Will I regret signing up for this VW lease?
August 15, 2016 7:39 PM   Subscribe

Lease with high drive off fee and insanely low monthly payments. Seems like it would be good for me but I feel like I'm missing something. Deepest gratitude in advance for the insight of more experienced car owners. Details within.

I know leasing doesn't make a lot of financial sense in most situations, but I feel like this offer makes sense given my circumstances. I would really appreciate hearing some other perspectives. I don't have any family or friends who are knowledgable about cars, Volkswagens, or leasing ;-)

Thanks in advance & sorry for the wall of text.

First off here is a link to the lease terms.

I spoke with the VW salesman and got some further info.
These are the basics: 2016 Jetta S. 2 year lease, 4300 down (including all fees and taxes), 75/mo including taxes, 11700 residual cost. 10,000/year mileage cap. Bumper to bumper warranty for duration of the lease.

As for my situation. I live with my folks but I'm looking to move out asap. My parents' house is close to where I work but I will have to move much farther away to a cheaper area. I can't do that without a car. I have a bit of savings (about 7k) but don't have a fat salary by any stretch of the imagination. With cost of living in my area + cost of gas + cost of auto insurance, the low monthly payments are very very appealing to me, possibly a necessity.

In the long run it appears that I would pay about 18k-19k if I end up buying the car after the lease is up, otherwise I get a reliable new car for two years without taking a big hit each month. The hefty driveoff fees don't bother me so much since I've had the luxury of saving while I live almost rent-free @ my folks' place.

The thing is I have no experience and this would be my first car purchase, so I'm sure I'm missing something. Any thoughts would be helpful.
posted by Griffinlb to Work & Money (19 answers total)
 
I have a bit of savings (about 7k)

Are you seriously proposing using up 61.4% (ish) of your savings to get... a leased Jetta?

That's not a great idea, especially if you want to move out soon and have to pay things like a deposit, first, and last month's rent all at once.
posted by saeculorum at 8:03 PM on August 15, 2016 [11 favorites]


That is a very low monthly payment, and apparently a screaming deal. I'm sure VW is having trouble moving cars off lots, especially with the pressure of 2017 models coming.

Thoughts about leasing, and this deal in particular.
1) By leasing, if you lose your job or otherwise can't pay, you really have no recourse. You can't sell the car (underwater or otherwise) and make a different plan. You cannot formally transfer the lease to someone else, or at least at Honda you can't -- you would have to give someone else the car, continue making the payments, and trust them to pay you. You might be OK with that risk given the very low monthly payment.
2) Do you really know how few miles 10k/yr is? That's an incredibly low number. My commuter car is right about there, and my commute is < 20 min, all surface roads. It's never the road trip car, because it's on a 12k lease. I'm super careful with it. Consider whether you'd be willing to pay more for a 12k or 15k/yr lease, given travel plans.
3) Make sure you are figuring in insurance and gas, although those are probably not dealbreakers.
4) Finally, think through what happens when you're done. You'll presumably either want to start fresh -- with no car and no deposit -- or you'll want to finance the residual. So you'll have a 2yo Jetta with ~20k on it for $12k or so. That's about what 2yo lower-mileage Jettas are going for on eBay (there aren't a ton of data points), and you'll be familiar with the car, which is worth a certain amount of money in itself. It's probably a wash - there's no wrong answer.

I don't see any red flags here. They want the car off the lot, basically, and they're drawing you in with a low lease payment, and then after 2 years, if you keep the car, your payments will go up. I imagine you can shop around for financing and decide how long a term you want, so those will determine the payment amount. It's just a way of spreading around risk a little differently than a purchase, at the end of the day. (If you were purchasing the car for the same total price, you might have payments of, say, $350 for 48 months, give or take, and at the two year mark you'd have the option of selling or refinancing if something went awry.)
posted by chesty_a_arthur at 8:06 PM on August 15, 2016


Saecaelorum has a good point, by the way; I wasn't really thinking about your total assets. Since you're not getting any equity for two years, it's not a great idea to blow your savings on the deposit. Depending on financing, credit, etc, for the same price you could buy a 2015 Civic, get equity, and have a car with a much stronger recent history of quality -- and the ability to sell it for something cheaper if things get hairy.
posted by chesty_a_arthur at 8:13 PM on August 15, 2016 [3 favorites]


(For what it's worth - I have a leased 2015 Civic as a commuter car, but the main family car, a 2009 Prius, is paid off in full. I wouldn't lease if I didn't have the paid-off car as emergency backup.)
posted by chesty_a_arthur at 8:14 PM on August 15, 2016


Best answer: Leases are only a good idea if you're absolutely sure your need for a car is temporary and you know you'll be below the mileage limit. They are an acceptable idea if you can stay below the mileage limit and you are comfortable with the idea of paying to have [access to] something new. Where a lease goes wrong is if you need to renew it (or sign up for a new one) just in order to have a car, or if the insurance costs more.

If you're worried about making a higher monthly payment now but you're on a career path with some growth potential, you could look at buying (instead of leasing) with a balloon payment loan instead of a lease. That would give you the flexibility to sell the car in the event of unemployment instead of terminating the lease early, and you could also refinance the balloon into something reasonable with the higher salary you might expect to be earning in three years, but you'd still own something. At the end of a lease you don't own anything, you just have the option to buy at a predetermined price that may or may not be on the nice side of fair market value two years from now.

And that doesn't even consider the fact this is a VW. I might consider getting into a balloon or lease on, say, a Honda or a Toyota or a Ford, but VW is bad news right now. I would not take this lease. I especially wouldn't recommend you put so much of your savings into a lease on a VW, and I'd probably even advise against buying a VW as well since you don't have the ability to ride out any problems. They and their dealers are going to continue to lose billions of dollars (above and beyond what's already been written off) over the next few years as a result of the diesel scandal, and I wonder if they'll be viable used cars in a few years.

Have you considered buying a used car? Perhaps a lease return?
posted by fedward at 8:51 PM on August 15, 2016 [5 favorites]


Response by poster: Thanks for all the replies. Lots to think about.

Fedward - going to look up what a balloon loan is right now. What you've said makes a lot of sense - especially that first line: only go into a lease if you KNOW your need for a car is temporary. I was thinking about it the other way around (why buy a car when I don't know I'll need one in 3 years).

Thanks again.
posted by Griffinlb at 9:02 PM on August 15, 2016


I'm really confused as to how you expect to afford the drive-off if you're that worried about low monthly car payments being a necessity. And if your savings total $7k from living with your folks for a significant stretch of time ... that's not promising. I don't think you have the financial assets to be treating yourself to a brand new car, and $3k/year is a fair bit to spend for a car that you hand back at the end, at which point you'd be in the same position you are now, minus some savings.

I'm pretty sure that you can get a reliable used car for what you'll be putting towards that Jetta in the first 2 years. And then you'd own it outright. I was shocked by how easy it was to buy a car on Craigslist - the key is having a reliable mechanic look it over, and be willing to take their advice and pass on something. If you don't need the car in 3 years, sell it! And, a used car won't have depreciated as much as the Jetta would have =)
posted by Metasyntactic at 9:08 PM on August 15, 2016 [8 favorites]


Make sure you go get an insurance quote before you buy any car. You'll need full coverage and I would strongly suggest more than the minimum on liability. Once you have this quote add it to your car payment. Your financing agreement will likely require you to have full coverage. You don't want to buy a car on what seems to be a good payment and then discover you can't afford the insurance. I've seen that happen a couple of times to people I know.
posted by azpenguin at 10:44 PM on August 15, 2016


You're living with your folks, you're making bugger-all, and you're thinking you need a new car?

No. You are not New Car Guy. You are First Car Guy. So you're not going to go and hand over $4300 of your saved $7000 to a new car dealer for the privilege of not owning a car.

What you're going to do instead is find something small and Japanese and ten years old, preferably with a manual transmission, and buy that outright for $2500, and put aside another $1000 to attend to all the little things that will go wrong with it in your first year of owning it. And then you're going to spend your $75/month on fuel and oil and brake pads and tyres. And you are going to do this because you are NOT COMPLETELY BARKING MAD.
posted by flabdablet at 3:46 AM on August 16, 2016 [18 favorites]


New cars are just a way of making a fifty-yard drive down a dealer's driveway cost $10,000.
posted by flabdablet at 3:47 AM on August 16, 2016 [2 favorites]


$4,300 up front is ridiculous. If it were zero, or, say, $500 down, you'd have a point - or, are you in a state that requires taxes be paid up front?
posted by tgrundke at 4:34 AM on August 16, 2016


For reference, I have a 2014 Jetta S, purchased almost exactly two years ago (I think it was two years ago yesterday), approximately 17,000 miles (apparently, I don't drive much; the "average" car apparently has 15k/year). $11,700 is above the trade-in Blue Book value and right around the private party Blue Book value, depending on condition. (Mine's a manual, so the value's actually lower than that, but I pretended it was an automatic.)

What you're going to do instead is find something small and Japanese and ten years old, preferably with a manual transmission, and buy that outright for $2500, and put aside another $1000 to attend to all the little things that will go wrong with it in your first year of owning it.

Unless the OP lives somewhere where the used car market is dramatically different than in my area, small, Japanese, 10 years old and $2500 is nigh on impossible. That plus a manual transmission is laughable. It's definitely worth looking at used cars, but for something that seems like it will both last three years and not be a complete money sink, but they may well be looking at a loan to keep some of their savings in reserve. (I ended up with the aforementioned Jetta in part because it was much cheaper than the low-mileage, small Japanese used car everyone tells you to buy.)
posted by hoyland at 4:53 AM on August 16, 2016 [3 favorites]


Unless the OP lives somewhere where the used car market is dramatically different than in my area, small, Japanese, 10 years old and $2500 is nigh on impossible.

I just looked at Toyota Corollas on my local Craigslist. Even at $2500, you are still looking at cars from the mid to late 1990s, almost all with high miles. To get a good condition example from the mid 2000s would mean spending more. There are definitely good deals out there still, but the used car market now is not like it was some years ago.

I would agree that your current finances don't seem to support this lease decision. You might be more comfortable with just straightforward payments on a newer used car, or the suggestions of buying older for cash. Whichever you do, figure in realistic costs for things like insurance and maintenance -- even a newer car under warranty may need tires, for example, and bad luck happens, like hitting a curb or having a windshield get cracked.
posted by Dip Flash at 5:29 AM on August 16, 2016 [1 favorite]


I'm pretty sure that you can get a reliable used car for what you'll be putting towards that Jetta in the first 2 years. And then you'd own it outright.

QFT. I am currently selling our car on Craigslist for $4500, and it would blow that Jetta out of the water in terms of quality, reliability, speed, handling, usable size, and the whole nine yards. And it's perfectly fine (even better than the new Jetta, IMHO), I just don't fit in it and I am sick of banging my head on the roof (I am 6'3" and it was my wife's car until recently).

My point is do NOT fall for "needing" a new car. And you are NOT lease material, OP. Leases are only good for very, very few people with very, very specific circumstances.
posted by TinWhistle at 6:27 AM on August 16, 2016 [2 favorites]


I just looked at Toyota Corollas on my local Craigslist. Even at $2500, you are still looking at cars from the mid to late 1990s, almost all with high miles. To get a good condition example from the mid 2000s would mean spending more. There are definitely good deals out there still, but the used car market now is not like it was some years ago.

Rereading this, I sounded more down on buying used than I meant to. If you did buy a high-miles Corolla for cash, you could put in a new engine every year for less than the payments on most new cars, for example. As long as you budget for some maintenance and repairs, a good condition older car is almost certainly going to be the cheaper and lower-risk option, and then you can buy a new car later when your finances support it.
posted by Dip Flash at 7:06 AM on August 16, 2016


We currently lease a VW. Their lease terms are very good. We are happy with our lease. But we leased for a very specific reason:

Three years ago, our car was on the verge of sudden death. We had our savings depleted by a series of unfortunate events (including loads of random repair bills on the aforementioned car), and basically had zero money. It was far more important to us, and our financial stability to know how much a car would cost us per month, than it was for us to 'own' the car in the long run. We traded 'owning' a car, for knowing exactly how much that car would cost us. We needed something bulletproof, and if it failed, we would not need to pay for it to be fixed. We also knew that we'd be over the mileage a bit. This was okay with us, and still is actually. We're basically financially rebuilt now, and we're viewing that as just part of the cost of the whole ordeal. This was a GREAT move for us, but now that we're in a better financial position, there's no way in hell we're going to lease again.

I would not lease again. Leasing is a very specific tool, and is rarely a good idea. I'm actually a proponent of leasing in certain circumstances, some of which are outlined by other posters upthread. It really doesn't sound like it will benefit you all that much in your situation, given the details you've provided.
posted by furnace.heart at 7:30 AM on August 16, 2016 [1 favorite]


This is a BAD deal. Simple math:
* $4300/24 month lease = $180 per month
+ $75 monthly payment
= $255 per month, and you have nothing to show for it at the end of the two year lease.

On the other hand, $255 * 60 month car purchase = ~$15,300. Basically, if you make the same payment for three additional years, you'll own the car. Here's a 2015 Passat for $14,000 and a Jetta for $13,000 and another 2015 Jetta for $11,500.
posted by cnc at 8:29 AM on August 16, 2016 [5 favorites]


NO NO DON'T DO IT. My biggest red flag is this statement:

My parents' house is close to where I work but I will have to move much farther away to a cheaper area. I can't do that without a car. I have a bit of savings (about 7k) but don't have a fat salary by any stretch of the imagination. With cost of living in my area + cost of gas + cost of auto insurance, the low monthly payments are very very appealing to me, possibly a necessity.

You have to live pretty close to where you work and drive very sparingly to be able to come in under the mileage limits of most leases. This sounds like very nearly the opposite of what you're talking about doing. You could easily find yourself in a situation where when the lease is up, you have to pony up a ton of dough for mileage overages and wear and tear, and not have enough money for a new car when you're all done.

Take that money down, take a few months worth of car payments that you would pay in the future, and buy a used car for $5k. The only thing better than a cheap car payment is NO CAR PAYMENT. :)
posted by pazazygeek at 1:06 PM on August 16, 2016 [1 favorite]


Also, insurance on a car you do not own (leased or loaned) is dramatically more expensive than insurance on a car that is 100% yours.

Buy something reliable for $6k, keep it maintained, and you can probably sell it in 3 years for most of what you paid for it.
posted by itesser at 5:05 PM on August 16, 2016


« Older A book full of sex and drugs and rock and roll...   |   I ate the burger. Now, a week later, I don't like... Newer »
This thread is closed to new comments.