To lease or not to lease ...

January 24, 2008 10:28 AM

Two year lease (new, used or swap) vs. buying a used car with the definite intention of getting rid of it after two years?

Swarm of details ahead, apologies for the length. I checked out some previous threads, but most of them were about getting out of a lease.

I moved from the US to Canada about two years ago and I brought my car with me. This car can't be registered in BC for a few silly reasons and it's on its last legs anyway, so my girlfriend and I are looking for something "new." My gf is currently on a learner's permit (recent university grad, transit was more than sufficient previously), so we need a car she can practice and take a road test with. Due a number of bad experiences with classes, she's (understandably) utterly opposed to Young Drivers, et al. In general, we drive very little (maybe 5-6 times/month) with the only major spikes in usage being a weekend to Seattle every few months. She's not very comfortable with a larger vehicle, so we'd be definitely looking for something small. A Mini or SmartCar would be perfect, but they ain't cheap (recommendations on similar, but less expensive cars would also be great).

An auto coop would be perfect for us and we know of at least two in the city. However, BC has a graduated driver's license system and the auto coops require that all drivers have the fully graduated license. So until my gf can get a full Class 5 BC driver's license (about two years), we need something else.

At this point, we're trying to decide if it would be better to lease something for two years or buy a used vehicle and get rid of it after two years. A lease will likely be more expensive, but there's less of a chance of catastrophic failure. You can perform all the due diligence possible, but there's always a chance the transmission could fall out of something used. I imagine the chance of what would be lower on a new-ish lease, plus it should still be under warranty.

We're perfectly amenable to the idea of leasing something used or taking over someone else's lease, but it seems like all the used/swap lease sites I've found are for the US. I saw this one, but the BC offerings were rather unimpressive.

I realize insurance will be high on a new lease vs. a old car, but I can either get the lowest usage class of insurance or just get per diem insurance. If there's a massive difference though, that would be something to consider.

In general, the budget for a used car purchase would be about $5k and about $7.5k over 24 months for a lease. Given how little we drive, it doesn't seem like a good idea to take out an auto loan on something more expensive (either new or new-ish), plus the thought of borrowing money on something that only depreciates in value is a little bothersome. We've both got great credit and solid, relatively lucrative jobs, so an auto loan is possible. But in general, we'd rather pay back our student loans and travel vs. have a fancy car and the loan that goes with it.

I realize this is long and a bit rambly; thanks for getting this far and any insight/opinions/ideas would be much appreciated.

posted by Nelsormensch to travel & transportation (6 comments total)

I'm trying to understand why you need to buy a car at all. It sounds like your needs are:

- A car for your girlfriend to practice/take the test on.
- A car to run weekly errands
- A car to drive to Seattle in.

If I'm correct, it may be more economical to just not get a car. I would suggest some mix of the following: get a car-share club membership (here we have zipcar, not sure what's available where you are) for the weekly errands. Rent a car (or use a shared car) when you go to Seattle. And your girlfriend can both practice and take the driver's test with a private driving school. This last may sound expensive, but it will certainly be less expensive than buying a car.

I would do a serious cost-comparison of buying/leasing a car and using a carshare/driving school and do whichever will cost less.
posted by lunasol at 11:59 AM on January 24, 2008

A lease will likely be more expensive, but there's less of a chance of catastrophic failure.

Regardless of whether or not that's true, what you're really concerned with is that most any failure will be repaired with money out of someone else's pocket.

I mention this only because if you make a $5,000 purchase of a used car which you get checked out by a mechanic before you commit then you can be almost certain you won't spend the additional $2,500 on repairs over the two-year life of that lease.

You're not absolutely certain - few things are - but the odds are in your favor. And on day 731 you'll still have a car, unlike with the lease.

Now if you really want to drive something nicer, or want the sense of confidence a lot of people get over having a car warranty, then by all means get the lease. If you think your financial or life situation will be better and warrant a change at that time then there's nothing wrong with that choice. But you have a much better chance at saving money with the used car.
posted by phearlez at 12:20 PM on January 24, 2008

I'm guessing you're stuck in the limbo of "can't rent car without valid drivers license, can't get valid drivers license without car". Otherwise, I wouldn't recommend either the lease or the car.

Leases only make sense if you have your own business and need the expense for a tax writeoff. Everything about them is expensive - insurance requirements, mileage caps, "reasonable care" requirements... you name it. Only plus is that you can get a very flash car on a not so flash budget for those two years. than you would if you had to buy it.

Ownership of even the crappiest used car still gives you an asset you can sell if necessary. The actual condition of the car is less important if you're using it infrequently than if you were using it daily for an hour's commute. Have a mechanic look it over and give it the thumbs up, and research value retention in used cars. Some lose very little over time, some are relatively worthless in no time flat.

Best combo of flash & used would be to find a used recent model car you like off someplace like craigslist or ebay - but again, get the mechanic to look it over.
posted by Grrlscout at 1:49 AM on January 25, 2008

Thanks for the opinions everyone. Based on this, a did checked things out a bit more and it's looking like a lease is going to be even more costly what I estimated. I'll probably just end up getting something used but reliable and resell it after two years.

When I go looking for a used car, I'll definitely be hitting up Craigslist. However, I did have a question about protocol for getting a mechanic to check the car out. How exactly would I go about doing that? As in, is it acceptable to ask the seller to drive the car to my mechanic before I pay for it? Give the person some money down and agree to give the rest upon getting things checked out? Have them meet me at my mechanic's shop?
posted by Nelsormensch at 8:59 AM on January 25, 2008

You should, I'd think. Get a referral to a good mechanic and ask them what (or if) they'd charge you to give the car a once over. I think if you're spending enough cash and have it ready to go for the seller that they'd understand why you wanted the check and help you as much as they can.

Everyone's different, though - what can it hurt to ask? :)
posted by Grrlscout at 9:16 AM on January 25, 2008

Every seller will have a different level of comfort. I don't know what the sitch is in Canada but here in the US the advantage is definitely on the side of the buyer - the last four years have had such a glut of new car promotions and things that there's way more used cars for sale than there are buyers.

If you know a mechanic you trust they're your best first bet, but as a non-owner I'm assuming you don't. Ask some friends in the area who they use. Once you get the names of some mechanics call them up and say you're getting ready to buy a car and want to know if they do pre-sales checkouts. I'd say odds are in your favor.

You might also ask them if they know of any of their customers looking to sell a car in your price range. It's how I found the buyer when I sold my last car.

Once you do that just do your shopping. If you're concerned you can ask the seller before you meet if they're going to have an issue with letting it be checked out before you even go see the car, but I always just asked them after I'd seen it and decided I would be interested. Nobody ever said no.

Some people will let you drive it away. After all, they still have legal ownership of the car. Others will take it themselves. It's worth knowing if your mechanic has an after-hours dropoff policy so you can make it easiest for the seller.
posted by phearlez at 1:09 PM on January 25, 2008