Win or Lose (Lease / Rent vs Buy)

[contrariwise]

For me, besides the equity math being in favor of buying, I can't imagine personally making such a large transaction with the end result being that I get nothing for all that money, except a somewhat limited privilege of driving someone else's property for a time.

The above is my way of thinking. But full disclosure, I have leased 2 cars in my life. I had a safe, reliable car to drive for a two 3 year periods at a fixed cost. Those transactions worked out fine for me, and fit my needs at the time. I don't delude myself that either was a superb use of money. I have owned the same car for 10 years now, no financing. The repair costs have been (relatively) minimal. But it is getting a bit old in the tooth, so I suspect I'm going to have to make a change soon. I hope I find a car that has been reliable as that one.

Anyway, there's lots of ways to go about these decisions. The choice you make doesn't HAVE TO BE the best financial choice out there. There are lots of other considerations. I don't tend to take advice from people I don't know on the internet. Who knows what's really going on in people's lives? You almost never see someone in one of these threads who admits, yeah, I've got five maxed out credit cards. Everyone, and I mean everyone says they have paid off their mortgage and never carries a balance on their credit cards. Everyone can't be that perfect.

 

[RustySpork]

The above is my way of thinking. But full disclosure, I have leased 2 cars in my life. I had a safe, reliable car to drive for a two 3 year periods at a fixed cost. Those transactions worked out fine for me, and fit my needs at the time. I don't delude myself that either was a superb use of money. I have owned the same car for 10 years now, no financing. The repair costs have been (relatively) minimal. But it is getting a bit old in the tooth, so I suspect I'm going to have to make a change soon. I hope I find a car that has been reliable as that one.

Anyway, there's lots of ways to go about these decisions. The choice you make doesn't HAVE TO BE the best financial choice out there. There are lots of other considerations. I don't tend to take advice from people I don't know on the internet. Who knows what's really going on in people's lives? You almost never see someone in one of these threads who admits, yeah, I've got five maxed out credit cards. Everyone, and I mean everyone says they have paid off their mortgage and never carries a balance on their credit cards. Everyone can't be that perfect.

Ahh, the rose colored glasses of the internet.

 

[21stamps]

The above is my way of thinking. But full disclosure, I have leased 2 cars in my life. I had a safe, reliable car to drive for a two 3 year periods at a fixed cost. Those transactions worked out fine for me, and fit my needs at the time. I don't delude myself that either was a superb use of money. I have owned the same car for 10 years now, no financing. The repair costs have been (relatively) minimal. But it is getting a bit old in the tooth, so I suspect I'm going to have to make a change soon. I hope I find a car that has been reliable as that one.

Anyway, there's lots of ways to go about these decisions. The choice you make doesn't HAVE TO BE the best financial choice out there. There are lots of other considerations. I don't tend to take advice from people I don't know on the internet. Who knows what's really going on in people's lives? You almost never see someone in one of these threads who admits, yeah, I've got five maxed out credit cards. Everyone, and I mean everyone says they have paid off their mortgage and never carries a balance on their credit cards. Everyone can't be that perfect.

If you haven't heard of Dave Ramsey, he's a special kind of "guru"...some people follow his advice like it's a religion. Those are probably the people with paid off mortgages, cars, and 0 debt. That's not realistic for the vast majority of Americans though.

The whole subject was brought up because of a conversation about him..
I respect a ton of what he says..
But, he's not my religion. People have to know themselves, first and foremost. If you are faced with 2 financial "mistakes"... chose the one that will do the least amount of damage.
So in his mind people who lease are unwise, but compared to buying and trading within 2.5-3years.. then people who lease are making the most wise decision for that specific situation. Like for me and @Lets Respect, we have enough foresight to know what we would do. Knowingly making a "mistake" isn't always a mistake for the individual...sometimes you have to choose the lessor of two evils.

 

[Dad 2 M & M]

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[Dad 2 M & M]

If you haven't heard of Dave Ramsey, he's a special kind of "guru"...some people follow his advice like it's a religion. Those are probably the people with paid off mortgages, cars, and 0 debt. That's not realistic for the vast majority of Americans though.

The whole subject was brought up because of a conversation about him..
I respect a ton of what he says..
But, he's not my religion. People have to know themselves, first and foremost. If you are faced with 2 financial "mistakes"... chose the one that will do the least amount of damage.
So in his mind people who lease are unwise, but compared to buying and trading within 2.5-3years.. then people who lease are making the most wise decision for that specific situation. Like for me and @Lets Respect, we have enough foresight to know what we would do. Knowingly making a "mistake" isn't always a mistake for the individual...sometimes you have to choose the lessor of two evils.

Well done again...

My beef with the "better than I deserve dude" is his BLANKET application that debt is bad. It IS bad for people who live beyond their means by overextending. For those that don't, debt is very useful, and in these times, money is FREE . Why would I pay cash for a car if I could? Borrow at 3% (you can do way better than that now), and invest the pile of cash.....even if the investment ended up paying less than the 3%, you still had full liquidity during the term of the loan....that is a better use of cash, and that same dude says "cash is king"....not the way he says to use it.....it's barely a grand duke in his example, certainly not king

And the original poster is just busting your chops, if you haven't already figured out the obvious...

 

[21stamps]

Well done again...

My beef with the "better than I deserve dude" is his BLANKET application that debt is bad. It IS bad for people who live beyond their means by overextending. For those that don't, debt is very useful, and in these times, money is FREE . Why would I pay cash for a car if I could? Borrow at 3% (you can do way better than that now), and invest the pile of cash.....even if the investment ended up paying less than the 3%, you still had full liquidity during the term of the loan....that is a better use of cash, and that same dude says "cash is king"....not the way he says to use it.....it's barely a grand duke in his example, certainly not king

And the original poster is just busting your chops, if you haven't already figured out the obvious...

Agree completely. I said that in another thread.. the rigid rules of "0 debt" are not always beneficial...and mostly are not, period.
There will always be the people who have too many credit cards..too much car..and too much house. However, there is a LARGE amount of responsible citizens who exist inbetween the "too much" group and the "Ramsey" group.

 

[RustySpork]

Agree completely. I said that in another thread.. the rigid rules of "0 debt" are not always beneficial...and mostly are not, period.
There will always be the people who have too many credit cards..too much car..and too much house. However, there is a LARGE amount of responsible citizens who exist inbetween the "too much" group and the "Ramsey" group.

That's just another reason why buying makes more sense than leasing.

 

[RustySpork]

Does your "research" work in the stock market?

Stocks are always a risk.

Question to you: As a banker, which of the 3 below would I prefer?

1) Customer pays dealer cash for car purchase
2) Customer finances car through dealer
3) Customer leases the car from the dealer

What are the merits (to the banker) of each of the three?

If I were a banker, I would ask you to come to my bank and I would pre-approve you for a loan with my bank before you went to the dealership. I would also tell you that paying cash for your car would be a waste because it will depreciate significantly after a few years of ownership. I'd then tell you that if you finance through the dealer you probably aren't going to get the best deal on financing. Then if you said you were thinking about leasing, I'd ask for your wallet. I'd take out your money, light it, throw it in the trash can, and then congratulate you on finishing your first lease.

 

[21stamps]

I love being in the minority! I don't follow his advice completely, but there is a lot I like and do follow.

There's a lot that I like too. Suze Orman as well..actually because of her the term "work pay" is used in my house instead of the word "allowance".lol. The book Rich Dad Poor Dad made such an impact on me when I was younger, it's still relevant, and I can't wait until my son is old enough to read and understand it. I think Robert Kiyosaki is great, but again I'm not in 100% agreement with everything that he says.
The key, for me, is to take SOME of what all of these "gurus" say and apply it to my own life, as well as common sense, and my own understanding of finances. That way I can come up with the "Best for my Family" plan.

 

[21stamps]

Stocks are always a risk.



If I were a banker, I would ask you to come to my bank and I would pre-approve you for a loan with my bank before you went to the dealership. I would also tell you that paying cash for your car would be a waste because it will depreciate significantly after a few years of ownership. I'd then tell you that if you finance through the dealer you probably aren't going to get the best deal on financing. Then if you said you were thinking about leasing, I'd ask for your wallet. I'd take out your money, light it, throw it in the trash can, and then congratulate you on finishing your first lease.

Question -when you go buy a car, who do you think the loan is thru?

 

[21stamps]

Agreed! But, I also believe that those who have financial issues can get out of trouble by following Ramsey's advice completely. It will help develop discipline so they can get to the same place we are.

Well I leased cars for years..so I can't be included in the "we are ".

 

[RustySpork]

Question -when you go buy a car, who do you think the loan is thru?

A bank.

 

[21stamps]

A bank.

Do you think that banks change their rates when you sign their loan paperwork at a dealer?
I'm curious because you said that you wouldn't get the best interest rate that way.
For example if your credit union is offering a special of 2%, do you think that percent changes because you are not applying for the loan inside of said credit union?

 

[RustySpork]

Do you think that banks change their rates when you sign their loan paperwork at a dealer?
I'm curious because you said that you wouldn't get the best interest rate that way.
For example if your credit union is offering a special of 2%, do you think that percent changes because you are not applying for the loan inside of said credit union?

A dealer can and often does mark up points on a loan you take out through them, and when they shop the loan "for you" they shop it with their best interests in mind and not yours. If my bank (or credit union) is offering a great rate, why in the world would I not talk to them and secure my loan approval before ever setting foot in the dealership. When you play poker, you don't lay your cards on the table face up as soon as your hand is dealt.

 

[21stamps]

A dealer can and often does mark up points on a loan you take out through them, and when they shop the loan "for you" they shop it with their best interests in mind and not yours. If my bank (or credit union) is offering a great rate, why in the world would I not talk to them and secure my loan approval before ever setting foot in the dealership. When you play poker, you don't lay your cards on the table face up as soon as your hand is dealt.

I said the mark up thing several pages ago, but you misunderstood.. who do you think is involved when a rate mark up happens? Dealers can't make that decision alone. They aren't the ones loaning the money.lol

 

[RustySpork]

I said the mark up thing several pages ago, but you misunderstood.. who do you think is involved when a rate mark up happens? Dealers can't make that decision alone. They aren't the ones loaning the money.lol

You really aren't getting the message here. Sure, I uhh misunderstood you. Yeah, that's what happened.

 

[21stamps]

The "We are" was meant to include those who are not in a financial problem situation. I don't have a problem with someone who leases cars. It's not for me, and that is OK. So, assuming you are not in a world of debt and doing well from a financial responsibility perspective, I would consider you part of the "we are".

And, I don't have a need to change anyone's mind. Actually, in the years I have been sharing on the internet (going back to the Usenet days of the 90's), I have learned that very few people really change their mind because of anything I can say. So, I just find it best to share what works for me, the reasons why and if someone chooses to change their mind after that, cool. If not, that's also cool.

Wow. You are a breath of fresh air on here.
I mean that as a sincere compliment!!

 

[Dad 2 M & M]

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[Dad 2 M & M]

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[21stamps]

Non answer in stocks....duly noted

Clearly you're not a banker. Why would I want you to come to my bank and waste my time with you? When the dealer could do the origination for me? I'd pay for the dealer's service...there is more of you going to the dealer than coming to me anyway, and who wants to loan on autos anyway? Not a bank. Sure we provide the service, because we need to, but the opportunity cost for dealing with an auto is losing out real capital opportunities/investment. If your conversation is anything like your posts, you wouldn't say anything of substance to the banker anyway.

Depreciate significantly - it would depreciate the same amount and rate whether buying, leasing, or paying cash....why would a banker tell you that? Because he's about to loan you money, maybe? No surprise here, as you have confused depreciation with risk, and who is holding the risk.

The banker would tell you you probably aren't going to get the best deal financing through the dealer? Wow, what a pearl of wisdom that was.....Wonder what the dealer would tell you.......

I'm sure you really did well as you climbed up that appreciating car ladder....nice non answers and evading the questions.....the comments themselves were senseless...unless, of course, you are assuming the banker would just lie to you...and assume you wouldn't have been on to him.....or hope you were and would get up and leave

By the way, the answer is the banker would prefer you finance at the dealership....that is what any banker would prefer. Most are partnered with dealerships and each dealership has a preferred banker. As a preferred lender, a banker does much more for a dealership than just finance auto loans, and thus the dealership "rewards" the preferred banker with the primo loan requests. We will sacrifice the beta for volume any day, especially when we can run a lean staff by letting a partner underwrite for us.....

Also, most dealerships have MULTIPLE lenders....reason being is when people have credit issues the dealership tries to find a way to make the sale work.

Wonderful.

So here's what his lesson is-
Cars depreciate- BUT if you take a 36 month loan out, then you can have "equity" in your vehicle after 36 months and now you can use that as a downpayment on a more expensive vehicle.

Basically he is using that 36 month loan as a way to deposit money into a forced savings account. But not one that's he's earning interest on, he's paying interest on that savings account.
The same goal could have been reached by taking the monetary savings between the lease and purchase payment, and putting it somewhere that could have been earning money. Or, just buy a cheaper car, longer term..with equal apr, and do the same with the difference saved..and work up to the "expensive" car that way. Putting money somewhere instead of paying it out.

I wonder how many people do this same thing as the OP, really. I've never thought of it before...but he can't be the first.