topic Re: Car lease question in Community Chat

Car lease question

Elom — Sun, 07 May 2017 12:39:48 GMT

I have a Toyota that is leased and soon the lease will end. I need advice from anyone as I am really struggling with an issue.

It only has 24000 miles on it which is low mileage and I don't know if it is a wise decision to just keep it and finance the residual which is 16K or get another lease.

I believe the dealer is the winner no matter what I decide because the car doesn't have a scratch on it, low mileage. Any thoughts? Thanks.

Re: Car lease question

software — Sun, 07 May 2017 12:42:28 GMT

Instead of buying your current car, see about buying a new car. This is a good time to buy, the 2018s will be coming out & you may get a really good deal on a 2017

Whenever I went from a lease to a buy at the same dealership, I got a good deal on a new car. And they didn't ding me on mileage or wear&tear.

@Limbo4now wrote:
I have a Toyota that is leased and soon the lease will end. I need advice from anyone as I am really struggling with an issue.
It only has 24000 miles on it which is low mileage and I don't know if it is a wise decision to just keep it and finance the residual which is 16K or get another lease.
I believe the dealer is the winner no matter what I decide because the car doesn't have a scratch on it, low mileage. Any thoughts? Thanks.

Re: Car lease question

ECBG — Sun, 07 May 2017 12:48:51 GMT

It's best to get out from under those agreements as soon as you can. The longer you don't the extra cost just waits on you.

Re: Car lease question

151949 — Sun, 07 May 2017 12:50:43 GMT

I would google the blue book value on your car and see what it is worth. Probably the dealer will want more if they sell you your car now and you may want to back away from doing that. If you have that information you are in a good place to negiate with them about the price.Be informed when you go into the dealer.

Re: Car lease question

CelticCrafter — Sun, 07 May 2017 12:53:29 GMT

What year is it?

I might be just me but $16,000 seems like a lot for a used car.

Re: Car lease question

software — Sun, 07 May 2017 12:55:38 GMT

@CelticCrafter wrote:
What year is it?

I might be just me but $16,000 seems like a lot for a used car.

Depending on which Toyota she has, that could be correct.

Toyotas are expensive and hold their value

Re: Car lease question

gidgetgh — Sun, 07 May 2017 12:56:34 GMT

@Limbo4now wrote:
I have a Toyota that is leased and soon the lease will end. I need advice from anyone as I am really struggling with an issue.
It only has 24000 miles on it which is low mileage and I don't know if it is a wise decision to just keep it and finance the residual which is 16K or get another lease.
I believe the dealer is the winner no matter what I decide because the car doesn't have a scratch on it, low mileage. Any thoughts? Thanks.

@Elom- I might be the dissenting view here, but here goes. I'm not a fan of leasing.

You're just finishing up a lease, so you've been paying monthly.

You mention that maybe you should buy that car and finance the balance. More payments.

Or lease again. Yet more payments. Which, at the end of that lease, you'll be faced with the same decision again.

For ME, the payments have to stop at some point and I want something in return for my money. You keep paying and paying and paying and you have nothing but air at the end. If I'm going to make payments, then by gosh, I want a car at the end of the rainbow.

Otherwise, I might as well just go to Hertz and rent one. You're doing the same thing.

Re: Car lease question

esmeraldagooch — Sun, 07 May 2017 13:05:27 GMT

From Dave Ramsey

QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.

ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.

During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.

Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.

People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car

Re: Car lease question

Plaid Pants2 — Sun, 07 May 2017 13:18:38 GMT

@esmeraldagooch wrote:
From Dave Ramsey
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.
ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.
During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.
Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.
People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car

And this is precisly why I have always thought that leasing was a scam.

Some people just MUST have the leatest and greatest with all the bells and whistles, and it's an image thing. "Look at me! Look at what *I* am driving!"

With a lease, they nickle and dime you for "excessive wear and tear", which is subjective, and of course, it always favors the deaership.

Nope, pay cash, and you'll have something to show for it even if you have to finance it.

Re: Car lease question

Miranda1550 — Sun, 07 May 2017 13:19:15 GMT

@Elom

Leasing is a huge money maker for the dealers.

You pay their car payment. And at the end

of the lease you have nothing.

Re: Car lease question

CAcableGirl2 — Sun, 07 May 2017 13:19:47 GMT

I've leased and I've purchased both new and used cars. Since the lease is usually only for 3 years and if you have little miles on the vehicle, it might make sense for you to purchase it outright at the end of the lease. It really depends on what you can afford, the current value of the vehicle and how much the payments will be each month (and most importantly, for how long). If you return the vehicle, you then have to either lease another vehicle or purchase one. If you don't need a car, fine, just return it, but most likely, you will still need some sort of vehicle. If the residual is $16K, depending on the car, that might be a great price for a car only 3 years old. If you can afford to pay off the $16 with a low interest loan from your credit union in a couple of years then that would be what I would look at. Most new and even some used auto loans are at 5 years, so try to purchase it in 2-3 if you can affort the payments so the overall amount of time paying on the vehicle doesn't go out longer than it should.

If you decide to purchase a new car, then the payments start all over again, higher registration and insurance payments as well.

If the car has had little or no issues, the residual payment is less than the current market value of the car, and you are happy with the car, and can affort to payoff the $16K in 3 or less years...I would probably buy it.

Since you are the only one who knows what you can comfortably afford, sometimes leasing is a great option.

Re: Car lease question

millieshops — Sun, 07 May 2017 13:22:46 GMT

If you're making a straight math decision, you'll probably find out the wisest thing to do would be to turn the car in and drive a much cheaper car for a while so that you can accumulate some money to buy a better car!

But many big financial decisions are not straight math decisions - when I was selling real estate I sold plenty of houses that I would never have bought myself had I been in the financial condition of my buyers - and I know lots of people who pay to lease their cars because they want or need to be driving a newer or bigger car than they can buy outright. Part of the decision isn't just about the money.

Still - I'd do the math first so that I'd know why I was spending what I decide. How much would a similar new car cost, what's the monthly with the down payment I have and for how many years?

Also research funding the cost of your leased car and don't assume the dealer is the best place to do the financing - I always investigate financing even if I might pay cash just in case and I've never found dealer financing to be better than my credit union financing.

Re: Car lease question

SilleeMee — Sun, 07 May 2017 14:11:01 GMT

Sometimes it is not possible to purchase a leased vehicle for which a person has made a contract. This is called a "closed end lease". I don't know the OP circumstance so I can't say if it's possible to buy out the residual. Personally, I would find another car to buy with new financing options.

Re: Car lease question

151949 — Sun, 07 May 2017 14:34:48 GMT

For some people leasing a car is a better choice. In our case , my DH just has to have a new car every couple years. No matter how much he loves his old car - it is really a stretch to get him to wait the 3 years. So , we may as well lease. It's cheaper than buying new cars every couple years AND it forces him to wait the 3 years.

Re: Car lease question

Jaspersmom — Sun, 07 May 2017 14:53:08 GMT

@151949 wrote:
For some people leasing a car is a better choice. In our case , my DH just has to have a new car every couple years. No matter how much he loves his old car - it is really a stretch to get him to wait the 3 years. So , we may as well lease. It's cheaper than buying new cars every couple years AND it forces him to wait the 3 years.

Why does someone have to lease just to have a new car every three years? Couldn't someone purchase a car, trade it in at the end of three years and start all over again? I guess I'd have to sit down and compare the math, but buying even with a loan might still be more cost effective.

https://cars.usnews.com/cars-trucks/buying-vs-leasing

Re: Car lease question

Plaid Pants2 — Sun, 07 May 2017 14:59:38 GMT

@Jaspersmom wrote:
@151949 wrote:
For some people leasing a car is a better choice. In our case , my DH just has to have a new car every couple years. No matter how much he loves his old car - it is really a stretch to get him to wait the 3 years. So , we may as well lease. It's cheaper than buying new cars every couple years AND it forces him to wait the 3 years.
Why does someone have to lease just to have a new car every three years? Couldn't someone purchase a car, trade it in at the end of three years and start all over again? I guess I'd have to sit down and compare the math, but buying even with a loan might still be more cost effective.

https://cars.usnews.com/cars-trucks/buying-vs-leasing

Right, because leasing = renting.

Might as well as go down to Avis or Enterprise, and rent a car from them for three years.

It equalls to the same thing.

Re: Car lease question

151949 — Sun, 07 May 2017 15:02:27 GMT

@Jaspersmom wrote:
@151949 wrote:
For some people leasing a car is a better choice. In our case , my DH just has to have a new car every couple years. No matter how much he loves his old car - it is really a stretch to get him to wait the 3 years. So , we may as well lease. It's cheaper than buying new cars every couple years AND it forces him to wait the 3 years.
Why does someone have to lease just to have a new car every three years? Couldn't someone purchase a car, trade it in at the end of three years and start all over again? I guess I'd have to sit down and compare the math, but buying even with a loan might still be more cost effective.

https://cars.usnews.com/cars-trucks/buying-vs-leasing

We did compare - and found we are better off to lease. Once I got my husband to be honest and admit he is going to buy a new car every 3 years at least.

Re: Car lease question

Plaid Pants2 — Sun, 07 May 2017 15:06:21 GMT

I would NEVER lease a car.

Why?

Because you have nothing to show for it at the end of the contract, except money out of your pocket.

It doesn't make any sense to keep leasing a new car every few years, because you are making monthly payments that will never end.

Wouldn't you rather have that money in your pocket?

I know that I sure would.

I am financing my Toyota.

Once it is paid off, I have more money in my pocket, and a car to show for it.

I win.

With a lease, the dealer wins, and the customer looses, in every which way possible.

Re: Car lease question

Pooky1 — Sun, 07 May 2017 15:12:49 GMT

i agree with you 100 percent. i never want to be making car payments forever. we were thrilled when they were payed off.

Re: Car lease question

sunshine45 — Sun, 07 May 2017 15:16:32 GMT

i agree with those that say that leasing a car is not a good idea.

so much better to buy a new car and then sell it when you get tired of it.....or better yet, buy a newer USED car and use it until you get tired of it and then sell it. i also would never trade a car in.

https://www.moneyunder30.com/why-you-should-never-lease-a-car