle, you better be darned sure you can stay under the miles. We negotiated the mileage to 15,000 per year, but given my job and our lifestyle, that was not enough. I ended up pretty much parking the stupid car for 6 months and driving a little convertible that we have rather that pay $.25 a mile. We would have been over by about 7,500 miles or $1,875.
- The premise of a lease is that if you buy it, you owe a payment at the end. We would have been better off to take some of our money out of the stock market to pay for the car at the beginning instead of deferring the payment to lease end. We know now that the stock market has not done as well over the past several years.
- I don't like to have to buy a new car after only 3 years. I tend to obsess over the process and I need more than 3 years to recover. I actually like being on a 7 year cycle.
- Don't lease the 'family' car. My car (used to be) the one we used on family outings and vacations, making it even harder to stay under the miles. My husband's car had to take up a lot of the slack over the past 3 years. Luckily, it was large enough to step in. This only worked because our kids are older now.
I spoke with a friend who is a financial advisor and asked what she advises her clients to do. She said that she will recommend that they buy a car that will hold its value for resale (she mentioned BMW, Mercedes & Volvo) and then maintain it well and hold it indefinitely.
When I asked my accountant for advice, he basically said their are advantages to each, but for leasing to remain an advantage, you must stay under the miles...oops.
So those are the results of my 3 year experiment and my conclusion is that leasing only makes sense for someone who feels the need to get a new car frequently and who does not drive too many miles in a given year. Whether you lease or buy, there is no way to know in advance if you are going to continue to like the car or if you are going to get a lemon. I guess the other argument for leasing is that for less money down you can drive a nicer car. For me this did not matter since my original plan was to buy the car I ended up leasing. This factor is important, however, for many leasing customers.
I am not sure that leasing would ever make sense for a Realtor, since we live in our cars and the odometer often reflects it! At the very least, I now know that it doesn't make sense for me.
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