To lease or to buy

[blankall]

I'm actuallly a leaser but I think there are a few factors that aren't really being taken into account:

1) The interest rate on financing tends to be lower than leases

2) You can purchase a vehicle in cash from the USA for much cheaper than here.

3) You don't have to drive a vehicle into the ground. You can resell a used vehicle you have purchased 3-4 years later, and many will still have considerable value.

[photon]

So a few other things to throw in the fire, because I may be thinking about this too.

In the example of leasing vs. purchasing, it's for a new vehicle on both sides. On the purchase side, one can opt to purchase something a few years old so that someone else has eaten the worst of the depreciation, so even for the "own for 3-4 years" crowd doesn't this tip the balance towards buying?

Alternately can you do this for leasing? I now you can take over a lease, is there any similar advantage to doing that? I.e. can you make the deal even better for me as a buyer by assuming a lease?

And finally, what about cases were you can majorly reduce the cost of the car, i.e. purchasing from the US. For some models you can save a huge chunk of change, so while the negatives of buying still apply, you have a reduced price up front and eventually will sell in the Canadian market so you've improved the depreciation situation. Not as effective as it was a few years ago, but I still see big differences for some models.

Heck I wonder if you choose the right models and years if you could work it so you import the car, drive it for a year or two, then sell it pretty much for what you paid for it.

[photon]

Oh and the other factor for buying if you are in the drive it into the ground camp is repairs. I've had my VW Passat for 11 years now, and with the amount of repairs we've had to put into it over the past 3-4, it's almost like having a small car payment.

Not every car is like that, but most cars need at least some work after a while.

[Slava]

If driving a new car every few years is important to you then leasing is great. If not though then the best car payment is no car payment.

[photon]

I guess, though I'm not so much concerned about the actual payment as the total cost of ownership.. All things being equal I'd rather pay that TCO per month vs. up front.

[pylon]

Originally Posted by photon

So a few other things to throw in the fire, because I may be thinking about this too.

In the example of leasing vs. purchasing, it's for a new vehicle on both sides. On the purchase side, one can opt to purchase something a few years old so that someone else has eaten the worst of the depreciation, so even for the "own for 3-4 years" crowd doesn't this tip the balance towards buying?

Alternately can you do this for leasing? I now you can take over a lease, is there any similar advantage to doing that? I.e. can you make the deal even better for me as a buyer by assuming a lease?

And finally, what about cases were you can majorly reduce the cost of the car, i.e. purchasing from the US. For some models you can save a huge chunk of change, so while the negatives of buying still apply, you have a reduced price up front and eventually will sell in the Canadian market so you've improved the depreciation situation. Not as effective as it was a few years ago, but I still see big differences for some models.

Heck I wonder if you choose the right models and years if you could work it so you import the car, drive it for a year or two, then sell it pretty much for what you paid for it.

Things are obviously different when you are talking used. Then I would advocate looking at a certified pre-owned car, with some sort of factory warranty extension. Usually you have the option to get a really good rate too. leasing and used cars, just does not work.

For what you save on 'most' imported vehicles, you lose in resale anyway. So you only really save up front. Importing is great for drive it into the ground people, not so much if you plan to turn it over. Any trade in we see that is imported from the US we will hit it 20%. Importing a car is an excellent way to 'launder' damaged vehicles, if it is done right, even brand new ones, so the dealers have to be extra cautious. Private sellers though, do not have to have the same disclosures, so a lot of sellers will keep lying about the origin, until they find a sucker. I see it all the time when people are trying to buy an extended warranty, and the car does not qualify when I run the VIN. Then somehow it is my fault, some scumbag with a disposable pay as you go phone sold them the thing in the Franklin Mall parking lot, and is no where to be found.

Originally Posted by photon

Oh and the other factor for buying if you are in the drive it into the ground camp is repairs. I've had my VW Passat for 11 years now, and with the amount of repairs we've had to put into it over the past 3-4, it's almost like having a small car payment.

Not every car is like that, but most cars need at least some work after a while.

Exactomundo. Unfortunately, an 11 year old Passat, is not our best example. You can luck out and get one that goes and goes trouble free, but there is no guarantees. Almost every car is going to have some major repairs at some point in time.

People bash on extended warranties all the time, but if you buy a genuine manufacturers warranty, and if you actually keep the car the full term, in almost every case, regardless of manufacturer, you come out ahead. The people that the manufacturers make the money on, are the ones that trade up before it expires, or sell the car off without properly transferring the benefits. There are enough of those people, that it is a profitable venture for the manufacturers. We have an 8yr/200,000 km extension available now for around $3800. At first I thought it would be impossible to sell at that price, when in fact, it is our top selling plan now, as people love the idea of only having to worry about maintanence until the year 2020 essentially.

[pylon]

Originally Posted by psicodude

I am not sure you realize this, but you pretty much made Pylon's argument for him. A LOT of people like driving new cars every few years, and for them, Leasing is the best option.

And you don't have to make a million bucks a year to lease a new car. You can get a seriously nice ride for $400 a month, which many people spend more on smokes and beer per month.

And that is another great point. I love cars. Some guys spend 500 bucks a month on fancy high fashion clothes, opt to buy my suits at Sears days, and spend my money on a hot rodded GTI. I don't look at them like appliances to get around, I want to have fun while I'm getting around, and all the latest kit to boot. Every couple years, I want that factory fresh, out of the wrapper feel. Nothing beats it, and it never gets old, even though I have had 8 new cars, in the last 12 years.

And our sales manager knows my threshold too...lol. Every 18-24 months, they tend to park a 2 door GTI, spec'd out exactly how I would want it, right in front of my office. Tinted, 3M'd full of gas and ready to go....until I cave in from having to look at it all day. And undoubtedly, after about a week I wander into his office with my tail between my legs..."OK butt head, what are you gonna give me for a trade in on mine?"

[photon]

Originally Posted by pylon

Things are obviously different when you are talking used. Then I would advocate looking at a certified pre-owned car, with some sort of factory warranty extension. Usually you have the option to get a really good rate too. leasing and used cars, just does not work.

A good rate on a used car too? Is that at dealerships I assume?

What about taking over a lease? Is there any real benefit to that? Or are you just giving up on the best time of a car for no real benefit?

Originally Posted by pylon

For what you save on 'most' imported vehicles, you lose in resale anyway.

That's interesting, I didn't know that.

Though I prefer to sell my old cars privately anyway rather than trade them in.

Originally Posted by pylon

People bash on extended warranties all the time, but if you buy a genuine manufacturers warranty, and if you actually keep the car the full term, in almost every case, regardless of manufacturer, you come out ahead.

Yeah I wish I'd got one for my Passat. Next car purchase if I plan on keeping it long like I did the Passat I'd go that route.

Are extended warranties transferable? I.e. would they increase resale?

[Jacks]

Personally I like to buy 2-3 year old lease returns for 1/2 price. It's easy to find them in great shape with fairly low KM's.

[pylon]

Originally Posted by photon

A good rate on a used car too? Is that at dealerships I assume?

What about taking over a lease? Is there any real benefit to that? Or are you just giving up on the best time of a car for no real benefit?

We have rates as low as 0.9% on certified preowned VW's. The average rate would be 3.9%. Plus the cars are backed by a 2/40K warranty that is added on to any existing coverage if there still is some. Creates some pretty neat loopholes on 1 and 2 year old cars. Sometimes you end up with more warranty than a new one. We get factory support on these cars, because most of them are lease returns, or VW corporate cars, so VW Canada buys down the rate from VW Credit to keep the pipeline flowing, and the cars selling so they don't get a logjam of lease returns. Right now VW is even making the first payment on some certain models. The one caveat is these cars have to be Certified, and have to be inspected with a microscope to qualify, which for the end buyer is a good thing. Most import manufacturers have similar programs nowadays. I would say ours and BMW's are the most comprehensive.

Originally Posted by photon

Are extended warranties transferable? I.e. would they increase resale?

Yes, and a big time yes. Our certified preowned cars which come with a 2/40k warranty, on average sell for around $3000 more than the average private sale in Joe Blows driveway car. The biggest reason is the warranty. Ask yourself, what is the biggest intangible in buying a new or used car? It is the warranty, hassle free driving, right?

So as a private seller it makes it hard to compete with my warranty, and finance rates on my certified cars. It is an uneven playing field. Having the coverage on the car slants it a little in your favour to the cash buyer now, as you have no taxes or fees to have to try and sell too, yet you have the same coverage as me.

This is my little ace up my sleeve with a customer when I am presenting a warranty, but I truly believe in the logic. It was actually presented to me, when I purchased a motorcycle a few years ago, and it is as close to a bulletproof argument as you can present. If a customer keeps giving me no's on a warranty, I will ask them this:

"To double the coverage on your new car, it will cost you $2800, we have established that. You have established it is not worth it to you at that cost. Tell you what then. If I give you $2800, will you sell me back, the original factory coverage on your new car right now, and take it off the lot as is? You just told me that 4/80,000 kms isn't worth $2800 to you."

I have never, in 3 years, since I have asked that question had a person say yes. And to follow up that statement:

"So if your original warranty is worth $2800 to you now when the car is new, unworn and tight, wouldn't it make sense, that it is worth far more, when the car is older, more worn, and more likely to break?"

I know it seems very "salesmanish" but I truly buy into that way of thinking. as long as you are buying a factory endorsed product. I do not believe in third party coverage, and only sell it if I absolutely have no other option. Those are the plans that give warranties a bad name. By the way, that motorcycle I bought, just got a new pistons and a head... under my extended warranty I paid 900 bucks for. So you think I am glad I bought it? Damn right.

[Table 5]

A warranty is probably the best "option" you can have on a used car.... especially if it's German!

Pylon do you have any experience with after-market warranties? Are there any particular companies you'd recommend, or are they all a little shady? I recently bought a car that's 4 year old and off-warranty (which typically goes against my belief of buying German off-warranty, but I couldn't resist), and while so far its had absolutely no issues, I wouldn't mind the peace of mind. It was originally bought in the US, but I will be bringing it with me to Canada.... which may or may not be an issue.

[photon]

It's too bad VW made their cars look like ass recently. Only the Golf and CC look ok.

[Table 5]

Originally Posted by photon

It's too bad VW made their cars look like ass recently. Only the Golf and CC look ok.

The Beetle is a step up from the previous generation....although I've only seen the Turbo version live. Still don't see a reason to buy one over a Golf though....

I wasn't a huge fan of the Jetta when it first came out, but there's a nice red one that's parked in front of my building quite a bit that's changed my mind. It's definitely on the understated side, but it will probably age well compared to a lot of the over-styled product coming from companies like Hyundai.

The new Jetta interior does suck balls though...as well as the general "make it bigger and de-content that crap out of it" philosophy. All part of VW's plan to take over the world by turning their cars into appliances I guess....

Still wish we had the Scirocco.

[photon]

The only Jetta I still like is the SportsWagen. The Jetta and Passat will age about as well as a Camry or an Impala does IMO.

I agree though the new Beetle is an improvement, faint echos of the TT.

Yeah Hyundai is pretty aggressive with their styling, though I do like the Genesis Sedan (looks like a Lexus) and Coupe (looks like an Infiniti). And I want to see one of the new Veloster, which won't age well, but does look kinda cool.

[pylon]

Originally Posted by Table 5

A warranty is probably the best "option" you can have on a used car.... especially if it's German!

Pylon do you have any experience with after-market warranties? Are there any particular companies you'd recommend, or are they all a little shady? I recently bought a car that's 4 year old and off-warranty (which typically goes against my belief of buying German off-warranty, but I couldn't resist), and while so far its had absolutely no issues, I wouldn't mind the peace of mind. It was originally bought in the US, but I will be bringing it with me to Canada.... which may or may not be an issue.

First Canadian and Secure Drive are the only 2 I will consider selling. What kind of car is it?

[bizaro86]

Originally Posted by pylon

"To double the coverage on your new car, it will cost you $2800, we have established that. You have established it is not worth it to you at that cost. Tell you what then. If I give you $2800, will you sell me back, the original factory coverage on your new car right now, and take it off the lot as is? You just told me that 4/80,000 kms isn't worth $2800 to you."

Out of curiosity, and since I would say yes to that statement, would you buy the warranty back from the buyer?

[ken0042]

I buy my cars; but I typically keep those cars as well. In my ~25 years of driving I have owned a total of 5 cars, and I still own 3 of them.

There are a few downsides towards leasing that have not been mentioned:

- Difficulty in selling. My 10 month old vehicle that I bought new; I could essentially walk away from it at this point. With a lease you are in a contract to keep that vehicle for the term. So not only do you have to find somebody to take over the lease (which limits your buyer pool), you also would have to give up quite a bit of money. With a lease you are agreeing to buy the car for one price, sell it back at a specific time for another price, and finance the difference. So while the depreciation is spread over even payments, if you try to get rid of the car early you now take the hit for the biggest depreciation that happens when a vehicle is new.

- Returning the car- it has to be in a certain condition. So not only do you have to worry for your own peace of mind about damaging the vehicle, but you may also face a hit when you return the vehicle. I know of one poster in this thread who was stressing when he had to turn in his last vehicle as he had a minor accident just before returning it. As it turned out the dealership worked with him; but I have heard other stories where they do not. What is the value of that extra stress.

- Along the same lines- mileage. You have to decide when you sign how many kms you plan on driving, and how much you want to pay for additional kms. You get a better price at signing by saying you will pay 50¢ for extra kms than paying 10¢ for extra kms; will that work out for you?

- You are forced to return on a specific date. That date may not work; maybe you have a trip coming up and you would rather return it later. Yes, you do have the advantage of not having to try and sell your vehicle, but you lose all flexability.

- Modifications. The car is not yours to do with as you wish; any modifications have to be un-done before you return the car.

- Insurance- the cost for insurance is higher on a leased vehicle.

So yes, for many people leasing is a great option. I know people who always lease vehicles and would never buy. However it's good to have all the facts to decide if it is worth it for you.

The other thing to add- Pylon's post earlier mentions dealers stopping leasing. Because that post is an older post, I believe that info may be out of date. During GM's restructure a few years ago they had to stop leasing, but now that is an option again.

[Table 5]

Originally Posted by pylon

First Canadian and Secure Drive are the only 2 I will consider selling. What kind of car is it?

07 Cayman. Have you had experience with those 2 yourself? Anything in particular to look out for?

[pylon]

Originally Posted by bizaro86

Out of curiosity, and since I would say yes to that statement, would you buy the warranty back from the buyer?

You have to be careful how it is presented, but no, and legally I could not. As is is not allowed on a bill of sale in Alberta.

I always present it as a scenario. and frame it with a statement like, "lets say I was able to....." "Imagine a scenario where....."

It is not an actual offer, it is just an analogy to get people thinking about the value of the coverage. You would be surprised at how many people never thought of it in that light.

[sclitheroe]

Originally Posted by pylon

"So if your original warranty is worth $2800 to you now when the car is new, unworn and tight, wouldn't it make sense, that it is worth far more, when the car is older, more worn, and more likely to break?"

No, for two reasons in my opinion.

I view the warranty on new cars as essentially the "debugging" period for the vehicle. It's not tighter and full of new parts, it's full of little problems and parts that weren't manufactured to tolerance to meet their expected lifespan. The first year or two and last year or two of a car are the bad ones, the in-between years not so much. Standard bathtub failure curve that you see in all kinds of industries - there's infant mortality, end of usable life, and not a ton of failure in-between.

Second, that $2800 is a much, much higher percentage of a used vehicle's purchase price, for the same coverage (or sometimes less) as that of a new vehicle, so it's a poorer value.