Can someone explain leasing to me ..

tina623 · September 2010

Dh and I bought our current car brand new 8 years ago. They engine light is always coming on and it is too stressful (because it's our only car) so we need to get another car. My co worker told me leasing his cheaper and every 3 years or so you can trade it for a new one. Does it have to be traded to the same place? Is it cheaper? Does it effect insurance (make it policy higher)? Anything else you can share? Thanks.

LisaMarisa · September 2010

With a lease you never earn equity in your car, it is basically renting long-term. When you trade it in, you are just returning the car you have (hopefully without having to pay extra for going over on mileage) and choosing a new one to start paying for.

It works for some people - if you dont drive a lot and you arent concerned about earning equity in the car.

I've never leased, just looked into it, so maybe someone else can give you more detailed info.

tina623 · September 2010

In 8 years we've put 70,000 miles on our car. I've been told that's not alot.

MichelleL1118 · September 2010

At least for me, leasing is a huge increase in the insurance, which is part of the reason we don't lease. If you have good credit, it's also not necessarily cheaper, since so many dealers are offering 0-3% interest financing right now. If you're not the kind of person who trades in cars every 2-3 years, and it doesn't sound like you are, then leasing probably won't benefit you that much.

Oh, and leasing often requires a lot more cash down than buying does, which doesn't work well for a lot of people.

qtpa2t · September 2010

Leasing = renting. As PP said, you never actually own the car. When you "trade" it in, you're essentially just returning it, and there's a lot of fine print to be aware of. It's a good deal if you are able to deduct your car as a business expense or if you're someone who will change cars every couple of years because you like to have the newest bells and whistles.

GypsyEsq · September 2010

That's not a lot. I also don't agree with the pp characterization of even the possibility of earning "equity" in a car. But I think that in some circumstances leasing makes a lot of sense. For one, payments are often lower. That can help. You are always in a new car, thus maintenance costs are less. Where it hurts people are when a $30,000 millionaire leases a BMW -- i.e., when you lease a car because you can't afford to buy it. There you will definitely end up owing far more at the end of a lease if you want to convert to buy and you'd be spending far more than you should be anyway on a payment.

But where you're just leasing a car you'd buy anyway you just want the protection of dealer warranty and to know that you can always be in a new car I think it can make a lot of sense. Also - full disclosure - I've leased my last two cars. I purchased my current one at the end of my lease and my payments went down b/c the residual value of the car and my residual "balloon" payment were nearly equal. The result for me was that I spread out my down payment over 24 months. Not a bad result at all.

browneyedgrl4282 · September 2010

my first two cars we least (i was 17 and 20 when i leased each car) and my payments we very low and did not put much down (i think 1000 each time). I bought out the 2nd lease because i had 36K miles allowed on the lease and only 20K. I had that car for 5 years until I got my truck which I ended up buying out right brand new because of settlement from an accident i was in ( i was hit by drunk driver and this was civil suit that took years). My van again was purchased out right.

Next car we will probably lease because we don't put a lot of miles on cars. Just make sure you read the fine print. Especially since we need a mini van or large SUV

sommerrayne · September 2010

Your payments are marginally lower because of the larger amount you put down. That's why.

Furthermore, they ding you (charge you) for every piece of "damage" (or perceived damage) when you turn it in. Overage is HUGE (you get about 10K miles a year for "free" and over that is anywhere from 40-80+ cents a mile).

You still are responsible for maintenence. I had to replace an alternator in one lease (a mere 3 mo before return), I got charged 1K for a chip in the windsheild because that's their estimate to replace it (and they wouldn't let me replace it since I'd turned it in), Was charged 200 per door ding (from other cars hitting me in parking lots), around 700 for a paint rub on the side mirror, etc....point is, they do take into consideration upholstry wear and tear but not anything very significant and with kids - there's NO WAY I would lease. I knew the door dings and paint rub would cost me but honestly, I didn't even know the chip in the windsheild existed (it was super high up and not in the line of sight) but I didn't think it would cost me THOUSANDS to give back a car for nothing in return. It is NOT cheaper no matter how you slice that pie.

here4u · September 2010

We just leased our Sienna. First time I've ever leased. Yes, they do require you to pay more up front. We didn't have what they were asking for so we just put down what we could afford, and the rest went into the monthly payment. The insurance is a lil more b/c you have to get full coverage. I have Geico and it was only $100 more to add the van onto the current policy. My old car is already paid off, and DH uses it now. We also got a theft protection package in the unlikely event that the car gets stolen, we can go back to the dealership and they will give us a new car, without us paying a difference. We got a 3 year lease 10,000 miles/year. DH would like to keep it after the 3 years instead of trading it in, but we'll see when the time comes. I'm not sure if the payments stay the same at that point though.

tina623 · September 2010

Thank you! We aren't doing anything until next year and you've given me enough to start with. Thanks again.

fallbride110406 · September 2010

I guess I'm going to be the only one that's really surprised at what people are saying. We lease and never, ever put money down. We always only pay the plate transfer fee ($50-70ish) and maybe a $200 security deposit. Most of the time they waive the first month's payment, if they don't we pay that too.

Leasing has been, on average, $100 less a month per car for us than buying. And we have excellent credit (top 10%) so we qualify for the low interest loans. We always do 2-3 year leases and always make sure that we have a full warranty that covers the car for the entire lease period. Neither of us has ever gotten charged for dings or anything and the last car I turned in had a 12" round stain on the back seat from something spilling and my husband's car had a dented/scratched rear bumper from when someone backed into him. They called it normal wear and tear or otherwise no-cost (both were GM cars).

Our insurance hasn't gone up at all, but it depends on what your state requires vs what the leasing company requires you to carry. In MI you have to carry PLPD (property loss/property damage, basically if you're in an accident, you're screwed) but every lease company we've used requires you to also carry collision (you pay your deductible to fix the car). So if you only had PLPD, yeah it would be more expensive.

I'm just surprised at how negatively leasing is viewed. We love having a warrantied car with a lower payment that we get to exchange for the newest model every year. The 3 cars that my husband and I bought outright ended up costing us more than they were worth by the time we got rid of them, a big reason why we switched to leasing. We only lease GM though (my husband's family is all GM) so maybe they're just easier to lease with.

browneyedgrl4282 · September 2010

fallbride110406:

I guess I'm going to be the only one that's really surprised at what people are saying. We lease and never, ever put money down. We always only pay the plate transfer fee ($50-70ish) and maybe a $200 security deposit. Most of the time they waive the first month's payment, if they don't we pay that too.

Our insurance hasn't gone up at all, but it depends on what your state requires vs what the leasing company requires you to carry.

I am little puzzled too beacuse i only put 1K and it wasn't required that was my choice. That was my first lease. The 2nd one i only put the security deposit. I never was charged for any kind of damage. My insurance not any higher either. When you finance a car you have to full coverage as well. the only time my insurance was lower was when I bought the brand new car out right without any financing. I know most people don't walk into a dealer with over 20K to buy a car unless it was settlement type think like I did.

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Can someone explain leasing to me ..

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