Considering a tow rig upgrade - lease vs. purchase

[Nitrousbird]

I moved from an '02 Avalanche North Face Edition I owned for over 10 years to an '07 Escalade EXT about 2.5 years ago.  Got a great price on it and like the truck, but she had higher miles already and I've only added to that.  I turn my own wrenches but I'd like to reduce that a bit and I've been doing some math; it may be time to move on.  I keep detailed spreadsheets on all of our vehicles for everything spent (other than car wash stuff, insurance and gas).  Looking at what I can likely sell the Escalade for, my current monthly cost of ownership will end up being about $300/month - that would be FAR higher if I didn't turn my own wrenches.  In the end, that's $300/month with sweat equity and a now 12 year old truck.  

Purchase Requirements:  4wd/AWD, at least 7500lbs tow capacity, truck, full crew/quad cab, leather, sunroof.  Prefer a fully loaded with all the toys truck but those are the bare minimums. 

I've never leased before and I'm thinking about it, only from a financial perspective.  A leased vehicle will have basically zero maintenance costs (figuring a 3 year lease).  It will be all about the payment.  Even a 3 year old truck will have a little in the maintenance costs and I'm worried about depreciation.  Let's say I find a decent mileage 2013 - 2015 truck I like for 33k.  After tax, about a 35k truck.  But if I can only get 20k resale after 3 years of ownership, I'm at a 15k loss.  Even if I pay cash, I'm still looking at $420/month in 3 year cost BEFORE considering maintenance, which will likely be a set of tires, battery and a couple other small items - probably safe to assume a total cost of $470/month.  Though many say leases are a bad idea...is it really if I lease a truck for $470/month (zero down other than first month's payment, of course)?

Am I wrong to think this?  I have a car too, so the truck doesn't get daily driver use year round but I am still averaging 11,000 miles/year.  If I can own a brand new truck, keep it for 3 years and be out the same amount of cash as buying a used one and selling that in 3, doesn't that make more sense?  That's assuming I can score a lease under $500 for what I want, zero down...which from what I've been observing on some of the leasing sites, it might be possible.  Again, I'm really focusing on the overall cost of ownership.

Any input from those that lease?  I'm not concerned about turn in condition as I do a pretty decent job taking care of my vehicles.  Am I missing a factor here?  Time is on my side; if I lease, it will be a vehicle with the right options, incentives, money factor, residual and dealer willing to negotiate off of MSRP.  If buying used, it would likely be a '15+ F150, '14+ Sierra, '13+ Tundra, '16+ Titan, '16+ Silverado or maybe a '13+ Ram (Ram is my least favorite of them).  

[oldjeep]

You can buy a brand new 2018 Ram crewcab 4wd for around 35K if you forgo car stuff like leather and sunroofs.  Hard to justify a lease since you are left with absolutely nothing at the end.

But, if you are planning on only keeping a new truck for 2 or 3 years then maybe a lease makes sense, you would have to do the math.

[Sixball]

I hated my lease vehicles. I don't like watching my mileage. And nothing in the end. I look today and think leasing might be good but then what I have put on for miles in the last years just does not mean I would not have a change of hart and want to change my driving habits. If I was to lose my big yellow dog YA he is getting old. I would like to do more travailing for photograph.Just when you think you have your life figured out things change. My vehicle is not going to be part of my decision making. And the vehicles I have owned have had very little maintenance time. and no breakdowns.  Tires and brakes have been the only big cost since 96. But in the end its a very personal choice.

[Soon2BV]

I have done both. I leased my last 2 trucks and purchased the one I have now (2017 GMC Sierra). 

Downside of lease - Be sure to get higher mileage up front, miles are expensive if you go over.  You have to keep it for the term, or it is really expensive.  Overall more $$, because you can end up with 0 at the end, but i actually got about $1500 on my last one - the book value was higher than my lease end value.  You may be restricted on what you can do - I had one truck that I could not put in a spray in liner - they said i would have to remove it at the end of the lease!

Benefits of lease - When its over, you drop off the keys and walk away. There are usually incentives to go into another lease.  Usually they will "pull ahead" 2-3 months if you want to exit a little early (only if getting another vehicle). Virtually no maintenance - our dealers usually throw in 1 - 2 oil changes as part of the sale.  

Benefits of purchase - it's yours. do what you want. get rid of it when you want. 

[Cole2001]

What about financing a slightly used/demo truck? That way you can get a good deal and walk away in a couple years without loosing anything crazy. 

[edwin]

12 hours ago, Nitrousbird said:

 If I can own a brand new truck, keep it for 3 years and be out the same amount of cash as buying a used one and selling that in 3, doesn't that make more sense?  That's assuming I can score a lease under $500 for what I want, zero down...which from what I've been observing on some of the leasing sites, it might be possible.  Again, I'm really focusing on the overall cost of ownership.

I have owned a bunch, and have leased a bunch.  If you're trading rides pretty frequently and keep your annual miles in check, the lease is a very good option to consider.  You're 100% on the right track - it's just math to figure out which works out better in the end.

Of the points mentioned above, my experiences differ a bit.

-every lease I've had was written so that I could terminate / buy out the lease at any time with no fee.  Had this twice on a Toyota, 2 more BMW's, and a Range Rover.  At any time, I could get a pay off amount (just like a loan).  I have traded in one early (Toyota T100 -> Toyota 4 Runner),  sold one out right before the end of the lease term (Toy 4Runner), traded in early (BMW 528, Rover), or scratch a check and buy it myself (BMW 335).  None of these scenarios were any different than someone who claims to 'own' a financed vehicle.  

- buying extra miles is a great idea if you're going to plan to drop the keys and walk away.  If any of the above mentioned is in play, you're wasting $$$ each month on miles.  You already know exactly how many miles you're gonna drive so do the math.

-I hate the comment of  "you have nothing at the end".  Having worked 7 years at a car dealership, most folks take out 5 year loans.  Most don't put a huge chunk of cash down.  When the customer comes in to trade a 3 year old ride that they've been making payments, they are usually lucky to be able to get trade in value = to their payoff amount.  Only ways to prevent this - put up-front money on the loan, be lucky if a car really holds it's value better than expected, or make payments to the end of the term then enjoy your paid off ride for as long as you want (now you're back to where you're starting from today).

-I'm sure you take good care of your rides, but lots of people treat leases like a 3 year rental.  They trash the living out of the car, rarely do any maintenance, etc.  There are acceptable levels of wear that are called out in the lease agreement.  This only matters if you keep it till the end of the lease term.  

My take on this - get it written as an open ended lease and you're likely to get the exact scenario you're asking for.  

Edited September 22, 2018 by edwin
typo

[Nitrousbird]

12 hours ago, oldjeep said:

You can buy a brand new 2018 Ram crewcab 4wd for around 35K if you forgo car stuff like leather and sunroofs.  Hard to justify a lease since you are left with absolutely nothing at the end.

But, if you are planning on only keeping a new truck for 2 or 3 years then maybe a lease makes sense, you would have to do the math.

The Silverado and GMC's are at the same price.  No chance I'm going cloth - I'm not looking for a big downgrade and hate cloth seats.  Even though I'm buying it, the family takes long trips and the wife mentioned (with no probing on my end) that she wants something nice and comfortable and a base truck isn't going to cut it.

I get you have "nothing" at the end, but what do you have at the end of 5-6 years owning a truck if your overall monthly costs (WITH maintenance/repairs) ends up being the same as your overall monthly cost leasing for 2-3?  I get if you keep it for 10-15  years that number may go down...but then again you get into my pickle of dealing with repairs you are simply tired of dealing with.  Again, that sweat equity is nice, but I'm at the point that I have enough other things to sweat over (boat and two German cars to maintain, house projects, family, etc.).  

Again, I'm not against buying a used truck either, but the deals seem poor at best. 

6 hours ago, Cole2001 said:

What about financing a slightly used/demo truck? That way you can get a good deal and walk away in a couple years without loosing anything crazy. 

I'm willing to finance a 3-4 year old truck.  The prices right now are pretty stupid.  When I'm looking at 30k+ for a 50k+ mile truck that's 4 years old and no warranty, it becomes a hard pill to swallow.  I'd do a demo (hell, you can buy OR lease a demo...my buddy just leased a Range Rover demo that saved him a chunk of change). 

I think the issue is the depreciation factor on trucks has changed over the years.  It used to be the biggest hit was in the first couple of years.  Now it seems to be almost an even depreciation over several years.  Well, this kills you buying used as you are eating similar depreciation as someone buying new/nearly new trucks as you end up driving an older vehicle with a similar yearly cost.  Only difference is less money is tied up during that period.

12 hours ago, Sixball said:

I hated my lease vehicles. I don't like watching my mileage. 

My mileage over the last 13 years has been pretty consistent on my trucks.  I've always had a 2nd vehicle and 10-12k a year is just the typical number.  I have zero concern in this regard.  

[carguy79ta]

@Nitrousbird that has been my finding as well. The slightly used trucks/SUVs sell for only slightly less than new.

[BlindSquirrel]

Another benefit to a lease, the lease company is the one risking the value of the truck if it’s in an accident. If you get t-boned and the truck is not totaled, as long as you fix it, the lease company eats the depreciation of the now wrecked car.

[oldjeep]

3 hours ago, Nitrousbird said:

 

I get you have "nothing" at the end, but what do you have at the end of 5-6 years owning a truck if your overall monthly costs (WITH maintenance/repairs) ends up being the same as your overall monthly cost leasing for 2-3?  

Aside from oil change, tires and brake pads, what kind of maint/repairs do you think a modern truck has in the first 5 to 6 years?  And realize that with a lease you are still responsible for all that.  It isnt a rental car, you pay sales tax as if you bought it (in mn) you pay reg and licence and you pay for anything that isnt warranty.  You are also responsible to return the vehicle with a legal amount of tread on the tires and brakes within spec.

Edited September 22, 2018 by oldjeep

[dlb]

I am not sure why anyone ever leases a vehicle,  it is not a good deal if you run the numbers.....  Except me.  I did run the numbers on a possible lease years ago and said no brainer and did it.  After I turned it in I have always run the numbers and purchased the vehicles we have wanted.

We keep vehicles in excellent shape and tend to own them for a long time, therefore we get value from them.

If you are cash strapped and need a vehicle a lease may be of benefit.  The alternative is to look at CPO vehicles at the financial quarter end, that is when the deals come.  Bought a not quite 3 year old vehicle with 16K on the odometer for not quite 55% of MSRP that had just been turned on off a lease. Still own it 8 years later.

Search for the deal.  Be patient.

Edited September 23, 2018 by dlb

[Pnwrider]

1 hour ago, dlb said:

I am not sure why anyone ever leases a vehicle,  it is not a good deal if you run the numbers.....

We keep vehicles in excellent shape and tend to own them for a long time, therefore we get value from them.

If you are cash strapped and need a vehicle a lease may be of benefit.  The alternative is to look at CPO vehicles at the financial quarter end, that is when the deals come.  Bought a not quite 3 year old vehicle with 16K on the odometer for not quite 55% of MSRP that had just been turned on off a lease. Still own it 8 years later.

To your first point, it really depends on the numbers. It can be a good deal depending on your current situation. I had lunch with a friend last week who happens to be a finance manager at a dealership, we had a similar discussion and he gave me several scenarios where a lease can make sense financially (I was skeptical and largely it wouldn’t work for me, but that doesn’t mean it doesn’t make sense for others in different situations). 

Your second point, “we keep vehicles for a long time” might as well stop you there and admit buying is a no brainer for you. OP said he was looking to get buy the next 3 years. Long term ownership doesn’t seem to be a factor here.

To your third point of half off a cpo, we are talking well optioned trucks here. If you can show op some 2-3 year old trucks optioned the way he wants, that are half the cost of new, I’m sure he’d appreciate it. Heck, I would too. I’ll be in the market for a new truck shortly...

[Nitrousbird]

18 hours ago, oldjeep said:

Aside from oil change, tires and brake pads, what kind of maint/repairs do you think a modern truck has in the first 5 to 6 years?  And realize that with a lease you are still responsible for all that.  It isnt a rental car, you pay sales tax as if you bought it (in mn) you pay reg and licence and you pay for anything that isnt warranty.  You are also responsible to return the vehicle with a legal amount of tread on the tires and brakes within spec.

Most states you only pay sales tax on the leased amount of the vehicle, not the whole purchase price.  Registration/title isn't much here.  A 3 year/36k truck shouldn't need brakes (which are cheap/easy anyway) or tires (which are not).  A 5 year old truck will need tires, tranny fluid, transfer case, front/rear diff, and probably brakes.  Likely an item or two outside of warranty as well.  Even DIY work will end up costing you $1500 - $2000 in maintenance you won't see on the lease.  Not a lot over 5 years but does add to the cost.  So it does go back to if your overall monthly cost on a new truck after 6 years and selling it is the same as your 3 year overall monthly lease cost, where is the benefit unless you plan to keep it even longer?

 

8 hours ago, Pnwrider said:

OP said he was looking to get buy the next 3 years. Long term ownership doesn’t seem to be a factor here.

I'm totally cool with long term ownership.  I kept my Avalanche for over a decade.  My wife kept her last Audi for 10 years and I expect will keep her current one for a similar amount of time.  I've had my BMW for about 4 years; I'd like to upgrade it to a '16+ 2SS 6MT Camaro but the truck is more important than my secondary toy...which is also costing me a lot less per month than my truck in overall ownership.  It's more of the real world monthly costs of ownership.  It never would have made sense years ago, but with the cost and (lack) of initial depreciation on these trucks it seems to make more sense...the whole "it looses 10% when you drive it off the lot" doesn't really apply any more as long as you paid the right negotiated price on the truck.    

 

[oldjeep]

I guess it depends on how many miles you put on a year.  At 20k a year I am replacing tires every 2 years and brake pads every 2-3 years.  

[Padge]

If you are like me, then you don’t ever intend on keeping anything over three years. That’s how I’ve always been. It’s like a hobby for me to trade lol. Leasing is a cool thing because you can always trade for a new vehicle. When you lease one, especially through ford, you will get a early bird re-lease special. Allows you to end your lease 3-6 months earlier and get a credit for the last three payments. Something else cool that ford does, is put the yearly taxes in the payment. Or at least in ky they do lol. So you don’t have a yearly tax bill. Ford has great lease deals on new f-150’s

[Nitrousbird]

2 hours ago, oldjeep said:

I guess it depends on how many miles you put on a year.  At 20k a year I am replacing tires every 2 years and brake pads every 2-3 years.  

11k a year on my trucks....has been this average since 2005.  2nd vehicle helps a lot with that; put about 9-10k a year on my BMW, as I try to drive it more Spring/Summer/Fall and only use the truck when needed (long trips, filling gas cans, towing, really crappy weather).

[Badger]

I have spoken with both the Chevy and Ford dealers in the last 2 weeks.  2018 Silverados have $10k off of MSRP right now, as the new 2019's are hitting the lots with a redesign.  Don't know if it is helping  the lease price though because I was there looking at Colorados.  I did check a F150 lease with crew cab, 4x4, not sure on leather and it had about a $8500 total cost for a 2 year lease with 15k miles per year.

Edited September 24, 2018 by Badger

[Falko]

Given how the market works for them, I'd buy a slightly used truck shortly after model year change. Many people are trading in and the market gets saturated. While trucks hold their value, they do depreciate quickly in the first year from my findings. While not quite as appointed as you like but for example I bought a one year old SR5 Tundra for 2/3 of the sticker with 25k on the clock. I know that is comparing to MSRP but Toyota doesn't move a lot on their vehicles from my experience as I was shopping new ones when I found this one. According to NADA I haven't lost any value in the truck yet as private sale is still what I paid for it even 15k miles later.  So if you wait for the right deal, you'll have lost little if you decide to drop it in three years. If you turn a new lease in, then you still have to come up with another $3-4k for the down payment on another lease or buy something else. I'm not a fan of leasing unless you are a business. 

[Nitrousbird]

On 9/23/2018 at 10:11 PM, Badger said:

I have spoken with both the Chevy and Ford dealers in the last 2 weeks.  2018 Silverados have $10k off of MSRP right now, as the new 2019's are hitting the lots with a redesign.  

Because of the model change, I've been looking at the Silverado's and Sierra's.  I like the Sierra's better and due to packages to get what I want, the Sierra ends up being cheaper MSRP to MSRP, oddly enough.  All I would want is a 4x4 Crewcab SLT, Premium Plus (the Plus being key here) + sunroof.  That also allows for max MSRP discounts; $11,200 if financed.

The problem - it seems dealers are somehow still getting NEW inventory of '18 models and have very few '19 models available.  So the GM discounts are great, the dealers aren't desperate yet.  And god forbid you find one with the 6.2L, lol.

The Fords - for what I want, are a good 8k cheaper MSRP to MSRP than the GM's (2.7 or 3.5 Ecoboost, 4x4 Crew Lariat with 501a and the Nav/roof/bucket seat package).  They don't have any real incentives though, which makes them slightly more expensive than the GM's before negotiation.  Dollar for dollar, I'm starting to see why the Fords are outselling the GM's.

Local Nissan inventory is a joke, as are the prices/incentives.  Toyota's MSRP pricing is pretty decent but boy are those things dated now and the incentives just aren't there.  As for the '18 Ram's...just can't do it.  To the point I can't even research any deals.  Just not my bag.  '19's are sweet but they aren't giving them away.

Guess I'll wait a month or two to see if anything changes.  I'm in no rush as of right now my truck is perfectly fine.  I'm almost leaning toward buying vs leasing now.  Maybe once the Ram and GM '19 models are readily available the used market may adjust a little more.