Thinking about: Leasing a new truck

flhrci

flhrci

Final Approach
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David
I am that person that does not go over the yearly mileage.

Tell me why this is a bad idea other than having to put down a hefty origination fee like $5000.
 
I am not a fan of leasing ANYTHING. I’m not big on the restrictions that come along with it and I certainly don’t like throwing my equity down the toilet. When the lease is up, you have nothing to show for it.

If it suits your needs, go for it, but I don’t recommend it.
 
Well, the moment you drive your new truck off the lot it probably drops at least $5k in value, so you start somewhere close to even.

After that, if your payments are significantly less with leasing and mileage is not a problem, then I don't see the downside.

However, I have no idea how they assess wear and tear on a truck.

Recently a friend of ours leased a lightly used truck. I didn't know they did that. Might be less up front money that way.
 
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The smart people on leasehackr.com (and other places) say never put money down on a lease.
If the vehicle is totaled, your money goes poof!
 
A new vehicle loses value as soon as you sign the papers, but after it is paid off you can still sell it and get a little money back or keep it and drive it.

A lease gets your money and gets the vehicle back.

A lease could be a good business expense for your company.
 
flhrci said:
I am that person that does not go over the yearly mileage.

Tell me why this is a bad idea other than having to put down a hefty origination fee like $5000.
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Do you NEED a new truck or are you WANTING a new truck?
 
Lndwarrior said:
However, I have no idea how they assess wear and tear on a truck.
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It will be in the contract. In my experience, you have to keep the vehicle in top condition, no scratches or dings and it has to stay clean etc., which isn’t typically an issue for me, but still... You’ll also be obligated to pay for anything that they consider to be ‘excessive wear’, so there’s a chance there might be some surprises at the time of return. It’s essentially renting the car for the duration of the lease and you’re held to many of the same stipulations.
 
I leased a vehicle once. We couldn’t qualify for a loan - we were dirt poor and I knew it was a crap deal, but it’s what we could do at the time.

There’s one thing, and only one thing, that I like about leases. They provide a steady stream of one and two year old, lightly used lease return vehicles that are far, far better deals.
 
DaleB said:
They provide a steady stream of one and two year old, lightly used lease return vehicles that are far, far better deals.
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Exactly right, and those are the ones to buy. I am second owner to my car now. It came off a lease with 32k miles... I got an awesome deal on it and paid cash money for it. I was and still am happy with it.
 
I leased many cars years ago. I found it was much easier for the car dealer to hide markup when leasing a car. In essence, you are borrowing the car's value, (minus any down payment), and you are paying down the amount borrowed to an agreed upon value three years down the road. So you lease a $40k vehicle, put $5k down, and now it's a $35k loan. The car's value at lease end is approx. $26k. So you are taking out a loan that buys down the note from $35k to $26k ( $9k reduction) over 3 years. Find your interest rate being charged, apply that do the $35k, and you can do an amortization chart that will find the correct payment within a few dollars.

The upside is you get a new car. The downsides are many, including putting on too many miles (high $ penalties, it's in the contract), putting on too few miles, (don't get any credit for that), getting in an accident where the value of the car is less than the amount of the buy down of the loan (get gap insurance), and the worst was needing to get out of the car lease early. (check the agreement, it can be very expensive)

At the end of the day, the real reason I leased back then was because I couldn't afford to buy new.
 
I'll say it. You can't afford it unless you won the lottery.

A couple months ago you posted that if the shut down went on for very long you would have issues. Ohio just opened back up two months ago. Of course with the extra$600/week unemployment you may have got I guess maybe you can afford it. Isn't there a better use of that money????
 
Ryanb said:
It’s essentially renting the car for the duration of the lease and you’re held to many of the same stipulations.
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This is true. However if you're a person who is going to buy a new vehicle and trade the old one to the dealer every couple of years no matter what, then you're essentially renting the vehicle anyway dollars and sense wise. You're still going to pay for excessive mileage as well as scratches and cosmetic wear via reduced trade in value.

Like others, I leased a new vehicle way back when because in those days, 6-7 year car loans were unheard of and the 5 year payments were a bit more than I could handle on my income. I leased it for 2 years. When the lease was up, I bought it as a used vehicle and got a 4 year loan on it. Paid the loan off and kept it for years. These days, 6 and 7 year loans seem much more common for new vehicles. Back then banks didn't seem confident that I'd still be alive more than 5 years down the road.
 
Juliet Hotel said:
This is true. However if you're a person who is going to buy a new vehicle and trade the old one to the dealer every couple of years no matter what, then you're essentially renting the vehicle anyway dollars and sense wise.
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Sort of, but you at least have some equity in the vehicles when you do that (though it’s very little), nonetheless that’s another bad strategy, unless you like to constantly be upside down and in debt.
 
Ryanb said:
nonetheless that’s another bad strategy, unless you like to constantly be upside down and in debt.
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I don't judge people for what they choose to do with their finances.
 
rpadula said:
The smart people on leasehackr.com (and other places) say never put money down on a lease.
If the vehicle is totaled, your money goes poof!
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Yep, no need to put anything down, but your monthly payment will be $139/mth higher over a 36 month lease. Which is why they love to advertise with a giant initial payment.
 
Ryanb said:
I don’t either, I just made a statement.
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Your statement sounded a bit judgmental. Maybe it wasn't meant that way, but that's how it comes across. I don't look down my nose at anyone who lives within their means even if they choose to spend money obnoxiously in a way that I never would.
 
Juliet Hotel said:
Your statement sounded a bit judgmental. Maybe it wasn't meant that way, but that's how it comes across. I don't look down my nose at anyone who lives within their means even if they choose to spend money obnoxiously in a way that I never would.
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Interpret it however you want.
 
saracelica said:
I'll say it. You can't afford it unless you won the lottery.

A couple months ago you posted that if the shut down went on for very long you would have issues. Ohio just opened back up two months ago. Of course with the extra$600/week unemployment you may have got I guess maybe you can afford it. Isn't there a better use of that money????
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I actually became employed on April 20th at 67k a year for AEP. I work at home for now until AEP decided to bring us back in. So things have changed and the job is going well. I might even be able to start being a part-time CFI again some day. I have never made this much money per year in my life.
 
Thanks for the advice every one. Leasing is off the table and buying is off to the side of the table for now. I have decided not to make any major financial moves for a few more months any way. I think my current truck will last a bit longer. I can put up with the lack of air conditioning and the (newly) air bag light being on.
 
Leasing started to become popular in the late 80's/early 90's. At that time the big "attractions" were lower acquisition cost and "A new car every two years".

I didn't buy into that thinking. I bought my Nissan Sentra the old way. I paid it off in 3 yrs and then drove it "for free" for another 3 until I sold it for the down payment on a Chevy S-10 pickem up truck.

My ex-wife was a new car gal. She was leasing and Infiniti QX4 when I met her. That lease ended and she swapped into the current year model QX4 (retrospect mistake because we both agreed the first one was better). When that went back I talked her into buying a Chevy Tahoe. That car was paid off and she was driving it "for free" when she left me. That was a good thing because she was a Psychiatric Intern at the time and that's a few years of really crappy pay.

So what does all this typing mean? Depending on your phase of life leasing can be a good choice.
 
I have leased one car and some business equipment . Both of those leases were structured in a way that had the price for the purchase of the assett written into the lease. Made sense from the tax angle in a business setting. My daily driver is a 3 year old truck that I bought new. This is not a 'SUV with a bed', I use it to transport yard stuff , furniture and bicycles. Some dents in the bed, some of the coating scratched off. I also tow with it. None of the dings are bad but its the kind of stuff a leasing company would ding me for.
So if you need a truck to do 'truck things', I would be careful about leasing. If you want a truck because that's just what you want to drive for whatever reason and the extra cost of buying new doesn't bother you, then lease may be a worthwhile option .
 
I look at a lease the same way I look at dealer financing. It's a way for a company to make a lot more money off of you. Good for me because there are a lot of three-year-old off-lease cars to purchase, many in good shape.

Originally lease was posed as being cheaper than financing for purchase as the residual value became part of the equation (e.g. You were financing the difference in value, not the full cost) in addition to getting a new car every 2-3 years. But all that changed.

For a business, it permits a much lower capital outlay and there are companies that will manage the fleet as part of the cost, but for an ordinary consumer I am of the opinion that a lease is not the best option. YMMV, of course.

(Now where is @denverpilot to weigh in?)
 
The residuals are lots worse than back when the industry was trying to convince more people to lease long ago.

Once in a blue moon some company has other goals and bumps up residuals and makes the lease attractive on handfuls of models but seems rare these days.
 
Ryanb said:
Exactly right, and those are the ones to buy. I am second owner to my car now. It came off a lease with 32k miles... I got an awesome deal on it and paid cash money for it. I was and still am happy with it.
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There's always a chance for a Powerball win, but honestly aside from that I'm pretty sure we bought our last new vehicle in 2011. We got my wife's current ride when it was a year old with less than 10K miles on it, factory warranty, like new, and $15K off MSRP. It's really hard to argue with that. The original owner traded it at a BMW dealership... it was very nicely cleaned and prepped.
 
Lease can be not horrible if it’s the right car. A truck is Probably not the right car for a lease unless you don’t really need a truck and won’t be using it as a truck very much or at all.

A lease can be a way to get more now at the expense of long term. But it’s always a worse choice than buying from a pure dollars in and dollars out perspective. I have leased a few times when it made sense for me, and no it still didn’t really make sense if you looked purely at costs of ownership.
 
Every car I've had I bought new and kept for 10-15 years. I basically run them util they aren't worth anything, and then run them some more. Yeah, maybe I pay too much up front, but after 5 years I have a used car that's in really good shape, since I don't abuse vehicles and tend to be proactive about maintenance. So tell me all about the advantages of leasing again?

Now if you turn over cars every few years anyway than leasing might be a better deal. But turning over cars every few years is a waste of money in the Book of Steingar.
 
flhrci said:
Tell me why this is a bad idea other than having to put down a hefty origination fee like $5000.
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All kidding aside ... for five grand or slightly more I can find a pretty decent ride and have zero payments for a few years. Personally, I have four vehicles that I drive and the newest one is thirteen years old. Two have A/C & the other two (the Bug & the Bike) do not.

The wife is a different story. She just bought a two year old vehicle that had 2800 miles on it. She still has her 2012 but I think that's going to one of our children.
 
My car is going to be 18 years old this December. No ac for years. Looked into it this spring to get fixed. $900. Meh it's not that hot that many days and the windows still work. If im going to take an extended trip I'll rent a car. My car still is mechanically sounds with 202k miles on her.
 
flhrci said:
Fleecing...

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Lots of opinion, none of it helpful for an individual who wants to decide whether leasing is a good option to get use of a new car. Doesn't address the key feature of a lease: The lessor assumes the risk of the value of the chattel decreasing more than anticipated at the time of the lease inception. Right now, a gallon of gas is $2 and change, there have been times it has been $4. If fuel prices were to return to that level in 3-4 years, the resale value of a vanity pickup truck is going to drop relative to more economical vehicles. As the lessee, you dont care, you give the thing a good detailing job and return it to the dealer before you sign the lease on the replacement. For the 3 year period of the lease, you have predictable monthly vehicle expense. The comparison with leasing a new car is not driving an 18 year old high mileage car with liability only insurance. The only valid comparison is buying a new car with either a loan or cash and trading it for a new car at the same fixed point in time. Whether that monthly expense is higher or lower than a loan payment + depreciation (or cost of money + depreciation for a cash deal) is a question you can only answer at the end of the entire transaction. Sure, the leasing companies dont do this out of the goodness of their little hearts but depending on the vehicle, the use-case and the market conditions between start and end of the lease,e it can be anything from a good deal to a sinkhole for the lessee.

There are several less expensive alternatives to buying/leasing a new car every three years. One that is typically cheaper but 'deprives' you of the new car experience is to buy a 2 year lease return with 24k miles and to sell it before the 5 year mark and with less than 100k miles (while your buyer can still get an extended warranty). That gets you a 'nice enough' vehicle and avoids the higher cost service items that tend to come up beyond the 100k mark.
 
Ryanb said:
It will be in the contract. In my experience, you have to keep the vehicle in top condition, no scratches or dings and it has to stay clean etc., which isn’t typically an issue for me, but still... You’ll also be obligated to pay for anything that they consider to be ‘excessive wear’, so there’s a chance there might be some surprises at the time of return. It’s essentially renting the car for the duration of the lease and you’re held to many of the same stipulations.
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I leased directly from Ford, they certainly didn't expect "top condition", they even enumerated how many dings, scratches, or dents were OK. I bought out the lease anyway, due to favorable loan conditions, and the fact that I don't drive much at all, maybe 3K miles/yr.
 
For the AC not working, some of the remedies discussed in the Escort ZX2 thread apply. Also, there was a stepper motor on the blend door on the evaporator box that was an Achilles heal for that year series.

If it is the compressor, you can get that at most auto salvage yards for under $80 with a short warranty and a bit more with a 1 or 2 year warranty. Search www.car-part.com for who has one near you.

And don’t forget to negotiate for lower price. Those compressors are very plentiful and supply outruns demand. So you can use the info on car-part to leverage one yards availability against another’s price to get the deal you want/deserve

And the crash sensor that @Zeldman pointed out was almost always the reason for the bag light. Sometimes the air bag computer, but rarely. Someone good at electrical system diagnostic can quickly point out the fault. Rockauto.com will have both items for reasonable.

~$500 might get these current troubles fixed. And then you can start an 18-month savings campaign toward the future replacement.

If your new truck was going to be $500/mo, then after 18 months you would have $9,000 in the sugar bowl, providing a good sum to go used truck shopping with.

And, if Mr. Murphey shows up and started stomping over your life with sharpened golf cleats, then you have cash (not debt) to clean up his mess and kick him down the road.
 
As a general rule, lease is going to cost you more money in the long run. Sometimes it works out the other way, but that's usually when economy unexpectedly does something that makes your car worth a lot less when you have to get rid of it. I.e. rare.

There are a few "pros" for leases and many, many "cons". Most were mentioned already. Some you may not even think about. A lot depends on the leasing company, but you have very little leverage on them and they have a lot of leverage on you. Once they got you, they usually got you. It's almost predatory.

Pro:
1. Compared to new car purchase, you typically have lower payments. This is the primary reason people lease, but this is actually not much of a pro as you may get sucked into a car you really cannot afford.
2. You get to drive new car all the time.
3. You don't have to worry about selling your old car.
4. In some states, it may be more beneficial from tax point of view to lease. This highly depends on how the state taxes lease and how it charges taxes on trade-ins

Cons:
1. Often you end up paying more for the car than you think. The "pro#1" makes it look good, but it's a lot easier to hide more charges in leasing(charges as you sign the lease and as you return the car)
2. You MUST keep your car in top shape and return it in a specified condition. Depending on the leasing company, even tires matter. You will be charged if tires are too used up or wrong brand/type. BMW expects you to bring the car back on run-flat tires for example.
3. Millage charges have been discussed.
4. Once you lease, you are on their schedule. Maybe you don't want to sell the car in 36 months. Maybe you don't like anything new. Maybe the next car you want to buy comes out in 3 months after the end of your lease. Doesn't matter. You are going to perform some kind of transaction when lease is up. And you are likely to pay something that you didn't expect in that transaction.
5. Getting out of lease early is either impossible or very expensive.
6. Usually you can buy your own leased car after lease is up(not always, btw) to solve some problems, but not only this defeats the whole point, you are also going to get hosed twice on the same car as you have practically no negotiating power.
7. Leasing becomes a cycle as you have no trade-in equity if you want to some day buy a car. You can, of course, save money during the lease, but now you are defeating the Pro#1 of the lease again.
8. You are continuously(if you keep leasing, see 7) taking the largest depreciation hit since you are always paying for use of new cars
 
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genna said:
As a general rule, lease is going to cost you more money in the long run. Sometimes it works out the other way, but that's usually when economy does something that makes your car worth a lot less when you are trying to get rid of it. I.e. rare.
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We've only leased once, and it didn't work out too badly. At the beginning of the lease, the negotiated residual end of lease was $33k. The car came due to be turned in during the worst of the 2009 downturn, and the lessor was awash in returned cars. They offered the car to us for $24k, and we bought it as it was still a nicer car than most that we could buy new for $24k. It ended up being a decent car, we put 160k miles on it over the 10 years we had it with very little in MX/repairs. At 160k, it encountered an issue that would cost more to repair than the car was worth, so time to go.

But, like you said, we were lucky due to market conditions. I won't lease again, too much of a roll of the dice.
 
flhrci said:
Thanks for the advice every one. Leasing is off the table and buying is off to the side of the table for now. I have decided not to make any major financial moves for a few more months any way. I think my current truck will last a bit longer. I can put up with the lack of air conditioning and the (newly) air bag light being on.
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I have the same truck...what is your AC not doing? Mine would cool sitting at a stop light and then when given gas it would go hot. This was last year. I bought a new accumulator, orffice tube, scharder valves, and pressure switch all of amazon. Was not expensive at all. And they screwed up and gave me a life time supply of orffice tubes, so if you need one I have one. Anyway replaced those, added some pag oil, and filled up the system. Better than new.

Even a new compressor is cheap on Amazon and easy to install. Will be cheaper than a new vehicle payment by a long shot.
 
I suppose leasing can be a decent option if you absolutely must trade your car in every couple of years and don't drive them. I'm not that. I run my vehicles in to the ground.
 
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