How to Handle Six Money Dilemmas, Lease a Car OR Buy a Car

Money magazine lists six money dilemmas and what to do about them. Over the next few days, I'll list each dilemma, what Money suggests as the best option, my take on the issue, and additional FMF posts on the topic. Here goes:

Dilemma #3: Lease a car OR buy a car

Money's suggestion: Over the long term, buying costs you less.

My take: We always buy new and then keep our cars forever. For me, "forever" means about 6-7 years -- until about the time when major repairs start to hit. For my wife, who drives about 5,000 miles a year, "forever" really does seem to mean forever. She's only owned three cars in her lifetime (she's got 20+ years of driving time) and the third car in that group (her newest car) only has 15k miles on it -- so she'll have it for a good, long time.

Anyway, I would NEVER lease.

FMF posts related to this topic: Save on Buying a Car: Four Steps to a Bargain on Wheels, Buying a Car Using the Web

Comments

[Brooke]

Leasing is such a waste of money. The only people that should lease are those that might be able to take a tax write-off, and even then the savings is iffy at best.

I know a guy that leased a car, then didn't change the oil. Talk about being "upside-down" in a car!

[Kevin]

Agreed, I would never lease either. To me leases are for people that want to drive luxury cars but they really can't afford them.

FMF, I'm surprised you think 6-7 years is "forever" on a new car. That seems like it would just be cracking 100,000 miles, which is nothing nowadays.

I'm in the camp of buying a car and keeping it until it dies (or the repairs to fix would be unreasonably high for the age.) I bought my Jeep in 2002 when it was already 4 years old and it hasn't given me any problems. I hope to keep it at least another 5 years or hit 200,000 miles.

[FMF]

Kevin --

Maybe I've just had bad luck. 100,000 miles seems to be the point where major bills start to kick in on my past cars.

[Oimcherry]

I agree with Kevin...I'd only lease if I wanted to have a flash new car every three years and could take a tax write-off.

FMF long term 6-7 years? You've bought lemons! I still have my 1994 Chevy S10 Blazer with 180k miles and yeah, some repairs over the years (nothing more than $1500) but it's been free and clear since 1998. I figure if I spend even $2000 in repairs over a year, it's still much less than a monthly car payment.
Besides, it runs great and still looks pristine. The key is service frequently and an annual detail.

What can I say, when it comes to cars, I'm frugal! Now if I can only apply that to the rest of life....

[MonkeyMonk]

Instead of buying new I'd recommend buying a nearly new (<10,000 miles) used car. You get a very nice cash savings and you'll likely get just as much life out of it over the long haul.

[suze]

Mmmm. I agree with FMF on this one. If you are driving 15 to 20 thousand miles a year, six to seven years is a good long time to drive a car. I'm religious about car maintenance, I buy cars with good to excellent reliability ratings, and I still start getting hit with major repairs after about 100000 to 120000 miles.

The bad thing about repairs is that you never know when they will be required -- and that can really affect your life negatively. In fact, my six year old car is at the dealer right now for a water pump repair. It's been there since last Thursday. It's an expensive repair made more expensive by the inconvenience.

So a new car may be in order.

I agree -- never lease. They can make it look good on paper, but you'll end up paying somewhere, somehow.

[Kevin]

Suze - it may be time to reevaluate what brands/types of cars you are buying. If you're getting hit with major repairs at 100k miles, something is wrong.

Also, doesn't your dealer have courtesy cars? I'm surprised - most dealers do nowadays for those types of major repairs. What about rental car coverage on your insurance? Mine is like $5 every 6 months for rental/roadside assistance. I used it once to call a locksmith ($60) and it paid for itself for nearly a year. Just a thought.

[Mark @ TheLocoMono]

The jury is still out with me on this one. Cars are an eternal black hole. It is not just about buying or leasing. There is also maintenance, insurance and gas to consider.

However, I do know that I wouldn't lease a car unless I was living in another country. I read somewhere you can lease a car in Europe more cheaply than in America. How much that is true, I don't know. But I do know if I was only there for two or three months and I need a car, I rather lease.

As for in America, the jury is still out with me, tick tock.

Happy New Year to yall.

[suze]

Kevin,

I have owned a Toyota Corolla, Honda Civic, Buick Century,and a Volkswagen Passat.

Outside of the Buick Century (which was used),all are considered highly reliable cars.

I don't know any dealers who offer courtesy cars outside of the warranty period.

[MonkeyMonk]

I've got a VW Passat as well and wouldn't exactly call it reliable. Great car . . . just a bit more expensive to maintain. That said, our dealer *always* gives us a loaner if the car is going to be in the shop for more than a day. We've been out of warranty for a good couple of years too. You just need to ask or find another dealer.

[Kevin]

Suze - I guess you've had bad luck with the Corolla and Civic. I would never buy a VW, I've heard nothing but bad stories on those. I try to stay away from GM & Ford as well since they have been less than stellar the past decade or so. Although they are supposedly making a comeback.

Agree with Monkey on the loaner issue - check around at different dealers. A local Jeep dealer here gives a loaner for oil changes, which I thought was really out of the ordinary.

[suze]

I'm pretty familiar with both auto manufacturer and dealer operations, so I stand by my assertion that it is unusual to get a loaner vehicle for an out of warranty car. There are exceptions: A dealer may extend goodwill to you if you have many repairs on the same vehicle or have purchased a number of cars from them. Also, if you own a Lexus or Cadillac (or similar vehicle) you will certainly get a courtesy car.

I used to work for Pontiac customer service and unless there was an extraordinary event outside of the warranty period, the dealers did not give out loaner cars. This was circa 1998 - 2002. Plus, I've obviously had experience with Honda, Toyota and Volkswagen dealers. They will usually provide a van ride to work or home, though.

The Passat has been the most reliable car I have owned (at 93000 miles as we type), followed by the Century (which was out of warranty for all of my ownership), followed by the Corolla and then the Civic, which was the worst of the lot.

But both the Civic and Corolla did manage 119,000 and 81,000 miles, respectively, before the major repairs set in. My point is: they are good cars, but not bullet proof.

Believe me, I do a lot of research when purchasing an auto and I take very good care of my cars. I have good relationships with the dealers. I don't think having major repairs once you hit 100,000 miles is unusual -- and it is inconvenient.

[suze]

It occurs to me, after re-reading my comment, that I drive too much. That is the real problem. Now I just have to get my employer to stop moving our office.

[Kevin]

Good luck with that, Suze. I have the same problem starting in May when our office will likely move. However, we're considering a new home closer to that area, so maybe it will work out.

[Big Cheese]

I'd recommend getting a job that provides a company car if you can. My company provdes a BMW 5 series and pays for all insurance, gasoline, maintenance and tolls. It's a good deal if you can swing it. If I can I'll never again 'own' a car.

Remember, cars appreciate and houses appreciate (current bubble deflating notwithstanding)

-Big Cheese