Author Topic: Looking for tips on leasing a vehicle  (Read 2181 times)

Offline farmboy

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Looking for tips on leasing a vehicle
« on: October 21, 2016, 07:43:46 AM »
Does anyone here have tips on leasing a vehicle? Or maybe know what episode Jack gave a bunch of tips on what to have in a lease contract?

My wife and I have a 2008, Grand Cherokee with about 150k miles, and a 2005, Buick Century with about 225k miles. The buick just went in to have the head gaskets replaced (fortunately we have a very good local mechanic who is very reasonable with cost). It's the first major issue we have had, there are some minor electrical issues with it. It got us talking about replacing it with something lower miles, a little newer, and much more reliable. But with us still working on student loans and doing what we can with homesteading, the thought of car payments scare us. Although driving the jeep gets to be costly with fuel. The thought of leasing came up where we keep both vehicles, I drive the Buick since I can deal with break downs easier, and she drives the reliable lease. We still need the jeep for hauling stuff around. The thought is so we can still be better off if something comes up and we have to drop the new car and payments.

If we're off base with our thinking, let me know. Otherwise, if leasing makes sense, does anyone have any input on what to watch for in the contract? I know Jack talked about sometime this year, but I couldn't find the episode. PAPrepper found episode 1749 where jack goes through the numbers in the comments which helps from that end of it.

Thanks in advance!
« Last Edit: October 21, 2016, 07:59:18 AM by farmboy »

Offline jerseyboy

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Re: Looking for tips on leasing a vehicle
« Reply #1 on: October 21, 2016, 09:37:21 PM »
As far as payments go, leasing and buying are the same to start.

Let's say you buy a $30,000 car and take a loan for 6 years with zero down, at 5% interest, your loan payments are $483.15

Let's say you lease the same car for 3 years and have a residual of $15,000 with zero down and an interest rate of 5%, your payments are $449.56

Now let's say you have $5000 down payment

For buying, your loan is $25,000 and your payments drop to $402.62
For leasing your cost is $10,000 and your payments drop to $299.71

For a $10,000 down payment

For buying, your loan is $20,000 and your payments drop to $322.10
For leasing, your cost is $5,000 and your payments drop to $149.85

They try to confuse you with "cost of money" instead of "interest rate" and it is hard to tell what the applied interest rate is unless you bring you spread sheet program along.

The other things are residual cost or guaranteed buy back price.
Allowable mileage is often very low
Also, most people don't negotiate on price when they enter a lease. If you wouldn't pay MSRP when buying, why pay MSRP when leasing?

There are a lot of ways for them to get you on a lease because they control everything. if you get them down on price, then the cost of money goes up.

Some banks and credit unions do leases that are fair. Better to go through them than the dealer unless it is an advertised special on a certain car which they make a good deal on to draw you in and that deal is usually a low cost of money deal.

Good luck