Automotive

Leasing vs buying a car

  • Last Updated:
  • Dec 7th, 2017 1:47 pm
[OP]
Newbie
Oct 29, 2017
57 posts
2 upvotes

Leasing vs buying a car

My wife was looking at cars today and was told it was $25,000 to buy a new car and approximately $26000 to lease the car with the option to buy the car after 4 years.

In looking at the numbers, it appeared that to lease the car, it would cost us $1,000 over 4 years and then we could buy the car or trade it in for another one.

I've never leased a car before and did get this information second hand from my wife, but does this sound correct that you only need to pay an extra $1,000 to lease a car?
37 replies
Member
Nov 13, 2011
435 posts
129 upvotes
Vancouver, BC
Who "told" you the costs? Hopefully not the dealership because they can't be trusted completely. Do your own calculations and find out. There are plenty of online lease calculators, you just need to know the residual and interest rate.
Newbie
Nov 15, 2017
54 posts
11 upvotes
Finances aside, the lure of leasing is that you can switch to the newest model once the least is up.

Example:

You lease a 2018 Mazda 3. After four years, the redesign is out. You say bye bye to the 2018 model, and hop in the 2022 model.

You could always sell the car, but you'd have to work out the math.

Personally, I would consider leasing if it is 0% interest. Car sales will "recommend" you to own instead of buy a vehicle.
Deal Expert
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Dec 7, 2012
26865 posts
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GTHA
timc00k wrote:
Dec 1st, 2017 11:11 pm
My wife was looking at cars today and was told it was $25,000 to buy a new car and approximately $26000 to lease the car with the option to buy the car after 4 years.

In looking at the numbers, it appeared that to lease the car, it would cost us $1,000 over 4 years and then we could buy the car or trade it in for another one.

I've never leased a car before and did get this information second hand from my wife, but does this sound correct that you only need to pay an extra $1,000 to lease a car?
You should watch the Q&A video in thread...

Buying a new car? Should you lease or finance? What about buying used? Are warranties worth it?
buying-new-car-should-you-lease-finance ... c-2147873/
Deal Addict
Jul 11, 2008
4148 posts
1361 upvotes
timc00k wrote:
Dec 1st, 2017 11:11 pm
My wife was looking at cars today and was told it was $25,000 to buy a new car and approximately $26000 to lease the car with the option to buy the car after 4 years.

In looking at the numbers, it appeared that to lease the car, it would cost us $1,000 over 4 years and then we could buy the car or trade it in for another one.

I've never leased a car before and did get this information second hand from my wife, but does this sound correct that you only need to pay an extra $1,000 to lease a car?
Which car and brand?? If there are no cash incentives, probably yes.
Sr. Member
Jan 15, 2017
689 posts
460 upvotes
No, it is not correct as your post left out lots of numbers.

You are comparing leasing and buying out a lease vs buying a car outright at the beginning. To compare the two, you need to determine the overall costs of both. With leasing and buying out, you need to consider any upfront money, total lease pmts (including interest), lease purchase fees, buyout price plus taxes and any interest fees if financing the lease buy out.

With purchase upfront, you need to consider any upfront amounts and the total pmts including interest.

Unless you receive a very low interest rate on leasing, it is rarely a good idea to lease a vehicle with plans to buy out the lease at lease end as interest is calculated differently on a lease than on a simple auto loan. Instead, finance the vehicle with a traditional auto loan from the start.
Deal Addict
Jul 26, 2007
2425 posts
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Toronto
Don't forget the lumpsum payment of residual at the end of the term. Will you have $15k at end of 4th year to pay off?
Member
Aug 18, 2014
328 posts
169 upvotes
Markham, ON
timc00k wrote:
Dec 1st, 2017 11:11 pm
My wife was looking at cars today and was told it was $25,000 to buy a new car and approximately $26000 to lease the car with the option to buy the car after 4 years.

In looking at the numbers, it appeared that to lease the car, it would cost us $1,000 over 4 years and then we could buy the car or trade it in for another one.

I've never leased a car before and did get this information second hand from my wife, but does this sound correct that you only need to pay an extra $1,000 to lease a car?
Sounds about right.

FYI, when you lease a car and buyout at the end, the only thing you are paying more compare to paying full price upfront is the interest cost (+ in some cases they charge extra administration cost for leasing/financing, typically $100-$500)
Lease payments and residual are calculated in a particular way. They are not made up randomly.

That is also why if the interest rate is 0%, you should ALWAYS lease. There should be no additional cost to lease a car then buyout VS paying everything upfront if the interest rate is 0%. (Of course unless the manuf. is giving additional discount on the car if you pay upfront, which is common and very reasonable.)

I usually argue if the interest rate is low enough (e.g. 1-3%), you really should lease as well since the extra money in your account can probably earn more than 3% in investment income anyway. Plus you are given the option & flexibility to keep or return the car at the end.
(e.g. You might plan to keep the car for 10+ years initially, but then you got into a $15K car accident or they car keep getting other repair issues you probably wouldn't want to keep it then)
Member
Aug 18, 2014
328 posts
169 upvotes
Markham, ON
peteryorkuca wrote:
Dec 2nd, 2017 10:34 am
Don't forget the lumpsum payment of residual at the end of the term. Will you have $15k at end of 4th year to pay off?
Well if he has enough money to pay for the whole car upfront, I can't see how he wouldn't have the money to pay off the cars after 4 years.
Deal Expert
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Apr 21, 2004
41473 posts
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timc00k wrote:
Dec 1st, 2017 11:11 pm
My wife was looking at cars today and was told it was $25,000 to buy a new car and approximately $26000 to lease the car with the option to buy the car after 4 years.

In looking at the numbers, it appeared that to lease the car, it would cost us $1,000 over 4 years and then we could buy the car or trade it in for another one.

I've never leased a car before and did get this information second hand from my wife, but does this sound correct that you only need to pay an extra $1,000 to lease a car?
I was just checking out Honda.ca and when you build and price a vehicle and change the terms of the financing or lease, you will see the total cost of borrowing below. I'm sure not all manufacturers show that on their build page.
Member
Apr 20, 2011
374 posts
8 upvotes
Scarborough
If you annual mileage is always less than 10000 km, does lease over finance always win if getting a brand new car?
Newbie
Jan 22, 2017
62 posts
27 upvotes
dainfamous41 wrote:
Dec 3rd, 2017 3:02 pm
If you annual mileage is always less than 10000 km, does lease over finance always win if getting a brand new car?
Depends on what your definition of "win" is.
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Apr 21, 2004
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dainfamous41 wrote:
Dec 3rd, 2017 3:02 pm
If you annual mileage is always less than 10000 km, does lease over finance always win if getting a brand new car?
Check total cost over the terms and cost of borrowing to buy the car at lease end. Usually to come ahead, you would have to finance or buy with cash and own at least seven years.

We got a brand new 11 Accord for $37k all in with extended warranty and tint, protective film sad to say, rust proofing, and it still drives really well.

This month marks seventh year of ownership. So I paid $440 a month after HST.

I still have extended warranty until end of next year. By then, it would just be $385.

I will drive it to the ground. It has electronic stability control and it's fast and handles well enough. Oh it's the coupe so it doesn't look bloated like the sedan. :)
Member
Apr 20, 2011
374 posts
8 upvotes
Scarborough
papermate2 wrote:
Dec 3rd, 2017 4:11 pm
Depends on what your definition of "win" is.
After 3 years at end of lease I return the car at 30,000 km or less, whereas if I had financed it after 3 years the car would have depreciated faster than me really using it. If I continue to own it, after 10 years lets just say I drive it 100000 km in total, the car would just be an older car with lower mileage and may not have a great resale value.
Member
Apr 20, 2011
374 posts
8 upvotes
Scarborough
alanbrenton wrote:
Dec 3rd, 2017 4:21 pm
Check total cost over the terms and cost of borrowing to buy the car at lease end. Usually to come ahead, you would have to finance or buy with cash and own at least seven years.

We got a brand new 11 Accord for $37k all in with extended warranty and tint, protective film sad to say, rust proofing, and it still drives really well.

This month marks seventh year of ownership. So I paid $440 a month after HST.

I still have extended warranty until end of next year. By then, it would just be $385.

I will drive it to the ground. It has electronic stability control and it's fast and handles well enough. Oh it's the coupe so it doesn't look bloated like the sedan. :)
What is your km after 7 years?

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