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itguy05

join:2005-06-17
Carlisle, PA

1 recommendation

reply to Mospaw

Re: Lease vs Buy

said by Mospaw:

Leases are very rarely a good move. New cars are also quite expensive, especially that very first time you take a drive in them.

That only comes into play if you sell it. If you keep it around for a long time depreciation is not a factor. After 5-7+ years its still worth the same no matter what. Depreciation is only something that you should take into account if you get new cars often. If you "drive them till the wheels fall off" it makes no sense to worry about it.

A car is not an asset - it will be worthless no matter what at the end of its life (it's not like real estate that theoretically appreciates) and all depreciation does is try to make a guess as to what value has been "used up".

So, yes that first drive off the lot "cost" you $10k (or whatever) but only if you turned back to the dealer and got something else.

quote:
I got 3.4% financing with a 72 month loan (!!) on my used car.
OUCH! 6 years on a car that's already 2 years old. You must not drive much. Typically if you shorten the loan the rate goes down. When I bought my new car in 2009 it was actually cheaper for a 60-month than a 72 month because of the rate.

quote:
I admit I'm cheap, but you're almost always better off (financially) buying used than buying new or leasing.
It all depends on the car. If they are doing 0% or other low rate financing + cash back you may well do better with new. If you keep your car for long periods of time (we do - at least 6 years) depreciation is not an issue at all.

If I buy a new car, keep it for 6 years and sell it at the end with 100-150k depreciation really has no affect. Case in point. Bought my last car in 2004, paid $32,500 for it. Traded it almost 6 years later for $7k. For 6 years I paid $25,500 for it.

If I bought it used in 2006 I would have paid right around $25,000 and in 2009 it would have still been worth $7k. In 2011 after 6 years of ownership of that used car would probably have been worth just as much as it would be older and have more miles.

Also you never pay sticker price so comparisons from sticker price are useless. Yes, your used car was 50% off sticker but you can usually start at invoice which is around 10% off sticker price. And if you get money off that reduces the cost even further.

It's all a game and you have to run the $'s and see what makes sense for you and your driving patterns.


Mospaw
My socks don't match.
Hawaiian Jellyfish
join:2001-01-08
Mile-High
kudos:1
Lots of good points, especially about you only lose $10k if you turn right around and trade it. I don't think anybody does that, so you point is very valid. As time goes one, the amount of depreciation gets split over more days and is effectively lessened.

I keep my cars a good long time. I had the last one for 7 1/2 years. I got about 23% of what I paid for it when I got it used as trade, which I think is pretty good.

My sweet spot is to buy something around 2-3 years old. They're usually new enough to have a little factory warranty left, but have taken the biggest hit in depreciation. I like depreciation because it makes the cars cheaper for me to buy!