Wilfred

On Wednesday, I returned my first new car, a '98 Mazda 626 ES-V6, after having extended the lease for as long as I could (an additional 6 months) and fixing the front bumper ($525) from when I ran underneath the shelves in the garage.

My lease was for 36 months/36,000 miles, extended to 42 months/42,000 miles. I returned the car with 74,072 miles...minus about 80 miles from when I got the car...left me with 32100 over.

I was expecting the worst, but it ended up being not that bad.

I dropped the car off...the leasing manager took a walk-around looking for elements of major damage and filled out a checklist saying "everything's ok." I signed a release, agreed to the final mileage amount...10 cents/mile x 32100 = $3210 - my security deposit of $550...gave him the keys and that was it.

I had hoped one of my friends from work would buy the car, but the salesman remembered a $700 disposition fee at the last moment, which blew the deal.

With that many miles on it, the car was absolutely silent at speed, with the A/C fan and everything else off...much quieter than my new 4.2. I love my Audi, but Mazda builds some mighty fine cars too.

Anyhow, I write this because I was scared to death of the lease return process. If my friend weren't trying to buy the car, it would've taken a total of 15 minutes. Enough to make me think that I misjudged the folks at Almaden Mazda. It was really painless!

Unless you know for sure that you're going to keep the car forever, I highly suggest leasing to pretty much anyone. You pay less money up front and you never know whether the car will develop problems or be in an accident in the first few years. Leasing gives you the ability to say "are you sure?" a few years down the line. In my case, I couldn't keep the other car because of the economic downturn in the valley (Sept. 14th is my last work day and I'll be out looking).

Later this month, I break out the Zaino and the felt strips (to stop the squeaks with).

Finman

I'm still a bit skeptical about leasing...adding $3210 to a $24k car after you've already given them 42 x $??? is still a significant penalty although it might have been worse paying for the whole car then selling it as a 3-4 year old car with 74,000 miles...probably not a whole lot of difference in the end. What is better about buying is that you can easily say "are you sure?" anytime and don't have to worry about an obligation to a leasing company (although leases can be bought out also).
Good luck with the future new job.

Wilfred

At least with the lease I got through MAC, the principal and interest remained the same throughout the term of the lease. When you purchase and finance, just as with a house, the P is very small, while the I is almost the entire payment. So, for the first 40% of the lease, I had actually paid in more principal than if I had financed the same car with similar terms.

I also didn't pay taxes on most of the car, just on the part I leased and on a month-by-month basis. It works out that I paid about $1100 more by leasing than if I had taken a 42-month loan against the entire cost of the car. That includes the almost $3K mileage cost.

If I had early-terminated the lease, the fee would've been $700 (disposition fee). The advantage is that I didn't have to mess with selling the car. If there had been an accident and I just didn't want the car anymore after seeing it get patched up, $700 to get out of it isn't that bad. The lease turn-in was amazingly simple and easy.

I can't see too many ways that I would've lost out. Now, I WISH I had purchased more miles up front on both the Mazda and the Audi I have now. I had planned on buying the Mazda so that the Audi wouldn't get as many miles. Since I have 12,000 miles since Feb. 1, and a 15,000 mile/year lease, at 20 cents/mile for overage....

Oh...the other thing is that, if I begin having problems after the warranty expires, I can *still* return the car and pay the lease termination fees before the repair costs get too intense...or even early-return it as I hit 60,000 miles.

Audiablo

Most people think a car (like a house) is an asset. Neither is. An asset is something that puts money in your pocket. If you can buy a car, it's always better to invest the sum, and use the return on investment to pay for the lease.

45000 x 2% per month = $900

When the lease ends, you still have your investment making $900 a month, just turn the car in and get another. If you had bought the car, you would have lost over $15,000 on it. Makes sense?

Just read Rich Dad Poor Dad by Robert Kiyosaki and do what the rich do. Own nothing, control everything.

Jack Orr

Where exactly do you think there is 12% annual interest available?????

Finman

Yeah, right, not this past year, you'd be lucky to have better than a 20% loss...maybe a couple years ago that was true...but to make 2% per month right now is very difficult even for the experts. Besides, lease or buy, not everyone has $45k laying around to buy the car outright or invest (of course, that would've been invested all along).

Stoney

I don't get Wilfred's logic at all. If you lease or buy over time, you are still paying for use of the money. In general, owning is cheaper because you are at risk. No one pays you to tie up their money for them. Comparing the two methods requires a complete understanding of ALL costs and of the various scenarios.

Most leases analyse out as worse deals than buying. This is why they push them so hard at the dealer (that and the fact that leasing brings you back to the showroom for a probable next car). My purchase came out AT invoice (dealer profit came from a kickback from Audi plus sliding incentives/rewards).

But, I haven't run the numbers, and I'm not sure I understand leases well enough to write a spreadsheet myself.

I HAVE done that with rent vs buy for a house, and buying pays off only if you stay for a while and if appreciation occurs (depending on market rents vs prices).

Who has a similar tool for leases?

Here are a link that may or may not still work:
<A HREF="http://aic2.autosite.com/cgi-win/loanlease.exe/CalcPayment">Monthly Payment Calculator</A>

Wilfred

GNMA, which is the gov't agency that backs home mortgages. Almost complete safety and a decent payback rate.

Wilfred

on whether you can do better with the money.

To wit, the best investment most people can make is to pay off their 18% or higher credit card debt. You automatically get an 18% return on that investment. If you have credit card or other debt at higher than 12%, and you can get a lease at 12% effective rate, it's better to put zero down into a lease and work your c-c debt down.

If the numbers are right with a lease, you gain tremendous flexibility...

1. If the car gets damaged, early return it.
2. If the car is a lemon, early return it.
3. If you want or need something different, early return it.
4. If you really like it and want to buy it, you've still put more toward principal than you would if you had financed it.

Cars are almost NEVER investments. How many cars sell for more than they were purchased? If you subtract out maintenance and additions, how much worse do the numbers get?

Housing can only be an investment if it appreciates in the market and earns you money, or if you rent it out and earn money that way. At least in the Bay Area, renting is cheaper than buying a $1 million house in a not-so-great area. Plus, if something breaks, it's someone else's problem.

Owning can be a liability. The "right to use" is where the value is.

Finman

If this or that happens (that you don't like) sell it, or trade it in...use money to pay off bank. No big deal...same as returning a lease early. A lease, to me, just creates a lot of rules that I am supposed to live by and it is not mine. Leases seem to work very well for those who a. will not have their car more than three years, and b. don't drive that much, and c. those who can use as tax write-off for business expenses. Otherwise, I don't see any advantage to leasing.
I pay a monthly payment just like a lessee does...I didn't drop $50k in one shot, I'm doing it over time, so theoretically I still have (yeah, right) that $50k in my pocket that I'm using to earn money (at 24% and using the profit to pay my monthly payment and offset the 7% interest rate...and at the end of 3 or 4 years, I own it!