The buying vs Leasing opinion thread

shooter69

shooter69

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Hi guys,

Let me first tell you where I come from and why I am considering leasing.

I am 29 and are on my 4th car since I bought my first one at age 20. I have basically been buying second hand cars and got either bored of them within 2-3 years or they gave me so much problems that I had to get rid of it. I do not have a rich family so had to get vehicle finance so I can get a car to get to work and take a girl out for a milkshake once a month. I have never been able to get more for my car than what I owed because I sold within 3 years.

I am now in a position where I can buy a new car. But I am wondering if buying is really the option. I might just get bored of it after 3 years(see the new shiny toy and want it as I always do) or I will start forking out big bucks on maintenance when the maintenance and warranty plans expire.

So I am now really considering leasing. The problem I see is that most people see leasing as a way to buy a car you can not afford and say you live beyond your means(this is what I have been reading all over forums covering this topic in sa including MyBB). Why is this? You are not buying the car in fact. You are renting the car. Even if I could not afford to buy the car, if I can afford to rent it, then what is the problem? Why is leasing so frowned upon in SA?

I just read an article that says in the US a lot more cars in the US are being leased. Why is this not happening in SA? http://businesstech.co.za/news/general/94239/buying-vs-leasing-a-car-in-south-africa/ even in the comments of the article one guys calls it "Living beyond your means".

My requirements :
1) buy a new car
2) drive a new car every 3 years
3) not pay for any maintenance
4) pay the lowest possible premium
5) just give it back after 3 years and walk away(obviously I need to look after the car and adhere to the terms and conditions)

I have been paying off second hand cars since I am 20. So in essence I never owned any of my cars as the car is only yours the day you have pay your last installment. This happens to the majority of middle class people. Out of 10 people I know, 1 does not pay for a car and that is because he has an old car that needs to be fixed and he is allowed to use the company bakkie. So none of my friends own their cars!!

If you do not intend to own the car for longer than 3 years then buying instead of leasing is a bad financial decision in my opinion.

I do think most people are not educated about the subject and give uneducated opinions about the subject. So for those who outright says leasing is dumb and made for people to live beyond their means..... Here is a link to a very good explination and the pro's and con's about leasing. http://www.investopedia.com/articles/pf/05/042105.asp

Again, if I can afford to rent it instead of buying it then why is it living beyond my means? To dumb it down a bit for those who gets stuck with it. I can afford to rent my apartment for R8k but I can not afford to buy it and pay a bond of R16k. I can afford to rent a car for R3k but I cannot afford the loan payment of R5k.... I do get the feeling that people do not understand the term "living beyond your means".

I am not putt off of leasing because of peoples comments as I do believe this is the way to go for me. I am just surprised by how opinionated people are about subjects they have no clue about.... this is probably where trolling comes from. lol


Ok done ranting now. Will go look at cars on saturday :D

Enjoy your long weekend MyBB peeps.
 
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Glad I don't buy and sell cars based on their excite-me/bore-me factor, I'd be swapping cars every 6 months at most...

If you really intend to swap every 3 years I guess it makes sense to go your route.
 
supersunbird said:
If you really intend to swap every 3 years I guess it makes sense to go your route.
Click to expand...

This is exactly what I am saying. People see the word leasing and immediately say its bad without taking everything else into consideration.

You just took the fact that I intend on not driving the car for longer than 3 years into consideration. This kind of thinking is what is missing from opinions on the interwebs.
 
supersunbird said:
Glad I don't buy and sell cars based on their excite-me/bore-me factor, I'd be swapping cars every 6 months at most...
Click to expand...

This. Both unthinkable and interesting to know there are people that actually do this. In a way I envy them :D
 
terencej said:
...or I will start forking out big bucks on maintenance when the maintenance and warranty plans expire.
Click to expand...

If you're going to go out of warranty and service plan while still paying it off, you're probably doing too much mileage for a lease. Most leases have very stringent maximum mileages, and you pay a fair bit more if you do even moderately high mileage. And if you're doing low mileage, you're covered by the maintenance plan.
 
Colin62 said:
If you're going to go out of warranty and service plan while still paying it off, you're probably doing too much mileage for a lease. Most leases have very stringent maximum mileages, and you pay a fair bit more if you do even moderately high mileage. And if you're doing low mileage, you're covered by the maintenance plan.
Click to expand...

I do about 1 000km p/m so 12 000km per year. This is below the 20 000 that is normally expected to stay under.

Your warranty and maintenance plan also depends on the make and model that you buy. For instance the standard vw warranty for a polo is 3 years/120 000km. So in 3 years your warranty falls away. You can however purchase an extended warranty and maintenance plans from the dealer. So your argument is dependent on what vehicle you buy and if you are willing to purchase more warranty.
 
terencej said:
Hi guys,

I have basically been buying second hand cars and got either bored of them within 2-3 years

I might just get bored of it after 3 years(see the new shiny toy and want it as I always do)
Click to expand...

^ This.

While I completely understand where you come from, I disagree with the way that you justify it. Additionally, if you are " forking out big bucks on maintenance" after 3 years, then you are probably buying the wrong type of car...

You are 100% right that leasing has its advantages, and in some instances it can be beneficial to lease a car as apposed to buy it, BUT in SA I think its a loophole to keep up appearances and buy a new car every couple of years.

I dont know about you, but I dont want to fork out X amount of money every month on a car for the rest of my life.
 
It can work as you describe.

One thing I would like to point out is that cars do not fall apart after 3 years. I bought my car new in 2010 and I havent spent a cent on it and its still good as new. Paid it off early and it rocks not having a hefty car repayment to worry about and that has enabled me to do other cool things like travel / buy property.

If you are a "car person" then sure, go ahead but maintenance shouldnt be a concern on a 3 year old vehicle.
 
Tman* said:
^ This.

While I completely understand where you come from, I disagree with the way that you justify it. Additionally, if you are " forking out big bucks on maintenance" after 3 years, then you are probably buying the wrong type of car...

You are 100% right that leasing has its advantages, and in some instances it can be beneficial to lease a car as apposed to buy it, BUT in SA I think its a loophole to keep up appearances and buy a new car every couple of years.

I don't know about you, but I don't want to fork out X amount of money every month on a car for the rest of my life.
Click to expand...

Yes, I was buying the wrong type of car. At those specific stages of my life I was not in the position to buy well maintained cars and needed what I could afford. This is where most young adults in that do not get new cars from daddy right after school find themselves. Buying any car second hand is a bet that something will not go wrong.

At the moment I do not mind paying every month for a car. Been doing it 10 years long and do not mind doing it for another 10 years as long as I have no worries. I do however mind the extra payments associated with whatever may happen outside of warranty. You also have the option to keep the car after 3 years so I can change my mind at a later stage in my life if I feel like it.

I see the expense the same way I see renting my flat. Everything else I do is cash. Just not my car or flat.
 
The answer is rather simple:

Emotionally/Short Term:

If you can afford a new car every 3 years - then really doesn't matter what you do - lease/buy with residual etc. You could argue - buy a new car with a high residual - and simply return if after 3 years - as long as the value covers the residual. Most manufacturers also offer finance deals that "guarantee" your future value - very similar to normal leasing - the difference though you are locked in for the period of finance, so if you were to apply for any other finance - say a bond - it will affect your affordability.

There are even rental deals that allow you to pay a monthly amount for 12 months at a fixed amount- and then return the vehicle - perhaps an option? An example I stumbled upon is from Hertz - search for "jeep special" - there are a few options for other vehicles as well. - These are all designed though for the finance institution to win based on the interest you pay...

Remember leasing in the US is popular as the interest rate is very low - 2% or often 0% - so it's an easy choice. Here when you are paying 10%+ interest - its a big amount of money to throw away over 3+ years - just use any of the online calculators - type in your purchase price - say 450K - say 12% over 54 months and see how much you are "REALLY" paying for the 450K.. All emotional options though :)

But back to reality/ Thinking with your head not your heart:

Rather buy that cheap little Honda for half the price to get to work and back (you might even afford some dinner with the milkshake) - take the other half of what you would have spend per month and invest that somewhere - then after 3 years when the Honda is paid - and your money gained some interest - drive the Honda another year or two and put the complete monthly payment into your investment - you'll see after 5 years your Honda is still going and it's cheap to maintain - you will have saved a lot of cash - perhaps to sell the Honda and but a new car if you still want one - but chances are by that time your priorities changed - you might have a bond, and would rather spend the money on other things in the house, holidays - who knows - perhaps by then girlfriend might be a missus - some kids are on the cards - believe me schools are way more expensive that cars... - basically life happens.

It's an emotional thing - everybody likes new things - but once you are at that "paid off car" stage the shiny car becomes less important - and other "nice to haves" become more important, and more expensive - it just takes some discipline to get there.

When we are younger - and credit is accessible - we tend to want new things - but when you are 45 - you might still be leasing a car, not owning your house and then wonder how your mates are able to own that 4 million rand house and the 4x4 and you are still renting a flat or townhouse and leasing a 3 series... the answer would be they stuck it out with a cheaper car and saved up the rest...it's a bit of short pain for long term gain.

Perhaps speak to some Finance Advisor/ a mate in finance / or simply use Excel to get another perspective - you need to see the maths and rand and cents on paper over 5 - 10 years to make a decision using your head :)
 
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terencej said:
I see the expense the same way I see renting my flat. Everything else I do is cash. Just not my car or flat.
Click to expand...

If you are renting a flat surely it is a better long term idea to buy a place than to drive a new car every 3 years?
 
Brawler said:
If you are renting a flat surely it is a better long term idea to buy a place than to drive a new car every 3 years?
Click to expand...

Just remember though, you can always rent something nice than you can buy, when it comes to property. It's a lifestyle choice we don't go for in SA, but in Europe and the US many people rent for their entire lives - especially in the big cities where property is often prohibitively expensive.
 
IguBu said:
The answer is rather simple:

Emotionally/Short Term:

If you can afford a new car every 3 years - then really doesn't matter what you do - lease/buy with residual etc. You could argue - buy a new car with a high residual - and simply return if after 3 years - as long as the value covers the residual. Most manufacturers also offer finance deals that "guarantee" your future value - very similar to normal leasing - the difference though you are locked in for the period of finance, so if you were to apply for any other finance - say a bond - it will affect your affordability.

There are even rental deals that allow you to pay a monthly amount for 12 months at a fixed amount- and then return the vehicle - perhaps an option? An example I stumbled upon is from Hertz - search for "jeep special" - there are a few options for other vehicles as well. - These are all designed though for the finance institution to win based on the interest you pay...

Remember leasing in the US is popular as the interest rate is very low - 2% or often 0% - so it's an easy choice. Here when you are paying 10%+ interest - its a big amount of money to throw away over 3+ years - just use any of the online calculators - type in your purchase price - say 450K - say 12% over 54 months and see how much you are "REALLY" paying for the 450K.. All emotional options though :)

But back to reality/ Thinking with your head not your heart:

Rather buy that cheap little Honda for half the price to get to work and back (you might even afford some dinner with the milkshake) - take the other half of what you would have spend per month and invest that somewhere - then after 3 years when the Honda is paid - and your money gained some interest - drive the Honda another year or two and put the complete monthly payment into your investment - you'll see after 5 years your Honda is still going and it's cheap to maintain - you will have saved a lot of cash - perhaps to sell the Honda and but a new car if you still want one - but chances are by that time your priorities changed - you might have a bond, and would rather spend the money on other things in the house, holidays - who knows - perhaps by then girlfriend might be a missus - some kids are on the cards - believe me schools are way more expensive that cars... - basically life happens.

It's an emotional thing - everybody likes new things - but once you are at that "paid off car" stage the shiny car becomes less important - and other "nice to haves" become more important, and more expensive - it just takes some discipline to get there.

When we are younger - and credit is accessible - we tend to want new things - but when you are 45 - you might still be leasing a car, not owning your house and then wonder how your mates are able to own that 4 million rand house and the 4x4 and you are still renting a flat or townhouse and leasing a 3 series... the answer would be they stuck it out with a cheaper car and saved up the rest...it's a bit of short pain for long term gain.

Perhaps speak to some Finance Advisor/ a mate in finance / or simply use Excel to get another perspective - you need to see the maths and rand and cents on paper over 5 - 10 years to make a decision using your head :)
Click to expand...

Although I do not agree with all you said, most of it makes sense. The milkshakes I had when I was 21 made that I am actually a married man today :wtf:

Anyhow, at this stage of my life I am seeing leasing/renting/buy back options as the way to go. I can change that in future(3 year terms).
 
Bit that has always bugged me about leasing in ZA at least is it looks too similar to just buying with a huge residual, in my experience there isn't much difference in monthly payments and the one just assumes you'll sell back to the dealer where with the other it is an option, but not assumed. Much of a muchness.

I'm a bit jealous of the brother-in-law's lease agreement in the Netherlands: a full maintenance lease that even covers unlimited fuel as long as you fill up within the Netherlands. The monthly payments work out significantly cheaper than buying especially once you factor in the fuel etc

Does such a thing even exist over here? Back to the question at hand though, my rule of thumb:
- always buy
- buy without any residual
- finance over a maximum of 3 years

If you can't afford a car within those parameters, buy a cheaper car
 
Must have been a great milkshake then! :)

I don't really see any issues with leasing - as long as it's sort of "sensible" - I bought a few cars - and eventually traded in when that "next good deal" (read - the fancy one I wanted!) came around.. and often wondered if it was worth it - as you usually loose way more than you think when you trade in - one exception is a smaller car we bought cash 9 years ago - my run around to work and back :) - that proved to be a great financial decision - but the 2nd car is usually the nice one - where low mileage is done - so a 2/3 year old is the sweet spot in my experience - many great deals on "expensive" cars - think SUV's around the 1M mark.. etc for between 40% and 50% discount of current retail value.. (car prices have skyrocketed over the last 3 years!)

It's to gauge what " sensible " means - of course vs what you can afford comfortably - that's the trick :)

Perhaps look for a nice lease option over 3 years with a GFV - guaranteed future value - and try to at least stick to the 3 years then decide. - No idea what your brand preference is - but there are a number of such deals available.

Good luck with the car search!
 
terencej said:
This is exactly why people fork out on maintenance. This is the issue I had for 10 years and it is not working for me.
Click to expand...

Just to clarify when I say "buy a cheaper car" I mean one that is relatively new / brand new with full maintenance plan included, maybe just one model down from the spec or maybe another brand. Even if you fully intend to get a new car every 3 years I'd still go the "buy" route, it will at least give you a deposit to use on the next car if you do it without a residual.

With a big residual / lease the math just keeps me up at night, the knowledge that the big monthly amount will get even bigger with the next car and it will never end :(

It's fine to just see it as an expense like renting a flat, but if you're happy with the flat you're renting and you find out you can buy it for the same monthly amount as the rent, you'll think about buying surely.

I try (not always successfully) to limit my options to things I can afford to buy and then the buy vs lease choice comes down to better considerations than affordability imo.
 
And as with cars - people should TRY and not pay off a bond over 20 years - you should essentially start with what you can "just about" afford - and as things improve start putting more money into the bonds..The savings over 10 years are frighting...

Same with cars - 3 years seem to be the sweet spot on depreciation - vs interest - so after 3 years you still get something back for it - of course brand, model etc plays a big role - or decide to keep it 5 years + - and if low mileage is the order of the day - then it makes a lot of sense as you shouldn't have issues with maintenance on low mileage.

The magic word is "interest" - that in my opinion is the cost.
 
IguBu said:
Must have been a great milkshake then! :)

I don't really see any issues with leasing - as long as it's sort of "sensible" - I bought a few cars - and eventually traded in when that "next good deal" (read - the fancy one I wanted!) came around.. and often wondered if it was worth it - as you usually loose way more than you think when you trade in - one exception is a smaller car we bought cash 9 years ago - my run around to work and back :) - that proved to be a great financial decision - but the 2nd car is usually the nice one - where low mileage is done - so a 2/3 year old is the sweet spot in my experience - many great deals on "expensive" cars - think SUV's around the 1M mark.. etc for between 40% and 50% discount of current retail value.. (car prices have skyrocketed over the last 3 years!)

It's to gauge what " sensible " means - of course vs what you can afford comfortably - that's the trick :)

Perhaps look for a nice lease option over 3 years with a GFV - guaranteed future value - and try to at least stick to the 3 years then decide. - No idea what your brand preference is - but there are a number of such deals available.

Good luck with the car search!
Click to expand...

I am currently leaning towards the VW Guaranteed value buy back option on a Polo. http://www.vw.co.za/en/purchase-and-finance/special-offers.html
 
As many have said, depends how you see your vehicle.

Some people enjoy driving and take pleasure from driving a "driver's" car. (I'm excluding those that buy a nice car to show off. That's just dumb). Those will probably get a new car every 3 years.

Then you get those that are terrified of driving something out of warranty. Those also buy a new car every 3 years.

Then you get those that see their vehicle as tool to get from a to b. They will be something cheap and keep it for a decade.

Different strokes, for different folks.
 
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