Results 1 to 14 of 14

Thread: Buy Used vs Lease New

  1. #1
    Featured Member Lilith's Avatar
    Joined
    Oct 2003
    Location
    Florida
    Posts
    1,309
    Thanks
    0
    Thanked 14 Times in 11 Posts

    Default Buy Used vs Lease New

    Our Toyota is such a great car but we need something bigger. Monthly payments need to stay below $450 (firm, within a few dollars); we would be more comfortable in the vicinity of $400. The Toyota is paid in full, gets awesome mileage, low insurance and never needs repairs but it is a '95 with cosmetic damage and would be of more value to us as a second car than a trade in. I am prepared to take a hit on interest rates, but I am firm that our obligation can go no more than five years. I've been doing tons of reading and I think we have three basic options.

    1) Buy used. I've found a 2003 Dodge Durango (VIN 1D4HR48Z23F611476). It is light almond, automatic, cd player, gray cloth interior with 13,600 miles and a decent bit of warranty left. Saleswoman says it has never been purchased and was used by dealers for driving to other dealerships, so is considered a used car even without a previous owner. Sticker says $21,900, saleswoman offered to put me into it for $18k with no down and no trade on a loan of five years or less, tow package thrown in for good measure. I stand a good chance of talking the price down more (but not much more; I'm thinking $17,500 with TT&F included).


    This is the best option but, to be frank, I'm not sure we could get the loan. Banks shy away from financing a used car that may not give them the collateral they need, and we don't have the ultra-prime credit scores or massive down payment to guarantee the loan.


    2) Lease new. Our choice on this would be a Dodge Grand Caravan with as few options as possible. Financially unwise, as it would give us no tangible asset for our money, but it would repair our credit while still giving us a bigger primary vehicle at a lower monthly cost than purchasing. The minivan also has lower insurance rates than the Durango.


    3) Buy new. This would be another Toyota Corolla, again with as few options as possible. Cheaper to buy and operate than a large SUV or minivan, which puts it in our price range, and easier to finance than a used car. The trade-off is that we would have to resign ourselves to never going anywhere in one vehicle. That could be troublesome. Worst possible scenario, this one.

    Well, what say you?



    He who fights with monsters might take care lest he thereby become a monster. And if you gaze for long into an abyss, the abyss gazes also into you. ~ Friedrich Nietzsche

  2. #2
    Jay Zeno
    Guest

    Default Re:Buy Used vs Lease New

    I like to buy used, with a decent down payment.

    I don't like the thought of losing a few grand of value as soon as I drive a new car off the lot.

    I don't like to lease, pay for the car, and then if I want to keep the car, have to buy it again for the residual.

    But I'm cheap ....errr, thrifty. I'm also unsophisticated.

    So personally, given your three choices, I'd keep my eye on the Durango, check out some other cars in the meantime that have the room you need but aren't quite so loaded, and if you really like the Durango, see if the financing goes through.

  3. #3
    God/dess montythegeek's Avatar
    Joined
    Oct 2003
    Posts
    2,103
    Thanks
    0
    Thanked 9 Times in 5 Posts

    Default Re:Buy Used vs Lease New

    I know you have a crowd so it may not work, but consider a plain Jane Caravan. With MSRP of 18K +big incentives it might end up lower unless the big Caravan is more incentivized.

    On the 2 car basis you also have to insure two vehicles and 2 drivers and 2 vehicles is a lot more than one vehicle and 2 drivers. You also have more gas consumption and more maintenance, especially with one of them older.

    I am by no stretch a features=carguy but if you were going for 2 vehicles I would look at a used caravan with a warranty if you can get cheap financing.

    I am a market vehicle guy though. As a note in terms of the market, the used car market is getting glutted again so vehicles coming off lease should be pretty cheap with dealers motivated to move them.

  4. #4
    God/dess VenusGoddess's Avatar
    Joined
    Oct 2003
    Location
    Home
    Posts
    13,598
    Thanks
    0
    Thanked 28 Times in 23 Posts

    Default Re:Buy Used vs Lease New

    Email Scorpio...he used to be a finance manager at a dealer here. He couldn't help you get a car, per se, but his expertise and experience in the biz may be invaluable to you. I'll tell him to check out this post, but since he is not on very often, it would probably be better to just email him the question.

  5. #5
    God/dess GoldCoastGirl's Avatar
    Joined
    Oct 2002
    Location
    ...hehehe... email me to ask me where i am ! (i dare you!)
    Posts
    11,486
    Thanks
    42
    Thanked 127 Times in 51 Posts

    Default Re:Buy Used vs Lease New

    My question is similiar yet not exactly the same.

    I have my moped motorcycle to use for personal transportation so I'm looking for a car for business purposes only.

    Would I be better off leasing a car than purchasing a decent inexpensive used car ???

    The car would be used to drive me to/from agency work (topless/lingere/nude waitressing, modelling work mainly with a little work with shows for parties). Otherwise, I'll use my moped motorcycle to get me to/from anywhere else (or even ride my bicycle).


    I know I'm in Australia... however.. I figured someone on SW might have a similiar question to me.

    I'm not exactly 'in the market' yet to either lease or purchase a used car... just considering my options.


    enter: E3167322D9 for your 10% discount

  6. #6
    God/dess montythegeek's Avatar
    Joined
    Oct 2003
    Posts
    2,103
    Thanks
    0
    Thanked 9 Times in 5 Posts

    Default Re:Buy Used vs Lease New

    Vee,
    Your question is very much going to depend on the tax laws in Australia.

    The answer in the US would depend very much on the time one acquires the vehicle. We have right now 2 provisions which are relevant. The first is a higher than normal limit on business purchases which can be expensed--i.e taxen as an imediate cost of doing business rather than depreciated. if I remember the tax rules, the expensing is set to expire at the end of 2006. There is also an allowance of an up front 50% depreciation on equipment which expires at the end of 2005.

    This may sound better than it is because depreciation is nothing more than the timing upon which you recognize a cost for tax purposes. If say a business bought something worth $25K, it could claim the 50% up front and take a charge against income for that so the government is partially financing the purchase.

    It is not buying the vehicle or equipment for you, but say you were in the 35% bracket, the amount you would have to pay in taxes for that period would go down by 35% of 50% of the 25K. Your business is less profiable for taxes, but if you sell the vehicle before it is less than tax depreciation value you have a gain which you would have to recognize and pay taxes on it.

    I know zero about Aus. tax law, but there were times in the US when the choice was very biased in one direction, and other times it was very biased in another. Ask your accountant for Oz rules. Be prepared for a fair amount of paperwork, especially with regard to justifying the expense and making sure you are not using it for personal purposes.

  7. #7
    God/dess GoldCoastGirl's Avatar
    Joined
    Oct 2002
    Location
    ...hehehe... email me to ask me where i am ! (i dare you!)
    Posts
    11,486
    Thanks
    42
    Thanked 127 Times in 51 Posts

    Default Re:Buy Used vs Lease New

    Quote Originally Posted by montythegeek link=board=6;threadid=13307;start=msg174257#msg174 257 date=1095038653
    Vee,
    Your question is very much going to depend on the tax laws in Australia.

    I know zero about Aus. tax law, but there were times in the US when the choice was very biased in one direction, and other times it was very biased in another. Ask your accountant for Oz rules. Be prepared for a fair amount of paperwork, especially with regard to justifying the expense and making sure you are not using it for personal purposes.
    I'm lucky with the paper work aspect.. my accountant gave me a booklet to fill out for the first 12 weeks so that she can get a decent picture of the basic costs involved with the car.

    I'll ask her and my other financial guy whether leasing or buying a decent second car is the better business decision.. thanks


    enter: E3167322D9 for your 10% discount

  8. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Buy Used vs Lease New

    Back to Lilith's original question, which falls under US tax law. A key question is whether you have established a business (corporation or sole proprietor) and whether or not you report significant amounts of income under that business. The reason for this is that tax rules presently allow for 100% first year expensing of a new business vehicle which weighs more than 6000 pounds. If so, then having the business purchase a Durango or Escalade or other huge SUV which meets the 6000lb weight requirement will give you a major business expense tax deduction. Leasing a new vehicle through your business also gives you fat business expense tax deductions. If you are in the 25% tax bracket + self employment tax, then these business expense tax deductions can be worth 33 cents on the dollar, maybe more !

    If you're not structured as a business and can't (or don't want to) purchase the vehicle in the name of your business, then the lowest 'cost per mile' option is to purchase a low mileage used vehicle which is 2 to 3 years old. The key here is to choose a vehicle where the depreciation curve is pretty steep (like SUV's), then buy as cheaply as you can. This month and next month are ideal times, as the used car market is glutted as Monty points out.

  9. #9
    God/dess montythegeek's Avatar
    Joined
    Oct 2003
    Posts
    2,103
    Thanks
    0
    Thanked 9 Times in 5 Posts

    Default Re:Buy Used vs Lease New

    As Melonie points out, the rules for depreciating vehicles are messy and change a lot. There are gobs of limits which make the whole thing a pain.
    If you want to wade through the whole mess see http://www.irs.gov/pub/irs-pdf/p463.pdf
    page 17-23. Unless this is a major cost, you may be better off using the mileage deduction. There are all kinds of limits on what can be claimed, and rules to allocate the percentage which is personal and what is a business expense.

    If you ever want to give yourself a headache, try figuring it out from the actual Congressional legislation. Been there, done that, bought the aspirin.

  10. #10
    Sitri
    Guest

    Default Re:Buy Used vs Lease New

    There is another topic recently posted by Mariah on How to I buy a care. It went into a lot of these questions.

    I was a big believer in owning by have now flipped to leasing for the past 10 years. I lease only as long as the care is fully covered under maintainence. Typically 2 or 3 years.

    I make sure I get the best price possible first and NEVER NEVER mention how much I want my payment to be. After I get the best price, than I ask for lease pricing. I demand ALL of the details.

    The list price, the cap. cost, the residual value, any fees for disposition. And I want them in writing.

    I have walked out of a lot of dealerships that won't work that way. This is the number 1 test for me. If they give me this information without arguement, they are an upfront dealer and everything is being shown.

    If they are not, get the heck out the door.!!!! If they just talk about payments, leave, if they won't show you the dealer's invoice, leave, if there are dealer add-ons for undercoating, or stuff below the factory line, check it out carefully.

    You don't get screwed on the backend when they tell you your car is worth nothing when you decide to trade it in. You just turn it in or buy it for pre-determined price. And, you can tell if it is a fair price by looking at blue book value.

    For $450 / month, you can get a lot of car. At 60 months of financing, this is $27,000. Plus, you have to pay the maintainence for 2 years.






  11. #11
    Featured Member scorpio's Avatar
    Joined
    Nov 2003
    Location
    Chicago
    Posts
    868
    Thanks
    0
    Thanked 3 Times in 3 Posts

    Default Re:Buy Used vs Lease New

    Quote Originally Posted by Melonie link=board=6;threadid=13307;start=msg174415#msg174 415 date=1095070562
    Back to Lilith's original question, which falls under US tax law. A key question is whether you have established a business (corporation or sole proprietor) and whether or not you report significant amounts of income under that business. The reason for this is that tax rules presently allow for 100% first year expensing of a new business vehicle which weighs more than 6000 pounds. If so, then having the business purchase a Durango or Escalade or other huge SUV which meets the 6000lb weight requirement will give you a major business expense tax deduction. Leasing a new vehicle through your business also gives you fat business expense tax deductions. If you are in the 25% tax bracket + self employment tax, then these business expense tax deductions can be worth 33 cents on the dollar, maybe more !

    If you're not structured as a business and can't (or don't want to) purchase the vehicle in the name of your business, then the lowest 'cost per mile' option is to purchase a low mileage used vehicle which is 2 to 3 years old. The key here is to choose a vehicle where the depreciation curve is pretty steep (like SUV's), then buy as cheaply as you can. This month and next month are ideal times, as the used car market is glutted as Monty points out.
    Durango's and Escalades aren't even close to weighing 6,000 lbs.

  12. #12
    God/dess montythegeek's Avatar
    Joined
    Oct 2003
    Posts
    2,103
    Thanks
    0
    Thanked 9 Times in 5 Posts

    Default Re:Buy Used vs Lease New

    Scorpio,
    The way trucks are defined both inside the industry and out is always by gross vehicle weight (curb weight + cargo), not just curb weight. The IRS and tax rules adopt this convention which goes back many decades.

    For a fairly detailed but simple (plain English) description of these rules see http://www.smbiz.com/sbrl003.html#lct4

    <6000 lbs is Class 1
    6-10k is class 2
    10-14k is class 3
    ... up to class 8 big rigs

  13. #13
    God/dess AinNY's Avatar
    Joined
    Jun 2004
    Location
    all around the world
    Posts
    2,939
    Thanks
    0
    Thanked 2 Times in 2 Posts

    Default Re:Buy Used vs Lease New

    Personally...i will never buy a new car....not unless i hit the lotto one day and have money to burn.

    New cars are a waste of money IMHO....as soon as you drive them off the lot you just lost $5k dollars....at least.

    I bought my car in 1997 with 84k miles for 10 grand...
    Now 7 years later with 120k miles i can sell it for 12-15 grand

    If she offered 18k already on the Durango....you should counter with 16k....thats the best option IMHO.

    I will never lease and I will never buy new.

  14. #14
    God/dess Casual Observer's Avatar
    Joined
    Jun 2004
    Location
    Boston MA
    Posts
    5,670
    Thanks
    35
    Thanked 144 Times in 74 Posts

    Default Re:Buy Used vs Lease New

    New cars are a waste of money IMHO....as soon as you drive them off the lot you just lost $5k dollars....at least.
    That&#039;s really dependent on how much you drive in a given year.

    For example, I drive about 30K miles a year--more than twice the average. Leasing is not an option under any circumstances, and buying used becomes less attractive if you need to maintain the car for any length of time greater than a traditional lease. I tend to own a car for at least 6 years because, as noted, cars are not a good investment; they&#039;re strictly utilitarian for me. This doesn&#039;t mean you have to go with a cheap car. I still only drive German cars--if I have to drive, I may as well have my Fahrvergnugen.
    Idealism is fine, but as it approaches reality, the costs become prohibitive.

    William F. Buckley, Jr.

Similar Threads

  1. Lease Agreements
    By papillonluvr in forum The Lounge
    Replies: 8
    Last Post: 12-05-2011, 05:10 AM
  2. Breaking a Lease When You Just Moved In?
    By Lady Xplicit18 in forum Life Support
    Replies: 17
    Last Post: 07-30-2011, 01:29 AM
  3. On the subject of rent-to-own and lease-to-own
    By wanderlust08 in forum Life Support
    Replies: 4
    Last Post: 07-02-2010, 12:44 PM
  4. Getting rid of a roommate who is on the lease?
    By Aubreyyy in forum The Lounge
    Replies: 16
    Last Post: 03-16-2008, 07:34 PM
  5. Roommate/lease help
    By kandie_kitten in forum The Lounge
    Replies: 6
    Last Post: 10-08-2007, 10:44 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •