The Matzav Shmoooze: To Buy or To Lease?


carsDear readers,

I’m in the market for a car and I am faced with the question of whether to buy or lease. I have always bought but I am wondering about which way to go now. I am turning to Matzav readers for your input.

Conventional wisdom says that if you lease, you’ll have nothing to show for your money when the term is up. But that ignores the opportunity cost inherent in buying

With leasing, assuming your car is in good shape, when your years are up, just stroll into the dealer, hand over the keys, and drive out with a brand new car and a new lease arrangement. You don’t have to bother with selling the car or haggling with a dealer over trade-in value.

However, similar to paying rent on an apartment, your lease payments don’t go towards owning anything. Unlike traditional financing, you can’t look forward to the day when the payments will stop and you can drive your own car free and clear.

However, you pay a big penalty if you want out of the lease before the full term. Bailing out early may cost you as much as six extra months of payments, depending on your leasing company.

Most leases charge an extra 12 or 15 cents for each mile you drive over a certain limit. Typically the lease agreement grants 12,000 to 15,000 miles per year. Also, you’ll have to pay up for any damage to the car beyond normal wear and tear when you turn it in. One way to avoid the mileage charge is to buy more miles at a reduced rate (of around 10 cents) up front.

If you total the car or it gets stolen, your insurance will only reimburse you for the car’s market value, which might not cover what you still owe on your lease. You can buy extra “gap coverage” to protect against this, and some lease deals include it automatically.

Leasing is attractive for people who want new wheels every three years or so.

I don’t need a fancy car. I don’t even want one.

My question is simply whether financially it is kedai to lease. If I buy (a used vehicle), I have to plunk down a lot of money (8 grand or more for a car and, say, 14 grand or more for a minivan). My friend tells me that it saves you the hassle of selling your cars, and allows you to move from car to car with relatively steady low monthly outlays and low down payments.

My concerns are the fact that I drive about 18-20,000 miles a year. I am also concerned about the scratches and other small damages once the lease is over. Am I going to pay through my nose?

I’d appreciate any help Matzav readers can give me to sort this through. I want to clarify that I am now looking to lease both a car and a minivan. I am not sure how that affects this discussion. Please help me understand if you can.

Thank you.

A Fellow Yid

Brooklyn, NY

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  1. I’ll give it to you simple: DONT’T LEASE!!!

    The #1 reason to lease is if you need to have a new car every 3 years. That being said, you pay good and well for that privilege!

    Since you said you aren’t the type of person that always needs to have a new car and your concern is the financial aspect – it is definitely much better to buy.

  2. we used to buy used cars, but,then every few years we’d need another one and we needed it for commuting, about 36000 miles a year. Then we opted for a new car, but, new cars get old and need repairs after the warranty is up. Now we lease and although we don’t do so many miles a year any more, we are happy to get a new car every three years, because cars started needing more repairs as they get older.

  3. Better to take buses and cabs buy a monthly metro card and for shopping once a week take a cab pr make store delivery u don’t have to worry about mielage monthly payements scratchs gas or oil changes

  4. FINANCE! FINANCE! FINANCE! You can get crazy low interest rates and pay the same or less than lease payments each month, but you OWN the car. No worries about scratches, etc. and after five years (or you can pay it up quicker), NO MORE PAYMENTS, just your own set of wheels!

  5. Aside from the other issues you mentioned, You also have to take into account the cost and hassle of repairs to a used car you buy.

    No matter how recent a model a used car will generally have regular repair costs associated with it whereas a leased car should generally be ok for the 2-3 year term of the lease.

    As for damage costs to the leased car it depends on your propensity for accidents. Most leases have $5k waiver for damages which should be enough to cover minor bumps and scratches associated with driving/parking in NY.
    But if you or your family members are a little bit more likely to damage the car, buying used car will probably make more sense financially and reduce your stress level minding a leased car.

  6. As a owner of a few cars over 14 years the first thing that
    No matter what you buy ,a car is not a house in a few years that will also go
    And you will be left with no car. They do not last forever and you never have much to show for money either way.
    Almost no one sells a car a few years down the road at somewhat the original price cars NEVER go up in value.(unless it is a collectors item).
    A car is a necessary evil we need it do if you buy and end up spending money by mechanics that are not the most Erlich
    Or even good ones it might have paid to lease
    No worries , no ripoff, and no wasting time or begging the mechanic to look st your car. I can go on and on tge point is tgat in the end leasing might even be cheaper in the long run

  7. i have been in the leasing business for 26 years. thereis NO 1 answer correct for EVERY person! if you want a situation where you will have a minimum of stress, repair bills, flexability if you dont have the right car for your situation, and a car budget designed to meet your needs then LEASE> if you want to WORK HARD at being a car person then buy?finance.

  8. I think that leasing makes sense if you are able to get one of the great deals that some frum companies offer. It seems that they are able to get great prices on a few cars that they have very high volume on. That being said, if money is the only concern and you don’t mind driving an old car then used is the way to go. There may be repairs, but it will likely still be much less than a new car or a lease.

  9. I bought a new minivan at the end of 2005. At that time Chrysler offered 0% financing.
    Despite taking very good care of my car, at this point it needs mechanical work, i.e.; catalytic converter, brakes and rotors, power steering repair etc.
    I think that if there is a reasonably priced lease available that might be a better deal.
    I paid $26,500 and I hope to sell it for somewhere between $5,000 to 10,000. My main problem is when mechanical repairs start adding up to a considerable amount of money. Like a number of the posters here stated, typically a 2 to 3 year old leased car shouldn’t require much more than scheduled oil changes.

  10. Buy a few years old reliable used car, it takes a 4.5 years, and you’ll be even with the amount spent on leasing, AND you’ll have the car.

    Example minvan 14k. $14,000/54 = $260. Cheaper insurance, no hidden fees, and generally no repairs before the vehicle is 8 years old. At that point, even if you sell it at a loss ($5000) you spent 167 a month.

  11. There is no answer that fits all. It all depends on your personal situation. You did not give enough details about your situation to properly guide you. Assuming you are using your car as a “family car” here are few points.
    1) contrary to what many people say, leasing is NOT throwing away money. You are paying a small a price to use a car. For example: if you pay $15.00 to go to a museum, after you leave do you say you threw away $15.00 because “you have nothing to show for your money?” If you pay $10.00 to take a car service, after the ride do you say you threw away $10.00 because “you have nothing to show for your money?” If you pay $150 for a night in a hotel, after your stay do you say you threw away $150.00 because “you have nothing to show for your money?” The point being, not everything you pay money for is in order to own it. So to with a car lease, you are paying a fee to use a car. You can lease a new honda accord for around $200.00 a month, less than $7.00 a day. For many people that is a small “fee” to pay to use a car. You are not throwing away the money, you are paying to get something.
    2) not everyone has money up front to pay for a car. If you don’t have the money you will have to pay to “get” the money (interest) Leasing gives you the opportunity to pay a small amount to have use of a car.
    3) the lease price is mainly based the on what the banks predicts the value of the car would be after the lease is over (residual value). For example: on a $30,000 car, if the bank feels that after the lease the car would be worth $20,000 on the used car market, your lease would be $10,000 plus interest divided by 36 months. If the bank feels the car would be worth only $15,000 after the lease, your lease would be higher. That is why you see many cars with the same sticker price yet the lease prices vary tremendously.
    4) Regarding if a leased car is totaled or stolen, the insurance company usually deals directly with the bank, and you are free to go.
    5) When financing (buying) a car, you may have to put down a few thousand dollars. In a case where you don’t have to put down any money, a finance is usually 60 months (5 years) so even if there is 0% financing, your monthly payment will be a lot higher than a lease payment.
    6) Usually the first 3-4 years your car wont need much maintenance. But after time moves on -even if you take care of your car – you will have to put money into it. You will have to change the tires, do a tune up, replace bulbs, new brakes, new wipers, maybe a few small parts here and there. As the years go on so does the expenses. While this is not a significant it adds up.
    I’m not saying leasing is better, all I’m saying is that it is not so simple that buying is better.
    I wish you much hatzlacha in whatever you end up doing.

  12. FINANCE ! I did it and I was so happy if you finance a brand new car , your the driver you know how to take care if it and not abuse it so you can get mire years out of your car as opposed to ore owned tou don’t know what the previous owner gas done with it or abused it in any way and you have no way of knowing if he did transmission work or body work and then after a year or so you realized you purchased a lemon . Just buy a NEW car FINANCE it , get a good interest rate , pay in time and own your own vehicle with your own history and care and give it oil changes regularly and you should have no problem to drive it for 10 years plus . I financed a GMC safari in 2001 and just scrapped it to the junk yard a month ago , just I forgot to mention make sure their are no penalties for paying before the end of the 5 or 3 year finance date and also find out about late fees or if you skip a payment whatever fine you would pay . Wishing you good luck and hope you make the right decision , I just currently FINANCED a Chevy Express and a Toyata Sienna this year it’s the best option I’m so happy I didn’t lease

  13. I would advise you to buy a 3 yesar old car which still drives awesome. Finance it and if you sell it after a few years you will have money to buy another in the same manner.
    for example, I just bought an 2009 sienna with 65k miles for 14500. if i sell it in 5 years assuming it has 130000k miles on it can be sold for 7000 dollars. I think for this reason its worthed

  14. I don’t have 8 thousand dollars for a car and if I buy a cheap one my mechanic has my credit card on file for constant repairs listen u get a cheap new car no money down at all for $200 a month and u could afford a payment like that and have no hassels

  15. “If I buy (a used vehicle), I have to plunk down a lot of money (8 grand or more for a car and, say, 14 grand or more for a minivan).”
    Yes, its true that you don’t have to deal with haggeling when it comes time to get rid of your old car and buy a new one, but the amount of money mentchined above, will last you for 8-10 years on a used car/van. That probably outweighs the por’s of leasing, especially if you buy a used car/van within 3-5 years of its manufacturing where you get the most value out of you money, and not losing a 1/3 of the value with you first mile out of the dealers parking lot.
    However, to each his own, for some people the comfort and eazyness of leasing outweighs the above, and you shoud make your own dicision based on how the pro’s and con’s work for you…

  16. Buy a Ford 12 passenger van. They last forever. If you need repairs, being that its an American vehicle, its much cheaper than Honda/Toyota. You don’t have to worry about scratches and little dents. Every other credit card has 0 apr for 8-9 months.

  17. My niece’s car which she also uses for work was damaged while being driven by valet parking at a supermarket. In fact, she was not able to drive it out of the parking lot. Both the supermarket owner and the valet people refused outright to do anything about it and told her that she would never have the money to fight this legally.. The tow truck driver and her mechanic both stated that it must have been driven abusively by the valet. Even the words of a witness, her passenger who had driven there with her, were completely ignored. Aside from the personal effects of such an experience, the financial costs of about $450 for both towing and repair- and the loss of one day of work were a real set-back to her. But since she only has basic liability auto insurance, her only legal recourse would be to make a court claim for damages. It’s important for people to know to protect themselves from being the victim by getting full coverage insurance, just in case. That way the insurance company fights for you and saves you the headache. Believe me, it’s worth the extra small outlay of money per month.

  18. Finance at a good rate, if you buy a Toyota or a honda it will always have a good resale value. Btw Toyota often offers 0 percent financing.

  19. We cheshboned the cost of monthly lease payments and insurance as opposed to just insurance for a purchased or financed car. If the car has less than 80k miles on it, seems cheaper to purchase/finance a pre-owned even with the insurance (and yes, in a place like NY you need to get full coverage as mentioned by #19!).

  20. I just went through the same dilemma and ended up LEASING a car.Being that this is going to be my only car,and I need lakewood-ny besides local, it needed to be reliable. After seeing the options that were available to buy (for example 2010 camry with around 35000 miles for $1400+ etc.)from reputable dealers, this would come out to 5 years worth of leasing. After 5 years which the car is now 8 years old,only then will the payments equal out,not to mention any money that you spend on repairs (which could over the course of 5+3 years equal another year of a lease) So for 5+ years of no headaches plus not knowing how many miles and money you will put in to the car (that all take away from the value of the car)it became a no brainer for me to lease.

  21. We leased and we tried owning-financing was much more costly and after 5 yrs we had quite a few expensive repairs. We found leasing when u figure a ten yr. period its just about the same financially and u have a new car every 2-3 yrs.