Buy or lease a car ?
September 21, 2010 7:52 AM Subscribe
Can anyone tell me if leasing a new Prius would be better then buying?
My thoughts are: the technology is so new who knows if these cars will stand up to the test of time and last 200k miles, plus if you buy one new and sell it in 3 years ( which I'm sure I will, I get bored after 3 hrs) the depreciation on the car probably just about matches the $6k or so for the lease right?
Plus leased cars are maintenance free! And FYI I will only use it on my 30min commute to and from work, no long trips.
My thoughts are: the technology is so new who knows if these cars will stand up to the test of time and last 200k miles, plus if you buy one new and sell it in 3 years ( which I'm sure I will, I get bored after 3 hrs) the depreciation on the car probably just about matches the $6k or so for the lease right?
Plus leased cars are maintenance free! And FYI I will only use it on my 30min commute to and from work, no long trips.
Leased cars are not "maintenance free." If you don't return the car in reasonable shape, you will probably have to pay a huge penalty. Read the fine print.
The basic technology in the Prius has been around since 1997 and has been used in literally millions of vehicles; I would say they have a pretty good handle on it by now.
Still, it is pretty easy to compare expected retail for a 2010 Prius, and the interest rates of both a lease and a loan, to figure out which will be better for you in the long run.
And of course the lease will have a lower monthly payment, which, all else being reasonably equal, is a bonus.
posted by kindall at 8:02 AM on September 21, 2010
The basic technology in the Prius has been around since 1997 and has been used in literally millions of vehicles; I would say they have a pretty good handle on it by now.
Still, it is pretty easy to compare expected retail for a 2010 Prius, and the interest rates of both a lease and a loan, to figure out which will be better for you in the long run.
And of course the lease will have a lower monthly payment, which, all else being reasonably equal, is a bonus.
posted by kindall at 8:02 AM on September 21, 2010
the technology is so new who knows if these cars will stand up to the test of time and last 200k miles
The technology is more than a decade old, and I'm sure a lot of the earlier cars are doing just fine at 200K. My 2001 Prius hasn't needed any more maintenance than a regular car.
posted by MsMolly at 8:02 AM on September 21, 2010
The technology is more than a decade old, and I'm sure a lot of the earlier cars are doing just fine at 200K. My 2001 Prius hasn't needed any more maintenance than a regular car.
posted by MsMolly at 8:02 AM on September 21, 2010
There's no one right answer for everyone. It's a calculation based on many personal variables.
For me, for example, I would never lease a car that was intended to be a daily driver.
There are numerous cost calculators available out there, but be wary of the source.
posted by Cool Papa Bell at 8:03 AM on September 21, 2010
For me, for example, I would never lease a car that was intended to be a daily driver.
There are numerous cost calculators available out there, but be wary of the source.
posted by Cool Papa Bell at 8:03 AM on September 21, 2010
Think of it this way: if leasing was better value for the customer than buying it, car companies wouldn't offer leasing. The reason they offer leasing (with free maintenance - uh, how much maintenance will a brand new car need for the first 3 years anyway?) is because they give you the car, you pay them $x over 3 years, then you give them the car back. End result: you = -$x, them = $x and a (used) car.
If the depreciation of a new car over 3 years was exactly equal to the $x that you paid for leasing the car for 3 years, then there would be no point in the company leasing to you as they would not make a profit.
the technology is so new who knows if these cars will stand up to the test of time and last 200k miles, plus if you buy one new and sell it in 3 years
If you buy it new, do 60 miles a day, 300 days a year, and have the car for 3 years, you'll do 54,000 miles. So whether it lasts to 200,000 miles would seem to be irrelevant.
posted by EndsOfInvention at 8:06 AM on September 21, 2010 [2 favorites]
If the depreciation of a new car over 3 years was exactly equal to the $x that you paid for leasing the car for 3 years, then there would be no point in the company leasing to you as they would not make a profit.
the technology is so new who knows if these cars will stand up to the test of time and last 200k miles, plus if you buy one new and sell it in 3 years
If you buy it new, do 60 miles a day, 300 days a year, and have the car for 3 years, you'll do 54,000 miles. So whether it lasts to 200,000 miles would seem to be irrelevant.
posted by EndsOfInvention at 8:06 AM on September 21, 2010 [2 favorites]
@EndsOfInvention: "if leasing was better value for the customer than buying it, car companies wouldn't offer leasing."
Not sure I agree with that logic... Why offer car sales then? Why not just require leases? I mean, if car sales were a better value for the customer than leasing it, car companies wouldn't offer car sales, right?
Leasing makes sense for some people, doesn't for others. There are tons of variables that go into it. Sometimes you "win" in a lease and sometimes you "lose," but it's hard to "lose" too much because if your car winds up being worth more than the residual value on the lease, you can sell the car, pay off the residual and pocket the difference.
posted by JakeWalker at 8:12 AM on September 21, 2010 [1 favorite]
Not sure I agree with that logic... Why offer car sales then? Why not just require leases? I mean, if car sales were a better value for the customer than leasing it, car companies wouldn't offer car sales, right?
Leasing makes sense for some people, doesn't for others. There are tons of variables that go into it. Sometimes you "win" in a lease and sometimes you "lose," but it's hard to "lose" too much because if your car winds up being worth more than the residual value on the lease, you can sell the car, pay off the residual and pocket the difference.
posted by JakeWalker at 8:12 AM on September 21, 2010 [1 favorite]
I noticed a few days ago that used Priuses (Priii?) are dirt cheap, even for one that's only a few years old.
Perhaps you're better off looking at a 2006-2008 model in excellent condition, especially considering that these cars seem to be depreciating much faster than average.
posted by schmod at 8:18 AM on September 21, 2010
Perhaps you're better off looking at a 2006-2008 model in excellent condition, especially considering that these cars seem to be depreciating much faster than average.
posted by schmod at 8:18 AM on September 21, 2010
I just bought a Prius in July. I found that in my area there wasn't a significant price difference ($2-3k) between a new Prius and a fairly new (2-3 years old) used one. The 2011 model year is about to come out and it's physically no different from the previous year, but you'll still be able to get deals on the 2010. Also, Toyota is throwing in maintenance up to 40k miles and 2% interest, so it makes buying pretty attractive.
posted by electroboy at 8:29 AM on September 21, 2010
posted by electroboy at 8:29 AM on September 21, 2010
I have a 2004 Prius with over 196k miles on it. besides oil changes and tires, I've only had one major repair (failed catalytic converter). Mileage is not what it once was, but I still get in the low 40 mpg range.
This is no longer "new technology"
I have over 50 mile one way commute, so it definitely makes sense to me. You'll have to run the math to see if your 30 minute commute actually will provide a cost benefit over the life of the car as compared to a similarly sized car with a traditional powertrain available at a lower price.
posted by jrishel at 8:43 AM on September 21, 2010
This is no longer "new technology"
I have over 50 mile one way commute, so it definitely makes sense to me. You'll have to run the math to see if your 30 minute commute actually will provide a cost benefit over the life of the car as compared to a similarly sized car with a traditional powertrain available at a lower price.
posted by jrishel at 8:43 AM on September 21, 2010
It strikes me that if you drive so much that the premium of buying a Prius is worthwhile for the great mileage, then you drive too much to making leasing worthwhile, because you'll go over the mileage limits.
My suggestion? If you don't drive much and don't take the car on long trips, then get a less expensive car: you might not get 40-50mpg, but you'll save a lot of money on the up-front costs (or the monthly payments of the least) on the car. If you do drive a lot, then mileage fees tacked on the the lease are going to kill you.
posted by deanc at 9:01 AM on September 21, 2010
My suggestion? If you don't drive much and don't take the car on long trips, then get a less expensive car: you might not get 40-50mpg, but you'll save a lot of money on the up-front costs (or the monthly payments of the least) on the car. If you do drive a lot, then mileage fees tacked on the the lease are going to kill you.
posted by deanc at 9:01 AM on September 21, 2010
Don't forget to factor in depreciation, maintenance and fuel costs. Edmunds True Cost to Own calculator is pretty useful when trying to decide between cars. The 5 year cost of a Prius is about $34,500. The absolute cheapest I could find was a Hyundai Accent (which retails for about half of the Prius's sticker price at $11k) at $31,000.
posted by electroboy at 9:10 AM on September 21, 2010
posted by electroboy at 9:10 AM on September 21, 2010
" uh, how much maintenance will a brand new car need for the first 3 years anyway"
2006 owner checking in - Iffy Lube and other places won't touch it, so you may end up at the dealer to oil change. My mechanic of 12 years just got Hybrid certified, but he cannot do scheduled manit like dealer can; not equipped.
Budget in scheduled manit. About $500 yr iirc.
Had the flux capacitor go at four years in, about $500 to fix. (some kind of thingy that makes the two engines do their thing to the batteries). Have 100k miles on this car.
Probably have 1 bad airbag and a broken radio (doesn't get 1 local station or more).
posted by tilde at 9:17 AM on September 21, 2010
2006 owner checking in - Iffy Lube and other places won't touch it, so you may end up at the dealer to oil change. My mechanic of 12 years just got Hybrid certified, but he cannot do scheduled manit like dealer can; not equipped.
Budget in scheduled manit. About $500 yr iirc.
Had the flux capacitor go at four years in, about $500 to fix. (some kind of thingy that makes the two engines do their thing to the batteries). Have 100k miles on this car.
Probably have 1 bad airbag and a broken radio (doesn't get 1 local station or more).
posted by tilde at 9:17 AM on September 21, 2010
Assuming that the mileage you will drive is predictable, you're pretty sure that you'll replace it in three years, and you're set on buying new instead of used then you sound like a good candidate for leasing.
I sold new cars (Nissan and Kia) for several years and this is what I can tell you about leasing. It doesn't usually save you money. In most cases it ends up being a wash. Basically, it insulates you from the risk of some adverse problem with the car that will affect its resale value.
I pulled together some numbers from Edmunds.com and made a few assumptions for this example.
If you buy a new Prius today for $23,800 and finance the whole thing for 60 months (as is typical) at 5% and then trade it in or sell it after three years, you will have paid roughly $2,900 in interest and lost about $8,300 to depreciation totaling $311 per month. I used this lease calculator and it estimates a lease payment of $334 per month.
I'm assuming that my math and assumptions are a little bit off and I'm ignoring things like sales tax so I'm basically calling them same cost in terms of your real economic cost. Financing would get you monthly payment of $450/month on the loan but since you sell your car at the end and recoup some of that it only costs you $311/month.
The real trick here is that the residual value is set at the beginning of the lease. If, at the end of the lease, you could sell or trade-in the Prius for more that the residual value, you can buy it from the lease company, sell it, and pocket the difference. If, on the other hand, technology advances significantly in the next three years and the technology in the Prius is now outdated and in low demand, the resale value of the car might suffer. This is especially true if they experience some huge problem that harms their reputation like a problem with the tires exploding (like the Ford Explorer) or unintended acceleration (Audi in 1986 and Toyota last year). It doesn't matter if it is a real problem or not, the resale value suffers. If you purchased the car, you've got a problem. If you leased it, you turn it in at the end of the lease and its the lease company's problem.
The best way to compare lease vs. buy is actually to calculate the IRR (internal rate of return) on the lease. Bascially, the cash flows are the purchase price (you initial investment) and the total annual payment adding the residual value at the end. The calculation spits out an interest rate. If this rate is lower than the loan rate, it is cheaper to lease. I'd bet that the rates will both be really similar indicating that there is no economic difference between them.
Having sold new cars for a living, I alway recommend buying used but I completely understand why some people feel the need to buy new.
You should make a trip into a dealership and find the car you want. Make sure it is the car for you. Be clear about your desire to buy the car and tell them that you want to see the details on a lease and their best guess at loan rate. Memail me with the lease details and I can do the calculation for you.
posted by VTX at 9:53 AM on September 21, 2010 [2 favorites]
I sold new cars (Nissan and Kia) for several years and this is what I can tell you about leasing. It doesn't usually save you money. In most cases it ends up being a wash. Basically, it insulates you from the risk of some adverse problem with the car that will affect its resale value.
I pulled together some numbers from Edmunds.com and made a few assumptions for this example.
If you buy a new Prius today for $23,800 and finance the whole thing for 60 months (as is typical) at 5% and then trade it in or sell it after three years, you will have paid roughly $2,900 in interest and lost about $8,300 to depreciation totaling $311 per month. I used this lease calculator and it estimates a lease payment of $334 per month.
I'm assuming that my math and assumptions are a little bit off and I'm ignoring things like sales tax so I'm basically calling them same cost in terms of your real economic cost. Financing would get you monthly payment of $450/month on the loan but since you sell your car at the end and recoup some of that it only costs you $311/month.
The real trick here is that the residual value is set at the beginning of the lease. If, at the end of the lease, you could sell or trade-in the Prius for more that the residual value, you can buy it from the lease company, sell it, and pocket the difference. If, on the other hand, technology advances significantly in the next three years and the technology in the Prius is now outdated and in low demand, the resale value of the car might suffer. This is especially true if they experience some huge problem that harms their reputation like a problem with the tires exploding (like the Ford Explorer) or unintended acceleration (Audi in 1986 and Toyota last year). It doesn't matter if it is a real problem or not, the resale value suffers. If you purchased the car, you've got a problem. If you leased it, you turn it in at the end of the lease and its the lease company's problem.
The best way to compare lease vs. buy is actually to calculate the IRR (internal rate of return) on the lease. Bascially, the cash flows are the purchase price (you initial investment) and the total annual payment adding the residual value at the end. The calculation spits out an interest rate. If this rate is lower than the loan rate, it is cheaper to lease. I'd bet that the rates will both be really similar indicating that there is no economic difference between them.
Having sold new cars for a living, I alway recommend buying used but I completely understand why some people feel the need to buy new.
You should make a trip into a dealership and find the car you want. Make sure it is the car for you. Be clear about your desire to buy the car and tell them that you want to see the details on a lease and their best guess at loan rate. Memail me with the lease details and I can do the calculation for you.
posted by VTX at 9:53 AM on September 21, 2010 [2 favorites]
I am currently leasing a 2010 Prius. I have no complaints.
But seriously, previously. The pros and cons of leasing are laid out pretty clearly there.
posted by valkyryn at 10:55 AM on September 21, 2010
But seriously, previously. The pros and cons of leasing are laid out pretty clearly there.
posted by valkyryn at 10:55 AM on September 21, 2010
Response by poster: Thanks everyone for your helpful comments! I think you're right, buying the car is probably the way to go... I'll probably either buy new or used and forget the lease idea.
Off I go to Carmax
Cheers
posted by absolutshrk at 6:28 AM on September 22, 2010
Off I go to Carmax
Cheers
posted by absolutshrk at 6:28 AM on September 22, 2010
Carmax is good for used, but you might want to try a traditional dealership for a new Prius. They're pretty desperate to unload the old model year, and has some more price flexibility than Carmax. We were able to get ours for under the invoice price.
posted by electroboy at 6:37 AM on September 22, 2010
posted by electroboy at 6:37 AM on September 22, 2010
This thread is closed to new comments.
posted by Bathtub Bobsled at 7:55 AM on September 21, 2010