Go on and lease those cars, I'll take 'em off your hands when you're done.
Do the math over the 40 years you'll spend behind the wheel, the leaser ends up paying a LOT more to drive a car for those forty years than someone who buys even new cars. You must work for a dealership to be shoveling that BS. Dealers like to lease you vehicles for a reason that has nothing to do with your financial well being.
With all kinds of 0-2% financing available ATM, there's just no way you can justify a lease. GM has 60 months ZERO PERCENT financing on all kinds of models right now, that kills any lease dead, if you want something higher end, go to SAAB, same deal as the rest of the GM family.
You mention SAAB, well the 9-3 Sport Sedan also has a special on a lease. For 3 years I can pay $299 to drive that SAAB or pay $420 for 5 years to own it.
In those 3 years its still under warranty and when the 3 years is up I just take it back and I'm done with it. No hassle of trying to sell it and no hassle of worrying about any maintenance at all. I can either get a NEWER SAAB, a more expensive car or a less expensive car.
I KNOW (as does anyone who leases) that I'm paying more in the end (who freaking cares about 40 years down the road anyway) but to me and anyone else who leases it doesn't matter because its worth it. Its worth it to pay less now to drive a nicer car without the worries. Its worth it to pay less now to know I'm not stuck with this car for more than 3 years.
I know for sure I'll never have to drop $1000 bucks or more to ever fix anything on my car (unless of course its an accident). You don't have that security with a purchase.
So go ahead and keep picking up my left overs . You don't even want to know some of the things that went on in the cars I drove in college...hehehe. But I guess if you like using what other people have gotten rid of thats your preference.
I really can't see justifying a purchase. I don't want to put out the extra money up front for a lesser car and more headaches.
So go ahead and keep picking up my left overs . You don't even want to know some of the things that went on in the cars I drove in college...hehehe.
Stay in hotels much? hehe... Nothing a steam cleaner can't fix, versus you can only turn the matress once before there's no point in it.
As for your theory, choose the right models and they practically sell themselves after the 3-4 year period is up.
Cars are not as delicate as you imagine. There are way too many models on the road today that will go for 10 years with minimal maintainance, even with pretty bad neglect!
I like cars that have come back from leasing. Pick em up, drive em, after 3-5 years you sell them and have driven a perfectly reliable car for a couple of thousand dollars, mebbe a thousand or so per year, versus 300-500 per month.
Its not like the Jetta is a terrible car or anything. I like mine a lot...but I guess its still not an Audi Sorry man.
Do you mind me asking what happened to hurt your financial situation?
Eh yeah...a 1999.5 A4 2.8 Quattro to be specific.
Nice ride but when the lease was up, VW Financing wasn't prepared to give me an extended warranty (even if I paid for it) because I got into a somewhat major accident. It was all fixed up...but they still refused...so I decided to just give it back.
I have my own business and things since 9-11 have really slowed down. So I need something reliable for a couple of years until I get back on my feet. ( I realize the Jetta is hardly what you might call reliable...but at least it's more fun to drive than a Civic).
For the image-obsessed who either have too much money than they know what to do with or like to live above their means then leasing is great. You get to rent what you can't buy and look richer than you are.
Quote:
A car depreciates so quickly that after a five year loan, you won't have much left anyway.
You'll have the entire freaking car left.
"But who wants a 5-year-old car? pfff, I have neighbors to impress and various personal inadequacies to make up for!"
Well its a matter of opinion and preference. I wouldn't say that leasing is for everyone, but you can't just outright say its a waste of money and stupid because thats just plain wrong (not that you're saying that, but others are).
I really would never want to drive a car with 200k miles on it! In fact I don't think I've even had one with over 50k miles on it.
If you're worried about your financial situation changing you're only in that lease for 3 years but the car purchase will typically be 5 years. So the same thing could happen in your 2nd year of purchasing your car. You can't really worry about things like that. You shouldn't get in over your head in the first place.
They say that your debt, car loans, and other expenses such as housing expenses should not be more than about 30-40% of your gross income. Of course if you have no debt except a car you shouldn't be spending 40% of your salary on a car alone. If that were the case I'd be driving a Mercedes S600!!
Instead I lease a nice VW Jetta. $260 a month and if I lost my job tomorrow I'd still be able to afford it on my Wife's salary alone. My lease will be up next June and since my financial situation has improved I plan on upgrading to an Audi. If our situation worsens during the lease we'll struggle for a little while and then just downgrade...but hopefully that won't happen.
You're funny.
It isn't a matter of preference. Dollars and cents pretty much don't lie. The only reason people believe a personal lease is okay is because they don't understand how money works. You buy the line they feed you because you want to. I have NEVER had a car cost as much to repair yearly as I see posted in various resources. If it is a bad year, I might spend $400 repairing my car.
As for worrying about a financial situation changing, limited thinking gets you limited results. Why would I have to worry about the size of my payment with a lost job if I own the vehicle outright?
Likewise consider what you mention about debt ratios. You have bought into it hook, line and sinker. Are those ratios that the rich would use? Are the middle or upper limit for middle class? Are they for one or two incomes? Do you know and do you know the motivations of those who would tell them to you? Middle class assumptions keep you middle class and poor assumptions keep you poor.
When you lease a car, you don't own it, you are borrowing it. More amazingly it counts against your own credit score and debt ratios. You don't even get to list it as an asset.
The car company gets to count the car as an asset. They get to declare your income as theirs.
Have you thought about any other assumptions you make financially? Mutual funds, diversification, 30 year mortgages, 401k's, etc? There is a reason all these folks keep ending up crying poor on the news.
Right on. It doesn't make any sort of sense. Ask a finacial planner. Rule number one, don't spend money when you don't have to. Lease equals money you don't have to spend. Either you can afford that car, or you can't, renting "lifestyle" accoutrements will only get you into trouble.
Okay, I'll have to look this up, but a few years ago was an article about the spending habits of millionaires and one thing they had in common: drove used cars/old cars that were paid for (no loans/no leases).
Tim Reid ( of Franks place) said in an interview that the first thing you do, if you are starting a business is to own your car. Why? So that you control your cash flow. Better to have a one time $1200 job than 5 years of $300 cash outflow.
First, we'll have the debate about financing a car. No one I know, being middle class, has the money to buy a decent car for cash. Any decent used car is going to cost AT LEAST $10,000. Anything less than that and we are looking at vehicles with 80K/100K plus on them. I don't buy your "but my repairs are not that bad!" argument. Cars with this mileage, though perhaps bettert than years ago, are prone to problems. Regardless of your personal experiences, dropping $2K into a single repair is not uncommon. And, to get that car, you has to come up with cold, hard cash. Perhaps $5K to $8K, we can assume. You still have to save the monthly amortization to come up with your NEXT downpayment.
So, financing has to be an assumption.
Quote:
It isn't a matter of preference. Dollars and cents pretty much don't lie. The only reason people believe a personal lease is okay is because they don't understand how money works.
Wrong. With a lease one has fixed cost. That is absolutely NOT so with an older vehicle/used car.
Quote:
When you lease a car, you don't own it, you are borrowing it. More amazingly it counts against your own credit score and debt ratios. You don't even get to list it as an asset.
Not really true. An account which is paid on time will actually help one's credit. An inexpensive lease can be a great way for a young person to build credit. Though it is listed as a debt, so is buying a new car. Most people that are going to run a credit check on you are not going to care about material assets....they are going to care about timely payment. The exception, of course, would be a mortgage. The other thing about a car is the aformentoned depreciation. A house listed as a material asset isn't going to lose 70% of its value in 5 years. A car will.
I think it is some of you who don;t understand how money and credit works. Debt is not always bad. My good credit completely overrode even my INCOME when I applied for my mortgage. My income ratio was a little high (income usage percentage), but I was told that since I had good credit the rules were bent quite a bit.
Quote:
For the image-obsessed who either have too much money than they know what to do with or like to live above their means then leasing is great. You get to rent what you can't buy and look richer than you are.
quote:
A car depreciates so quickly that after a five year loan, you won't have much left anyway.
You'll have the entire freaking car left.
"But who wants a 5-year-old car? pfff, I have neighbors to impress and various personal inadequacies to make up for!"
You'll have to do better than that. You can't just dismiss anyone who leases as either shallow or stupid.
Okay, I'll have to look this up, but a few years ago was an article about the spending habits of millionaires and one thing they had in common: drove used cars/old cars that were paid for (no loans/no leases).
It was in a book called The Millionaire Mind and was published along with The Millionaire Nextdoor.
You guys are doing a piss poor job of convincing me.
Sondjata,
You obviously didn't read what I wrote. I won't have to pay for :
Tires, Breaks, Plugs or even OIL! VW Jetta warranties are for 50k miles and the oil changes are included for all 50k miles! By the time I hit 50k the lease is up and I'm on to the next car with the new warranty.
So enjoy sitting at Pep Boys waiting for all those wonderful things to get done. I won't need to get them replaced and even if I did I wouldn't have to pay for them.
Matsu.....I was just kidding about the used thing. Of course I stay in hotels and I'm sure they do a much worse job of cleaning them then the dealership does with my car. You'd never even know there was a horrible stain in that back seat....errr...uhh...nevermind. hehe
I like how you guys automatically think wanting to drive a nice car makes you a snob or that it means you're trying to make up for "various personal inadequacies" - come on groverat, you're smarter than that. You know not everyone is like that.
I'd rather drive a safe, well engineered stylish German car for $300 a month than own something I might have to worry about later -- and thats because "I" want to drive that car, I don't give a rats ass what Mr. Jones next door does. Thats just my preference and I've been doing it since I was 17 without ever going poor or being in a finacial crunch. Yeah I think I know how money works....
First, we'll have the debate about financing a car. No one I know, being middle class, has the money to buy a decent car for cash. Any decent used car is going to cost AT LEAST $10,000. Anything less than that and we are looking at vehicles with 80K/100K plus on them. I don't buy your "but my repairs are not that bad!" argument. Cars with this mileage, though perhaps bettert than years ago, are prone to problems. Regardless of your personal experiences, dropping $2K into a single repair is not uncommon. And, to get that car, you has to come up with cold, hard cash. Perhaps $5K to $8K, we can assume. You still have to save the monthly amortization to come up with your NEXT downpayment.
So, financing has to be an assumption.
Wrong. With a lease one has fixed cost. That is absolutely NOT so with an older vehicle/used car.
Not really true. An account which is paid on time will actually help one's credit. An inexpensive lease can be a great way for a young person to build credit. Though it is listed as a debt, so is buying a new car. Most people that are going to run a credit check on you are not going to care about material assets....they are going to care about timely payment. The exception, of course, would be a mortgage. The other thing about a car is the aformentoned depreciation. A house listed as a material asset isn't going to lose 70% of its value in 5 years. A car will.
I think it is some of you who don;t understand how money and credit works. Debt is not always bad. My good credit completely overrode even my INCOME when I applied for my mortgage. My income ratio was a little high (income usage percentage), but I was told that since I had good credit the rules were bent quite a bit.
You'll have to do better than that. You can't just dismiss anyone who leases as either shallow or stupid.
SDW2001,
Look your assumptions are yours and you are welcome to work with them. I question alot of assumptions and find very little to support most of them. Most cars that are not beater-econoboxes (Geometro for example) hold up well and need infrequent repairs. You don't have to be mechanical, but when you know someone who is, you just ask them who they would recommend and that has worked out best for me.
As for dropping $2000 into a single repair, I have never in my LIFE dropped $2000 into a repair. Most repairs I have dealt with are of the water pump, alternator, type variety. Most engines don't fail dramatically but rather something fails and stupid people who know nothing about cars continue to drive them until it becomes major. So it is, gee my water pump bearing went bad, but I put some water in it and drove to work, and bam blew the head gasket. Also as mentioned by Sond, all cars need brake pads, belts, tires, fluids, etc. You don't escape those costs.
Again with the assumptions, cold hard cash is not so hard to come up with when you live within your means and aren't paying extra for everything via financing.
My maxim for this is that $50k will feel like $75k when you don't use credit and $50k will feel like $25k when you do.
Most people blow more money than they care to admit. Whether it was good or bad, being a teacher I learned to budget early because I only get paid once a month. I mean when you screw up and the next check isn't coming for WEEKS, you learn to be careful. Lots of folks get paid every two weeks and if there are two incomes, they might even get paid on alternating weeks. They never get use to thinking more than a week/2 weeks ahead.
I have gone through my friends finances and literally found hundreds of dollars of savings per MONTH without even trying hard. Sack lunch instead of eating out 3-5 times a week, tell Starbucks to take a hike, make your own snacks instead of buying little prepackaged ones, etc.
For however much you think you need to live on, I assure you someone else is living on less. Also anyone can find a way to live on less the second they lose their job or have some other financial hardship. You simply choose not to make those choices now because you don't have to. If you pretended you had a 20% pay cut, you likely could find a way to make your current life work. You would just go to the library instead of Barnes and Noble. You would wait until the movie came out on network television instead of HBO, PPV or the theater. You could play board games and enjoy a picnic at the park instead of going to some high dollar amusement park/mall.
When you get this cold, hard cash in your hands and become the master of it, you will be amazed how much power it has over others when they are selling. They start thinking about how much they need it, and have to be instantly gratified now. Their mind/heart start racing, pre-spending it, imagining it already in their hands and pockets. Most people are selling something because they want to buy something else.
I kid you not, the last big ticket thing I bought was about 2 weeks ago. A very nice 19 foot boat with inboard/outboard. We are going to use it for about a month at the river this summer. The initial asking price was $3300. I started with, "Well, what is your cash price?" Soon we were already down to $2500. I offered $2000 cash. He couldn't take it. I said (and this is always my favorite part) "Well, why don't I go get dinner and you can think about it. I'll double check to make sure my offer is fair."
He called my cell 25 minutes later and we agreed to $2300. His final words were, and I kid you not, "We can find the other $200 somewhere else."
I don't know what he was buying for $2500, but the point was that thinking about cash on hand made him cave. It happens pretty much everytime when you are dealing with people who are not use to having cash on hand. Everything is financing and everything is terms so whatever will get them to their terms is just fine.
As for the credit check items you mentioned. I do believe, and I say this nicely, that you have not questioned common assumptions about credit. I ran 60+ credit checks last year for my units/houses that I rent out. When you run a credit check it shows the monthly payment, but it also shows the total debt, type of debt, ratio, job history, prior addresses, etc. Almost all of these things can change your chances of getting a loan.
I understand that not all debt is bad. Student loans, mortgages (reasonable ones that are payable by one salary), and business investment loans are good credit. Stock leveraging, credit cards, bank loans, cash-out refi's for consumer goods (or even most home improvements), car loans, and pretty much any consumer electronic financing are all bad credit in my book.
Now when it comes to mortgages, I have a little experience her. For better or worse I have 5 of them. They will find a way to finance just about anyone nowadays, it simply matters how much you bring down, points you pay, and interest you will accept. If you were right on the edge of qualifying, then why advocate a car payment? How much easier would your qualifying have been if that wasn't part of your monthly debt load?
Then again we get to the other areas. Did you have to pay extra points/fees to get the rate you wanted? Did you have to come in with more down? Did you have to get mortgage insurance? (PMI)
Do we start to see how $50k feels like $25k?
BTW, please take any of this personal. You mentioned some information and I just asked you to question a few assumptions about it. I hope you don't feel it was an attack because it wasn't meant as such. I did volunteer I have 5 mortgages.
A car with 50,000 miles hasn't even seen 1/4th of its life.
Willoughby says "After 50,000 miles I'm in a new car" as if that's necessarily a positive. A car is a conveyance, I guess I just don't care as much.
Sorry, but leasing a car doesn't make sense logically. It's silly materialism. I'm not against silly materialism but don't try to spin it like it makes any reasonable sense, it's insulting.
Just say "I want to have a new car all the time!" and leave it alone.
I'm happy to buy leased cars. Spend the rest of your life renting, I'll own my ride and drive it until it is dead.
Most leases do not inlcude such things as oil changes, tune ups or tire changes.
Unless you drive like a granny..no way you're tires will last you 'till 50k. Same with brakes. Brakes, Clutches and the like are items that get worn depending on the skill level of the driver. Most dealerships are not going to warrantee those items. Even BMW USA only offers regular maintenance. And if you know a dealer that will cover all those things then by all means take it.
But back to my original cost analysis: There are only two things on a vehicle that will set you back over 1G. Engine and transmission. In the long haul, if one buys or leases a decent German vehicle you will pay less over that time for a used one than a new one. No if's, and's, buts or maybe's about it. Furthermore I do most "scheduled" mentenance myself. Wich means I that I save $75/hour labour rates on most decent shoppes since I only pay for parts. I figured that my unused free time is better spent doing those things than my cash going to a dealer for his time on the clock.
I agree that most middle class families do not have the cash to plunk down a nice down payment for a finance ( or increasiningly leases) But if one leases a car for 8 years (two leases back to back) you can spend $25,000 easy and have absolutely no equity in the vehicle. whereas if you bought used and kept it well maintained. you'd spend at least half that amoung over the same 8 years and you could still wring out a few thousand bucks for it (depending on what you have).
But hey, it all comes down to what you want to drive and what you feel comfortable in. But let's not fool ourselves into thinking that it is cheaper to buy new. The math does not support that.
A car with 50,000 miles hasn't even seen 1/4th of its life.
Willoughby says "After 50,000 miles I'm in a new car" as if that's necessarily a positive. A car is a conveyance, I guess I just don't care as much.
Sorry, but leasing a car doesn't make sense logically. It's silly materialism. I'm not against silly materialism but don't try to spin it like it makes any reasonable sense, it's insulting.
Just say "I want to have a new car all the time!" and leave it alone.
I'm happy to buy leased cars. Spend the rest of your life renting, I'll own my ride and drive it until it is dead.
I never want to own a car. I don't want to deal with the hassle. I don't feel like driving the same thing for 5 years. That isn't silly materialism, its A.D.D or something
Since I really don't care to own a car, work on it, maintain it, worry about it ever breaking down, or trying to sell it/junk it what other option is there? Leasing is perfect. It does make reasonable sense for someone who doesn't know the difference between a timing belt and a spark plug.
Especially if you can afford it, why not? $300 bucks a month is not a big deal and I never have to worry about anything with the car - that makes reasonable sense to me.
Lets look at it over a 10 year period.
Lease - $36000 (120 x $300)(at least 3 cars, going on 4th - all new)
Purchase - $25200 (60 x $420 - 5 year finance). At the end of 10 years you've got a car you paid $25200 for which probably isn't worth half that and now has probably 120,000 miles on it, if not more.
Now without even counting any maintenance (which there WILL be for the 10 year old car) this looks like a big difference but divided out over 10 years the Leasee is only paying $1080 more per year to have a brand new car with no maintenace worries. Thats $90 a month.
Yes its more money, yes its not for everyone. Especially if you like fixing cars or having that extra 90 a month. Unreasonable, NO.
And some leases DO include oil changes. Mercedes for example.
Its not about materialism. Its about piece of mind, comfort and convenience. All of which is worth $90 extra a month to me. But thats just me apparently.
Here's a good analogy. I would never consider buying a desktop PC. It is MUCH MUCH cheaper to build one yourself. The problem is you get seperate warranties for each part and have to do all maintenance/repairs/fixes yourself. If something goes wrong when you're putting the parts together, you're SOL.
But for me, this isn't a big deal. I love putting computers together and I know what I'm doing. I'm pretty good at it too.
So is it for everyone because its cheaper? Of course not.
My brother-in-law doesn't know the first thing about computers. He can barely turn it on. He basically just uses it to surf the web (probably for porn). So in no way is the cheaper route better for him. Instead he purchased a Dell which of course costs more but he gets their tech support and warranties and doesn't have to worry about taking care of it himself - especially since he's too busy always fixing his car
I edited this because it seemed like I was flaming you....
First, I understand credit and cash management. I also live within my means. I try not to finance things unless there is a good reason. I think you may be a little misinformed on what constitutes "good" or even "great" credit today.
Here's the thing: MOST people need to finance a car. Period. Any car that most people could afford not to finance (pay cash for) is going to have very high mileage. If you haven't dropped $2K on a repair, then please go out and buy a lottery ticket RIGHT now. It's is not uncommon at all...even for cars with less than 80,000 miles on them.
goverat:
You own about 30% of what you paid at the end of the loan. And, you've been paying a higher monthly payment for a longer term.
I'm just saying that leasing is a nice option for people that understand it. I would be doing it again next time, but I'd like to put more miles on it.
Comments
Originally posted by Matsu
Go on and lease those cars, I'll take 'em off your hands when you're done.
Do the math over the 40 years you'll spend behind the wheel, the leaser ends up paying a LOT more to drive a car for those forty years than someone who buys even new cars. You must work for a dealership to be shoveling that BS. Dealers like to lease you vehicles for a reason that has nothing to do with your financial well being.
With all kinds of 0-2% financing available ATM, there's just no way you can justify a lease. GM has 60 months ZERO PERCENT financing on all kinds of models right now, that kills any lease dead, if you want something higher end, go to SAAB, same deal as the rest of the GM family.
You mention SAAB, well the 9-3 Sport Sedan also has a special on a lease. For 3 years I can pay $299 to drive that SAAB or pay $420 for 5 years to own it.
In those 3 years its still under warranty and when the 3 years is up I just take it back and I'm done with it. No hassle of trying to sell it and no hassle of worrying about any maintenance at all. I can either get a NEWER SAAB, a more expensive car or a less expensive car.
I KNOW (as does anyone who leases) that I'm paying more in the end (who freaking cares about 40 years down the road anyway) but to me and anyone else who leases it doesn't matter because its worth it. Its worth it to pay less now to drive a nicer car without the worries. Its worth it to pay less now to know I'm not stuck with this car for more than 3 years.
I know for sure I'll never have to drop $1000 bucks or more to ever fix anything on my car (unless of course its an accident). You don't have that security with a purchase.
So go ahead and keep picking up my left overs
I really can't see justifying a purchase. I don't want to put out the extra money up front for a lesser car and more headaches.
Originally posted by Matsu
Oh, and the cars from Japan inc are so much more inspiring? Please. A little more competent mebbe, but nothing to get excited about.
not just limited to the japanese but...
better designs
better engineering
better quality
better service
better resale value
in other words, better experience.
Originally posted by Willoughby
So go ahead and keep picking up my left overs
Stay in hotels much? hehe... Nothing a steam cleaner can't fix, versus you can only turn the matress once before there's no point in it.
As for your theory, choose the right models and they practically sell themselves after the 3-4 year period is up.
Cars are not as delicate as you imagine. There are way too many models on the road today that will go for 10 years with minimal maintainance, even with pretty bad neglect!
I like cars that have come back from leasing. Pick em up, drive em, after 3-5 years you sell them and have driven a perfectly reliable car for a couple of thousand dollars, mebbe a thousand or so per year, versus 300-500 per month.
Originally posted by Willoughby
D'oh!
Were you leasing the Audi as well?
Its not like the Jetta is a terrible car or anything. I like mine a lot...but I guess its still not an Audi
Do you mind me asking what happened to hurt your financial situation?
Eh yeah...a 1999.5 A4 2.8 Quattro to be specific.
Nice ride but when the lease was up, VW Financing wasn't prepared to give me an extended warranty (even if I paid for it) because I got into a somewhat major accident. It was all fixed up...but they still refused...so I decided to just give it back.
I have my own business and things since 9-11 have really slowed down. So I need something reliable for a couple of years until I get back on my feet. ( I realize the Jetta is hardly what you might call reliable...but at least it's more fun to drive than a Civic).
A car depreciates so quickly that after a five year loan, you won't have much left anyway.
You'll have the entire freaking car left.
"But who wants a 5-year-old car? pfff, I have neighbors to impress and various personal inadequacies to make up for!"
I read somewhere that you should "buy the most expensive home you can afford, and buy the least expensive vehicle you need". Seems to be a smart idea.
Originally posted by Willoughby
Well its a matter of opinion and preference. I wouldn't say that leasing is for everyone, but you can't just outright say its a waste of money and stupid because thats just plain wrong (not that you're saying that, but others are).
I really would never want to drive a car with 200k miles on it!
If you're worried about your financial situation changing you're only in that lease for 3 years but the car purchase will typically be 5 years. So the same thing could happen in your 2nd year of purchasing your car. You can't really worry about things like that. You shouldn't get in over your head in the first place.
They say that your debt, car loans, and other expenses such as housing expenses should not be more than about 30-40% of your gross income. Of course if you have no debt except a car you shouldn't be spending 40% of your salary on a car alone. If that were the case I'd be driving a Mercedes S600!!
Instead I lease a nice VW Jetta. $260 a month and if I lost my job tomorrow I'd still be able to afford it on my Wife's salary alone. My lease will be up next June and since my financial situation has improved I plan on upgrading to an Audi.
It isn't a matter of preference. Dollars and cents pretty much don't lie. The only reason people believe a personal lease is okay is because they don't understand how money works. You buy the line they feed you because you want to. I have NEVER had a car cost as much to repair yearly as I see posted in various resources. If it is a bad year, I might spend $400 repairing my car.
As for worrying about a financial situation changing, limited thinking gets you limited results. Why would I have to worry about the size of my payment with a lost job if I own the vehicle outright?
Likewise consider what you mention about debt ratios. You have bought into it hook, line and sinker. Are those ratios that the rich would use? Are the middle or upper limit for middle class? Are they for one or two incomes? Do you know and do you know the motivations of those who would tell them to you? Middle class assumptions keep you middle class and poor assumptions keep you poor.
When you lease a car, you don't own it, you are borrowing it. More amazingly it counts against your own credit score and debt ratios. You don't even get to list it as an asset.
The car company gets to count the car as an asset. They get to declare your income as theirs.
Have you thought about any other assumptions you make financially? Mutual funds, diversification, 30 year mortgages, 401k's, etc? There is a reason all these folks keep ending up crying poor on the news.
Nick
you: ha haa..I got a lease...$300 this month.
next month....
me: nothin'
you: $300
next month:
me: nothin'
you: $300
next month:
me: oil change
you: $300 + oil change
next month:
me: spark plugs, wires,
you: $300 + plugs and wires ( unless you like to let 'em stay)
next month:
me: nothin'
you: $300
Next year:
me: $ new tires $500
you $300 + new tires ($500) = $800
next month:
me: Brakes
you: $300 + new brakes ( hope the rotors ain't get cut)
next month:
me: nothin'
you: $300
end of lease:
me: nothin'
or buy a second set of wheels
you: HOW MUCH PER MILE??????????????!!!!
or
you: fat baloon payment
I really disagree with you here.
First, we'll have the debate about financing a car. No one I know, being middle class, has the money to buy a decent car for cash. Any decent used car is going to cost AT LEAST $10,000. Anything less than that and we are looking at vehicles with 80K/100K plus on them. I don't buy your "but my repairs are not that bad!" argument. Cars with this mileage, though perhaps bettert than years ago, are prone to problems. Regardless of your personal experiences, dropping $2K into a single repair is not uncommon. And, to get that car, you has to come up with cold, hard cash. Perhaps $5K to $8K, we can assume. You still have to save the monthly amortization to come up with your NEXT downpayment.
So, financing has to be an assumption.
It isn't a matter of preference. Dollars and cents pretty much don't lie. The only reason people believe a personal lease is okay is because they don't understand how money works.
Wrong. With a lease one has fixed cost. That is absolutely NOT so with an older vehicle/used car.
When you lease a car, you don't own it, you are borrowing it. More amazingly it counts against your own credit score and debt ratios. You don't even get to list it as an asset.
Not really true. An account which is paid on time will actually help one's credit. An inexpensive lease can be a great way for a young person to build credit. Though it is listed as a debt, so is buying a new car. Most people that are going to run a credit check on you are not going to care about material assets....they are going to care about timely payment. The exception, of course, would be a mortgage. The other thing about a car is the aformentoned depreciation. A house listed as a material asset isn't going to lose 70% of its value in 5 years. A car will.
I think it is some of you who don;t understand how money and credit works. Debt is not always bad. My good credit completely overrode even my INCOME when I applied for my mortgage. My income ratio was a little high (income usage percentage), but I was told that since I had good credit the rules were bent quite a bit.
For the image-obsessed who either have too much money than they know what to do with or like to live above their means then leasing is great. You get to rent what you can't buy and look richer than you are.
quote:
A car depreciates so quickly that after a five year loan, you won't have much left anyway.
You'll have the entire freaking car left.
"But who wants a 5-year-old car? pfff, I have neighbors to impress and various personal inadequacies to make up for!"
You'll have to do better than that. You can't just dismiss anyone who leases as either shallow or stupid.
Originally posted by Fangorn
Okay, I'll have to look this up, but a few years ago was an article about the spending habits of millionaires and one thing they had in common: drove used cars/old cars that were paid for (no loans/no leases).
It was in a book called The Millionaire Mind and was published along with The Millionaire Nextdoor.
Millionaire Mind
I hope to be featured in the third book.
Nick
Sondjata,
You obviously didn't read what I wrote. I won't have to pay for :
Tires, Breaks, Plugs or even OIL! VW Jetta warranties are for 50k miles and the oil changes are included for all 50k miles! By the time I hit 50k the lease is up and I'm on to the next car with the new warranty.
So enjoy sitting at Pep Boys waiting for all those wonderful things to get done. I won't need to get them replaced and even if I did I wouldn't have to pay for them.
Matsu.....I was just kidding about the used thing.
I like how you guys automatically think wanting to drive a nice car makes you a snob or that it means you're trying to make up for "various personal inadequacies" - come on groverat, you're smarter than that. You know not everyone is like that.
I'd rather drive a safe, well engineered stylish German car for $300 a month than own something I might have to worry about later -- and thats because "I" want to drive that car, I don't give a rats ass what Mr. Jones next door does. Thats just my preference and I've been doing it since I was 17 without ever going poor or being in a finacial crunch. Yeah I think I know how money works....
and yeah everything SDW2001 said too
Originally posted by SDW2001
Sondjata, Matsu and Trumptman:
I really disagree with you here.
First, we'll have the debate about financing a car. No one I know, being middle class, has the money to buy a decent car for cash. Any decent used car is going to cost AT LEAST $10,000. Anything less than that and we are looking at vehicles with 80K/100K plus on them. I don't buy your "but my repairs are not that bad!" argument. Cars with this mileage, though perhaps bettert than years ago, are prone to problems. Regardless of your personal experiences, dropping $2K into a single repair is not uncommon. And, to get that car, you has to come up with cold, hard cash. Perhaps $5K to $8K, we can assume. You still have to save the monthly amortization to come up with your NEXT downpayment.
So, financing has to be an assumption.
Wrong. With a lease one has fixed cost. That is absolutely NOT so with an older vehicle/used car.
Not really true. An account which is paid on time will actually help one's credit. An inexpensive lease can be a great way for a young person to build credit. Though it is listed as a debt, so is buying a new car. Most people that are going to run a credit check on you are not going to care about material assets....they are going to care about timely payment. The exception, of course, would be a mortgage. The other thing about a car is the aformentoned depreciation. A house listed as a material asset isn't going to lose 70% of its value in 5 years. A car will.
I think it is some of you who don;t understand how money and credit works. Debt is not always bad. My good credit completely overrode even my INCOME when I applied for my mortgage. My income ratio was a little high (income usage percentage), but I was told that since I had good credit the rules were bent quite a bit.
You'll have to do better than that. You can't just dismiss anyone who leases as either shallow or stupid.
SDW2001,
Look your assumptions are yours and you are welcome to work with them. I question alot of assumptions and find very little to support most of them. Most cars that are not beater-econoboxes (Geometro for example) hold up well and need infrequent repairs. You don't have to be mechanical, but when you know someone who is, you just ask them who they would recommend and that has worked out best for me.
As for dropping $2000 into a single repair, I have never in my LIFE dropped $2000 into a repair. Most repairs I have dealt with are of the water pump, alternator, type variety. Most engines don't fail dramatically but rather something fails and stupid people who know nothing about cars continue to drive them until it becomes major. So it is, gee my water pump bearing went bad, but I put some water in it and drove to work, and bam blew the head gasket. Also as mentioned by Sond, all cars need brake pads, belts, tires, fluids, etc. You don't escape those costs.
Again with the assumptions, cold hard cash is not so hard to come up with when you live within your means and aren't paying extra for everything via financing.
My maxim for this is that $50k will feel like $75k when you don't use credit and $50k will feel like $25k when you do.
Most people blow more money than they care to admit. Whether it was good or bad, being a teacher I learned to budget early because I only get paid once a month. I mean when you screw up and the next check isn't coming for WEEKS, you learn to be careful. Lots of folks get paid every two weeks and if there are two incomes, they might even get paid on alternating weeks. They never get use to thinking more than a week/2 weeks ahead.
I have gone through my friends finances and literally found hundreds of dollars of savings per MONTH without even trying hard. Sack lunch instead of eating out 3-5 times a week, tell Starbucks to take a hike, make your own snacks instead of buying little prepackaged ones, etc.
For however much you think you need to live on, I assure you someone else is living on less. Also anyone can find a way to live on less the second they lose their job or have some other financial hardship. You simply choose not to make those choices now because you don't have to. If you pretended you had a 20% pay cut, you likely could find a way to make your current life work. You would just go to the library instead of Barnes and Noble. You would wait until the movie came out on network television instead of HBO, PPV or the theater. You could play board games and enjoy a picnic at the park instead of going to some high dollar amusement park/mall.
When you get this cold, hard cash in your hands and become the master of it, you will be amazed how much power it has over others when they are selling. They start thinking about how much they need it, and have to be instantly gratified now. Their mind/heart start racing, pre-spending it, imagining it already in their hands and pockets. Most people are selling something because they want to buy something else.
I kid you not, the last big ticket thing I bought was about 2 weeks ago. A very nice 19 foot boat with inboard/outboard. We are going to use it for about a month at the river this summer. The initial asking price was $3300. I started with, "Well, what is your cash price?" Soon we were already down to $2500. I offered $2000 cash. He couldn't take it. I said (and this is always my favorite part) "Well, why don't I go get dinner and you can think about it. I'll double check to make sure my offer is fair."
He called my cell 25 minutes later and we agreed to $2300. His final words were, and I kid you not, "We can find the other $200 somewhere else."
I don't know what he was buying for $2500, but the point was that thinking about cash on hand made him cave. It happens pretty much everytime when you are dealing with people who are not use to having cash on hand. Everything is financing and everything is terms so whatever will get them to their terms is just fine.
As for the credit check items you mentioned. I do believe, and I say this nicely, that you have not questioned common assumptions about credit. I ran 60+ credit checks last year for my units/houses that I rent out. When you run a credit check it shows the monthly payment, but it also shows the total debt, type of debt, ratio, job history, prior addresses, etc. Almost all of these things can change your chances of getting a loan.
I understand that not all debt is bad. Student loans, mortgages (reasonable ones that are payable by one salary), and business investment loans are good credit. Stock leveraging, credit cards, bank loans, cash-out refi's for consumer goods (or even most home improvements), car loans, and pretty much any consumer electronic financing are all bad credit in my book.
Now when it comes to mortgages, I have a little experience her. For better or worse I have 5 of them. They will find a way to finance just about anyone nowadays, it simply matters how much you bring down, points you pay, and interest you will accept. If you were right on the edge of qualifying, then why advocate a car payment? How much easier would your qualifying have been if that wasn't part of your monthly debt load?
Then again we get to the other areas. Did you have to pay extra points/fees to get the rate you wanted? Did you have to come in with more down? Did you have to get mortgage insurance? (PMI)
Do we start to see how $50k feels like $25k?
BTW, please take any of this personal. You mentioned some information and I just asked you to question a few assumptions about it. I hope you don't feel it was an attack because it wasn't meant as such. I did volunteer I have 5 mortgages.
Good discussion,
Nick
At the end of buying you own the car.
A car with 50,000 miles hasn't even seen 1/4th of its life.
Willoughby says "After 50,000 miles I'm in a new car" as if that's necessarily a positive. A car is a conveyance, I guess I just don't care as much.
Sorry, but leasing a car doesn't make sense logically. It's silly materialism. I'm not against silly materialism but don't try to spin it like it makes any reasonable sense, it's insulting.
Just say "I want to have a new car all the time!" and leave it alone.
I'm happy to buy leased cars. Spend the rest of your life renting, I'll own my ride and drive it until it is dead.
Unless you drive like a granny..no way you're tires will last you 'till 50k. Same with brakes. Brakes, Clutches and the like are items that get worn depending on the skill level of the driver. Most dealerships are not going to warrantee those items. Even BMW USA only offers regular maintenance. And if you know a dealer that will cover all those things then by all means take it.
But back to my original cost analysis: There are only two things on a vehicle that will set you back over 1G. Engine and transmission. In the long haul, if one buys or leases a decent German vehicle you will pay less over that time for a used one than a new one. No if's, and's, buts or maybe's about it. Furthermore I do most "scheduled" mentenance myself. Wich means I that I save $75/hour labour rates on most decent shoppes since I only pay for parts. I figured that my unused free time is better spent doing those things than my cash going to a dealer for his time on the clock.
I agree that most middle class families do not have the cash to plunk down a nice down payment for a finance ( or increasiningly leases) But if one leases a car for 8 years (two leases back to back) you can spend $25,000 easy and have absolutely no equity in the vehicle. whereas if you bought used and kept it well maintained. you'd spend at least half that amoung over the same 8 years and you could still wring out a few thousand bucks for it (depending on what you have).
But hey, it all comes down to what you want to drive and what you feel comfortable in. But let's not fool ourselves into thinking that it is cheaper to buy new. The math does not support that.
Originally posted by groverat
At the end of a lease you don't own the car.
At the end of buying you own the car.
A car with 50,000 miles hasn't even seen 1/4th of its life.
Willoughby says "After 50,000 miles I'm in a new car" as if that's necessarily a positive. A car is a conveyance, I guess I just don't care as much.
Sorry, but leasing a car doesn't make sense logically. It's silly materialism. I'm not against silly materialism but don't try to spin it like it makes any reasonable sense, it's insulting.
Just say "I want to have a new car all the time!" and leave it alone.
I'm happy to buy leased cars. Spend the rest of your life renting, I'll own my ride and drive it until it is dead.
I never want to own a car. I don't want to deal with the hassle. I don't feel like driving the same thing for 5 years. That isn't silly materialism, its A.D.D or something
Since I really don't care to own a car, work on it, maintain it, worry about it ever breaking down, or trying to sell it/junk it what other option is there? Leasing is perfect. It does make reasonable sense for someone who doesn't know the difference between a timing belt and a spark plug.
Especially if you can afford it, why not? $300 bucks a month is not a big deal and I never have to worry about anything with the car - that makes reasonable sense to me.
Lets look at it over a 10 year period.
Lease - $36000 (120 x $300)(at least 3 cars, going on 4th - all new)
Purchase - $25200 (60 x $420 - 5 year finance). At the end of 10 years you've got a car you paid $25200 for which probably isn't worth half that and now has probably 120,000 miles on it, if not more.
Now without even counting any maintenance (which there WILL be for the 10 year old car) this looks like a big difference but divided out over 10 years the Leasee is only paying $1080 more per year to have a brand new car with no maintenace worries. Thats $90 a month.
Yes its more money, yes its not for everyone. Especially if you like fixing cars or having that extra 90 a month. Unreasonable, NO.
And some leases DO include oil changes. Mercedes for example.
Its not about materialism. Its about piece of mind, comfort and convenience. All of which is worth $90 extra a month to me. But thats just me apparently.
But for me, this isn't a big deal. I love putting computers together and I know what I'm doing. I'm pretty good at it too.
So is it for everyone because its cheaper? Of course not.
My brother-in-law doesn't know the first thing about computers. He can barely turn it on. He basically just uses it to surf the web (probably for porn). So in no way is the cheaper route better for him. Instead he purchased a Dell which of course costs more but he gets their tech support and warranties and doesn't have to worry about taking care of it himself - especially since he's too busy always fixing his car
First, I understand credit and cash management. I also live within my means. I try not to finance things unless there is a good reason. I think you may be a little misinformed on what constitutes "good" or even "great" credit today.
Here's the thing: MOST people need to finance a car. Period. Any car that most people could afford not to finance (pay cash for) is going to have very high mileage. If you haven't dropped $2K on a repair, then please go out and buy a lottery ticket RIGHT now. It's is not uncommon at all...even for cars with less than 80,000 miles on them.
goverat:
You own about 30% of what you paid at the end of the loan. And, you've been paying a higher monthly payment for a longer term.
I'm just saying that leasing is a nice option for people that understand it. I would be doing it again next time, but I'd like to put more miles on it.