Buy or Lease?

[Southern Comfort]

Just to give a little back ground info on my financial standings I am 20 years old, I am a full time student, and I have two part time jobs. Right now I am driving a 2004 Chevrolet Z71. At the time I bought it I wasnt thinking about the $480 per month payments. I was thinking... hell yeah Im gonna be pulling chicks hard core now, and well, I was right. But like anything, it wears off. The newness has definitely worn off, and the payments are getting OLD FAST. I CAN afford them, I just think it would be more realistic to get into some smaller payments, even if I have to sacrifice the "image" of a brand new truck. Im thinking of leasing, nothing extravagant, maybe like a 2005 4 door F-150. Reason Im thinking of leasing is becuase Ive never owned a vehicle for more than 1.5 years any how. Ive been in 6 different vehicles since I was 16. The way its looking Im going to be making car payments for the rest of my life, which really doesnt bother me, BUT, If Im going to be making payments I want it to be on something brand new. If there are any car salesmen on here feel free to chime in. I drive about 20k miles per year. A lot of leases wont go that high. What do I do?

 

[Crowler]

Just to give a little back ground info on my financial standings I am 20 years old, I am a full time student, and I have two part time jobs. Right now I am driving a 2004 Chevrolet Z71. At the time I bought it I wasnt thinking about the $480 per month payments. I was thinking... hell yeah Im gonna be pulling chicks hard core now, and well, I was right. But like anything, it wears off. The newness has definitely worn off, and the payments are getting OLD FAST. I CAN afford them, I just think it would be more realistic to get into some smaller payments, even if I have to sacrifice the "image" of a brand new truck. Im thinking of leasing, nothing extravagant, maybe like a 2005 4 door F-150. Reason Im thinking of leasing is becuase Ive never owned a vehicle for more than 1.5 years any how. Ive been in 6 different vehicles since I was 16. The way its looking Im going to be making car payments for the rest of my life, which really doesnt bother me, BUT, If Im going to be making payments I want it to be on something brand new. If there are any car salesmen on here feel free to chime in. I drive about 20k miles per year. A lot of leases wont go that high. What do I do?

I know this wasn't one of the options you listed but here you go any ways.

IMO stop buying a new car every 1.5 years. Buy a 2 year or even 4 year old car/truck and use the extra money to put towards buying a duplex. You will end up being able to use your pasive income to pay your car payments instead of your pay checks.

BTW if you are looking for some good finacial information Rich Dad Poor Dad are some VERY good books with great info. The author is a MAJOR liar but don't let that stop you from garnering good information from his books.


CROWLER

 

[Vanilla-Gorilla]

I think you should lease and just lease another vehicle every 2 years or so. As far as the mileage goes (20,000), just do your best to keep it under the 15,000 mile terms they give you. Damn 5,000 miles over a 15,000 mile lease at 25 cents a mile is $1250.

 

[maxsupplements]

well,

well, my dad drives a new truck every 2 years, puts 50k miles on them and just takes the loss when he trades it in, he doesnt mind paying and losing that money for the look of a new car. i think its ludacrous and a waste of $ but he has the $ to waste, so giddyup!
i drive a 2000 chevy Z71 with all the extras, has 150k miles and drives excellent, i only paid 10k for it.
think about a cheaper car thats PAID OFF. you can keep the extra $ in your wallet, and its not the truck that attracts the women, its the other stuff, if its your truck then the women your pullin arent worth a notch on my bedpost.

 

[BULK_CITY]

no advice, but why do you say rober kyisoaki is a liar? i just picked up one of his books "rich dad poor dad" b/c so many people recommended it

thx

 

[Paul Bunyan]

I sell Chevy's and leasing is a great option for those with a short attention span. You have a new vehicle with a lower payment, no worries about depreciation, and usually a full factory warranty. You pay for what you use and turn it back in. You can bury your negative equity in a nice Trailblazer LS on a 4yr lease. Any idea what you owe on your truck?

PB

 

[Crowler]

no advice, but why do you say rober kyisoaki is a liar? i just picked up one of his books "rich dad poor dad" b/c so many people recommended it

thx

Some people might even say he is a scammer but I do not. It has been proven that he lied about alot of things in his book. BUT that does not take away from the fact that he has alot of really good information in the books.

He lied about things like his rich dad. It has been researched where he says he grew up and there is no such person. He lied about his military experience. He actually got rich by selling his books telling people how to get rich. He was in Amway and he had thousands of the books printed up and then his friends and people in his downline bought them. This is how it the Rich Dad Poor Dad series of books got started.

I actually used the accountant that cowrote one of his books. She told me that there are ALOT of fish stories in the books but MOST of the information is sound financial advice.

I have heard but have not bothered to do it, that if you put in a search for robert kiyosaki is a liar you will find some easily verifiable facts that disprove a number of things Robert claims in his books.



CROWLER

 

[Southern Comfort]

I sell Chevy's and leasing is a great option for those with a short attention span. You have a new vehicle with a lower payment, no worries about depreciation, and usually a full factory warranty. You pay for what you use and turn it back in. You can bury your negative equity in a nice Trailblazer LS on a 4yr lease. Any idea what you owe on your truck?

PB

Thanks Paul for the helpful advice... I owe a little more than $20,000. Its hard as hell right now to trade in or even sale Chevy trucks because of GMC handing out the GM Employee discount to EVERYONE. Truth is, someone can but my truck for 20k OR get a brand new one off the lot for only about $4k more.

 

[xcelbeyond]

Don't let this sound like I'm hitting you on the head - I fall into the same category.

Here's some facts:
Unless you can "write-off" a lease, avoid them.
If you can't payoff a car loan in 2 years, guess what - you can't afford it.
Buying a late-model used car with low miles will save you a TON of money.
Driving a new car and not meeting this criteria only means you feel like you need to impress somebody (which could be yourself) for taking such a loss.

Why not take the 10 grand loss whenever you turn over a car a put that money to work for you?

I just recently bought a 2004 Chev with 13,000 miles on it for $11,000 - about half the price of a new one. Hell - everyone thinks it's a new car but I could care less. It'll be paid for within 2 years.

 

[Crowler]

Don't let this sound like I'm hitting you on the head - I fall into the same category.

Here's some facts:
Unless you can "write-off" a lease, avoid them.
If you can't payoff a car loan in 2 years, guess what - you can't afford it.
Buying a late-model used car with low miles will save you a TON of money.
Driving a new car and not meeting this criteria only means you feel like you need to impress somebody (which could be yourself) for taking such a loss.

Why not take the 10 grand loss whenever you turn over a car a put that money to work for you?

I just recently bought a 2004 Chev with 13,000 miles on it for $11,000 - about half the price of a new one. Hell - everyone thinks it's a new car but I could care less. It'll be paid for within 2 years.

Amen brother. Once again you have said what I was thinking.

 

[DOGMA]

My advise. NEVER finiance a depreciating asset. Pay cash for your car... Nothing depreciates faster than an automobile, unless its a classic/investment quality car. Only finiance appreciating assets ie: Real estate. I know it is not easy Bro but if you trade cars with bank notes every 1.5 or 3 years like the rest of the US population, you will spend for more money on cars than you will the homes you will live in the rest of your life.

 

[Coopie]

Amen!

Dogma really hit the nail on the head - A car is a DEPRECIATING ASSET from the second you purchase it. If you finance it then you're paying interst on an asset that is worth less with each passing day. The only time this makes sense is if you can extract enough use out of the car to get past the point wherein the cost of ownership is less than the cost of losing the cash flow.

For example - if you plan on owning a car for 7 or more years, finance it. Over time, the usage of the vehicle offsets the cost of ownership. Seven years is about the turning point by most standards at which this happens.

Leasing allows you to RETAIN CASH FLOW on a monthly basis while USING (BUT NOT OWNING) an asset. From a pure "pro" and "con" and balance sheet standpoint, it's a great option because you're LEVERAGING an asset relatively cheap.

The downside to leasing is usage. If you exceed the allotted mileage, be prepared to pay through the ass. I returned a 2000 BMW M3 in 2003 after a 39 month lease (15k miles/year) and I had 80,000 miles on the car. I had to pay thousands to return the car. I would have bought it but it was in an accident (while parked) 1 week before lease was due.

I do a lot of driving, so for me personally, I don't want any of my cars after 3 years. Even my "weekend car" is a lease and here in NYC with the weather and roads, the car is starting to show wear after only 15,000 miles. My lease is up tomorrow and I am glad to be returning the car even though I love it.

 

[dallasmsl]

Not proud here!

Hey, I have two cars that I paid cash for. No, they aren't new. They are about 12 and 15 years old. I change the oil regularly, keep them running, sometimes I have to pay extra for maintenance but, hey, I have NO monthly payments. Envy me but it can be done. I'll never go into debt again for a car unless it's only a two year loan.

 

[casman]

to quote Frank Lloyd Write

My advise. NEVER finiance a depreciating asset. Pay cash for your car... Nothing depreciates faster than an automobile, unless its a classic/investment quality car. Only finiance appreciating assets ie: Real estate. I know it is not easy Bro but if you trade cars with bank notes every 1.5 or 3 years like the rest of the US population, you will spend for more money on cars than you will the homes you will live in the rest of your life.

"If it appriciates buy it, if it depreciates lease it" - Frank Llyod Write

That's from memory but I think it's close to an exact quote if not bang on.

 

[xcelbeyond]

"If it appriciates buy it, if it depreciates lease it" - Frank Llyod Write

I think in general, this is great.

Here's the thing with cars - at least in my neck of the woods:
1) you need to have one for transportation (no public transportation where I live).
2) they depreciate but only because most people need to have a new one every 2-3 years. The longer you keep it, the less depecriation is a factor.
3) i drive WAY TOO MANY miles a year to lease.

If you can't afford to make payments for a two year loan (or pay cash), you can't really afford it - especially if you plan on getting another new one in 2-3 years. I tend to keep a car until it's not worth anything. My last car was bought in 1997 - a 1992 VW Passat. It had 100k but just had a new engine installed. It recently turned 240k. I paid $5000 for it, put $2000 in maintainance since owning it, and it's worth ~$2600 (KBB) - that's what I'm going to claim as donation for tax purposes. I paid cash for it - do the math and see how much it cost per mile - then see what you're paying per mile for a vehicle.

I'm not proud either

 

[dallasmsl]

Car Appreciation

Your post reminds me of a 1974 VW I used to own. I bought it in 1978 and had to get a loan for $2200. I drove it for about 15 years and even took it to the middle-east with me when I was in the Air Force. I brought the car back, finished college, and then had to sell it. I sold it for $2400!!!

Essentially, I had the free use of a car (less annual maintenance and repairs) for approximately 15 years.

Today, I have two old used cars both with over 100k miles on them. They would cost more to replace than they do to maintain so I keep them...and they run fine. When they stop running fine and start falling apart, I'll sell them. Money in my pocket is a hell of a lot better than money on a lease vehicle!

 

[casman]

I think in general, this is great.

Here's the thing with cars - at least in my neck of the woods:
1) you need to have one for transportation (no public transportation where I live).
2) they depreciate but only because most people need to have a new one every 2-3 years. The longer you keep it, the less depecriation is a factor.
3) i drive WAY TOO MANY miles a year to lease.

If you can't afford to make payments for a two year loan (or pay cash), you can't really afford it - especially if you plan on getting another new one in 2-3 years. I tend to keep a car until it's not worth anything. My last car was bought in 1997 - a 1992 VW Passat. It had 100k but just had a new engine installed. It recently turned 240k. I paid $5000 for it, put $2000 in maintainance since owning it, and it's worth ~$2600 (KBB) - that's what I'm going to claim as donation for tax purposes. I paid cash for it - do the math and see how much it cost per mile - then see what you're paying per mile for a vehicle.

I'm not proud either

haha I sold my pride for a bottle of gin.

I still have a 91 talon. I payed cash for it and it was worth it, I could leave it on the curb now and have gotten my money's worth.

so yah every "rule of thumb" is just that, is what's "usually" the best advice but it boils down to personal preference as much as anything. If it's strickly the money you have to run the numbers and that includes expected milage.

I live in LA and finding an honest mechanic is like... if there was a word bigger than impossible... so I want that rust bucket out of my hair before the transmition goes

Just remeber you are going to pay for the depritiation either way, ain't no freebies.

 

[callgolf]

Leasing Seems Preferred

Just thought I would interject some personal experiences. I just leased a new 2005 BMW 325i, because the lease terms were so sweet. 315 a month, with 17,000 residiual due at the end of the lease period. I think most people forget that if you have a favorable residual, you could end up making money on the vehicle. I am not restricted to the 13,000 mile a year limit because I am not going to return the car to the dealer at the end of my lease. I am going to assume the residual and sell the car, probably in the range of 20,000-22,000. So if you purchase a car that has a strong resale potential and doesn't depreciate like most trucks and SUV's, you can do pretty well leasing.

 

[Crowler]

Just thought I would interject some personal experiences. I just leased a new 2005 BMW 325i, because the lease terms were so sweet. 315 a month, with 17,000 residiual due at the end of the lease period. I think most people forget that if you have a favorable residual, you could end up making money on the vehicle. I am not restricted to the 13,000 mile a year limit because I am not going to return the car to the dealer at the end of my lease. I am going to assume the residual and sell the car, probably in the range of 20,000-22,000. So if you purchase a car that has a strong resale potential and doesn't depreciate like most trucks and SUV's, you can do pretty well leasing.

What is the number of months on the lease and the down payment?

 

[callgolf]

36 month lease

THe lease term is 36 months. The one drawback is the 325i is a car, you can't carry stuff or move as the car is small in comparison to an SUV or truck. But I find that it saves me alot of money on fuel costs, I get 22/31 fuel economy. On insurance, cars, especially safe cars with like 4 air bag systems are alot cheaper to insure than an SUV or truck. Also, BMW offers free maintenance and free everything for 4 years, 50,000 miles, I don't have to pay for oil changes or any small problems that might come up between now and then. I even get a brand new set of low profile/high performance tires at 35,000 miles. That is what the car came with. Also, these cars are very reliable, one of the most reliable vehicles you can buy. Even more so than a Mercedes or Lexus, so that is why I like the BMW. Some people may hate them because they are really expensive, but I think this a situation where "you get what you pay for". If you look at the "real" cost, those who are economists know what I mean, driving these 3 series is surprisingly affordable. I love driving that car, it is quick and nimble.

The down payment was 2,999. So three grand, little steep, but I just made a bunch of money in petroleum futures, so I could justify the expense.