buy vs lease

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Brett Hartwig

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so the wife is looking to change to a Jeep Cherokee Trailhawk. First, anybody have any opinions/reviews on this vehicle. Second whats your thoughts on leasing a car? I've never gone that route, would have to research it a little. She averaged 8500miles/year on her last car. Pro's...Con's?
 
She averaged 8500miles/year on her last car.



That would most likly be the killer for a lease. $$ for the extra miles.

Ther are stats out there. The person that buys and keeps for at least 8yrs. Saves an average of $350K over a life time. Than those who lease every 3yrs. Exception to tax write offs.
 
freeport,

I have leased 3 vehicles in my lifetime and it works great as long as you do your homework. It took me 3 times to get it right. Previously I first leased a 1997 Pontiac Grand Prix and made a lot of mistakes. Next, in 2000 I leased my first 2001 Sport Trac...That was OK, but I could have done better....I turned it in at the end of the lease and Purchased my 2003 Sport Trac Last May I leased a 2013 Hyundai Tucson and got a great lease deal, but I did my homework and got it right this time..:grin:



The homework involves knowing the "Money Factor and the "Residual" and knowing that if you keep the vehicle at the end of the lease, you should pay it off in full (balloon payment) or turn it in. Occasionally you can sell the vehicle at a profit at the end of the lease, but you should never consider refinancing the balance to keep the vehicle



The "Money Factor" is like the interest rate, but should not be confused with the interest rate. To find the Interest Rate you are being charged on the Lease, you must multiply the Money Factor X 2400.



The Residual is a percentage of the original value which is the remaining value of the vehicle when the lease ends. By subtracting the Residual value from the agreed total price of the vehicle, you get the amount of the vehicle you are using and paying for ie: a $25K leased vehicle with with a 56% residual on a 36 month lease will have a predetermined value of $14K...meaning you are paying for using $11K of the vehicles value during the course of the lease.



In leasing, you want the lowest Money factor and the highest Residual. I also refuse to pay any Security Deposits, Turn In Fees, or put any money down. I can do that only because I have Excellent credit...someone with a lower credit score may not be able to do that.



I leased my 2013 Hyundai Tucson last may with a Residual value of 62% and a Money Factor that translated into 1.66% APR Interest Rate. I test drove the vehicle and got the Residual and Money Factors. I went home and did some online pricing and calculating. The next day I made an offer for the vehicle based on what Edmunds.com said was a Fair Price for the vehicle without all the overpriced dealer installed options That vehicle was not available but they had another identical model that had more options but they did not charge me for them..:grin:



The vehicle I purchased was on the showroom floor and needed to have the battery charged because people where alwasy leaving the doors or hatch open and the interior light was draining the batter. I picked it up in the morning 2 days later. I only had to pay my first months Lease payment and I drove away.



The vehicle is very impressive, the perfect size for me and easily gets the EPA rated 30 MPG on the highway...I have verified that with my calibrated UltraGauge. The vehicles has run flawlessly since the day I drove it off the lot, and with less than 8K miles I only had one oil change and tire rotation done at 5K miles. Hyundai's have a 10 yr/100K mile warranty on the drive train, but that does not matter that much if you are leasing.



...Rich
 
Richard L gives some authoritative information, good stuff.



I've leased twice. In BOTH cases I got in more car than I would have been otherwise able to afford given the monthly payments.



Eddie gave some info, but I think he misread your yearly average miles. 8,500 miles per year is low miles and if your wife is assured to be well under 12k miles per year (the typical allowance for a lease) you won't get hit with penalties. If you DO look like you might go over the mileage allowance a few months prior to the end of the lease term you can always surrender it early, make the final payments, or even roll into a new lease (or purchase) and often get "pay your remaining lease payments" incentives.



Lastly, take with a huge grain of salt what many will say about leasing costing more, or how it is like "renting" because you never really "own anything." All of that depends on your particular point-of-view, I suppose. If you finance a car for 5 years and sell it after 5 years did you ever really own it? Sure, if you hold onto a car for eight years or more than you can save a lot of money, but then again, you drive the same care for 8 years.



Some people like being in a new car, a hassle-free new car, every 3 years. And they like being in cars that they otherwise might not be able to afford to buy. Leasing is great for them. Let's be realistic, lease or buy, the largest portion of the depreciation of a vehicle is during the first three years, and the BETTER, or ATTRACTIVE cars hold their value more during that period...those are the ones to look to lease. Luxury imports are a good example.



Also, Eddie said:
Ther are stats out there. The person that buys and keeps for at least 8yrs. Saves an average of $350K over a life time. Than those who lease every 3yrs.



I don't understand how that could possibly be the case. If such a buyer lived to be 96 years of age, bought a new car each and every year since the age of 16, that would be 10 cars over 80 years. If the total average savings is $350K, then that is $35K saved, on average, per car. That just doesn't make sense.





Anyway, good luck.
 
TJR also made some good points.



The longer you keep a car, the more financial gain (actually less financial loss since cars depreciate). I used to keep my cars for 6 to 10 years and had a few, like my Honda Accord that I kept for 20 years. The reality is, most cars don't last that long and will demand a lot more expensive repairs down the road, and can you afford to be without your car while it is in the shop, or do you have the time to make those repairs yourself?



Just like buying a car, Leasing has it's pit falls, and you can get suckered into a bad lease. You still have to negotiate the best price for the vehicle, and don't let them throw in a lot of extra charges and dealer options. Another factor was that Hyundai took off 2% of the sales tax on my lease. I don't know if that was something that Hyundai did, or if it was something the State of Texas does on Leased vehicles?



Many New Car leases will allow you to specify your mileage at the beginning of the lease. I was offered both a 12K or 15K mile per year lease. I took the 12K mile per year lease since it was a little cheaper and I am retired so I don't have a daily commute. I still have my Mercedes I can always use if I start to accumulate too many miles on my Leased Hyundai. So far since the end of last may I have put on 8700 miles on it...and that includes a 2500 mile round trip drive to Ohio to visit my daughter and her family last summer. That's averaging just under 1000 miles per month.



As for Eddie's reference to saving $350k in a lifetime....I think he may have quoted an article without doing the math. Like TJR said, it does not add up to $350K, or there is something more to their calculations.



...Rich

 
8500 miles a year is the PERFECT candidate for leasing. Generally, they have a 12,000 mile limit and you can easily re-negotiate that number.



If you keep the vehicle in good shape and don't mod, its a good way to get a high-end vehicle for lots less thsn buying. It just isn't for everything.
 
DoctorCad is partially right.



Many New Car leases will allow you to specify your mileage at the beginning of the lease



That is only partially true:



Most Leases will not go below 12K miles per year and most will give you a choice of 12K or 15K miles per year. Yes it's true that many will ask you how many miles you expect to average per year, but if you say 8500 miles, they will put you down for a 12K mile per year lease. Read your lease and you will see that regardless of how few miles you drive per year, they will put 12K miles per year in the lease agreement.



In my case, I leased my Hyundai and not really expecting to drive more than about 5000 per year since I have another car that I will use part time. They said the lowest the go is 12K miles per year.



Both of my vehicles get the same 30 MPG on the highway but the Mercedes requires 92 Octane premium gas while the Hyundai uses 87 octane regular....that's a 15-20 cent per gallon difference and a significant savings if I put more mileage on the Hyundai, since I was already paying for 12K miles per year.



8500 miles per year makes you an ideal candidate for a lease...but only in the dealer's eyes, because that means your vehicle will have lower miles when you turn it back in and makes the resale value higher. in reality, most leased vehicles are not resold by the dealerships...they are owned by the leasing entity of the corporation go back to that leasing entity. They are then sold through some third party fleet sales or large volume used car dealerships. Some may get sold back to their dealerships, but the dealerships get nothing from the resale of leased vehicles...they made their profits from the original lease.



That's also why most dealerships don't inspect the vehicles being turned in very carefully...No where near as closely as they would if you owned it and were going to be trading it in. They no longer have a dog in the fight...they just follow the basic turn-in inspection requirements from the leasing entity. If it is not obvious damage it is assumed to be "Fair wear and tear"



There is no incentive to piss off a customer by claiming excessive damage when that customer may refuse to purchase or lease from you again.



I had made modifications to my leased 2001 Sport Trac including adding a wooden dash overhlay, painted my step bars to match the vehicle, added a bug deflector and a rear-window vent-visor which I left on the vehicle when I turned it in. The guy who inspected my car said they are only concerned about modifications that are so personalized or outlandish that most people would not buy the vehicle. Things like jacking up or lowering the vehicles, or things that could not be simply removed and the vehicle restored to stock.



...Rich





 
"Jeep Cherokee Trailhawk. First, anybody have any opinions/reviews on this vehicle"



from what i read and test drove i experienced it is getting a good review.

the trailhawk edition is definately more "off-road" then then the other models.

the limited has a very nice interior with many safety features found in more expensive vehicles.

the limited can push the $35K range.

i would recommend the V-6 as it is best in class performance.

i have a 12 grand cherokee SRT8 that i love but i still keep in the back of my mind it is still a chrysler product!



best of luck
 
Consumer Reports did an article several years ago studying leasing and purchasing. Their conclusion was that there was little difference good or bad between the two if you did your homework and negotiated a good deal. They stressed that many factors of the lease could be negotiated. Bottom line, know what you are getting into.



I would argue that 8,500 miles a year for a 12,000 miles per year lease is probably gonna be a horrible deal, since you are not using 3,500 miles each year that you are "paying for/entitled to".
 
I've done three leases in my lifetime and won't do another. For me the distaste for having Perpetual Car Payments overrides the benefit of driving new cars under warranty. You can study the buy/lease question until the cows come home; it makes sense for some (business use), but for most of us it's a horrible way to acquire an appliance that depreciates in value. Cars are all about emotion, which is why we spend so much on them.
 
Vic,

it's a horrible way to acquire an appliance that depreciates in value



All vehicles depreciate in value when used.



There are good and bad sides to leasing as there are in buying. If you buy a vehicle that turns out to be an unpopular vehicle or goes out of style because it uses too much gas, or is a poor design, you end up eating the total cost of depreciation. With a Lease, you only pay for the portion of the vehicle you used and you can usually get more car at less cost than you could get if you were buying.



If you bought a vehicle and now want to trade it in, you will suffer even more depreciation when you have to sell the vehicle at whole sale prices. With a leased vehicle, you don't really car what the car is worth when you turn it back in. If the car was dud and the car is not worth the residual value you don't eat that loss. That also frees you up to buy or lease another vehicle without worrying about selling the old vehicle or the price you will get if you trade it in. I have found that you can always negotiate a better deal Buying or Leasing if you are not encumbered by a Trade In.



...Rich



 
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