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 Post subject: Buying vs. Leasing a Car: Dilemma
PostPosted: Thu Mar 21, 2013 8:40 am 

Joined: Thu Mar 21, 2013 8:31 am
Posts: 8
I have always owned used cars outright and have never wanted to buy new or lease. Our current car is a 2001 Ford, which I've owned since 2007. It's been very reliable, but we put a ton of miles on it when we moved and drove it across the country. When we arrived in our new destination, understandably, there was some maintenance that needed to be done.

Recently, the car seems to be needing more and more work. It's making a lot of unfortunate noises and we are 99% certain that the transmission is going (which is thousands of dollars to fix if it does go). Since we had no plans to look for a new car, we do not have adequate savings to purchase another used car, as much as I would like to.

A friend of ours recently had the same problems. Her car was going to cost too much to fix and would likely not be running well in only a few short months. She got her car appraised for a trade-in value and as given more money back than she expected. She decided to lease a new car, using the trade-in money as a down payment and with a low monthly lease.

I feel torn. We are not in the position to buy another used car. I feel uncomfortable with a lease because I've never had one, and I feel like it would be throwing money away. But if we wait in order to save up for a car (which is one of the LAST things we should be saving for at this current time), our current car may break down, leaving us with no transportation and a much lower appraisal value should we trade it in. What should we do? Look to lease, or save up as much as we can in the next year or so and cross our fingers that our car makes it that long?


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 Post subject: Re: Buying vs. Leasing a Car: Dilemma
PostPosted: Thu Mar 21, 2013 8:57 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1627
Location: Seattle, WA
kmari wrote:
Since we had no plans to look for a new car, we do not have adequate savings to purchase another used car, as much as I would like to.


Do you have an emergency fund? The time to save for your next car is before you need it, of course.

kmari wrote:
A friend of ours recently had the same problems. Her car was going to cost too much to fix and would likely not be running well in only a few short months. She got her car appraised for a trade-in value and as given more money back than she expected. She decided to lease a new car, using the trade-in money as a down payment and with a low monthly lease.


Your friend may or may not have gotten a good deal. When you trade in a car for a new one, be it purchase with loan or lease, they have a lot numbers to play with. Look up the "four square" technique, e.g. http://consumerist.com/2007/03/30/dealerships-rip-you-off-with-the-four-square-heres-how-to-beat-it/
So for example, if they sense you want a lot for your trade-in, they'll give you more than it's worth, but then will increase the price of the car you're buying, or the interest rate (leases do have an interest rate). Or in the case of a lease, they might be able to lower the residual value.

Leases are generally not a very good deal. In general, the average lease is going to cost the consumer more than the average new car purchase, and the average new car will cost the consumer more than the average used car purchase. There are exceptions, but they are exceptions to the general rule.


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 Post subject: Re: Buying vs. Leasing a Car: Dilemma
PostPosted: Thu Mar 21, 2013 12:30 pm 

Joined: Tue Jan 20, 2009 11:38 pm
Posts: 78
I've never leased, and I've never bought new. I buy used but "young" cars, pay them off as fast as possible, and keep them about six years.

I always thought leasing sounded like a terrible deal. But I read an article on GRS years ago that made me rethink it. The upshot was that it makes no sense to buy a depreciating asset (a car), so if you can negotiate a great lease deal, it's a better option. I had never thought about it that way and it's stuck with me (I still haven't leased, however).

I have some friends who have happily leased, others who have gotten a very rude awakening when they turned the car in and were dinged for all kinds of things (the rules are strict).

In your situation I would probably buy, but buy used. You say you're not in a position to buy, but you'd be using your current car as a trade-in for the lease, correct? So you could do the same for a used car. Payment might be higher than the lease payment but if you are willing to negotiate it might not be too far off. It seems like you might end up trapped in a lease that doesn't work for you.

Of course, when your car is having issues, the clock is ticking. Part of this decision may come down to what you can do quickly to make yourself feel as secure with your transportation as possible. That may mean the lease. (When I traded in my last car, I know I could have done better, but it had started shifting poorly and my peace of mind mattered more than getting the best deal possible.)


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 Post subject: Re: Buying vs. Leasing a Car: Dilemma
PostPosted: Sat Mar 23, 2013 7:14 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
stannius wrote:
Your friend may or may not have gotten a good deal. When you trade in a car for a new one, be it purchase with loan or lease, they have a lot numbers to play with. Look up the "four square" technique, e.g. http://consumerist.com/2007/03/30/dealerships-rip-you-off-with-the-four-square-heres-how-to-beat-it/


Wow, that article is enlightening. I despise going to car dealerships. I always feel like they are trying to take advantage of me. I've walked out pissed more than once. Now, I buy used. Even better, I negotiate with a "normal" person. I try to make sure the deal is fair for both parties...


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