Leasing a car, good move or bad?

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goldsummer

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I'm a new attending. I have an old crappy car. I dont mind at all, but sooner or later I'll have to get another vehicle. Or spend a lot fixing it. I bought my current car for $9000 cash 12 years ago.

I recently heard that leasing a new car is an option. I dont totally understand how that works just yet, but along the lines of: Put money down, then pay on it each month, get full insurance, drive for a few years, then trade it in for a newer one.

Is leasing a car financially more wise than just buying another used ~10k one?

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This post is kinda long and I really do hope it genuinely helps you.

Something very important to consider with leasing is mileage. How far is your job from home? What about significant other, parents or other family? Do you drive your car a lot or plan on taking trips that may require you to drive? As an example, my girlfriend leased a car for 3 years for a total of 36k miles. She put $1,200 down and had to pay $240/month on it. She had to stop driving it for nearly 2 months because she would have blown past the 36k miles. Every mile over was an extra $0.35 she would have had to pay.

In addition to the mileage, it's fairly difficult to return a leased car without any kind of "damage" reported by the dealer. As a result, you'll be responsible to pay for repairs or detailing after the car's returned to the dealer. In a near similar fashion to the mileage situation, my girlfriend had to pay some money to have the car detailed when it was returned.

What is your student loan and/or debt situation like? The overwhelming consensus on this forum and other investment websites is to live like a resident after finishing residency in order to aggressively pay off your student loans/other debt.

Now I'm not a physician nor do I make a lot of money (see my other thread in this subforum), but something I don't want to do for a long time (or ever again) is finance a car. I've been paying for a car now for a little over 4 years and I hate the fact that I've had to for so long. Instead of using that money for student loans or other things, I have to pay for a stupid car. If I miss a payment or two, I risk my car being repossessed and paying even more fees.

My recommendation is to purchase another car with cash because you don't have to worry about making monthly payments, financing with credit, etc. I would use craigslist and search your local area to see if you find something you like (try to avoid a stealership because they will sucker you in with all of their deals and bullcrap). Surprisingly enough, I found a 1-owner, 2006 Chevy Cobalt LS in excellent condition with only 46K miles for $2900 on craigslist today. Your savings takes an initial hit when you purchase a car upfront, but you know that your monthly budget isn't being reduced because of a dumb car payment. Not to mention that at the end of the day, that car in the driveway is yours and you can do whatever you want with it.
 
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As noted in the post above, leasing a car is rarely a good financial decision. You never own the car outright, so if you have financial difficulty and need to sell off assets, your leased car is not one of them. You're better off buying a gently used car that you can drive into the ground.

Of course, if you have the money and having a new car every couple years while having a monthly payment throughout that time is what makes you happy, go for it.
 
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Although there are exceptions, in general leasing is only a good idea if you want to drive a new car every few years (and are willing to pay for it), have the ability to write off part of the lease as a business expense (not easy), want to drive a more expensive car than you can afford to buy.
 
In our society a car is an important tool. But it is ONLY a tool.

No matter what your profession, it is important to have total control over your tools. Your tools need to function well. (Looks don't matter to function.) Your tools must be readily available and in good order. A good tool will often last your entire career.

Tools are best owned by the professional NOT rented.
 
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Leasing a car is often the most expensive way to operate a vehicle. Often interest rates are double digit, and since it isn’t technically a loan, they don’t have to disclose it. Car lots push leases because they make the most money on them.

All cars go down in value, and you will pay for the loss in value with a lease. Car companies aren’t there to lose money.


 
simple response (as noted above) is if your concern is financial you should probably never lease a car. Cheapest is to drive what you currently drive for as long as possible. Then buy a used car and repeat.
 
To some degree, the advantage of buying or leasing will depend on the car make/model, price, deprecation, miles you expect to drive, and other personal factors like how much to value driving something new.

People aren't wrong that "buying a slightly used car off craigslist" is generally the cheapest option, but there are some counterpoints:

- The price of used cars has significantly increased due to covid.
- There's an opportunity cost of paying $12k down for a car. That money could have been invested.
- Interest rates can be sub 2% for qualified customers (doctors).
- (Used) car maintenance costs money. Leasing generally comes with complimentary maintenance.
- At the end of your 3 year lease, you just bring the car back to the dealer and walk away. There's very little stress.
- New cars have better features/safety/MPG.
- Leasing can be a borderline negligible expense (I'm seeing offers on solid cars for $0 down and $270-300/mo payments).
 
you just bring the car back to the dealer and walk away. There's very little stress.
Is it that easy though? I've never leased a car and it's the return process that I would worry about the most. It's really built on the assumption that you're able to keep your car in very good condition and that the dealer doesn't try to point out every potential nick or tiny scratch as an issue.
 
Is it that easy though? I've never leased a car and it's the return process that I would worry about the most. It's really built on the assumption that you're able to keep your car in very good condition and that the dealer doesn't try to point out every potential nick or tiny scratch as an issue.

Little sets and scratches are normal wear on the vehicle. They also want you to be a return customer.

As someone who doesn’t lease a car, its only an issue unless it is obviously above average damage, . . . Then they get nit picky.

To some degree, the advantage of buying or leasing will depend on the car make/model, price, deprecation, miles you expect to drive, and other personal factors like how much to value driving something new.

People aren't wrong that "buying a slightly used car off craigslist" is generally the cheapest option, but there are some counterpoints:

- The price of used cars has significantly increased due to covid.
- There's an opportunity cost of paying $12k down for a car. That money could have been invested.
- Interest rates can be sub 2% for qualified customers (doctors).
- (Used) car maintenance costs money. Leasing generally comes with complimentary maintenance.
- At the end of your 3 year lease, you just bring the car back to the dealer and walk away. There's very little stress.
- New cars have better features/safety/MPG.
- Leasing can be a borderline negligible expense (I'm seeing offers on solid cars for $0 down and $270-300/mo payments).

The “complimentary” maintenance is built into the price of the lease. And car repair almost never justifies buying a new(er) car simply because the main cost of vehicle ownership is depreciation. My friend leased a GTR and he had to buy his own tires. (which is like $2400/yr. . Fancy sports car tires have to be replaced like every 8k miles and are like $800 for the “budget” one).

I’d always suggest people who really worry about the opportunity cost of a car. . . Should buy less expensive cars. I’m also the guy with no payments and likes it that way.

PS COVID is a temporary issue that has disrupted the supply of vehicles. It won’t last (I hope).
 
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A lease is just a fancy way of renting a car. Buying used and keeping it for a long time is the best financial move but as people said there are some issues with that. Buying new and keeping for a long time solves some of the issues at a higher price point, but depending on the situation and what you are looking for it may be worth it (especially if you can afford to pay cash for it but instead do their zero percent financing and invest the cash). Buying new and keeping for a short time isn't a great financial move. Leasing and buying it at the end is an even worse financial move. Leasing and getting a new car each time is possibly worse financially but hey at least you get all the new features all the time. People who do this tend to value those new features enough that to them it justifies the financial losses, or they do it because they get a nicer car than they could otherwise afford.
 
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I'm a new attending. I have an old crappy car. I dont mind at all, but sooner or later I'll have to get another vehicle. Or spend a lot fixing it. I bought my current car for $9000 cash 12 years ago.

I recently heard that leasing a new car is an option. I dont totally understand how that works just yet, but along the lines of: Put money down, then pay on it each month, get full insurance, drive for a few years, then trade it in for a newer one.

Is leasing a car financially more wise than just buying another used ~10k one?
No. It's basically a long term rental. When this one dies, just buy another one. If you have more than $9K, spend more than $9K on it and enjoy. But don't lease it.
 
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Okay, so you've already gotten the advice that financially it doesn't make a whole lot of sense. The most financially savvy thing you can do is buy the worst used car you can tolerate with low maintenance fees and drive it until it dies. There are a few things I think worth noting about leases if you are thinking about it still.

Of note, I've leased 4 different cars, all from Honda, throughout the years so my perspective is entirely through their leasing program.

1. You have the option to purchase the vehicle at the end of the lease for a predetermined price. You should compare the total cost of the lease + end-of-lease purchase price to the cost of buying the same car new. In my Honda leases, the cost difference has been less than $1000.

2. When you end the lease, there are several options. You can turn it in(sometimes with a high disposition fee which you should look at before leasing), you can buy it and keep it(probably the worst option), or you can buy it and sell it for a profit, including as a trade-in for your next lease or purchase. My most recent leased car was worth $1500 more than the buy-off value so I was able to trade it in and lower my lease cost.

3. Most leases will not charge you for "normal wear and tear" and additional damages up to a pre-determined amount($1500 for Honda). I've dinged up all my leases and never been charged.

4. The car you want now might not be the car you want in 3 years. Being in the military, I can be moved anywhere on a 3 year cycle to drastically different climates and areas, so the short term commitment works well for me.

5. What you negotiate is down payment vs monthly payment and the annual mileage. The cost of the lease is advertised upfront so there's no haggling or worrying about getting ripped off.

6. Most vehicles will have very little in maintenance costs in the first 3 years. I get oil changes less often then I probably should and change the wiper blades maybe once the entire lease duration. It's not my car, so paying for additional maintenance isn't in my interest so long as the car is drivable at the end of the lease. In convenience alone, it's really nice.

7. New cars have nice features that old cars don't. Having Android Auto was a huge plus for me, as are the additional safety features such as lane departure and early braking assistance.

8. New cars also have better gas efficiency. My current car gets 50mpg, which helps offset the cost.

9. You don't have to sell it when you're done with it. I personally don't have the time or energy to take pictures, meet with potential buyers, do all the paperwork, etc.

Again, leasing is a loss financially but there are some nice advantages to it. You can decide if its worth it or not.
 
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Was gifted a 3 year old basic sedan for high school graduation and have been driving it for the last 11 years. Granted, I was blessed to received such a gift but not having a car payment for such a long time has been amazing. The insurance is reasonable and the maintenance minimal so far. Hoping it makes it through the rest of residency (4 yrs) and then some. Buying used is the best way to go, imo. The people I know who lease generally want to drive new cars and not ever worry about maintenance hassle. But it certainly is not a financial decision.
 
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There's definitely a middle ground between leasing and buying an unreliable 3000 dollar car. The sweet spot is a 2-3 year old vehicle with low miles. You save tens of thousands in depreciation and you are still driving a nearly new vehicle with modern features, etc. Paying cash is best, but a low interest car loan isn't that big a deal.
 
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