Anthony Posted June 3, 2016 Share Posted June 3, 2016 (edited) New Stats: Avg Auto Loan: $30,032 / Payment: $503 / Duration: 68 mos http://www.cnbc.com/2016/06/02/us-borrowers-are-paying-more-and-for-longer-on-their-auto-loans.html Auto loans and payments have been growing steadily over the past seven years as the price of new vehicles has climbed. TrueCar said the average transaction price for a new vehicle hit $32,994 in May, up 3.4 percent on the same month a year ago. Edit: added stats in thread since topic title was getting cut off on mobile. Edited June 4, 2016 by Anthony Quote Link to comment Share on other sites More sharing options...
fuzzymoomoo Posted June 3, 2016 Share Posted June 3, 2016 This is what I don't get Why don't more people who want to buy cars outright just lease them first, then buy them at the end of the lease rather than paying $700 a month Quote Link to comment Share on other sites More sharing options...
akirby Posted June 3, 2016 Share Posted June 3, 2016 Some people are averse to the idea of a lease regardless of the facts. I considered doing that on the MKX but in the end decided the payments were ok and the wife falls into the aforementioned category. Quote Link to comment Share on other sites More sharing options...
twintornados Posted June 3, 2016 Share Posted June 3, 2016 This is what I don't get Why don't more people who want to buy cars outright just lease them first, then buy them at the end of the lease rather than paying $700 a month . Especially if the residual is less than the value of the vehicle at lease end. If it is higher, drop the keys on the desk and go pick a new ride. Quote Link to comment Share on other sites More sharing options...
akirby Posted June 3, 2016 Share Posted June 3, 2016 (edited) . Especially if the residual is less than the value of the vehicle at lease end. If it is higher, drop the keys on the desk and go pick a new ride. Except that getting a new one is much more expensive than buying out the old one and keeping it. The assumption was you'd just wanted a longer finance period and you planned to keep it. If you don't mind spending more money then being able to walk away and get a new one is an advantage. Edited June 3, 2016 by akirby Quote Link to comment Share on other sites More sharing options...
fuzzymoomoo Posted June 3, 2016 Share Posted June 3, 2016 Except that getting a new one is much more expensive than buying out the old one and keeping it. The assumption was you'd just wanted a longer finance period and you planned to keep it. If you don't mind spending more money then being able to walk away and get a new one is an advantage. Right. It sometimes makes sense since lease payments can be stupid low. If you intend on keeping the car anyway it's sort of a win-win. Quote Link to comment Share on other sites More sharing options...
BORG Posted June 3, 2016 Share Posted June 3, 2016 (edited) Leasing makes more sense for new car purchases in which you know your mileage needs or your mileage needs don't exceed 20K a year. If you have to buy something, buy used. This becomes more obvious when leasing/purchasing luxury cars or trucks which have high depreciation. Like every other consumable, I believe in constantly turning around technology to stay ahead and reliable. In most cases, a new cheaper lease is better than a used luxury car because tech and quality advances so significantly. Edited June 3, 2016 by BORG Quote Link to comment Share on other sites More sharing options...
blazerdude20 Posted June 3, 2016 Share Posted June 3, 2016 (edited) Leasing makes more sense if you're buying a new car, buying makes no sense if you're buying anything other than used. Hell most luxury makes will lease you a newly used vehicle. Edited June 3, 2016 by blazerdude20 Quote Link to comment Share on other sites More sharing options...
jpd80 Posted June 3, 2016 Share Posted June 3, 2016 (edited) Hell most luxury makes will lease you a newly used vehicle. yeah, a lot of the depreciation happens in the first year or two, so getting a low mileage vehicle could be a real bargain., not quite new but the payments will be a lot less and the surrender value could make it even more attractive. Edited June 3, 2016 by jpd80 Quote Link to comment Share on other sites More sharing options...
silvrsvt Posted June 4, 2016 Share Posted June 4, 2016 This is what I don't get Why don't more people who want to buy cars outright just lease them first, then buy them at the end of the lease rather than paying $700 a month So how does this work? (I've never leased a vehicle) Depending on the lease deal, wouldn't you be basically spreading the loan over say 7 years (3 years lease and another 4 years conventional loan at the roughly the same cost per month?) Quote Link to comment Share on other sites More sharing options...
fuzzymoomoo Posted June 4, 2016 Share Posted June 4, 2016 So how does this work? (I've never leased a vehicle) Depending on the lease deal, wouldn't you be basically spreading the loan over say 7 years (3 years lease and another 4 years conventional loan at the roughly the same cost per month?) Yeah, pretty much. The key factors to watch for are interest rates at the expiration of the lease and how much the residual is at the end of the lease. A lot of times (from what I was told) is the payments wind up being pretty close to each other, whereas if you purchase from the start the payments on the loan can be much higher than if you leased from the start. Quote Link to comment Share on other sites More sharing options...
fordmantpw Posted June 4, 2016 Share Posted June 4, 2016 Yeah, pretty much. The key factors to watch for are interest rates at the expiration of the lease and how much the residual is at the end of the lease. A lot of times (from what I was told) is the payments wind up being pretty close to each other, whereas if you purchase from the start the payments on the loan can be much higher than if you leased from the start. At first, I just dismissed it, but you've piqued my interest now. This gives you a bit more flexibility if you sell your vehicle outright. You have more time to sell and just get the cash since you are paying monthly for the lease. Then, you can save that cash to pay when you purchase. Hmmm, I will have to explore (no pun intended) this option when it comes time to purchase in a couple years. Quote Link to comment Share on other sites More sharing options...
silvrsvt Posted June 4, 2016 Share Posted June 4, 2016 Yeah, pretty much. The key factors to watch for are interest rates at the expiration of the lease and how much the residual is at the end of the lease. A lot of times (from what I was told) is the payments wind up being pretty close to each other, whereas if you purchase from the start the payments on the loan can be much higher than if you leased from the start. But if you could get a hypothetical 7 year loan (going at zero percent interest, which I know would never happen) it would be roughly the same cost...looking at it very simply. Quote Link to comment Share on other sites More sharing options...
fordmantpw Posted June 4, 2016 Share Posted June 4, 2016 But if you could get a hypothetical 7 year loan (going at zero percent interest, which I know would never happen) it would be roughly the same cost...looking at it very simply. Interest rates are generally lower on new cars, and 84 month loans are not unheard of now. 1 Quote Link to comment Share on other sites More sharing options...
akirby Posted June 4, 2016 Share Posted June 4, 2016 The advantage is lower payments for the first 3 years and sometimes you can get much better subsidies on a lease than you can on a purchase (they're just hidden). It also gives you an easy out if you end up not liking the new vehicle. Quote Link to comment Share on other sites More sharing options...
fuzzymoomoo Posted June 4, 2016 Share Posted June 4, 2016 The advantage is lower payments for the first 3 years and sometimes you can get much better subsidies on a lease than you can on a purchase (they're just hidden). It also gives you an easy out if you end up not liking the new vehicle. And you can still custom order a lease too Quote Link to comment Share on other sites More sharing options...
silvrsvt Posted June 4, 2016 Share Posted June 4, 2016 Does plan pricing apply also? Quote Link to comment Share on other sites More sharing options...
akirby Posted June 4, 2016 Share Posted June 4, 2016 Does plan pricing apply also? Yes Quote Link to comment Share on other sites More sharing options...
jpd80 Posted June 4, 2016 Share Posted June 4, 2016 If you turn your cars over more regularly, I think leasing is a better way to go because: - you have a defined residual value and can calculate any reduction for excess mileage - you just know dealers will be ready to offer you another new vehicle towards the end of your lease.. If you keep your vehicles for seven years or longer, you're probably better off with a seven year loan but remember to check what deal you get for cash, the zero percent interest may be buried in the MSRP Quote Link to comment Share on other sites More sharing options...
sullynd Posted June 5, 2016 Share Posted June 5, 2016 I drive 15-20k miles a year, depending on where my project is for work. My wife's commute is 15 minutes, we switch cars often to try and balance them out. Leasing is not for me. I try to keep them for ten years. Our cars are staggered by five years, and I do five year loans so I always have one car paid off. I see no need to replace my cars as often as I replace my iPhone. 2 Quote Link to comment Share on other sites More sharing options...
silvrsvt Posted June 5, 2016 Share Posted June 5, 2016 I drive 15-20k miles a year, depending on where my project is for work. My wife's commute is 15 minutes, we switch cars often to try and balance them out. Leasing is not for me. I try to keep them for ten years. Our cars are staggered by five years, and I do five year loans so I always have one car paid off. I see no need to replace my cars as often as I replace my iPhone. Well my commute has finally gone under 20 miles one way for the past couple years, so I'm not putting 25K on a car any more like I used too. I'm trying to get where I can only have one car payment, but my wife has an Escape with 150K on it and I think she'll be lucky to go another 2 years before it needs replacing...which I'm hoping it lasts till I can pay my car off, so we don't have two car payments. Quote Link to comment Share on other sites More sharing options...
Stephen White Posted June 5, 2016 Share Posted June 5, 2016 I scrimped and saved last year to buy my new car in cash, and I just bought my Fusion in cash, too. I hate the idea of car payments. 2 Quote Link to comment Share on other sites More sharing options...
buddysystem Posted June 5, 2016 Share Posted June 5, 2016 Here's an example of how my wife's 2103 Honda Pilot EXL lease has gone. Initial lease purchase price was about $32k on a $36k vehicle. 36 months @ $360/mo for 15k mi/yr. w/$3k trade down. Purchase payments would have been $500/mo (all these figures are recollection without looking them up). Just finished the lease and we were faced with buy/sell/give back the keys. Residual on the vehicle was $19.5k, street value is still $24-26k. We decided to purchase it and not give the stealer a quick $5k profit and we'll either flip it and get a nice deposit on the next rig or keep it. I'm hoping she wants a nice Wrangler Unlimited since she doesn't need the mommy mobile 3rd row anymore....We did the lease deal for pure monthly cash flow reasons. Worked out well so far. Quote Link to comment Share on other sites More sharing options...
akirby Posted June 5, 2016 Share Posted June 5, 2016 Couple of points - the dealer doesn't sell the vehicle, Ford sells it at auction. And the auction price is a lot closer to $19k than $24K. Obviously you can sell it yourself at retail so it's a good deal for you but not a windfall for the dealer. Quote Link to comment Share on other sites More sharing options...
blazerdude20 Posted June 5, 2016 Share Posted June 5, 2016 Couple of points - the dealer doesn't sell the vehicle, Ford sells it at auction. And the auction price is a lot closer to $19k than $24K. Obviously you can sell it yourself at retail so it's a good deal for you but not a windfall for the dealer. I can't speak for Honda but many times when people would turn in red carpet leases Ford would allow the dealers to buy them without going to auction. It's a set price Ford offers and the dealer decides whether it's worth it. Typically works out well for both parties. Quote Link to comment Share on other sites More sharing options...
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