Lease vs buy?

[JFD140]

i can afford the truck, i can make gas, insurance and car payments in a weeks paycheck or week and a half tops. (i sometimes don't work Saturdays) I am simply trying to figure out what will work most in my favor. I am only 18 i therefore don't have proper knowledge about the matter. I am trying to be smart and do my research thats all. My mom explained leasing a bit as well and said if you go over the mileage its good game you ****ed yourself royally so seems out of the question.

But can anyone answer the question about taking a loss if i put a lower down payment? I realize there is tax and interest rates that will make the truck expensive in the end but if somehow i get around that how much would it be with a good credit rate? 35000?

I need to know if i put a lower down payment from the start, do i take a loss in the end or is it still going to cost me the same 40000 in the end?

[stevegillings]

OK, this time I'll be a little more straight with you. And I hope you don't mind.

i can afford the truck, i can make gas, insurance and car payments in a weeks paycheck or week and a half tops.

Nope, you can not afford this truck. Period. This is the biggest flaw in your thinking. I would say you can afford it if you have the cash. But let's forget about my opinion: you think that 25-35% of your pay is reasonable to spend on this. FALSE! That is the percentage that a bank sees as reasonable for a families housing payment, not for a vehicle! That maybe the reason (combined with your lack of credit history of course) that they are trying to hit you with an 18% interest rate. THAT IS NOT NORMAL!
You only think you can afford it because you have never lived on your own.

I am simply trying to figure out what will work most in my favor.

You got the answer to that several times: Buy used, save your money and get your dream truck when you actually can afford it.

I am only 18 i therefore don't have proper knowledge about the matter.

That's the only reason why I am still replying. It just hurts to see an 18 year old being ripped off like that by these sharks. If you were 30+ years old I'd have given up the argument.

I am trying to be smart and do my research thats all.

That is a good thing. At least you did not run out and got ripped off right away. If you still do it, you know what you did, and then don't blame anybody else down the road when things get tight.

My mom explained leasing a bit as well and said if you go over the mileage its good game you ****ed yourself royally so seems out of the question.

I was lucky that my dad explained all those things to me in great detail when I was your age. To add to what your mom has explained: its good game you ****ed yourself royally if you go ahead with this either way. Paying 18% interest on a depreciating asset while using 30% of your income means you ****ed yourself royally. It is no better then the lease.

But can anyone answer the question about taking a loss if i put a lower down payment? I realize there is tax and interest rates that will make the truck expensive in the end but if somehow i get around that how much would it be with a good credit rate? 35000?

I have adressed this question before also. Nobody can really answer that with the info we got. It would be a good question to ask the lending institution, or in your case, most likely the "friend at the dealership".

I need to know if i put a lower down payment from the start, do i take a loss in the end or is it still going to cost me the same 40000 in the end?

A lower down payment will of course cost you more in interest, especially at 18%. If you want to know if you can catch up after you sold your current car: please look at the paragraph above: nobody here can possibly know the terms of your loan without you telling us.

Don't do it. And hey, I replied to every question in your post. Don't say you didn't get the answers!

- Steve.

[Splicer]

Steve, you certainly have earned my respect. You have gone far above and beyond to explain everything to JFD, and you've made it very understandable and been respectful. My hat's off to you.

JFD140, I've been on a half-dozen or so forums for a number of years, and the replies you have received from everyone here has been excellent. It's good that you asked questions rather than jumping in blindly. I hope you use your newfound knowledge to your benefit. Good luck with your decision.

[Pavilion]

No matter how you cut it, a lease in the long run cost more total dollars than a financed purchased. Plus when you lease, you have to pay sales tax on total price of car, not just that part that you finance. Try looking for a certified used pickup at a toyota dealer. They will be a little higher than a non certified vehicle, but vehicle will have a long warranty period if you get a 3 year old with low to average miles. Most certified's give a 6 year 100,000 mile total warranty. That means 6 years from initial sale of vehicle to initial owner and speedometer total to 100,000. This is a power train only warranty. But if you get a good three years old, with like 40,000, you will have powertrain warranty for three years or 100,000 miles total, whichever comes first.

[jtsailjt]

Originally Posted by JFD140

no not really but i cant deal with my current car any more and finally have the money for something i want for once. I just don't see why leasing would somehow be bad though hence why im asking the questions to find what is best to not throw away money. I'm paying 13680 dollars plus insurance for 3 years to lease it. And at the end of that three years i get a new truck all over again no? Where can it hurt me?

Saying that you "get" a new truck all over again is a bit of a misconception. Since you won't have any equity in anything at that point, you'll have to get some other vehicle somehow, but it will be at a cost even higher than the $13,680 you've already spent. If you pay cash now, or even borrow from the bank to buy, in 3 years you may have paid out the same amount of money, but you'll have some pretty good equity in a still very nice truck AND you'll be looking into the not too distant future at the pleasant prospect of several years with NO car payments! My suggestion is to make as big a down payment as you can, get your own financing for the rest, buy the truck you want/need, and then take very good care of it.

[SMTRDSPORT]

also consider this... with gas prices, are you going to be able to afford roughly $65-75 in gas EVERY couple weeks or so depending how much you drive? Figure your going to pay and easy $140ish bucks a month in fuel.

[JFD140]

definitely not sure if im going to buy it new anymore but i pay about 100 for gas now and the taco gets better mileage then my car.

Thank you all for all the help, il let you know what i decide.

[PA Taco]

How long do you plan on living at home ? If its the next 2-3 years then I would get the truck you want and Pay it off before moving out. You should be able to make extra payments towards the principle each month.Check the interest rates at banks and credit unions in your area. Be sure of what you want so you can keep it till it dies in 10-15 years. I traded in several times and owe about 10k yet so now I wish I had done that.

[kf4mnc]

I was like you when I was 18 or 19. I was dieing for a Tacoma. I just loved the trucks. I tried and tried to get a new one, wanted my parents to cosign and what not, but no dice.

What I ended up getting was a used one that had just been traded it. It was perfect, pretty much everything I wanted, even a truck box! However, I did have to purchase one that was about 4 or 5 years old.

But, what I got in the long run was a quality vehicle that is still being driven with little to no problems for a fraction of the cost of a new vehicle.

Not to mention if you get a factory certified truck which has the extended warranty . . . def. worth it. My GF just bought a Highlander like that. The car is like new!

If you wait a month or so you will have about or more than $10,000.

You can get a pretty nice ride for $10,000. Not to mention what you might get for a trade or private sell on your other car.

Just my .02. Think about it, buy used.

[Bill Anderson]

First of all, JDStalling(? sp), gave you some very good advise. You are thinking in terms of payment amount. This is a very dangerous slope to begin playing on (financially speaking). You are thinking about how to spend the money that you work so hard to earn. Buy a used truck, cash outright, say for $4000 and use that truck for 4 years for your side contracting business (and you can find a decent Tacoma with higher miles for that price, you may have to look around, but they are out there). Over that 48 months you have saved the NEW Truck payment. Not only have you saved $26,400, and not paid the lenders a dime, you have taken that money and put it away into a very safe investment, CD for example. Now with interest that you have gained at 5% over 4 years, initial investment of $5000 ($1k that you saved from planned downpayment) + $550 per month investment of payment that you did not have. Now you have $35,262. Having your money work for you has gained you almost $10,000 and now you have the money to buy the truck without a loan with about $7000 left over + the price that you sell the used Tacoma for, probably $2,000, now, it is four years later... you are driving a Brand New Tacoma that is yours plus you have $9,000 in your account that can still be working for you. Now that you don't have a payment of $550 per month and $9,000 in hand, take that money ($9,000 and $550/month) and invest it at an annual return of 5% for 10 years and now you have $100,228. NOW, take that $100,228 invest it at a rate of 5% again for twenty more years, and don't put any more money into that account monthly, and now you have $271,882. The return interest rates are are very conservative. This can easily be done. IOW don't be a slave to material things, allow your money to do the work, and allow it to buy the things that you can really afford, not your back-breaking labor. You just have to be patient. Wait 4 years and you can buy that truck by writing a check from your personal/side business account.

You think that you can afford the truck, but you really can't. You are justifying your desire to have a new truck.

Now if you choose to ignore the advice on these boards, then my recommendation is, purchasing would better suit your plans. You will more than likely, put a lot of miles on the truck, scratch and dent it (inevitable in carpentry) thus making leasing a very bad option(because at the end of the lease, they WILL nail you hard (pardon the pun) for those infractions of the lease). Now in terms of waiting to sell your car and purchasing the truck now, and then adding the selling price of your car to the loan later, and if that will add to the long term cost of the truck. That will depend soley on these two facts: 1) If in fact you sell the car and use the money to reduce the priciple on the loan (usually people find an excuse to use the money for something else that is "NEEDED") and 2) If your bank imposes early payoff penalties. You need to speak to your lender, as stated earlier.

I have been seeing ads on TV, and the local Toyota dealer website for 5.9% interest for 60mos, and 3.9% for 36 mos., for Tacomas, check those out if your heart is set on getting one now.

Don't get caught up in the "I WANT IT NOW" mentality of society. Those are the ones that will financially struggle their entire lives, because they cannot wait to buy things with credit, when they really cannot afford them.

Never consider a car salesman your friend. They never are, and if they seem/pretend to be, that is just their angle to get you into the "best deal possible", for them, and the dealer anyway. Take the best advice and wait, to really, buy your truck. You will rest a whole lot easier. Dealerships take advantage of 18 year olds all the time. You are their favorite customer. Be the exception to that rule, not the norm. Hope this will help you. Good Luck, Bill

Originally Posted by JFD140

i can afford the truck, i can make gas, insurance and car payments in a weeks paycheck or week and a half tops. (i sometimes don't work Saturdays) I am simply trying to figure out what will work most in my favor. I am only 18 i therefore don't have proper knowledge about the matter. I am trying to be smart and do my research thats all. My mom explained leasing a bit as well and said if you go over the mileage its good game you ****ed yourself royally so seems out of the question.

But can anyone answer the question about taking a loss if i put a lower down payment? I realize there is tax and interest rates that will make the truck expensive in the end but if somehow i get around that how much would it be with a good credit rate? 35000?

I need to know if i put a lower down payment from the start, do i take a loss in the end or is it still going to cost me the same 40000 in the end?

[jpmorrisvb]

Originally Posted by Bill Anderson

Never consider a car salesman your friend. They never are, and if they seem/pretend to be, that is just their angle to get you into the "best deal possible", for them, and the dealer anyway.

Good advice.

I have told salesmen (salespersons), "We are not friends. We didn't grow up together. We didn't attend the same school. We don't go to the same church. Don't tell me that you're doing me a favor and you are losing money on this deal. If you were losing money you wouldn't be selling me this vehicle."

Having said all that and having read these posts I believe that you have gotten nothing but great advice.

As I have said before, "Good luck."

[WillardBubby]

Someone once told me that you should buy something that appreciates in value, such as land or a home or a classic car. You should lease/rent something that depreciates in value, such as a car. This makes alot of sense. If you buy a car, after about 4 or 5 years you have alot of miles. After alot of miles, all cars will need more and more maintanence/repairs no matter who makes them. You are basically left with a car that is unreliable, that isn't worth anything and costs you more money than what its worth. I have owned several high mileage cars that left me stranded in the middle of a Minnesota winter, not fun at all. This is why I decided to start leasing.
Everyone has there own unique financial situation, as well as preferences. I have own 4 vehicles and leased two Toyotas. Prior to leasing, however, I spent about six months researching the difference between leasing and buying.
Buying makes alot of sense when you qualify for 0% or low rate financing. I do not qualify for these, I checked several places and the lowest I could get was around 5%. If I would have puchased my Tacomas, after 5 years I would have paid several thousand dollars in interest.
With leasing I get more vehicle for less money and every four years I get a new truck. I worked out a deal with my salesman so I do have to pay a large down payment and if I make all payments on time I can get out the lease 6 months early and get a $1000 discount. Also, I buy 1000 extra miles to make sure I don't go over, which is far, far cheaper than going over the mileage limit.
For me leasing works great and I do not have a high income or own a business. While researching leasing, I found that Toyotas and Hondas are some of the best vehicles to lease because they hold there value/retain a high residual value which means a lower monthly payment. My Tacoma retains over 50% of its value after 4 years. American car makers are the worst, retaining less than 40%.

[stevegillings]

Great post by Bill Anderson above. That message is stuffed with true facts and just good information. JD, pretty much all you need for the right decision is handed to you by now.
And again, you did great asking here first before making a big mistake.

WillardBubby, you are being taken to the cleaners. Sorry to tell you that straight, but reading your post, red flags just keep on popping up.
Yes, you do drive an almost new vehicle all the time, but believe me, you are paying for it. Big time.
If you want a meaningful analysis, post your numbers over the last 10 years or so. I will be happy to do the math.

- Steve.

[jpmorrisvb]

Originally Posted by WillardBubby

My Tacoma retains over 50% of its value after 4 years.

WillardBuddy .... you said it right there.

50% of value after 4 years! That's four years of reasonable payments. If you buy, at the end of that four years that vehicle is yours. If you lease, at the end of the same four years that same 50% value belongs to Toyota Corporation. They can now turn around and sell it outright to you with a large balloon payment or at auction at that 50% value.

If you choose not to purchase you begin the process all over again.

I'm sorry, it just doesn't make sense to me for John Q. Public to lease. Businesses can write it off. You can't.

As I have said before, this is just my opinion.

[Bill Anderson]

[quote=WillardBubby;732090]Someone once told me that you should buy something that appreciates in value, such as land or a home or a classic car. You should lease/rent something that depreciates in value, such as a car. This makes alot of sense.

This would make a lot of sense if there were no added charges at lease end. I would say that your friend was speaking in business terms (depreciation etc), not in personal asset terms. The truth is, The dealer is simply not going to let you drive in, drop off your vehicle with a lot of miles, and dents or scratches, or both, from one end to the other, at lease end, and shake your hand, take the car no questions asked, and tell you to have a nice day. You will get hit with fees, and mileage, unless of course, you have paid for a bunch of miles ahead of time, as you have said you done.

If you buy a car, after about 4 or 5 years you have alot of miles.
In this case, you are definately better off to buy. No doubt.


Buying makes alot of sense when you qualify for 0% or low rate financing.
No, buying makes a lot of sense when you have saved and invested, and have accumulated enough that you can buy a car, without monthly payments. It is just that most people do not like to wait, to get what they want. I do agree that with a low rate, and the buyer is a religious saver, the buyer should take that low rate, as they can earn more through investing, than the rate will cost them.
With leasing I get more vehicle for less money and every four years I get a new truck.
I question this, as the next sentence breaks a very valuable rule: Never believe a car salesman is your friend. Don't get me wrong, they may not be a bad person, they are doing what they are instructed to do, to make the most money for themselves and the dealer, and most, if not all, will take advantage of you to meet that objective. Just as you should be trying to achieve the best possible price for yourself.
I worked out a deal with my salesman so I do have to pay a large down payment and if I make all payments on time I can get out the lease 6 months early and get a $1000 discount.
Large down payment? You are not really getting a discount, and you are really buying your lease out early with a "large down payment", and that $1000 discount was also paid for somewhere along the scheme of things. Also, I buy 1000 extra miles to make sure I don't go over, which is far, far cheaper than going over the mileage limit.Wait, Save, invest, and buy, and you don't have to worry about mileage limits.

While researching leasing, I found that Toyotas and Hondas are some of the best vehicles to lease because they hold there value/retain a high residual value which means a lower monthly payment.
I am not sure how residual value figures into monthly lease payments. You will not get a break on a lease payment, just because a particular vehicle holds its value better than another brand. However you should use this logic in deciding which vehicle to buy, but never use it to determine which to lease, according to lease payment.

My Tacoma retains over 50% of its value after 4 years. American car makers are the worst, retaining less than 40%.
I agree with American car makers being the worst. But I believe that Tacomas hold their value better than, 50% over four years.
[quote]

I don't mean to offend, I just like to see young people save and not dig a hole for themselves early on, by not making sound buying decisions. Respectfully, Bill