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

[huzy]

So last weekend I returned home from a trip away with the news that my fiance had "totaled" my car. Not her fault, what can you do? These things happen...Thank god she's okay.

I'm assuming after the final appraisal is completed by my insurance company, I should recive between $7500-$8000 for the car (It's a 2004 Mazda with 92,000 miles)

I have $3500 left in payments, which I'll immediately pay off with the insurance check, leaving me with roughly $4000-$4500 to start my search.

Here's my criteria:

-I'd strongly prefer to keep my monthly payments below $250. In the ideal world, below $200.

-I'm open to putting the entire amount down, but would love to keep some to put towards upcoming wedding expenses.

-My previous car was an SUV, which I liked. While I'm open to a Sedan, I would prefer a fuel efficient SUV at a reasonable price. (Open to car suggestions)

-I've never leased before, but have done some research. I would only do a closed ended lease, as I have no interest in buying after a 36 month payment period.

Based on other threads that I've read regarding finances, mortgages, etc., as well as my own luck (I found our wedding band through Celticsblog. ) I figured this was a good place to solicite advice from.

Lease or Buy? What should I get?

Thanks!!
 

[Rondo2287]

Buy Buy Buy Buy Buy

Here is what Suze Orman says,

http://biz.yahoo.com/pfg/e16buylease/

[Rondo2287]

This is the part of the article I found most helpful


"There's also the odometer issue. Most leases stipulate that only the first 12,000 miles a year are covered by the lease. After that you will be charged a per-mile fee, maybe 15 cents or so. Here's just one scenario to ponder. You lease the car and don't worry about the mileage because your office is four miles from your home. Now let's jump ahead one year. You decide to move, or you land a fabulous new job that's not as close to home. Your daily roundtrip commute jumps from eight miles to 30 miles. That means just to get to and from work you are going to run up about 7,500 miles a year rather than 2,000. That will leave you just 4,500 miles to live your life: run errands, go to the movies, visit your friends and family, take a road trip. And what happens if Mom or Dad becomes ill and you decide to make the 300-mile roundtrip trek home each week to visit them?

The point is that life is full of unknowns. Right? When you sign a lease you can't possibly understand where your life is going to be in six months or two years. Your lease doesn't care what happens in your future; it won't adjust to your changing lifestyle. And that can end up costing you big-time.

Let's say you end up averaging 13,000 miles a year. That will mean over the three years you will be 3,000 miles over the limit. That's gonna cost you an extra $450 when you turn the car back in. Overrun your limit by 2,000 miles a year and you will be forking over $1,000 when you hand in the keys. The car experts at Edmunds.com tell me that they estimate about 10 percent of leasers exceed their mileage allowance, and typically by a whopping 5,000 miles a year. At 15 cents a mile, that's going to be another $2,250 they owe when they finish a three-year lease. Hmm� I bet every one of them assumed when they took out the lease that they would never go over the 12,000 limit."

[Rondo2287]

More here

"Or consider another possible disaster scenario. What if you lose your job and can't make your lease payments? If you call up the leasing company to explain your hard-luck story, don't expect any sympathy because you won't get any. I don't even really blame them for that. You signed a contract and they certainly have a right to demand you keep up with your monthly lease payments. You could turn the car in, but you would still owe them $24,000. And when you try to sell the car on your own, you discover all you can get for it is about $17,000. So even if you sell the car you would still owe the leasing company $7,000 to settle your account with them. That's $7,000 you don't have.

Sadly, that's probably your best option. If you decide to just give them the car back, you're in for a deeper hurt. The leasing company could sell your car to its used-car dealership for $5,000 and still demand you pay them the difference between that $5,000 and the $24,000. That's a $19,000 nightmare. Don't think it can happen? It happens all the time."

[hardlyyardley]

if you think you will put on more than 12k a year, you can negotiate excess mileage up front at a much better rate than 15 cents....but you'd better be sure or else your throwing your money away

[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.

[Mr October]

I'm in the Buy camp. ..new or used doesn't matter.

[huzy]

This is great advice! Thanks.

I've always been intrigued by leasing, but the more I hear about it..sounds like fool's gold.

I guess initially I looked at the scenario of "newer car...lower payments. I have to check it out!"

Like every other investment...it looks like there's always a catch!

Thanks again...and Roy, I'll be sure to check out the Forrester. You're not the first person to recommend it, so they've gotta be doing something right.

 

[Kwhit10]

Check out the Saturn Vue Green line.  25mpg city/31 highway

The 2008's can go around 23-24k, or a 2009 may be up near 27k.  If I were in the market for an SUV I'd check them out first.

[D Dub]

If you really want to go maximum MPG without sacraficing the niceties of a full-size SUV - go find a older Diesel rig (pre 2002) and VEG that sucker.  

Check out these surfer's who traveled deep into Baja with a VEG-powered off road rig.  If their system can handle those 'roads' down there with VEG horse power, they'll be able to go anywhere...
http://www.patagonia.com/bendtobaja/index2.shtml

[FatoineLover]

You should never lease or finance a car, if you cant pay cash for the car you can't afford it. If I was in your shoes I would take whatever I had left from the insurance money and a few thousand from savings and buy a nice used Toyota or Honda for cash. You will never build serious wealth if you are making payments on anything.

[angryguy77]

I'm big on paying off your car and not having a payment. Leasing will not allow you to do that. The less money going out the better, unless if your a big time lawyer like some people not named here  

[JSD]

Have you considered buying a used car? In a down market you can get a really good deal and the extra money your saving can be allocated toward your wedding.

- Save money on insurance
- Save money on monthly payment
- Good value

You mentioned you had a 2004 Mazda with 92K on it? Check this whip out: http://boston.craigslist.org/gbs/cto/1385715719.html It's a 2004 Mazda 3 Hatchback with new tires, brakes and a sharp look. They're asking $5500 or best offer. Go down there, kick the tires and offer $4000 cash. With the extra $500 take the woman down to Springfield, stay at the nicest hotel, eat at the most divine restaurant and check out the MJ updated Hall. Good luck.

[Moranis]

I'd go with a toyota.  They last forever and they always under estimate the miles per gallon.  I've never driven a toyota that didn't get better gas mileage then what was quoted (which is the exact opposite of every american car I've owned).

You also might want to consider getting a used car from a rental agency.  You can get a relatively new car at a pretty reduced price.  Drivers of rental cars are harder than your typical driver, but the rental agency does make sure all maint. is done when it is supposed to be.

[EJPLAYA]

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.