Submitted by SquishyEmerald t3_12792ux in personalfinance
Never leased before, but my financial planner thinks I should because my monthly payments over the 3-year lease period would be less than financing. Full disclosure: I just posted a nearly identical question to r/ELI5, so if you answer here, I still need you to explain it to like I’m 5 (or probably more like 15). Thanks!
Do you run a business? If no then you shouldn't.
I sold cars a few years back and I don’t know that I ever saw anyone turn in lease who didn’t go over their miles. That mileage penalty can cause quite the sticker shock if you’re not paying attention. So you really need to consider how much you drive.
I would definitely be able to drive it less than 30,000 over those 3 years.
You say that but my mentor at work took this job and is panicking on how to meet the lease terms now. Things change over those periods.
It’s the same price as financing.
There’s just a call option at the end.
Leasing is a luxury for people who would buy a car every 3 years, which most people aren’t rich enough to do.
> would be less than financing
Well, at the end of 3 years, you would own a financed car.
At the end of 3 years, you turn your lease back in.
Leases are a great way to be spending money perpetually. And lest anyone say something about "unreliability" - the average age of cars on American roads is 12 years. You're fine keeping what you've got.
Would love to keep the car I inherited from my mom, a 2001 Subaru Forester with under 84k miles, but it needs a new engine to the tune of around $10k. I’m planning on getting a new Subaru.
A new engine is more like$4k
Sorry, I didn’t explain that correctly. New engine and other stuff not as urgently needed, but still needed really soon.
leases, you pay the depreciation cost of the car + profit to the owner.
financing, you pay the entire cost of the car and eat the depreciation cost but own the car while paying interest to a financing company.
they should be pretty neutral options for the same car.
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I've leased a couple times in the past and was quite happy with it. I was able to drive a new, reliable car with a fixed low monthly cost. On a tight budget that could not squeeze out an unexpected $300 or $2000 for critical repairs, which always seemed to happen just when I'd paid off previous used cars, it was great for peace of mind. I was never even close to going over the annual mile allowance, even with some out-of-state trips. For someone with more resources though, I'm not sure what the advantage of leasing would be, aside from perhaps freeing up other money to invest in something that does not depreciate.
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Fenderstratguy t1_jedaib5 wrote
You need a new financial planner. If you keep leasing for ever increasing costs every 3 years instead of saving money and buying a cheaper car that you hold onto for 10-12 year - you will have a ton of money going towards a slick ride that you never get to invest for retirement.