Film-Tech Forum ARCHIVE: Lease or purchase a new vehicle?

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Posted by Mark Gulbrandsen (Member # 72) on 04-30-2008, 08:35 AM:

I absolutely HATE dealing with car dealers.... are any of you guys ex-car dealers out there? I need some advice on possibly leasing a new one...

Wife wants a new SUV... she works hard and deserves a nice vehicle. We have looked at both leasing and purchasing. The lease period is 39 months and there is an optional service that I can buy with the lease that covers minor damage/over-milage costs at the end of the lease for the cost of about one lease payment. I;m not sure exactly how much overmilage and other stuff it covers though. With this lease (GMAC) I can't sell the lease out at any time it is in effect. Purchasing it means we are stuck with 60 payments which we could pay off a bit early... but if gas goes gonzo on price we could at least sell the purchased vehicle and get out from under it and purchase a couple of bicycles, we would however be stuck with the leased vehicle if gas hits the Queen's price of 10 bucks a gallon!

Interest rates are really low right now at 2.7% for the new 2008 and 0% for if we take one of the last 2007's on the lot. There are varying rebates involved and there is even a rebate on the lease vehicle that I can probably get the dealer to spit up. I can also get the same 2007 vehicle used from a rental car sales place near our shop that has about 10K miles on it for $8,000 or more off the 2007 sticker price... there is a 5 year 100,000 mile transferable warranty on the used vehicle with about 3.5 year and 90K miles left. Fixed rate interest rate on the used one is 5.4% through my credit union.

Has anyone here had good experiences with leasing vehicles... negative experiences? I am leaning towards the used one myself... Wife wants the new one... dealer reccomends leasing one. Yikes... which way to go [Eek!]

Thanks!
Mark

Posted by Scott Norwood (Member # 30) on 04-30-2008, 09:01 AM:

From what I can tell, leasing only makes sense for those who want/need a new car every few years, but who are not high-mileage drivers. For those who use the car exclusively for business, it makes the tax paperwork easier.

Ultimately, the economics depend on how long you plan to keep the car. Watch for add-on fees and hidden costs, as well as possible insurance implications.

I hate car dealers, too, and prefer to avoid dealing with them. In general, it seems that the best "deal" is to buy a car that is a few years old and keep it until repairs become frequent and/or uneconomical. Obviously, this only works if you don't care about having a "new" car, and don't mind having to sell/trade the old car when it is time to replace it.

Posted by Richard Hamilton (Member # 321) on 04-30-2008, 09:14 AM:

Mark,
I have leased, and bought new and used. You probably know the advantage of leasing is you get more car for your money. If you trade in every few years, then I would think that the lease is good. I was able to get out of my lease a year early and trade it in on the Sport Trac, which I got 0% financing on. That was described as basically "free" money. Not free to me though, the ex got it in the divorce!

You should be able to find a good deal on a used SUV. I traded the Escalade in last year because gas was killing me. They gave me a low trade in amount because they had too many SUVs sitting on the lot not being sold. People trading them in for the same reason.

Rick

Posted by Chris Slycord (Member # 4239) on 04-30-2008, 09:15 AM:

Also,

If you purchase by paying in cash up-front, they'll usually lower the price for you by a significant amount.

Posted by Barry Floyd (Member # 385) on 04-30-2008, 09:19 AM:

From strickly a "math" point of view, leasing a vehicle is only good for the dealer. It's much like renting a car. You still have the payments, usually an up-front down payment, the rebates usually always go to the dealer - not to you, and because you will go over the mileage... (trust me, you will), you'll get tagged with overage penalties at the end of the lease, and you still have to give it back.

Me personally... I don't do car payments period. I can't justify huge monthly payments on an asset that only goes down in value. My wife drives a '01 minivan that we paid cash for, I drive a '96 F150 that we paid cash for back in '98 (it was a lease turn in vehicle), and I alternate my truck with an ugly '97 Buick Regal we keep as a spare. I have another "toy" car that I keep in parents basement (on jack stands under cover), but it needs a little engine work, and it's definetely not a daily driver.

If you don't have the cash on hand to buy the vehicle outright, I'd only opt for the used vehicle at the fixed rate from the credit union.

[ 04-30-2008, 03:17 PM: Message edited by: Barry Floyd ]

Posted by David Stambaugh (Member # 1102) on 04-30-2008, 09:51 AM:

Suze Orman on leasing

quote:
It drives me nuts to see all the money wasted on car leases. In my opinion, leases are a drug for status-conscious people who need the rush of driving a "nicer" car than they can really afford. The auto-financing folks have basically perfected a way to let you think you can have your cake and eat it too. Can't afford to buy a BMW or Lexus? No problem, just lease it!

Well I am here to tell you it is a very big problem. The car dealers can make the cake pretty enticing, but if you really understood the true financial cost - not to mention the risks you are taking - you would be sick to your stomach.

Posted by Mike Blakesley (Member # 26) on 04-30-2008, 09:52 AM:

Mark - You might consider going out of town to a smaller dealership to avoid the high pressure and bullshit sales tactics.

I know our local Ford dealer is much easier to deal with than the big lots in Billings because they do not use the sales tactics of the big lots. My brother in law (from Billings) came here to buy a pickup in 2003 and told us it was "a breath of fresh air" compared to the crap he had to put up with in the Billings dealerships. Same thing might be true in the SLC area.

Posted by Louis Bornwasser (Member # 3063) on 04-30-2008, 02:40 PM:

3 rules:

Buy from a very small dealer (see above) that you can trust. Mine will show me ALL the figures and the markup as line items.

NEVER EVER lease from the dealer. There are leasing companies that do this who are YOUR friend, not the dealer's friend.

"Lease that which depreciates; buy that which appreciates!" SUVs must be dirt cheap by now; don't "create" another one; buy a used one as you mentioned.

The other advice is EXCELLENT!.Louis

Posted by Tim Rectanus (Member # 3282) on 04-30-2008, 02:44 PM:

If I were Mark, I don't know what I would do but I wouldn't let that Orman article sway me in either direction.
1. Her main point is about not leasing a car you can't afford. This doesn't pertain to Mark b/c he said he is buying the car if he doesn't lease it, which I assume means he can afford it, I could be wrong there but knowing absolutely nothing about Mark other than his posts, he doesn't seem like the type.
2. The article is not for a Lease vs Buy scenario, it is Lease vs Buy USED idea! BTW, you can lease used cars too but that is another story. She doesn't think anyone should buy a new car, which is fine but it isn't fair to mask that opinion into a Lease vs Buy article.

For me, if you are going to have it for over 3 years, I would buy it. Although it should be noted that you don't own the car until it is paid off, you rent it from the bank, granted you have more options than a lease but it isn't that unsimilar.
24 months with extra miles built in to the deal from the beginning makes sense to me for a lease b/c at the end of the lease term, you would likely be upside down (owe more than it is worth)in the car if you bought it in the first place and were trying to sell it. Some people just want a different car every couple of years so leasing can make a lot of sense for them.

I sold cars for a while and saw advantages for leasing and buying depending on the person and use of the vehicle. Granted, I ended up leaving after 5 months because it was super slow at the store I was in and the hours were a killer but there are a lot of misconceptions about the car salesman, at least from when I did it. The biggest two, I did fine in the business without ever lying to a customer so those guys are out there. And, the guy you are talking to doesn't have anything to do with what they will sell you the car for, the Manager does all that. The Salesman's job is to report what he thinks you are eventually willing to pay and the manager decides whether that is good enough for the dealership based on a bunch of things including sales numbers for the month, then sends the salesman back to see if you will go higher.
One sure thing in car sales, The end of the month is by far the best time to buy a car!! Of course that doesn't matter if you are dealing with a place that doesn't haggle, I think Saturn is like that. So I guess I should change that to, the best time to haggle over price is the end of the month.

Posted by Chris Slycord (Member # 4239) on 04-30-2008, 02:58 PM:

What I really hate is when I hear a dealer advertisement on the radio saying something like "We'll take your trade-in even if you owe $10,000 on it." I'm sitting there going "Well obviously that owed money isn't going to disappear" and lo and behold at the end of the ad it mentions that the balance will be added to your new lease.

And since the listener is a dumb shit who owes $10,000 already, they're obviously not going to give him/her a good rate either so they REALLY come out ahead.

Posted by Tim Rectanus (Member # 3282) on 04-30-2008, 03:13 PM:

That is the other thing, you should always "decide" you are going to trade your old car in after you have worked out a deal on the new car. Don't tell them you are going to trade it in from the beginning, it gives them so much more negotiating power. At least if you do it after you figured out a deal, then you know exactly what they are giving you for your trade, which won't be much but at least you know. You should think of it as two totally different transactions. Plus, when you toss in the trade at the end, it annoys the hell out of the salesman and a little turnabout is fair game, right?

Posted by Mike Blakesley (Member # 26) on 04-30-2008, 03:44 PM:

quote: Tim Rectanus
the guy you are talking to doesn't have anything to do with what they will sell you the car for, the Manager does all that. The Salesman's job is to report what he thinks you are eventually willing to pay and the manager decides whether that is good enough for the dealership based on a bunch of things including sales numbers for the month, then sends the salesman back to see if you will go higher.

That proves my (and Louis's) point right there. At our local dealership, there are four salesmen. Two of them are the OWNERS of the dealership, so there's none of that crap.

Consumer Reports says to not even mention your trade-in until you have a firm price established...does that tactic work? (I guess that's one disadvantage of the small-town thing...the dealer already knows what I'd be trading before I even come in!)

Posted by Monte L Fullmer (Member # 2797) on 04-30-2008, 04:05 PM:

Heard that, if one is gonna do leases, do a closed end lease. That way, when the contract comes up, you turn the vehicle in and can walk away - as long as one can stay under the mileage/year condition in the length of the contract - since leases are just like an interest only mortgage: you're only paying on estimated depreciation and nothing on the principal.

Others call it "flushing the toilet for 36 months" The vehicle will never be yours esp when you repeat the 'flushing' with another new car and start the cycle over again.

Granted, leases are totally easy to get into - both closed and open end leases - so you can get the vehicle you want without little or no money down, but the thill of ownership has really taken a nosedive (plus, with leasing, it keeps the factories at top form making expensive vehicles and huge profits for both the factories and the dealers... turning customers into lemmings falling over the cliff with these leasing tactics)

Good luck Mark in your search for an answer.

-Monte

Posted by Joe Redifer (Member # 3) on 04-30-2008, 05:02 PM:

Definitely purchase. You can get the dealer to bend over and take it in the ass if they think they will lose a sale. The best way is to go in and be legitimately interested in one of their cars. Now you won't be able to talk them down to 10 bucks or anything, but you can make sure you don't get one with those lame "add-ons". A few months ago when I went to purchase a new car all of them had this retarded "clear bra" already attached, along with the dealer logo on the back. The clear bra added $300 I think. Not only is that way too much, but it looks extraordinarily tacky. At first they were willing to split the cost in half so I only paid $150 extra. I said no, see ya. Then they offered it for free. Nope, see ya. Then they finally informed me of a new car coming off the truck the next day which will not have that nonsense applied. That's really what I wanted. The next day they showed me the car, but it had already gone through the preamble that dealerships do (removing he plastic from the seats, detailing, etc) and it had the GO HONDA logo applied on the back. They were not paying me to advertise for them. I saw that and said "That needs to go" and they said "You're right!", ran and got one of their guys and peeled and washed it off right there leaving no residue.

Posted by Jennifer Pan (Member # 2035) on 04-30-2008, 05:20 PM:

Purchase it out right. Cash(check). No hassle. And they get you out the door... or in my case they don't talk to you for very long and just have you sign a bunch of papers and wait for the keys. Almost like I didn't exist because they didn't have to deal with financing and all the other junk.

Posted by David Stambaugh (Member # 1102) on 04-30-2008, 05:57 PM:

Try plugging some numbers into this lease vs. purchase calculator. No matter how I tweak the numbers (while being realistic), purchase always comes out a better deal.

Posted by Ron Funderburg (Member # 4561) on 04-30-2008, 06:28 PM:

At the moment SUV's are almost impossible to sell used so prices should be good on them. However, I see nothing to make me think gas prices are coming down. How about you get her a small sports car that gets pretty good millage! Then again a sports car that gets terrible millage is more fun!

Posted by Mark Gulbrandsen (Member # 72) on 04-30-2008, 07:37 PM:

I completely agree with all your assessments about not leasing from the dealer... We didn't and after the BS we got last night at the local Hummer dealer we decided we never would. We found out they didn't disclose the extent of the $3500.00 rebate that was also included in a GM deal if you lease a 2008. I called em and told em to go fly a kite. We took a couple of hours this morning and stood back and looked at what we could choose from, at what interest and so on and the used purchase was by far the best deal... we went with that. Wife now drives a 2007 Hummer H3. We saved at least $12,000 over buying a new 2008 and the car only has a little over 10K miles on it. It also has the beefier 3.7L engine that the earlier H3's don't have... gas milage is about the same as the Land Rover we have... 14/18. Neither of us drives far to work...The extent of the gas we use is off roading a couple of times a month out in the desert.

BTW: It came from Thrifty Car Rental Sales here in SLC. Still has most of its 5/100 power train warranty and we bought an extra warranty with a reasonable deductable that covers everything else. The most we should have to pay is $250.00 for the first repair and then just a 25.00 co-pay after that. That warranty is also transferable if she decides she ever wants to sell it.

I agree Ron... I too don't see gas comming down very much if at all but they are now saying it will level out somewhat and they also said in US News last Friday that the economy is already beginning a rebound just ever so slightly.

Thanks everyone for all your advice... the number of fast replys were beyond belief! This is the sort of thing that makes Film-Tech a great site!

Mark

Posted by Monte L Fullmer (Member # 2797) on 04-30-2008, 09:07 PM:

True with any purchase: get the extended warranty package and it's great that you went with Thrifty for they're wonderful to work with in getting vehicles that have low mileage on them, still be like new and have great warranty packages to go along with them.

Congrats on your wise decision to complete such a transaction!

-Monte

Posted by Mark Gulbrandsen (Member # 72) on 05-02-2008, 08:40 AM:

Thanks Monte... I found out that the line up of Hummers that had were rentals that were used for the last Sundance Film Fest.

Mark