[Bicepeak]

I have always bought cars and kept them many years. But since I am waiting for more choices to come out, I am considering leasing in the meantime.


Can anyone give me the pros and cons?


The first thing I am thinking that if I lease and then decide to keep it longer, it costs more in the long run.
So is leasing really only suitable if you routinely change cars every couple of years ?


Thanks!

 

[CdnColin]

I have always bought cars and kept them many years. But since I am waiting for more choices to come out, I am considering leasing in the meantime.


Can anyone give me the pros and cons?


The first thing I am thinking that if I lease and then decide to keep it longer, it costs more in the long run.
So is leasing really only suitable if you routinely change cars every couple of years ?


Thanks!

First deciding factor is usually how many miles you intend to drive. In Canada we are allowed 20,000Km annually (12,000 miles) before extra charges apply. High mileage drivers pay heavily for the extra wear and tear.. This penalty doesn't apply however if you decide to buy it at the end of the lease. Doing the math usually shows the final cost is the same for leasing then paying the buyout vs financing a purchase.

A few pro's and cons:

Pro's
You can walk away after the term and get into something new again.
You can walk away if it has been a lemon.
You can walk away if it has been in an accident.
You can invest your money and hopefully get a better return
You can buy if you love it and add extended warranty.

Con's
You can't (shouldn't) customize it
If you don't take good care of it Honda will ding you but that's fair
You don't have that comfortable paid for feeling if you are able to buy outrite.

Residual (buyout) can be both a pro and a con. Car companies are gambling when they set residuals. They really want the value to be as close as possible to the vehicles value at the end of the term. Set it too high and people get a cheap lease and they won't buy it after. Set it too low and they may not get the sale and/or the buyout is way too low compared to the market value. Bottom line is the lessee has some control over the depreciation they expect.

I am sure there are more pro's and con's.

 

[hrv-guy]

I am also considering a lease on an HRV. This would be my first lease, I have always bought my cars because I hate the feeling of throwing my money away with nothing to show for it. But now that I'm older I realize that things like this are just related to the cost of living. And as I look at the potential trade in value on my current car its not as much as I hoped. I also like the lower payments of a lease and would be in a position to put some extra money away each month for a down payment if I decide to buy at the end of the lease.

Unfortunately Honda has yet to release any HRV lease offers on their USA website. They have lease offers for every other model but the HRV. I'm going to email a few dealers to see if leases are available and ask what they are.

If I can lease an HRV for under $200 a month I'd go for it. The only way I could get a car payment that low would be to put more than 50% down, or about $12K. I think I'd rather keep that $12K in the bank or use it for all the road trips I take with my HRV!

 

[Hondude]

Anerican Honda's current Money Factor Sell Rate (basically the finance rate) on their 2016 HR-V (EX AWD, at least) 36-month/12,000 mile lease is currently 0.00165. You multiply the money factor times 2400 to get the percent, so 3.96%. Thi being a new vehicle is on the high side compared to, say, obsolete models they are trying to unload like the 2015 Pilot (the 2016 redesign release is right around the corner).

That money factor for the HR-V is set to change on 7 July. Whether it goes up or down is anyone's guess. So if you're patient and not susceptible to (ahem) Honda marketing drones who post on this board trying to get you to buy Real Soon Now you might best fill out an application shortly before 7 July to lock in the current money factor and then wait until the 7th to see if the new money factor goes down and then re-apply.

You also want to look out for dealer tomfoolery like overinflated Doc Fees, Bank Fees, DMV charges. Etc. A few dealers in the NYC suburbs are currently charging a $2k mark-up on HR-Vs (above MSRP+$880 destination) because of "low stock and high demand". Watch your numbers.

 

[idearat]

Good discussion... I'm contemplating the same question!

I can add that in Canada (or at least BC) when you lease you pay tax only on each payment... i.e. the main tax burden is deferred.

I hear "you can just exchange it for a new car in 2 or 3 years" a lot, but I don't think people get how much more that costs. I've had a good car for 12 years without a single payment. Yes, I could have made some with that money invested, and it would have been nice to have a new car under warranty every 3 years, but I bet we're talking many thousands saved.

At this point for me it's more about the easy return if it turns out the car has problems or isn't what it seemed to be; otherwise I'll buy it out at the end of the lease.

Question: I've heard the advice to not make a down payment if you lease, but I'm not sure why, or how much makes sense if you do. Any comments?

 

[Denny]

Additional leasing pro- bank is taking the risk on the resale value. So if the value is less at lease end than anticipated, just turn it in. If value is higher, trade it in and receive your 'profit'.

Additional leasing con- fees, fees, and more fees. You're looking at a minimum $695 lease acquisition fee, plus possible lease turn in fees, and of course $.20-.25 per miles you go over your allotment.

My supposition is that a purchase payment will be close to a lease payment. Also I anticipate the HR-V having a very high resale value over at least the next few years, so save yourself the fees and higher interest rates and purchase.

 

[idearat]

I think purchase payments are going to be sgnificantly higher than lease payments, if my understanding is correct. The lease only finances the deprciation on the car... i.e. the difference between the value at purchase and the residual at lease-end. That's the big appeal of leasing, and why they're so popular: lower cash flow, new car every three years, easy trade... what's not to like? ...of course, the payments go on for ever, and climb over the years with inflation.

(Disclaimer: I'm only beginning to understand leases, and it sounds like there are various types in the US... not sure that's true here in Canada.)

I think if you're buying a new car every few years, lease is much simpler and likely competitive with purchase / trade-in. If, like me, you're comparing lease to outright purchase, and planning to keep the car for a long time, it's a different (and confusing, to me) set of considerations. In Canada, if you have (non-RRSP) investments, you can sell them, buy a car with the proceeds, get an investment loan to buy them back, and the interest is tax-deductible. All based on very good credit rating, of course. Decisions like this make my head spin...

In the end, if money is the most important factor, buy a 2-year-old rental return with cash, and drive it until it falls apart.

 

[Bicepeak]

Great discussion. Thanks for all the input. From my understanding of it, leasing may not be for me.

 

[Denny]

I think purchase payments are going to be sgnificantly higher than lease payments, if my understanding is correct. The lease only finances the deprciation on the car... i.e. the difference between the value at purchase and the residual at lease-end. That's the big appeal of leasing, and why they're so popular: lower cash flow, new car every three years, easy trade... what's not to like? ...of course, the payments go on for ever, and climb over the years with inflation.

(Disclaimer: I'm only beginning to understand leases, and it sounds like there are various types in the US... not sure that's true here in Canada.)

I think if you're buying a new car every few years, lease is much simpler and likely competitive with purchase / trade-in. If, like me, you're comparing lease to outright purchase, and planning to keep the car for a long time, it's a different (and confusing, to me) set of considerations. In Canada, if you have (non-RRSP) investments, you can sell them, buy a car with the proceeds, get an investment loan to buy them back, and the interest is tax-deductible. All based on very good credit rating, of course. Decisions like this make my head spin...

In the end, if money is the most important factor, buy a 2-year-old rental return with cash, and drive it until it falls apart.

Sometimes lease payments are lower than purchase payments (especially if the lease is incentivized by the manufacturer), but as I was taught, 36 month leases can typically be around a 60 month purchase payment, figuring 0 down and no incentives to lease.

 

[Hondude]

Leasing is a good idea when technology is changing rapidly. Those who like the current HR-V (and why not?), but are concerned over its low H.P. and low torque night just wish to hang in there for a 36-month lease and see what the "2018" HR-V (just to use as a name) has to offer after the lease is complete.

 

[CdnColin]

Sometimes lease payments are lower than purchase payments (especially if the lease is incentivized by the manufacturer), but as I was taught, 36 month leases can typically be around a 60 month purchase payment, figuring 0 down and no incentives to lease.

Hi Denny, don't quite understand. My math would typically find the total cost of leasing and buying at the residual almost always equally a purchase plan.

 

[mzoltek]

Additional leasing con- fees, fees, and more fees. You're looking at a minimum $695 lease acquisition fee, plus possible lease turn in fees, and of course $.20-.25 per miles you go over your allotment.

So I am currently waiting for my hrv to show up at the dealers and currently have a 2012 crv that is leased. I loved the 2012 redesign and when I saw one decided that I would save up for a few months, trade my 03 Accord in and get a crv. Weeks later my Accord died, I obviously did not save that much in a few weeks but wanted a crv. I leased my crv for only 30 dollars more that I paid for my Accord and was excited that I could still afford the car I wanted. Problem came when we moved less than a year later making my work commute 70-75 miles as opposed to the 40ish miles it was when the lease started. As I type this I have 68000 miles on my leased crv, when I was allowed 36000... Now that sounds scary right? My buyback on my car after my next payment will be in the high 17000 range. The dealer I am buying my hrv from is giving me 17000 for my trade in. Since I'm technically "buying" the car and then trading it in I don't have to pay for any of those miles and I'm **** near close to breaking even.

What I've learned is that leasing is a good way to get the car you want for what you want to pay a month. The problem is at the end you are left with either buying it, or leasing again and it's hard to pay the same amount to finance a 3 year old car than it is for a new one. Luckily I can finance an hrv for very little down and only a few bucks more per month. Don't let the mileage scare you off from a lease as if you buy the car after you don't owe them anything. Obvious if you don't buy and keep you can sometimes break even on trade in. Financing at least gives you something to trade in and potentially make money on where a lease doesn't offer that.

 

[DexterHugo]

So I am currently waiting for my hrv to show up at the dealers and currently have a 2012 crv that is leased. I loved the 2012 redesign and when I saw one decided that I would save up for a few months, trade my 03 Accord in and get a crv. Weeks later my Accord died, I obviously did not save that much in a few weeks but wanted a crv. I leased my crv for only 30 dollars more that I paid for my Accord and was excited that I could still afford the car I wanted. Problem came when we moved less than a year later making my work commute 70-75 miles as opposed to the 40ish miles it was when the lease started. As I type this I have 68000 miles on my leased crv, when I was allowed 36000... Now that sounds scary right? My buyback on my car after my next payment will be in the high 17000 range. The dealer I am buying my hrv from is giving me 17200 for my trade in. Since I'm technically "buying" the car and then trading it in I don't have to pay for any of those miles and I'm **** near close to breaking even.

What I've learned is that leasing is a good way to get the car you want for what you want to pay a month. The problem is at the end you are left with either buying it, or leasing again and it's hard to pay the same amount to finance a 3 year old car than it is for a new one. Luckily I can finance an hrv for very little down and only a few bucks more per month. Don't let the mileage scare you off from a lease as if you buy the car after you don't owe them anything. Obvious if you don't buy and keep you can sometimes break even on trade in. Financing at least gives you something to trade in and potentially make money on where a lease doesn't offer that.

Wow - they really either screwed up your residual value on that car when you got it or they are giving you a major deal on that car now. My experience has been that at the end of the lease the cars value has been very close to the residual but if I had another 32k miles on it - it would not be worth the amount used.

Curious - could you hit the kelly blue book and see what they say your car should be worth for both dealer trade in and private sale? Also - try putting the mileage back to 36k and see what difference that would have made.

 

[mzoltek]

Wow - they really either screwed up your residual value on that car when you got it or they are giving you a major deal on that car now. My experience has been that at the end of the lease the cars value has been very close to the residual but if I had another 32k miles on it - it would not be worth the amount used.

Curious - could you hit the kelly blue book and see what they say your car should be worth for both dealer trade in and private sale? Also - try putting the mileage back to 36k and see what difference that would have made.

the "GOOD" value of my car with 68k miles is 16,500 to 17,423. Just realized a typo, they are giving me 17000 flat not 17200 (not sure how I even did that). The middle of the KBB trade in is 16980. At 36k miles the trade in value is 19231-20118 with a middle of 19675.

I did do some research before I went in, I know that dealers are selling 2012 CRV EX-Ls for 20-21k with 65-70k miles on them. I had received multiple letters from all different dealers from Kia to Hyundai as well as every Honda dealer in the area stating that there is a large demand for my car and they can get me a good deal on something new due to that. I assumed it was all marketing BS but maybe it was true to some extent? Needless to say I am very thrilled to be getting out of my lease being responsible for less than 10% of what my mileage overage cost would most likely be.

 

[Miketsi99]

So I am currently waiting for my hrv to show up at the dealers and currently have a 2012 crv that is leased. I loved the 2012 redesign and when I saw one decided that I would save up for a few months, trade my 03 Accord in and get a crv. Weeks later my Accord died, I obviously did not save that much in a few weeks but wanted a crv. I leased my crv for only 30 dollars more that I paid for my Accord and was excited that I could still afford the car I wanted. Problem came when we moved less than a year later making my work commute 70-75 miles as opposed to the 40ish miles it was when the lease started. As I type this I have 68000 miles on my leased crv, when I was allowed 36000... Now that sounds scary right? My buyback on my car after my next payment will be in the high 17000 range. The dealer I am buying my hrv from is giving me 17000 for my trade in. Since I'm technically "buying" the car and then trading it in I don't have to pay for any of those miles and I'm **** near close to breaking even.

What I've learned is that leasing is a good way to get the car you want for what you want to pay a month. The problem is at the end you are left with either buying it, or leasing again and it's hard to pay the same amount to finance a 3 year old car than it is for a new one. Luckily I can finance an hrv for very little down and only a few bucks more per month. Don't let the mileage scare you off from a lease as if you buy the car after you don't owe them anything. Obvious if you don't buy and keep you can sometimes break even on trade in. Financing at least gives you something to trade in and potentially make money on where a lease doesn't offer that.

Please be careful, I bet they are only going to offer your 17,000 for your crv IF YOU GET INTO A NEW DEAL WITH THEM. Watch out, they may give you the 17,000 for the trade in but try to stick it to you on the new deal. They know you're screwed with the high miles so your kinda forced into whatever deal they offer. A good idea is to see what another dealer will give for trade in without mentioning its a lease end vehicle. I'm willing to bet the house that they will offer you far below 17,000....Or you could always say sure 17,000 for the CRV, but I want to finance not lease the HRV so you know exactly what you're paying without all the hidden lease fees and such..

 

[mzoltek]

Please be careful, I bet they are only going to offer your 17,000 for your crv IF YOU GET INTO A NEW DEAL WITH THEM. Watch out, they may give you the 17,000 for the trade in but try to stick it to you on the new deal. They know you're screwed with the high miles so your kinda forced into whatever deal they offer. A good idea is to see what another dealer will give for trade in without mentioning its a lease end vehicle. I'm willing to bet the house that they will offer you far below 17,000....Or you could always say sure 17,000 for the CRV, but I want to finance not lease the HRV so you know exactly what you're paying without all the hidden lease fees and such..

Already went to another dealer, 2 actually... 16000-17000 is what I was offered from each dealer. I walked away from this dealership because they could not get me to the monthly payment I wanted and then they called me the next day and got me to that payment (about 40 dollars less per month than when I was there). Basically I'm financing the AWD EX what I probably would have paid to keep my CRV with 48 month financing, maybe 5-10 dollars more. Of course my term is longer than 48 months, but I'm happy with my "deal", but of course I haven't signed the papers yet haha so we shall see.

Also the HRV is financed and not leased, with putting 20k miles on the car per year it makes no sense to lease.

 

[DexterHugo]

the "GOOD" value of my car with 68k miles is 16,500 to 17,423. Just realized a typo, they are giving me 17000 flat not 17200 (not sure how I even did that). The middle of the KBB trade in is 16980. At 36k miles the trade in value is 19231-20118 with a middle of 19675.

I did do some research before I went in, I know that dealers are selling 2012 CRV EX-Ls for 20-21k with 65-70k miles on them. I had received multiple letters from all different dealers from Kia to Hyundai as well as every Honda dealer in the area stating that there is a large demand for my car and they can get me a good deal on something new due to that. I assumed it was all marketing BS but maybe it was true to some extent? Needless to say I am very thrilled to be getting out of my lease being responsible for less than 10% of what my mileage overage cost would most likely be.

It's good that they screwed up your residual then! You were good with the payments and you got enough equity to not worry about the miles. It worked out. I wonder how many people turn in that car at the end not knowing they could get 2k out of it instead of turning it over if they had 0nly 36k miles?

I do think it's true that all used cars are in demand. Ever since hurricane sandy wiped out a ton of cars on the east coast -and now with Texas and their flood problems, used cars are in higher demand. Add to it that people still don't buy cars as frequent as they did in 2007 and are holding onto those used cars - and you got the perfect setup for a good price on your car. Congrats.

 

[mzoltek]

It's good that they screwed up your residual then! You were good with the payments and you got enough equity to not worry about the miles. It worked out. I wonder how many people turn in that car at the end not knowing they could get 2k out of it instead of turning it over if they had 0nly 36k miles?

I do think it's true that all used cars are in demand. Ever since hurricane sandy wiped out a ton of cars on the east coast -and now with Texas and their flood problems, used cars are in higher demand. Add to it that people still don't buy cars as frequent as they did in 2007 and are holding onto those used cars - and you got the perfect setup for a good price on your car. Congrats.

That is a good point, I figured though that my car had at least a good amount of value even more so since apparently they messed up my residual! I'm glad to get out of the lease pretty much unscathed!