So my wife and I need a new car for when we move from Boston to Maryland. We are really interested in the Toyota Prius for its great gas mileage. There is a toyota dealer 2 blocks from my house and I am considering just walking in to get one, but I of course want to read up on what to expect, as neither of us have owned or thought about leasing or buying a car in the last 6 years. Actually neither of us have ever leased a car. I bought one 9 years ago from a bank that sold used cars.

So, I guess I'm just wondering if anyone knew of some good sites where I could learn about what is involved in leasing a car (all the various fees and options and such).

The reason I am leaning toward leasing a car over financing one is that, it being a Hybrid, I might not be able to take it to just any mechanic. Also we would probably get a different car sooner rather than later.

Any advice would be great.

geez, reading about buying/leasing a car is terrifying, it's all about how to avoid getting ripped off. I don't even want a car, I just can't take public transportation to my new job.

Okay, a couple first thoughts. The monthly payment is determined by taking the price of the car when new and subtracting the estimated price of the car after the term of the lease (like 3 years for example). so if it is $20,000 new and $12,800 after 3 years then the car depreciates $7200 over three years. Three years is how long I'm going to have the car, so I need to pay that $7200 to the leasing company.

7200/36 = 200

So part of the payment per month is 200 dollars. But, there is more to pay, of course, it can't be that easy.

It gets a little tricky here

Next, you take the price of the car: $20,000 (this actually isn't the price of the car but the number that you and the dealership agree the car is worth) and add to this the price of the car after 3 years: $12,800.

and you get $20,000 + 12,800 = 32,800. Why do you do this? I have no idea. But here is the weird part, you multiply this number (32,800) by something called the money factor, which is a number on the order of .0035, (let's just use this number) and you arrive at a figure

32,800 x 0.0035 = 114.80

Then you add 200 + 114.80 = 314.80 and this is the monthly payment.

What the hell? doesn't this seem needlessly complicated? Then I learn that the "money factor" is something like an APR (annual percentage rate) divided by the universally used number 2400. Who comes up with this?

I would think that you could just pay 7200 dollars financed at xx% interest over the 3 years that you would be keeping the car. Of course, that is probably too simple and would be harder for the car companies to make money. I've looked at Edmunds.com for information on vehicles, but I've never actually bought or leased one so I have no first hand knowledge. Leasing makes sense if you have no desire to keep the car after 3 years, but it is so complicated that I get throughly confused every time I try.

Not the advice you are looking for but:

Never lease a car. It is the the most expensive way to purchase car (which is why the manufacturers push it SO hard, and rename it to enticing things like "Smart buy!")

It is simply a bad deal.

It's the only worse deal then buying a NEW car.

Are you sure you NEED a new car? Nobody NEEDS a new car. They rationalize their want of a new car into a NEED of a new car.

You want gas mileage, presumably to save money -- you can buy a wonderful, reliable, used car that will get excellent gas mileage. Enough to save far more then the premium difference between a new (purchased OR leased) Prius.

And, you'll be able to take it to your mechanic, like yous aid (although I know nothing about whether or not you can take a Prius to an average mechanic).


Wealthy people buy, with cash, a 2-4 year old car and have no car payment. They let some sucker take the buttkicking on the depriciation that all cars experience when they are 'new'.

Buy a 10 year old Geo Metro or something, get insane gas mileage, spend $2,000, and be good! If the thought of that makes you cringe, re-evaluate if you really NEED a new car or just want a shiny new car.

That's my opinion, it never helps people always get the car fever and buy the new car anyway, but 2 or 3 or 4 or 6 (!!!!) years into their payments, they usually realize the dumbness of the decision.

Finally, cars are the second biggest purchase most people make, behind houses. Spend some time to really, REALLY understand what car will fill your needs the best.


Here is what I do: I drive a very reliable 97 Subaru Impreza wagon. I think it is beautiful, other people can't stomach wagons. Whatever. I have no car payment. BUT I pretend I do have a car payment, and put away $350 into savings every month. So, when this car finally goes or whatever, I'll have a nice big stash of $$ to buy another car cash when it is time.

I refuse to ever have a car payment (car fleece err, lease included) for the rest of my life. It is a bad deal.

Bad deal!

(I'll get criticized for this point of view, I always do! The "you only live once, enjoy it!" crowd... My reply is "You only live once, don't waste your life making a bank rich!")

Finally, this above point of view is developed through personal experience of being in trouble with debt (of which the crushing effects I've discussed publicly on this board several times). I'm not just repeating what others say (although I am a fan of Dave Ramsey and he does in fact say the above)

-Allen

Make sure when the dealer says "There's a bumper to bumper warranty" that is what they really mean.

My parents leased a new car a number of years ago. About 6 months into the lease, the horn didn't work anymore. When they brought it back to the dealership to have it fixed, they were told that it wasn't covered.

When my step father reminded them of the "bumper to bumper warranty" that they promised, they said that the horn didn't count. Apparently in the world of car dealerships, the horn is not within the bumpers. :rolleyes:

Needless to say, when their lease was up, they never did return to that particular Nissan dealership.

Allen, thanks for your input. No I don't need a NEW car. I said earlier, that I don't even want a car. But buying a used car almost seemed more daunting of an experience. But maybe not.

Oh and the good gas mileage was also to simply use less gas in addition to saving money. I'm glad they are making more efficient cars now and also wanted to support that.

Back in '98 I bought a '95 Pontiac Grandam for $10k, no money down and a 5 year loan, from Fleet bank. I thought that was a pretty good deal. But unfortunately the car depreciated faster than the loan, and when it got totaled 3 years after I had to make car payments for a whole year after I had no car. I probably should have done it for 3 years.

Car's are nice and convenient, but what a pain. Gas, insurance, maintenance. You pay out the ass for the convenience. Now Zipcars are nice. You pay one fee that includes gas, insurance and maintenance. They just aren't economical for a daily commute.

Zilla, I will check out the warranty it is usually set by the manufacturer though, and not the dealer.

I'm going to go over in just a minute and see how my experience with the dealer goes. Don't worry I'm not going to buy anything right now. ;)

Not the advice you are looking for but:

Never lease a car. It is the the most expensive way to purchase car (which is why the manufacturers push it SO hard, and rename it to enticing things like "Smart buy!")

It is simply a bad deal.


So you gave a lot of reasons to not buy a NEW car, but what about leasing is specifically bad?

Not the advice you are looking for but:

Never lease a car. It is the the most expensive way to purchase car (which is why the manufacturers push it SO hard, and rename it to enticing things like "Smart buy!")

It is simply a bad deal.

It's the only worse deal then buying a NEW car.

Are you sure you NEED a new car? Nobody NEEDS a new car. They rationalize their want of a new car into a NEED of a new car.

You want gas mileage, presumably to save money -- you can buy a wonderful, reliable, used car that will get excellent gas mileage. Enough to save far more then the premium difference between a new (purchased OR leased) Prius.

And, you'll be able to take it to your mechanic, like yous aid (although I know nothing about whether or not you can take a Prius to an average mechanic).


Wealthy people buy, with cash, a 2-4 year old car and have no car payment. They let some sucker take the buttkicking on the depriciation that all cars experience when they are 'new'.

Buy a 10 year old Geo Metro or something, get insane gas mileage, spend $2,000, and be good! If the thought of that makes you cringe, re-evaluate if you really NEED a new car or just want a shiny new car.

That's my opinion, it never helps people always get the car fever and buy the new car anyway, but 2 or 3 or 4 or 6 (!!!!) years into their payments, they usually realize the dumbness of the decision.

Finally, cars are the second biggest purchase most people make, behind houses. Spend some time to really, REALLY understand what car will fill your needs the best.


Here is what I do: I drive a very reliable 97 Subaru Impreza wagon. I think it is beautiful, other people can't stomach wagons. Whatever. I have no car payment. BUT I pretend I do have a car payment, and put away $350 into savings every month. So, when this car finally goes or whatever, I'll have a nice big stash of $$ to buy another car cash when it is time.

I refuse to ever have a car payment (car fleece err, lease included) for the rest of my life. It is a bad deal.

Bad deal!

(I'll get criticized for this point of view, I always do! The "you only live once, enjoy it!" crowd... My reply is "You only live once, don't waste your life making a bank rich!")

Finally, this above point of view is developed through personal experience of being in trouble with debt (of which the crushing effects I've discussed publicly on this board several times). I'm not just repeating what others say (although I am a fan of Dave Ramsey and he does in fact say the above)

-Allen


Good stuff Allen! Get a VIP account and come downstairs. I have a financial discussion thread that you might enjoy. I am suffering from NOT having debt...my motorcycle insurance premiums are higher because I:
Don't have a car payment - no auto loans in the past 57 months
Don't have any student loans
Don't have a mortgage payment
BUT BUT BUT...my credit score is 790.
I get penalized because I am not in debt! Additionally, I pay the premium for the year upfront. So, it can't be that I can't pay or that the insurance company is taking any risks that I cannot pay.

GH,
I understand your situation because I know where you will be living and working (thank goodness I no longer have to drive there). I haven't bought into the whole hybrid thing yet. Those batteries have to be disposed of too. MY roommate just bought a new Toyota Yaris. It gets obscene gas mileage. Way better than most hybrids. It is more of a no frills car, but you seem like the type not to really care about that either.
As for leasing...if an automaker pushes leases you can guarantee that they are not going to be losing money. Go to Edmunds.com and check out their articles on leasing and you can look up their forums about leasing Prius's as well.

Leasing is a more expensive way to operate a car than simply buying new. You pay for the amount the car actually depreciates, plus some profit for the auto dealer. If they weren't making a profit versus selling you the car outright, they wouldn't go through the hassle of taking the car back and selling it used.

I say buy a 4-5 year old honda or toyota for cash from a private individual. It'll depreciate slower, and not having a car payment will help your bottom line over the long run.

So you gave a lot of reasons to not buy a NEW car, but what about leasing is specifically bad?

Leasing takes everything bad about buying a new car AND adds unattractive financing and gotcha fees into it, as well as mileage limits.

Someone is paying that depreciation of the new car, and if you lease, it's you! And, at the end of the lease you have nothing to show for it.

It is somewhat akin (but not exactly like) taking an interest only mortgage on a house. Your payments are low, but you aren't REALLY owning anything, you are just controlling it. Kind of like renting...but not really.

I'm not articulating the exact point I want to above, car fleece is in it's own class so it's hard to compare it to other things.


The only advantage is you get to drive a NEW CAR!! With LOW PAYMENTS!! But when you look at the value of where you spent the dollars, it is all wasted as an investment.

I guess that is my point, cars are the largest investment we make that goes DOWN in value like a rock (that's where Chevy got that!). Leasing (or buying new) is paying all that negative appreciation versus buying used when a car has already taken the depreciation.

Again, this is just my point of view and it is unpopular in today's "Must have it now, future be damned, you only live once!" world.

-Allen

Good stuff Allen! Get a VIP account and come downstairs. I have a financial discussion thread that you might enjoy.

I would love nothing more then to support this Site and John and all the wonderful things I've learned here and people I've met, and it is one of the first things I"m going to do once I am 100% out of consumer debt. I've posted publicly here several times in the past about my "debt-loss" program (in addition to my 'fat-loss' program) and luxuries like JSF Membership will have to wait until I finish undoing the stupidity of my youth.

Then, I will save up, and purchase a a lifetime membership.

-Allen

I used the information on this website to negotiate ~$6000 off the MSRP on the sale (not lease) of a Honda Pilot. These folks know their stuff. Lots to wade through but good info, nonetheless. :gl:

I would disagree, but just a bit. There are lots of reasons not to buy a new car, and those are multiplied exponentially if you are buying on credit or worse, have less-than-perfect credit.

There are, however, some benefits in a new car:

-Never been owned. Most people don't drive their cars like maniacs, but it's a known quantity with a new car.

-Better efficiency and mileage. Any new truck or SUV is far more efficient than some car from even the early 90s. Now, they may not get better mileage, but if you're worried about environmental concerns, new cars are "less bad" than older ones.

-New car. It's a new car, so it's probably going to be nicer than an older one :)

That said, I would agree with Allen on a number of points. First off, never lease a car. If you are unsure of the formulae they use to calculate the price of a car, they can boost the price on you in the negotiating room. Also, research the model you want. What are the differences between this year's model and last? You can save thousands on a previous year and not lose anything.

You also have tools available. Use the internet, particularly sites like edmunds.com or similar ones and find the invoice price of your car. Look for special interest rates- I got my car with a 0% APR- free (to borrow) money! Call the fleet manager at the dealership that you want to buy from and agree on a price without setting foot in the dealership. If you work for some large corporations, they can have corporate purchasing deals with auto companies.

Good luck :)

-L

Wow, what a confusing experience. It seems like the whole point of the the car dealership is to get you there, try to wow you with the new shiny cars, get you set on one. And then after you say you will buy it, then they run the finance deals. We were there for two hours and did not even get to the finance options because I didn't feel like sitting through that.

So they quoted a 2007 prius in the color we wanted for 22,769. They really are pretty nice cars.

Thanks for the input guys, although I'm still quite confused, I feel like I am learning something though. They also estimate the 2 year old prius being worth 14,100. That's a huge drop. I don't know why they put that info on the sheet. That would make you want to get a 2 year old car.

You can see it in their eyes when you choose to walk out the door, they are so crushed.

NEVER lease a car, its just a bad all around deal for you. Most others have covered the reasoning pretty well, but one point thats not mentioned is the return. When you return a leased car it has to be in the EXACT same condition it was when you got it. That seems like no problem right? But remember life happens..... If anything (no matter how insignificant) is out of place the dealer will make you pay. I imagine this varies from dealer to dealer, but a few years ago my friend tried to return a 97 GMC jimmy that he leased and it was going to cost him about half of the buyout price just to return it!!

They told him any cosmetic blemish that couldn't be covered with a nickel needed to be repaired to factory fresh condition.... that meant because of normal parking lot dings and a scratch on the bumper from someone else rubbing him in a parking lot the dealer wanted to repaint more then half of the truck and charge him for it! Then on the interior they wanted to charge him some insane amount (something like $500) to detail the thing, plus a few hundred more for that seatbelt that broke somewhere along the line.... and a few hundred more for the crayon his kids got on the headliner (they wanted to replace the whole thing). Oh..... and the millage :eek:. I don't remember the specifics on the millage cause this was a few years ago, but I do remember it was a crazy amount of money for going over a few thousand KM's.
Anyways, he was trying to decide what to do with the thing when someone flying over a hill at over double the speed limit t-boned him while he was pulling through an intersection. Writing off a leased vehicle is the best way to return it from what I hear ;).

You may think to yourself "well I wouldn't trash the inside of my lease, or get parking lot dings, or go over the millage" but keep in mind, Life happens, and when it does the dealer who leased the car to you will be waiting with a bottle of ass lube. Unless you can keep that leased car in a plastic bubble, expect more fee's when you try to return it.

My personal favorite is buying "previously well loved" cars (~10 year old) but if your looking to spend more and want something more reliable with some warranty still left on it, get a 1-2 year old car. As you noticed already, the first few years is when the car will depreciate the fastest and whether your buying or leasing I promise you will pay for that. Also the 1-2 year old cars generally look/feel brand new still, and quite often even have that new car smell.

As for what to get, thats as much personal preference as what color you paint your living room. I don't know if you have put much research into it or just jumped to "I want a toyota prius" but being the second biggest investment most people make, I would really do some research on what to get. You can find a plethora or reviews and information online, and most car dealers will let you take a 24hour test drive now so you can see how your new car will handle in normal everyday driving conditions (a normal test drive is to short and allot of things can be overlooked). I would pick a few cars I liked (whether for looks, speed, comfort, price, gas millage etc) test drive them all for a good long while (preferably on a 24hour test drive) then take it from there.

I don't think I have ever met someone who leased a vehicle and was happy about the deal in the end.


Chris.

Cars today last forever. My company has many vehicles driven HARD every day with over 200,000 miles on them. I agree w/ all the others - buy a 5-ish year-old car with low mileage from an individual. Take it to a detailer and get a nice cleaning and it'll seem like new. Change the oil, change the belt(s), have the fluids flushed and refilled. Replace any bad tires and brake pads. You'll be much further ahead.

I remember reading an article about Walmart, on how many of the local people in the Bentonville, Arkansas area became millionaires by buying Walmart stock early on. One guy I remember reading sold his stock in like like 1961 to buy a lawnmower. I say this to you for when you are young, that is the time to save for a house, or even start throwing money into your companies 401K. By spending your income on a car, you are giving up the use of the money that could be earned / invested with those lease payments for years to come. While I commend you for looking to buy a hybird car, unless you do a huge amount of city driving, you can never recoup the additional cost for the hybird over a normal small car like a Honda Civic or Toyota Corolla. Try looking into getting a car loan, and see what the difference in the month cost would be. Atleast at the end of the loan, you own something, and aren't forced to start the lease cycle again for another car. Good luck on whatever you decide.