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Lease or Buy: What I Learned from My 3 Year Experiement

By
Real Estate Agent with Associate Broker, Momentum Realty

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, w
e 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 leasesign 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:

  1. 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.
  2. 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, vwthat 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.
  3. 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.
  4. 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.
  5. 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 carthat 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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 Momentum Realty

A GREAT Real Estate  experience.

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Comments (5)

Suzy Morris
The Morris Team - Carlsbad, CA

Hi Holly - thanks for your post.  I am going to be the market for a new car in the new year and you raised some great points.  I want to purchase, but my husband is thinking we should lease.  After reading your blog, especially the points about the mi.es and not leasing the family car, I am sure we will be purchasing.

Nov 23, 2009 12:47 AM
Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

It is almost always a better financial decision to purchase the car. Maintain it well, and keep it for 200,000 miles. You will be far ahead of your neighbor who has a car payment or lease payment every month of their life.

Nov 23, 2009 01:25 AM
Mike Morgan
Internet Marketing for Real Estate Agents and Brokers - Jensen Beach, FL

I never understood the lease pitch.  I've always purchased and came out ahead.  I gotta think its a pitch from the folks that clean up on high finance charges and manaement charges on the leases.  Thanks for the post.

Nov 23, 2009 02:30 AM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

Great post!! My re buddies don't understand why I LEASE my RX....I just got a new one from Pohanka and am thrilled.  It is my second one on a lease * I elected a 3 year lease * and I own a used 2001 Lexus from them that I use to keep miles off the leased one.....Yes, I could have bought the last RX; however, I would have had to sell stock which is going UP now and pay capital gains....leasing was the BEST choice for me!!!  It is a TOTAL write off for my RE management s-corp!!!

Nov 26, 2009 09:26 PM
Denise Hamlin, Broker/Owner
Cardinal Realty ~ 319-400-0268 - Iowa City, IA
Helping Happy Clients Make Smart Choices

Hi Holly ~ Always wondered what the pros were of leasing. Seems for me there probably aren't any. Appreciate the insights, now I won't have to wonder anymore.

Denise

Nov 28, 2009 09:19 AM