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NBR: Leasing?

DH and I are considering trading in his car and are waying suv vs. mini van as well as purchasing vs. leasing.  We have never leased before, but it looks like there are some pretty great deals out there right now.  Any pros and cons you could give us?
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Re: NBR: Leasing?

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    Based on my love for Dave Ramsey, I will let him explain why he calls it "fleecing" not "leasing" he thinks it's a horrible idea.  My husband and I have follewed his advice on buying the 2 year old cars in near perfect cndition and have been very happy.  Also, I was going to trade my old car in when I bought my last used car at the lot.  They were going to offer me 800 bucks for the car and I was able to sell it in 2 weeks on craigslist for 2k.  So, selling your car vs trading it might get you some more cash too

    Is leasing thro.wing your money away?

    Dear Dave,

    We have leased our last couple of vehicles and to me it seems like we?re just throwing our money away. At the end of the three-year term we have nothing. What is your take on buying new cars or leasing? What is the best way financially to go about getting a vehicle?

    Anna 
    Kankakee, Ill.

    Dear Anna,

    Well, to start with I?ve got to tell you that I?m a boy and I love cars. However, I have found as I run the numbers on cars that they are the largest purchase Americans make that goes down in value. We buy a larger purchase with our home, but typically it goes up in value. Kiplinger?s Personal Finance Magazine says that a new car will lose 60% of its value in the first four years. Well, that doesn?t work. Turning $30,000 into $11,000 is not a good plan. So financially speaking, and common sense agrees, if you?ll pay cash to buy a two-year-old car with very low miles in near perfect condition, you will let someone else take the bulk of the value loss. That is what the typical millionaire does. Very few millionaires lease cars ? or as we call it, fleecing a car ? because it is the worst deal on the car lot. Consumer Reports, Consumer Federation of America and Smart Money Magazine have all done articles on the ?fleece? and the fact that it?s a rip-off. It is good only for the dealership. It is a high rate of interest; of course the interest rate is never disclosed. 

    The bottom line is that you?re buying a new car that?s going down in value and you?re financing it expensively, but they offer a low monthly payment, which is all a lot of people look at. You?re almost renting your car and at the end you turn it in and you have nothing. So I would buy a two-year-old or older vehicle ? whatever I could get paying cash.
    Dave

     

    ETA: added content

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    imageMrs.Cooley2bee:

    Based on my love for Dave Ramsey, I will let him explain why he calls it "fleecing" not "leasing" he thinks it's a horrible idea.  My husband and I have follewed his advice on buying the 2 year old cars in near perfect cndition and have been very happy. 

    Is leasing throwing your money away?

    Dear Dave,

    We have leased our last couple of vehicles and to me it seems like we?re just throwing our money away. At the end of the three-year term we have nothing. What is your take on buying new cars or leasing? What is the best way financially to go about getting a vehicle?

    Anna 
    Kankakee, Ill.

    Dear Anna,

    Well, to start with I?ve got to tell you that I?m a boy and I love cars. However, I have found as I run the numbers on cars that they are the largest purchase Americans make that goes down in value. We buy a larger purchase with our home, but typically it goes up in value. Kiplinger?s Personal Finance Magazine says that a new car will lose 60% of its value in the first four years. Well, that doesn?t work. Turning $30,000 into $11,000 is not a good plan. So financially speaking, and common sense agrees, if you?ll pay cash to buy a two-year-old car with very low miles in near perfect condition, you will let someone else take the bulk of the value loss. That is what the typical millionaire does. Very few millionaires lease cars ? or as we call it, fleecing a car ? because it is the worst deal on the car lot. Consumer Reports, Consumer Federation of America and Smart Money Magazine have all done articles on the ?fleece? and the fact that it?s a rip-off. It is good only for the dealership. It is a high rate of interest; of course the interest rate is never disclosed. 

    The bottom line is that you?re buying a new car that?s going down in value and you?re financing it expensively, but they offer a low monthly payment, which is all a lot of people look at. You?re almost renting your car and at the end you turn it in and you have nothing. So I would buy a two-year-old or older vehicle ? whatever I could get paying cash.
    Dave

    Yes great advice! Thanks linds!

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    imageMrs.Cooley2bee:

    Based on my love for Dave Ramsey, I will let him explain why he calls it "fleecing" not "leasing" he thinks it's a horrible idea.  My husband and I have follewed his advice on buying the 2 year old cars in near perfect cndition and have been very happy.  Also, I was going to trade my old car in when I bought my last used car at the lot.  They were going to offer me 800 bucks for the car and I was able to sell it in 2 weeks on craigslist for 2k.  So, selling your car vs trading it might get you some more cash too

    Although we aren't Ramsey followers, we do the same thing when purchasing our cars. In fact, we bought both of our current cars off someone else's lease and (at less than two years old and with very few miles, relatively speaking) paid less than half the sticker price of the new year models.  

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    We do the same thing- buy a 2-3 year old car with 40k or less (usually 25k miles) and are able to save a ton.  Usually half or more of the sticker.

    Most dealers offer a 100k warranty, whether it came at purchase or only goes to 60k miles- but you can upgrade to the 100k warranty for a fee.  We did this when we bought my car.  The original warranty expired at 60k miles so we extended it to a 100k or 10 years.  It only cost $1,000 for that warranty and the car had 30k miles when we bought it so it was more than worth it for us.

    Good luck deciding on a car! We went to carmax and test drove on the lot any/everything we were interested in.  We didn't buy from them, but their prices were too high.  It enabled us to immediately discern which cars we liked and which ones we didn't though!

    image Momma to Ms. C age 16 months and Mr. C age 3 months!
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    I was going to post Dave Ramsey's points on why leasing is a terrible thing but Mrs. Cooley beat me to it!  There are more cons to post if you need even more reasons as to why it's a bad financial move. PP's have already stated that buying a car that is 2 or 3 years old is your best bet. Good luck 
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    I haven't read many articles about it, but I can share my personal experience.

    Several years ago, I was young and wanted to buy a new car, and my dad (of all people!) actually advised me to lease a car (vs. buy).   I really really really wanted a new one, and I did end up leasing the car of my dreams -- for 5 years!  I knew I loved that car and I wanted to keep it a while.  Looking back now, I'm not sure why my dad advised me to do this -- he's usually fairly money savvy but apparently had blinders on while helping me car shop.

    As soon as I signed the contracts and drove away in my new car, I knew I had done the wrong thing.  You are limited to a low number of miles per year (over the life of the lease term) and there are strict rules about the condition the car must be in when you turn it back in.  I wasn't sure I was going to be able to keep my car in pristine condition for 5 years, much less stay under the miles that the contract stipulated.

    I loved that car so much that I ended up buying it at the end of the lease term, and drove it for 3 more years.  I cringe when I think how much I really paid for that car, good thing I loved it.

    I have always heard that if you plan to keep a car for a long time, or you drive the hell out of one, you should buy instead of leasing.

    Justin Thomas joined us on 8.4.07
    Tyler Anthony arrived on 9.21.09
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    I guess I'll be the odd one out and speak up about the benefits of leasing a car, even though I've never done it myself.

    It all depends on your needs/wants and whether or not they fit your budget. Cars are the worst "investment" you could ever make, so if saving money is your main priority, buy used. The value of a brand new car can depreciate up to $7,000 the minute you drive it off the lot.

    One of my customers experienced this when he drove his brand new Ford F150 home from the dealer and was hit head on by a drunk driver with no insurance. He had financed the vehicle through my bank, and I had to be the one to explain that he still had to pay $6500 for a loan on a totaled vehicle because the insurance wouldn't cover more than that. Bad investment.

    However, if you're the kind of person who likes having a new car every 2-5 years. If you don't put many miles on your vehicle and you don't want to fork out money anytime something goes wrong with the car, then leasing might be best for you. From what I've seen, there are some pretty fantastic deals on leases out there so it is possible that it's a good fit for you. 

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