OT - Considering buying (or leasing) my first NEW car. Need paceline wisdom

[Llewellyn]

Originally Posted by froze

First off to make sure you understand where I'm coming from, I'm a tightwad so keep that in mind when you read what I am about to say.

In regards to leasing there are pros and cons, and personally, because like I said I am a tightwad the cons are too great to ignore.

First the Pros: Lease payments are lower than purchase payments. Lower or no down payment. You can get a new car every 3 years that a typical lease is for. Some have free scheduled maintenance. No hassles at the end of the lease, just hand over the keys and walk away.

Now the Cons: You don't own the car and thus have no value in it. Can't drive it further than the agreed upon max miles, if you do you get severely penalized. You get penalized for every little scratch, ding, and wear marks. You cannot cancel a lease agreement mid term, you're out of luck if you want out. If you opt to continue leasing after the first one expires you'll never own a car and will be in a perpetual payment the rest of your life which will cost you a great deal more than a purchase. Lease payments are based on the depreciation between the car’s sticker price and the projected value of the car at the end of the lease, combined with a lease rate that is paid to the leasing company. Add an acquisition fee at the start of the lease, or a disposition fee at the end of the lease, or both, and a lease costs thousands of extra dollars that you’ll never recoup because you’ll never own the car.

It's the cons to leasing that is the reason I would personally never lease a car.

Having said that I'm also against buying a new car, but to be fair let me list the pros and cons of purchase.

Pros: You own your own vehicle. You can change and modify your vehicle anyway you see fit. Most cost effective over the long run. No mileage penalties. You can sell the car at anytime. Factory warranty.

Cons: Higher down payment with higher monthly payments. Maintenance costs are your responsibility. Depreciation is horrible even at the very second you sign on the dotted line. Trade in or resale falls on you.

The cons listed is the reason I would not buy a new car, but the biggest reason is depreciation, here is an example, let's say you get a Toyota Highlander XLE $38,520 without any options is worth at the time you sign on the dotted line just $34,215, so you lost about $4,300 before you even drove it one time! In one year the car's value drops to $28,979, in 2 years to $24,617, 3 years $20,778, 4 years $17,379, and in 5 years $15,408. So in 5 years you've lost 60% of your money! That's the worst investment I can imagine besides going to a casino! Those price drops are based on average miles driven, if less than average the drops are not quite as much.

With the internet you can shop easily for a low mileage 6 to 7 year old car by simply inputting the highest mileage you're willing to accept, but you'll save about 60% of the cost of a new car! And all the fear mongering about buying someone else's problem is just nonsense, all I have ever purchased was used cars and never had an issue, my wife and kids have never been stranded...though a brand new car could also strand your wife and kids then what will you do? I had a friend who bought a brand new car for his wife, 2 months after getting it the car died in the middle of a very busy street with her and 2 kids, so it's crazy to come up with some example of a used car doing something when new cars do the same thing. Sure the new car had a warranty and the repair was covered for my friend but it was cold and snowy that day and it took 45 minutes for a tow truck to come! Fortunately for her and the kids it was a city street and about 10 minutes passed when a cop car came by and the family got into it to stay warm till the tow truck got there, but that could have been a lot worse had they been on some country road.

Usually, though not all the time, dealers that sell new cars will have better used cars, the cars they don't want to keep on their lot they wholesale them out to used car dealers; new car dealers as a whole do not want a car that could be a potential problem, like a significant crash that was repaired, no or poor records of maintenance, and high mileage, new car dealers want to sell you a nice used car in hopes someday you'll come back and buy a new car, or even a used car from them again.

Best post in this thread.

[Louis]

Originally Posted by froze

The cons listed is the reason I would not buy a new car, but the biggest reason is depreciation, here is an example, let's say you get a Toyota Highlander XLE $38,520 without any options is worth at the time you sign on the dotted line just $34,215, so you lost about $4,300 before you even drove it one time! In one year the car's value drops to $28,979, in 2 years to $24,617, 3 years $20,778, 4 years $17,379, and in 5 years $15,408. So in 5 years you've lost 60% of your money!

Perhaps, and I agree with much of what you said, but you're leaving out one thing: IMO few people who consider themselves frugal and watch their expenses are going to go out and buy a $38.5k car, even if the depreciation rate is a fraction of that.

The first car that I purchased new was my '97 Acura Integra. I drove it until 2014, when it had 265k miles. I sold it and purchased a new Subaru Impreza. The Acura was somewhere around $18k, and the Subie $24k. Having been careful with my money for a long time and driven $1000 cars for a very long time, I had enough money saved up to allow me to switch from used to new, all for cash. I plan on driving the Impreza for a long time, so hopefully this won't be an issue for me for quite a while to come.

Another reason to save up and buy cash is that it forces you to think a bit harder about whether your really want to spend that extra $20k for the glitzier brand. When you're leasing or have a loan, it's say, just another $75 per month (or whatever) which somehow seems a lot less painful, but over time it all adds up.

[CNY rider]

Great post froze.
I just wouldn't consider a car an investment though.
It is a consumable durable good, albeit a big expensive one.

[Mikej]

Originally Posted by pjm

I never see the Korean brands recommended 'round here, but they have improved by leaps and bounds, and are now legitimate contenders.

no they are not, it only seems like they are.

[Mikej]

To the OP, I looked at Highlanders, (bought an Outback LTD 2016) the 2017 is the updated model and you can now get an LE Base model Hybrid for 36k starting price. I would suggest to buy new. The key to buying new is this - GET A GOOD DEAL! Go over to the TOYOTA NATION HIGHLANDER FORUM and check out the prices paid. You are going to see $3500+ off MSRP from internet haggling. You can also see the quirks and problems of the vehicle. I never buy used, and I would have a hard time because the used late model SUV / Crossover prices start at 2k above new.... Plus, the 2017 HL has many features on all trim levels now, where in the past you would have to buy the 50k model. All in all, the HL is a really nice vehicle and a really nice size. It cruises very well on the highway as well. Good luck Shopping!

[Llewellyn]

Originally Posted by Mikej

no they are not, it only seems like they are.

Can't speak for the others but Hyundai's are very good. But I still wouldn't buy new.

[froze]

Originally Posted by Llewellyn

Can't speak for the others but Hyundai's are very good. But I still wouldn't buy new.

I had a friend who bought a new Hyundai Azera (because the dealership was offering a double warranty for free (nothing is free, you have to take the car to the dealer for all scheduled maintenance or lose the warranty), so he has a 200,000 mile warranty), and I got to drive it, all I can say about it is that it felt cheap and the interior looked cheap, the seats were uncomfortable for long rides more due to the cushioning in the seats because there was plenty of room. While the ride itself, the effect of the suspension, was comfortable in handling road imperfections but the suspension gave up on handling. The auto trans sucked, but I think all modery sedan trans suck these days, it shifted slowly, when trying to manually up or down shift there was about a 2 second delay! The reasons he bought the car was a huge sale and the extra long warranty, he didn't care about anything else the car had going on with it good or bad, so he's happy. And I told him nothing of what I wrote here, just told him basically that it seemed to be a really nice car...but you wouldn't catch me buying one.

The last time I was in a Hyundai was a 2010 Sonata, and that thing was a joke, over semi rough roads the suspension would thump, the doors sounded tinny when being closed, the trans was slow, the car was slow, the car broke a lot...under warranty though!

[45K10]

I would recommend at least test driving a RAV4 and compare it to the Highlander. We have a 2015 RAV4 and we love it. Plenty of room in the back and trunk even with a car-seat. It gets good gas mileage and it is a lot easier to park when we go into the city.

If you use a cargo a topper you can carry a lot of stuff. Then if you get a Kuat or One-UP hitch rack you'll be all set and you saved yourself some cash.

Good luck with the search.

[shovelhd]

No third seat in a RAV4. He says he needs one.

[froze]

Not only does the Rav4 not have the third row seat but overall space is less, plus the Highlander had more power and is built more solidly.

[weisan]

I know I probably don't fall under the "general population." Like my bikes, when it comes to cars, I only buy used. I have taught myself over the years how to service and maintain my cars just I had with my bikes. I know what to look for. In my experience, I have some really good luck with used cars, zero issues, long service life, paid dirt cheap. I have one or two "not so good" ones in the last 20 years. I tend to stick with Honda or Toyota, primarily because that's what I know.

I have to say this though, part of the money I saved over the years with cars, they were channeled to buying bikes and we are talking only about 10-15%, cars are expensive compared to bikes...uber expensive.

We have six kids. I get the idea of not wanting my wife and kids to be stranded in the roads because of mechanicals...but I think it's often over-blown and we go for "quick fix" which is to buy a new car. I am intimately involved with my cars, and my bikes. I don't get surprises.

[jlyon]

I leased my current 2016 Honda Accord after paying cash for a 2013 and seeing how much it depreciated over the 3 years that I had it.

When I worked at a dealership and was able to buy both new and used cars for dealer cost. I would run the numbers assuming a leased new and bought a 3 or 4 year old model and kept each 4 years.

For me it seemed the premium on a new car was smaller than most would realize and I always seemed to go new instead of used. This was probably caused by the very strong residuals of the Lexus (new car) I was looking at and the more average residuals of used cars.

Of course if money savings is the number one priority it will be used.
But many people are thinking the true value of used cars for the next few years will be lower than the residuals leasing companies are now using, so leasing give you a floor that protects you from real world value fluctuations.

The hardest part of leasing for me is waiting the 36 months to get a new car because I always seem to want something new. But it also let's me have the future certainty that I will be getting a new car soon.

Or you can do both a look at the swap a lease website they have several used highlanders available with remaining life of 9-36 months.

Generally it is not a good deal because you are paying the same payment for an older car as they paid when new, but it does give you the option to learn if you like a car before committing to a longer term decision. And if you really like it you can buy it for the residual value at the end of the lease you assume.

[45K10]

Originally Posted by froze

Not only does the Rav4 not have the third row seat but overall space is less, plus the Highlander had more power and is built more solidly.

agreed, I am just saying don't discount the RAV4 without checking it out in person.

When we were looking the comparable Highlander was $10K more than what we paid for the Rav4 and we were paying cash so the price difference really stands out when you start writing the check.

Also $10K can't get you two sweet MTBs. One for Mom and Dad!

[froze]

Originally Posted by 45K10

agreed, I am just saying don't discount the RAV4 without checking it out in person.

When we were looking the comparable Highlander was $10K more than what we paid for the Rav4 and we were paying cash so the price difference really stands out when you start writing the check.

Also $10K can't get you two sweet MTBs. One for Mom and Dad!

Well for 5 grand each you better be getting sweet MTB's! Like I said earlier, I'm a tightwad, I can't see spending 5 grand for a MTB that I'm going to trash, since I don't race it don't matter if I get the best suspension. Both of my MTB's are cheap, like in a baby chick cheap.

[Ken Robb]

I think if a person assumes an existing lease SOMETIMES the original lessee will pay some cash to the person who assumes the lease. This can be win/win because the cash exchanged will be less than the buy-out fee to terminate the lease early. The lease exchange companies may get all or most of this cash though if they are involved.

As a long-time member of BMWCCA I have seen quite a few lease assumptions offered through the club classifieds.