Comments on: My Money Mistake and How to Avoid it http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/ Wed, 08 Feb 2012 17:31:40 +0000 hourly 1 http://wordpress.org/?v=3.1 By: Idetrorce http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-2164 Idetrorce Sat, 15 Dec 2007 14:40:07 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-2164 very interesting, but I don't agree with you Idetrorce very interesting, but I don’t agree with you
Idetrorce

]]> By: nobleea http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1982 nobleea Mon, 03 Dec 2007 16:39:42 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1982 I can't see leasing is always bad. As has been pointed out, it depends on the interest rates. If one was to compare lease vs buy for an import (say a honda). Year end deal and you get 2% lease for 48 months or 2% finance for 48 months. People need to compare apples to apples. Say you had 20K with which to buy a new car (a honda civic perhaps). Because finance/lease rates are so low, you decide to invest the 20K and withdraw money every month to pay for the loan or lease payments. The 20K investment should cover all the finance payments over 48 months, plus a little extra interest due to having the money in there over the 48months. The 20K investment will also cover all the lease payments and the buyout at the end, but the difference is that your buyout (50% of original purchase price, say 10K buyout) has been invested for the full term. That extra interest will more than cover any difference between leasing and financing and will put leasing further ahead. A lot of people have very closed minds when it comes to this, but don't think about it from a true financial perspective. Think of it as a 'deposit', like on beer bottles. Why pay it upfront if you don't have to? Of course, people who just give the car back at the end of a lease or nuts. Especially since most automakers depreciate their cars far more than they should (50% depreciation for a toyota over 4 years?? gimme a break!) I can’t see leasing is always bad. As has been pointed out, it depends on the interest rates. If one was to compare lease vs buy for an import (say a honda). Year end deal and you get 2% lease for 48 months or 2% finance for 48 months. People need to compare apples to apples. Say you had 20K with which to buy a new car (a honda civic perhaps). Because finance/lease rates are so low, you decide to invest the 20K and withdraw money every month to pay for the loan or lease payments. The 20K investment should cover all the finance payments over 48 months, plus a little extra interest due to having the money in there over the 48months. The 20K investment will also cover all the lease payments and the buyout at the end, but the difference is that your buyout (50% of original purchase price, say 10K buyout) has been invested for the full term. That extra interest will more than cover any difference between leasing and financing and will put leasing further ahead.

A lot of people have very closed minds when it comes to this, but don’t think about it from a true financial perspective. Think of it as a ‘deposit’, like on beer bottles. Why pay it upfront if you don’t have to?

Of course, people who just give the car back at the end of a lease or nuts. Especially since most automakers depreciate their cars far more than they should (50% depreciation for a toyota over 4 years?? gimme a break!)

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1980 Canadian Dream Mon, 03 Dec 2007 12:26:56 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1980 Jeff, The lease doesn't cover any maintenance costs (at least in my case). As to buying a lemon you are best off to research a bit before you get here what is a good car. Also check into auto insurance rates. That can dramatically effect the cost of owning your car (as Telly mentioned). Tim Jeff,

The lease doesn’t cover any maintenance costs (at least in my case). As to buying a lemon you are best off to research a bit before you get here what is a good car. Also check into auto insurance rates. That can dramatically effect the cost of owning your car (as Telly mentioned).

Tim

]]> By: Jeff http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1978 Jeff Mon, 03 Dec 2007 10:44:03 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1978 This is a helpful discussion for me because I am moving back to Canada soon and will need a family car. I tend to agree with those who advocate owning a car as opposed to leasing. It just feels like throwing your money away to lease. But is there another factor to consider here? What about the costs of maintaining the car? Doesn't the lease cover some maintenance costs? Also, second-hand cars are notorious for needing continuous upkeep and if you happen to buy a lemon, you're stuck with it. For those who are handy with cars, definitely the buying option is the way to go. But for the mechanically or time challenged could the lease be the better option? I'm curious to hear opinions. They'll definitely factor into my upcoming decision. This is a helpful discussion for me because I am moving back to Canada soon and will need a family car. I tend to agree with those who advocate owning a car as opposed to leasing. It just feels like throwing your money away to lease. But is there another factor to consider here? What about the costs of maintaining the car? Doesn’t the lease cover some maintenance costs? Also, second-hand cars are notorious for needing continuous upkeep and if you happen to buy a lemon, you’re stuck with it. For those who are handy with cars, definitely the buying option is the way to go. But for the mechanically or time challenged could the lease be the better option?
I’m curious to hear opinions. They’ll definitely factor into my upcoming decision.

]]> By: And the Winners are… http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1976 And the Winners are… Mon, 03 Dec 2007 05:51:35 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1976 [...] Buying or leasing a shiny new car as soon as landing a new job after graduating seems to be a common money mistake. But Canadian Dream also found a bright side to the mistake. [...] [...] Buying or leasing a shiny new car as soon as landing a new job after graduating seems to be a common money mistake. But Canadian Dream also found a bright side to the mistake. [...]

]]> By: telly http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1921 telly Thu, 29 Nov 2007 21:15:56 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1921 Wow, I'm surprised to hear people advocating leasing. If you were planning to trade in your vehicle every 4 years then the lease option is the better choice for sure, but if you keep the car for 6+ years, buying is definitely superior. Cars built today will easily last 10+ years. I just can't justify leasing knowing that. I'm currently paying ~$60/mth for my car (dropped collison on my policy thanks to that depreciation). Now THAT'S low monthly cash flow! Wow, I’m surprised to hear people advocating leasing. If you were planning to trade in your vehicle every 4 years then the lease option is the better choice for sure, but if you keep the car for 6+ years, buying is definitely superior.

Cars built today will easily last 10+ years. I just can’t justify leasing knowing that. I’m currently paying ~$60/mth for my car (dropped collison on my policy thanks to that depreciation). Now THAT’S low monthly cash flow!

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1911 Canadian Dream Thu, 29 Nov 2007 12:16:56 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1911 Mike, You hit it on the head. This issue was getting a new car, not per say the lease itself. MJ & James As to the lease. It depends on how you view your cars. If you really got it together and paying cash for a car then you are ahead on the entire game (no interest charges). Yet if your paying interest then you have a numbers game to play. Which way is the cheapest depends on the various rates involved and if you plan to keep that car at the end of the lease. If you do intent to keep the car the lease can often be more expensive, but not always. Thanks for the comments everyone, Tim Mike,

You hit it on the head. This issue was getting a new car, not per say the lease itself.

MJ & James

As to the lease. It depends on how you view your cars. If you really got it together and paying cash for a car then you are ahead on the entire game (no interest charges). Yet if your paying interest then you have a numbers game to play. Which way is the cheapest depends on the various rates involved and if you plan to keep that car at the end of the lease. If you do intent to keep the car the lease can often be more expensive, but not always.

Thanks for the comments everyone,
Tim

]]> By: FourPillars http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1905 FourPillars Thu, 29 Nov 2007 05:14:00 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1905 I agree with MG - there is no difference between buying and leasing in theory, it's just two different ways to finance the same thing. In CD's case the issue was not buying vs leasing it was getting a car that was too expensive for his situation. Good post by the way - I'm spent (wasted?) a few bucks on cars over the years... Mike I agree with MG – there is no difference between buying and leasing in theory, it’s just two different ways to finance the same thing.

In CD’s case the issue was not buying vs leasing it was getting a car that was too expensive for his situation.

Good post by the way – I’m spent (wasted?) a few bucks on cars over the years…

Mike

]]> By: James http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1901 James Thu, 29 Nov 2007 02:17:35 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1901 MoneyGardener, Lease Vs Buy is all about cost of ownership. Take you monthly payment and multiply it by all the payments you need to make before you can walk away. Now compare that to the cost to buy that same car with low Kms. In many of the cases I looked at, including the car I bought, 4 years of lease payments were about the same as just buying a used version of the same car. After the same amount of time I now own that car instead of having to hand it back. MoneyGardener,

Lease Vs Buy is all about cost of ownership. Take you monthly payment and multiply it by all the payments you need to make before you can walk away. Now compare that to the cost to buy that same car with low Kms. In many of the cases I looked at, including the car I bought, 4 years of lease payments were about the same as just buying a used version of the same car. After the same amount of time I now own that car instead of having to hand it back.

]]> By: moneygardener http://blog.canadian-dream-free-at-45.com/2007/11/28/my-money-mistake-and-how-to-avoid-it/comment-page-1/#comment-1894 moneygardener Wed, 28 Nov 2007 20:28:57 +0000 http://blog.canadian-dream-free-at-45.com/?p=288#comment-1894 I used to think that leasing a car was a bonehead financial decision. But, once I actually got to thinking about it, and crunched the numbers. It's really not a bad decision. I currenctly own one of my cars and lease the other. What I like about a lease is that you are only paying for the depreciation of the vehicle. Vehicles are money pits, and are the worst investments you can ever make in life. Looking at it that way why not just 'use' the car, and have its be the lowest drain on your monthly cash flow that it can be. I fail to see the disadvantages of leasing a modest car vs. buying one. I used to think that leasing a car was a bonehead financial decision.

But, once I actually got to thinking about it, and crunched the numbers. It’s really not a bad decision. I currenctly own one of my cars and lease the other. What I like about a lease is that you are only paying for the depreciation of the vehicle. Vehicles are money pits, and are the worst investments you can ever make in life. Looking at it that way why not just ‘use’ the car, and have its be the lowest drain on your monthly cash flow that it can be.

I fail to see the disadvantages of leasing a modest car vs. buying one.

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