When is it better to lease a vehicle instead of buying?

[Michelle H]

My Husband is 69 and I am 65, we need a new vehicle. We are thinking about an Expedition or something similar, but we are unsure about financing. We are both on Social Security and supplement that with selling at flea markets, etc. Would it be more practical to lease for 3-5 years or should we go ahead and purchase?

[ashley]

Leasing or buying a new car is on every financial experts no no list. Try to find a used car, you can find gems out there if you look hard enough and it'll come with all the bells and whistles for a much cheaper price.

[nap4gbp]

leasing in fine if you want a new car every few years, but if keeping for longer than 5 years you should buy. this is the golden rule on buying versus leasing.
leasing can be a hassle because you can't go over the alloted miles they give you. you must keep it in good condition. if leasing for more than 3 years it;s usually out of warranty so if something goes wrong you will have to fix and that includes tires, brakes etc.
leasing is like it says you are renting the car and must keep it in good shape when you return it, so many people do not or go over the miles so they end up buying it and that is worse because you lease off the sticker price and therefore are paying that price if you buy.
if keeping for 5 years than buy it and buy one you can afford instead of buying one you want.

[dmaccri]

if u buy a new vechle and u fiance it the average person keeps it 3 yrs chances are after that u will be out of equity on it at least 5 to 6k dollars and on a lease u dont have to worry about that in 2 or 3 years all u have to do with it is turn it in or u can buy it

[Happyqueen644]

There are times when leasing makes sense

1) You like to get a new car every 2 yrs. I advise to NEVER lease past 2 yrs. 3 at the max. If you like to keep your cars forever then leasing is not for you

2) You dont drive more than 12k miles per year. Most leases are constructed around 10-12,000 miles per year. When you go over that mileage limit, you pay for every mile. So make sure you dont drive more than about 1000 miles per month

3) You dont mind never "owning" a car. In a lease, you rarely pay off the car and keep it. You just go from one to another every couple of years.

Fact is, if you fall into all three of those criteria, a lease is not a bad way to go. You always have a car under warranty, you get a new one every couple of years, and you dont end up "upside down" in a car you dont want to keep.

One note though - in a lease if you decide you want to keep the car at the end, there wll be a predetermined price. You can pay that amount (called a residual, or Lease End Value) and keep it. Few people do that, since cars depreciate so much, and they would usually need to finaince that amount - meaning another 5-6 yrs of payments. But, its an option.

[fpenkala]

If your credit is good but money is tight, leasing may be a reasonable way to go. Lease payments will be significantly lower than finance payments over the same contract term.

As seniors you probably want a really reliable vehicle. Leasing allows you to trade up every few years and stay in something newer, hopefully with little or no maintenance requirements in the mean time.

Look for a vehicle that will hold its resale value for the length of the lease (aka "residual value"). I have had the best trade-in experience and value retention with Honda.

If you keep your vehicle meticulously clean and don't put on a lot of miles you should be in positive valuation territory when you trade up, especially on a 36 or 48 month lease.

Make sure you are in a "closed lease" where you can hand the keys in at the end of term. "Open leases" leave you on the hook for the residual value, regardless of what the fair market value may be at the end of the term.

Leasing is about paying for use, rather than paying to own. Don't expect to build any equity in a leased vehicle. Get exactly the vehicle you like and want and can be happy with for the full term you sign on to; trading in or trading up early is a pain and usually very expensive.

Finally, do not make any down payment for your leased vehicle -- it's money you will never see again; offer first & last payments only.

Best of luck.

Frank Penkala
President
LeaseDirect Canada Corp.

[flower]

If all you have for your income is Social Security retirement, unless you have great credit and a big down payment, I dont see how you can qualify to buy such an expensive car. At your age, why not buy a 5-year-old car for a lot less? If it is a closed end lease, at the end of 5 years of paying you have to give it up and have nothing to show for it.