First Car: Buy or Lease?

B

bmilla35

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Aug 29, 2007
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Well, as the title says I am looking to get my first vehicle. However, I am really quite ignorant when it comes to cars. I don't talk to my parents all too often, so they're not too much help. What I would really like to know is what are the advantages and disadvantages of buying vs leasing a vehicle?

What I DO know is that with leasing you're limited to a certain amount of miles per year, but that's about it. I don't know if you have to put money down, or if it's just monthly payments....?

If I bought a car, it would have to be used because i'm trying to keep my monthly payments to $250 at the most.

I know this is vague but any help would be really, really appreciated.

Thanks,

Bryan
 
Never lease.


This is what you do, Go to a bank or credit union preferably and get an auto loan per-approved. Then, go to the dealership and tell them what you are willing to pay "out the door." "Out the door" is important. That means the total price all dealer fees and other crap included. Do not listen to their sales pitch on financing, and make sure to haggle a little on price esp. a used car. The sticker price will be crazy high on a used car, so check online first to get a better idea of a competitive price. The used car market is not so hot right now, in general the inventory is low so used cars are selling a little higher right now. The last car I bought I had a blank check from my bank with a maximum amount pre-set. I really liked the blank check and believe that is how I got that car. One guy had a deposit on it but was unhappy with the financing options the dealership was giving him. I told the sales guy I had a blank check and was ready to drive the car home. He said he had to give the other guy an hour to make a deal and he did not like the financing so I got it. Plus, three other people were interested behind me, so if I did not have financing lined up there is no way I would have gotten that car. My interest rate is 3.25% which is pretty good, and I am sure the dealership was offering something like 7% and probably had 5% from the bank and tacked on another 2% for their sole profit. I personally have always bought cars with cash, but wouldn't you know my wife wrecks her car a month after I take comprehensive and collision off her insurance, and I did not want to drain our cash on her new car. Monthly payments suck, but buying with this strategy is the closet thing to buying with cash and that is powerful when buying a car.

Even if you do not get financing lined up before-hand (I really hope you do), do NOT tell the sales guy, "I want my monthly payment under $250." He will be licking his chops. Plus, buying a car can be an all day event esp. if you go through their financing department.
 
what I usually calculate is taking the sticker price, divide by two.
that is what your total payments plus money down should equal with a three year lease.

usually foreign cars lease better than american cars since the american cars have a poor residual
 
I don't know if you have to put money down, or if it's just monthly payments....?
Click to expand...
That varies by brand and model, depending on what promotions are going on at the moment. Here's an example, randomly selected from a manufacturer's website:
$464mo
39 month lease
$5151 due at signing

My philosophy: Buy the nicest used car/truck I can. Drive the wheels off it. Repeat every 4-10 years.

Why buy used? Simple: "The sort of new car I could afford, I wouldn't want."

Leasing does not appeal to me at all.
 
Take whatever money you would put down on a new car/lease and buy a used car.

This is easier if you just need transportation rather than a sporty, luxury, etc statement.

IMHO a used car bought in cash is the best way. Especially if you don't need a car tomorrow.

For the down payment on an average new car I have a nice sedan and a very nice sport motorcycle.
 
If you intend to keep the car beyond about 18 months, then buy it.
 
I can't help you with the leasing question because its never appealed to me but heres some random car buying advice:

Find out what the insurance costs will be prior to purchasing. In my state insurance is required and when financing a car they require full coverage. When I was younger and dumber I bought a Trans Am and ended up paying more per month in insurance than my car payments were.

You can usually find a better deal buying from a private seller than car dealerships.

Doing a background check (Carfax) on the car can be useful.

Its usually a good idea to avoid buying a 1st year model. They haven't worked out all the bugs yet and subsequent years will often be a bit more reliable.

Research repair costs prior to buying. You can find some really nice cars for really good prices....often the reason is the repair costs are so high. Research both parts cost AND labor cost if you do not intend to do the work yourself. You may see a nice Porsche 944 for $1,500 that "only needs a clutch" You see a clutch is only $300, but then you find out labor replacing it can be $1,500 alone. Often you can save a ton of money if you learn to do repairs yourself.

Look up consumer reports on reliability, safety, and longevity of the model. Some cars are just made better than others.

If you do not know your way around cars then having a mechanic inspect the car prior to buying can save you a lot of grief.
 
Leasing a car is your most expensive option so you'll want to purchase. I strongly recommend you purchase something in cash. While many people do it, and sometimes it is unavoidable, a loan on your most expensive depreciating asset is not a blessing. You will find a lot of people who disagree with this advice. They are entitled to their opinion. I don't borrow money so that influences everything I buy.

Also, consider purchasing used vs. new. Let someone else take the butt kicking on the depreciation.

I second the advice to use Consumer Reports. They have recommended used vehicles within most price ranges.
 
I say stick with used and purchase all your cars with cash on the spot. Over a life time you will save a lot of money that you can buy knives with. :D

I drive a '97 Buick purchased new with no payments. Best never to borrow money for things that will be worth less when the loan is paid off. At this time the knife that is usually in my pocket is worth more than my vehicle. :). It is just a vehicle that takes you where you want to go, no reason to borrow money to drive it. You will spend enough to insure and maintain it anyway.
 
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I drive a '91 D250 Dodge pickup with a Cummins turbo diesel. I did extensive research to identify low cost, low maintenance used vehicles. The previous owner gave me a history of the truck that I was able to verify on the web. I hope to drive this for the next twenty years at a cost of about $1800 per year for maintenance and insurance. I bought it for $3600 cash over a year ago.
 
Leasing is usually more expensive, even if you borrow to buy, because, obviously, you have the leasing costs and profits rolled in. I agree with the several posts that caution against borrowing to buy a depreciating asset though. The dealers thrive on manipulating payments to make them "affordable" but usually the more affordable the payments the higher the interest component, so in the end it is more expensive, not cheaper. But there are exceptions. Some leases will cover most maintenance and you then don't have those big expenses as the car ages and starts to fall apart as it gets older. Nonetheless, usually the best bet is to buy a used car in good condition because it has already depreciated so you don't pay that huge new car premium, and as long as it really is in good condition or you have a decent warranty the repair costs won't burn you and you may even be able to sell it or trade it in decently later when you are ready for another car.
 
If you have a particular car in mind I highly recomend using a car broker to get the best deal possible. Usually they chage 250 plus 250 and will take care of the haggling for you. Also if you end up not buying from a dealership dont be shy about taking the car to a mechanic you trust to get it checked out. As everybody else said, except for very limited circumstances, leasing is almost never as good as buying. Some poeple recomended going to a bank. I think thats usually a good idea, except some company offer 0% financing, which would make them a better option. When I used a broker they took care of that. The internet is your friend when it comes to car shopping. Research all sorts of things about the car before you buy it. Also call around and see what the insurance rates are as they differ from car to car. My family and I have had great luck with Toyota's and Honda's.
 
Well after all that it seems like leasing is out for me!

I do appreciate everyone's input, and i'll do my best to comment on what everyone had to say...

First thing's first, I will need to get a loan. There really is no way around it. It's hard to accumulate a lot of money when you have to pay for schooling. I DID however get pre-approved for a loan a few months ago, but it since expired. I plan on buying a used vehicle, and the bank that I usually deal with only offers auto loans on new vehicles. That means I need to get a personal loan, which carried a pretty high interest rate. Regardless, I can use it to negotiate, right?

I've never even heard of a car broker, so that is a possibility.

Thanks again for the help. Please keep it coming!
 
Bmilla,
1. Find a different bank. Try a credit union. You don't have to get a loan at the bank you "usually deal with."

2. Don't buy a vehicle on a loan. Don't go to a car dealer for your first car. Go find a used Buick or small pickup for $2000, buy $150 worth of Craftsman mechanic set tools and a $20 Haynes manual and learn to do basic maintenance on your vehicles. It's too damn expensive to take your vehicle to a mechanic every time you need something little done.
 
Buy an off lease certified used car for the best value on a Like New dealer experience.


Leasing makes sense if it's a clean business write-off, but it sounds like your talking personal use.


If I do get a deal a new vehicle, I buy it for life and pay it off as quickly as possible; for me life means ten years and two to three hundred thousand miles.

Regular maintenance and synthetic oil let's me do that, especially on my work trucks.



If you just need to get around town, the best bang for the buck is still a cheap well used car.





Big Mike
 
medicevans said:
Bmilla,
1. Find a different bank. Try a credit union. You don't have to get a loan at the bank you "usually deal with."

2. Don't buy a vehicle on a loan. Don't go to a car dealer for your first car. Go find a used Buick or small pickup for $2000, buy $150 worth of Craftsman mechanic set tools and a $20 Haynes manual and learn to do basic maintenance on your vehicles. It's too damn expensive to take your vehicle to a mechanic every time you need something little done.
Click to expand...

+1 on going to a different bank, the rest is up to you and how comfortable you feel doing your own maintenance. The Haynes manual + the internet can provide a lot of information to diagnose and repair cars. Fixing one's own car is not for everyone and you will not always be able to do every job yourself, but can definitely save money on brakes, oil changes, and other misc repairs.
 
Maintence shouldnt be too much of an issue
. Im lucky enough to have plenty of mechanically inclined people around me
. However, I will look in to loans at other banks. Does anyone know if all banks only offer auto loans on new vehicles?

I never even thought about buying a vehicle without a loan. I'm definitely willing to buy oitside of a dealer, though
 
bmilla35 said:
Maintence shouldnt be too much of an issue
. Im lucky enough to have plenty of mechanically inclined people around me
. However, I will look in to loans at other banks. Does anyone know if all banks only offer auto loans on new vehicles?

I never even thought about buying a vehicle without a loan. I'm definitely willing to buy oitside of a dealer, though
Click to expand...

No, I bought a used car with a loan, the blank check. They did stipulate 2003 or newer, and under 80,000 miles or less. They also had a minimum of $7500 I believe.
 
I guess it's just PNC Bank! I'll call around to several banks in the area, but I know nothing of Credit Unions. If someone could enlighten me it would be great!
 
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