Cost analysis - used car vs new car

[NDman]

Is there a site or place I can get some sort of bench marks on cost analysis on buying a new car vs a used car?

i.e. Strictly financially speaking, would I be better off to buy a used car, say 3-5 years old, drive it for 5 years or so, sell it for a much lower price; then repeat with another used car; versus keeping a brand new car for 10 years? I understand that's a lot of assumption to be made (make/model of the car, not caring for driving a brand new car, etc). I also know you have to factor in the increasing maintenance costs for older cars too.

What is your opinion and is there anywhere I can find some comparisons or guideline on that?

[Jucius Maximus]

No analysis is needed. Depreciation is fastest at the beginning.

I saved $10K on a 28K car by getting it one year old. The other 18K depreciation will be spread over 7-10 years.

[TodayHello]

No analysis is needed. Depreciation is fastest at the beginning.

I saved $10K on a 28K car by getting it one year old. The other 18K depreciation will be spread over 7-10 years.

Jeez, what car depreciated that fast 1yr from new?

Cobalt SS comes to mind ... ?

[Jucius Maximus]

Jeez, what car depreciated that fast 1yr from new?

Cobalt SS comes to mind ... ?

Well I am including the cost of PDI, taxes, etc. I drive a Mazda6 and it would have cost $10K more to get the same car new on the road including all fees, taxes, etc.

[CheapScotsman]

I got a one year old Toyota Sienna with 10k miles out of the US for just more than 1/2 the price new in Canada (CDN $39K out the door in Canada, CDN $22K out the door in Canada). Approx 45% depreciation in the 1st year.

From this thread (http://www.redflagdeals.com/forums/showthread.php?p=8219542#post8219542) he can buy new for $35K or 3 year old used for $12-$15K. Its not going to drop another $20k in 3 years.

As Jucius said, its pretty straight forward.

[stuntman]

Is there a site or place I can get some sort of bench marks on cost analysis on buying a new car vs a used car?

i.e. Strictly financially speaking, would I be better off to buy a used car, say 3-5 years old, drive it for 5 years or so, sell it for a much lower price; then repeat with another used car; versus keeping a brand new car for 10 years? I understand that's a lot of assumption to be made (make/model of the car, not caring for driving a brand new car, etc). I also know you have to factor in the increasing maintenance costs for older cars too.

What is your opinion and is there anywhere I can find some comparisons or guideline on that?

Depends on what you are buying. I found the Civics and Corollas were not going as cheap used as I thought they would. I quickly gave up and bought new. I will sell in 6 years while it still has warranty and hopefully get 10-11K.

I will take a hit of 2K per year, but, no repair bills except brake pads, muffler and regular maintenance. I figure I will have less stress and therefore certainly be ahead in the end.

Its better than leasing.

stuntman

[CheapScotsman]

Depends on what you are buying. I found the Civics and Corollas were not going as cheap used as I thought they would. I quickly gave up and bought new. I will sell in 6 years while it still has warranty and hopefully get 10-11K.

I will take a hit of 2K per year, but, no repair bills except brake pads, muffler and regular maintenance. I figure I will have less stress and therefore certainly be ahead in the end.

Its better than leasing.

stuntmanHmmm ... I've put $5k in maintenance in the last 6 years into my 1984 honda civic (including a big rebuild type expense after it was sitting for 2 years hardly being driven and $500 in new tires) plus my insurance rates are much lower than new ... and no depreciation ... but, yes, it is an older car.

My friend has a 2000 civic and the only issues in the last 3 years has been two O2 sensors.

I think the best overall $ stategy is to buy them after major depreciation hit (2-5 years) then drive them into the dust.

but either is better than leasing.

[bobbycole]

but either is better than leasing.



can you or someone explain?

[stuntman]

Hmmm ... I've put $5k in maintenance in the last 6 years into my 1984 honda civic (including a big rebuild type expense after it was sitting for 2 years hardly being driven and $500 in new tires) plus my insurance rates are much lower than new ... and no depreciation ... but, yes, it is an older car.

My friend has a 2000 civic and the only issues in the last 3 years has been two O2 sensors.

I think the best overall $ strategy is to buy them after major depreciation hit (2-5 years) then drive them into the dust.

but either is better than leasing.

Insurance rates: I went from a 2000 Civic with basic insurance and deductable to a 2009 Corolla with full coverage and zero deductable. Cost me $400 more. I was really surprised.

I agree that if it does the job and you can afford to have it in the shop: Yes a 2-3 year old car would be the best deal if you can find one your happy with. I was not in that position. But, I do not think I will be taking such a big hit for the luxury of a new car. I will drop you a line in 6 years if/when mine is ready for sale :P

I think you can get a good used 9 year old 2000 Civic for around 3k-4K. One that is 10 years newer will cost 23K-24K.

[stuntman]

can you or someone explain?

Your kidding right? You need someone to explain that leasing is not a frugal/cost effective means of owning a personal car?

How about stating why it is a good thing.

stuntman

[Vladimir]

I think it mainly depends on brand of car.
A civic for example would probably be better new vs 1 or 2 years old.
If you really want a deal can usually get a demo, almost brand new and dont pay pdi/freight as well as quite a bit more off.

[neospice]

Keep in mind that in today's market, buying new is sometimes a good option. If you're paying cash then probably used is a better deal but if you're financing you can get a really low rate, long-term on a new car vs higher-rate on a used car. You get the full warranty, knowledge that no one else has beaten on your car, less chance of the car breaking down vs a used one, etc.

[boyoflondon]

All depends on what you are buying.

I just got an 09 Fusion SEL for $19k on the road .... Normally, it would have been $30+ ... 2 year old models are fluctuating around the same price.

For me, new would have been the way to go ...

[VivienM]

Your kidding right? You need someone to explain that leasing is not a frugal/cost effective means of owning a personal car?

How about stating why it is a good thing.


Leasing is a cost-effective, low-risk means of always having an under-warranty, <4 year old vehicle. Have you tried trading in a 4 year old owned car? The stealerships will rob you blind... and if you try to sell privately, it takes tons of time and effort. And depending on what car/options/colour you got, it may be hard to find interested buyers...

Obviously, always driving a <4 year old vehicle (whether leased, bought-after-trading-in, or bought-after-privately-selling) will cost you more than buying something lightly used (or even new) and driving it into the ground (unless you got unlucky and bought something very unreliable).

Yet, plenty of people compare the cost of apples (always having a <4 year old car) and oranges (having a >4 year old car for... 5-10 years) and say "leasing is bad".

[D-3vil]

Hmmm ... I've put $5k in maintenance in the last 6 years into my 1984 honda civic (including a big rebuild type expense after it was sitting for 2 years hardly being driven and $500 in new tires) plus my insurance rates are much lower than new ... and no depreciation ... but, yes, it is an older car.

My friend has a 2000 civic and the only issues in the last 3 years has been two O2 sensors.

I think the best overall $ stategy is to buy them after major depreciation hit (2-5 years) then drive them into the dust.

but either is better than leasing.

lol, I guess there was a reason behind choosing that username when joining :)

Really, with a new car, you're paying a bit for peace of mind. A new car has numerous extra safety features added. Its pollution levels are also about 1% of the 25-year old car (in terms of smog-forming pollutants), so you'd be doing your part in preserving air quality. Of course, it's debatable how many years it would take to ammortize the carbon footprint of building the new car.

[airodus]

The quickest depreciation as far as practical resale happens when the warranty expires. So 5 year old cars are a relative bargain in that light. I've always bought used cars because I thought they were a better value for their money. However, they have never been as cheap as I expected them to be because of the lack of warranty and age of the vehicle. Adding two 5 year old vehicles, driven for 5 years each, I spent a little less out of pocket than buying a new car and holding for 10 years. But it was quite a lot more in headache than I expected. When things are out of warranty, you spend a lot of time shopping around, haggling, living with problems, etc... all of which is avoided when you are under warranty. You also have to buy and sell the vehicle more often which can be time consuming as well (the first car I sold I had to show to 9 people before it sold). I would estimate that the 2 used car approach cost me about 80% of what a new car would have, not counting the mental anguish.

So anyways, I value my time more now than I did 10 years ago, so I just bought a new car recently. I think depending on where you are financially, you might want to spend more money to save yourself some time and hassle. But ultimately it's up to you. I think that depending on the person, a new car can be as justifiable a decision as an old car.

[james_see0625]

If you're worried about expired warranties, you may want to take a look at Certified Pre Owned cars from the manufacturers. These are cars usually 2-3 years old, but with the manufacturer adding an additional 2 year, 40,000km extended warranty on top of the car's original warranty. Also, each car goes through an inspection by the dealership - but you'll probably end up paying more for these cars, as opposed to buying privately.

Good luck.

[airodus]

If you're worried about expired warranties, you may want to take a look at Certified Pre Owned cars from the manufacturers. These are cars usually 2-3 years old, but with the manufacturer adding an additional 2 year, 40,000km extended warranty on top of the car's original warranty. Also, each car goes through an inspection by the dealership - but you'll probably end up paying more for these cars, as opposed to buying privately.

Good luck.

Yes, this is a good idea.

I bought a used Audi A4 a few years ago from the Audi used car shop. They had a few models I was interested in, the major difference being that 2 were certified and 1 wasn't (it's mileage had gone over). The difference in price was astronomical however. The certified cars were selling for 30k, while the un-certified one was selling for 20k (had about 30k more kms). I thought the un-certified one was a deal, so I got that one. I kind of regretted it down the road for all the reasons in my last post.

[james_see0625]

Airodus, if you don't mind me asking - what was wrong with your uncertified A4? I am actually looking a used A3 right now - unsure if i should purchase CPO or privately.

PM with a response if you like.

Thanks.

[at1212b]

Having read several newspapers, and watching auto shows, buying a used newer car (~1-3yrs old) always seems to be the adviseable thing to do according to experts.

Do the math yourself, and it'll confirm that too.

The new car is for someone who must absolutely have it new, fresh, and the fact that is hasn't (or rarely) been touched by someone else. Also, it can be psychological for many therefore the way the market works is, consumers will put a premium on that.

[airodus]

Airodus, if you don't mind me asking - what was wrong with your uncertified A4? I am actually looking a used A3 right now - unsure if i should purchase CPO or privately.

PM with a response if you like.

Thanks.

Owned the car for less than 3 years.

Lots of electrical problems (both headlights went out at the same time... twice! whole washer fluid system borked, problem with the 6-cd changer not changing discs, HUD froze up once and had to be reset). Lots of fluid problems (leaking coolant which took 3 services to diagnose, leak in the rear LSD). Also blew a fuel injector (required a tow) and had 2 bad ignition coils. At 160k service, I had to spend thousands on preventative maintenance which I could have avoided if I had a warrantied car (either with lower mileage, or just wait for things to break and let warranty fix them). Anyways, I ended up bringing the car in 4-5 times a year for issues which was just way too much. Also, just an Audi idiosyncrasy, you can't change the battery yourself without some really specialized tools. So that's $130 labor + parts to get your battery changed lol.

Anyways that car was a curse for me. I also got sideswiped while parked once and had to spend a lot of time/effort to get money from the guy for the body work, and even then I ended up paying out of pocket cause I decided to bring it to the Audi body shop instead of the guy's two-bit local garage.

[NDman]

Thanks for all the responses (CheapScotsman, Jucius Maximus and stuntman). I was thinking on on the same line initially but airodus did bring up some good points -- the mental stress and possible time wasted. I don't have the urge/need to drive a new car so I am perfectly fine with that. Anyway, thanks again for generating the discussion. Learned a few things here

[CheapScotsman]

Leasing is a cost-effective, low-risk means of always having an under-warranty, <4 year old vehicle. HCost effective???

There are priorities when people "acquire" a car. Make. Model, new/used, how much can they afford? do they have to finance?

If the priorities are ... new, change every 4 years, finance (lease or rent) along with all the "features" ... then "cost effective" is really down on the list of priorities.

Financing and/or leasing costs adds thousands to the base cost of a car ... and that isn't cost effective for the biggest depreciating asset people buy.

Yes, leasing and financing are options used by too many who shouldn't be ... but, hey, extending credit is what got us into the current financial mess.

lol, I guess there was a reason behind choosing that username when joining :)

Really, with a new car, you're paying a bit for peace of mind. A new car has numerous extra safety features added. Its pollution levels are also about 1% of the 25-year old car (in terms of smog-forming pollutants), so you'd be doing your part in preserving air quality. Of course, it's debatable how many years it would take to amortize the carbon footprint of building the new car.Yep, don't disagree with the peace of mind and I sure do like the smell and feel and everything of new cars. It is nice to have something new, less stress, less headache, less hassles ... This is a good route to go for the latest safety features, etc but works out the best if you drive it till dust.

and the safety features is one thing that does concern me once in a while while bombing around in our vroom vrrom car (as my 3 year old calls it)

but for pollution... hmmm. Here in BC we have to yearly/biyearly emission test our cars before you can insure them. From their website, driving 10k per year, my 1984 civic produces 2.04 tons of C02 per year while a 2008 civic produces 1.78 tons. 15% less for a newer car for 24 years of technology improvements.

edit ... interesting to note in my actual test sheet. There is a column for average readings then actual car results ... and my actual car results are 25% to 100% of average (and average is about 1/3 of maximum/fail).

[TodayHello]

Leasing is a cost-effective, low-risk means of always having an under-warranty, <4 year old vehicle. Have you tried trading in a 4 year old owned car? The stealerships will rob you blind... and if you try to sell privately, it takes tons of time and effort. And depending on what car/options/colour you got, it may be hard to find interested buyers...

Obviously, always driving a <4 year old vehicle (whether leased, bought-after-trading-in, or bought-after-privately-selling) will cost you more than buying something lightly used (or even new) and driving it into the ground (unless you got unlucky and bought something very unreliable).

Yet, plenty of people compare the cost of apples (always having a <4 year old car) and oranges (having a >4 year old car for... 5-10 years) and say "leasing is bad".


Bingo.

I am sure we can all agree there are no absolutes ... leasing isn't inherently bad ... nor is leasing better or worse than financing without knowing a persons finances, purchase purpose, and preferences.

[stuntman]

Bingo.

I am sure we can all agree there are no absolutes ... leasing isn't inherently bad ... nor is leasing better or worse than financing without knowing a persons finances, purchase purpose, and preferences.

This thread is about cost analysis and affordability.

-Leasing a personal vehicle is the most expensive option, period.
-Warranties can be had for up to 7 years (or more?) and are brakes and mufflers really hassle type repairs? So if it is warranty your worried about buy new/almost new with a longer warranty.
-Yes, it does save a person the hassle of selling the car at the end of the lease so that is a small +. Is selling a 4-6 year old car really that much of a hassle? I guess it probably is if you bought a lemon/crummy car.

The reason that leasing has a bad rap is because it is the least economical of all options and that many people lease when it obviously not the right choice for them. Leasing was fashionable and lost its lustre even with the car companies.

If someone is leasing because they want a new car every 3-4 years then they are buying luxury. Luxury is not economical.

stuntman

[afong56]

This thread is about cost analysis and affordability.

-Leasing a personal vehicle is the most expensive option, period.
-Warranties can be had for up to 7 years (or more?) and are brakes and mufflers really hassle type repairs? So if it is warranty your worried about buy new/almost new with a longer warranty.
-Yes, it does save a person the hassle of selling the car at the end of the lease so that is a small +. Is selling a 4-6 year old car really that much of a hassle? I guess it probably is if you bought a lemon/crummy car.

The reason that leasing has a bad rap is because it is the least economical of all options and that many people lease when it obviously not the right choice for them. Leasing was fashionable and lost its lustre even with the car companies.

If someone is leasing because they want a new car every 3-4 years then they are buying luxury. Luxury is not economical.

stuntman


we all know people who can't stand the thought of driving a car that is much older than 4 or 5 years old.

some of those same people finance a vehicle thinking, "hey, i'm not wasting my money, i'll be able to own this car after i'm finished the payments". sure enough, 4 years later, they own it, have absorbed the depreciation, and now are in a showroom taking a bath on their trade in, or flogging it on private sale to make room for their new 'baby'.

i know, they are delusional, but i'm pretty sure there are many people like that. granted, maybe none of them on this board, but they exist.

these are the people who have a false economy by financing their new vehicles, and who might be better served by leasing. for them, it is economical, not just luxury.

[VivienM]

-Leasing a personal vehicle is the most expensive option, period.


No, it's not.

You know what's expensive? NOT leasing a car with a residual of $12K after 4 years, then trading it in after 4 years for $5K because the market went bad, the manufacturer flooded the market, etc.

You are, as I said above, confusing apples and oranges. DO NOT COMPARE LEASING WITH OWNING A VEHICLE FOR MORE THAN FOUR YEARS. It is NOT the same thing. It does not cost the same. It does not provide the benefits.

[VivienM]

Cost effective???

Yes, cost-effective.

If the priorities are ... new, change every 4 years, finance (lease or rent) along with all the "features" ... then "cost effective" is really down on the list of priorities.

Why? If I can get a new car every 4 years for a total cost of $X with no trade-in/resale uncertainties, or I can get one for $Y, and if the resale value drops, I'm out a further $5K, how is one way of doing it not more cost effective than the other?

Financing and/or leasing costs adds thousands to the base cost of a car ... and that isn't cost effective for the biggest depreciating asset people buy.

It's a DEPRECIATING asset. That's the biggest point here.

Let me give you an example.

Let's take the numbers from my mom's leased car. 48% residual, 2.9% interest rate (she got in in July before things blew up).

Assume the following:
- you have the full purchase price available in cash or easy to liquidate assets
- you do not intend to keep the car more than 4 years

You have three options:
a) Pay cash. This isn't "free", even if you have the cash, since you are foregoing interest that might be earned if you invested your cash elsewhere (2-3% on a savings account, maybe a little more for a GIC, possibly way more/less for stocks). Pay PST/GST on 100% of MSRP. If the car is worth 40% of MSRP in 4 years, 8% of MSRP goes byebye. If the car is worth 55% of MSRP, pocket the 7% of MSRP.
b) Finance the car (with no down payment). 2.9% interest, I think, is what they were offering. Your cash stays in your mutual funds or savings account or whatever. You still pay 100% of PST/GST, plus interest on that. If the value of the car is different than 48%, see above.
c) Lease the car (with no down payment to make things easier). 2.9% interest. Pay PST/GST, without interest, on 52% of the purchase price. Invest your cash. If, at the end of the 4 years, the car is worth 40%, they're out the 8% of MSRP. No loss for you. If the car is worth more than 48% of MSRP + 13% sales taxes, buy it out, and resell it, and pocket the profit. And you don't have to find a private buyer or get screwed haggling on your trade...

Now, if you look at those three options, is it so obvious that a) is the best (which seems to be what you're saying)? And that a) is the most cost-effective?

You're tying up your cash in a depreciating asset, and if that asset depreciates more than expected, whoops. (Then again, seeing the stock market in the last 6 months, a car was probably a better investment than a mutual fund.)

(Now, of course, if the lease interest rate is 9.9%, which is what it was in January on the same model car my mom got, then these conclusions may change. But that just means that particular automaker is offering piss poor leasing offers.)

[CheapScotsman]

No, it's not.

You know what's expensive? NOT leasing a car with a residual of $12K after 4 years, then trading it in after 4 years for $5K because the market went bad, the manufacturer flooded the market, etc. Just varying degrees of fiscal ineptitude. From a financial perspective, somebody should think really REALLY hard before planning on forking out 27+K for a car with a 4 year depreciated value of 12K then giving the car up (lease expire) or selling it for 12K (example: new/used Accords selling for here). From a fiscal perspective, its a very poor move to take 4K depreciation per year.

You are, as I said above, confusing apples and oranges. DO NOT COMPARE LEASING WITH OWNING A VEHICLE FOR MORE THAN FOUR YEARS. It is NOT the same thing. It does not cost the same. It does not provide the benefits.There are no fiscal benefits (except for those who can write it off on their taxes) to financial or leasing new for 4 years then giving up the car and doing it all over again. There are lifestyle benefits ... but those come at a large financial cost.

[VivienM]

some of those same people finance a vehicle thinking, "hey, i'm not wasting my money, i'll be able to own this car after i'm finished the payments". sure enough, 4 years later, they own it, have absorbed the depreciation, and now are in a showroom taking a bath on their trade in, or flogging it on private sale to make room for their new 'baby'.

i know, they are delusional, but i'm pretty sure there are many people like that. granted, maybe none of them on this board, but they exist.

That's what happened to my dad. He had two leased cars before. Finances the last one (the GM W body that has been extensively discussed in this forum) because... well... 0% financing, and the kind of reasoning you've described ("this is a decent enough car, I'll keep it longer than 4 years").

Car gets to be 5 years old. His income has gone up. His expenses (no more kid in expensive education program to support) have gone down. He moved to a new house and now drives to work instead of taking the bus. He's a bit bored with the existing car. He wants a new car. They gave him something like $5K for the car (it's hard to say for sure, of course since dealers play with trade values). Most dealers wanted to give him $3K. Had he leased the car, the residual would have been like $11K the year before. So, he spent something like $10K more buying the car than leasing it (remembering that the finance interest rate was lower), and at the end of the day, the car is worth $3K. Whooops.

He's learned his lesson. Both of my parents' cars are currently leased, and it'll stay that way.

You know what I think it is, really? There are two kinds of people:
a) "long term car people" who don't care that much about cars, don't have the money to upgrade cars frequently, etc.
b) "new car people" who can afford new cars, like new cars, and generally will get restless driving the same thing more than 4-5 years.
Anybody in category b) who buys instead of lease is taking a HUGE gamble. Anybody in category a) who leases instead of buying is an idiot and throwing money away.

[canadiankorean]

Is leasing to own bad?

Let's say 2.9% 3 yr lease and then buy the car at the end of the lease.
What's wrong with that method?
Let's also say, I have the cash to purchase the car at the end(no financing).

Why do ppl say leasing is so bad?
Is it bad experience? perception that it's like renting?

[VivienM]

Just varying degrees of fiscal ineptitude. From a financial perspective, somebody should think really REALLY hard before planning on forking out 27+K for a car with a 4 year depreciated value of 12K then giving the car up (lease expire) or selling it for 12K (example: new/used Accords selling for here). From a fiscal perspective, its a very poor move to take 4K depreciation per year.

From a fiscal perspective, it is a very poor thing to do anything other than invest in a GIC. :)

Personally, I have less of a problem with people "throwing away" money leasing fancy new cars than with people "throwing away" money on fancy meals, dinners, vacations, etc. (Leasing nice car instead of Civic: $300 more/month. From what I'm told by my drinking friends, one night at a bar: $50-100, plus a hangover. I'll take the car and spend my nights arguing with my beloved friends on RFD.) Many people think the exact opposite. It's what keeps Starbucks, bars, and high-end restaurants in business. :)

And some people have generally frugal lifestyles. 10 year old Corolla, rarely go out for dinner, etc. Good for them.

And BTW, have you seen lease residuals lately? Most Japanese imports beloved in this forum are in the 38-40% range... even Lexus/Infiniti now. The Germans are higher for now. With the exception of Civic/Corolla, new cars depreciate like mad.

There are no fiscal benefits (except for those who can write it off on their taxes) to financial or leasing new for 4 years then giving up the car and doing it all over again. There are lifestyle benefits ... but those come at a large financial cost.

Sure. But if you are going to get a new car every 4 years, why not LOWER that financial cost and LOWER the financial risk by leasing instead of buying?

See, this is the problem with this discussion. What you people are saying is that GETTING A NEW VEHICLE EVERY 4 YEARS IS VERY EXPENSIVE TRANSPORTATION. The issue isn't leasing vs buying/trading-in or leasing vs buying/selling-privately: the issue is keeping a vehicle for 4 years instead of 7 or 10 or 15.

If we define the issue that way, then can we agree on the two following propositions?
a) Getting a new vehicle every 4 years is an expensive way to have transportation sitting in your garage.
b) If, not withstanding a), you insist on getting a new vehicle every 4 years, then leasing is a lower-risk, quite-possibly-lower-cost way of accomplishing it.

[CheapScotsman]

It's a DEPRECIATING asset. That's the biggest point here.

Let me give you an example.

Let's take the numbers from my mom's leased car. 48% residual, 2.9% interest rate (she got in in July before things blew up).

Assume the following:
- you have the full purchase price available in cash or easy to liquidate assets
- you do not intend to keep the car more than 4 years

I can't dispute that leasing is a great way to go if - you do not intend to keep the car more than 4 years

but that is probably the most cost ineffective way to own a car.

EXPENSIVE: Lease/Finance a car for the first 5 year. New Accord: 28K. 4 Year old get rid of it (lease expiry or finance sell): 12K. Simple depreciation: 4K per year not even including lease/finance charges.

INEXPENSIVE: Buy that 4 year old used car for $12K. Drive it for another 12 years (I have s 2004 Civic still on the road, we scrapped my 2004 Honda Prelude after 20 years. My friend has a 2001 Accord on the road). Depreciation: 1k per year. Maintenance on my civic is around 1k per year.

Yes, I fully understand that leasing/financing gives one a new car with no issues all wrapped up in a nice warranty and new smells and that some people want that lifestyle ...

but it is the most expensive way to own a car. Ones pay for it and it is the most cost ineffective way to own a car.

[VivienM]

Is leasing to own bad?

Let's say 2.9% 3 yr lease and then buy the car at the end of the lease.
What's wrong with that method?
Let's also say, I have the cash to purchase the car at the end(no financing).

Why do ppl say leasing is so bad?
Is it bad experience? perception that it's like renting?

In your example, it's bad because you're paying more interest than if you had financed the car outright for the same period of time at the same rate.

OTOH, if in 3 years, you don't want the car for whatever reason, leasing gives you an easy out...

[VivienM]

I can't dispute that leasing is a great way to go if - you do not intend to keep the car more than 4 years

but that is probably the most cost ineffective way to own a car.

EXPENSIVE: Lease/Finance a car for the first 5 year. New Accord: 28K. 4 Year old get rid of it (lease expiry or finance sell): 12K. Simple depreciation: 4K per year not even including lease/finance charges.

INEXPENSIVE: Buy that 4 year old used car for $12K. Drive it for another 12 years (I have s 2004 Civic still on the road, we scrapped my 2004 Honda Prelude after 20 years. My friend has a 2001 Accord on the road). Depreciation: 1k per year. Maintenance on my civic is around 1k per year.

Yes, I fully understand that leasing/financing gives one a new car with no issues all wrapped up in a nice warranty and new smells and that some people want that lifestyle ...

but it is the most expensive way to own a car. Ones pay for it and it is the most cost ineffective way to own a car.

So then, we're arguing about lifestyle choices. Nothing more and nothing else.

I could show up here with an ad from a high-end restaurant that charges $100/meal/person. I could say that going to said restaurant is a mighty expensive way to fill your stomach when you can buy food at a grocery store for $2/meal or go to the sketchy restaurant down the street and eat for $8/meal and end up with an equally full stomach.

You'd agree with me, I hope? :)

I don't see how choosing one car over a cheaper one, or choosing to keep said car for more or less time, is any different.

[CheapScotsman]

See, this is the problem with this discussion. What you people are saying is that GETTING A NEW VEHICLE EVERY 4 YEARS IS VERY EXPENSIVE TRANSPORTATION. The issue isn't leasing vs buying/trading-in or leasing vs buying/selling-privately: the issue is keeping a vehicle for 4 years instead of 7 or 10 or 15.

If we define the issue that way, then can we agree on the two following propositions?
a) Getting a new vehicle every 4 years is an expensive way to have transportation sitting in your garage.
b) If, not withstanding a), you insist on getting a new vehicle every 4 years, then leasing is a lower-risk, quite-possibly-lower-cost way of accomplishing it.LOL, yes, I thnk we can agree ... and leasing is possibly the better way to go but I don't following the leasing market cause I buy till they die ... I'm on my 4th car ever and will probably get out with less than 6 cars in my lifetime. ... you are more up the leasing subject than me.

[CheapScotsman]

So then, we're arguing about lifestyle choices. Nothing more and nothing else.

I could show up here with an ad from a high-end restaurant that charges $100/meal/person. I could say that going to said restaurant is a mighty expensive way to fill your stomach when you can buy food at a grocery store for $2/meal or go to the sketchy restaurant down the street and eat for $8/meal and end up with an equally full stomach.

You'd agree with me, I hope? :)

I don't see how choosing one car over a cheaper one, or choosing to keep said car for more or less time, is any different.You bet I agree with you. I love sketchy restaurants ... more character; some of it in the food, too. :D

Hey, everybody "splurges" and you can do that with a car too. Buy new once in a while then buy used or buy and keep ... but somebody leasing every 4 years is the same as somebody going for $100 dinners only.

and to each their own ... but its not inexpensive either way ;)

[VivienM]

Hey, everybody "splurges" and you can do that with a car too. Buy new once in a while then buy used or buy and keep ... but somebody leasing every 4 years is the same as somebody going for $100 dinners only.

... except that it's a much cheaper addiction than $100 dinners only. :)

[stuntman]

You know what I think it is, really? There are two kinds of people:
a) "long term car people" who don't care that much about cars, don't have the money to upgrade cars frequently, etc.
b) "new car people" who can afford new cars, like new cars, and generally will get restless driving the same thing more than 4-5 years.
Anybody in category b) who buys instead of lease is taking a HUGE gamble. Anybody in category a) who leases instead of buying is an idiot and throwing money away.

That about sums up the general lease considerations.

to ever said leasing is like renting.....with the exception of first crack at buying the car at the end of the lease at the educated guess of dealer value. It is renting.

[airodus]

This kind of derailed.

Leave vs purchase is a lifestyle choice, as is new vs used.

However, the scenario presented by the OP is very specific (buy 3-5 year old car, drive for 5 years, repeat). If anything, he is interested in the "leasing" lifestyle of only keeping a car for a few years, but is looking to save money by doing it with older cars.

In this case, I think that leasing a new car might be the way to go for him. He removes the uncertainty of used vehicle depreciation, gets a full warranty, and pays less up front, letting the balance of his money work for him (thru investment or whatnot).

[NDman]

However, the scenario presented by the OP is very specific (buy 3-5 year old car, drive for 5 years, repeat). If anything, he is interested in the "leasing" lifestyle of only keeping a car for a few years, but is looking to save money by doing it with older cars.



Actually, I was just assuming the "normal" life span of a car at 10 years for comparison sake. If I could get 8-10 years without major headache out of a 3-5 years old car, I will be all for it.

I am actually not interested in leasing. I am one of those people who want maybe a half decent car, but don't need to be luxurious by any stretch. Bells and whistles are nice, I am not a car buff to want them all. :) Thanks for the inputs so far, everyone (pros and cons, buy and lease, etc)

[canadiankorean]

In your example, it's bad because you're paying more interest than if you had financed the car outright for the same period of time at the same rate.

OTOH, if in 3 years, you don't want the car for whatever reason, leasing gives you an easy out...

Is a lease rate calculated differently from a finance rate?
I thought it was the same.
It's just with a lease you have a 'big' amount left to pay and usually people need to finance that if they want the car for a higher rate like 8%.
But if it's cash purchase for the full amount, then there is no interest.

I'm so mixed up.

[AudiDude]

I prefer to buy 3 year old off-lease cars. I try to find someone who is returning their car and offer them $500-$1000 more than their buyout. They sell me the car (if they are leasing from the same company, even better) and put the extra towards their new car.

I don't really want to have to bring the car in for warranty because there is almost always something else wrong with your car either after they "inspect" it or actually touch it. Most dealership mechanics suck and replace parts instead of repairing cars. Find a dedicated good mechanic and you are laughing.

No matter what car I have had, I spend about $600 annually (brakes, tires, suspension), execpt the older fox body Mustang. The Mustang ran ridiculously long, without needing parts. Many just needed brakes/tires and a water pump gasket to go five years with no issues.

I drive them either until they are worth $1500-$1700 and sell them, or if I see something I like, I will sell sooner. MY Taurus SHO cost me 10K and I drove it for 10 Years and spent about $5000 to maintain it. If the car wasn't ridiculously difficult to work on, or if it didn't need specific high-performance parts, it would have cost less.

[KawaiiTentacleBeast]

older fox body Mustang.... Taurus SHO...

I like your taste in cars. One day I will have enough money for a nice 5.0 as a summer car.

[TT333]

From what I'm told by my drinking friends,

lol, you nerd.

Really though great points. I agree with you most.

[VivienM]

Is a lease rate calculated differently from a finance rate?
I thought it was the same.
It's just with a lease you have a 'big' amount left to pay and usually people need to finance that if they want the car for a higher rate like 8%.
But if it's cash purchase for the full amount, then there is no interest.


No, but... you are paying interest on the residual.

Say the purchase price is $25K, residual is $10K, 48 month term. You are going to be paying back $15K (the depreciation), interest on the $15K depreciation, and interest on the $10K residual (because the lessor's money is tied up in the car)

So, at the end of the lease, you've been paying interest on the residual (which never shrinks) for 48 months.

If you financed the car (ignoring the taxes, which are calculated directly), you would have been down the WHOLE $25K principal over time. i.e. less interest...

(Okay, that may not be the best explanation, but hopefully you get the idea.)

[scotchtape]

Thanks for making this post NDMan!!!
I'm lookin' for a car as well.
Learning a lot!

[CaptSmethwick]

I've struggled with this in the past and learned that there are few absolutes and the answer to the question depends on the criteria you value.

For me, the pros of a new car:

the best years of a car are its early ones
I hang on to cars for roughly 6-8 years, so depreciation is really quite spread out
manufacturers tend to put more/better safety features in newer models
newer cars tend to have more/better features period (car for car)
warranty coverage is better (and higher end cars, the warranty includes maintenance for 4 years)


And the con:

higher amortized depreciation


To many, buying a 2 y.o. car every 4 years is the same as buying a new car every 6 years - in that you are never driving a car old than 6 y.o. Still, over a 12 year period, the used cycle involves 3 transactions instead of 2 (a pro or a con depending on how much you like variety vs. buying) and, in the used cycle, you will have driven a car with an average age of 4 years (vs. 3 in the new cycle) and are exposed (typically) to either higher warranty expense or uncertainty.

So, to my mind, there are few absolutes here and it depends on what you want. If you find a pristine, well cared-for used car with low mileage, etc. such that it's virtually new, it might be the way to go.

[sofa_king]

To me an important plus to buying new is a proper break in ....especially relavent if you are going to keep the car for awhile. You just don't know?

[BigAl999]

Is there a site or place I can get some sort of bench marks on cost analysis on buying a new car vs a used car?

i.e. Strictly financially speaking, would I be better off to buy a used car, say 3-5 years old, drive it for 5 years or so, sell it for a much lower price; then repeat with another used car; versus keeping a brand new car for 10 years? I understand that's a lot of assumption to be made (make/model of the car, not caring for driving a brand new car, etc). I also know you have to factor in the increasing maintenance costs for older cars too.

What is your opinion and is there anywhere I can find some comparisons or guideline on that?

It all depends on your budget. Some people can afford to buy new cars every few years, while others are content getting slightly used cars. Generally new cars depreciate like crazy the first couple years, so if you do buy new, be prepared to do your homework and buy one where you can keep for at least 5 years.

But then again, if you are well off, go ahead and splurge, within budget of course. :razz:

[Skirby01]

To those people who think leases are evil;

Leases are good for some people. If you drive relatively low kilometres and there isn't a big gap between financing and leasing interest rates, you can figure out the difference in your monthly pymts between a lease and finance. Accumulate the difference over however many months it would be and figure out your total savings by leasing and compare it to the residual value. If it is close, it may be worth the cost because this way you have a chance to walk away if you don't like the car.

[maniacshopper]

Insurance rates: I went from a 2000 Civic with basic insurance and deductable to a 2009 Corolla with full coverage and zero deductable. Cost me $400 more. I was really surprised.

.

You're comparing insurance with apples and oranges.
Compare the two together, same yr car, at same coverage, same deductible.
Pretty sure the civic has the higher insurance, due to it's slightly sporty nature :lol:
But I've seen a lot of accidents involving corollas, my own observation.
Think the insurance for corollas maybe going up to equal the civics.
I can't stand the driving dynamics of the corolla. The steering for the previous gen, prior to the sunfire tail lights on the bumper, the steering was ridiculously light at high speeds, say about 120kph.
A sneeze and I'll be in someone else lane. I felt like I was aging 3X faster in that car, kinda like presidents appearances aging 2yr more for every 1 yr at office

[cq358]

But the way the dealer calculate the sticker price of those Certified Pre owned Vehicles are based on the new car price and minus how many months they were on the road times the lowest financing payment.

That why the difference between a new car price and a 1 year old used car is as little as 1500-2000... in some new car dealerships. Their price don't factor in the true market depreciation (eg, red book value).

[VivienM]

But the way the dealer calculate the sticker price of those Certified Pre owned Vehicles are based on the new car price and minus how many months they were on the road times the lowest financing payment.

That why the difference between a new car price and a 1 year old used car is as little as 1500-2000... in some new car dealerships. Their price don't factor in the true market depreciation (eg, red book value).

I think the stealerships expect people to bargain 15-20% off...

[cq358]

I think the stealerships expect people to bargain 15-20% off...

Most of those 1-2 years old car are comming form rental companies too. For instance, they get the 10 Corollas CE B from Hertz for $12000-12600 each with 28k-32k on ODO. Recondition it and put it back to the used car lot asking for $18 995.

[stuntman]

You're comparing insurance with apples and oranges.
Compare the two together, same yr car, at same coverage, same deductible.
Pretty sure the civic has the higher insurance, due to it's slightly sporty nature :lol:
But I've seen a lot of accidents involving corollas, my own observation.
Think the insurance for corollas maybe going up to equal the civics.
I can't stand the driving dynamics of the corolla. The steering for the previous gen, prior to the sunfire tail lights on the bumper, the steering was ridiculously light at high speeds, say about 120kph.
A sneeze and I'll be in someone else lane. I felt like I was aging 3X faster in that car, kinda like presidents appearances aging 2yr more for every 1 yr at office

I was only comparing my old car rate to a new car rate for a seemingly similar 4 door sedans and how it was a surprise. New cars don't always have to be a downer with the insurance rates. I went from bare bones to full coverage on a new car for $400 extra....I do not know how I would compare that to apple and oranges but you can if you like.

Is the point of your post to cut up the Corolla? What does it have to do with this thread?
Are you saying your a bad driver?

SM

[cq358]

You're comparing insurance with apples and oranges.
Compare the two together, same yr car, at same coverage, same deductible.
Pretty sure the civic has the higher insurance, due to it's slightly sporty nature :lol:
But I've seen a lot of accidents involving corollas, my own observation.
Think the insurance for corollas maybe going up to equal the civics.
I can't stand the driving dynamics of the corolla. The steering for the previous gen, prior to the sunfire tail lights on the bumper, the steering was ridiculously light at high speeds, say about 120kph.
A sneeze and I'll be in someone else lane. I felt like I was aging 3X faster in that car, kinda like presidents appearances aging 2yr more for every 1 yr at office


?

[maniacshopper]

I was only comparing my old car rate to a new car rate for a seemingly similar 4 door sedans and how it was a surprise. New cars don't always have to be a downer with the insurance rates. I went from bare bones to full coverage on a new car for $400 extra....I do not know how I would compare that to apple and oranges but you can if you like.

Is the point of your post to cut up the Corolla? What does it have to do with this thread?
Are you saying your a bad driver?

SM

nothing about the corolla being good/bad.
eg. for me to get civic liability insurance cost me $1500/yr. When I get a ins quote on a new corolla, full coverage, $500 deductible, the insurance goes up to $1800.

My pt was that the variance in ins cost cannot be compared between the two cars. Ones a old car, civic, no security system, easier to steal, parts to replace expensive, will cost more to insure. New car (usually more expensive to insure anyway, try liability only and find out), Corolla, is cheaper to insure, has anti-theft/engine immobilizer, so harder to steal, corolla owners statiscally get into less accidents or driving violations.

my comment on its driving dynamics, is implying personally it's not for me, I'm not comfortable driving it. If we all drove the same car, you wouldn't be an individual, you'd be a number.

[Sgt_Strider]

Interesting thread guys, but I notice there hasn't been a lot of focus on the mileage when leasing a car. Granted, I know nothing about leasing and buying a car and I'm trying to learn as much as I can in this final exam climate. I recalled a friend telling me how the "rules" that he has to observe since he's leasing his car. So my question for you guys is when you're leasing a car, are you given a reasonable amount of milage? Also, how does one define as reasonable mileage? Someone may commute 10-15km to work each day and some may do more or less. Shouldn't that be an important part of the equation when deciding whether to buy or lease?

[VivienM]

Interesting thread guys, but I notice there hasn't been a lot of focus on the mileage when leasing a car. Granted, I know nothing about leasing and buying a car and I'm trying to learn as much as I can in this final exam climate. I recalled a friend telling me how the "rules" that he has to observe since he's leasing his car. So my question for you guys is when you're leasing a car, are you given a reasonable amount of milage? Also, how does one define as reasonable mileage? Someone may commute 10-15km to work each day and some may do more or less. Shouldn't that be an important part of the equation when deciding whether to buy or lease?

Most manufacturers offer two or three mileage options. 20K/year ("low mileage") and 24K/year are the most common. Some manufacturers also have 12K/year or 16K/year.

If you go over, then... ouch. It can be up to 25 cents/km for some low-km leases...

[Sgt_Strider]

Most manufacturers offer two or three mileage options. 20K/year ("low mileage") and 24K/year are the most common. Some manufacturers also have 12K/year or 16K/year.

If you go over, then... ouch. It can be up to 25 cents/km for some low-km leases...

Thanks for the response Vivien. Since you seem to be an expert at this and btw, I'm really bad with Math so that's why I'm in Arts :). Let's say I'll lease an Audi TT within the next year or two. So I went to Audi's website and I picked a 48 month term which is 4 years at 25,000km/year. I guess that's fairly reasonable since I'll most likely use the car to commute between work and home. It asked for a down payment and I don't know what the standard is so I just entered $10,000. Then I got the following figures.

Your Monthly Payment:$515 / month*
Compare All Lease Terms
Estimate Details*
Base MSRP: $ 49,350
Equiv. Interest Rate: 5.81%
Down Payment: $ 10,000
Residual Value: $ 21,714
Total Amount Financed: $ 39,350

Yes, I know that taxes, title and delivery fees are not factored in. For the sake of helping me to understand how this work, let's not factor those things in. Does that mean, I'll be paying $515/month for the next 48 months? If so, what happens after 4 years? Does the car goes back to Audi or what?

[BAM]

Your Monthly Payment:$515 / month*
Compare All Lease Terms
Estimate Details*
Base MSRP: $ 49,350
Equiv. Interest Rate: 5.81%
Down Payment: $ 10,000
Residual Value: $ 21,714
Total Amount Financed: $ 39,350

Yes, I know that taxes, title and delivery fees are not factored in. For the sake of helping me to understand how this work, let's not factor those things in. Does that mean, I'll be paying $515/month for the next 48 months? If so, what happens after 4 years? Does the car goes back to Audi or what?

You would pay 515 per month then after 4 years have the option to either buy the car from Audi for 21,714 or return it. If you keep the car in decent shape and haven't used up more than your alloted KM's the return part is free

[Sgt_Strider]

You would pay 515 per month then after 4 years have the option to either buy the car from Audi for 21,714 or return it. If you keep the car in decent shape and haven't used up more than your alloted KM's the return part is free

Ok, another stupid question to ask. The math doesn't add up for me. So how did Audi's calculator come up with the "Total Amount Financed at $39,350".

[VivienM]

Ok, another stupid question to ask. The math doesn't add up for me. So how did Audi's calculator come up with the "Total Amount Financed at $39,350".

The Audi estimator on their web site is notoriously unclear.

Simple answer: the car is $49,350. You're putting down $10K. The "remaining amount" (absolutely useless for a lease) is $39,350.

If their web site was better designed, it would give you what they call "total lease cost" on the actual quotes you get from Audi dealers. THAT one is calculated by taking all the upfront fees, plus 47 times your monthly payment... and is far more meaningful.

(P.S. Why are you getting the "quattro" TT? Bah, Haldex. Torsen all the way. :))