Buy? Lease? Argh: We just want reliable transportation!
July 12, 2017 1:43 PM   Subscribe

My partner and I begrudgingly need another car. We have a lot of student loan debt and are torn between leasing, buying a beater, or or a nice used car.

Together we have about $500 left each month after our bills and retirement (IRA, public retirement systems).
We have about 12k cash in our name (including 3k saved next year for our wedding) and 80k in student loan debt together. No other debt. 15 months from now, after the wedding, we'll have an extra $400/month coming in.

We both do not have any emotional attachment to cars, don't have much knowledge besides reading consumer reports and every thread on ASK Mefi; just want the sweet spot of reliability and lowest cost of ownership so we've looked at Corollas, Camrys, and Civics.
Our current car is a 96 grand am with only 70k miles, hope to drive it into the ground for however it can last, no idea how long it will last. Partner's previous car was a 00 Corolla with 185k, lasting 6 years with them until now.

Our options:

- Buy a $5-7k car and no warranty (05-07 Corollas with ~100k mileage); gamble that it'll be reliable and hope we won't be in a similar position next or the following year's midwestern winter. Continue to use extra money to pay off our student loans and replenish our cash on hand. My brother (an auto insurance claims adjuster and former gearhead) strongly advised us to lease because buying a used car for $5-7K or that much mileage is far too much of a risk and stupid.

- Lease a car: With small amount $ (2-3K) due at signing, use the $200-300 left over from budget to pay off student loans. Hope that we don't get subjected to fees when we return the car. Reassess options 3 years from now. For any road trips that we do, rent a separate car or take the impala.

- Buy a recently leased car ($10-15k) which would still require a loan of $5-10k depending on specific car and how much we put down, it has a warranty. Gamble that my car won't fall apart before the wedding after which we'd have more cash flow. Drive this into the ground.

There's no clear consensus so far and don't like any of the options.
Asking: Should we ignore my brother's advice? Any other models of cars to consider? Other options to consider? Would it be worth to take on more debt (via a car loan) rather than lease? Go back to the idea of renting a car occasionally

Partner drives about 10k/year
I drive about 5-6k/year on the grand-am
we may take 1 500+ mile road trip once or twice a year (included above)
We use our cars simultaneously ~2 times a week thanks to public transportation but have found it a little inconvenient when we've needed 2 cars in the past few weeks.
All of our driving is within the city and suburbs; all 4 seasons of weather.
Insurance between a brand new leased Corolla and used 07 would be negligible (~$20/month cheaper for an 07 )
No kids
Rent our housing and will for the foreseeable future because of debt ratio
800 credit
posted by fizzix to Work & Money (20 answers total) 3 users marked this as a favorite
First, I'd include Hyundai and Kia here, too. The Japanese entry-level cars have gotten real competition from Korea. My wife bought an Elantra in 2002 and it was a GREAT car.

We've bought used, bought new, and leased new in the last 10 years, and have nice things to say about all three options.

My limited understanding of the economics involved suggests that leasing is more likely to be a good idea on higher-end cars that hold their value, but perhaps not the greatest option closer to the lower end where cars typically lose value more quickly, but this is a fairly reductive analysis that may not always hold true.

Car-buying economics are super weird and car prices super influenced by dealer incentives and whatnot, so this isn't a slam-dunk piece of advice. You also seem to be saying you drive in aggregate only about 16K a year between you, so the new car would get only a share of that, which on paper makes leasing more attractive. And, of course, if you lease a new car, reliability is going to be a nonissue for you; that's worth something.

If leasing still makes sense, though, be SURE you buy whatever lease protection product they offer. This will cover dings and whatnot beyond what they consider "normal" wear and tear, so you don't have to pay at the end of the lease. We bought that when we leased a BMW X1, and it saved us about $3K on the back end thanks to some door dings and my inability to parallel park without scuffing the rims.

Does this help?
posted by uberchet at 2:00 PM on July 12, 2017

This really depends on your priorities. Do you prefer greater reliability or lower expenses?

I opted to bike and bus year-round so my ex and I could share a car, and it was really great for our finances. If that's not for you, could you consider an electric bike?
posted by metasarah at 2:22 PM on July 12, 2017

I've never bought a car, but I have bicycled year-round in the midwest (and continue to make almost all trips by bicycle and transit in all seasons and weather). Before purchasing or leasing a car, it might be worth seeing how many of your trips you can make by bicycle, and working out what other options you have for the trips that aren't feasible without a car.

Having a one-car household is easier if everyone in the household uses a bicycle/transit as their primary mode, so that the car's available when needed without inconveniencing anyone. A car share subscription might also be a good supplement.

I don't normally pop in to the "what car should I buy?" questions with this answer, but you did ask about other options, your mileage is low, and you're short on cash, so it seemed like a good fit. In any event, if you give it a try for a month and it doesn't work for you, that's still a few hundred bucks in extra savings that you won't have spent on a car yet, so you might have additional car-acquisition options.
posted by asperity at 2:23 PM on July 12, 2017

$5-7k for a 2007 Corolla seems really high! I had a 2007 Certified Used Corolla back in 2012 that was around 6k from the dealership with ~75k miles. I sold it last year, with just over 100k miles, to a private party for about $3500, in an expensive market. Private parties can be tricky but if a dealership is selling the same vehicle without a warranty, it may be advantageous to go third party. (I've had good and bad luck with buying from private parties, and my unsolicited advice in that regard would be to have a good gut feeling about the trustworthiness of the seller).
posted by stillmoving at 2:29 PM on July 12, 2017 [1 favorite]

If at all possible, sell that time-bomb Grand Am to Carmax and buy the newest Corolla/Civic/Fit you can afford... and then share that one car between the two of you for as long as you can. If you can both get to-and-from work in a reasonable amount of time with only one car between you, then this is the smart play. This is doubly smart if you can make use of Uber/Lyft/Zipcar.
posted by everythings_interrelated at 2:58 PM on July 12, 2017 [4 favorites]

I read in the last few days, maybe here? that the most economical way to drive is to buy a ten year old car and keep it for five years but I suppose it depends on the car. We take any car we are considering to our mechanic. For a fee he checks out the car and also advises on upcoming maintenance like timing belt replacement.
We also found a pretty good used car lot, maybe not the cheapest but they offer guarantees so it might be worth asking friends about their experience.
posted by Botanizer at 3:01 PM on July 12, 2017 [1 favorite]

Most leases limit the lessee to 12K-15K miles a year, with penalties for going over (an additional 10 cents to 30 cents per mile at the end of the lease). New employment, a new address, or other changes, and your current mileage figures might increase significantly. Negotiating a higher limit = greater payment. (Also, does that insurance quote for a leased car cover both drivers, including gap coverage?)

FWIW, I think your brother's advice is sound. Once in my life I lucked into a true "creampuff" used car -- in great shape, with low mileage, for very little money. But I prefer car ownership over leasing, so I think a reliable, guaranteed late-model used car, exactly as you've described, may be your best option. You can put a decent amount down without wiping out your savings, and you should secure financing outside of the dealership (even if you only end up using said financing to finagle still better financing). Then you drive the car into the ground, or have an asset to sell if circumstances change, or whatever.

Lastly, a twenty-one-year-old car is generally not the road-trip car, it's the local, low-speed (because it lacks more modern safety features), fallback car. If you're not taking the newer vehicle during holidays, definitely rent.
posted by Iris Gambol at 3:04 PM on July 12, 2017 [1 favorite]

I leased a Corolla for $190 per month for two years, though I do think I needed to put a couple thousand bucks down to get that monthly payment. I liked leasing because if I had any issues, the car was under warranty and the dealership covered it. I do think buying a used car involves the risk of problems that could require hundreds of dollars in repairs. With my Corolla, I scraped the hell out of the hub caps and had a couple bumps/scraps on the bumper, but I was told anything like that at or below the bumper was fine when it was inspected at the end of my lease. I was very worried about fees, but I ended up paying nothing.

With leasing, I think you should be able to calculate your total costs up front, whereas you're rolling the dice more when you buy a used car. At the same time, if your life situation changes, you're stuck with that lease whereas you could always sell a car you owned. I went for a two-year lease, which was somehow cheaper than a three-year lease, because I didn't want to lock myself into a car long-term. When my lease ended, I got rid of my car and exclusively started to use Lyft, Car2Go, public transportation, and my feet.
posted by AppleTurnover at 3:30 PM on July 12, 2017

Okay, I know we all have reservations about the financial peace guru Dave Ramsey as a person, but I think most people who are passionate about being debt-free (or working towards being debt-free) agree he has lots of sound advice.

Here is his take on the car lease (or car fleece as he calls it), for what it's worth. And here. And here's a post he did about car payments in general.

I vote buy a used car, personally. We're driving a 2003 Subaru Legacy and honestly it's fine. We take good care of it and we don't owe any payments on it. So, that's nice. And, hey, that's Dave says to do, too.
posted by pinetree at 3:32 PM on July 12, 2017 [2 favorites]

We were recently in a similar situation and ended up with a really nice electric bike and it is *amazing*. I do 6km/day four day a week and it's nothing, despite my whole route being rolling hills. I looooove my bike. Rent a car for the road trips.

We got a used Harry vs Larry bullitt cargo bike off eBay - I do the daycare run so ours has a child's seat in front. It takes exactly the same length of time as driving did. There are lots of options in e-bikes though if you need to accommodate grocery store trips and the like... just know it can be done.

The bike is paid off, few ongoing expenses -no gas, no getting it smogged, no mandatory insurance etc. A lot of repairs and maintenance can be done at home, and there's a whole community of people you meet at the bike shop (if you want).

Our car is a "cream puff" beater.

Feel free to memail me if you have any questions about e-bikes!
posted by jrobin276 at 3:55 PM on July 12, 2017 [1 favorite]

I recently chose option 3 myself, and I'm happy with that choice. I put about 8k down (half from my savings, half from insurance after my wife totaled her car) and got a 2014 Corolla for under $150/month. Your mileage requirements are less than mine, and your credit is much better, so you could most likely get a slightly older car (around 2010ish) for less.

Another thing I would suggest is to trade your old Grand Am for something marginally newer. Pontiacs aren't known for reliability, but with so few miles, you'll probably get good value that you can put toward an early 2000s Corolla.
posted by kevinbelt at 4:43 PM on July 12, 2017

If there are only 2 trips per week where you need two cars, I would just use Lyft Line for those trips. My husband and I share a car, and one or other of us probably takes a Lyft 3-4 times per week, and we still come out ahead. (We used to have a Zipcar membership, but found that doing Lyft Line is both more convenient and worked out cheaper for our needs.) If you have car2go in your city, I've also heard rave reviews of it (it doesn't exist in our city so obviously we don't use it).
It can get a little inconvenient at times, but it's worth it to us for the cost savings. Especially if you know it's only for about a year and then you'll have more cash flow, it seems like a good tradeoff.
posted by rainbowbrite at 4:51 PM on July 12, 2017 [1 favorite]

Take a look at buying used cars from the major rental companies. You get a discount on the blue book value because they're rental cars, but they tend to have been very well maintained.

If necessary, rather than leasing, get a car loan from a credit union.

I did this and may never buy a car another way again. I got a 25% discount off bluebook, it was hella easy, the car was in great shape. I have also talked KathrynT and phunniemee into it.

You will be looking more at the $10k range, but you'll be getting cars that are only 2-3 years old and are very well-maintained mechanically. A similar option is government auctions, which sell not just seized cars (drug cars!) but government fleet vehicles which are like dull Civics and Corollas and Focuses.

Feel free to memail me if I can answer any questions. Usually you can rent the specific car you want to buy for three days, take it to your mechanic, and just return it if you don't like it or keep it if you do. (If you buy the rental fee counts towards the purchase.)
posted by Eyebrows McGee at 6:56 PM on July 12, 2017 [1 favorite]

Those 10 year old Corollas are solid cars if they've been cared for. I know half a dozen people, including my mechanic, who all drive Corollas of that vintage and they seem to be lasting forever. Caveat: this is in a place with no snow. I have no idea how snow affects the longevity of a car.
posted by cholly at 3:12 AM on July 13, 2017

I drive a 1995 Daihatsu Mira that I bought in 2008, with 150,000km on it, for AU$3500 (over the odds from a dealer rather than waiting for better value in a private sale because I needed it in a hurry). It's a fine little car. Total cost of ownership has been way less than anybody else I know has devoted to their "nicer" newer cars.

I've always had it regularly serviced and replaced wear items at the intervals specified in the owner's manual, so it's always stayed reliable. Spent about $1200 on an engine teardown and rebuild at 220,000km when oil consumption started to increase a bit quickly. It's got 285,000km on it now.

I am completely convinced that nine tenths of "beater" unreliability is down to people thinking of them as essentially disposable and therefore skimping on servicing. Small Japanese (and as mentioned upthread, Korean) cars can run very economically for a very very long time if you look after them as if they were new.
posted by flabdablet at 7:05 AM on July 13, 2017

Thanks for the advice and look forward to hear more.

We'd love to do car share and although we live in one of the densest part of the area, the closest car share location is about 6-7 miles away (30 minutes by public transportation) and there's only 2 car sharing locations in the entire county).

We'd consider lyft more often but have initially balked because a few of the trips (doctor's, rec league) we priced out were ~$20 one way. Admittedly, I'm also a little concerned about getting hosed on surges. That probably needs more consideration.

We initially started in favor and pursued option #1, but had 2nd thoughts when my brother came on me hard (and essentially held an intervention over the phone).
posted by fizzix at 2:32 PM on July 13, 2017

Warranties on new cars are not magic. Like any other kind of insurance, they're just a bet: that the amount you will pay in premiums over the life of the policy is less than the amount the events you're insuring against will end up costing you over the same period.

When you buy a car with a warranty - whether that's new, or whether it's used from a dealer - you're effectively buying insurance against needing to rectify faults during the warranty period, and you pay the entirety of the premiums up front.

The other thing that isn't magic about new cars is their reliability. As with any durable machine (and cars are not yet constructed as disposables) reliability has more to do with whether the machine gets proper preventive maintenance at the rate it's designed to need it. In a properly maintained used car, that rate doesn't increase over time. A twenty year old car that's been properly maintained is every bit as unlikely to break down when you need it not to as a new one.

And yet new cars sell at a ridiculous multiple of the value of ten-year-old cars. Seems to me that this has to be down to the desirability of new-car features rather than to reliability per se.

If reliability and low total cost of ownership are your overriding priorities, I can't see how you'll do better than acquiring a well maintained used car over ten years old - even if the engine is at the end of its effective service life. As long as the bodywork is in good nick, an engine rebuild is the most expensive requirement that an old car can possibly impose on you, an old car plus an engine rebuild can leave you with a machine that's more reliable than a newer one for less upfront cost, and if it's small and Japanese it's not going to cost you significantly more to fuel and maintain either.

The fact that the old car costs so much less upfront also makes the warranty bet much less attractive for you, because you stand to lose so much less in the worst case. So if old cars are still on your possibilities list, I wouldn't be worrying too much about warranty. They really aren't magic, and simply having one can't get your car back on the road any quicker if it does break down.
posted by flabdablet at 8:32 PM on July 13, 2017

And yet new cars sell at a ridiculous multiple of the value of ten-year-old cars. Seems to me that this has to be down to the desirability of new-car features rather than to reliability per se.
Er, no. At this point, 10-year-old cars tend to break in annoying ways that are expensive to fix, so you either live with brokenness (if it's not related to motion or safety) or pay to resolve the problem (if you can afford it).

I would be willing to bet money that a 2 to 3 year old car would, on average, be materially more reliable over a 3-5 year ownership period than a 10 year old car. In fact, I make that bet every time I buy.

The other aspect to this to factor in is the owner's cash flow and financial position. Even if we stipulate that a car from the Bush administration won't cost so much in repairs as to equal a new car's cost, that *also* assumes that the money you'd spend on repairs is on hand. There area meaningful benefits to a newer car beyond reliability (increased safety, fuel economy, more modern features).

Simply put, there are more people are in a position to assign a portion of their cash flow to worry-free transportation than there are who keep thousands of spendable dollars on hand for things like engine rebuilds or other high-dollar repairs. The incentives typically on offer for highly qualified buyers of new cars just makes this even MORE true.
posted by uberchet at 7:57 AM on July 14, 2017

I would be willing to bet money that a 2 to 3 year old car would, on average, be materially more reliable over a 3-5 year ownership period than a 10 year old car. In fact, I make that bet every time I buy.

Most people do. Personally I've always had good results from betting the other way.

I've owned three cars. Each was well over ten years old when I bought it. Each cost me about AU$3500 up front and each of them has needed maybe AU$2000 more than a newer car over the period during which I've owned them to replace and repair stuff that would not have needed replacing or repairing on a newer car. None has ever let me down due to mechanical failure. Had other people not destroyed the first two, I would still be driving the first one.

My wife has owned three cars. All of them were newer, bigger, more complicated, and more expensive both to buy and to run than any of mine. Unlike any of mine, none of hers came with a complete service history. She's had overheating troubles that have cut journeys short with two of them.

It ain't the age, it's the maintenance.
posted by flabdablet at 8:33 AM on July 14, 2017

stillmoving, unfortunately, that's the going rate where I live.

After more looking, we purchased an 07 corolla (99k, $5900, 6,700 with negotiated down from a list price of $7,900) over the weekend; it was the same one that we were looking at 2-3 weeks ago. Before buying on Saturday, we did take it to my mechanic of 15+ years who approved of it and didn't find anything structurally wrong with it.

Later that night, we realized that the windshield washing fluid wasn't coming out of the tank; looks like the motor on that pump or the fuse for it is shot.
We're generally happy at this point but I'm personally pissed at myself (& a little at my mechanic) for not catching that considering it worked when I test drove the car for the first time a few weeks ago.
posted by fizzix at 9:25 AM on July 24, 2017

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