Teach me about Leasing please

[SteveBrickNJ]

I am a 57 year old who has always purchased a car with a 4 or 5 year loan. I'd consider leasing a car.....possibly summer of 2020. I see an ad for an Acura 2020 RDX. The ad's details are $2,999 due at signing. $409 per month for 36 months. So here are the questions: If I have a TRADE IN that is worth far more than the "money due at signing" do they simply rework the numbers and offer a 36 month lease at a lower monthly cost? What are any other tips re leasing? Thanks!

 

[Queen of the WDW Scene]

A big question is how much do you drive? (my sister was almost baited into leasing but decided to purchase. she bought in mid February and she already has 13,000+ miles on it so its a good thing she didn't lease)
BTW those prices are more or less to get you in the door and the price is always much higher.
That's what a salesperson friend of mine told me.
Not sure how they work the trade in since its not a leased trade in.

 

[SteveBrickNJ]

A big question is how much do you drive? (my sister was almost baited into leasing but decided to purchase. she bought in mid February and she already has 13,000+ miles on it so its a good thing she didn't lease)
BTW those prices are more or less to get you in the door and the price is always much higher.
That's what a salesperson friend of mine told me.
Not sure how they work the trade in since its not a leased trade in.

I saw a YouTube video for people like me who need to learn about Leasing . The guy on the video said that they have options for more annual miles. You can pay more per month for more allowed miles. I am usually between 13,000 and 13,500 miles a year. But my wife and I could easily use her nice Honda Accord on the weekends if I had a lease car. I could manage to be lower miles easily

 

[Queen of the WDW Scene]

I saw a YouTube video for people like me who need to learn about Leasing . The guy on the video said that they have options for more annual miles. You can pay more per month for more allowed miles. I am usually between 13,000 and 13,500 miles a year. But my wife and I could easily use her nice Honda Accord on the weekends if I had a lease car. I could manage to be lower miles easily

Yes you can get higher mile leases but usually they don't go over 15,000 for 12 months and you pay through the nose for it.
If you can get a low mile lease and EASILY as in not have to think/worry about which car you'll have to drive for which outing based on miles you'll be driving and you can get the price they claim on the commercials and you are an excellent driver who will not get a single ding or dent the size of a quarter then it might be a good option for you.
My sister's friends swear by leasing but they also live very close to work and stores/restaurants etc so its rare they drive longer distances.
Meanwhile my sister lives 12 miles away from work so that is a minimum of 24 miles 5 days per week. Plus an extra 12 miles each way if we end up going to a movie, shopping, out for dinner, to a doctor...

 

[SteveBrickNJ]

A big question is how much do you drive? (my sister was almost baited into leasing but decided to purchase. she bought in mid February and she already has 13,000+ miles on it so its a good thing she didn't lease)
BTW those prices are more or less to get you in the door and the price is always much higher.
That's what a salesperson friend of mine told me.
Not sure how they work the trade in since its not a leased trade in.

I saw a YouTube video for people like me who need to learn about Leasing . The guy on the video said that they have options for more annual miles. You can pay more per month for more allowed miles. I am usually between 13,000 and 13,500 miles a year. But my wife and I could easily use her nice Honda Accord on the weekends if I had a lease car. I could manage to be lower miles easily

Yes you can get higher mile leases but usually they don't go over 15,000 for 12 months and you pay through the nose for it.
If you can get a low mile lease and EASILY as in not have to think/worry about which car you'll have to drive for which outing based on miles you'll be driving and you can get the price they claim on the commercials and you are an excellent driver who will not get a single ding or dent the size of a quarter then it might be a good option for you.
My sister's friends swear by leasing but they also live very close to work and stores/restaurants etc so its rare they drive longer distances.
Meanwhile my sister lives 12 miles away from work so that is a minimum of 24 miles 5 days per week. Plus an extra 12 miles each way if we end up going to a movie, shopping, out for dinner, to a doctor...

Thank you for your response. What about the issue of the "Money due" at the beginning of the lease? What IF I "give" $10,000 down instead of $2,999......will my monthly payments be $200 something instead of $400 something. Do dealerships have flexibility like that?
I have a 2016 Mazda CX-5 that is "Grand Touring". Mine is Mazda's top trim level. I'm sure it will be worth(at least) around $10,000 Kelly Blue Book when it is payed off this summer.

 

[SteveBrickNJ]

I saw a YouTube video for people like me who need to learn about Leasing . The guy on the video said that they have options for more annual miles. You can pay more per month for more allowed miles. I am usually between 13,000 and 13,500 miles a year. But my wife and I could easily use her nice Honda Accord on the weekends if I had a lease car. I could manage to be lower miles easily

Thank you for your response. What about the issue of the "Money due" at the beginning of the lease? What IF I "give" $10,000 down instead of $2,999......will my monthly payments be $200 something instead of $400 something. Do dealerships have flexibility like that?
I have a 2016 Mazda CX-5 that is "Grand Touring". Mine is Mazda's top trim level. I'm sure it will be worth(at least) around $10,000 Kelly Blue Book when it is payed off this summer.

I came back to the thread to report that I put the specifics of my 2016 Mazda as it is TODAY into Edmunds True Car Value calculator and it came out to be worth just over $15,000. By August 1st maybe at least $13,000?? I went to Acura's website and I "built" my hypothetical future Acura. It's purchase price would be $43,000.
The goal for me is to have as low a monthly payment as possible.
So in conclusion....my hypothetical $43,000 car with my hypothetical $13,000 down payment
5 year car loan
or 3 year lease
Which will be a lower monthly payment? Surely the lease.
I e-mailed an Acura dealership with the same questions as I put on this thread. The closest one to me is 35 minutes from my home.
I assume they will get back to me on Monday.

 

[RobWDW1971]

I came back to the thread to report that I put the specifics of my 2016 Mazda as it is TODAY into Edmunds True Car Value calculator and it came out to be worth just over $15,000. By August 1st maybe at least $13,000?? I went to Acura's website and I "built" my hypothetical future Acura. It's purchase price would be $43,000.
The goal for me is to have as low a monthly payment as possible.
So in conclusion....my hypothetical $43,000 car with my hypothetical $13,000 down payment
5 year car loan
or 3 year lease
Which will be a lower monthly payment? Surely the lease.
I e-mailed an Acura dealership with the same questions as I put on this thread. The closest one to me is 35 minutes from my home.
I assume they will get back to me on Monday.

It’s not about down payments and monthly payments, it’s about total cost of ownership. Always stay focused on net cash.

Take your expected time of ownership and add up all the costs (lease payments or loan payments, down payments, trade ins, etc), take into account the potential resell value when you expect to sell it, and compare the options.

From a strictly financial standpoint, generally speaking buying a slightly used car with either cash or a zero/low interest loan will be the best financial option. Longer ownership is also better.

Leasing is generally for people who want to drive new cars every couple of years, but are not great financial programs.

 

[SteveBrickNJ]

It’s not about down payments and monthly payments, it’s about total cost of ownership. Always stay focused on net cash.

Take your expected time of ownership and add up all the costs (lease payments or loan payments, down payments, trade ins, etc), take into account the potential resell value when you expect to sell it, and compare the options.

From a strictly financial standpoint, generally speaking buying a slightly used car with either cash or a zero/low interest loan will be the best financial option. Longer ownership is also better.

Leasing is generally for people who want to drive new cars every couple of years, but are not great financial programs.

I DO get bored with my cars every 4 or 5 years. I also hate paying big money every oil change for the needed maintainence as a car goes over 60K and especially beyond 75K.

 

[RobWDW1971]

I DO get bored with my cars every 4 or 5 years. I also hate paying big money every oil change for the needed maintainence as a car goes over 60K and especially beyond 75K.

Understood, just giving you the financial perspective. And yes, auto maintenance gets more expensive as a car gets older but usually in those later years it is fully paid off so those expenses are still significantly less annual outlay than new payments.

 

[SteveBrickNJ]

Understood, just giving you the financial perspective. And yes, auto maintenance gets more expensive as a car gets older but usually in those later years it is fully paid off so those expenses are still significantly less annual outlay than new payments.

Thank you for your perspective. It IS something I need to consider.

 

[Master Yoda]

It’s not about down payments and monthly payments, it’s about total cost of ownership. Always stay focused on net cash.

Take your expected time of ownership and add up all the costs (lease payments or loan payments, down payments, trade ins, etc), take into account the potential resell value when you expect to sell it, and compare the options.

From a strictly financial standpoint, generally speaking buying a slightly used car with either cash or a zero/low interest loan will be the best financial option. Longer ownership is also better.

Leasing is generally for people who want to drive new cars every couple of years, but are not great financial programs.

This^^^

The only way I have seen leasing to work out as a financial benefit is if you must have a new car every 2-3 years and don't drive much. The only reason a lease works out better for you in that situation is due to the steep depreciation you face when trading in a 2-3 year old car. It is the lesser of 2 evils at that point. Even then, many people often take a bath with a lease if they go over mileage.

This is what happened with me on my one lease experience. I leased a Firebird with the plans to upgrade to a WS6 Ram Air TA. I went over milage and got clubbed like a baby seal for it.

If you can keep a car for 5 years or longer, buying tends to be a better value. Ideally, the best way to get the most out of a car is to maintain it and keep it for 10 years or more. Every year you keep a paid-off car saves you about 4-6 grand or more. If you can be disciplined and keep putting your previous payment into savings you can often buy your next car with cash in only a few years.

When it comes to buying a car, the used vs new is not as cut and dry as it used to be. Buying a 1 year old or less used car use to be a sure thing, but that is no longer the case especially when you are financing. Many car manufacturers offer 2% or less financing on a new car. Used car financing tends to start around 4% which will make any savings evaporate quite quickly. You always need to look at the total price of the loan. I ran into many cases where buying new was less expensive overall than a 2 year old car.

 

[SteveBrickNJ]

This^^^

The only way I have seen leasing to work out as a financial benefit is if you must have a new car every 2-3 years and don't drive much. The only reason a lease works out better for you in that situation is due to the steep depreciation you face when trading in a 2-3 year old car. It is the lesser of 2 evils at that point. Even then, many people often take a bath with a lease if they go over mileage.

This is what happened with me on my one lease experience. I leased a Firebird with the plans to upgrade to a WS6 Ram Air TA. I went over milage and got clubbed like a baby seal for it.

If you can keep a car for 5 years or longer, buying tends to be a better value. Ideally, the best way to get the most out of a car is to maintain it and keep it for 10 years or more. Every year you keep a paid-off car saves you about 4-6 grand or more. If you can be disciplined and keep putting your previous payment into savings you can often buy your next car with cash in only a few years.

When it comes to buying a car, the used vs new is not as cut and dry as it used to be. Buying a 1 year old or less used car use to be a sure thing, but that is no longer the case especially when you are financing. Many car manufacturers offer 2% or less financing on a new car. Used car financing tends to start around 4% which will make any savings evaporate quite quickly. You always need to look at the total price of the loan. I ran into many cases where buying new was less expensive overall than a 2 year old car.

The car I want costs $43,000
If I PURCHASED that car....My anticipated downpayment would $13,000
That means I would have to finance $30,000 5 years at 0.9%.......I'm gonna have high monthly payments!
.........won't leasing be cheaper?
Will a dealership waive the advertised $2,999 due at lease signing and accept $10,000 to $13,000 instead?
Then my monthly payments would be low?
.........and 3 years later the lease is over and I can just swap that car for a new one.

 

[WWWD]

I wouldn’t put a big down payment on a lease. If there is a loss of use of the vehicle (stolen, totaled) then you lose that money since you do not own the vehicle. For example, if you put down a large down payment or trade in to lower your monthly payments and then the vehicle is stolen a couple months later, the insurance company will pay the dealership the value of the vehicle. However, the dealer will not be refunding you any money.

Also when looking at leasing, remember the residue value of the vehicle. Your lease payments plus residue value equal value of car. The higher the residue value at end of lease means the lower your total leasing payments.

Like others have said, If you need a new vehicle every 2-3 years leasing can make sense. Dealers are not pushing leases to help us save money!

 

[SteveBrickNJ]

I wouldn’t put a big down payment on a lease. If there is a loss of use of the vehicle (stolen, totaled) then you lose that money since you do not own the vehicle. For example, if you put down a large down payment or trade in to lower your monthly payments and then the vehicle is stolen a couple months later, the insurance company will pay the dealership the value of the vehicle. However, the dealer will not be refunding you any money.

Also when looking at leasing, remember the residue value of the vehicle. Your lease payments plus residue value equal value of car. The higher the residue value at end of lease means the lower your total leasing payments.

Like others have said, If you need a new vehicle every 2-3 years leasing can make sense. Dealers are not pushing leases to help us save money!

Well you (and additionally everyone else who has posted) are so kind to share your thoughts. Would you be willing to expand on or define a bit better: "Residue Value"?

 

[Master Yoda]

The car I want costs $43,000
If I PURCHASED that car....My anticipated downpayment would $13,000
That means I would have to finance $30,000 5 years at 0.9%.......I'm gonna have high monthly payments!
.........won't leasing be cheaper?
Will a dealership waive the advertised $2,999 due at lease signing and accept $10,000 to $13,000 instead?
Then my monthly payments would be low?
.........and 3 years later the lease is over and I can just swap that car for a new one.

I wouldn’t put a big down payment on a lease. If there is a loss of use of the vehicle (stolen, totaled) then you lose that money since you do not own the vehicle. For example, if you put down a large down payment or trade in to lower your monthly payments and then the vehicle is stolen a couple months later, the insurance company will pay the dealership the value of the vehicle. However, the dealer will not be refunding you any money.

Also when looking at leasing, remember the residue value of the vehicle. Your lease payments plus residue value equal value of car. The higher the residue value at end of lease means the lower your total leasing payments.

Like others have said, If you need a new vehicle every 2-3 years leasing can make sense. Dealers are not pushing leases to help us save money!

@WWWD summed it up pretty well. A high down payment is not always the best way to do a lease. It will not save you as much as a high down payment on a car you are buying.

The link below goes into this in-depth.

Should You Make a Down Payment When You Lease? | Edmunds

Should you make a down payment on your new lease? If you're getting a low money factor, maybe not.

www.edmunds.com

As to swapping out for a new car at the end of the lease...that is how it is supposed to work in theory. In practice can be much different. Go over milage, slack on maintenance or turn in a car with any damage and you can easily have to roll a few thousand more into your next lease.

Just going 5k miles over can cost you up to $1500. Ding you bumper, that's another grand. And so on.

 

[Master Yoda]

Well you (and additionally everyone else who has posted) are so kind to share your thoughts. Would you be willing to expand on or define a bit better: "Residue Value"?

The article I linked in my post above goes into "residual value".

 

[SteveBrickNJ]

@WWWD summed it up pretty well. A high down payment is not always the best way to do a lease. It will not save you as much as a high down payment on a car you are buying.

The link below goes into this in-depth.

Should You Make a Down Payment When You Lease? | Edmunds

Should you make a down payment on your new lease? If you're getting a low money factor, maybe not.

www.edmunds.com

As to swapping out for a new car at the end of the lease...that is how it is supposed to work in theory. In practice can be much different. Go over milage, slack on maintenance or turn in a car with any damage and you can easily have to roll a few thousand more into your next lease.

Just going 5k miles over can cost you up to $1500. Ding you bumper, that's another grand. And so on.

How disappointing.

 

[WWWD]

How disappointing.

While my wife and me were in grad school years ago, we had our first son and decided to lease a new vehicle to drive something safer for our newborn. It was great for 2 years but after that we were out our trade-in and those monthly payments with nothing to show for it. The savings by leasing quickly evaporated when 2 years later we had no trade in and needed to put a new down payment on a purchase this time. I can’t foresee myself leasing again.

The mini van we purchase, I drove for 16 years.

 

[SteveBrickNJ]

While my wife and me were in grad school years ago, we had our first son and decided to lease a new vehicle to drive something safer for our newborn. It was great for 2 years but after that we were out our trade-in and those monthly payments with nothing to show for it. The savings by leasing quickly evaporated when 2 years later we had no trade in and needed to put a new down payment on a purchase this time. I can’t foresee myself leasing again.

The mini van we purchase, I drove for 16 years.

This summer IF I leased a car....which probably after this thread I won't.....but IF I did I will be 58. By the time that lease was up I'd be 61. I will certainly have $2,999 due at signing....I'm not a 25 year old still paying back college loans. Yet I have taken to heart all the things that were kindly shared with me....things that were said to be helpful. I am not likely to lease an Acura after all. Yet I don't want to "Buy" a car that is $43,000 and make payments on a $30,000 loan because I will only have $13,000 down.

 

[Master Yoda]

While my wife and me were in grad school years ago, we had our first son and decided to lease a new vehicle to drive something safer for our newborn. It was great for 2 years but after that we were out our trade-in and those monthly payments with nothing to show for it. The savings by leasing quickly evaporated when 2 years later we had no trade in and needed to put a new down payment on a purchase this time. I can’t foresee myself leasing again.

The mini van we purchase, I drove for 16 years.

That is the only way to truly get the value out of a car.

I got roughly 12 years and 300k miles out of our mini-van before it started burning too much oil. My current car it a 98 Pathfinder with 208k on it and I want to try and squeeze about 4 more years out of it.