Need info on leasing. Pro/Cons

KARNUT · October 5, 2019

I never pay cash when I can get 0 percent or close to it. Even appliances. JC pennies had 0 percent. We filled up our kitchen with top of the line stainless steel for 100$ per month, no interest. In that time period my AC went out. I would have had to dip into my IRA. Instead my cars at low interest, my appliances at 0, my AC cash and my IRA still making interest.

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CatRacer213 · October 5, 2019

I am on my third lease in a row. I started with a 2014 double cab Silverado when I was in college because it was a way to get cheap payments and have a new reliable truck. Went way over my miles (15k miles over the 45k total). Bought the truck out and traded it back to the dealer on another lease the same day. Cost me about 2 grand to do it which was cheaper than the mileage overage. Lesson learned on mileage overages. Rolled that 2 grand into the new lease on a 2017 double cab Silverado. It kept my payments low coming out of school, buying a house, paying student loans monthly, and everything else that comes with.

Fast forward three years, GM lease loyalty combined with early lease buyout and a few other incentives put me in a new 2019 crew cab 5 months before my last lease was up with zero money down and a payment increase of $30 bucks a month. I was dead set on buying a used K2 crew cab when my lease was up, but I knew where I wanted to be with payments, and itt didn't make sense to buy used and have a similar payment on a truck with 70k miles on it plus very likely have to put money down on it to do it. There are pro's and con's to both, but so far my leases have been good for me. If I still like my T1 I will likely buy it out at the end of the lease. Time will tell.

Imcrazy · October 11, 2019

Let's put it this way, I know people who can pay cash for a 1/2 million dollar house who think leasing a vehicle is a much better financial move because of the terrible depreciation on a car.

For example my 2016 DBL cab that had a $50k sticker and a $40k purchase price now has 83k miles on it and is only worth about $20k to trade in and I've put a set of tires for $1000 plus about $3k of other maintenance.. Granted I'm a very high mileage driver but, the high miles probably only takes away about $2-3k of value and given that my employer basically covers 90% of my car payment I can't complain..

oldmann · October 11, 2019

Cost per year is always cheaper for me to buy when paying up front.

johnnys2k · October 11, 2019

This is what I do for a living, train dealerships on the pros and cons of leasing vs purchasing...

Look, leasing is not worse than buying, it's just different. It's another way to pay for a car, where you're just paying for the portion of the car you use. Payment based on expected depreciation, and we all know cars depreciate, and protects you from unexpected depreciation.

Economics 101 - Buy things that appreciate, lease/rent things that depreciate.

If you are trading every few years, drive a predictable number of miles, and always have a car payment (ie: never pay a car off and keep it after), then leasing is probably the better option for you. So what are the benefits?

1) No negative equity

2) No risk of any kind (accidents, market changes, supply/demand, fuel prices, etc...) all that goes to the lender

3) New car more often, usually under warranty

4) Typically lower payments

5) More car for the same money

As far as some of the comments made earlier...

1) Yes, you can get out of a lease early, at least with GM Financial. No early term fee's, just trade out or pay remaining lease payments. Whichever is more reasonable.

2) Insurance: Yes, requirements are higher, but that's not going to make a huge impact on your premiums unless your carrying liability only right now...

3) Equity: Let's say lease vs purchase on the same car, lease is $100 less per month, if you're smart and save that money, on a 36 month lease, that's $3600 in your pocket, THAT IS EQUITY. All you do when you put money down on a purchase is BUY YOUR EQUITY up front or lower your chance of NEGATIVE EQUITY... you're not BUILDING EQUITY in a depreciating asset, EVER!

4) End Of Lease: walk away and get another one, buy it and keep it, buy it and sell it to someone else, or IF you have equity in it, trade it in and that equity is yours to do whatever you want with. Put it down on the next one or pocket it and go buy a new tv...

5) Mileage penalty: whoopty doo! $.25/mile! It's not much in the grand scheme of things. Imagine you buy a car, finance it for 72 months (the average now days) and in 2 years trade it in with 70,000 miles, you think your not getting penalized for miles? MILES ARE NOT FREE whether you buy, lease, pay cash. If you lease, you can max a lease at 25k miles per year with GMF, so you go over by 20K miles... that's $5,000 in penalty. That same truck traded in after 2 years on a 6 year loan is at least 8-10K in negative equity, and that's assuming perfect conditions, no accidents, market is good, etc...

Anyways, take it for what it's worth, at the end of the day it's your choice, but anyone who says "LEASING SUCKS" is extremely misinformed. If you have more questions, I'd be happy to answer them for you.

John

davester · October 11, 2019

8 minutes ago, johnnys2k said:

1) Yes, you can get out of a lease early, at least with GM Financial. No early term fee's, just trade out or pay remaining lease payments. Whichever is more reasonable.

2) Insurance: Yes, requirements are higher, but that's not going to make a huge impact on your premiums unless your carrying liability only right now...

3) Equity: Let's say lease vs purchase on the same car, lease is $100 less per month, if you're smart and save that money, on a 36 month lease, that's $3600 in your pocket, THAT IS EQUITY. All you do when you put money down on a purchase is BUY YOUR EQUITY up front or lower your chance of NEGATIVE EQUITY... you're not BUILDING EQUITY in a depreciating asset, EVER!

4) End Of Lease: walk away and get another one, buy it and keep it, buy it and sell it to someone else, or IF you have equity in it, trade it in and that equity is yours to do whatever you want with. Put it down on the next one or pocket it and go buy a new tv...

5) Mileage penalty: whoopty doo! $.25/mile! It's not much in the grand scheme of things. Imagine you buy a car, finance it for 72 months (the average now days) and in 2 years trade it in with 70,000 miles, you think your not getting penalized for miles? MILES ARE NOT FREE whether you buy, lease, pay cash. If you lease, you can max a lease at 25k miles per year with GMF, so you go over by 20K miles... that's $5,000 in penalty. That same truck traded in after 2 years on a 6 year loan is at least 8-10K in negative equity, and that's assuming perfect conditions, no accidents, market is good, etc...

John

1. is hilarious. Yes, you can get out of your lease early. All you have to do is make all remaining payments, in full, right now. I would suggest giving a couple lease brokers a call to see if someone else is willing to make at least some of the payments for you first...

johnnys2k · October 11, 2019

58 minutes ago, davester said:

1. is hilarious. Yes, you can get out of your lease early. All you have to do is make all remaining payments, in full, right now. I would suggest giving a couple lease brokers a call to see if someone else is willing to make at least some of the payments for you first...

That's also an option, you can do a lease assumption and someone takes over your lease. Also, you don't have to pay all the payments, let's say residual is 25K, and remaining payments are 6K... if the truck is worth 30K on trade, you can trade it in, and you're only 1K negative, which is peanuts in the negative equity game... or pay off your 6K if it's more reasonable (IE: roll it in as negative equity)

Also, depending on the state your in, there is a tax savings since you only pay tax on the monthly payment, and not the entire truck. So add that to your "equity" bucket.

mwbutcher · October 11, 2019

8 minutes ago, johnnys2k said:

That's also an option, you can do a lease assumption and someone takes over your lease. Also, you don't have to pay all the payments, let's say residual is 25K, and remaining payments are 6K... if the truck is worth 30K on trade, you can trade it in, and you're only 1K negative, which is peanuts in the negative equity game... or pay off your 6K if it's more reasonable (IE: roll it in as negative equity)

Also, depending on the state your in, there is a tax savings since you only pay tax on the monthly payment, and not the entire truck. So add that to your "equity" bucket.

This is good advice for additional options. Equity and residual value is interesting. I've twice recieved checks at lease end because my truck was sold for more at auction than the residual value. Very true it could have a hefty equity value prior to lease end and definitely worth looking into.

Imcrazy · October 13, 2019

On 10/11/2019 at 4:36 PM, johnnys2k said:

This is what I do for a living, train dealerships on the pros and cons of leasing vs purchasing...

Look, leasing is not worse than buying, it's just different. It's another way to pay for a car, where you're just paying for the portion of the car you use. Payment based on expected depreciation, and we all know cars depreciate, and protects you from unexpected depreciation.

Economics 101 - Buy things that appreciate, lease/rent things that depreciate.

If you are trading every few years, drive a predictable number of miles, and always have a car payment (ie: never pay a car off and keep it after), then leasing is probably the better option for you. So what are the benefits?

1) No negative equity

2) No risk of any kind (accidents, market changes, supply/demand, fuel prices, etc...) all that goes to the lender

3) New car more often, usually under warranty

4) Typically lower payments

5) More car for the same money

As far as some of the comments made earlier...

1) Yes, you can get out of a lease early, at least with GM Financial. No early term fee's, just trade out or pay remaining lease payments. Whichever is more reasonable.

2) Insurance: Yes, requirements are higher, but that's not going to make a huge impact on your premiums unless your carrying liability only right now...

3) Equity: Let's say lease vs purchase on the same car, lease is $100 less per month, if you're smart and save that money, on a 36 month lease, that's $3600 in your pocket, THAT IS EQUITY. All you do when you put money down on a purchase is BUY YOUR EQUITY up front or lower your chance of NEGATIVE EQUITY... you're not BUILDING EQUITY in a depreciating asset, EVER!

4) End Of Lease: walk away and get another one, buy it and keep it, buy it and sell it to someone else, or IF you have equity in it, trade it in and that equity is yours to do whatever you want with. Put it down on the next one or pocket it and go buy a new tv...

5) Mileage penalty: whoopty doo! $.25/mile! It's not much in the grand scheme of things. Imagine you buy a car, finance it for 72 months (the average now days) and in 2 years trade it in with 70,000 miles, you think your not getting penalized for miles? MILES ARE NOT FREE whether you buy, lease, pay cash. If you lease, you can max a lease at 25k miles per year with GMF, so you go over by 20K miles... that's $5,000 in penalty. That same truck traded in after 2 years on a 6 year loan is at least 8-10K in negative equity, and that's assuming perfect conditions, no accidents, market is good, etc...

Anyways, take it for what it's worth, at the end of the day it's your choice, but anyone who says "LEASING SUCKS" is extremely misinformed. If you have more questions, I'd be happy to answer them for you.

John

Couldn't have said it better! The problem is, these days people don''t understand that everything has a cost and somehow they think a modern car is an asset... It has always gone in the liability column for me all cars owned beyond their warranty terms are ticking time bombs... My 4 year old Silverado 1500 needs a new AC condenser to the tune of $7-800 with labor, I've already put 1 set of tires on and it needs a second set this winter, I've done drive train maintenance to the tune of $800, the shocks were shot at 40k miles and the front brake rotor warped so I tossed pads on while I was at it... If I had not DIY'd those last two items I'd have easily spent $5000 on maintenance and tires to date.. No mileage penalty for buying ? Yeah right, my truck as 83k miles on it and the damn thing isn't worth 1/2 of what I paid for it new in 2015 on a trade in... Many folks just don't fully understand money & unfortunately many dealers and their reps are in that group so there is a lot of bogus info out there on financing options... If I could have a 2 year 72k mile lease on a $50k truck for about $650-$700 a month, I'd sign up but, with my job leasing isn't an option for anymore... Although I can't complain my employer pays $475 per month plus $0.20 per mile so I pay about $90 a month above and beyond on that...

Edited October 13, 2019 by Imcrazy

johnnys2k · October 13, 2019

10 minutes ago, Imcrazy said:

Couldn't have said it better! The problem is, these days people don''t understand that everything has a cost and somehow they think a modern car is an asset... It has always gone in the liability column for me all cars owned beyond their warranty terms are ticking time bombs... My 4 year old Silverado 1500 needs a new AC condenser to the tune of $7-800 with labor, I've already put 1 set of tires on and it needs a second set this winter, I've done drive train maintenance to the tune of $800, the shocks were shot at 40k miles and the front brake rotor warped so I tossed pads on while I was at it... If I had not DIY'd those last two items I'd have easily spent $5000 on maintenance and tires to date.. No mileage penalty for buying ? Yeah right, my truck as 83k miles on it and the damn thing isn't worth 1/2 of what I paid for it new in 2015 on a trade in... Many folks just don't fully understand money & unfortunately many dealers and their reps are in that group so there is a lot of bogus info out there on financing options... If I could have a 2 year 72k mile lease on a $50k truck for about $650-$700 a month, I'd sign up but, with my job leasing isn't an option for anymore... Although I can't complain my employer pays $475 per month plus $0.20 per mile so I pay about $90 a month above and beyond on that...

if I were you, I’d still lease. 2yr 50k max with GM, and your penalty would be $5500 for the extra 22k miles. Based on your allowance and mileage, you’d probably be at a break even. Check the payments out and do some math, might still work out for you!

diyer2 · October 13, 2019

The idea of having monthly payments forever just doesn't sit well with me.

Simple.

AlaskaErik · October 13, 2019

5 hours ago, diyer2 said:

The idea of having monthly payments forever just doesn't sit well with me.

Simple.

My sentiments too. I bought my 2001 Sierra 1500 in October 2000 and paid it off two years later. So from 2002 to when I sold it in 2015, I had no payments. All I did during that time was one brake job, one set of tires, one set of shocks, fuel pump and starter. All told, about $2000. That's less than three months of new truck payment if you have a five year loan.

Michael John · October 30, 2019

I just leased a 2019 Silverado. RST package sticker was $51800. $0 down $525 monthly. You get a cheaper payment with a lease.. but with a purchase after 4 years you'll have a good amount of equity with good credit

HONDABBQ · October 30, 2019

Both sides work. Just depends which works better.

I have leased a few back in the day but not recently with my last 3 trucks.

I have made great deals when purchasing and have come out the other side smiling with positive equity. I have a 2015 SLE AT that I just traded in and got 5 k in equity towards my new truck. 2019 SLT. The SLT has a list of 72k. I’m off the lot for 51.5 k.

I kept the 2015 for 4 years and not 3 because the numbers didn’t work at 3 years in. I’m hapoy to say I have had ZERO in maintenance to okay out in that 4th year. (oil changes not included), all other work, which was minimal was on the warranty dime.

Buy smart at the end of the model year and you can build your own equity.