Lease vs. Buy Honda? Here’s What You Must Consider
So I used to buy my cars exclusively. No way I was going to lease. I refused to pay thousands and thousands of dollars over the course of a lease term only to give the car back and have nothing!
Because to me, that was crazy. And to a lot of other people too. That’s due to when carmakers first introduced leasing unscrupulous car dealers found lots of ways to take advantage of customers.
And people who leased got ‘taken for lots of rides’ – pun intended.
But since then leasing has become far more buyer-friendly. And with all the tech and innovation happening in the cars we drive these days it makes sense to get something new every 36-months or so.
Please consider this analogy:
Smartphones: Their purpose is to keep us in touch, informed and entertained. And we buy new ones every 12 to 24-months.
Vehicles: Their purpose is to get us and our families from points ‘A’ to ‘B’ safely. So shouldn’t we buy new ones regularly too?
And if you’re with me on the above then leasing because more logical.
Continue reading or click play below for even more logic on leasing instead of buying. My friend and General Manager of Rock Honda shares more great points about leasing.
Lease vs. Buy Honda
Today we’re talking about something I only recently started doing, and that is leasing my cars instead of buying. I’m talking about leasing those everyday drivers – the commuter that you’re putting 10,000, 15,000 miles on a year, the grocery-getter, the kid hauler. The cars are taking a beating anyway, so why not lease them?
I love leasing for a lot of reasons, including the reasons I’m not so crazy about- the “Oh my god, it’s got a little scratch.” “Oh my god, it’s got a little ding.” “I need to park it five rows away from all the other cars.”
For me, leasing was something that I didn’t do for a really long time because of the intimidation factor, and also, I was old school. I wanted to own the car. It was a stressful situation.
We’re going to walk you through all of the ins and outs of leasing because it can be very intimidating. Heck, the whole car buying process can be extremely intimidating. For me, leasing was something that I didn’t do for a really long time because of the intimidation factor, and also, I was old school. I wanted to own the car. So, It was a stressful situation.
It took me a long time to come to the realization that I ought to be leasing, but now I’m not turning back.
It took me a long time to come to the realization that I ought to be leasing, but now I’m not turning back. I had the chance to speak with David Latif of Rock Honda, and we talk about the difference between leasing and buying a car today.
In The Old Days of Leasing vs. Buying
Let’s go over just from some high-level facts first. When did leasing really become popular, you ask?
Well, for a long time it really wasn’t popular. In the old days, when you leased a car, the price of the car wasn’t disclosed in the contract. “That was one of the biggest issues and problems with leasing – they would tell you the price of the car is, and then they would charge you would be two different things. You never saw anything. The price of the car could be 20,000 and they’re charging you 25,000. You would see the residual and the payment on the contract, but the price was never disclosed” says David. So it’s no wonder why people have had a bad taste in their mouth when it comes to leasing.
Whatever you negotiate with the dealership or with the salesperson on the price of the car, that’s what you’re leasing the car for and you will see this reflect on your paperwork.
However, ten years or so back, they changed all the rules and laws. Now, the price shows right on the contract. Whatever you negotiate with the dealership or with the salesperson on the price of the car, that’s what you’re leasing the car for and you will see this reflect on your paperwork.
A Shorter Commitment
Are you afraid of commitment? Well, with a lease, in three years, you’re out of it. Even in two years, you’re out of it. And most brands, in two years on a three-year lease, you’re about break-even. So, why would you get stuck on a purchase?
If you get attached really love the car and you want to keep it, you can buy the car after the lease. You have that option. It’s not like when the lease is done, you have to turn in the car.
“A lot of buyers plan on keeping their cars forever, but it never happens. Realistically, the most you’ll keep a car is three, four years. However, if you get attached really love the car and you want to keep it, you can buy the car after the lease. You have that option. It’s not like when the lease is done, you have to turn in the car” says David. So remember, you always have the option to buy the car.
Licensing and Taxes
Licensing is something that you’re going to pay regardless of whether you purchase a car or lease a car. “It is what it is, but when you purchase a car, you’re paying tax on that whole amount” says Latif.
When you’re leasing a car, you’re paying tax on every payment.
Keep in mind, when you’re leasing a car, you’re paying tax on every payment. In other words, you’re paying only tax for half of the car instead of paying for the whole car if you decide not to keep it. So, that’s another benefit to add to the list.
Ouch, The Cost of Repairs!
Cars now need to be hooked up to the computers, and it’s not a cheap fix by any stretch of the imagination.
Remember that these cars today have a lot of new technology in them. They’re not going to be cheap to fix. You can’t just pull in a gas station and have a mechanic fix it for you right away. Cars now need to be hooked up to the computers, and it’s not a cheap fix by any stretch of the imagination.
It’s NOT an Investment – Even A Honda
Let’s put it really simple. Buying a car is not an investment. So if it’s not a good investment, why would you want to buy it? As you drive the car, it starts depreciating. Every day that you’re putting miles on it, every day that it’s getting weathered and it’s on the road, it’s losing value as you drive it and as it gets older.
It’s not like a wine where the older it gets, the more money it’s going to be worth.
“It’s not like a wine where the older it gets, the more money it’s going to be worth. You don’t want to own something that keeps going down in value because if you buy it, by the time you add the interest into the tax and license and everything, that $20,000 car is gonna cost you close to 30 grand. By the time you’re done paying that 30 grand, that car is probably going to be worth about five grand with all the miles on it” notes David.
Think about this – the biggest purchase that you’ll make in your life is probably your house. The second biggest purchase is your car. The house, well that does appreciate- you do make money back on the house, typically. However, a car is not an investment.
The Downside of Leasing
So what about the downside? And one of the downsides and concerns for a lot of drivers is “okay, well, then I have to predict the miles that I’m driving…”
People need to realize whether you’re purchasing a car or leasing a car, if you’re putting a lot of miles on it, you are going to pay over mileage fees.
Let’s say you buy a car and you’re a commuter, and you’re putting a lot of miles on it. Say you decide in three years you’re going to trade in your car- what happens then? “When that car comes in and we look at the blue book on the car, there’s a plus and a minus for mileage on the car on the blue book. So if your car books for $12,000 but it has a big deduct for miles for $3000, $4000, that’s the same as you do on a lease. There’s no difference” says Latif.
People need to realize whether you’re purchasing a car or leasing a car, if you’re putting a lot of miles on it, you are going to pay over mileage fees. The miles are actually going to cost you less if you lease as opposed to buying.
Buying Miles Ahead of Time
Buy the miles ahead of time. It is a lot cheaper and it will give you the freedom of driving the car.
One more nice perk – you can buy miles ahead of time. That’s the cheapest way to do it when you’re leasing a car. If you really know you’re going to go over 15,000 miles a year- or even 20,000, 25,000, buy the miles ahead of time. It is a lot cheaper and it will give you the freedom of driving the car.
Why Some Buyers Don’t Lease
Everything is disclosed just like a purchase. Every detail on the contract is in front of you.
The hesitancy to lease is very understandable. Just the fact that there was so much kink and fraud is enough to make anyone scared. But thank God all of that has changed. Everything is disclosed just like a purchase. Every detail on the contract is in front of you.
If you’re buying a Honda, go to Rock Honda website, and the factory, usually, posts all these special leases. Those are the best deals.
On a lease, the only thing you should really worry about and concentrate on is how much out of your pocket and how much you’re paying a month because that determines the price of the car. “The best way of finding that out is going through websites. If you’re buying a Honda, go to Rock Honda website, and the factory, usually, posts all these special leases. Those are the best deals. When a factory puts a lease together, it’s not for a dealer, it’s for consumers. They want to be aggressive on the market” notes David.
The competition is tough. These leases are very aggressive. So if you want to lease a car, go to the website of a dealership and look at their specials. Even if you can get a little bit more off that, you’re doing great.
Credit Considerations When Leasing Vs. Buying Honda
The only downfall on a lease is you’ve got to have good credit to lease. You cannot lease with marginal credit. It’s not just about the FICO score. Obviously, it’s the whole credit detail that pops up when they run a customer’s credit. Some people are a first-time buyer and they score at 700. However, they don’t necessarily qualify for a lease.
If you’re just fresh or you have bad credit, especially if you’re late on car payments, that’s a no-no on the lease.
On the other hand, if you get a guy that his credit goes back 10 years, and is a homeowner, and has a credit score of 626, 640, they’ll lease him a car. If you’re just fresh or you have bad credit, especially if you’re late on car payments, that’s a no-no on the lease.
David Latif notes “in the old days, Wells Fargo, BVVA, all had very aggressive leasing, but not anymore. Right now, Rock Honda is very with aggressive rates and everything else with the residual. All the leases, 99.9% of them are going through Honda. The same goes for most manufacturers as well.”
Do Your Homework
If you really know what you want when you come in, you can be out of the dealership in 45 minutes.
It is recommended that before anyone goes to a dealership, do a little bit of homework as far as what kind of car you want. People will say “I hate going to a dealership because it takes forever to buy a car.” Now being fair, that’s not really the case. 80% of the time we spend is looking for a car is because we as costumers don’t know what we want. If you really know what you want when you come in, you can be out of the dealership in 45 minutes.
What About the Warranty?
There’s a lot of different options you can buy when it comes to warranty.
The typical lease is around three years. In Southern California, a lot of us drive great distances. The good news is, there’s a lot of different options you can buy when it comes to warranty. There are warranties that give you more miles, less term, and there are other warranties that you can buy where it gives you long term and less miles.
David notes “In most cases, the engine, transmission in most of these cars are covered for four years, 50,000 miles. And those are the two most expensive parts of the car. So they’re covered. I wouldn’t worry about covering it for another year. Plus, even if I’m doing that, meaning even if I’m doing 15,000 or even 20,000, 25,000 miles and adding in an extended warranty, I’m still better off leasing than buying.”
Wear And Tear – Lease Vs. Buy Honda
Not to mention, if you bought it, wouldn’t you want to buy the same warranty? You put into miles. The warranty doesn’t change when you lease or buy a car- which goes back to the point earlier that you’re putting the miles on, why not put them on under lease when the miles are actually cheaper?
You know you’re going to beat up the car. You’re putting miles on it.
This is especially true if you know you’re beating up the car- and you know you’re going to beat up the car. You’re putting miles on it. If you’re going to run around with the kids, and the grocery, and all that stuff, there will be little dings and scratches. Why would you want to buy something like that and own it? That is not an investment. Unless you’re buying an old classic 1967 Corvette or something. Those are the ones you want to buy. Then you keep it in the garage maybe under the environmental control museum type.
The Bottom Line with Leasing Vs. Buying Honda
Try it one time. Lease a car for three years. I think you’ll be happy with it.
The bottom line, I don’t think you should be afraid of leasing. Try it one time. Lease a car for three years. I think you’ll be happy with it. Once you get into leasing a car, I don’t think you’re going to be buying anymore. Times are different. And if you’re looking to lease a Honda, I highly encourage you to make your lease your Honda at Rock Honda in Fontana.
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