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February 18, 2010

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If you plan to trade the vehicle every 3-4 years anyway, you will come out ahead if you can find a subsidized lease.

If you're buying, I'd recommend a Honda CR-V with the optional all wheel drive, or a Subaru (any model you like, the newer ones all have AWD).

I think most major brands now have a "certified used car" program, that can give you the benefits with new car ownership regarding warranty and service issues, and still help you avoid the huge depreciation that occurs when you buy new.

If you were planning to keep a car three years, leasing wasn't such a bad deal when the auto companies were subsidizing them to gain market share and drive up perceived resale values. I think those days are over now.

Buy a three-yearold Toyota, Honda or Lexus coming off lease (depending on your budget). Take advantage of the fact that someone else has paid to lease for three years and now the vehicle is a bargain.

Many Lexus owners/lessees like to have their cars serviced by the dealer - I guess they like the ambience of the $500 oil change. You can review the entire service history in the Lexus database. I like to see that:
a) all service was done at the dealership (even though I hate to waste my own money that way!),
b) all service was done on time,
c) there were no major or recurring issues.

Buy a 2007 AWD Lexus RX 350 for cash, and you'll never regret it. Find one that still has a few months of bumper-to-bumper warranty left.

If you want to save some money, don't go the Certified Pre-Owned route. Instead, find one you want to buy and go to the Lexus dealer for a check - they will do the exact same checks they do before they certify a car as pre-owned. In my latest one, they wrote up "worn floormats" - I kid you not!


How much money did you ever get back from a lease? Oh, you had to pay for over-mileage fees and maintenance for something you didn't own. Leasing is terrible! Buying a new car gives you a warranty, knowledge that the car has not been abused, and knowing that the car will be yours after your loan is paid off. I've been through many new cars, and even though I took an immediate hit with depreciation, my cars always still had some value to trade in with. Be careful of cars that will put you upside down, however. Luckily I liked imports which tend to hold their value more. I suggest Honda or Acura, because they hold their value so well. I like Subaru also which is probably your best bet because you want the AWD. Also if you buy a new car you might want to consider extending the "factory" warranty because most new car warranties last only 3 years/36k miles. Doubling it should cost about $1200, I think. Also try to put enough down so you can avoid the necessity of having gap insurance. Once you buy your first car and keep it for the long term you will see that leasing was a waste of money.

I recently bought a brand new Ford Escape AWD in November. Because they were so strapped to sell cars they gave me a full bumper-to-bumper warranty for 36 months AND a full maintenance warranty for 36 months. Basically, if anythign goes wrong with the car in the first three years I take it to any delaer and get it fixed with no charge to me. I know buying a new car is not the greatest because of depreciation, but the inner peace knowing that I don't have to do diddly with my car for the next three years was worth it. Like above, put as much down as you can or even pay for the whoel car in cash and ask for a 10% reduction in price. Dealers are seriously hurting for sales, so be ready to negotiate and walk away if you don't get what you want. Stay clear of Dodge/chrysler because their still on shaky financial ground. Ford is good and solid right now. Despite the Toyota mishap, them and Honda have the longest lasting cars.
Just my two cents worth...

My advice:

(1) Buy a calculator (2) Calculate how much it is costing you to lease a car, year after year. Make sure you include all of the ridiculous "cap reduction" fees they hit you with upfront. (3) Compare that number to what it would cost to buy a slightly used car and own it for 8-10 years. (4) Stop using the "I'm a single woman" rationalization for making car financial decisions. (I have an 11 year old Lexus bought off-lease and I guarantee it's more reliable than your leased Audi.) (5) Ignore what your family did. Bad financial behavior has an unfortunate tendency to spread down the family tree.

Good luck.

Take advantage of the image problems Toyota is having and use that to buy or lease a Toyota or Lexus.

Just do yourself a favor and make sure you can cut off the engine or put in neutral should the acceleration run away. You and all drivers who would use the car need to be ready on how to respond in the event of a runaway acceleration. Practice this as part of your test drive.

As they say at Toyota, "Hang on and Enjoy the ride."

-Mike

Lease vs. Buy: An interesting dilemma that can easily be solved by looking at the deal from the seller side. Any sale that has more numbers associated with it will be more profitable to the seller (I used to work in car sales).

A lease is not a bad deal if you know what you are getting for your money...maybe you'd rather pay extra than deal with resale etc. (and that's a reasonable choice). The most likely cheaper option will be to buy because there is only 1 variable...the car price. Leases have many variables such as fees, capital reduction costs, over mileage costs, hidden or obscured finance rates, residual values, initial price and others I've forgotten. Don't forget that leases still cost you sales tax, excise tax and registration fees...none of which can be deducted on your federal taxes because you don't own the car (alright so only sales tax and excise based on the value of the car can be deducted).

There are many other aspects that need to be examined to get a full picture and they don't fit here, but you can find them on the web. Good luck and whatever you choose, know what you are paying for.

People on this site are going to tell you to buy a basic boring car with zero extras for as cheap as possible. Cars are a black hole for money so minimizing this cost makes a ton of sense. (You also didn’t ask for any of us to superimpose our consumer values upon you by telling you what kind of car to buy. You only wanted to discuss buying vs. leasing.)

You’ve lived in NYC, you appear to be financially responsible, and you seem to have a decent income. My advice is decide the range you want to spend, pick the car/cars you would like to buy, and then do the analysis on buy vs. lease.

Buy vs lease non financial considerations:
When will you want to replace this car?
Maintenance costs and mechanical reputation? (Toyota vs Rover)
Personal driving habits? Miles per year? Parking?
Resale value at the end of a lease term?
Taxes- is there a tax advantage or disadvantage to one option?
I’m sure there are a ton more but these are on the top of my head.

From a purely financial standpoint, buying a new car or leasing a car is the most expensive/ worst choice. Buy, with cash, a 2-3 year old car with a manufacturer extended warranty if that helps you sleep at night. A 2-3 year old car will still feel like new to you.

If you really want to get a good deal, buy the car from a person off craigslist or ebay. You can get some great deals, still have a few years of warranty, and buy an extended warranty if you so desire. (but again you didn't really ask for this advice)

I'd suggest checking out the price for an extended warranty on a G35x, 335ix, or Legacy with premium package (of course you already know about Audis). Then realize that if you buy an extended warranty from a dealer, they can usually cut the price on the warranty by 1/4 - 1/2.

These things work. I had a steering column replaced one time with 90k miles on the clock. I happily paid the $100 deductible.

Check out the payments vs. a lease and figure in your expected residual value. (note: many luxury buyers won't value the AWD capabilities on the Infiniti or BMW over a standard RWD version.)

What would you do with the extra cash? There's lots of non-qualified investments out there, and with such a hefty emergency fund, it sounds like you're already headed in that direction.

Buy a used car. It's the best bang for your buck. My big rule during car buying is to always leave the lot at least once before you say "I'll take it" . Car salesmen know that if you leave the lot, the chances of you returning are very slim. So most will try to give you their best offer before you leave the lot. I just keep telling them that I have to look at a few more dealerships before I make my decision. If they give you an ultimatum...don't fall for it. When they say someone else was looking to buy this one so unless you jump on it now it'll be gone. Tell them no problem....lots of other cars out there for sale. Same if they tell you the deal only is good till the end of the day or any of that sort of nonsense. Smile and tell them "no problem". You'll do your best like this.

Thanks for all your comments. I knew the right answer was to buy a slightly used car but it helps to hear all the suggestions and reasons as to why. After 6 years of leasing and not much to show for it, I am more inclined to actually buy a car I can call my own for a long period of time.

I leased a "subsidized" car about 3 years ago. It was for my business so I needed a newer car to drive clients around. It was a Honda Accord. They had a special: $2000 down and $199/mo with no end of lease charge. It allowed 12k miles a year. Now that the term is about over I have to say that it was worth it since the miles were written off under the business. This allowed about half of the cost to be covered in reduction of tax liabilities.

Like someone else mentioned, if you must have new every 2 to 4 years then subsidized leases are the best. Typically they are Camrys and Accords with the same terms I got. You can also find subsidized leases are models being changed. Make sure you read the fine print.

My next car will be purchased though. My company is big enough now to pay cash and depreciate it as an asset. Depreciation provides greater tax relief.

Two words: Subaru Legacy. My husband loves his and they're pretty affordable.

My recommendation:

1 - Buy a car with whatever cash you have on hand (no financing).
2 - Buy a "pre-certified" car that is 2-3 years old. Make sure the pre-certified provides at least a 24-month bumper-to-bumper warranty (with option to buy an extended warranty if you plan to keep the car over 5-6 years). A 2-3 year old car has taken the depreciation hit, yet still has a lot of life and good value left in it.
3 - Do the standard stuff like checking the car fax report, checking reliability stats, etc. Generally-speaking, your Japanese models are most reliable (Toyota, Honda, Nissan, Lexus, Acura, Infiniti), and Korean/U.S./European models generally less reliable in varying degrees.
4 - lighter-colored cars (white, silver, beige) tend to look better longer than dark colors (black, dark red, dark blue, dark green), thereby better holding their value in general.

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