Ask HN: Car Lease or Finance? | Hacker News Reader

Ask HN: Car Lease or Finance?

7 pointstrinsic218 comments

A few years back I leased a car instead of financing, I didn't look to closely at the particulars of the lease because, at the time, I had limited time. I don't have a lot of disposable income and I don't want to be making a car payments for the rest of my life by continuing to lease a car every 3 years. On the other hand, is it cheaper to lease a car from a maintenance perspective? I mean should I worry about the cost of maintaining a car from a cost perspective on a yearly basis? Also I'm wondering if this is going to be more of pain to switch out of when the lease ends.

If you are NOT a financial professional, that has a vested interest in the leasing perspective, what's your take on this and what have you experienced?

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Usually the maintenance on brand new cars for the first 36k miles (typical lease term) is minimal. Like a few oil changes and tire rotations minimal so ~$500 or so over 3 years. The dealer may include some of that anyhow, lease or loan. So comparing a lease vs. loan of the same exact vehicle for maintenance costs isn't terribly helpful in the short term. The items that will need frequent maintenance are your brakes and tires. I've had 2 leased cars need tires before turning in the lease (there's tire tread depth requirements for lease turn-in). In one case I bought used tires cheaply ($100) that barely met the requirement and turned it in since new tires were like $800 or so.

Leasing is a good option for cars where the brand is known for really expensive repairs (i.e. luxury or German made) and you want to try out that brand for 2-3 years and have zero strings attached at the end if you don't like it. If you have a budget of $X per month and just want to always have a car under warranty and maintenance covered then leasing will give you that peace of mind, at an added cost.

Your key things at lease end that will cost you are scratches, paint or fabric issues larger than a credit card/dollar bill (depends on lease), tire tread depth and mileage over the lease terms.

Long term maintenance for higher quality cars is going to make the total cost of ownership of a car be much cheaper than leasing. Pick a right sized Toyota, take a loan out and do all the scheduled maintenance at the right times and you could easily see that car get 200k miles before larger issues happen.

Thanks for the info. I have been taking good care of the car from a fabric and paint perspective. I might be 500 miles over when my lease is up. Whats a good way to check out the terms as I didnt look when I leased the car?

Ill be mindful of the tread depth as well. I'll need to find that out.

The lease terms should be in the paperwork you signed, usually there is some cost per mile and other details like the residual value, which is what the dealer determined the value of the car would be at lease end. If the market value of the car is above the residual value (with pandemic + inflation this might actually happen) then you may have more options depending on your local laws, lease agreement, etc. You might be able to sell the car to another dealer or trade it in and have some equity towards another car or at a minimum walk away without having to deal with 500 miles over and tire wear, etc.

All that being said, do some research on your next option for a car if you still need one. When I was looking last fall, there was a shortage of supply, prices were over MSRP and there were long wait times for ordering. All of those things combined might mean that the cost of getting a loan to buy your leased car might be the best option.

Thank you for the suggestions I will look into these things. It's good that I am thinking about this before my lease is up in October.

If you are not a car enthusiast, and only want reliable personal transportation to take you from Point A to Point B with minimum fuss, the usual suggestion for being financially prudent is to find a used Toyota or Honda and drive it until it dies.

100%

And change your oil (engine and transmission) often - it's much cheaper than an engine.

A decent 2017 CRV should be around 17k, and if you are just a touch careful, you shouldn't need to do anything expensive to it for a solid 250 000km. Same with an Accord or a Civic!

Where are you located where 2017 CR-Vs go for $7k in a presumably driveable condition? A fairly serious question as I'd probably pick up a 2017 CR-V if it were in decent condition and $7k.

A used, low-end 2017 CR-V LX (low end model) goes for about $20k here in the PNW and often higher.

It was a typo! I meant 17k!

Sorry for the confusion

Darn, was hoping it was true. Thanks for the reply :)

When the car dies you lose all of its value, financially speaking you should add that cost back to the monthly spendings.

Also don't forget that reliability is statistics, and the kind of older cars we are talking about, 10 years old?, is already loaded with electronics and sophisticated systems that cost a lot to fix.

Add to that the poorer safety of older cars, even lower speed accidents in town can be fatal and the newer the car you have a better chance to not get hurt.

Disclaimer: you're preaching to the choir since as a car enthusiast, I'm not one to follow the advice I posted.

However...

When the car dies, it's expected to have been driven long enough that it's nearly worthless anyways, so you're not going to be losing much.

I would expect a 2013 (ten years old) Toyota or Honda to be pretty reliable. I would even gamble a 2013 Toyota Camry will last longer than a 2023 Mercedes Benz or various other brands.

Is a 2013 Toyota Camry safer than a 2023 Toyota Camry? Probably not, but I'm pretty sure there is a certain level of diminishing returns, and the gap between a 2013 Camry and 2023 Camry is not significant.

Also, this is a Camry (or Accord or CR-V or RAV4 etc.). We're not talking about a high level of sophistication. I'd be more concerned if this was something like a Mercedes or Porsche or even something like a Civic Type-R that have long had all sorts of fancy technology to achieve a high level of performance.

A lease costs you more and makes more for the dealer (former car finance mgr here).

They're usually only advantageous for a business which can write off the monthly "rental" cost vs making a capital investment that's amortized over time.

With individuals, unscrupulous dealers use leases to shove people into more car they they can afford, since at the end of your payments with a lease you get nothing.

Generally speaking (and besides possible tax advantages that depend on your local tax code and financial situation) a lease is not cheaper, it is usually much more expensive, though not all leases have the same terms and offer the same levels of servicing.

The only advantages (talking of an integral lease, i.e. one where everything maintenance related is included) are those of knowing in advance what you will pay, no matter what happens and - again generally speaking - you will have a "better" insurance and replacement car in case of prolonged workshop stops.

It may make some sense if you have a constant, fixed, income or you are making a budget for a firm, and if you are terrible at driving (as you will have a known in advance fixed monthly payment, with no peaks in case of large repairs), but it will cost more in the end, besides, hard to say where you live, in some cases it will be complicated to bring in the car for maintenance and there may be "caps" or "ranges" on yearly mileage (if you choose more miles than you actually drive, you are wasting money, but if you exceed the chosen mileage, you will pay the excess mileage a lot).

I recently finished my lease from ford and found it to be decent from a cost perspective, primarily because I am foreign (no loan history) and financing rates were very high at the time. I bought the car outright at lease end for the agreed amount (residual value), I could have easily handed it back and walked away. This level of optionality is awesome imo. Be careful however, the financing terms of a lease agreements can be difficult to digest and some companies like Tesla do not allow you to purchase at the end [1]

[1] https://www.tesla.com/support/leasing/lease-end-options

It really depends on the terms of the lease and your habits. If you're the type to change cars often (every 3-5 years) and want the latest and greatest and to not worry too much about maintenance, then leasing isn't a bad option.

From a financial perspective, you'll almost always come out on top financing and keeping the car long term. Usually if you finance 5-6 years, and maintain the car, you can easily get another 5-6 years out of the car without too many issues and no payments. And then you have a bit of equity to put towards your next one when the time comes.

I've leased and financed in the past, but some of the lease deals I got were really really good and made sense at the time.

I looked a used car site and looked at cars 10+ years 200k+ miles for sale that were used. I looked at which brand/models were the best from long run perspective.

Then I bought one that was like 5 years old at the time.

At the time is was a Toyota Camery.

If you don't plan on keeping it for 7 years and/or your not planning on driving it bunch of miles then go with a lease.

going the other direction if you want to have fun and have a flashy car that makes you sound richer than you are the best bang for your buck is a used porsche boxster. at least in the midwest. You won't impress car people or rich people but at the end of the day you still drive a porsche.

And what ever you do don't let them drive it especially if they're drunk.

Neither. I buy an old car and pay cash. The dollar-to-happiness ratio of a new car is abysmal. I prefer to spend the money elsewhere.

Buying a new car is a waste of money. The most effective way is to use a car pool for times when you really need a car.

If the car is for commuting to your job every day is it possible to find another way?

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