Shawn writes:
In Nov-2010 my 2000 Camry v6 XE with 70k miles started to have some problems, mainly an oil leak and a power steering leak. Additionally it was going to need a new timing belt soon, and the front driver side wheel makes some squeaking noises. While I could live with a small oil leak, I needed to fix the power steering pump. I don’t have the time or place (and possibly ability) to replace the power steering pump myself so this was going to have to be done at the mechanic.
After looking at the choices it seems to me the Camry was going to cost me ~2k to fix and possibly more in the next year or two (exhaust and tires were coming sooner than later). In trying to find cost effective transportation I found a 2010 Nissan Sentra with a $189 no money down lease. With the dealer giving me $4500 for my Camry my costs end up being reduced to about 80 a month for the payment plus ~$12 more dollars in insurance.
By my calculations the Camry would have needed to have over $5500 worth of repairs and maintenance items like brakes/tires in 3 years to make the Sentra the better economic deal so I am certain keeping the Camry was the better choice but I leased the Sentra because I valued fixed costs and hopefully 39 months of trouble free transportation.
My question to you and the best and brightest is what would you have done? Also do you have a target for cost per mile for your vehicles that you like to keep to. In my scenario the Sentra is .34/mile with the Camry at an estimated .27/mile (including 3k worth of repairs). Thanks.
Steve Answers:
Your calculations were wrong.
Sajeev answers:
Again, Steve is on the right track. To which I ask: you need cost effective transport, but you leased an economy car? Assuming this is a short term lease, the deal sounds okay from what little we see. Which is a thin veneer that often hides the ugly fiscal truth: there’s no way I woulda done that. What will you do after the lease ends? Perhaps I am being too mean, but it sounds like you are making payments on that Camry too.
Which implies your finances are highly leveraged. That’s bad, as it only works for a short period of time. And cars are not like college loans or a mortgage note, they are a terrible reason for going into debt. Well, the debt of leasing a Nissan Sentra, that is.
Like mentioned in a previous Piston Slap, you can do better buying a car in this price range. The CPO Focus was about $50 more a month, will last for 8+ years with minimal upkeep and is probably better optioned than your Sentra. And owning a brand new Corolla for $272 a month is a far smarter deal than your $189 lease payment. Even if you hate the Corolla, odds are it will be worth decent scratch in the end, to a kid on Craigslist. So kiss that money goodbye: you may not feel that now, but you will 4 years from now.
Wow, should have asked the question beforehand. But then as I got about half way through the OP letter I thought; “The guys are gonna say: ‘Should have kept the Camry and worried about paying down your debt.\'”
In my opinion, this vintage Camry was the most “American” foreign car ever built based on style alone. Possibly the best Camry ever built as well.
Definitely keep it, but you asked TTAC a question AFTER THE FACT, thus rendering any advice by Steve and Sajeev, and by extension, us, irrelevant! The damage is done. What to do now? Good question. Now you’re insuring two vehicles, one that is 11 years old with only 70k miles! If you are financially squeezed, sell the Camry, sit out the lease by not going over the mileage, treat it like a museum piece, drive it as little as possible, park in the next county when you go somewhere so it won’t get dinged, take the bus, ride a bike, or just walk, because for any damage the car has, for any miles over the limit, you will pay dearly!
Of course, if you really like the car, you can always buy it, thus sparing the indignities above, but a Sentra is no Camry. You’re kinda stuck, to be honest, in my opinion. Cheer up, I’ve made many financial mistakes too! You made a decision, now you must deal and live with it, unless you have a rich uncle to bail you out. I never did.
For a completely out-in-left-field comment, my wife and I looked at one of these in 1999. We bought a Dodge Stratus instead. Saved over $5k. That was at least as good a car for our needs at the time. Generally the same size.
He didn’t keep both cars — he traded the Camry in to cut his monthly lease payment
Leasing makes sense when you own a company and can write it off as a business expense. That’s it. Full stop. If you can’t afford a car payment at a dealership, buy one off of Craigslist or Ebay. DO NOT LEASE A CAR. Leasing sounds great until you realize you get all the downside (paying for the depreciation) and none of the upside ( you don’t own jack shiite) for use of a car.
I have never understood why anyone would lease a car other than those who can get a better tax treatment than by owning a car. Lease a car, and you are paying someone else to own it, plus a profit. How can that be to your advantage?
Folks lease for a variety of reasons. One, if you own a business, it usually makes sense, like you said. The other reason, and it is a $hitty on, is that the driver wants more car than they can afford to own but want it anyway. So they get locked on the payment cycle of hell. When they turn it in, they pay more junk fees and possible body repair charges. Then, they lease again because the dealer will waive the junk fees for another lease. Bad move. Or, perhaps they just want a new car every three years and don’t mind throwing good money away. If you can afford an new car every three years, I don’t know why you wouldn’t simply buy it and trade. That way you are not held hostage for anything.
This was short-term justification for a long-term issue. Yes, when the lease ends, chances are you are not going to get to keep that low montly payment on ANYTHING. The biggest repair cost for the Camry was the timing belt, and the power steering leak could have meant just a seal kit for the pump.
Steve, I may be reading Shawn’s note incorrectly, but I believe he also calculated the repairs to the Camry to come out at $2500. The $5500 was the number he figured would have been needed in repairs to make the Sentra an economic wash.
So Shawn, in answer to your question, was taking what you recognized to be the more expensive route in return for fixed costs and the potential for 39 months of repair free motoring the right decision: if it allows you to sleep better at night and/or makes you happy – yes, it was the right decision. If not, well, only you can decide if it was worth it then.
Right, he is including new tires and other items that will come soon, whereas the Sentra has new tires and brakes. It’s not nearly as bad a deal as some are making out. In this age of soon to be $4 gas, the Sentra is likely much much more fuel efficient. Another area of savings.
I agree however that in replacing it, purchasing a CPO economy car would have made more sense. You’d get the warranty, the new tires and hopefully brake pads, and could own it for a similar payment. The other factor, at least where I live, is that insurance and property/excise taxes are higher for new cars.
$4500 doesn’t seem that low to me as a trade value for a Camry that obviously needed some work. Sure he could have sold it himself for more.
I agree however that in replacing it, purchasing a CPO economy car would have made more sense
When you look at CPO prices for something like a 3 year old Civic – it makes no sense to buy it used.
In this age of soon to be $4 gas, the Sentra is likely much much more fuel efficient. Another area of savings.
His 00 had 70k on it. If it’s parked that much 5 mpg one way or the other is just noise.
Leasing makes sense if you want an expensive car for lower payments. For example, if I did not put many miles on my car (like 10,000 or less), I would consider leasing a Bimmer. By leasing I could afford much more car and it’s not like I would want a Bimmer out of warranty given the high maintenance costs. Leasing just takes a lot more more to keep from getting taken. Have to know residual on the car, money factor, etc. If you are good at the math and like to keep a relatively new car all the time, not a bad option.
Don’t see the point of leasing an economy car. The delta between owning and leasing is just too small to justify it.
Agreed — I would never lease because I’m too cheap. But do like the idea of having an “opt-out” in 36 months, in the event reliability becomes questionable or if the styling doesn’t age well to you. The problem becomes when you “opt-out” every year, and have driven 4 new cars over 12 years instead of one reliable one. To each his own.
No possible benefit could come from asking this question after the transaction has been completed. The only possible outcome is that you feel buyers remorse…either the same level that prompted you to ask (don’t deny it; if it wasn’t there you wouldn’t have asked) or an even higher level that will prompt an angst-riddled experience in your long-term rental Sentra. You made your bed, take your lumps, and if you’re lucky you’ll learn from the experience without disastrous consequences.
The 2000 Camry might also be a peak year in the quality/cost ratio. That 70k mile example had a crap-ton of life left in it. My wife’s sister has a 2000 Camry with what must be over 200k on it that was my wife’s for a time in college and her mom’s before and after that. They drive like a barge, ride like a hot air balloon, and the interiors reek as bad as an old hockey bag but they’re dead reliable despite utter neglect.
+1 My wife’s ’01 Camry with 142k hard-earned miles is like Tina Turner with Ike – keeps getting abused and performing with a smile on her face. As long as the Camry doesn’t want to write a book that gets turned into a movie…
I wouldn’t say it drives like a barge, but it doesn’t have what I would define as excellent road feedback. It is an appliance (I nicknamed the gray Camry “The Appliance” as a matter of fact). In its life, it has only taken an O2 sensor, VSV and charcoal canister (allegedly because I topped off the gas tank – a no no in many Toyota cars I’ve heard), and normal maintenance items (although I replaced all four strut/springs with quickstruts and that really helped make it drive like a real car when loaded down).
It gets good gas mileage (24 with brutal urban DC driving, 31 highway with full load, A/C, and averaging 75/80), has a large, useful trunk, and decent seats. As much as it pains me as it bores me, I don’t see any reason to ever get rid of this car. It will outlast the cockroaches.
And owning a brand new Corolla for $272 a month is a far smarter deal than your $189 lease payment.
I’d totally agree. Also, he should look at how much it would be to buy the Sentra. With $2000 cash back from Nissan and $4500 from the Camry he’d be looking at $126/month to buy the Sentra.
Cognitive dissonance defined.
Not to pile on, but $4500 for a V6 Toyota with only 70k on the clock sounds low.
Not really, if we took that car in on trade we would offer no more than $3000 for it. Don’t forget that it did need some work to be put back right again, something any alert dealer would’ve factored into the trade-in value. All in all, he did VERY well. (at least on the trade, that is…)
@ott
Thanks for the insider perspective. I know that KBB pricing is divorced from reality, but in my zip code they have the trade in value for fair, good, and excellent at 4900, 5525, and 5900 respectively.
From what I’m reading:
-He got $4500 from the dealer on the Camry, so the Toyota is now out of the picture.
-He estimated the repairs on the Camry to be around $2000. The $5500 figure is what the Toyota would have needed for the Sentra to make economic sense. So he freely admits he is losing some money on the deal.
-He doesn’t drive many miles.
-He would rather spend around $200/month forever than own a vehicle and have to deal with the long term upkeep costs. I’m guessing this is why he didn’t outright buy the Nissan, as it would have needed maintenance items eventually.
Sage Advice, unless you own your own company
There’s no special IRS rule that says you can only deduct lease payments. It’s just that someone else has done the depreciation math for you. If you can do math on your own, the IRS will let you do the same stuff on a car your company has purchased.
If you lease, the lease payment is the cost of the providing car, throw that on the expense side of the balance sheet and you’re done, end of story. If you buy, the car goes into your capital accounting — it’s an asset, and the loan is a liability, both of which affect the value of your company, and both of which vary for the life of the loan and the car. One of those variables is a big unknown. You put it on a depreciation schedule. It’s worth leasing just for the reduced hassle of the paperwork, nevermind that the tax laws are also favorable.
While I’m not a fan of leasing you were right to dump the Camry when you did it was about to suck a big amount of money out of your wallet.
From my reading of it you are on the hook for about $3500 for the Sentra for the next 39 months and the Toyota would have eaten at least that much for the rubber band, brakes, tires, exhaust, steering and oil leak.
If you continue to drive a similar amount of miles per year when that lease is up the residual should be less than the value of the car at that point, and it will still be a couple of years before it will need any major cash sucking repairs, making it a good buy then.
Throw in the fact that the Nissan will save you some cash on fuel and you are going to end up spending less for your car expenses for the next 39 months than you would have on the Camry in the next 24 months. So you should essentially get a “free” year of driving and the oportunity to by a low mile used car for less than it’s real market value. (Assuming the residual wasn’t adjusted to be way out of whack so they could move some steel now in exchange for a loss in the future.)
you are going to end up spending less for your car expenses for the next 39 months than you would have on the Camry in the next 24 months
Except that at the end of the 39 months…instead of still having an admittedly cheaper asset….he now needs more cash for the next down payment.
There is also the $4,500 he paid up front for the Sentra in the form of his 70,000 mile Camry. If the Sentra is a CVT, I wouldn’t want to own it when it is off warranty for any price, which is this lease’s one redeeming value.
Why be worried about the CVT? Didn’t Nissan extend the warranty on them? Wouldn’t this cover the CVT? http://www.nissanassist.com/vehicles.php?menu=5
Why do you suppose Nissan extended the warranty? They’re still the same fundamentally flawed transmissions.
We all know that if money was the only thing that mattered in life, then the smart thing would be to drive the Camry to it’s 250k mile expected life. But at this guy’s mileage, he’d have the displeasure of piloting this vehicle for 42 years. He’ll save lots of money! And spend the majority of his life never enjoying his car. A new Sentra doesn’t sound all that much better to me but if he finds pleasures in the car that he really enjoys that buys him some subjective value then good on him, so be it. If $189 a month is the sum total of your automotive expenses and you’re happy with it, then you’re finding automotive happiness on the cheap.
No matter which way you slice it, trading the toyota on a lease didn’t make sense. If Shawn wasn’t comfortable with a Camry with 70k on the clock, he needs to be educated about the longevity of cars today. I got my ’99 Accord in 04 with 67k on the clock. It now has 189k. It’s been great, and I suspect it will be great quite a bit longer. Sure, it has a repair every now and then, and I’ll be doing the timing belt for the second time in about a year ($450 last time), but that pales compared to the cost of buying a new car, and at least in my town, paying property taxes on said new car.
I think Shawn did fine. It is economically unsound to own anything that depreciates, unless you can write it off. Take the cash, and buy a good utility that yields 6%, lots of them out there.
Yes, I lease.
Strange logic, William. Instead of owning a car and therefore “owning something that depreciates”, you instead rent the car and write the owner a check to (more than) compensate him for his depreciation?
That is exactly what I do; a check for far less than if I bought the same car. The bank takes the hit, and I drive a new car every couple of years with no maintenance costs.
My friend Jim spent thirty years with GMAC, and he still laughs whenever I tell him I have leased another car. Of course he gets a 30% discount.
Yeah, what’s with all the penny-pinching and lease hate? If you guys analyze your grocery purchases with the penurious passion that you do your car purchases you must eat nothing but ramen noodles and generic mac-n-cheese, chased down with tapwater… ;-)
There. I said it.
No wide screen TVs either.
…and that’s how people stay broke. Some folks learned from the recession, some did not. If you rent your assets (leased cars, interest only mortgages) you can never shake off the debt monkey and own assets/save money. Do you really want to be making car or mortgage payments in your old age?
Hope you enjoy saying “Welcome to Wal-Mart.”
“Yeah, what’s with all the penny-pinching and lease hate”
You’re kidding, right? If Shawn had extra money to spend on a car, you think he’d opt for a Sentra over something more fun? Seems like he’s trying to be frugal, as many of us are. Credit where credit is due.
Many years ago my NC license plate was TOAD, from The Wind In The Willows. Then I discovered boats.
Leasing can make perfect sense if you dont keep cars for very long. I am constantly swapping cars every 2-3 years just because I like to try new things. And trying new cars is cheaper than trying new women.
I have always bought 2-3 year old cars and then traded them in for my next fix. The only problem is that maintenance can be a hassle and i always try to have mechanical empathy with something i “own”. Next time I am going for a lease just so i can beat the living piss out of something for two years. Redlines are fun.
While I agree with the consensus here that leases generally don’t make sense for individuals, there are exceptions to the general rule. To get to the exceptions though, you have to know the money factor of the lease (akin to the interest rate of a loan) and the planned residual value of the lease. Sometimes manufacturers will subsidize leases more than sales. In those cases, it can make sense to lease if the residual value of the car at the end of the lease is less than what would have been owed on the vehicle at the same point in time in a loan with similar payments. Actually, that’s not exactly true, because the interest rates on used cars (which is what this will be at the end of the lease) is generally higher than the interest rate for new cars, so to make an apples to apples comparison, you need to combine the pro-forma lease with a pro-forma end-of-lease purchase at a term no longer than an amortizing loan of the same length to figure the total cost. You also have to make various adjustments for lease origination and termination fees plus sales tax.
There is another instance where leases can make sense and that is if you have a lot of high interest debt that you are paying on, savings of a monthly payment on a lease can save you money if you use the savings to pay down high interest rate debt. If you can pay down 36% interest credit card debt because you are paying $100/month less on your car payment, that’s something to consider, but you have to actually pay down the debt.
In this case we also need to factor in the time value of the immediately needed repairs of the Camry. Does he have the cash needed for the repairs needed now or is that going to go on a credit card at how much interest?
Analyzing a lease seems to be beyond the skills of most of us. However, I would say, at various times, luxury car manufacturers have offered sweet lease deals to “move the metal” without torpedoing the value of the current customers’ cars by a drastic reduction in sale prices.
The question in any of these new vs. used comparisons is what kind of a value to you put on a car that (you hope) will avoid frequent trips to the shop? That said, like the OP, I’m a low miles kind of guy (about 5K per year), and I’m perfectly satisfied keeping cars 10 years. I just make damn sure I like it when I buy it new.
If he’s a one-car man and his primary question is — will this get me to work on time every day? — it’s a safer bet on continued employment on the new car than the 10-year-old car. Once thrown from the horse, one is more reluctant to get back on. Did the power steering fail in dramatic fashion — for example, on an expressway on ramp at the apex of the curve?
Having a fire-breathing vintage ride that occasionally requires coaxing to turn over is OK if you aren’t depending on it for life, limb, or livelihood.
That said, I don’t like leases, but I read that as he’s got reliable transportation for under $100/month. Fair enough if you have to live with a payment.
Yup the piece of mind and lack of the unknown is priceless for a fixed ~$100 a month vs having to plunk down a far more than that in the immediate future for the Camry.
The insurance savings not needing collision and comprehensive on the Camry versus a new(er) car, pays for the Camry repairs over the next 3 to 4 years, before any other factors you guys are considering.
In my case it was a $12 difference. The camry/sentra makes up a small part of my total insurance costs.
I don’t understand. You do not really need collision and comprehensive coverage on a 11 year old Camry. Your total risk of a total loss was $4500.
The coverage on the new car will be many hundreds of dollars per year, not $12.
$80 per month net lease is $960 per year. This would also pay for a lot of future repairs.
To put meat on the bones, let’s take a tasty morsel that I have been looking at: BMW 335is. BMW offers a no money down 30 month lease at $659/mo (10K miles per annum) for a car that lists at $55,000. According to Edmunds, you can purchase this car for around $51,000 and with BMW’s best rate of 2.9%, the monthly payments would be $900 for 5 years (assuming no money down). So you save $240/mo for those 30 months or $7200. Granted, you are not building equity in the car, but at the 30 month mark, you are likely still upside down, given the projected depreciation of $19,000 for that time period (again, from Edmunds). So if you liked to have a new car every 30 or 36 months and do not drive a lot of miles, a lease could make sense. Of course, this example also shows the wisdom of buying a 2-3 yr old car and letting someone else take the big depreciation hits in the first few years of ownership.
ar that lists at $55,000
List? Who pays list? Second, a 335Xi is 44 not 55k. With the 2k BMW is offering you can get a new 335Xi for $38,525.
http://www.edmunds.com/bmw/3-series/2011/options.html?style=101288740&trim=335i-xdrive
JMO – big difference between a 335xi (mid-$40s) and a 335is (mid-$50s).
…and few pay list….(unless you plan to buy a Prius in 30-60 days :)….but list is a relevant number when calculating lease as a % of sticker.
JMO – big difference between a 335xi (mid-$40s) and a 335is (mid-$50s).
Sticker of 51k, yes. On a good day you can get a 335i coupe for $45k including $2k cash back from BMW.
but list is a relevant number when calculating lease as a % of sticker.
No, it’s not. If comparing the cost of buying new, leasing new or buying used to you need to compare the actual price you pay. What would the point be in using a fiction “list” price that no rational person ever pays?
I pulled the figures off of Edmunds as rough figures to show when leasing might make some sense even if you do not own a company. Of course, the better economic decision would be to purchase a 2-3 yr old car or keep the car as long as possible (assuming reasonable costs for keeping your baby on the road).
Thanks for all the replies. To answer a couple of the questions:
– Car came to me 6 years into it’s life with 20k miles on it. I put about ~10k/year on it main for getting to work. Also having down days without a car totally messes up my life professionally and personally.
– I posed the question because while I know my decision was not the best in a pure economical sense I felt the topic had value and I was interested in others point of view.
– Car was in pretty good shape but had been re-sprayed. Had a scrape and prior to coming to me the po fixed it and resprayed it. We essentially traded cars with my wifes grandfather (00 Camry for 06 Neon). Both cars were paid off.
– My only buyers remorse is I think I could have gotten the sentra with the spoiler from another dealer. Man that would have been cool. Seriously I am not of the mind that I got the greatest deal just an ok deal that worked for me.
My reasoning against the buy option right now was the lease included tax and title, which when factored in to most of the buy deal (272 Corolla) ends up being an additional $1200.
By my calculations I will after 39 months be out about $1200 vs the Corolla but my payment is $145 cheaper per month. I am not a person who wants to take a lot of money out of the bank to purchase in cash rather than pay in installments, just me, I value the perceived freedom of cash in the bank. Of course in the 3-10 years after the corolla option would continue to improve while my next purchase will most likely be less of a value.
To me the $1200 possible loss was made up buy the hopeful reliability and fixed costs.
Once again thanks to TTAC and the best and brightest.
You made the right choice. Some people put no value on their time or on inconvienence. And as reliable as a 2000 Camry might be it is also an 11 year old car that you need to depend on.
And it was also right not to buy a Sentra. Beat the hell out of that car and get something better in 3 years.
I too, would have kept the Camry. In my mind the Camry was an asset that had already gone through majority of it’s depreciation. Lease the Sentra now, lose the Camry, pay for the lease + insurance hike, in 3 years end up with -$4500 -$3900 = Negative $8400.
Lets reverse that. Keep the Camry, pay for repairs and maintenance = +$4500 in assets – $5500 in estimated repairs – $1500 in depreciation = Negative $3000, which is over 5K further in the red than in the first example.
Was it a good deal? That depends on if peace of mind is worth $138 a month for 39 months.
A simplified version of my initial worksheet on this purchase:
Toyota: -9,468
initial costs : -2000 (repairs), future repairs: -2000, gas: -8468 (39k/17.5*3.8), +3000 value after 39m
Nissan Lease: -9368
initial costs: -7700 (lease), gas: -5700, insurance increase: -468 ($12*39), +4500 value of toyota a 0m
I had some other numbers included (and I factored gas a $3.30 initially) but overall this captures what I was looking at.
I certainly could be missing something, what other economic factors do others calculate to determine costs for vehicles?
Thanks.
if anything the cost spread between the two may even be closer. $3,000 is a quite aggressive trade in for this car in another 3+ years especially given what the dealer above said on what it’s worth today. Also like you say, gas now approaching $4 will narrow the gap further.
I don’t disagree with the throngs which say this is too granular, and just shut up and enjoy the new car and move on, but these analyses can be fun. It’s the little victories in life, right?
I’d consider ownership tax (unfortunately) but since you’re not living in communist Holland that doesn’t apply to you…
So I guess you’ve got the important costs accounted for. Of course whether the budgeted 4K for repairs on the Toyoda is a bit arbitrary and you seem to have calculated that the Sentra will get 50% better real world mileage than the Camry, which seems a tad optimistic to me. Time value of money might sway things a couple a hundred bucks in one direction or the other that we can’t quite predict right now (primarily dependant on when the repairs would have needed to take place).
I guess the downside some here foresee is that in 3,25 years you’re now left without a car now, where if you would have kept the Camry you would still own a known quantity with a history you’re familiar with and that you’d probably be able to run for another year if it’d be necessary. Of course you can try and go buy a used Camry for 3K by then in terms of value but that’s not the same as owning your own car.
Those Camries get that bad mileage? Damn… Yes, in that case switching to a more efficient vehicle will swing those numbers just as you’ve shown. $71 per month in fuel savings will almost cover your entire payment so your monthly cashflow hardly changes either.
Now, if your current ride had been getting 22 – 26 mpg, then you’d have a harder time making this work because you’d have to get something that gets over 40 mpg on a regular basis to save as much or drive at least twice what you do now.
As a mechanic I’d say you did good, Because in 3 years that Camry is more likely to be worth $1k on a trade in when the repaint starts to fail. You could also be out a ton of money with the Camry. You could just as easily end up with out a car in 2-3 years when the trans goes out and then you could have easily spent $7-8K to drive that Camry that is only worth the few hundred the wrecking yard will pay, or you throw more good money after bad and put the trans into it and then be married to the car needing to keep driving it for another 2-3 years. I’ve seen it too many times.
Enjoy your new car and put the money your saving on gas away for a down payment on your next or this car.
swhiteside wrote: <quote>A simplified version of my initial worksheet on this purchase:
Toyota: -9,468
initial costs : -2000 (repairs), future repairs: -2000, gas: -8468 (39k/17.5*3.8), +3000 value after 39m
Nissan Lease: -9368
initial costs: -7700 (lease), gas: -5700, insurance increase: -468 ($12*39), +4500 value of toyota a 0m
I had some other numbers included (and I factored gas a $3.30 initially) but overall this captures what I was looking at.
I certainly could be missing something, what other economic factors do others calculate to determine costs for vehicles?
Thanks.
</quote>
Let me elaborate on this for you slightly.
Option 1 Keep the toyota:
Summary: you erroneously compared a period when you happened to have a lot of repairs for this car vs. the lease. Assuming this car is in otherwise good condition excepting what you listed, it probably would have lasted many more years and many thousands of miles after this period. Beating the Pants off having to buy a new car in 3 years time. In fact, there would be some years where you would pay only regular maintenance like oil changes to drive this car, essentially zero.
Furthermore, for a cheap car like the camry, you could (and should) completely drop all non-essential insurance. This would save you hundreds a year.
Also, as others have stated, those repairs were easily DIY’able for less than a couple hundred + tire cost. I’ve only just started tinkering with cars less than a year ago and I could do them with ease by downloading a manual for free.
Option 2 Leased sentra:
Here’s the thing about the lease, I’ve never had an acquaintance return a lease and not had large fees slapped on by the stealership. You did not factor in these inevitable trumped up charges in the end.
Personally I would not feel comfortable driving a rental for 3 years. Feeling like you’re responsible for protecting and repairing someone else’s property. Not having the freedom to do my own repairs etc etc.
Option 3 Buy a 2 year old sentra or camry from a private party:
Buying a 2 year old car, can get you a car that is in as-near-as-can-tell in identical condition to a new car for 45% less. That’s right, you pay half price for something that’s almost indistinguishable from how it was 2 years before. Let the first owner, or leaser, take the big depreciation hit of the first 2 years and you drive away with a very reliable car in it’s prime and a much lower depreciation hit.
In fact, I’ve bought a motorcycle and a car from private parties, driven them for a year or two and then sold them or traded them for the same price or more than I bought them for. The only two assets I’ve had that helped greatly were that I am a good negotiator and I enjoy looking at vehicles.
With today’s easily accessible used car histories, public records and a good eye or mechanic buddy you can easily avoid damaged goods.
Also, the dealership profit margin doesn’t come out of your pocket here. Insurance coverage can also be lower than option 2, because the car is yours and you know how safe/unsafe you are. In addition insurance companies almost always recoup their costs from you in the long run.
I’m not going to go over the exact numbers because I think I’ve made my point but heres the short term and long term price comparisons as I see them:
3 year period:
Cheapest to most expensive:
Option 3, Option 1, Option 2.
Peace of mind best to worst:
Option 3, Option 2, Option 1
(unless you’re a good mechanic DIYer then Option 2 is the worst)
5 year period.
Cheapest to most expensive:
Option 1, Option 3, Option 2.
Peace of mind best to worst:
Option 3, Option 1, Option 2.
(with Option 2, you’ve had to find another car already because you ended up with nothing after 3 years)
In my mind, leasing is the worst way to ever provide yourself with an auto, even if it’s for a business.
Relax,and enjoy your new car. The bigger problem is the Bose Wave I want.
OMG, you can get way cheaper boom boxes than the Bose Wave. Get used to saying "Welcome to Walmart"… :-D
Contrarian,
What % of your income do you figure you need to save if you start saving at 22 and plan to retire when you’re 67?
I started at 30, and 30% worked. I retired at 45. Save every penny you can, but don’t cheat yourself or your family.
No highs no lows , must be a Bose ! The Wave radio is an overpriced piece of plastic and Bose these days is better at marketing their sub par expensive inferior sounding audio equipment than actually making a top of the line high quality audio product . Cambridge Soundworks makes a table radio for half the price that actually has some bass . Or if you really want great sound for a low price a good 2.1 speaker system added to your computer will make either of those radios sound like a tinny transistor radio . I bought the Logitech system below (when it was on sale for $104) , added a 20 dollar sound card for tone control and it shakes the walls at half volume all for $125 . Plenty of less costly better sound options out there than Bose .
http://store.cambridgesoundworks.com/
http://www.amazon.com/Logitech-Z-2300-THX-Certified-Speaker-Subwoofer/dp/B0002SQ2P2/ref=sr_1_2?ie=UTF8&qid=1302040586&sr=8-2
Ditto on the Bose shoddyness. Absolute waste of money. My Wave started having issues six months out of warranty. It’ll only play if I pick it up and angle it just right. A buddy of mine had the same issue with whatever the next model up is, only he complained and wound up spending way too much time back and forth with Bose’s Customer Service Department. Bose eventually sent him a new one.
Bose Blows
OK, no Bose. How about Yamaha? The reviews say the Cambridge CD players break early. My KLH lasted 25 years.
Sorry Bertel, but this is important.
Relax guys, he got a new car with peace of mind, a factory warranty for all but the last 3 months of the lease, better mileage in the city, and no worries about being stranded on the commute home and the call to the Boss saying “I can’t come in today, my car’s in the shop” – all for $68 a month ($80 payment -$12 lower insurance) which is definitely affordable! Yes, he gonna be out of a ride in three years, which is enough time to save some money for a down payment or cash purchase on something in 2014. Heck, gas might be $6.00 a gallon then and he’ll want to buy a Nissan Leaf and possibly get a loyalty discount. Or…he could then have a 14 year old Camry that he sunk $3500 a couple of years ago that now needs a transmission or somesuch.
Even if that’s the case his lease deal wasn’t particularly good either. His insanely juiced up repair numbers were basically just him rationalizing the new purchase to himself, most of those issues could have easily been fixed for plenty cheap and to be honest a lot of the stuff you could probably DIY with the same amount of effort you’d spend buying a new car.
@tekdemon : I wanted to keep the camry and the last thing I wanted was a sentra but with the $2k repair bill which I don’t think is ‘insanely juiced’ plus the coming wear and tear items it seemed with a low (relative) lease payment this option was all in all the best for me. It lowers my risk, keeps initial outlay of cash down, put me in a decent position for fuel costs and possibly a financial a wash with current fuel prices. (Still need to look into my insurance @PlentyofCars I may have been paying too much and didn’t account for it in my calculation)
I am not a mechanic, have small children who i don’t want to prioritize behind a car, a 50-60 hour a week job right now and middle of a northern winter so diy is out of the realm of possibility for me. I can see how you and others save a lot of money with this approach. It took me ~4 hours to run the numbers and buy the car and I am surely not going to fix an oil leak or timing belt in that time.
@All: If anyone has additional information about a recent car purchase of a 2008+ MY that in three years would cost less than 13.5k to (finance/lease)+fuel-resale@3y I am very interested to hear it.
Once again thanks to all for your view points and your willingness to discuss them.
“@All: If anyone has additional information about a recent car purchase of a 2008+ MY that in three years would cost less than 13.5k to (finance/lease)+fuel-resale@3y I am very interested to hear it.”
http://monthlycarlease.com/2011/03/car-lease-specials-march-2011/
The Honda Insight and Hyundai Elantra would fit that bill.
Not that I follow these things. But I also remember several 2010 Cobalt XFE sedan’s recently advertised for $9995. If the real world mpg is 31 and you throw in the availability of 0% financing and $4,000 in rebates, I believe that model would result in a ‘keeper’ car at a price pretty close to the leasing of the Sentra.
Gas would average at approximately $1200 per annum if you believe the average would be $3.50 and real world mpg is 30. Insurance is apparently not an issue for you. So it would pretty much be sales tax and ad valorem which would be extra.
You put that money in an investment with Warren Buffett’s anticipated 5% long-term return for the market ($500 a year), and the sales tax and ad valorem would more than likely be a wash after three years… and a profit for you on years four and five.
Finally after three years you can sell the vehicle. Let’s say it only goes for $6000. That puts you at a cost basis of around $7500 to $8000 for the three year period. Edmunds has a very high cost structure with their projections given the scenario you gave us. But even with their results you would still end up owning the car outright instead of leasing it.
@Steve
Thanks for the information. I have learned about a lot of great site related to buying and selling cars from TTAC. I agree that sounds like a better option than the lease. In 35 months when I am purchasing my next basic transportation device I will know there are other options that may be better than the end of year cheap lease. I did look for them but I was under a time crunch and needed to make a decision to fix or move on in a short time so my timing may have been off or I just didn’t look in the right place.
Once again thanks to all for making this a great site.
Man that post seems to have struck a nerve.
$200/month with taxes? Why not. Sure you can drive more cheaply, but if you buy old and have just a bit of bad luck, you can spend significantly more.
I don’t lease because I’m too much of a control freak, but I see nothing terrible here.
A car is an “investment” if it ensures one gets to work every day. Our friend now has 39 months to sort out what he wants to do next. Seems OK to me.
I would have fixed the Camry, but i like driving older cars.. at the same time, I’ve got an 07 Vibe that i bought new, because I simply don’t have time and energy to mess with cars. So now my time can go to my job, my family, and fixing up the house. When that’s under control, I’ll be back to junkers. If Shawn doesn’t enjoy that sort of thing, the Nissan was a good choice.
Cheers -Mathias
Only 70k miles? And already a $5500 repair bill? And you people have the hutspa to call European cars unreliable?!!
You went from a POS to a worse POS. Congratulations.
swhiteside, there is more to life than cost. Instead of looking for absolute cheapest, try looking for absolute best.