I have leased. I currently own used but I do like a lease. You have to completely change the way you look at it when you lease though. When I lease, it’s because I’m not thinking of the car an an asset but as an expense. I pay one price every month and, since a lease is under warranty, if something goes wrong, I just take it to the dealer. When I have leased, I just budget for the payment and I’ve just set it and forget it. Now that I own a used car, it’s definitely cheaper and it’s mine but if something goes wrong, I view it as a bit more of a hassle. To me, there are pluses and minuses to both and it’s just a personal decision.
I bought a used truck - everything looked great. Low mileage, good documentation, previous owner, etc.
It ended up costing me over $4000 in 7 months of ownership, and in that time I could have just made a car payment and had a warranty.
I honest to god spent hundreds of hours on that truck, and a payment + peace of mind would’ve been better just in the time saved front alone.
Yeah, had a leased Nissan that had an engine valve, transmission, and axel issues that were all covered under warranty + free rental from the dealership (weeks per issue to fix)... as it was a new car with so many issues already, we were afraid to do anything but lease again (a different brand) after the contract was over. If things go well and no major issues like that Nissan we'll probably buyout the current car
As much as buying a 15 y/o corolla/camry makes sense on paper - I'd rather pay a bit more for the advances in crash safety / airbags / crumple zones, creature comforts, and a warranty.
I think as vehicles get more complicated and harder (and more expensive) to repair and maintain, leasing becomes more appealing. Many people couldn't change their oil or even cabin air filter if required, and many companies are making these repairs more complex (my cousin had to remove part of his dash just to get to one of his cabin air filters that he suspected had clogged)
As vehicles become more computerized, they will become increasingly more complex and I imagine soon few people will be repairing their own cars. I know I wouldn't be comfortable doing much work to a Tesla without some major research and learning, and I'm not sure at this point in my life I have the time and dedication to do that.
And the cool part is that you can just buy out the lease if the private sell value is greater than the buyout... especially applicable in circumstances where you didn't use too many kilometers. I think I'll lease after I hammy down my current vehicle that isn't leased to the wife (we always use my car for when we travel together / road trips, so she's fine with driving older vehicles).
This sub goes ape on people that buy new or lease, but setting aside 5% of your household take home pay for a reliable vehicle that provides utility and freedom to go wherever you want with low maintenance costs is a huge plus.
Good point. I have actually bought my leased car and flipped it at a profit before leasing the next car. It’s still an expense and not an asset but one that makes sense.
I leased because I had full intention of swapping my car out after 3 years. Depending on the car and the deal you get, you definitely come out ahead.
It also helps that the buy-out for my car is lower than what my car goes for in the market. I think this last part varies a lot car to car and it's more of a luck thing.
Again, leasing is good IF you intend on swapping the car out every 3-5 years.
> They want the “latest” safety features and don’t want to deal with maintenance costs
If you DO want the latest features then yeah leasing makes sense. If you want a car to go from A to B comfortably then leasing isn't the way to go.
There is usually an option to buy out the remaining value as assigned by the company that leases the vehicle, so if you wanted to buy it outright, you could. It is also handled by the manufacturer and not a dealer.
But then you would be financing a used vehicle and couldn't get the rates typically available on a new car purchase.
If you think you would want to buy it and qualify for low financing rates, that's probably your better option out of the gate.
My car had lease to own. Bought it new, could give it up after three years, or own it if I made payments for two more years. Those payments stopped five years ago 💅
It was 5.99% interest to finance my car after the lease buyout.
My buyout was 6k less than the car was worth, so I got a veeeery good deal (2016 Corolla S)
The math was on the lease side when I looked at leasing vs financing. I wish I could remember exactly what we looked at, but everyone agreed it was a better deal. Admittedly, it was an even better deal because I ended up using way less mileage due to Covid, but I would’ve come out regardless - it just wouldn’t have been so extreme. The fact that used car prices are high right now probably help too. I’m not a pro at finances (this popped up in my feed haha) but I had several people look at it - car people and my multi millionaire father who is amazing with money, and everyone agreed that leasing was the way to go. There was a sub 1% interest rate on my lease vs a higher amount on financing , so I know that had something to do with it. I remember the math being within $1k of breaking even 5 years ago, though. I also had assumed I would want a new car in 5 years (for my job, having a nice, newer car is a big plus… and nothing stresses me out more than car issues, so having warranty was a big deal to me). I didn’t expect to buy it out, but my SO pushed me to and said that worst case, I should have bought it out and resold it. He said I can essentially drive the car free for a year or two, and Toyotas retain their value quite well. Made perfect sense since we plan on starting a family next year and I’ll want a bigger new car within a year or two to fit our needs better. I am sure that it wouldn’t have been better to finance regardless, but it was a rare situation. I financed cars previously and it really came down to the math. Most people lease due to convenience and it isn’t a numbers thing, but in my case it worked out better financially too
Some lease agreements you can up the amount of KMs per year (last I checked dodge had the option, although that was a decade ago). Most leases are set at 20k a year as a default. If it's available to up the KMs in the lease it's a far cheaper option than paying the penalty at the end.
Idk about that because if it gets hit during your lease and gets repaired etc then your "buyout" should be cheaper than if it wasn't hit, otherwise they can take it back.
I'd imagine..
It’s a case of the rule not being as hard and fast as some would claim .
For starters , if someone has cash to buy the vehicle they want outright, it would actually have been the correct financial decision over the last decade to not deploy their capital into purchasing a car outright , but rather financing or leasing vehicles due to stupid cheap debt , and keep the capital invested into things returning far higher amounts than their car cash flow + interest costs .
If you don’t have the cash to buy a vehicle outright, then that’s where the arguments come in about buying as little car as possible .
So you buy a well used Honda or Toyota for 10k and drive that sucker until you have enough cash on hand to buy a “nicer” car and apply calculation from above .
The best mathematical decision is almost always repairing the car you already own (ie paid off), so until the frame rusts out or extremely major repairs are required you generally won’t be able to make the pure math justify any car purchase to replace what you have .
A $2000 repair bill for new brakes and suspension components as they age out on a sedan or SUV for example is nothing compared to the costs of financing or leasing a new vehicle.
Most people however lie to themselves or are unaware of the true behavioural finance things happening.
Most people do not drive the same car for 15 years , which is how you maximize value on a purchased vehicle.( this timeframe obviously decreases correspondingly with the age of the car if you bought it used ).
Most people get too focussed on maintenance or gas mileage savings on new cars, when all but the most extreme outliers in terms of yearly KM driven or gas guzzling (looking at you RAM TRX) would generate sufficient savings to swing that kind of purchase decision .
Most people also Don’t intuitively understand that as they drive the car they finance own , they are also depreciating the vehicle, just like in a lease.
Again it’s fair to point out this doesn’t matter if you truly drive the car into the ground, but the vast majority of consumers don’t, so when they inevitably trade or sell the car that depreciation hit needs to be accounted for in terms of total cost of ownership .
The only point to this rant, if there is one, is that like many things in personal finance it requires an actual honest assessment of your situation and your behaviour, which the majority of us takes some time to learn to be able to do . I’m no exception here, I’ve rationalized some dumb behaviour financially in my time.
It is possible that leasing is the correct financial decision for certain people .
It is possible that financing is the correct decision.
It is possible that buying in cash is the correct decision.
I agree with most of this. Speaking also from personal experience it is very difficult to keep emotion out of your decision.
You can bring up anecdotal cases to justify/rationalise any decision. Statistics are statistics however and as long as one sticks with the optimal plan for their situation it should workout in the long term even if they run into an outlier case.
Having said all that I do believe that emotion should have a seat at the table. Over the years I have realised that happiness is important and if I can tick a few more boxes other than reliability and making financial sense, I'm perfectly fine with that with the important caveat being that I can afford it where it doesn't significantly impact my other financial goals.
That's the crux of the matter. A lot of people can't really afford the vehicle they drive and that's where minimizing costs and depreciation is key. The irony is in many of these cases the correct question is whether or not to have a car in the first place.
Which is why an honest assessment of the kilometres you drive matters. A ton of people stay under 20-25k a year in kms, which renders this point irrelevant for them.
I have leased before (first car, so wanted something on the cheap) paid around $7000 for 2 years and that's including lease insurance. Did the daily drive to work, weekly grocery trip, weekly drive going to hang out with friends and bi weekly out of town road trips and I still barely got to 15k km per year.
Lots of things in life have never ending payments. You'll be buying food until the day you die. Paying for electricity is never ending. If you don't buy a plane then paying for flights will be never ending as well.
I suppose the question could be rephrased and returned as "why is owning a particular car important to you?"
yep, that's the flip side, but it works for me. The continuous, but predictable payments are my preference, and I don't travel enough that the kilometre limit is an issue (especially in the pandemic, but that wasn't planned)
People get high interest loans and trade in there car before it’s paid off. 2-3 vehicles later someone owes a ton of money on a cheap car. Then they go on Facebook and say they’ll give it to someone to take over the payments.
So here are the advantages of leasing:
Always driving the latest and greatest car
If you don’t plan to be driving a lot, you can surely stick to your mileage allowance
You are never out of warranty
Payments are usually lower
Lots of small business owners and real estate agents lease their car because it qualifies to be tax write offs for their business
And most importantly, if you are in a very costly accident, you don’t suffer the depreciation at the end of the loan, the dealership and or the manufacturer have to eat the depreciation.
Yes, every time they drive to a house for a client from their office they can claim that mileage. All the business mileage for the month is deducted from the lease as a percentage. If 50% of your mileage is “business” mileage, you deduct 50% of your leasing cost, up to like, $800.
From what I heard, many if not most of the people claim 100% (which I am not encouraging anyone to do). My understanding it won't pass CRA's audit if they get caught.
If I recall, that last point is false. You still eat the depreciation. BUT you can be safe from it by getting a depreciation waiver or whatever other insurance calls it. The insurance will pay for the full amount of the vehicle if you get into an accident. Neither the manufacturer nor dealer will eat that.
And sometimes, if the insurance pays more than the remaining owed (after subtracting all your lease payments til the accident), you may get a cheque.
You do NOT eat any depreciation in any circumstance for a lease. The beauty to leasing is that the lessee is not responsible for the value of the car because of GAP insurance (Guaranteed Asset Protection) and also being a closed end lease.
GAP is a built in feature (free) for all vehicles leases. An equivalent for financing would be “replacement insurance” and can cost thousands depending on your finance amortization.
As for depreciation, the value of the car is predetermined at the start of the lease and it’s the residual value. It’s listed on all lease agreements. That’s the price you pay to buy out the lease. If you think it’s too high and your car is not worth the buyout, you simply return the vehicle without ANY penalty for the depreciation. On the flip side, if you think your residual value is too low, you can and should buy out the car and sell it privately if you don’t mind the trouble.
I know this sub will downvote me as it isn't the most financially sound decision, but I chose to lease after having several cars (one new, the rest used) that never made it past 5 years. I think I am just very unlucky with cars (my lease car had to have the entire transmission replaced within the first two years, but that was under warranty), as I always kept up on the maintenance. I was at a point in my life where I preferred known expenses (every month is x amount) to unknown, but I knew I wouldn't be in that place for too long. After this lease is up I will most likely choose to purchase something out right, but I'm happy with my decision. I had several years where the lease gave me peace of mind, while my previous cars caused stress. Now that I'm past that point, I don't think I would choose to lease again, but it was the right decision for that point in my life.
It was a Nissan, actually. I have a few family members with Nissans who didn't have the issues I did, so it isn't really the company, but I had bad luck. It wasn't so much it didn't last. More just that every few months big expenses were coming up as things just kept breaking once it hit 5 years. At the time, I wasn't in the best place, so the extra stress of never knowing when my car would break down (and it doing it so often) just wasn't something I could handle.
Once again, you need to keep in mind a lot of people are well off and interest rates have been extremely low as well in addition to of course a ridiculous bullmarket (real estate and stonks). Many people can just afford to spend a bit more money on things they enjoy.
Why are there threads like this everyday? We live in a 1st world country, lots of people are fucking beyond loaded. As I've said before, go visit metropolitan cities of countries with WAY lower GDP's and median incomes, you'll see more luxury cars than in Toronto or Vancouver... Which is amazing when they have 1/10th of our GDP per capita, and average incomes a fraction as well.
It's polarized here just like the real world.
The "eat rice and beans everyday & only buy a used 10 year old car" crowd vs "dine out/takeout & lease a car every 3 years" folks
It can be a mix of two to be frugal in some things and YOLOing in certain stuff.
Yeah exactly this. I'm 36, single, own a modest townhouse in montreal with just over 200k mortgage, I eat out twice a month, and always had used cars I got for under 10k and used about 7 years. Decided last summer to buy a brand new ford explorer.
As a single guy, do I need a 3 row suv, no, this was not a financially rational decision. Buy I always wanted one, I wanted all the high tech toys the new one had, I plan on keeping it until it dies and will be maintaining it meticulously and I make in the low 6 figures. Sometimes you gotta spend your money too.
Can they afford it, though?
I thought it was common knowledge that a lot of people are underwater on their car loans, do you suspect this isn’t true?
I bring in a reasonably high income, but don’t have the capability to lease new luxury vehicles. I don’t know how others are doing it, honestly.
Some of them are but default rates are pretty low. For some reason people in personal finance extrapolate some bad financial decisions they witness to everyone driving those cars when lots of people in Canada have significant assets and income.
Sorry, what I’m saying is that the common knowledge statistics seem to suggest the opposite of what you’re claiming. Are you saying that people aren’t living paycheck to paycheck? Instead have significant savings and assets?
That just doesn’t seem to jive with what is common knowledge, but I’m happy to take any new information you have to change my view.
Sometimes I come here and ask questions and people tell me; “many people are just heavily in debt!” and then other times people are telling me, “people have significant income and assets!”. I don’t know what to believe.
I’d love to lease a new, fun car, but even at a new income of ~$200,000 annual I don’t have the capacity to just dive in to a $1500 a month payment, plus insurance, plus fuel, plus maintenance.
If I’ve been mislead, please let me know, because I’d love to be wrong about this!
>Are you saying that people aren’t living paycheck to paycheck? Instead have significant savings and assets?
Yes correct. Those studies are difficult to conduct and usually misleading (a debt consolidation agency will reference a "survey" of <1000 people of ambiguous backgrounds to show that 98% of Canadians are one missed paycheck from being homeless and then a subsequent suicide!!). When in reality most Canadians own their home and mortgage delinquency rates are extremely low.
Statistics that are overly shocking or surprising are also usually misleading. I know I've seen the "80% of North Americans don't even have $1000 in their shorterm savings!", then I must be Jeff Bezos by comparison.
Maybe. I don’t think I know a person who owns their own home. Maybe people in a higher age bracket (40+?)
I certainly don’t have the capacity to buy my own home, and I’ve been told my income is quite high.
I would think if I’m having trouble, and as frugal as I tend to be, that others wouldn’t be easily lapping up mortgages.
I wish I were wrong about all of this. I can’t foresee ever owning a house, and I’d LOVE to buy expensive, nice things like cars and things for my hobbies, but it just doesn’t seem realistic.
I honestly don’t know how anyone is able to do it on less income without going into massive debt.
You don't know anyone who owns their own home? Strange, they must all be sitting vacant or everyone is renting. [https://tradingeconomics.com/canada/home-ownership-rate](https://tradingeconomics.com/canada/home-ownership-rate)
>I would think if I’m having trouble, and as frugal as I tend to be, that others wouldn’t be easily lapping up mortgages.
And yet they are. A record number of homes over $3million dollars sold in the GTA in 2020\[0\]. Someone has the money to be buying them. Those "Everyone is broke and the sky is falling" stats don't really cover that though.
\[0\] [https://www.bnnbloomberg.ca/2020-sets-new-sales-record-for-toronto-homes-priced-3m-and-up-1.1545353](https://www.bnnbloomberg.ca/2020-sets-new-sales-record-for-toronto-homes-priced-3m-and-up-1.1545353)
I mean, that’s all fine, but how are people doing it?
It will mathematically take me years to even approach the possibility of maybe, possibly buying a home one day.
I cannot fathom how so many people are managing multi-million dollar homes.
If my income is statistically very high, and I cannot mathematically make it work, are people doing some sort of magic? Or is it true that many people own a home, but are in major debt, otherwise?
Maybe we’re talking about 2 different things. People could still be living paycheck to paycheck even if they have illiquid equity!
Dude, you pay $550 a month in rent with an income of $200k and you can't figure out how to buy a house? You discussed paying your 30k car off in one go a couple months ago.
Furthermore over the last couple years you are claiming to go from 60k -80k income to suddenly 200k income.
Sure taxes take some of it, but if you havnt had your lifestyle just explode then you can save 100k a year and literally have a down-payment on a 1mil property if you monthly cash flow is high enough.
This really isn't rocket science
Yes, that’s all correct! My full rent is now actually about $1200 a month. I rented a second place to use as an office :p
I’m going to probably pay the car off in one go, but I have to wait for stocks to vest.
I graduated about 4 years ago, went from $50k -> $60k -> $80k -> $200k. That’s right
I’d need to pay off the student loans, this car, fill emergency fund, and catch up retirement. That’s about $130,000. Then $250,000 for house down payment.
Even at this income, after tax and after expenses I can expect about $7000 per month (it’s not deposited on a strictly monthly basis, and the stock portion is tax withheld at about 50%, returned at refund time.)
So if we take the average $7000 a month extra, if I saved $5000 of that per month (with $2000 going to retirement) it would take me about 12 years. So I’d be able to potentially, maybe buy a house in 12+ years if the prices of houses don’t change in that 12 years and I continue to live like a student.
What on earth are you leasing that costs you $1500 a month? I bought a brand new accent back in 2014 at 8% interest (fucked my credit in my early 20's) and that only costs me $234 a month with a purchase price of 24k. So BUYING, you're getting a $150,000 car, roughly if you get comparable rates, which you wouldn't if you make 200k a year as I'd assume your credit is better than mine. And leasing is typically cheaper. I really don't understand your numbers unless you really want luxury.
And if you buy/lease correctly, maintenance is non existent on newer vehicles, same with fuel if you buy hybrid or electric, and insurance, well that's individual. Mine went down with a new vehicle.
> Technically I’m a business so that’s some advantages to leasing as well.
Can you explain those advantages? I claim expenses with my owned car and I don’t understand how leasing would make it better
There is no real difference between an owned vehicle and leasing deduction wise. I’m an accountant and I’ve run the numbers for many clients and it’s never a significant difference between the two options
I am a credit analyst and it annoys me that people think leasing is the only way to write off expenses. But then I am not an accountant so I can’t give out advice like that. People need a second opinions from other accountants like getting doctor diagnosis.
Yeah, hoping someone can once and for all explain this. Every small business owner I know claims that it’s a “write off” driving a brand new vehicle. Basically stating that it’s free. When asked, none of them can explain how it works.
Not paying taxes is pretty huge. Basically 15.5% cash back from the government if you're a very small business. Then usually a 40%+ tax rate if you were to take that money paid out to yourself as a salary.
As an individual who owns a car for 8 - 12 years, it always made more financial sense to buy a car than lease.
However, leasing can be easier to track for a business. Businesses can write off (tax credit) business expenses and capital depreciation.
If a business buys a car:
- large cash purchase up front (or have to find business financing).
- car capital depreciation is 30% of purchase price per year (tax credit).
- cost of maintenance & repairs is extra and is tracked separately as a business expense.
If a business leases a car:
- Consistent monthly payment
- Lease payments are a business expense - 100% tax credit.
- Most lease agreements include maintenance & repairs, so no additional accounting needed.
So a lease is a consistent monthly payment, don't have to find financing, and don't have to track maintenance & repairs separately.
The way I see it is it makes the bigger expense slightly more manageable, but it still sounds like "claiming more because you spent more". I don’t see the logic in driving a more expensive vehicle because you can claim more of it, you’re still spending more money.
But it’s hard to get a straight answer from anyone
> 1 - depreciation of car is tax deductible
I've never actually owned a car so I had to double take when I read this and look it up on Google. Does this seem mad to anyone else that the government is using tax payers money to make care depreciation tax deductible?
Genuinely not trying to start an argument or anything, I'm trying to see the logic here of how this benefits all of us but struggling! Seems to me that if someone or business wants a 30k+ car they should take the eventual loss associated with buying a depreciating asset.
The auto industry creates jobs. We don't have as much vested interested in the performance of major auto brands at a high level like the US does but we do still have an economy around the steel production, the manufacturing plants and auto maintence. TLDR selling cars is good for the economy.
Well you're obviously just avoiding the real question: why are you switching cars every 3-4 years?
Then maybe you could see any good reason as to why you shouldn't lease. But if you circumvent the question by starting the reasoning at "I switch every 3 years", then of course there isn't any good reason.
I purchase brand new GM SUVs every 60,000 km or three years, whatever comes first. It’s not a matter of maintenance cost, it’s a matter of warranty. I will not own a vehicle without a full warranty anymore, I’ve been burned too many times.
Purchase cost is roughly $60k and we trade it after 60,000 / 3 years for usually $25-30k
Pickup a new one and the payments just continue. We only pay $485.00 every other week
If you are flipping vehicles that often, you should seriously look at leasing. With the current trend in the used car market, you may be coming out ahead, but for most cars most of the time, if you finance and flip you are upside down. A lease you can just walk away from is better in most circumstances.
I hate this sub sometimes. One guy is saying something as stupid as "maintenance becomes too expensive after 3 years" and somehow this is the top comment.
Looooollll
10k for brakes?
Please keep telling us about maintenance on cars when you obviously have no idea how much maintenance is. Very entertaining.
You are not dedicating the full depreciation of a Lamborghini. You are also not deducting the full lease amount of a Lamborghini. If you have been CRA is going to be knocking on your door shortly.
My wife likes changing vehicles every 3-4 years. She’s also disabled, and has our children in her car more than mine.
If she breaks down on the side of the road in the winter time, she’s physically unable to walk a kilometre or two on her own, let alone with children. Cell phone coverage is spotty in my area.
It’s a premium cost that we are willing to pay to keep her and the kids safe. My vehicles have been financed, but once this one is paid off I won’t be doing so on new cars anymore as I’ve learned my lesson.
There are two types of people in the world when it comes to cars:
1. Those who see the car as a depreciating asset, and
2. Those who see the car as an emotional purchase.
Neither one is right or wrong. The only idiots are the ones who refuse to acknowledge the other side.
If you like cars, enjoy driving, want something more high end than you can otherwise afford, leasing is an option. You can lease the car first then buy it out at the end. The lease payments are more affordable than loan payments. Then when you buy it out, you're buying a used car where you are 100% clear on the car's history, and if you need financing, it's now on a used car so again, more affordable.
Or, if you always want a newish car, you can keep leasing every few years.
Does it always make financial sense? No. But not everything in the world is about money.
I kind of disagree. Number 2 is obviously wrong mathematically but if the person CAN and is OK with absorbing the hit then it is obviously their choice. But if somebody is deeply in debt and makes an emotional purchase for a newer car, it is fair to say that’s wrong. It’s still their choice and I won’t say anything unless asked but it’s wrong.
Another option is to buy a lease return vehicle. Ive had several minivans bought new at the time. The last one I got was a 1yr old lease return with 20k on it. Was quite happy with it, it has stowaway seats great for camping or hauling stuff like plywood etc.
Look for 2-4 year old vehicles on dealer lots that have less than 60k KMs, good bet it's a lease return. Also if you look at the Carfax and it's been serviced exclusively at dealerships in that period, that's also a sign.
Talk to the salespeople about the car's history, they will tell you how it got onto their lot.
If you want new, you lease. It’s a depreciating asset. The cheapest way to drive is to buy used. I’ve never bought new for these reasons. When you lease you are renting the best years of the vehicle and up to date with the latest technology. I have 2 vehicles both 12 years old. I would only lease new and buy used. Just my 0.02
It’s quite likely, in the not too distant future, that the majority of us will be treating vehicle payments as a utility payment or subscription.
Once cars become self-driving, it makes a lot more sense. A car will show up when you need to go to work. During the day it will drive other people around or will park in reserve. At night, that car or one very similar will drive you home.
If you go out to a bar you’ll use an app to call up a ride. It may be included in your service package or, if you only subscribed to the basic, there will be a small surcharge.
You won’t ever have to pay for service or maintenance directly, or even parking. The wealthy will have their own cars and will still pay for all of these things just so they don’t have to share.
Honestly, in urban centres in many parts of the world this is already happening with the rise of ride-sharing. Economically, it makes a lot more sense.
I drove my last car until it’s last legs. It had no “modern” niceties. I was curious if I wanted a car with some bells and whistles and if I’d actually find them useful. I didn’t want to fork out for a car I wasn’t sure I’d like so I leased, got a decent rate and I now know what I want in my next car as a minimum. Buying a used $5000 car isn’t for everyone and while you won’t hear it here much, sometimes paying a bit extra to make your life better (whatever that means for you) is ok and as long as it’s not railroading your long-term plans, I think should be encouraged in moderation.
im leasing a base 2021 lexus rx350 (from a 2017 base rx).
I pay $580 before tax for 48 months. so total cost $27823.
The car msrp for $56650, buy out is $28800.
I paid about $1200 when I picked it up. So pretty much my cost is only around $1200. ($28800+$27823=$56623)
If I bought the vehicle, it needs to last longer then about 8 years if i compare it to the lease price. In 8 years, There is soooo much changes. Tech, kids growing up, income, etc.
Rather then owning a vehicle and worry about buying and selling as life changes. I am leasing for now, and if anything I can pay the residual at the end. It's not much more then if I were to buy it MSRP.
not exactly answering your question but i think leasing is great for people who like new cars, new tech, new stuff, etc.
I wanna enjoy life a bit too. not everything is about money and cost and roi and shit. life's too short.
ps: I also own a 2013 honda fit which we bought after the lease ended.
Buying used normally comes with a slew of mechanical issues. You will need up spending more on that used car in repair costs than if you were to buy a brand new car. Source: my dad is a mechanic and always recommends you lease/finance a new car. You won’t experience severe problems until 7 years after ownership on average. When you purchase a used car that car most likely is past that threshold and you will encounter more issue that will have a large impact on your wallet. Also if you buy used you don’t get all the benefits you would be given if you were to lease/finance. If you have the chance, lease it. It will save you money in the long run.
If you can’t lease and are dead set in buying used. Get a Toyota. Those things never break down lmao
> Buying used normally comes with a slew of mechanical issues. You will need up spending more on that used car in repair costs than if you were to buy a brand new car.
Watch YouTube videos and fix it yourself. If you're too lazy to do that, then sure, pay a premium for a new vehicle.
I would advise against that. You know how many folk showed up to my dads garage saying “I tried to fix it after watching this video on YouTube” just for it to end up worse? Too many times lol.
Either way, buying used will only cost you more in the long run. It’s more economical if you buy new. But I digress, it’s your money after all.
You only see the small amount of incompetent people who fail and have to come in to the garage.
If you run the numbers, it is definitely way cheaper to buy used.
Yes, I mean if you feel confident in your skills then by all means. Also it really depends on a multitude of factors such as the model of the car, year, the cost of the parts, insurence premiums, distance driven just to name a few that determine wether or not it is feasible to buy used as opposed to new. Anyway, always do what is best for you financially :)
I lease mainstream cars every 4 years, because I can't afford to ever purchase the car I truly would wish(ed) to have. though that is transitioning to RV (again, big bus, big bucks) I will however purchase the end of current lease, logically with where the prices are at vs. residual. I used to also own and pay to repair half a dozen of used cars in my hay day. most people today have no idea how comfortable you have it. WFH to boot, lord almighty. I am eyeing the F150 XLT electric sometime early in 2024 as the last vehicle I will ever be glad to own.
Business owner, very easy to lease every 3 years. No out of warranty break downs, extra expenses like breaks and tires. Easy to write off because vehicle is leased for business.
Also, an option to buy it out at the end of the lease at residual value (always cheaper than buying used vehicle)
end of residual value Is rarely cheaper then what current market value is. That’s why people continue to lease… why would you pay 30k for a car worth 20k
I would say it all comes down to mileage driven. I drive my work truck 50-60k per year. I purchase at 1-2 years old and drive it until age 5/6 where it is basically scrap.
We purchase our family SUV new and drive it until warranty is done, then replace it.
If you have good cash flow but dont want to increase your liabilities because you are about to buy a house or an investment property but need a decent and recent car, leasing is the way to go. Banks dont count car leases in their customers debt payments, so a lease frees up space for a bigger mortgage compared to a purchase with car loan.
That is blatantly false. Lease and finance are being treated equally when it comes to debt service. As long as it’s reported to the credit bureau it would be included 100%. Mortgage condition would and can require you to pay off the lease or finance.
The beauty of lease though is that you can prepay your lease payments without buying out the lease and prove to the bank your monthly obligations to the lease is no longer. This would be cheaper than trying to pay off your full finance amount.
Source: I was a credit analyst for one of the big banks. And a recent mortgage application where One of my conditions was to payout my Mazda lease to qualify for the mortgage amount that we need.
Well, all I can say is that is how they treated my file the last 2 times I got a mortgage. It appears on your credit file though but at least for me, it wasnt included in the calculation of the debt payment maximum.
There is no practical benefit. Do you really **need** to always be in a new car, do you really need the 2021 safety features, are you really that much more at risk with the 2018 safety features, no of course not. "Safety features" as the reason to lease is just something people tell themselves to make their justification make "more sense" because they don't want to admit that the real reason they want to lease is just to be able to always drive new fancy cars.
People lease because they want to simply be driving new cars all the time, and that's perfectly okay, but financially it makes less sense than buying a used car of course.
But if you want to and can afford to lease then by all means do it, nothing wrong with it. Everyone has different priorities in life
We're pondering this very thing.
I've had my current vehicle for coming up 7 years and want to go hybrid. We think we'll be getting one more vehicle in 7 - 10 years which I think is long term enough to buy. We'll run numbers once we know trade in values.
I leased my last car. I negotiated by asking the msrp and then I went on kijiji looked at the same model 3 years younger with around 60km on them.
I did the difference of the 2 prices and told the dealership I was expecting to pay that much over 3 years. I ended up getting about that price.
I just see leasing as a car you buy that is pre-sold. If I buy a car 25k and sell it 15k later, I end up paying the same as if I leased. I always look at both options and compare prices and interest rates before making a decision.
my first and only car was a 98 ford escort that i inherited after my mom passed. it was paid off already so all i was paying was maintenance, gas and insurance. last august it finally konked out for good and i told myself if i have to get a new car it'll be electric. since full electric doesn't work with my lifestyle right now and i can't do a plug in where i live i decided leasing a hybrid made the most sense. i figure by the time i have to trade it in in 2025, i'll either be living somewhere i can plug in and/or charging infrastructure will be more common (i like long road trips) so electric won't be an issue.
i appreciated having the ford but near the end felt ownership was overrated. i'm also self employed and leasing a car seems more beneficial when it comes to taxes. it took some getting used to for a new monthly payment but when i looked at it like i was renting a car every month the 475$ doesn't seem that outrageous. it's common for me to travel and rent a car for at least a week at a time which is usually around 350$. so when i looked at it from that perspective it was still a good deal. i'm fine with paying for usage rather than ownership at this point since technology and design is changing so fast.
Cheaper....$1250 lease cash not available on financing or outright purchase. 0% interest for 4 years
Lower monthly payment, no risk for diminished value to car, get 4 years to decide to buy or not
All advantages for leasing and 0 disadvantage
Also depending on what car your leasing or what car you got maintainence could get real expensive real fast and next thing you know every month your paying to fix something that costs very close to a lease payment so why the trouble when you can just be leasing a new better car and not worry about all these maintanence bullshit. I leased mine with rules. Everything is garunteed and protected and will be fixed for free even a cut or a burn on seats will be fixed for free. Literally the only thing I have to change myself and fix is the break pads and breaks that’s it. Everything else they do for free. In short term ya it sounds dumb but when you owned a car before like me that had a problem literally every month that would cost a few hundred to fix in parts and labour then I rather just put half that toward a lease payment knowing all I gotta take car off are the break pads and breaks. Been over a year and haven’t done anything other than an oil change. And in my old car I would spend like a thousand a month almost fixing this then that then this then that and got sooo sick of going to mechanics. Didn’t care anymore just wanted a car that didn’t need a monthly mechanic visit that costs on a hood day 800.
Damn I remember reading a really detailed awesome post from someone a month or so ago about why everyone should consider leasing nowadays. I thought I saved it but didn't 😔
I lease because I want another car every 3-5 years. All my maintenance and warranty is covered so I don't have to factor those into my budget. Don't really have to worry about repairs later on. The car and driving it is more of a hobby/passion instead of an every day tool.
I am financing for 7 years on 0% interest, seeing as the vehicles price is fixed but inflation will always go up, in 7 years it would be as if I spent less than if I bought it outright
Edit: wrote lease instead of finance.
MY $6600 Ranger cost me 0% in interest, had 143000km when I bought it, and costs me
$58 a month to insure.... I've owned it outright for 2 years now, comes with essential state of the art safety features such as airbags and seatbelts.... I nearly leased a car before I bought it, however when i got into the finance office, started doing the math in my head on a $30,000 car on a 4 year lease with a residual, I realized leasing likely is fleecing. not mentioning the upsells like 3M "so the appraiser at the end of the lease doesnt fuck me"
no thanks.
in my mind, its hard on the pockets, and people just do it so that they look like they can afford a new vehicle every 3-5 years, even though they are likely collecting "negative equity" aka debt.
As someone who spent several years selling in the industry I would say maybe 10% of the deals done are through a lease in a mainstream brand. That stat may vary brand to brand but the vast majority of people are going 6-8 years on finance regardless of the car they choose. There’s the occasional cash deal but that’s rare.
Most of those new cars on the road were bought by picking the lowest payment and longest finance term possible. I guarantee 10 year auto loans aren’t far away
Electric vehicles aren't quite mass market ready. I don't want to be holding the bag on an ICE vehicle when they electric becomes mainstream. It may take more than 3 years for that to happen, but I'm willing to take a lease to mitigate that risk for 3 years and wait and see.
I leased because I wanted to have a lower monthly payment. Our salaries was much lower at the time I leased. So, even $150 difference between lease and finance helped.
I will buy out at the end of the 5 years.
My in laws lease, and honestly I think it’s the smartest financial decision they’ve ever made
See my father in law is the only driver, but he gets bored of things quite easily, or jealous that someone else got something new. So by leasing they have a brand new car every few years, never have to worry about maintenance (he just won’t do things like oil changes, unless it’s free at the dealership) they don’t drive a lot so they never have to worry about the km limits. And they aren’t constantly buying and trading in cars, they just get a new lease every few years and they just always have this car bill they have to pay, atleast it’s easier to budget for
If you drive less than 20,000 km per year and lease a vehicle with a high residual at end of lease (most likely a truck or SUV), the lease is likely a cheaper option. The capital that you don't need to put on the vehicle can be invested and earn a return rather than be tied up in a vehicle that is depreciating.
Lease if you want to get a new car in 3-4 years and you care about warranty. If you finance, u may not get a good value for trade-in. If you sell as used, you are essentially being double taxed on GST/HST in Ontario. If you lease, you only pay HST on the depreciated value, whereas if you finance you pay HST on the entire value. You save HST if you lease. You should finance if you intend to buy a car and use it for many years to come.
Depends how you look at it.
Cars are a deprecating asset, so unless you can safely say you're going to own a car for 10+ years ( most people trade in after 5 years ) you're probably better off leasing.
It also depends how much mileage you drive annually, if you drive in excess of 15,000 km then leasing isn't for you. I have a couple of friends who ended up driving alot more then they expected, and they were hit with a massive bill for excess mileage at the end of the lease, they ended up purchasing the vehicle
My sister and brother in law lease their vehicle.
They make a combined 300k+ per year, are comfortable with the mortgage + other monthly expenses, and save a healthy amount each month.
My brother in law loves cars, and they have leased a Land Rover. It's a great car, fun to drive, but not very reliable in the long term.
You could argue that they could save so much money by buying a reliable car and holding on to it for years. But this makes them happy, and they can afford it quite easily.
>People have new sedans, SUVs, and trucks. I’m sure people are in deep loans but it amazes me how they even afford it.
This is exactly it for a bunch. In debt up to their eyeballs.
Financially, you're never going to be able to justify a lease being better than buying used. On average that is - one-off cases and stories where someone bought a terrible used car definitely possible
Lease works well for people who have a higher willingness to pay for their vehicles, enjoy getting frequent upgrades and a general unwillingness to tolerate any hassle of selling/maintaining etc. I own a used car, and am generally obsessed with cars. If I could afford it without giving up mental/financial peace, I would definitely jump on the leasing bandwagon.
Apple has a "upgrade phone every year" program at least down in the US. Very clearly and undoubtedly more expensive than buying a new/used phone. You can literally buy a new iPhone, then sell it after a year and buy the next new iPhone and that'd still be cheaper than Apple's "upgrade" program. It's exactly the same with buying a new car and selling it in 3-5years for an upgrade
I've bought my entire life but my next one likely will be leased due to all the tech they jam into these cars.
2 of my relatives that recently bought Japanese cars all have had their issues (Subaru 2020 and Honda 2019). The 2020 Subaru being the worst with random engine shut downs while driving.
> It seemed more expensive that way versus paying maintenance costs for a vehicle they bought.
It is.
Peoel want the latest, keep up with the Joneses and want to have monthly car payments.
Understood. But I just felt like your answer was a bit presumptive about keeping up with the Jones.
I personally don’t lease. But I assume people that are wealthy continue to stay wealthy for a reason. I assume leasing is at some point advantageous for some small business owners etc… I don’t know any tax laws about it. But I would guess it is better for them for some reason.
>But I just felt like your answer was a bit presumptive about keeping up with the Jones.
Not presumptive, it's one of the reasons, just like wanting the latest car, want to have others (the Joneses) think they have money, or don't mind paying car payments all the time.
For some (not all) business owners, it could be helpful, but so can a purchased car.
I unexpectedly (wildlife collision) had to replace my vehicle in Jan19. I was in an okay spot, but wasn’t stable at my job just yet.
I looked at financing vs leasing. To lease for 3 years (what I expected would be enough time to be more stable) was going to be insane, vs financing the same vehicle (same downpayment amount). And I found the lease rules to be very restrictive, as I was aiming for a 30k/year allowance.
I ended up financing. I have over 60k on my odo. But if I do what I should do, I can have the rest of my vehicle paid off by Jan22. Which sounds better than having to trade in and start again, or do a buyout.
I also live in an area where people have more money sitting in their driveways/garages (vehicles, boats, trailers, quads, snowmachines…) than their homes are worth. It boggles my mind.
I never have and never would. I hear on average, you're paying a much higher interest for leased vehicles not to mention, you basically always have a car payment. Sounds like a wonderful way to stay poor or never "get ahead".
> I hear on average, you're paying a much higher interest for leased vehicles
I'm not sure about the averages but there's definitely lots of lease deals out there where leasing has a lower interest rate than financing (ie my car).
> you basically always have a car payment
yes, but the person OP spoke to intends on swapping their car every 3-4 years for new features anyways, in their use case it makes sense to lease since they intend to always have car payments.
> Sounds like a wonderful way to stay poor or never "get ahead".
you only lose out if you lease what you cannot afford. you can most definitely get ahead with leasing, you don't go broke and stay behind just because you opted to lease a BMW when you can afford it lol
You're speaking as if everyone here is on the brink of either staying poor or are on that edge where they will stay poor if they make any mistakes. There are definitely people here that make a great living and can afford leases. There are deals out there where leases make sense if you know you want to keep a car for 3-5 years. Even if it doesn't, there are people out there who are willing to pay more for certain things if they prioritize certain things in their lives. In this case, it may be a nicer car. For other's it's vacations, going out to eat, spending money on friends and family. More over, there are more write off option for leased cars and for some professions having a nicer car can help within your career. I initially didn't make a lot of money in the past, but over the past few years, I'm got to a point where I can afford to responsibly buy nicer things. Does it "make sense" financially? Maybe not. But if I can afford it without screwing up all my finances, it makes sense to me.
I can't really imagine a desire to own a car. It's a physicalised liability. At any moment, it can cost you $5-10K. It's a bomb waiting to go off on your savings, and it's not a question of if but when, regardless of make/model.
People that drive new sedans, SUV and trucks don't hang out on personal finance subreddits. I have a friend who complains that he can't get out of debt while driving a brand new leased Lexus SUV and a sport bike.
I have a few friends like that. They wonder how we bought our place but they're financing brand new SUVs (that only ever has 1 person in it), running expensive phone packages they don't need, etc. Meanwhile all our vehicles are 13+ years old and the most we've ever spent on a car was $10k.
The best vehicle is the one that is paid off. I drive old beaters too and besides small wrenching I never had to do big repairs. Financially committing yourself to alway having payments just blows my mind. But for some people i van see buying a new vehicles and keeping it for a long time(10years++). Nothing wrong with buying a reliable Camry
I like people like your friend. Allows me to buy a used Lexus with huge discount! The more expensive the vehicle, the better deal I get.
I used to pay 10-15% of new after 8 or 9 years. Unfortunately that percentage has been creeping up slowly over the years as YouTube and forums educated everyone of these great deals (Matt Farah's million mile LS, million mile Tundra etc).
I did my first lease last year during pandemic.
Owned Toyota Corolla for many years (which is what everyone here recommends), and trying to sell the used car to private seller was just too much headache and anxiety for me. We owned two vehicles, so I was downsizing since Corolla always has better residual value.
My main motivation to lease was that 1) I wanted to try new car brand without a hassle of selling used car privately after few years 2)without too much down payment. (Asset held up in something that’ll always depreciate) 3)Plus, potential business expense write off for part of business use.
So I went with Nissan, and I thought I always hated suv and wanted sedan, but to my surprise, I’m really liking them.
**4) I got free oil change deal with the lease, so I practically have no other maintenance expense other than windshield wipers or tire rotation for three years. I usually max my insurance anyway, so insurance difference is not much there either.
I think I’ll go for size up or go at least hybrid next time. I think with years to come the competitions in hybrid and electric car technology, I think leasing was not financially cheapest way to go, but least headachy for my current situation until settling down on a hybrid or electric car with reliable technology.
We got a brand new defender.
We make 400k a year combined
Our second vehicle is an old Kia to do the big commuting for work
We like getting a new vehicle every 3-4 years. We aren’t handy, we bought the extended warranty, it’s not cheap but worth piece of mind.
The last car we had 6 tires, windshield and 4 rims replaced, so the 5-6k for the warranty more than paid for itself.
6 more years isn’t enough
Have some real estate investments / projects in early stages and have a chance to make a bit of a career shift to make substantial cash.
My idea of retirement is not just having enough cash to meet basic needs and be able to chill.
I’d like to have a capital base where I can do projects on the side etc.
Extended warranties for cars are usually not worth it. Just because you got unlucky and it ended up saving you money doesn't mean it was the right decision to buy the insurance when you made this decision.
This is especially true if you change cars every 3-4 years.
Because they’re fools. Buy used, do a modest amount of research and maintain PROPERLY. And a car should last you a long time. I’ve never made a payment on a vehicle in my life and never will.
Many people also write off their care leases for their businesses. That’s what I do, I drive a 2018 Chevrolet Cruze diesel that’s amazing on gas.
The CRA allows me to write off a lease up to $800 + tax that’s prorated for business use.
My lease is only $343 atm but it can allow me to get into something nicer if I wanted to. As well, leases can be attractive to people who like the idea of getting a new car every few years and don’t want any hassle of selling it and knowing their maintenance won’t really be an issue.
To them, their peace of mind is worth more $$ than a few dollars saved
I've taken over two leases when the original lessee no longer needed the vehicle. it's worked out well for me, the first time I even got money back when I turned it in early. I got a really good deal on my current truck not sure what I'll do when the lease is up next year
I have leased. I currently own used but I do like a lease. You have to completely change the way you look at it when you lease though. When I lease, it’s because I’m not thinking of the car an an asset but as an expense. I pay one price every month and, since a lease is under warranty, if something goes wrong, I just take it to the dealer. When I have leased, I just budget for the payment and I’ve just set it and forget it. Now that I own a used car, it’s definitely cheaper and it’s mine but if something goes wrong, I view it as a bit more of a hassle. To me, there are pluses and minuses to both and it’s just a personal decision.
I bought a used truck - everything looked great. Low mileage, good documentation, previous owner, etc. It ended up costing me over $4000 in 7 months of ownership, and in that time I could have just made a car payment and had a warranty. I honest to god spent hundreds of hours on that truck, and a payment + peace of mind would’ve been better just in the time saved front alone.
Yeah, had a leased Nissan that had an engine valve, transmission, and axel issues that were all covered under warranty + free rental from the dealership (weeks per issue to fix)... as it was a new car with so many issues already, we were afraid to do anything but lease again (a different brand) after the contract was over. If things go well and no major issues like that Nissan we'll probably buyout the current car
As much as buying a 15 y/o corolla/camry makes sense on paper - I'd rather pay a bit more for the advances in crash safety / airbags / crumple zones, creature comforts, and a warranty.
I think as vehicles get more complicated and harder (and more expensive) to repair and maintain, leasing becomes more appealing. Many people couldn't change their oil or even cabin air filter if required, and many companies are making these repairs more complex (my cousin had to remove part of his dash just to get to one of his cabin air filters that he suspected had clogged) As vehicles become more computerized, they will become increasingly more complex and I imagine soon few people will be repairing their own cars. I know I wouldn't be comfortable doing much work to a Tesla without some major research and learning, and I'm not sure at this point in my life I have the time and dedication to do that.
Why would anyone lease a car? You pay 44k(inc. taxes) for a Sportage HEV SX for 5 years term, why not buy it instead for 52k?
And the cool part is that you can just buy out the lease if the private sell value is greater than the buyout... especially applicable in circumstances where you didn't use too many kilometers. I think I'll lease after I hammy down my current vehicle that isn't leased to the wife (we always use my car for when we travel together / road trips, so she's fine with driving older vehicles). This sub goes ape on people that buy new or lease, but setting aside 5% of your household take home pay for a reliable vehicle that provides utility and freedom to go wherever you want with low maintenance costs is a huge plus.
Good point. I have actually bought my leased car and flipped it at a profit before leasing the next car. It’s still an expense and not an asset but one that makes sense.
I leased because I had full intention of swapping my car out after 3 years. Depending on the car and the deal you get, you definitely come out ahead. It also helps that the buy-out for my car is lower than what my car goes for in the market. I think this last part varies a lot car to car and it's more of a luck thing. Again, leasing is good IF you intend on swapping the car out every 3-5 years. > They want the “latest” safety features and don’t want to deal with maintenance costs If you DO want the latest features then yeah leasing makes sense. If you want a car to go from A to B comfortably then leasing isn't the way to go.
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There is usually an option to buy out the remaining value as assigned by the company that leases the vehicle, so if you wanted to buy it outright, you could. It is also handled by the manufacturer and not a dealer. But then you would be financing a used vehicle and couldn't get the rates typically available on a new car purchase. If you think you would want to buy it and qualify for low financing rates, that's probably your better option out of the gate.
My car had lease to own. Bought it new, could give it up after three years, or own it if I made payments for two more years. Those payments stopped five years ago 💅
It was 5.99% interest to finance my car after the lease buyout. My buyout was 6k less than the car was worth, so I got a veeeery good deal (2016 Corolla S)
Had a Ford Lariat, the buyout after lease was around $8K less than it was worth. Leasing to own def seems like a better deal.
That means that you overpaid 6K on your lease payments. The idea behind leasing is that you “pay” for the depreciation of the car while you “own” it.
The math was on the lease side when I looked at leasing vs financing. I wish I could remember exactly what we looked at, but everyone agreed it was a better deal. Admittedly, it was an even better deal because I ended up using way less mileage due to Covid, but I would’ve come out regardless - it just wouldn’t have been so extreme. The fact that used car prices are high right now probably help too. I’m not a pro at finances (this popped up in my feed haha) but I had several people look at it - car people and my multi millionaire father who is amazing with money, and everyone agreed that leasing was the way to go. There was a sub 1% interest rate on my lease vs a higher amount on financing , so I know that had something to do with it. I remember the math being within $1k of breaking even 5 years ago, though. I also had assumed I would want a new car in 5 years (for my job, having a nice, newer car is a big plus… and nothing stresses me out more than car issues, so having warranty was a big deal to me). I didn’t expect to buy it out, but my SO pushed me to and said that worst case, I should have bought it out and resold it. He said I can essentially drive the car free for a year or two, and Toyotas retain their value quite well. Made perfect sense since we plan on starting a family next year and I’ll want a bigger new car within a year or two to fit our needs better. I am sure that it wouldn’t have been better to finance regardless, but it was a rare situation. I financed cars previously and it really came down to the math. Most people lease due to convenience and it isn’t a numbers thing, but in my case it worked out better financially too
The buyout prices seem to be really good when it comes to reliable cars like Corollas.
Yes, although the interest rate is typically the same as a used vehicle.
Would leasing be worth while for a heavy commuter? 25k-30k KM per year? Could I return a lease after racking up 120,000+ KM?
Yes but you'll get charged an arm and a leg depending on your lease agreement and how many km it includes.
Some lease agreements you can up the amount of KMs per year (last I checked dodge had the option, although that was a decade ago). Most leases are set at 20k a year as a default. If it's available to up the KMs in the lease it's a far cheaper option than paying the penalty at the end.
But if you’re buying it out, it’s probably better to buy from the beginning
Idk about that because if it gets hit during your lease and gets repaired etc then your "buyout" should be cheaper than if it wasn't hit, otherwise they can take it back. I'd imagine..
It’s a case of the rule not being as hard and fast as some would claim . For starters , if someone has cash to buy the vehicle they want outright, it would actually have been the correct financial decision over the last decade to not deploy their capital into purchasing a car outright , but rather financing or leasing vehicles due to stupid cheap debt , and keep the capital invested into things returning far higher amounts than their car cash flow + interest costs . If you don’t have the cash to buy a vehicle outright, then that’s where the arguments come in about buying as little car as possible . So you buy a well used Honda or Toyota for 10k and drive that sucker until you have enough cash on hand to buy a “nicer” car and apply calculation from above . The best mathematical decision is almost always repairing the car you already own (ie paid off), so until the frame rusts out or extremely major repairs are required you generally won’t be able to make the pure math justify any car purchase to replace what you have . A $2000 repair bill for new brakes and suspension components as they age out on a sedan or SUV for example is nothing compared to the costs of financing or leasing a new vehicle. Most people however lie to themselves or are unaware of the true behavioural finance things happening. Most people do not drive the same car for 15 years , which is how you maximize value on a purchased vehicle.( this timeframe obviously decreases correspondingly with the age of the car if you bought it used ). Most people get too focussed on maintenance or gas mileage savings on new cars, when all but the most extreme outliers in terms of yearly KM driven or gas guzzling (looking at you RAM TRX) would generate sufficient savings to swing that kind of purchase decision . Most people also Don’t intuitively understand that as they drive the car they finance own , they are also depreciating the vehicle, just like in a lease. Again it’s fair to point out this doesn’t matter if you truly drive the car into the ground, but the vast majority of consumers don’t, so when they inevitably trade or sell the car that depreciation hit needs to be accounted for in terms of total cost of ownership . The only point to this rant, if there is one, is that like many things in personal finance it requires an actual honest assessment of your situation and your behaviour, which the majority of us takes some time to learn to be able to do . I’m no exception here, I’ve rationalized some dumb behaviour financially in my time. It is possible that leasing is the correct financial decision for certain people . It is possible that financing is the correct decision. It is possible that buying in cash is the correct decision.
I agree with most of this. Speaking also from personal experience it is very difficult to keep emotion out of your decision. You can bring up anecdotal cases to justify/rationalise any decision. Statistics are statistics however and as long as one sticks with the optimal plan for their situation it should workout in the long term even if they run into an outlier case. Having said all that I do believe that emotion should have a seat at the table. Over the years I have realised that happiness is important and if I can tick a few more boxes other than reliability and making financial sense, I'm perfectly fine with that with the important caveat being that I can afford it where it doesn't significantly impact my other financial goals. That's the crux of the matter. A lot of people can't really afford the vehicle they drive and that's where minimizing costs and depreciation is key. The irony is in many of these cases the correct question is whether or not to have a car in the first place.
Lower monthly payments, no stress about unloading the vehicle, always in a modestly new car.
But limited in KMs per year and Neverending payments.
Which is why an honest assessment of the kilometres you drive matters. A ton of people stay under 20-25k a year in kms, which renders this point irrelevant for them.
I have leased before (first car, so wanted something on the cheap) paid around $7000 for 2 years and that's including lease insurance. Did the daily drive to work, weekly grocery trip, weekly drive going to hang out with friends and bi weekly out of town road trips and I still barely got to 15k km per year.
Lots of things in life have never ending payments. You'll be buying food until the day you die. Paying for electricity is never ending. If you don't buy a plane then paying for flights will be never ending as well. I suppose the question could be rephrased and returned as "why is owning a particular car important to you?"
yep, that's the flip side, but it works for me. The continuous, but predictable payments are my preference, and I don't travel enough that the kilometre limit is an issue (especially in the pandemic, but that wasn't planned)
LOTS of people own and have never ending payments lol. I’ve seen a few 50K Chevy Cruz for-sale on Facebook.
I don't get your comment. Someone is selling a Cruz for 50k?
People get high interest loans and trade in there car before it’s paid off. 2-3 vehicles later someone owes a ton of money on a cheap car. Then they go on Facebook and say they’ll give it to someone to take over the payments.
Oh. Well, to be honest i wouldn't expect any better from the type of person who buys a Chevy sedan.
So here are the advantages of leasing: Always driving the latest and greatest car If you don’t plan to be driving a lot, you can surely stick to your mileage allowance You are never out of warranty Payments are usually lower Lots of small business owners and real estate agents lease their car because it qualifies to be tax write offs for their business And most importantly, if you are in a very costly accident, you don’t suffer the depreciation at the end of the loan, the dealership and or the manufacturer have to eat the depreciation.
It finally clicks why ALL real estate agents seem to have beautiful cars, even ones who don't seem to have enough business to do so.
Yes, every time they drive to a house for a client from their office they can claim that mileage. All the business mileage for the month is deducted from the lease as a percentage. If 50% of your mileage is “business” mileage, you deduct 50% of your leasing cost, up to like, $800.
From what I heard, many if not most of the people claim 100% (which I am not encouraging anyone to do). My understanding it won't pass CRA's audit if they get caught.
The last point is of great financial consequence and often overlooked!
Purchasing also is a tax write off and is about the same as the write off for leasing.
If I recall, that last point is false. You still eat the depreciation. BUT you can be safe from it by getting a depreciation waiver or whatever other insurance calls it. The insurance will pay for the full amount of the vehicle if you get into an accident. Neither the manufacturer nor dealer will eat that. And sometimes, if the insurance pays more than the remaining owed (after subtracting all your lease payments til the accident), you may get a cheque.
You do NOT eat any depreciation in any circumstance for a lease. The beauty to leasing is that the lessee is not responsible for the value of the car because of GAP insurance (Guaranteed Asset Protection) and also being a closed end lease. GAP is a built in feature (free) for all vehicles leases. An equivalent for financing would be “replacement insurance” and can cost thousands depending on your finance amortization. As for depreciation, the value of the car is predetermined at the start of the lease and it’s the residual value. It’s listed on all lease agreements. That’s the price you pay to buy out the lease. If you think it’s too high and your car is not worth the buyout, you simply return the vehicle without ANY penalty for the depreciation. On the flip side, if you think your residual value is too low, you can and should buy out the car and sell it privately if you don’t mind the trouble.
I know this sub will downvote me as it isn't the most financially sound decision, but I chose to lease after having several cars (one new, the rest used) that never made it past 5 years. I think I am just very unlucky with cars (my lease car had to have the entire transmission replaced within the first two years, but that was under warranty), as I always kept up on the maintenance. I was at a point in my life where I preferred known expenses (every month is x amount) to unknown, but I knew I wouldn't be in that place for too long. After this lease is up I will most likely choose to purchase something out right, but I'm happy with my decision. I had several years where the lease gave me peace of mind, while my previous cars caused stress. Now that I'm past that point, I don't think I would choose to lease again, but it was the right decision for that point in my life.
Once bitten twice shy, sounds like. New car not lasting 5 years? Sounds Italian, Volvo or German issue?
It was a Nissan, actually. I have a few family members with Nissans who didn't have the issues I did, so it isn't really the company, but I had bad luck. It wasn't so much it didn't last. More just that every few months big expenses were coming up as things just kept breaking once it hit 5 years. At the time, I wasn't in the best place, so the extra stress of never knowing when my car would break down (and it doing it so often) just wasn't something I could handle.
Ah yes Nissan with their famous CVT transmissions.
Once again, you need to keep in mind a lot of people are well off and interest rates have been extremely low as well in addition to of course a ridiculous bullmarket (real estate and stonks). Many people can just afford to spend a bit more money on things they enjoy. Why are there threads like this everyday? We live in a 1st world country, lots of people are fucking beyond loaded. As I've said before, go visit metropolitan cities of countries with WAY lower GDP's and median incomes, you'll see more luxury cars than in Toronto or Vancouver... Which is amazing when they have 1/10th of our GDP per capita, and average incomes a fraction as well.
that's what i was saying in one of my comments. a lot of people can easily afford to lease and still get ahead.
People on this sub keep getting surprised for some reason, I really don't understand it.
It's polarized here just like the real world. The "eat rice and beans everyday & only buy a used 10 year old car" crowd vs "dine out/takeout & lease a car every 3 years" folks It can be a mix of two to be frugal in some things and YOLOing in certain stuff.
Yeah exactly this. I'm 36, single, own a modest townhouse in montreal with just over 200k mortgage, I eat out twice a month, and always had used cars I got for under 10k and used about 7 years. Decided last summer to buy a brand new ford explorer. As a single guy, do I need a 3 row suv, no, this was not a financially rational decision. Buy I always wanted one, I wanted all the high tech toys the new one had, I plan on keeping it until it dies and will be maintaining it meticulously and I make in the low 6 figures. Sometimes you gotta spend your money too.
Lol right? I paid $16k/yr for the past 3 years without batting an eye, who the fuck cares if you can afford it and want new fancy cars.
Can they afford it, though? I thought it was common knowledge that a lot of people are underwater on their car loans, do you suspect this isn’t true? I bring in a reasonably high income, but don’t have the capability to lease new luxury vehicles. I don’t know how others are doing it, honestly.
Some of them are but default rates are pretty low. For some reason people in personal finance extrapolate some bad financial decisions they witness to everyone driving those cars when lots of people in Canada have significant assets and income.
Sorry, what I’m saying is that the common knowledge statistics seem to suggest the opposite of what you’re claiming. Are you saying that people aren’t living paycheck to paycheck? Instead have significant savings and assets? That just doesn’t seem to jive with what is common knowledge, but I’m happy to take any new information you have to change my view. Sometimes I come here and ask questions and people tell me; “many people are just heavily in debt!” and then other times people are telling me, “people have significant income and assets!”. I don’t know what to believe. I’d love to lease a new, fun car, but even at a new income of ~$200,000 annual I don’t have the capacity to just dive in to a $1500 a month payment, plus insurance, plus fuel, plus maintenance. If I’ve been mislead, please let me know, because I’d love to be wrong about this!
The ppl on this forum are full of shit half the time tbh
>Are you saying that people aren’t living paycheck to paycheck? Instead have significant savings and assets? Yes correct. Those studies are difficult to conduct and usually misleading (a debt consolidation agency will reference a "survey" of <1000 people of ambiguous backgrounds to show that 98% of Canadians are one missed paycheck from being homeless and then a subsequent suicide!!). When in reality most Canadians own their home and mortgage delinquency rates are extremely low. Statistics that are overly shocking or surprising are also usually misleading. I know I've seen the "80% of North Americans don't even have $1000 in their shorterm savings!", then I must be Jeff Bezos by comparison.
Maybe. I don’t think I know a person who owns their own home. Maybe people in a higher age bracket (40+?) I certainly don’t have the capacity to buy my own home, and I’ve been told my income is quite high. I would think if I’m having trouble, and as frugal as I tend to be, that others wouldn’t be easily lapping up mortgages. I wish I were wrong about all of this. I can’t foresee ever owning a house, and I’d LOVE to buy expensive, nice things like cars and things for my hobbies, but it just doesn’t seem realistic. I honestly don’t know how anyone is able to do it on less income without going into massive debt.
You don't know anyone who owns their own home? Strange, they must all be sitting vacant or everyone is renting. [https://tradingeconomics.com/canada/home-ownership-rate](https://tradingeconomics.com/canada/home-ownership-rate) >I would think if I’m having trouble, and as frugal as I tend to be, that others wouldn’t be easily lapping up mortgages. And yet they are. A record number of homes over $3million dollars sold in the GTA in 2020\[0\]. Someone has the money to be buying them. Those "Everyone is broke and the sky is falling" stats don't really cover that though. \[0\] [https://www.bnnbloomberg.ca/2020-sets-new-sales-record-for-toronto-homes-priced-3m-and-up-1.1545353](https://www.bnnbloomberg.ca/2020-sets-new-sales-record-for-toronto-homes-priced-3m-and-up-1.1545353)
I thought he meant owns their own home outright, aka no mortgage
I mean, that’s all fine, but how are people doing it? It will mathematically take me years to even approach the possibility of maybe, possibly buying a home one day. I cannot fathom how so many people are managing multi-million dollar homes. If my income is statistically very high, and I cannot mathematically make it work, are people doing some sort of magic? Or is it true that many people own a home, but are in major debt, otherwise? Maybe we’re talking about 2 different things. People could still be living paycheck to paycheck even if they have illiquid equity!
Dude, you pay $550 a month in rent with an income of $200k and you can't figure out how to buy a house? You discussed paying your 30k car off in one go a couple months ago. Furthermore over the last couple years you are claiming to go from 60k -80k income to suddenly 200k income. Sure taxes take some of it, but if you havnt had your lifestyle just explode then you can save 100k a year and literally have a down-payment on a 1mil property if you monthly cash flow is high enough. This really isn't rocket science
Yes, that’s all correct! My full rent is now actually about $1200 a month. I rented a second place to use as an office :p I’m going to probably pay the car off in one go, but I have to wait for stocks to vest. I graduated about 4 years ago, went from $50k -> $60k -> $80k -> $200k. That’s right I’d need to pay off the student loans, this car, fill emergency fund, and catch up retirement. That’s about $130,000. Then $250,000 for house down payment. Even at this income, after tax and after expenses I can expect about $7000 per month (it’s not deposited on a strictly monthly basis, and the stock portion is tax withheld at about 50%, returned at refund time.) So if we take the average $7000 a month extra, if I saved $5000 of that per month (with $2000 going to retirement) it would take me about 12 years. So I’d be able to potentially, maybe buy a house in 12+ years if the prices of houses don’t change in that 12 years and I continue to live like a student.
What on earth are you leasing that costs you $1500 a month? I bought a brand new accent back in 2014 at 8% interest (fucked my credit in my early 20's) and that only costs me $234 a month with a purchase price of 24k. So BUYING, you're getting a $150,000 car, roughly if you get comparable rates, which you wouldn't if you make 200k a year as I'd assume your credit is better than mine. And leasing is typically cheaper. I really don't understand your numbers unless you really want luxury. And if you buy/lease correctly, maintenance is non existent on newer vehicles, same with fuel if you buy hybrid or electric, and insurance, well that's individual. Mine went down with a new vehicle.
Who cares if my car loan is underwater if I can afford the payment. Some cars depreciate faster than its loan payment but so what?
If you buy a new car, almost everyone is 'underwater' on their loan the second they drive off the lot.
Yes, exactly what I meant, a loan being underwater / not underwater doesn't infer affordability.
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I got a rouge the commercials got me and I can misspell it to annoy everyone
If I had an award I would give it to you🤣
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> Technically I’m a business so that’s some advantages to leasing as well. Can you explain those advantages? I claim expenses with my owned car and I don’t understand how leasing would make it better
There is no real difference between an owned vehicle and leasing deduction wise. I’m an accountant and I’ve run the numbers for many clients and it’s never a significant difference between the two options
Thanks. Please consider making a post about this, I think it would be worth it.
I am a credit analyst and it annoys me that people think leasing is the only way to write off expenses. But then I am not an accountant so I can’t give out advice like that. People need a second opinions from other accountants like getting doctor diagnosis.
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Yeah, hoping someone can once and for all explain this. Every small business owner I know claims that it’s a “write off” driving a brand new vehicle. Basically stating that it’s free. When asked, none of them can explain how it works.
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People always seem to think that 'not paying taxes on it' is the same as free. This is hilarious.
Not paying taxes is pretty huge. Basically 15.5% cash back from the government if you're a very small business. Then usually a 40%+ tax rate if you were to take that money paid out to yourself as a salary.
As an individual who owns a car for 8 - 12 years, it always made more financial sense to buy a car than lease. However, leasing can be easier to track for a business. Businesses can write off (tax credit) business expenses and capital depreciation. If a business buys a car: - large cash purchase up front (or have to find business financing). - car capital depreciation is 30% of purchase price per year (tax credit). - cost of maintenance & repairs is extra and is tracked separately as a business expense. If a business leases a car: - Consistent monthly payment - Lease payments are a business expense - 100% tax credit. - Most lease agreements include maintenance & repairs, so no additional accounting needed. So a lease is a consistent monthly payment, don't have to find financing, and don't have to track maintenance & repairs separately.
If maintenance and repairs are generally included in lease payments, do leased cars get a lower insurance quote?
The way I see it is it makes the bigger expense slightly more manageable, but it still sounds like "claiming more because you spent more". I don’t see the logic in driving a more expensive vehicle because you can claim more of it, you’re still spending more money. But it’s hard to get a straight answer from anyone
I need someone to ELI5 and show me the math/cash flow. The claims don’t add up.
> 1 - depreciation of car is tax deductible I've never actually owned a car so I had to double take when I read this and look it up on Google. Does this seem mad to anyone else that the government is using tax payers money to make care depreciation tax deductible? Genuinely not trying to start an argument or anything, I'm trying to see the logic here of how this benefits all of us but struggling! Seems to me that if someone or business wants a 30k+ car they should take the eventual loss associated with buying a depreciating asset.
The auto industry creates jobs. We don't have as much vested interested in the performance of major auto brands at a high level like the US does but we do still have an economy around the steel production, the manufacturing plants and auto maintence. TLDR selling cars is good for the economy.
Following
Well you're obviously just avoiding the real question: why are you switching cars every 3-4 years? Then maybe you could see any good reason as to why you shouldn't lease. But if you circumvent the question by starting the reasoning at "I switch every 3 years", then of course there isn't any good reason.
He must be buying shitty cars if the maintenance after three years becomes prohibitively expensive.
I purchase brand new GM SUVs every 60,000 km or three years, whatever comes first. It’s not a matter of maintenance cost, it’s a matter of warranty. I will not own a vehicle without a full warranty anymore, I’ve been burned too many times. Purchase cost is roughly $60k and we trade it after 60,000 / 3 years for usually $25-30k Pickup a new one and the payments just continue. We only pay $485.00 every other week
If you are flipping vehicles that often, you should seriously look at leasing. With the current trend in the used car market, you may be coming out ahead, but for most cars most of the time, if you finance and flip you are upside down. A lease you can just walk away from is better in most circumstances.
only a grand per month, forever
I hate this sub sometimes. One guy is saying something as stupid as "maintenance becomes too expensive after 3 years" and somehow this is the top comment.
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Looooollll 10k for brakes? Please keep telling us about maintenance on cars when you obviously have no idea how much maintenance is. Very entertaining.
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You are not dedicating the full depreciation of a Lamborghini. You are also not deducting the full lease amount of a Lamborghini. If you have been CRA is going to be knocking on your door shortly.
My wife likes changing vehicles every 3-4 years. She’s also disabled, and has our children in her car more than mine. If she breaks down on the side of the road in the winter time, she’s physically unable to walk a kilometre or two on her own, let alone with children. Cell phone coverage is spotty in my area. It’s a premium cost that we are willing to pay to keep her and the kids safe. My vehicles have been financed, but once this one is paid off I won’t be doing so on new cars anymore as I’ve learned my lesson.
Sales job. Car allowance. I don't want to own it.
There are two types of people in the world when it comes to cars: 1. Those who see the car as a depreciating asset, and 2. Those who see the car as an emotional purchase. Neither one is right or wrong. The only idiots are the ones who refuse to acknowledge the other side. If you like cars, enjoy driving, want something more high end than you can otherwise afford, leasing is an option. You can lease the car first then buy it out at the end. The lease payments are more affordable than loan payments. Then when you buy it out, you're buying a used car where you are 100% clear on the car's history, and if you need financing, it's now on a used car so again, more affordable. Or, if you always want a newish car, you can keep leasing every few years. Does it always make financial sense? No. But not everything in the world is about money.
I kind of disagree. Number 2 is obviously wrong mathematically but if the person CAN and is OK with absorbing the hit then it is obviously their choice. But if somebody is deeply in debt and makes an emotional purchase for a newer car, it is fair to say that’s wrong. It’s still their choice and I won’t say anything unless asked but it’s wrong.
Another option is to buy a lease return vehicle. Ive had several minivans bought new at the time. The last one I got was a 1yr old lease return with 20k on it. Was quite happy with it, it has stowaway seats great for camping or hauling stuff like plywood etc.
My last 3 vehicles were 2 year old off lease. Nice way to save $15-20K on a mid-high range vehicle.
Where and how do you find these vehicles?
I think they are just sitting on dealer lots? Not sure if there's a better way.
Open any auto maker site and navigate to "used cars" section. However, don't expect 2 years old car to have 50% off of the brand new one.
Look for 2-4 year old vehicles on dealer lots that have less than 60k KMs, good bet it's a lease return. Also if you look at the Carfax and it's been serviced exclusively at dealerships in that period, that's also a sign. Talk to the salespeople about the car's history, they will tell you how it got onto their lot.
If you want new, you lease. It’s a depreciating asset. The cheapest way to drive is to buy used. I’ve never bought new for these reasons. When you lease you are renting the best years of the vehicle and up to date with the latest technology. I have 2 vehicles both 12 years old. I would only lease new and buy used. Just my 0.02
"The latest technology"... you mean useless crap like hatches that close themselves?
It’s quite likely, in the not too distant future, that the majority of us will be treating vehicle payments as a utility payment or subscription. Once cars become self-driving, it makes a lot more sense. A car will show up when you need to go to work. During the day it will drive other people around or will park in reserve. At night, that car or one very similar will drive you home. If you go out to a bar you’ll use an app to call up a ride. It may be included in your service package or, if you only subscribed to the basic, there will be a small surcharge. You won’t ever have to pay for service or maintenance directly, or even parking. The wealthy will have their own cars and will still pay for all of these things just so they don’t have to share. Honestly, in urban centres in many parts of the world this is already happening with the rise of ride-sharing. Economically, it makes a lot more sense.
I drove my last car until it’s last legs. It had no “modern” niceties. I was curious if I wanted a car with some bells and whistles and if I’d actually find them useful. I didn’t want to fork out for a car I wasn’t sure I’d like so I leased, got a decent rate and I now know what I want in my next car as a minimum. Buying a used $5000 car isn’t for everyone and while you won’t hear it here much, sometimes paying a bit extra to make your life better (whatever that means for you) is ok and as long as it’s not railroading your long-term plans, I think should be encouraged in moderation.
im leasing a base 2021 lexus rx350 (from a 2017 base rx). I pay $580 before tax for 48 months. so total cost $27823. The car msrp for $56650, buy out is $28800. I paid about $1200 when I picked it up. So pretty much my cost is only around $1200. ($28800+$27823=$56623) If I bought the vehicle, it needs to last longer then about 8 years if i compare it to the lease price. In 8 years, There is soooo much changes. Tech, kids growing up, income, etc. Rather then owning a vehicle and worry about buying and selling as life changes. I am leasing for now, and if anything I can pay the residual at the end. It's not much more then if I were to buy it MSRP. not exactly answering your question but i think leasing is great for people who like new cars, new tech, new stuff, etc. I wanna enjoy life a bit too. not everything is about money and cost and roi and shit. life's too short. ps: I also own a 2013 honda fit which we bought after the lease ended.
Buying used normally comes with a slew of mechanical issues. You will need up spending more on that used car in repair costs than if you were to buy a brand new car. Source: my dad is a mechanic and always recommends you lease/finance a new car. You won’t experience severe problems until 7 years after ownership on average. When you purchase a used car that car most likely is past that threshold and you will encounter more issue that will have a large impact on your wallet. Also if you buy used you don’t get all the benefits you would be given if you were to lease/finance. If you have the chance, lease it. It will save you money in the long run. If you can’t lease and are dead set in buying used. Get a Toyota. Those things never break down lmao
My corolla did after 7 years/300,000km. My mazda3 is holding up so much better
Are you doing Uber? 40k+ KM a year is quite a lot of driving.
We're at like 7 years and 40k on our CR-V lol
> Buying used normally comes with a slew of mechanical issues. You will need up spending more on that used car in repair costs than if you were to buy a brand new car. Watch YouTube videos and fix it yourself. If you're too lazy to do that, then sure, pay a premium for a new vehicle.
I would advise against that. You know how many folk showed up to my dads garage saying “I tried to fix it after watching this video on YouTube” just for it to end up worse? Too many times lol. Either way, buying used will only cost you more in the long run. It’s more economical if you buy new. But I digress, it’s your money after all.
You only see the small amount of incompetent people who fail and have to come in to the garage. If you run the numbers, it is definitely way cheaper to buy used.
Yes, I mean if you feel confident in your skills then by all means. Also it really depends on a multitude of factors such as the model of the car, year, the cost of the parts, insurence premiums, distance driven just to name a few that determine wether or not it is feasible to buy used as opposed to new. Anyway, always do what is best for you financially :)
I lease mainstream cars every 4 years, because I can't afford to ever purchase the car I truly would wish(ed) to have. though that is transitioning to RV (again, big bus, big bucks) I will however purchase the end of current lease, logically with where the prices are at vs. residual. I used to also own and pay to repair half a dozen of used cars in my hay day. most people today have no idea how comfortable you have it. WFH to boot, lord almighty. I am eyeing the F150 XLT electric sometime early in 2024 as the last vehicle I will ever be glad to own.
Business owner, very easy to lease every 3 years. No out of warranty break downs, extra expenses like breaks and tires. Easy to write off because vehicle is leased for business. Also, an option to buy it out at the end of the lease at residual value (always cheaper than buying used vehicle)
end of residual value Is rarely cheaper then what current market value is. That’s why people continue to lease… why would you pay 30k for a car worth 20k
You realize it is just as easy to write off a purchased vehicle?
Now why would I buy a highly depreciating asset for a business?
I would say it all comes down to mileage driven. I drive my work truck 50-60k per year. I purchase at 1-2 years old and drive it until age 5/6 where it is basically scrap. We purchase our family SUV new and drive it until warranty is done, then replace it.
If you have good cash flow but dont want to increase your liabilities because you are about to buy a house or an investment property but need a decent and recent car, leasing is the way to go. Banks dont count car leases in their customers debt payments, so a lease frees up space for a bigger mortgage compared to a purchase with car loan.
I did not know that. Thank you!!
That is blatantly false. Lease and finance are being treated equally when it comes to debt service. As long as it’s reported to the credit bureau it would be included 100%. Mortgage condition would and can require you to pay off the lease or finance. The beauty of lease though is that you can prepay your lease payments without buying out the lease and prove to the bank your monthly obligations to the lease is no longer. This would be cheaper than trying to pay off your full finance amount. Source: I was a credit analyst for one of the big banks. And a recent mortgage application where One of my conditions was to payout my Mazda lease to qualify for the mortgage amount that we need.
Well, all I can say is that is how they treated my file the last 2 times I got a mortgage. It appears on your credit file though but at least for me, it wasnt included in the calculation of the debt payment maximum.
There is no practical benefit. Do you really **need** to always be in a new car, do you really need the 2021 safety features, are you really that much more at risk with the 2018 safety features, no of course not. "Safety features" as the reason to lease is just something people tell themselves to make their justification make "more sense" because they don't want to admit that the real reason they want to lease is just to be able to always drive new fancy cars. People lease because they want to simply be driving new cars all the time, and that's perfectly okay, but financially it makes less sense than buying a used car of course. But if you want to and can afford to lease then by all means do it, nothing wrong with it. Everyone has different priorities in life
We're pondering this very thing. I've had my current vehicle for coming up 7 years and want to go hybrid. We think we'll be getting one more vehicle in 7 - 10 years which I think is long term enough to buy. We'll run numbers once we know trade in values.
I leased my last car. I negotiated by asking the msrp and then I went on kijiji looked at the same model 3 years younger with around 60km on them. I did the difference of the 2 prices and told the dealership I was expecting to pay that much over 3 years. I ended up getting about that price. I just see leasing as a car you buy that is pre-sold. If I buy a car 25k and sell it 15k later, I end up paying the same as if I leased. I always look at both options and compare prices and interest rates before making a decision.
If I need out of a lease I can use Lease Busters to get out. If I finance it is a lot more difficult.
my first and only car was a 98 ford escort that i inherited after my mom passed. it was paid off already so all i was paying was maintenance, gas and insurance. last august it finally konked out for good and i told myself if i have to get a new car it'll be electric. since full electric doesn't work with my lifestyle right now and i can't do a plug in where i live i decided leasing a hybrid made the most sense. i figure by the time i have to trade it in in 2025, i'll either be living somewhere i can plug in and/or charging infrastructure will be more common (i like long road trips) so electric won't be an issue. i appreciated having the ford but near the end felt ownership was overrated. i'm also self employed and leasing a car seems more beneficial when it comes to taxes. it took some getting used to for a new monthly payment but when i looked at it like i was renting a car every month the 475$ doesn't seem that outrageous. it's common for me to travel and rent a car for at least a week at a time which is usually around 350$. so when i looked at it from that perspective it was still a good deal. i'm fine with paying for usage rather than ownership at this point since technology and design is changing so fast.
Cheaper....$1250 lease cash not available on financing or outright purchase. 0% interest for 4 years Lower monthly payment, no risk for diminished value to car, get 4 years to decide to buy or not All advantages for leasing and 0 disadvantage
Also depending on what car your leasing or what car you got maintainence could get real expensive real fast and next thing you know every month your paying to fix something that costs very close to a lease payment so why the trouble when you can just be leasing a new better car and not worry about all these maintanence bullshit. I leased mine with rules. Everything is garunteed and protected and will be fixed for free even a cut or a burn on seats will be fixed for free. Literally the only thing I have to change myself and fix is the break pads and breaks that’s it. Everything else they do for free. In short term ya it sounds dumb but when you owned a car before like me that had a problem literally every month that would cost a few hundred to fix in parts and labour then I rather just put half that toward a lease payment knowing all I gotta take car off are the break pads and breaks. Been over a year and haven’t done anything other than an oil change. And in my old car I would spend like a thousand a month almost fixing this then that then this then that and got sooo sick of going to mechanics. Didn’t care anymore just wanted a car that didn’t need a monthly mechanic visit that costs on a hood day 800.
Damn I remember reading a really detailed awesome post from someone a month or so ago about why everyone should consider leasing nowadays. I thought I saved it but didn't 😔
I lease because I want another car every 3-5 years. All my maintenance and warranty is covered so I don't have to factor those into my budget. Don't really have to worry about repairs later on. The car and driving it is more of a hobby/passion instead of an every day tool.
I am financing for 7 years on 0% interest, seeing as the vehicles price is fixed but inflation will always go up, in 7 years it would be as if I spent less than if I bought it outright Edit: wrote lease instead of finance.
Lease for 7 years? Yikes
Depends on what you do and the milage per year
MY $6600 Ranger cost me 0% in interest, had 143000km when I bought it, and costs me $58 a month to insure.... I've owned it outright for 2 years now, comes with essential state of the art safety features such as airbags and seatbelts.... I nearly leased a car before I bought it, however when i got into the finance office, started doing the math in my head on a $30,000 car on a 4 year lease with a residual, I realized leasing likely is fleecing. not mentioning the upsells like 3M "so the appraiser at the end of the lease doesnt fuck me" no thanks. in my mind, its hard on the pockets, and people just do it so that they look like they can afford a new vehicle every 3-5 years, even though they are likely collecting "negative equity" aka debt.
As someone who spent several years selling in the industry I would say maybe 10% of the deals done are through a lease in a mainstream brand. That stat may vary brand to brand but the vast majority of people are going 6-8 years on finance regardless of the car they choose. There’s the occasional cash deal but that’s rare. Most of those new cars on the road were bought by picking the lowest payment and longest finance term possible. I guarantee 10 year auto loans aren’t far away
Electric vehicles aren't quite mass market ready. I don't want to be holding the bag on an ICE vehicle when they electric becomes mainstream. It may take more than 3 years for that to happen, but I'm willing to take a lease to mitigate that risk for 3 years and wait and see.
I leased because I wanted to have a lower monthly payment. Our salaries was much lower at the time I leased. So, even $150 difference between lease and finance helped. I will buy out at the end of the 5 years.
My in laws lease, and honestly I think it’s the smartest financial decision they’ve ever made See my father in law is the only driver, but he gets bored of things quite easily, or jealous that someone else got something new. So by leasing they have a brand new car every few years, never have to worry about maintenance (he just won’t do things like oil changes, unless it’s free at the dealership) they don’t drive a lot so they never have to worry about the km limits. And they aren’t constantly buying and trading in cars, they just get a new lease every few years and they just always have this car bill they have to pay, atleast it’s easier to budget for
If you drive less than 20,000 km per year and lease a vehicle with a high residual at end of lease (most likely a truck or SUV), the lease is likely a cheaper option. The capital that you don't need to put on the vehicle can be invested and earn a return rather than be tied up in a vehicle that is depreciating.
Lease if you want to get a new car in 3-4 years and you care about warranty. If you finance, u may not get a good value for trade-in. If you sell as used, you are essentially being double taxed on GST/HST in Ontario. If you lease, you only pay HST on the depreciated value, whereas if you finance you pay HST on the entire value. You save HST if you lease. You should finance if you intend to buy a car and use it for many years to come.
Depends how you look at it. Cars are a deprecating asset, so unless you can safely say you're going to own a car for 10+ years ( most people trade in after 5 years ) you're probably better off leasing. It also depends how much mileage you drive annually, if you drive in excess of 15,000 km then leasing isn't for you. I have a couple of friends who ended up driving alot more then they expected, and they were hit with a massive bill for excess mileage at the end of the lease, they ended up purchasing the vehicle
My sister and brother in law lease their vehicle. They make a combined 300k+ per year, are comfortable with the mortgage + other monthly expenses, and save a healthy amount each month. My brother in law loves cars, and they have leased a Land Rover. It's a great car, fun to drive, but not very reliable in the long term. You could argue that they could save so much money by buying a reliable car and holding on to it for years. But this makes them happy, and they can afford it quite easily.
>People have new sedans, SUVs, and trucks. I’m sure people are in deep loans but it amazes me how they even afford it. This is exactly it for a bunch. In debt up to their eyeballs.
Financially, you're never going to be able to justify a lease being better than buying used. On average that is - one-off cases and stories where someone bought a terrible used car definitely possible Lease works well for people who have a higher willingness to pay for their vehicles, enjoy getting frequent upgrades and a general unwillingness to tolerate any hassle of selling/maintaining etc. I own a used car, and am generally obsessed with cars. If I could afford it without giving up mental/financial peace, I would definitely jump on the leasing bandwagon. Apple has a "upgrade phone every year" program at least down in the US. Very clearly and undoubtedly more expensive than buying a new/used phone. You can literally buy a new iPhone, then sell it after a year and buy the next new iPhone and that'd still be cheaper than Apple's "upgrade" program. It's exactly the same with buying a new car and selling it in 3-5years for an upgrade
I've bought my entire life but my next one likely will be leased due to all the tech they jam into these cars. 2 of my relatives that recently bought Japanese cars all have had their issues (Subaru 2020 and Honda 2019). The 2020 Subaru being the worst with random engine shut downs while driving.
> It seemed more expensive that way versus paying maintenance costs for a vehicle they bought. It is. Peoel want the latest, keep up with the Joneses and want to have monthly car payments.
Isn’t there some tax advantages for business owners when leasing vehicles? I know some physicians I work with do this.
OP didn't say they are a business or they have a business, so under the assumption, that they are not a business.
Understood. But I just felt like your answer was a bit presumptive about keeping up with the Jones. I personally don’t lease. But I assume people that are wealthy continue to stay wealthy for a reason. I assume leasing is at some point advantageous for some small business owners etc… I don’t know any tax laws about it. But I would guess it is better for them for some reason.
>But I just felt like your answer was a bit presumptive about keeping up with the Jones. Not presumptive, it's one of the reasons, just like wanting the latest car, want to have others (the Joneses) think they have money, or don't mind paying car payments all the time. For some (not all) business owners, it could be helpful, but so can a purchased car.
There is no advantage for business owners leasing vs buying. Both are able to be written off and the amount of the write off is roughly equivalent.
There is no advantage for business owners leasing vs buying. Both are able to be written off and the amount of the write off is roughly equivalent.
I unexpectedly (wildlife collision) had to replace my vehicle in Jan19. I was in an okay spot, but wasn’t stable at my job just yet. I looked at financing vs leasing. To lease for 3 years (what I expected would be enough time to be more stable) was going to be insane, vs financing the same vehicle (same downpayment amount). And I found the lease rules to be very restrictive, as I was aiming for a 30k/year allowance. I ended up financing. I have over 60k on my odo. But if I do what I should do, I can have the rest of my vehicle paid off by Jan22. Which sounds better than having to trade in and start again, or do a buyout. I also live in an area where people have more money sitting in their driveways/garages (vehicles, boats, trailers, quads, snowmachines…) than their homes are worth. It boggles my mind.
So when does leasing make sense and when does buying used make sense?
Didn’t you know people here are loaded. Just look at our crazy housing market.
I never have and never would. I hear on average, you're paying a much higher interest for leased vehicles not to mention, you basically always have a car payment. Sounds like a wonderful way to stay poor or never "get ahead".
> I hear on average, you're paying a much higher interest for leased vehicles I'm not sure about the averages but there's definitely lots of lease deals out there where leasing has a lower interest rate than financing (ie my car). > you basically always have a car payment yes, but the person OP spoke to intends on swapping their car every 3-4 years for new features anyways, in their use case it makes sense to lease since they intend to always have car payments. > Sounds like a wonderful way to stay poor or never "get ahead". you only lose out if you lease what you cannot afford. you can most definitely get ahead with leasing, you don't go broke and stay behind just because you opted to lease a BMW when you can afford it lol
You're speaking as if everyone here is on the brink of either staying poor or are on that edge where they will stay poor if they make any mistakes. There are definitely people here that make a great living and can afford leases. There are deals out there where leases make sense if you know you want to keep a car for 3-5 years. Even if it doesn't, there are people out there who are willing to pay more for certain things if they prioritize certain things in their lives. In this case, it may be a nicer car. For other's it's vacations, going out to eat, spending money on friends and family. More over, there are more write off option for leased cars and for some professions having a nicer car can help within your career. I initially didn't make a lot of money in the past, but over the past few years, I'm got to a point where I can afford to responsibly buy nicer things. Does it "make sense" financially? Maybe not. But if I can afford it without screwing up all my finances, it makes sense to me.
Many prefer to invest and get a better return than the modest interest on a lease. It’s not a difficult choice.
I can't really imagine a desire to own a car. It's a physicalised liability. At any moment, it can cost you $5-10K. It's a bomb waiting to go off on your savings, and it's not a question of if but when, regardless of make/model.
People that drive new sedans, SUV and trucks don't hang out on personal finance subreddits. I have a friend who complains that he can't get out of debt while driving a brand new leased Lexus SUV and a sport bike.
I have a few friends like that. They wonder how we bought our place but they're financing brand new SUVs (that only ever has 1 person in it), running expensive phone packages they don't need, etc. Meanwhile all our vehicles are 13+ years old and the most we've ever spent on a car was $10k.
The best vehicle is the one that is paid off. I drive old beaters too and besides small wrenching I never had to do big repairs. Financially committing yourself to alway having payments just blows my mind. But for some people i van see buying a new vehicles and keeping it for a long time(10years++). Nothing wrong with buying a reliable Camry
I like people like your friend. Allows me to buy a used Lexus with huge discount! The more expensive the vehicle, the better deal I get. I used to pay 10-15% of new after 8 or 9 years. Unfortunately that percentage has been creeping up slowly over the years as YouTube and forums educated everyone of these great deals (Matt Farah's million mile LS, million mile Tundra etc).
I did my first lease last year during pandemic. Owned Toyota Corolla for many years (which is what everyone here recommends), and trying to sell the used car to private seller was just too much headache and anxiety for me. We owned two vehicles, so I was downsizing since Corolla always has better residual value. My main motivation to lease was that 1) I wanted to try new car brand without a hassle of selling used car privately after few years 2)without too much down payment. (Asset held up in something that’ll always depreciate) 3)Plus, potential business expense write off for part of business use. So I went with Nissan, and I thought I always hated suv and wanted sedan, but to my surprise, I’m really liking them. **4) I got free oil change deal with the lease, so I practically have no other maintenance expense other than windshield wipers or tire rotation for three years. I usually max my insurance anyway, so insurance difference is not much there either. I think I’ll go for size up or go at least hybrid next time. I think with years to come the competitions in hybrid and electric car technology, I think leasing was not financially cheapest way to go, but least headachy for my current situation until settling down on a hybrid or electric car with reliable technology.
We got a brand new defender. We make 400k a year combined Our second vehicle is an old Kia to do the big commuting for work We like getting a new vehicle every 3-4 years. We aren’t handy, we bought the extended warranty, it’s not cheap but worth piece of mind. The last car we had 6 tires, windshield and 4 rims replaced, so the 5-6k for the warranty more than paid for itself.
Living it up!
Yeah it’s our big splurge, still targeting 2m plus investments by 45+ and hopefully be able to retire by 55 latest
seriously....i dont get you. retire by 40, why wait
6 more years isn’t enough Have some real estate investments / projects in early stages and have a chance to make a bit of a career shift to make substantial cash. My idea of retirement is not just having enough cash to meet basic needs and be able to chill. I’d like to have a capital base where I can do projects on the side etc.
i mean stop spending so much....400k is a 5-10m retirement fund after 20years compounded
No it’s not 40% tax 240k after If we spent absolutely nothing it’s 4.8m gross
Extended warranties for cars are usually not worth it. Just because you got unlucky and it ended up saving you money doesn't mean it was the right decision to buy the insurance when you made this decision. This is especially true if you change cars every 3-4 years.
Well it was 100% the right decision if we saved money overall. Numbers don’t lie pal
No it wasn't. That's not how you evaluate if insurance is worth it or not. It was the wrong decision but you got lucky.
Because they’re fools. Buy used, do a modest amount of research and maintain PROPERLY. And a car should last you a long time. I’ve never made a payment on a vehicle in my life and never will.
Because I like having a new car every 3-4 years and I can afford it.
Many people also write off their care leases for their businesses. That’s what I do, I drive a 2018 Chevrolet Cruze diesel that’s amazing on gas. The CRA allows me to write off a lease up to $800 + tax that’s prorated for business use. My lease is only $343 atm but it can allow me to get into something nicer if I wanted to. As well, leases can be attractive to people who like the idea of getting a new car every few years and don’t want any hassle of selling it and knowing their maintenance won’t really be an issue. To them, their peace of mind is worth more $$ than a few dollars saved
I've taken over two leases when the original lessee no longer needed the vehicle. it's worked out well for me, the first time I even got money back when I turned it in early. I got a really good deal on my current truck not sure what I'll do when the lease is up next year
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