buying vs. leasing... - PeachParts Mercedes-Benz Forum

TheDon · #1 05-15-2007, 02:27 PM

ok I kinda get the two..

but which would be better for someone like me. 18 outa highschool.. would like a more reliable car than my current one.. preferebly with a warrenty so I dont have to always be under the hood.

I have 2k in my account.. ( bout the same in scholarship money from the CC for books) as well as money from graduation coming in as well as the sale of my benz if I do follow through

VW (I still want the rabbit) has leasing with the option to buy at the end. with financing

then buying it etc ya know..

i know some of you are going to be like.. you dont need either

PaulC · #2 05-15-2007, 03:11 PM

Assuming your age is not a legal/policy issue in regard to entering a lease agreement, a couple of factors have to be considered:

1. Personal Credit History - because entering into a lease often requires little or no down payment to offset the cost of the car, finance companies often use stricter credit criteria against you than if you were going to buy the car with 20% down payment. Even if you have no black marks against you, your age probably means that you don't have much of a credit track record to be evaluated. Theoretically, it could work against you. You won't know until you know.

2. Mileage - if you can live within the annual mileage allowance, all is well. If you start going over the allowance and turn the vehicle in with excess mileage, a charge will apply, typically 20-25 cents per excess mile. That can add up.

3. Vehicle upkeep - you are contractually bound to keep the vehicle in very good mechanical and cosmetic condition. If you don't, and the vehicle shows it at turn-in time, you will be assessed a penalty that would probably be higher than the cost of the repair. Scratches, dents, upholstery stains, tears, etc. will probably expose you to some type of financial penalty. Lease agreements are not universal on what kind of damage they will tolerate before imposing a penalty. Read the lease agreement and make sure that you understand it on this point (and all other points as well). You're attending college? Most college cars look like they had a front-row seat at a tornado festival after 2-3 years.

4. Insurance - most lease companies have minimum insurance coverage limits that are fairly healthy. That, and the fact that you are insuring a new ($$$) car, means that you will be probably be subject to a higher insurance premium than you're used to paying.

Ya, I'm trying to talk you out of it. College is not a great time to bind yourself to a multi-year finance contract.

Dee8go · #3 05-15-2007, 03:25 PM

I never could see any point in leasing vehicles unless the cost of the lease can be written off as a business expense. In that case you can deduct the whole payment rather than just thaking the depreciation.

Since I don't think you have a business through which to lease your VW, I'd recommend buying the car instead. When the payments are over, you own it. Since I'm sure you take much better care of your cars than most people do, you'll have something worth owning.

SwampYankee · #4 05-15-2007, 03:30 PM

The mileage limit would be tough for me (well that and the fact that my dog and kids do a good job of destroying whatever they're in) , most are in the 12,500/yr. range. While I've never leased they do appeal to me in that every 3-4 yrs. you turn the car in and get something else. I tend to get bored with whatever I'm driving after a few years and the idea that you just get something else after that is pretty cool. Besides, since the money situation is likely to improve over those years you might be able to upgrade a class.

Some will argue about not owning it, but if you have to finance a car the bank owns it until it's paid off. So unless you're paying cash for the entire balance you don't own it either way.

If you can easily afford the down and monthly payment it's worth considering (says the guy who probably wouldn't

).

jlomon · #5 05-15-2007, 03:43 PM

The main problem with leasing (assuming you don't have the ability to write it off) is that it has you on a constant payment treadmill. You never own anything. Yes, I realize that as an investment a car is laughable because of the rate it depreciates at. But at the end of a finance contract you have an asset that you own. With a lease you own nothing. Even halfway through a finance contract you have equity in the car (you could sell it for more than you owe on it and then make use of the leftover funds).

You can pay off a loan at any time, and not have to worry about paying for future interest. This is not the case with a lease. When you sign the agreement you are obligated to pay all of the payments, inclusive of principal and finance amount. This will have you "upside down" in the finance agreement (owing more on the contract than the car is worth) for longer into the term. This will make it harder to get out of the lease if you need to change cars for any reason.

The up-side to leasing is that you get to drive more car than you can afford on a monthly payment. You get a car that is always under warranty. You get to drive a new car every 3 or 4 years, depending on the terms you choose. But for my money, I would rather have an asset to show for my payments and I would rather not give as much control to the leasing company as they require.

thorsen · #6 05-15-2007, 03:47 PM

I can't remember - weren't you the one who wanted to blow $2k on an Apple laptop a couple of months ago??

Kuan · #7 05-15-2007, 03:55 PM

Quote:

Originally Posted by thorsen

I can't remember - weren't you the one who wanted to blow $2k on an Apple laptop a couple of months ago??

No kidding. Who in their right mind would want an Apple?

thorsen · #8 05-15-2007, 04:13 PM

Quote:

Originally Posted by Kuan

No kidding. Who in their right mind would want an Apple?

I assume you are being facetious, but one can never really tell through an emotionless medium. I own a couple of Apples, and am pleased with them thus far.

My point was that he just needs to do more research, and wait for the next $SHINY THING$ to grab his attention. It should be coming along in about 6-8 weeks, if past history is any indication of future performace.

BENZ-LGB · #9 05-15-2007, 04:21 PM

Quote:

Originally Posted by TheDon

ok I kinda get the two..

but which would be better for someone like me. 18 outa highschool.. would like a more reliable car than my current one.. preferebly with a warrenty so I dont have to always be under the hood.

I have 2k in my account.. ( bout the same in scholarship money from the CC for books) as well as money from graduation coming in as well as the sale of my benz if I do follow through

VW (I still want the rabbit) has leasing with the option to buy at the end. with financing

then buying it etc ya know..

i know some of you are going to be like.. you dont need either

You can do a lease if, as it has been previously suggested, you can deduct the cost of the lease.

The other way of doing a lease is if you are really good about saving money. This is what I mean.

Let's say the monthly payment on a loan for the car you want is $500 but a lease is only $250. (Same term, 36 month loan or 36 month lease). If you are good and disciplined about saving money, then you can take that $250.00 and bank it. On a 36 months lease that's $9000 in the bank.

If you can do that, then the lease may not be a bad idea for the reasons that you stated: 1. driving a better car and 2. not have to worry about the cost of repairs.

My daughter has put well over 16k miles in the 2006 Rabbit that we bought for her. The car has been trouble free and extremely reliable. (as well as fun to drive

)

Something to think about.

Honus · #10 05-15-2007, 04:35 PM

For $3,000 you can probably get a Toyota, or something similar, that will give reliable transportation for several years. That beats the heck out of having a car payment at this stage of your career. IMHO, of course.

I don't claim to be an expert, but I would stay away from VW unless you get a relatively new one. I don't think they have the high mileage reliability of the Japanese makes. VWs are fun to drive, though.

aklim · #11 05-15-2007, 04:45 PM

Quote:

Originally Posted by PaulC

Insurance - most lease companies have minimum insurance coverage limits that are fairly healthy. That, and the fact that you are insuring a new ($$$) car, means that you will be probably be subject to a higher insurance premium than you're used to paying.

Unless you pay cash for it, IOW the bank has an interest in it, won't they also insist you get a certain amount of coverage?

PaulC · #12 05-15-2007, 04:49 PM

Quote:

Originally Posted by aklim

Unless you pay cash for it, IOW the bank has an interest in it, won't they also insist you get a certain amount of coverage?

I'm sure that they would insist on collision and comprehensive coverage during the term of the loan, but leasing companies would also insist on pretty healthy liability insurance coverage.

aklim · #13 05-15-2007, 04:51 PM

Quote:

Originally Posted by PaulC

I'm sure that they would insist on collision and comprehensive coverage during the term of the loan, but leasing companies would also insist on pretty healthy liability insurance coverage.

Any ideas how much in each case? I know that a few years back 500/500 would work. What about leasing?

PaulC · #14 05-15-2007, 04:53 PM

Minimum limits are set by the individual leasing companies. No hard and fast rule, but typically they're higher than an 18-year old guy with minimal personal assets to protect would normally consider.

300SD81 · #15 05-15-2007, 05:23 PM

For $2-4k, you can probably get a much more reliable version of the same Benz

My $100 + $200 auction fees has never given any issues other than regular maintenance.