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Why would anyone lease a vehicle? - 10/22/2009 9:02:25 PM
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Kath
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I seriously don't get it. I asked my husband and he doesn't understand it either. What is the point of leasing a vehicle? You make all those payments and then in the end you have nothing to show for it.
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RE: Why would anyone lease a vehicle? - 10/22/2009 10:04:07 PM
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GroupW
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Depends. A lease is just a different way of financing a car. If you've made the decision to finance the car, then a lease vs buy analysis makes sense. In the end, it comes down to the implied interest rate and one's opinion of the residual value of the car.
For a time, a few car companies had very rosy ideas of what a car would be worth in four years. If you think the car will depreciate faster than the car company thinks, a lease might make sense. There was about a year or so in 2006 when I thought some leases would have been good deals
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RE: Why would anyone lease a vehicle? - 10/22/2009 10:20:14 PM
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Ps103
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And there are some people who, for whatever reasons, need a (fairly) new car all the time. I guess leasing a new car over and over fills that need as cheaply as buying them and trading them in.
I have known people that would lease a new car every two years. Usually people who needed to look prosperous for business purposes.
I think company cars are almost always leases.
But for someone who just needs a car and is looking for a way to get one, the lease "deals" I have seen advertised are no bargains. Even the ones that sound pretty good (ie, cheaper than a car payment) have big balloon payments at the end of the term, and you end up paying more than the car is worth.
Now, we used to lease cars to go on long trips, just to keep from putting all those miles on our own cars  But I drive so little that we take my car on trips now, to get some miles on it, so we don't do that anymore. But I don't think that is the sort of lease you are talking about.
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RE: Why would anyone lease a vehicle? - 10/22/2009 11:37:02 PM
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peace77
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My uncle leased a car once.
His company sent him to the U. S. for 2 years and it didn't make sense to pay for shipping his car. Also, it wasn't worth the hassle of trying to sell it when he would need to return home.
Leasing a car is like renting an apartment.
You get the use of it.
Peace,
Anne
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RE: Why would anyone lease a vehicle? - 10/23/2009 12:09:41 AM
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LCannon
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The main advantage of leasing is tax liability. If you or a cooperation can lease depending on the lease contract the cooperation can write the value off without deprecation or maintenance costs. I think John Paul Getty said, 'Buy for inheritance lease everything else.'
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RE: Why would anyone lease a vehicle? - 10/23/2009 6:34:04 AM
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Random
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As someone mentioned there are two cases where it makes a lot of sense.
1. Company cars -- presumably the company is providing you a car because you drive it with clients, so you need to have a relatively new one.
2. Salespeople and others who "need" to always have a new car. Lease a new one every two years and you always have a relatively new car.
For the average family using it as a commuter car or just a chauffeur the kids car, they rarely make sense.
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RE: Why would anyone lease a vehicle? - 10/23/2009 2:34:41 PM
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Kath
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quote:
Leasing a car is like renting an apartment.
You get the use of it.
That's what I was thinking.
I can understand a company leasing cars for employees, that makes sense.
quote:
His company sent him to the U. S. for 2 years and it didn't make sense to pay for shipping his car. Also, it wasn't worth the hassle of trying to sell it when he would need to return home.
something like that makes sense to me. I guess I was thinking that just the average joe would go out and lease a car instead of buying, (which made no sense to me) but I guess that really doesn't happen much.
quote:
Now, we used to lease cars to go on long trips, just to keep from putting all those miles on our own cars
I can even understand leasing a car for like a month to go on a trip or something. Do companies do leases for a month? Is it cheaper than renting a car for a month? What's the difference between renting for a month and leasing?
I thought that if you leased and something happened to it you could just turn it in, like a rental, but Larry said you still had to pay for repairs.
We just had to rent a car for the weekend, so renting/leasing is on my mind.
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RE: Why would anyone lease a vehicle? - 10/23/2009 4:54:34 PM
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Miss Giggles
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You can lease a nicer car for the money. I have never leased since I usually end driving over the miles so I just buy.
Some older people lease if they travel for part of the year, etc.. so they don't have to drive a car across country.
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RE: Why would anyone lease a vehicle? - 10/23/2009 8:06:05 PM
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clydewolf
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For individuals that are always making car payments, often the monthly lease payment is less than the auto loan payment. This will work well until the end of the lease when miles plus wear and tear are factored into the bill. Then maybe that can be carried over into the new lease payments?
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RE: Why would anyone lease a vehicle? - 10/23/2009 10:15:42 PM
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bolt.
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We leased our first car, because we didn't qualify for regular financing (5 year). It ended up that the monthly payments were lower, and so was the interest. So we leased for 3 years, and saved enough to pay the residual end payment on the day it was due... meaning we ended up paying the full amount over 3 years rather than 5, and saving a bunch of interest.
We had every intention to keep the car, and this turned out to be both cheaper and faster than the financing we would have chosen if we hadn't been turned down.
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RE: Why would anyone lease a vehicle? - 10/24/2009 3:52:53 PM
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Kath
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quote:
We had every intention to keep the car, and this turned out to be both cheaper and faster than the financing we would have chosen if we hadn't been turned down.
so you were able to keep the car? Do the payments go towards purchasing it?
I honestly don't know anything about leasing and thought this would be the place to ask. :)
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RE: Why would anyone lease a vehicle? - 10/24/2009 7:40:47 PM
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Random
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When you lease and then buy, you will basically end up paying the same total amount at the end of the day. You lease the car for a few years, paying the difference between the purchase price and what the car will be worth once the lease is up (plus interest). At the end of the lease, you get a new loan for the value of the car that day. So in total you pay the entire purchase price.
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RE: Why would anyone lease a vehicle? - 10/24/2009 8:25:53 PM
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Kath
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quote:
ORIGINAL: Random
When you lease and then buy, you will basically end up paying the same total amount at the end of the day. You lease the car for a few years, paying the difference between the purchase price and what the car will be worth once the lease is up (plus interest). At the end of the lease, you get a new loan for the value of the car that day. So in total you pay the entire purchase price.
Thanks!
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RE: Why would anyone lease a vehicle? - 10/24/2009 9:05:38 PM
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bolt.
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quote:
At the end of the lease, you get a new loan for the value of the car that day. So in total you pay the entire purchase price.
Or, at the end of the lease, you just pay the residual value with the money you saved up for it.
Example:
Car Costs $10,000
Finance it for 5 years, pay $2,000 per year plus interest = $10,000 (plus 5 year's interest)
Lease it for 3 years, pay $1,500 per year plus interest
Save up 5,500 and pay it off with no added interest = $10,000 (plus 3 year's interest)
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RE: Why would anyone lease a vehicle? - 10/24/2009 9:26:18 PM
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GroupW
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In theory, it should work out the same. In practice it rarely does since the finance company is essentially taking the risk of having a different residual value at the end of the lease term. Companies like to get paid for any risk they take so the lease usually ends up being more expensive by a nose.
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"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Why would anyone lease a vehicle? - 10/24/2009 9:38:31 PM
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Kath
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I appreciate all the responses. Thank you so much. :)
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RE: Why would anyone lease a vehicle? - 10/24/2009 10:00:00 PM
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Random
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quote:
ORIGINAL: bolt.
quote:
At the end of the lease, you get a new loan for the value of the car that day. So in total you pay the entire purchase price.
Or, at the end of the lease, you just pay the residual value with the money you saved up for it.
Example:
Car Costs $10,000
Finance it for 5 years, pay $2,000 per year plus interest = $10,000 (plus 5 year's interest)
Lease it for 3 years, pay $1,500 per year plus interest
Save up 5,500 and pay it off with no added interest = $10,000 (plus 3 year's interest)
Correct, I was more commenting on the amount of principal, not the method of financing, but you could easily pay the residual in cash.
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RE: Why would anyone lease a vehicle? - 10/24/2009 10:03:06 PM
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Random
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quote:
ORIGINAL: GroupW
In theory, it should work out the same. In practice it rarely does since the finance company is essentially taking the risk of having a different residual value at the end of the lease term. Companies like to get paid for any risk they take so the lease usually ends up being more expensive by a nose.
I understand this better than you might guess. My employer sold residual value insurance (RVI) to many of the major manufacturers AND lenders. We got out of the business in about 2006, but until all those leases run off (2011) we are still on the hook for a while.
We never should have been insuring business risk in the first place, IMHO.
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RE: Why would anyone lease a vehicle? - 10/25/2009 11:24:06 AM
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Szaftoo
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When I was single I leased a car and it worked very well for me. I was able to get a much nicer and more expensive car with no money down. After about a year of leasing, I applied all of the payments toward the purchase of the car which was an option going in. There was a yearly mileage limit which was fine because I didn't drive that much any way.
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RE: Why would anyone lease a vehicle? - 10/25/2009 12:20:16 PM
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mrtigger
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quote:
ORIGINAL: Kath
I seriously don't get it. I asked my husband and he doesn't understand it either. What is the point of leasing a vehicle? You make all those payments and then in the end you have nothing to show for it.
I think in general leasing is a bad idea.
However, my dad used to lease his vehicle -- his reason was it was used for business and it was easier to deal (tax wise) with the lease payments as a business deduction instead of dealing with the depreciation mechanism.
I can see it making sense too if someone has a job (or ego) that always requires a vehicle that is only a year or two old.
But for most people, it is a bad idea. Car dealers have a lot more tricks to play on you with a lease than when you are buying outright.
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RE: Why would anyone lease a vehicle? - 10/25/2009 7:34:55 PM
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mrlucky8ball
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It's the simplest way to keep getting different vehicles. Buying and selling takes a lot of time and effort.
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RE: Why would anyone lease a vehicle? - 10/25/2009 10:03:30 PM
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APZR
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As a business owner, there can some tax advantages to leasing. If you need/want a new car every 2 to 3 years for professional image and marketing, leasing is a viable option with tax advantages. Other than that, it's usually because people want more car than they can really afford. There can be rare cases where it's actually an advantage to leasing, like if you drive less than 15,000 miles per year and the interest rate is less than bank financing. But those cases are rare, especially in todays economy with low residual returns on used autos and increasing interest rates.
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RE: Why would anyone lease a vehicle? - 10/26/2009 12:22:18 PM
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buckifn
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I have done it before and would do it again. Free maintenance is a big plus. I don't think one has much to show after leaving the lot with a new car either because the value falls drastically once you leave the lot.
There is not always a huge balloon payment at the end. I had none at the end when I leased before. I think the huge payments may come in when one exceeds the allowed milage. It would be a very bad choice for people who drove a lot of miles unless they had a contract which allowed for extended milage.
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