Buy or Lease a Car? (Looking for advice...)

[Greenbean]

I just bought a Subaru Forrester, and I absolutely love it.  It meets your criteria for a fuel efficient SUV, it rates extremely highly in safety and resale value, and it's not all that expensive, as far as SUVs go. 

I've always bought; I prefer having equity in a car.

Roy just wondering how you have equity in any car since the value plummets as soon as you drive it off the lot. Maybe I dont understand what equity means. Educate me!

To answer the OP...to quote Jay-Z...

"I dont lease I buy the whole car, as you should"

Not a bad business mind to take advice from.

[Greenbean]

I was in the car business for quite a few years and one thought I will share with you is that leasing only benefits the car dealer. There are so few occasions that a person truly ought to lease a vehicle that it is almost a no-brainer. Don't worry so much about monthly payments. That is the dealers game. Worry about how much total you can spend, and getting a vehicle that is reliable and worth the amount you are spending.

Like many on here, and being a financial advisor for a living, I would highly recommend you consider paying cash for a vehicle and financing nothing. If you need to save some of it for a wedding then buy a cheaper car. There are only 2 things in life that actually make sense to finance. A house, and education. Both are appreciating assets while a car is a depreciating one. The old saying about interest is always true. "Them the understands it EARNS it. Them that don't PAYS it."

You can buy a lot of vehicles with about 150k mileage (Toyotas and Hondas) that are very reliable and have another 100k worth of driving left in them for about 2-3k. That will leave you some extra for the wedding. Remember. A car really is transportation. Even that 100k Porsche loses its appeal after 6 months. Then you are just stuck with the bill.

That is some great advice for everyone. Thanks EJ! I agree. If you are getting married and starting a new life/family there is no shame in making a moderate purchase where you can pay cash. You will have plenty of time for luxury vehicles down the road unless you have a job where a nice vehicle makes a difference. An example would be a real estate agent where your clients would always see what you are driving and in some cases be driving with you.

Sorry for the double post.

[Roy Hobbs]

I just bought a Subaru Forrester, and I absolutely love it.  It meets your criteria for a fuel efficient SUV, it rates extremely highly in safety and resale value, and it's not all that expensive, as far as SUVs go. 

I've always bought; I prefer having equity in a car.

Roy just wondering how you have equity in any car since the value plummets as soon as you drive it off the lot. Maybe I dont understand what equity means. Educate me!

To answer the OP...to quote Jay-Z...

"I dont lease I buy the whole car, as you should"

Not a bad business mind to take advice from.

You don't have equity right away, but you have it after a couple years of making payments.  Let's say you buy a Honda for $18k, on a four year loan.  Four years later, you've made all your payments, and still have a car valued at $8k - $10k.  Thus, you have that much equity. 

Obviously, you never get that with a lease.  You're literally renting a car, whereas when you buy, at the end of the term you actually own something.

[Greenbean]

I just bought a Subaru Forrester, and I absolutely love it.  It meets your criteria for a fuel efficient SUV, it rates extremely highly in safety and resale value, and it's not all that expensive, as far as SUVs go. 

I've always bought; I prefer having equity in a car.

Roy just wondering how you have equity in any car since the value plummets as soon as you drive it off the lot. Maybe I dont understand what equity means. Educate me!

To answer the OP...to quote Jay-Z...

"I dont lease I buy the whole car, as you should"

Not a bad business mind to take advice from.

You don't have equity right away, but you have it after a couple years of making payments.  Let's say you buy a Honda for $18k, on a four year loan.  Four years later, you've made all your payments, and still have a car valued at $8k - $10k.  Thus, you have that much equity. 

Obviously, you never get that with a lease.  You're literally renting a car, whereas when you buy, at the end of the term you actually own something.

Ahhh..okay I see. I was thinking of equity as  in car value minus loan amount. I get it now. I looked up equity with a car lease as the parameters while I was waiting. I am an engineer so Im great with numbers but not when they are attached to money. Thanks Roy!

[bdm860]

Put me down with all those who say buy it for straight cash!

Look at right now, your car is totaled and you still have to make payments on it, what sense does that make?  Be in debt to no man.

You don't want to pay interest on something that depreciates.  Plus overall it's cheaper to not make payments. 

Use this car loan calculator
http://www.edmunds.com/apps/calc/CalculatorController
Going bare bones here for this example: buy a car for 10k with nothing down and no other fees, no sales tax, no title, just straight 10k, using car payments over 60 months with 6.95% APR.  Overall you'd pay $11,866.2 for a 10k car (just take the monthly payment times the number of months to figure out what you'd be paying overall).  I don't know about you, but I can do alot with that extra $1,866.20 I'd be paying in interest.  Buy straight cash.

[jambr380]

I'll never understand Americans and their cars. They are pretty much status symbols. If you can't afford a car with money you already have, then you really shouldn't try to afford it. EJPlaya makes a very good point about appreciating/depreciating values in his post. You can get a very nice, reliable car with the remaining money from your insurance pay out. You will be amazed how good it feels not to have a monthly car payment.