Quote:
Originally posted by yellowgowild
I just caved in and started a 4 year lease on a 2005 volvo s40 base model for $1,000 down, and $330 a month, 12,000 miles a year.
Four years seems like an uncommonly long time, but the contract states there are no penalties when I close the lease, and I get an allowance of $1,000 to cover any dents and scratches it has when I turn it in.
I know nothing about how most lease deals go, and was wondering if that seems like a good deal.
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Well, with leasing, it basically is up to you whether or not it is a good deal. If the volvo is worth $330 a month with the restrictions to you, it was a fine deal. My only advice with leasing (and I am not all too knowledgeable about it, mind you) is do not, do not, do not go over the mileage allowed. I had a friend of mine that drove it too much and it would quite literally sit in his garage 3-4 months a year, instead of risking paying the obsene $0.10 per mile or whatever it was over. He had leased it, and not too long after got a much higher paying job but needed to commute. If it isn't likely that your circumstances are going to change in the next 4 years, it shouldn't be much of an issue, but should they, that car may be a thorn in your side.
However, I am not particularily fond of leasing myself, unless there are extenuating circumstances. I'll give you an example of why. We'll use a 2000 Volvo S40 (base) for an example, as it should reflect the approximate depreciation of your 2005.
MSRP of 2000 Volvo S40 $22,900.00
$1000.00 Down leaves a loan balance of 21,900.00
Loan payments on a 6 year (72 month Loan) at 4% interest - $342.63/month
After Four Years of Payments (same as your lease) the principle balance on your loan is $7890.09, providing you paid on the date that it was due, and never a cent more than you needed to. The retail value (taken from
www.kbb.com) is approximately $11,720.00. If you sell it at this point, you walk away with $3829.91. Had it been on a shorter term (read: higher payment) you would have more equity. And all this with no mileage restrictions.
Four years from now, you'll likely have the option to buy out something for a higher than market value when you have made payments on it for the last four years.
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Note:
Keep in mind, you may actually come out ahead on the deal, if they difference of the lease payment vs the loan payment is greater than the equity you have in your car at the time the lease ends. I was unable to find a "typical" lease payment for the 2000 volvo, so I am unable to give a truly accurate synopsis of which, in this case, would be "better"
Personally, I
never buy brand spankin' new cars because I'd prefer someone else takes the hit on depreciation than I. I drive newer cars, (currently a 2003) but never brand new. Basically, I am probably a bit biased that way. I would prefer to have something to hold onto after I have been shoveling out hundreds of dollars a month for years and years, but some people would prefer the simplicity of leasing, or the nicer, more attractive cars than they can afford with a loan buying it outright.
Hope that helps a bit, I didn't try to be too confusing
