Should I lease or buy a car?

Question

I have an 05 Mitsubishi Endeavor and I owe about $2,500 more on it than what it is worth. I have it for sale but I am think about trading it in and doing a lease. What is the best thing for me to do without losing to much money on it??

Answer 1

Leasing is pretty much throwing your money away, you have the option to buy at the end but until then you never actually own the car.

Answer 2

it really does depend on your situation. The problem with most questions like this is that we really dont know what your personal habits are. How often do you trade? (you have a 2 or 3 yr old car and are upside down.. not a good thing. Now if you buy you will be tacking on 2500 plus any negative equity you have in the new car after you want to trade it in 2 or 3 years). Pretty soon you will be so upside down no one will be able to get you out.

How many miles a year do you drive? Leases can be custom tailored to your driving habits. I have seen 20k mile a year leases, and they still made sense.

You need to have an analysis done both ways. But, the fact is, if you drive less than 18-20 thousand miles a year, and tend to trade every 2-4 years, you might be much better off leasing. Or, you can get traditional financing for 36 months, if you can take the payment. If you need the lower payment, lease, stick out the term, and then turn it in and go into the next one.

People will argue, yeah, but then you never own the car... like that is some kind of big deal.. if you trade every 2-4 years, and take out 60-84 month financing to afford it, all you own is a big debt at the time you try to trade.

Go to a dealer near you with a good reputation, and tell them you want an analysis to see if you are better leasing or buying. Make sure that the selling price and the cap cost are the same. On a lease the cap cost is the purchase price. If it is higher, make them show you what fees are included in that cap cost, and make sure you have apples to apples. Also make sure that any lease payment quoted to you includes sales tax, as on a lease you pay tax on each payment, while on a purchase you pay tax on the whole car up front (yet more money saved, potentially hundreds if not thousands of dollars since on a purchase you pay tax on the whole amount up front, and then finance it at interest, while on a lease you pay tax each month you have the car, and it is not subject to interest. Also consider the warranty. If you are able to do a 36/36000 lease, you will have warranty coverage your whole lease. If you have to do a 60 month purchase you would be paying 2 years with no warranty coverage unless you pay extra for it.

In regards to GAP coverage, a lot of lease companies do include it as part of the lease. You need to read the contract. Ask the finance manager if it is included. Make them show you the paragraph where is is mentioned.

And most lease companies do not nitpick the car anymore. They look for the type of damage that if you were to keep the car you would likely fix (broken glass, damaged fenders, bald tires, cracked rims, etc). The fact that the car is overpriced at the end works in your favor, since you pay the difference between the residual value (value at the end of the lease) and what you are paying as a cap cost (agreed upon selling price). If the car is overpriced, why would you buy it? Walk, or negotiate with the bank. Sometimes they will give you a good deal and a good financing package to buy your lease car. Ask, it only costs you a little of your time.

As for the comment that salespeople get paid higher commissions for leases, that is only true if they actually make more on the car in terms of profit.

Good luck with your situation.

PS... regardless of how you go, you are still losing the 2500, but with leasing you can eventually stop the bleeding if you are realistic on your ability to make payments, miles driven per year, etc.

BTW, leasing is not for everyone, but it is for some people. Do the math.

Answer 3

Leasing is the best way to buy a new car. The good thing about trading it in on a lease is that at the end of the lease you will not have any negative equity. It's really a toss up on buy vs lease, but if you are like 85% of the car buyers in the USA you probably like to trade every 2-3 years and have set aside a part of your monthly budget for a vehicle and will always have that expense.

Answer 4

Allot of people lease, but for different reasons. Some have a business that makes leasing a vehicle adequate.

Should you decide to lease the problem is that you must keep it under so many miles allowed per year. You can trade it in and the process keeps repeating itself and you always end up driving a new vehicle and never owning it.

The end result is basically your paying to drive a new vehicle every year and never own it.

Some people find that better than buying, but that is like making payments for the life of driving something nice every single year.

It sounds great. but putting stipulations on the miles is another thing. You can get the dealer to extend the mileage rate, but on the average you have to keep those miles in that range when you go to trade it back in or you lose.

Too much of hassle for me. I would rather buy a used vehicle with low miles fairly new and pay to own and then save my money after it is paid off until one day I am ready to buy again.

I will never buy a new vehicle again. I have lost too much money when I drove it off the lot.

My last purchase was a 2005 Cadillac Escalade. $27,000.00 down and when I traded it in six months later I lost $16,000.00

Live and learn. The most stupid deal I ever did in my life and I learned from it.

Answer 5

Buying is better than leasing. Leasing is like renting a car, it limits the amount of mile you can drive per year and at the end of the lease you can either buy an overpriced used car (the one you leased) or return it and have the leasing company nit-pick at every little dent and charge you for miles over the limit. Also if the car is in an accident and a total loss or stolen ant not recovered you OWE the leasing company the money stipulated in the leasing CONTRACT, regardless if this is the real value of the car, on the other hand your insurance company will ONLY reimburse you for what the car is worth according to market value (which they set). So unless you have "gap" or "umbrella" insurance (which you pay extra for) you will still have to pay $1,000s AFTER the insurance company paid for the damages.

Get informed, look at this website (no spam, no viruses) before entering in any auto contract:

http://carbuyingtips.com/

It saved my life and saved me tons of grief.

Answer 6

I would NEVER EVER recommend a lease. Leasing a car means you get to finance the car for the amount of time you're going to use it. You get to pay for all the depreciation. At the end of the lease, you can purchase the car or give it back. Either way, they're going to turn around and sell the car again...either to you or to someone else.

Leasing is of huge financial benefit to the LEASING COMPANY. Did you know that car salespeople get paid much higher commissions for doing leases than they do for sales?

Check this link out...it was written by someone who was in the same situation as you. If you're "upside down" on your Mitsubishi Endeavor payments, sell the car and get out of it, but for heaven's sake, DON'T do a lease!

Answer 7

Sell it. If you trade it you will still end up paying more in interest at the end. Do you really want to pay more over the years or stick with what you have now. An 05 is really not that old, leasing a newer model is going to cost you a lot more than 2,500.

Answer 8

You'll be rolling your negative equity into a lease & then you'll have the balloon at the end! If you are concerned about losing money DO NOT LEASE! Find a dealer who is willing to give you more on your trade and then finance your next vehicle. The down payment that you would've put on the lease will go toward paying down your note. Good luck!

Answer 9

If you are planning on keeping the this new car for a long period of time usually buying it makes more sense but if you always want a new car every 2-3 yrs than leasing is a better option as long as you don't drive more than 10-15k miles per yr.

Answer 10

Leasing supplies flexibility in terms of the recommendations obtainable. in case you opt to alter your motor vehicle each and every few years or in the adventure that your life-type demands a sparkling motor vehicle each and every few years, then leasing is an captivating determination. So hire is extra advantageous while in comparison with a loan.