Automotive

Leasing vs buying a car

  • Last Updated:
  • Dec 7th, 2017 1:47 pm
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dainfamous41 wrote:
Dec 3rd, 2017 8:02 pm
What is your km after 7 years?
106k. Could have been more if my wife didn't ask for a SUV. :)

I don't like to drive around wasting fuel.

Actually best is to buy used and buy an extended warranty from a manufacturer that honors its own warranty. That's what I am going to do for my next car if I don't go with a pure electric because I need longer range. For now only Bolt and TM3 can meet that and the latter is vaporware.

Too much money wasted buying new but in 2011, ESC was just being made mandatory. In 2016, we got
the SUV with BSM , ACC, AEB, backup camera, parking sonar and hybrid technology.

I don't think I need any more safety nannies for my daughter in two or three years' time besides what already exist.

Lexus is coming up with self steering around pedestrians but I don't think most of us need that yet unless pedestrians turn to jaywalking zombies.
Last edited by alanbrenton on Dec 3rd, 2017 8:08 pm, edited 1 time in total.
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For me, the reason for leasing is:
1. I don't drive much. <13K km per year for last 10+ years. I now don't want to own a car that depreciates faster than how much I drive.
2. bill for maintenance + wear/tear replacement keeps going up and more frequent after 7-8 years.
3. I can write off part of the cost as business expense. The tax credit is likely higher than the cost of leasing interest.

Unless you like to drive a brand-new car every 4-5 years OR you have justifiable financial reasons, buying is always more sensible choice.
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terry0703 wrote:
Dec 3rd, 2017 8:08 pm
For me, the reason for leasing is:
1. I don't drive much. <13K km per year for last 10+ years. I now don't want to own a car that depreciates faster than how much I drive.
2. bill for maintenance + wear/tear replacement keeps going up and more frequent after 7-8 years.
3. I can write off part of the cost as business expense. The tax credit is likely higher than the cost of leasing interest.

Unless you like to drive a brand-new car every 4-5 years OR you have justifiable financial reasons, buying is always more sensible choice.
Agreed buying is more sensible choice if you really will drive the car and its a long term purchase. However, also agree with point #1, if you don't drive much than lease is probably a better option with a new car
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dainfamous41 wrote:
Dec 3rd, 2017 8:20 pm
Agreed buying is more sensible choice if you really will drive the car and its a long term purchase. However, also agree with point #1, if you don't drive much than lease is probably a better option with a new car
Point #1 has nothing to do with leasing or buying unless you know you won't be driving much after the lease ends. If you will be driving little over eight years, it doesn't matter whether you lease or own you still come up a winner with ownership. Just look at my example, I am still at $440/month. You can lease an Accord for that much every three years but then sometime during your third lease, I will come out ahead if my car doesn't break down much. :)

Driving low km means getting by with a reliable car to get you from point to point. No need for all the convenience technology like ACC if you drive little. Also no need for electric or hybrid technology because payback period will be so long.
Last edited by alanbrenton on Dec 3rd, 2017 8:27 pm, edited 1 time in total.
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alanbrenton wrote:
Dec 3rd, 2017 8:27 pm
Point #1 has nothing to do with leasing or buying unless you know you won't be driving much after the lease ends.

Driving low km means getting by with a reliable car to get you from point to point. No need for all the technology if you drive little. Also no need for electric or hybrid technology because payback period will be so long.
If you really wanted a new car and if your driving habits are going to stay the same for like 10 years, based primarily on your job location (ex. if you just drive to the go station and back everyday for all the work days in a year), then I can't see how buying makes sense?
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alanbrenton wrote:
Dec 3rd, 2017 8:27 pm
Point #1 has nothing to do with leasing or buying unless you know you won't be driving much after the lease ends.

Driving low km means getting by with a reliable car to get you from point to point. No need for all the technology if you drive little. Also no need for electric or hybrid technology because payback period will be so long.
At least when leasing, I can choose to pay less for driving less.
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dainfamous41 wrote:
Dec 3rd, 2017 8:30 pm
If you really wanted a new car and if your driving habits are going to stay the same for like 10 years, based primarily on your job location (ex. if you just drive to the go station and back everyday for all the work days in a year), then I can't see how buying makes sense?
Because after year 7 or 8, I will come ahead of the lessee on his third three-year lease agreement.

Why does it matter if I drive a little? Cash outflow is cash outflow no matter what.
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terry0703 wrote:
Dec 3rd, 2017 8:31 pm
At least when leasing, I can choose to pay less for driving less.
Km allowance charge? There is a usually a min of 20k. If you drive 13k, do you get further ahead?
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alanbrenton wrote:
Dec 3rd, 2017 8:33 pm
Because after year 7 or 8, I will come ahead of the lessee on his third three-year lease agreement.

Why does it matter if I drive a little? Cash outflow is cash outflow no matter what.
If you new car was at 70000km after 7 year, the resale value may or may not be great. I think it really depends on whether you like the car and have commitment to drive it for a long time.
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alanbrenton wrote:
Dec 3rd, 2017 8:34 pm
Km allowance charge? There is a usually a min of 20k. If you drive 13k, do you get further ahead?
There's 16k annual leases for a lot of brands
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alanbrenton wrote:
Dec 3rd, 2017 8:34 pm
Km allowance charge? There is a usually a min of 20k. If you drive 13k, do you get further ahead?
All I'm saying is, I can at least choose to leave better residual value by signing up to drive less, and therefore commit to pay less.
For example on a $45K vehicle, the typical difference in monthly cost between 24,000km/yr vs 12,000km/yr is $50-60 per month depending on leasing term.
That makes up anywhere between $2,000 - $3,000 over the period of the lease. Still, the monthly lease amount x leasing term + residual value becomes typically $2-3k more than MSRP buying outright, but I would consider that as cost for the warranty - I keep the car always in warranty and I am free of my reason #2. (If I want to buy extended warranty after 4 years, it typically is $2-4k for 4 years). This way, I justify leasing might be a better choice for people like me who drive a very short mileage per year.

I know I am not like most people - typically people drive more like 16,000 - 25,000km/yr, so I may be some extreme case....or my idea is simply wrong.
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Xfiles wrote:
Dec 3rd, 2017 8:38 pm
There's 16k annual leases for a lot of brands
Okay. So the monthly cost go down by $50 at the most over three years bumping residual value by around $1,800 for a $30k vehicle?
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dainfamous41 wrote:
Dec 3rd, 2017 8:37 pm
If you new car was at 70000km after 7 year, the resale value may or may not be great. I think it really depends on whether you like the car and have commitment to drive it for a long time.
The reason I bought the car was to drive it to the ground not to think about reselling it in year 7.

I might as well lease a fancier car if I was going to sell a financed car every 7 years, which I assumed is the break even point for lease in perpetuity vs finance and drive to the ground analysis.

It is like renting vs home ownership but for a depreciating asset.

Leasing comes ahead for those who like fancy but unreliable and costly to maintain cars because like BMW, you don't pay for the first four years of maintenance anyway.
Last edited by alanbrenton on Dec 3rd, 2017 8:58 pm, edited 1 time in total.
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I've always thought about leasing since I get bored of cars after 3-5 years. Never thought about looking for a 0% lease before, interesting idea...
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terry0703 wrote:
Dec 3rd, 2017 8:54 pm
All I'm saying is, I can at least choose to leave better residual value by signing up to drive less, and therefore commit to pay less.
For example on a $45K vehicle, the typical difference in monthly cost between 24,000km/yr vs 12,000km/yr is $50-60 per month depending on leasing term.
That makes up anywhere between $2,000 - $3,000 over the period of the lease. Still, the monthly lease amount x leasing term + residual value becomes typically $2-3k more than MSRP buying outright, but I would consider that as cost for the warranty - I keep the car always in warranty and I am free of my reason #2. (If I want to buy extended warranty after 4 years, it typically is $2-4k for 4 years). This way, I justify leasing might be a better choice for people like me who drive a very short mileage per year.

I know I am not like most people - typically people drive more like 16,000 - 25,000km/yr, so I may be some extreme case....or my idea is simply wrong.
You are not atypical. It is just most of us are employed and have no thriving side businesses. I tried with my wife's realtor license but we parked it to save on costly licenses because it wasn't easy at that time with a full time job and that was in 2009 so I would think r/e is not going to do as well with the changes next year.

If I had businesses income and used the car at least 80% for it, I would likely just lease a car. Well even if I financed, I can always apply CCA but with leasing you get to expense $800/month where as for CCA the cap is $30k I believe so for more expensive vehicles, leasing is the way to go.

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