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21 Posts
Discussion Starter #1
Hello! I just put a deposit down on a Silver EX-L w/ Nav. I was curious if people are leasing or buying... I was thinking of doing my very first lease to lower my payments and because I like new cars every three years or so.

If there are any leasers out there, can you please share your good/bad experiences?


290 Posts
I leased....

Probably won't ever do it again. It wasn't worth it for me. Of course, I also said I would never again throw away my money by buying a brand new car, and here I am with a brand new Pilot. I hope this thing retains more of its value than my past vehicles.

The vehicle I leased was a Jeep Gr Cherokee and while I payed less monthly, in retrospect, I would have graciously paid the extra given my review of the situation.

Here is a brief synopsis.

MSRP: ~$29,000.00

Down Payment (Lease Buydown & other) ~$3,500
15,000 miles/year allowed
3 year lease
Payments: ~$393
Residual (amount I could Buy it for at end of Lease): ~$20,200
Fines/Fees at Lease turn in: ~$850 (which included fees for excessive mileage, interior damage - broken visor clip, broken plastic around 4 wheel drive gear selector, and scratches on center console, and external damage - some scratches on the hood (not to bare metal) and a single door ding on the rear passenger compartment). I flat refused the ~$850 and after much bickering, I told them to sue me or accept my counter offer to pay for the excessive mileage and a much smaller fee ($75) for the damage (I considered most of the damage as normal minor wear-and-tear, but they wanted it perfect). They accepted my counter and I paid them ~$550.

Loan (if I had done it):

If I had done a 5 year loan:
Financed: $25,500 @7% (assuming $3,500 down on 5 year loan)
Payment: $505
Loan Balance @ end of 3 years: ~$10,839.00

If I had done a 6 year loan:
Financed: $25,500 @7% (assuming $3,500 down on 6 year loan)
Payment: $435
Loan Balance @ end of 3 years: ~$13,728

Blue Book value of Jeep at time I turned it in: ~$19,500

If I had sold the Jeep for exactly Book value, I would have made
the following:
5 year loan: 8661
6 year loan: 5772

For the loans, I am assuming that I sold it at 3yrs.

Cost of lease: $3,500 + (36 * $393) + $550 = $18,198
Cost of 5 yr loan: $3,500 + (36 * $505) - $8,661 = $13,019
Cost of 6yr loan: $3,500 + (36 * 435) - $5,772 = $13,388

As a note, I bought my second Jeep Gr Cherokee used (2 model years old w/32,000 miles) and saved $13,000 over new MSRP. To me, that was the smarter move. Also, as I had put upwards of 49,000 miles on the lease vehicle and had to replace the tires earlier in the year and handed over the vehicle with only about 10,000 miles on the tires. So that was an additional $300 that was mostly thrown away (especially since the used Jeep I replaced it with needed tires within 6 months).

So, from my experience, you might fair better getting a 6 yr loan (lower payments) and then selling it at the same time you would have turned in your lease.

Of course, your mileage will vary. Expected Residuals and resale value all factor in to the equation, and Honda's are known to have better residual value. That may mean that the lease is more attractive. I would get some numbers and try work it out. The hard thing is that you never know what the vehicle is going to be worth at the end of the term. But if you assume it is going to be high, then you should have very low lease payments, and if you buy, you should be making back a lot of what you already paid in.

One big advantage with buying is that money that you get when you sell it. When I traded in my leased Jeep, I got $0 money back, and as I said, I actually had to pay ~$550. So when I went to buy my next one, I had to rely on money I had saved. It would have been really nice to have had that $5,772 to put down on the next one.

Now that I have done it, I can't really see where a lease would ever really be all that much better.

That's my $0.02. Man, I type too much.

- Rick H

61 Posts

What kind of mileage do you expect to put on the vehicle in 3 years and your driving habits?? Everything I've heard lately on leasing a vehicle is it's not as good of a deal as it used to be. They can put TOO many stipulations in a lease and you'll miss it if you don't read the fine print.

Personally, I drive too many miles in a year to lease. Plus it's a Honda, they last forever!!!

176 Posts
r_hammel has learned well...

I am always running into friends who have a similar expereince.

Most of the 'analysis' you see of lease vs. buy are based on the text book type stuff: ' money cost', retained value, mileage charge etc.

In the real world people have "little expenses" for tires, batteries, parking lot dings and the like that end up with you feeling cheated at lease end.

r_hammel also brings up the very important "real world" effect of having a vehicle with EQUITY to reduce cost of NEXT VEHICLE, something that generally is impossible with leases (sure you COULD put money into a savings account, but most people WON'T). Unless you know are going to die before your car, you should always consider what your future vehicle needs/wants might be, and plan for them.

Don't overlook the "emotional attachement" factor -- if you have to "turn in" a leased vehicle that has been GREAT you kinda feel attached to it, and if the "buy out" price is about what you'd owe on a longer finance plan anyway you kinda feel pulled in different directions- one side argueing for "next new thing" other side "stick with winner" while in the back of your mind you know the warranty expires for a reason...

There are some cases that make leases easier to justify, mostly related to out-of-the-ordinary business situations and/or cases where you REALLY have a very good grasp of 'cost of money' and have been successful maximizing your savings return. If you don't fit in those categories {and MOST people won't ;) } you can almost always do better buying AND when/if you do buy it also makes ALOT of sense to map out your costs of keeping vs trading in/selling. As the Pilot will likely have very good resale through 2004-5 (due to low probability of changes & high demand) that MAY be a good time to change to new Pilot or whatever else you want. While it may make sense for some folks to "drive in until it has to be towed away" I've seen many folks who would have been much happier by selling when their vehicle was still in demand. (Of course to really know this, you'd need to factor in repair/maintence costs and accurately predict the depreciation rate in addition to the lease vs loan calculation, and THAT gets very 'crystal ballish' because the are some troublefree vehicles at 150K miles and some that are trouble from day one that miraculously become troublefree after being in the shop for the first three years of ownership-- I guess you have to play the odds).

BTW Be sure to explore the various means of financing BEFORE you head to the dealer. Even if your Credit Union doesn't have the "best rates" they are useful for helping you to see how the length of loan and type of loan can make a BIG difference in your total costs.

900 Posts
Yes we noticed that the dealer has not been pushing leasing on this
car purchase either.
On previous car purchases, the dealers were always pushing us to lease. I'll bet they have lots of 3 year old cars to get rid of.

5 Posts
The devil is in the details

Leases look attractive because the amount of principal/depreciation financed is lower. You don't finance the entire cost of the vehicle, only the difference between the purchase price and the residual value. Subtracting off the residual value makes the monthly payment significantly lower.

However, most people don't realize that the interest portion of a lease is based upon the sum of the purchase price plus the residual value. Yup, the more residual value the vehicle retains, the more interest you will pay for a lease.

Here is a simple example of a lease calculation:
Lease term = 36 months
MSRP = $32,500
Purchase price = $30,900
Residual value = $19,900
Money factor = 0.00323 (~7.75% APR interest)

Total Depreciation = Purchase price - Residual value
Total Depreciation = $30,900 - $19,900 = $11,000

Monthly Depreciation = Total Deprecation / Term
Monthly Depreciation = $11,000 / 36 = $305.56
(This is the attractive part of a lease)

Total Principal = Purchase price + Residual value (note the plus sign)
Total Principal = $30,900 + $19,900 = $50,800

Total Interest = Total Principal * Money Factor * Term
Total Interest = $50,800 * 0.00323 * 36 = $5907.02

Monthly Interest = Total Interest / Term
Monthly Interest = $5907.02 / 36 = $164.08
(This is the ugly part of a lease)

Total Payments = Total Depreciation + Total Interest
Total Payments = $11,000 + $5907.02 = $16,907.02

Total Monthly Payment = Monthly Depreciation + Monthly Interest
Total Monthly Payment = $305.56 + $164.08 = $469.64

Conventional Loan:
Loan Term = 36 months
Principal = $30,900 (no money down, to be consistent)
Interest Rate = 7.75% APR

Monthly Payment = $964.97
Total Principal Paid = $30,900
Total Payments = $34,738.92 ($964.97 * 36)
Total Interest Paid = $3838.92


Note the monthly payments:
Lease = $469.64 vs Loan = $964.97

Note the interest paid in the two scenarios:
Lease = $5907.02 vs Loan = $3838.92

Wow, what a deal for the seller. They get to offer the consumer a significantly lower monthly payment, and yet they get paid a whole bunch more interest.


Also, you may not see an interest rate quoted in a lease document. Look for or ask what the "Money Factor" is. Take the Money Factor and multiply by 2400 to get the APR interest rate. (e.g. Money Factor = 0.00323; APR = 0.00323 * 2400 = 7.75%)

You'll notice in the example that the purchase price was not the MSRP. You should negotiate just as hard on the purchase price for a lease as you would on a cash or loan deal. Of course, currently on the Pilot this is very difficult.

**This example is not intended to be comprehensive, but it gives a good basic understanding of a lease calculation.**

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