

Ask HN: Leasing vs. buying a car  - officialjunk

Does anyone know of any technical analysis, comparison calculator or have advice on leasing vs buying a car?<p>I&#x27;ve seen some analyses of buying vs renting a house, but not for a car. I know one major difference is that a car is generally an asset that depreciates in value. I&#x27;ve purchased a few realtively cheap (~$2k) used cars, but am considering going for a new car this time around and am researching leasing over buying.
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JacobAldridge
There was an article on here many years ago (some quick searching has failed
to reveal it, alas) that 'demonstrated' the most sensible thing to do was buy
a 2 year old car and sell it 5 years later.

This gave you the benefit of some of the new car warranty, and meant you
passed it along before the more expensive fixes started to show up. Broadly,
if you want to be sensible with your finances, _don 't buy a new car!_ You're
essentially tearing up a whole lot of money the moment you drive it off the
lot.

Late last year I did the numbers for myself (so again, sorry - no link!). I
could run it through my company, so had the tax advantages of that when it
comes to leasing. What I found was that the benefits only became clear when I
compared leasing a new car with purchasing a new car. (iirc, Leasing with tax
benefits was just a better option than purchasing with cash.)

And since I knew a new car wasn't a good idea, leasing was shelved and I
bought a second hand (pre loved?) vehicle. Those tax benefits (which would
differ in different jurisdictions) may be one reason why it's hard to find the
site you're looking for.

On the related topic of financing a car purchase, which I did with my first
car many years ago, an obvious lesson I learned the hard way was combining
weekly repayments with the length of the loan. All I had in my head at the
time was "$100 per week" \- of course, the dealer immediately applied this to
a 5 year loan which almost lost me finance on my first home some years later.
If you can't pay cash today, think $x/week over 2-3 years max to ensure it
doesn't become a depreciating black hole.

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wikwocket
Without knowing your situation or location, it is difficult to provide
targeted advice, but in general it will be advantageous to buy a 1-3 year old
car, from a good manufacturer, using your own financing (or even better,
mostly with cash).

New cars are nice and shiny, and do have the latest safety/efficiency gains,
but you will lose a bunch of resale value as soon as you drive it off the lot.
Depending on your goals, needs, and the car model, a lightly-used year-old car
can give you 95% of the value for a lot less cost.

Then, as for financing, shop around instead of using dealer financing. Check
with banks and especially local credit unions and see their rates. Then when
you have a car in mind, get pre-approved and get the car.

I would only recommend a new car to someone with cash to burn, and I would
only recommend leasing if it's a car for your small company and your
accountant advises it.

~~~
loumf
There was an analysis done by a respected frugal blog (can't find it now) on
new v. used.

From what I remember, the result was "new" only won if you intended to get a
car and have it for a very long time. Eventually you could overcome the
initial depreciation with decreased maintenance.

Obviously, there are a lot of assumptions, chief among them, that we were only
talking about cars with good maintenance histories.

A lot of people would like to not have the same car for 15+ years -- they
should get a used car.

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axaxs
Never buy, lease, or otherwise pursue a brand new car, unless you have money
to burn and a hang up. The fact you posted makes me believe otherwise...
Assuming buying "hardly used", buy. Most of the loss has been eaten by the
previous owner.

~~~
caw
There are legitimate reasons to purchase a new car, but it really comes down
to doing the numbers for yourself.

I bought a new car right after college. My intent was to do the "responsible"
thing and buy a lease return or some slightly used vehicle. However, with the
price difference, the warranty on that versus a new car, the APR I could get
on a new vehicle (0%) versus a used one (2.75%), and how long I intended to
keep the vehicle swung me to buying new. The warranty in particular was a key
selling point because I was moving to a new city with no social net to help if
I suddenly had to have massive car repairs. Been there, done that, it's not
fun.

There was some other intangibles. I have full service records for my car,
there's no risk of "hidden" damage, I didn't have to bother with taking it to
a mechanic to get checked out.

Bottom line is run the numbers before blatantly assuming it's "money to burn".
It's a cost effectiveness scenario. Obviously more expensive cars potentially
have more expensive depreciation cycles.

Leasing is similarly a good idea _in certain cases_. There's tons of articles
around that illustrate in what scenarios it actually is a plausible option of
obtaining a vehicle.

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cstrat
I am sure this depends on which country and which state you live in.

I'm from Australia and the tax ramifications are quite interesting with both
options. I did all the calculations on a normal lease vs. novated lease vs.
outright purchase. Since I am on the road for work and I can deduct vehicle
expenses and depreciation. So it works out okay to get a new car. It is still
throwing away lots of money, but because of the tax deductions it is less
painful.

I have taken out a novated lease, and also bought outright with finance from a
bank. In the end I worked out that novated leases are a waste of money if you
are able to deduct car expenses yourself. Since I only benefit from a
component part of the monthly expenses being paid pre-tax. (another benefit is
that you dont pay GST on any expenses). Buying outright is fine if you don't
have any need for the money, but I was better off putting the money in my
mortgage offset and being charged interest - that interest is deductible along
with the expenses that go along with the car.

Edit: Again, this really only applies to you if you can deduct car related
expenses from your income tax.

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izzomatik
[http://www.carbuyingtips.com/used.htm](http://www.carbuyingtips.com/used.htm)

This has been around for years and is very in depth with his analysis.

I'm in the same vote , i'll be buying pre owned

but remember "a car is not an investment."

keep your payments low if leasing and lease short term

i guess in the end, ask yourself what car would you be fine with for a long
period of time with no payments if buying and why

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dynabros
Most people forget to factor incentives and bargaining into the
new/old/buy/lease argument. I've leased new cars that cost less than the
depreciation on a purchase. You can also buy a used car for an exorbitant
amount, spending more than new.

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wiradikusuma
Everyone seems to suggest buying used car. But how about miles "used" by the
car and any "abuse/negligence" by the previous owner(s), e.g. using the car
for road trips across desert.

