Automotive

What is your thinking when you decide to lease even when you know you will need a car for a long term

  • Last Updated:
  • May 30th, 2019 9:28 pm
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON

What is your thinking when you decide to lease even when you know you will need a car for a long term

HI guys

I am looking for a car and I need to get a low monthly payment rate so I am also looking at leasing from this perspective
Here is what leasing a Kia Soul for three years with 0 down payment means. I don't see the point of leasing when after 3 years you would have paid 50% of the car already.
Assuming that you do not want to change the car every three years, you do not have a business to write off the lease amount and you do not plan to leave the country soon ...what other reasons would you have to lease??
Image
[external link removed, do not repost]
35 replies
Deal Fanatic
User avatar
Mar 17, 2006
6833 posts
5736 upvotes
North York
lease at cheaper interest rate than finance. save the interest on those 3 years
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
konsensei wrote: lease at cheaper interest rate than finance. save the interest on those 3 years
But you end up paying more car if you don't buy the car at the end of the lease
[external link removed, do not repost]
Deal Fanatic
User avatar
Mar 17, 2006
6833 posts
5736 upvotes
North York
CuriousC wrote: But yo end up paying more care if you don't buy the car at the end of the lease
if you are not buying the car at lease end, what's your question then?
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
Swerny wrote: There have been many threads on this topic.

Outside one of those scenarios, there's no good reason to lease other than a lower monthly payment, but if that's the only reason you are leasing, you are leasing more car than you can afford.
I did search the forum Buying vs Leasing but I could only see isolated messages ...maybe I am not using the right key words
[external link removed, do not repost]
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
konsensei wrote: if you are not buying the car at lease end, what's your question then?
If you are buying at the end the total cost of the car should be higher than if you finance the car from the beginning I think
[external link removed, do not repost]
Deal Addict
Mar 17, 2016
1429 posts
1260 upvotes
There are plenty of reasons to lease:
- cheaper rate, lower monthly payments, lower out of pocket initial expenses. Can invest the rest and get more money back
- 3-5 years is generally how long the majority of people prefer to keep their cars. Not a lot of people keep cars for decade+ anymore. Let's be honest here, you get tired of having the same car after year 3.
- no hassle involved trying to sell your vehicle. Just return it back once lease is done. No need to deal with tirekickers, scammers or get fleeced by trading it in.
- most comprehensive warranties expire after 3-4 years. If you keep your car for longer than that you're running into a risk of expensive repairs etc.
- can drive a better car than you can actually afford (need to be careful with this one)
- tax advantages for business owners

It's got its advantages and disadvantages. It's really up to you.
Last edited by Hindenburg1 on May 29th, 2019 9:39 am, edited 1 time in total.
Deal Fanatic
User avatar
Mar 17, 2006
6833 posts
5736 upvotes
North York
CuriousC wrote: If you are buying at the end the total cost of the car should be higher than if you finance the car from the beginning I think
if i can lease a car at 1% rate then buy off after 3 years vs finance a car at 5% for 5 years.
Which one do you think is better economically?
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
Hindenburg1 wrote: There are plenty of reasons to lease:
- cheaper rate, lower monthly payments, lower out of pocket initial expenses. Can invest the rest and get more money back
- 3-5 years is generally how long the majority of people prefer to keep their cars. Not a lot of people keep cars for decade+ anymore. Let's be honest here, you get tired of having the same car after year 3.
- no hassle involved trying to sell your vehicle. Just return it back once lease is done. No need to deal with tirekickers, scammers or get fleeced by trading it in.
- most comprehensive warranties expire after 3-4 years. If you keep your car for longer than that you're running into a risk of expensive repairs etc.
- can drive a better car than you can actually afford (need to be careful with this one)
- tax advantages for business owners

It's got its advantages and disadvantages. It's really up to you.
you are kidding right? I paid 1000 more to get 6 years bumper to bumper warranty for my Outback...To me that looks like a lot better deal
And then you get charged by the dealer for any scratch or damage done to the vehicle and limited mileage
[external link removed, do not repost]
Deal Addict
Mar 17, 2016
1429 posts
1260 upvotes
CuriousC wrote: you are kidding right? I paid 1000 more to get 6 years bumper to bumper warranty for my Outback...To me that looks like a lot better deal
And then you get charged by the dealer for any scratch or damage done to the vehicle and limited mileage
So you've just reinforced my point. You paid an extra $1000 to be covered for those extra 2 years. What if nothing breaks? You are still out $1k extra regardless. You will get dinged on resale value if your car is all scratched up/banged up anyways.
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
Hindenburg1 wrote: So you've just reinforced my point. You paid an extra $1000 to be covered for those extra 2 years. What if nothing breaks? You are still out $1k extra regardless. You will get dinged on resale value if your car is all scratched up/banged up anyways.
it is bumper to bumper
the bumper to bumper expires after 1 year so I bought 5 more years of that
when you resell your car you have the option to say f...off to the guy who is bargaining on scratches, at that point any car would have scratches so he can't buy or get a discount from the others either ....it will be the market value calculated with an average number of scratches
when you finish the lease you have to pay for those scratches no matter what
[external link removed, do not repost]
Deal Addict
User avatar
Sep 9, 2012
4172 posts
3461 upvotes
Oakville, ON
Hindenburg1 wrote: There are plenty of reasons to lease:
- cheaper rate, lower monthly payments, lower out of pocket initial expenses. Can invest the rest and get more money back
- 3-5 years is generally how long the majority of people prefer to keep their cars. Not a lot of people keep cars for decade+ anymore. Let's be honest here, you get tired of having the same car after year 3.
- no hassle involved trying to sell your vehicle. Just return it back once lease is done. No need to deal with tirekickers, scammers or get fleeced by trading it in.
- most comprehensive warranties expire after 3-4 years. If you keep your car for longer than that you're running into a risk of expensive repairs etc.
- can drive a better car than you can actually afford (need to be careful with this one)
- tax advantages for business owners

It's got its advantages and disadvantages. It's really up to you.
There’s an additional tax benefit that applies for both business owners and salaried/hourly/retired.

You only pay sales taxes on the lease payments during the life of the lease. You save the tax on the residual value if you walk away. In the OP’s example in Ontario there would tax savings or avoidance of $1,257 in Tax ($9,671 x 13% HST).

The more expensive the vehicle and/or the higher the residual the less tax you pay. Of course though, if you sign up for another lease, you’ll start paying tax on the next lease payment again. So really it’s not so much a tax savings as it is a tax deferral.

Not a deal breaker or tipping point but it is an additional consideration in the pro vs con of buy vs lease.
Deal Addict
Mar 17, 2016
1429 posts
1260 upvotes
CuriousC wrote: it is bumper to bumper
the bumper to bumper expires after 1 year so I bought 5 more years of that
when you resell your car you have the option to say f...off to the guy who is bargaining on scratches, at that point any car would have scratches so he can't buy or get a discount from the others either ....it will be the market value calculated with an average number of scratches
when you finish the lease you have to pay for those scratches no matter what
Oh ok I see. That's a really good deal then for 5 years. I thought you just topped up 3 years to 5.
Sr. Member
Jan 20, 2012
770 posts
392 upvotes
Toronto
1 huge advantage I found from leasing is you can walk away from an accident damaged / lemon without obligation.
Deal Fanatic
Sep 1, 2004
6116 posts
4728 upvotes
Lease is definitely good if you can write it off for some pretax spending.

If you can't the benefit of leasing are:

1) cheaper payment.

2) Be ahead of depreciation, a $70K Merc will lose $10K the minute you drive off the lot. It will take 11 months of lease payments before you hit that.

3) In event of accident, you don't take the hit of dimmished value, the leasing company that owns the car does.

When leasing doesn't work.

1) you know you will own the car beyond warranty, doesn't matter if it got into an accident or if it's a lemon.

2) you are using this as a way to buy something you can't afford.

3) you don't have the money to invest in other thing that isn't a depreciating asset.
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
Xtrema wrote:
3) you don't have the money to invest in other thing that isn't a depreciating asset.
That is a very good point that I never considered
[external link removed, do not repost]
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
Now that is opening my eyes to an issue that I have
I have to split my cash between car and paying off the mortgage
Going with a lease and buying up at the end might work better then ..that allows me to pay my mortgage which will carry a higher interest than 0.99% interest that you can get from some of the dealers for a lease. I have not checked all of them but the example I started with in this thread has exactly that
[external link removed, do not repost]
Deal Fanatic
Sep 1, 2004
6116 posts
4728 upvotes
CuriousC wrote: Now that is opening my eyes to an issue that I have
I have to split my cash between car and paying off the mortgage
Going with a lease and buying up at the end might work better then ..that allows me to pay my mortgage which will carry a higher interest than 0.99% interest that you can get from some of the dealers for a lease. I have not checked all of them but the example I started with in this thread has exactly that
Now of course there are cars that a better lease than others. When you set you mind to leasing, make sure you shop around. Residual value matters more than rates. That's why sometimes it's cheaper to lease a $25K Civic than a $20K Fit. Or something a $45K Cadalliac can be leased for the same monthly payment as $30K Civic.

Paying off mortgage is a guarantee win, especially if you are very early in your amortization period, 20+ yr.

As my advice always is, only buy a car that you can pay if off fully in cash. Lease/Finance is up to your debt/investment/incentives to free up cash flow.

If you look at it as I can either finance a Soul but the same payment can lease me a X3, that's a big no-no.

Also be prepare to have cash to buyout at end of lease. Financing options are few at that point and cheapest would be HELOC.

So let me put it in another way. While I hate people getting into 84 months car loans, if you KNOW 100% you are going to keep the car for that long and you can negotiate discount and rate lower than 1%. That's probably a good way to go. Just make sure you pick a reliable car. That way, you don't have to worry about financing the buyout when time comes.

I personally has no faith on any manufacturers or mechanics, so I only keep cars that are under warranty.
[OP]
Deal Addict
Jun 27, 2015
1659 posts
213 upvotes
East York, ON
Xtrema wrote: Now of course there are cars that a better lease than others. When you set you mind to leasing, make sure you shop around. Residual value matters more than rates. That's why sometimes it's cheaper to lease a $25K Civic than a $20K Fit. Or something a $45K Cadalliac can be leased for the same monthly payment as $30K Civic.

Paying off mortgage is a guarantee win, especially if you are very early in your amortization period, 20+ yr.

As my advice always is, only buy a car that you can pay if off fully in cash. Lease/Finance is up to your debt/investment/incentives to free up cash flow.

If you look at it as I can either finance a Soul but the same payment can lease me a X3, that's a big no-no.

Also be prepare to have cash to buyout at end of lease. Financing options are few at that point and cheapest would be HELOC.

So let me put it in another way. While I hate people getting into 84 months car loans, if you KNOW 100% you are going to keep the car for that long and you can negotiate discount and rate lower than 1%. That's probably a good way to go. Just make sure you pick a reliable car. That way, you don't have to worry about financing the buyout when time comes.

I personally has no faith on any manufacturers or mechanics, so I only keep cars that are under warranty.
I paid 1k for bumper to bumper warranty for 6 years for my subaru
if I can do it again I will do it for a lower model (crosstrek or imprezza) and keep the car ...I was looking to save on gas with hybrids but they suck due to the battery degradation
I can see a hybrid losing more value than the ICE car over the same span (-4-5 years) dues to battery degradation. that is just my opinion now...
[external link removed, do not repost]
Deal Guru
User avatar
Jul 12, 2003
11449 posts
3715 upvotes
Toronto
We lease to buy our Lexus because the lease rate is 0.4% only....and the dealership even waiving the admin fee if we buy out the car at the end of the term.
We are ready to pay cash to pay off the car in day 1, but with the money on our hand for the next 39 months, we could easily make more money than the 0.4 interest that cause us.
Retired Forum Moderator February 2009 - June 2015

Top