Cars: buying vs. leasing and other advice

For the 10 years or so I've lived in Boston, I've been a strictly public transit guy. It's ludicrously cheap and reasonably convenient, and every time I run the numbers on getting a car (car payment, insurance, parking, gas, incidentals), it just doesn't seem to add up.

But a variety of factors are conspiring to make it essentially a necessity. Odds are strong that I'll need to buy a car over the next 2-3 weeks. I don't really know how to do that.

Any general advice?

Lease or purchase?

Are there any rules of thumb for what to expect for a down payment, monthly payments, interest/financing, etc?

Where/how are the best places to do research?

(My initial plan is to buy a good used Honda--maybe a 2004 or 2005 Accord.)

I know several of you are very experienced in this area, so any advice you can share with this noob is appreciated.

I'm not the used car type, and leasing doesn't work for me because I put too many miles on a vehicle. I don't think leasing is normally an option for used cars unless you're buying a "certified" car from an OEM dealer. Even then I'm not sure they lease them as old as 2004 & 2005 models. Leasing is only practical for people who don't put a lot of miles on a car (less than 12K per year) and who don't plan to customize the car much, unless you're willing to buy out the lease at the end of the term.

You generally get better financing deals through the dealer than directly through a bank or even a credit union, because the banks cut incentive deals with the dealers to get more volume. I've had good luck with E-LOAN before too. The last time I used them (when I bought my 2001 Sequoia) they had a better rate than the dealer, but a couple days later when I was ready to close the deal, the dealer worked out a rate with my own bank that was actually better than E-LOAN, so I canceled and went with my bank.

If your credit is good, you won't even need a down payment to get financed. But 10-20% is the typical down payment, and usually keeps you from driving off the lot "upside-down" (negative equity). I generally trade rather than pay cash down, although on my Sequoia I traded and paid a couple thousand down.

I used to buy a new vehicle every 2-3 years, but I've been so happy with my Sequoia that I've had it for almost 7 years and 130K miles -- the first vehicle I've driven over 100K. Having no payment sure is nice, but I'm getting the itch again so I'll probably trade within a year.

From my understanding leasing a car may provide additional tax benefits as a person could write off a lease as a business expense. You'd have to google more info yourself on that issue as Im not 100% positive on how that all works.

Anyways this should give some additional help

http//www.autopedia.com/html/LeaseCompare.html

Thanks for the suggestions guys.

No prob

Thanks CG ;) , I was also gonna post a similar topic, I want a new car though, Audi or Camry? hmmmmmm

Are you planning to stay in Boston? Look into ZipCar. There's yearly membership fee, but then you rent the car by the hour. The per hour rental cost covers, fuel insurance and parking.

There's an article in the current Fast Company about them. The founder went to HBS I believe.
http//www.fastcompany.com/magazine/123/zipcar-makes-the-leap.html

[quoteaeb4b28ae3="doylnea"]Are you planning to stay in Boston? Look into ZipCar. There's yearly membership fee, but then you rent the car by the hour. The per hour rental cost covers, fuel insurance and parking.

There's an article in the current Fast Company about them. The founder went to HBS I believe.
http//www.fastcompany.com/magazine/123/zipcar-makes-the-leap.html[/quoteaeb4b28ae3]
Yeah I am a zipcar member and have a pickup location a few blocks from me.

If you don't plan on driving that much, it's a great option and they have some nice cars.

The just introduced that ZipCar service at my uni. Sounds pretty convenient for locals who want a quick rental car.

As for leasing vs. buying, I'd go with buying. Sure, you may get a lower monthly payment leasing, but you'd always be worrying about mileage. My mom used to lease, so we never could use her car for road trips, etc. There's usually a hefty fee for going over the mileage. Not to mention you can't "mod" your car, if that's what you're into.

If you do buy, buy a cheap, reliable car. The financing will all depend on your credit. Other factors might affect it also how much you make, employment history, etc. But as Dmorris said, definitely put the biggest down payment you can afford, so you can get better financing, and not owe more than what the car's worth.

I've done ZipCar. Doesn't suit my current needs (we're talking daily commute here), but even for shorter-term needs, regular car rental usually ends up being more cost effective anyway. If only I weren't still involved in a dispute with my (formerly) favorite rental agency.

Here's what a friend of mine that loves to lease told me

[quoteb06f7ef6bd]· You never pay for repairs because you don’t own the car, you only pay for basic maintenance. This means no unexpected bills!

· You have few to no repairs because your car is new, so you don’t have to go to the shop very often

· You get a brand new car every 2-3 years, depending on how long you sign your lease for

· You can do it with no money down (just ask them for that as part of the terms)

· You can generally drive a nicer car than if you buy because the payments are less expensive for a lease than a car loan

· If you drive significantly fewer miles than your lease was for (as is happening in my case currently), you can buy out the car and “flip” it to make some money at the end of the lease. They commit to offering you a certain price for you to buy it after the lease term when you set up the lease, so if it ends up being worth more due to low mileage, etc., you have some equity there.



Caveats to be aware of are

· If you drive a lot of miles, it’s not going to work for you (I don’t think this is you guys). Standard leases are 10, 12, or 15k, but I believe you can work with other amounts if you ask

· You still have to pay the annual excise tax on the car, which is a few hundred $s depending on value[/quoteb06f7ef6bd]

The problem with a lease in my eyes, is that basically, you're paying money out the window and have nothing to show for it. Rather than buying something and making payments on it, (which you then own, or own some portion of) with a lease, you're paying for the privilege of driving the car. If you buy a reasonably new car (like the 2006 Accord (which I highly recommend)) from a dealer, you could conceivably inherit some of the warranty as well.

If cars weren't such rapidly depreciating assets, I probably wouldn't even consider leasing.

Off the top of your head, what does a 2006 Accord run? I'm on something of a budget, but I really don't want a POS.

I went to KBB.com and found the following for a 2006 4 Door Accord with 30K miles.

Condition Value
Excellent $15,980
Good $15,000
Fair $13,715

That said, Accords run forever. A friend has a 99' with 165K miles and hasn't replaced much other than the timing belt, water pump etc at 90K, alternator and battery and tires. The only thing to be aware of with Hondas is that close to 90K miles, you have to replace the timing belt/water pump (~$1K expense). Because of the interference-type engine that Honda uses, If the TB fails, it's catastrophic and the engine is all but ruined.

I'd be totally comfortable recommending all the way back to a 2002 Accord, just be aware of the mileage (make sure the TB has been replaced if near 90K, or set aside money to have it replaced).

Very good info. Thanks for the suggestion to check out KBB.com too.

[quote4a97cc88c5="KeithA"]Very good info. Thanks for the suggestion to check out KBB.com too.[/quote4a97cc88c5]

you may want to check out www.nada.com

If i remember right, KBB is a better for the seller, Nada is better for the buyer, so if you are going to negociate something, you should go with the NADA value because it is lower...

I may be wrong, but be sure to check both of them, maybe take the average...

K, I bought a 2005 accord w/ 18,900 miles today. bought it through a dealer, which i expect is not the cheapest way to do things. but i didn't have much time or freedom, and i am convinced i got the best deal the dealer could give me. there were some nice 2006 and 2007 models, but they weren't worth the premium asked.

couple things i learned over the last week, through research and experience

1) if you're financing, don't let your terms extend longer than 48 mos if possible. you run the risk of owing more than your car is worth.
2) most things are negotiable, but don't negotiate upfront. make them like you first, then talk numbers.
3) don't do anything the first day you test drive cars.

thanks to everyone for your advice / suggestions. stay tuned to the members' rides threads for photos...

You'll love yours, I have a 2004 Accord and when I got it it had ~27,000 on it, haven't had a problem with it.