cars- buy or lease?

[wombatclay]

OK, a little while ago I would never ever have considered leasing. But...

We have 1 car. This wasn't a problem when we lived in town but we moved to rural acerage (seasonal dirt roads, 20 minute drive to town in good weather, no public transport or carpools, etc) and dh's work schedule/price of gas is such that my taking him to work and picking him up again isn't possible. Initially we thought we'd buy a used car that could hold all the carseats/stuff for me, while dh drove our current vehicle.

However, a used car that fits our needs is at least 15K. And gas hasn't been less than 4 dollars a gallon in over a month... and some stations are approaching 5 dollars. We'd love a hybrid but there aren't many used yet and they cost even more.

Dh suggested we:
--lease a new, efficient, "large" hybrid vehicle with 4wheel drive (necessary) that can hold the car seats (currently 2, 3 some time next year). This would be "my" vehicle and would be used to ferry the girls around and in case of emergency (so reliability is crucial). We could then re-evaluate the situation (gas prices, number of car seats, etc) in a few years when the lease ran out.

--buy a used vehicle for dh's commute. It could be smaller, gas efficient, and very used (it would still need 4wheel drive). It wouldn't be able to hold the car seats but it wouldn't have to.

Now, I don't like the idea of leasing but is this just a knee-jerk reaction? We have some money saved but not enough to buy a large/fuel efficient vehicle outright so we'd be looking at a monthly payment no matter what. Considering how cars depreciate (and how much gas costs are probably going to rise) is the "equity" of owning the car really worth much compared to the lower month;ly lease amount?

What would you do? We have to get at least one vehicle and the one Dh uses to commute now isn't big enough for our family anymore (we had initially thought I'd use that one for the girls and he'd get a tiny used car but it just doesn't work).

Thanks!

[ShaggyDaddy]

Hybrids do not generally save money. There are other reasons to get them, but I assume you are talking Escape AWD hybrid(28mpg)

When you compare to say the Escape AWD non-hybrid (2.3L 4 cyl 21mpg)

When you factor in Gas for 75,000 miles, insurance, cost of the vehicle, etc the true cost of ownership for 5 years is lower on the Non-hybrid untill gas gets to $10.00 per gallon.

If you are going to drive twice that much (150k miles in 5 years) then the hybrid does not become cheaper until $7.00 per gallon.

All of the hybrids are this way when you compare them to their non-hybrid counterpart... the exception of course is the prius and insight which have no real counterpart, but they are much more expensive to own than other less gas friendly cars.

I know it hurts every day when you pay at the pump, but it hurts more every month when you pay the hybrid premium... the actual issue is that people look at their gas gauge more often than at their monthly car/insurance/maintenence bill.

Don't get me wrong there are lots of reasons to buy a hybrid (indeed I would love to have one), but none of those reasons are financial... at least none of them are properly researched and financial.

[wombatclay]

Hmmmm... we hadn't actually looked at the Escape. We just started looking and were sort of thinking about a certified Civic Hybrid (48mpg) we saw, but basically we need better milage than the 19mpg we get now

Initially the plan had been for me to use our current vehicle while dh got a small/efficient commuter type car... the problem being, that vehicle would still need to do serious hills in serious snow. But we hardly fit our vehicle now and as the girls keep growing it's just not going to work (plus the car is 8 years old and has massive mileage on it so it's not entirely reliable at this point). And then we were going to buy a certified used vehicle while DH commuted with our current vehicle... but we're in one of the highest gas sections of NY and since we're already to almost 5 dollars (and the stations are basically saying "buy now, we're jacking the price every night") the commute cost is killing our budget right now.

(I guess "big" is relative we're not getting a minivan or third row seat type vehicle... we're talking mostly sedan or wagon styles that could hold 3 radians side by side if necessary).

Mileage aside, what do you think about the lease vs own question?

[Pancakes]

Leasing a car is great for someone that doesn't put many miles on their cars and buys a new one every three years or so. It is never good for people who put tons of miles on their vehicles, like living out in the country, or for people who typically keep their cars for a long time.

Because of my ownership habits, I have never, and will never lease a car; it just doesn't make financial sense. However, if you plan to buy a new car in three years and can keep the mileage down, it may be a good deal for you.

Look at your vehicle ownership history. How long have you owned your cars? How many miles do you typically put on your car in a year? How many do you expect to put on in the next few years?

I don't like leases, but that's me. So my recommendation would be to never lease a car; but I'm trying not to let that cloud my response here. They do work for some people.

[ShaggyDaddy]

ah ok, just make sure you compare apples to apples... 48mpg may seem awesome, but for purchasing a civic 4d auto vs a civic hybrid... the civic non-hybrid is cheaper till 11 dollar gas. Used is a whole other ball game, but I suspect it will be at least close to comperable.

32mpg (civic non-hybrid) @$4 a gallon is $1875/15,000 miles (typical yearly usage)
48mpg (civic hybrid) @$4 a gallon is $1250/15,000 miles

It is just not that different. $52 more a month on gas can get eaten quickly when you consider the price premium on hybrids, the increased insurance cost, and the more expensive scheduled maintenence. Especially that when you consider every 1000 financed = about $16-$17 a month on your payment...even a 16mpg improvement that cost 3k more loses on cost imediatly, before maintenence or insurance costs.

you just mentioned 4wd and large as requirements, the only hybrid on the market fitting those is the Escape.

As for leasing... you need to know how many miles you will put on it. Plug in the gas mileage like I did and see if it is actually a better deal... I would be willing to bet that it isn't.

Leasing is a great solution for people who absolutly must have a new car every few years, but driving and maintaining a car that you purchased will be cheaper most of the time.

[wombatclay]

I'm in the "never lease" camp with you... but dh made some good points and I'm trying to be objective.

Our car history is "one vehicle, bought used, driven into the ground". We usually make them last around 10 years and we do A LOT of driving (travelling between upstate NY and Boston frequently to see family, camping in wilderness regions, etc). But in this case we have some specific needs... large enough for the girls and possibly a future third child, 4x or AWD, super reliable. AND since it would be the "kiddo car" it would do maybe 50-60 miles a week, maybe one or two long trips a year tops. We're concerned about rising fuel costs and our current plan is to move back to a public transport/foot traffic setting in about 4-5 years (when dh is out of grad school, the girls are older, and I'm WOH again) so if we bought we'd be selling the second car in that time frame and I don't know that the resale value of a moderate milage 10 year old car would be worth what we'd put into it.

I'm not convinced, but dh had some decent arguements (the last paragraph is essentially "his") and I don't want to just react with a "no lease!" if his ideas make sense, you know? I've suggested leasing the "kiddo car" and dealing with the gas consumption of our current car (instead of leasing one, and buying one.... the "two new to us" cars at once thing kind of gives me the willies) but I don't know if that makes the most sense yet either.

[wombatclay]

The civic we saw the other day had AWD? It said it was a hybrid but since it was our first trip out I wasn't taking notes so I may be mixed up.

Hybrid would be nice, but it's the mileage I'm mostly concerned with... thanks for running the numbers for me!

[lmonter]

Own.

If you lease, you don't even have the *option* of selling it when you're done - just paying more to buy out the lease than you probably would've if you'd just bought the car outright.
If you buy, well, then you can sell or get rid of the car at pretty much any time, where with an ironclad lease, not so much. A nicer option if you don't have a crystal ball, ykwim? You just never know what might happen in the future.

[sanguine_speed]

There are a lot of used Escape hybrids out there.
We bought a 2005 new, but it was the SAME price as the non-hybrid because it was a demo model. We drive 45,000km a year and have saved so much. We do fit three kids in car seats in it. You could buy one for $15,000 now.

[ShaggyDaddy]

Originally Posted by wombatclay

The civic we saw the other day had AWD? It said it was a hybrid but since it was our first trip out I wasn't taking notes so I may be mixed up.

With a name like Wombat I am guessing maybe you are in AU or NZ and you aren't dealing with the chincy junk they pass of as cars here in the U.S.

Mine was a America-centric analysis... didn't notice you are most likely in a place where they have proper cars.

[tallulahma]

i may be biased, but growing up in the motor city, I loved a lease.

I currently own and I hate it.

I drove off the lot owing 14,000 dollars on a USED vehicle- for 5 years. Im a year and a half into it andm y car is worth 7500 dollars.... I owe 10,000 still.

So if i wanted to sell now- I would take a loss. Im still stuck with this car making a 267 dollar a month payment for FOUR MORE YEARS!

If I had just leased a new car a car I liked ( i do not like my car) I could have leased a car for the same amount I bought and if I hated it, in three years, i walk away. I do not owe anything, if I love the car, I lease the new model of it.

I have leased four different cars, this is my furst purchasee, and I purchased it because dh is a "owner" and he purchased his car and said its the best way to go.

Now I am miserable and hate my car and want a better one which I should have just gotten.

I could seriously have leased a brand new car for the price I am buying this used car.

and guess what in five years I may get a trade in value of 1,000 dollars.

ugh.

I hate owning cars.

but I may be conditioned by the car industry and their easy leasing options in detroit.

[velochic]

Financially, (the hybrid/non-hybrid issue aside), leasing is almost ALWAYS the more expensive option. The purpose of lease options is to pull in people who really can't afford the car if they bought.

You said that you keep cars for 10 years. That alone is reason to buy. Over the course of 10 years, you'll have 4 leased cars, with an average pay out of $15,000 (assuming the residual value of the car is adequate that you don't have any fines or fees). That means you will pay $60,000 for cars over 10 years rather than getting two decent cars at $7500 each... and if they are Hondas or Toyotas, you'll still be driving them 10 years from now.

The other thing you have to think about is the MANDATORY maintenance. When I drove a leased car for work, these were about $500, and I had them a couple times a year (I wasn't paying for it, though, so who cares). So, you will want to budget about an additional $75 - $100/month for these maintenance appointments.

If you are in a financial bind, you cannot get out of your lease. Are you financially secure enough to know without a doubt that you can manage the lease payments for 3 years?

Finally, auto dealers are notorious for the old bait and switch with leases. If you don't take the advice to buy, I would take the lease home and inspect it intensely to make sure you are getting what was said. Often they will back load them with fees, reduce the allowed miles, or tack on ridiculous stipulations.

Good luck!

[wombatclay]

That's good to know about the maint fees!

We'd only need this second vehicle for 3-4 years since we know (for sure) we're not staying here past that point. So this would be the only lease, and it wouldn't be the "commuter" car (so not a lot of mileage).

I hadn't really thought about it till dh brought it up, but the scenario inchijen described is what is worrying me now. I'm 90% sure I'll stay in the own-camp but...

If we buy a 5 or 6 year old vehicle (as we usually do) the "good gas" vehicles are right at the tippy top of what we can afford. We'd be trying to sell it in 3-4 years. Depending on the price, we may still owe on the car at that point. DH was thinking the lease option would be better since the car/payments would "end" at about the same time we'd otherwise be trying to sell an old car for a specific dollar amount (we usually own our cars by the time we sell, so there's no pressure... and being old/worn they usually end up sold for scrap).

We've never bought/leased new so it's not a world we're familiar with (though my parents did buy a new Saturn a handful of years ago when my dad's health reached the point that he couldn't rehab their cars)... honestly the prices have me in shock! Most of the cars we've seen cost more than our house! It's insane.

[counterGOPI]

: dh and i were just discussing if we should buy or lease a van.

[wombatclay]

So, we did some more looking today... and we'll be crunching numbers tonight.

Right now it looks like we'll purchase a used Subaru (probably an outback). This would be our "kiddo car". Then DH would strip down our current vehicle to bare bone minimums to see if he can cut down on fuel consumption... right now he is spending ~13 dollars/day in gas just in the straight commute to and from work. Grrr!

[savithny]

Knowing the approximate region and being familiar with the terrain of your commute, I would not lease EVER. You're almost certain to go over milage and get stuck with fees -- AND what carseats and kids do to the upholstery and floors of cars --- again, fees. Lots of fees. They don't tell you about those fees when they lease you the car.

Find DH a used Geo Metro! THey're going for a premium (people are paying far more than their blue book) because they're so fuel efficient.

Can DH find anyone to ride-share with? Even someone who lives further out or closer in? A slight detour to pick someone up would still be worth it if either he wasn't driving every day or they were splitting gas?

Be sure to try three carseats in anything you think of buying, if you're planning on #3. I think if you go Subaru it'll have to be a Legacy or Outback (and don't discount the Legacy wagon over the outback, either - the clearance difference isn't huge and it is a fair bit cheaper). I really don't think 3 seats in the back of an Impreza or Forester is going to be easy.

[Pancakes]

Originally Posted by velochic

Finally, auto dealers are notorious for the old bait and switch with leases. If you don't take the advice to buy, I would take the lease home and inspect it intensely to make sure you are getting what was said. Often they will back load them with fees, reduce the allowed miles, or tack on ridiculous stipulations.

Good luck!

This is what my DH does for a living. He hates leases because he CAN'T do what you are saying. When he has a customer that wants a lease, he almost always doesn't make money on it. He comes home every day complaining about leases...every day.

[velochic]

Originally Posted by Pancakes

This is what my DH does for a living. He hates leases because he CAN'T do what you are saying. When he has a customer that wants a lease, he almost always doesn't make money on it. He comes home every day complaining about leases...every day.

I used to be lessee of cars at my old pre-SAHM company. They used to do this *all* the time. Especially back-end fees for what I considered normal wear and tear. They would also often draw up the lease having lowered the amount of allowed miles on the car or the required maintenance. Of course the salesman or any other individual along the leasing line doesn't make the profit! The company makes the profit on leases. That's why they push them. People like your husband do the work and they get the profit.

[LEAW]

FWIW, you can get 3 radians in just about any car.

They fit easily across a Jeep Cherokee, I'm pretty sure they fit across the back of a Civic.

LOVE the suggestion on the Metro. My dad drives my old Prizm, which is just a smidge bigger than a Metro, and we can put 2 radians + my 10 yr old niece in the back seat.

[Pancakes]

Originally Posted by velochic

I used to be lessee of cars at my old pre-SAHM company. They used to do this *all* the time. Especially back-end fees for what I considered normal wear and tear. They would also often draw up the lease having lowered the amount of allowed miles on the car or the required maintenance. Of course the salesman or any other individual along the leasing line doesn't make the profit! The company makes the profit on leases. That's why they push them. People like your husband do the work and they get the profit.

DH isn't the salesman and he does get paid on the dealership profit; actually that is exactly how he gets paid. And you are right, the salesmen do not get paid on the lease profits, the F&I guy, the dealership, and the bank does. The dealership doesn't give a fig on whether the bank profits, and honestly the F&I guy usually doesn't care if the dealership profits...only himself. So things like reducing mileage and maintenance fees do not affect his paycheck. What does, and what he will push is a maintenance contract and an extended warranty if the lease is for longer than the manufacturer warranty. With a leased vehicle it does save money to get the maintenance contract (if it's not over inflated), but typically not the warranty unless you plan to buy the car after the lease. The only other place with a lease to make money is with the interest rate and most leasing banks only allow the dealership to mark it up one point, where buying banks typically don't care and you are only limited by what the state will allow.

What dh gets hacked off about is that the leases are structured in such a way that if he wanted to make a decent profit from one, he'd really have to screw the customer over and he's just not willing to do that. He would much rather sell the car, make decent profit, and not screw people over. Car dealerships have a pretty nasty rep for screwing people, but in all honesty probably 2/3 of them don't. It's the 1/3 that do that most people hear about.

From the 12 or so years he's been doing this, leases have always been a lose/lose situation for both the customers and the dealerships. Leases are just preying tools on those individuals who wouldn't normally be able to purchase the car. It allows people to essentially rent a car that they wouldn't normally be able to afford.