Should a student Buy or Lease when they graduate from college?

Most of my friends will be graduating from a college or university within the year.The question we have for our Panel Of Experts is should we buy or lease a new vehicle given the fact most of us will have good credit (thanks to our parents) and less then $1500 down? Or should we buy a used vehicle?

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Permalink Reply by Bobby Compton on October 20, 2010 at 12:45am

I say lease a brand new vehicle!

With great credit deserves the pleasures and hassle-less free experience of driving a wonderful new car problem free!

I was a young whipper snapper once, not saying I'm not any more if you know what I mean - lol, and I've owned to many vehicles to remember how many! Short term lease on a vehicle you can afford and enjoy...

I hope this helps...

Cheers to you and all your friends for graduating college... Much respect and best of wishes... B.C.

Permalink Reply by Dennis M. Sims on October 20, 2010 at 11:59am

The question buy, lease, new, or used, begs for much more information. There are obviously pros and cons to all options.

The absolute necessary information if your choice is to lease, is, as Jim said, can your mileage be determined for the next 2 years, or may it change based on the job you get and if you'll have to relocate.

Most Leases are for 12,000 miles per year, which for some of you young graduates will be much more than enough, but for others, not nearly enough.

Again, as Jim said, there are steep penalties (approx. 15-20 cents per mile) for going over your set mileage.

If you know you'll be putting 10-12,000 miles per year on your car then my recommendation would be to lease a New Vehicle for a couple of reasons.
> You will get a lot more car for a lot less per month for a shorter time by Leasing, rather than by purchasing.
> Your decision is for a short term anyway if you Lease. Things may change in 2 Years so you don't want stuck with a 60 Month Loan which is how long you'll probably have to finance to get what you want at what you can afford.
> Interest Rates and Residuals have become much better lateley for Leasing because only a small
percentage of consumers qualify for the high credit standards.
> Put as little money, IF ANY, down. Keep your cash. The interest rates are low and you'll only be
reducing your monthly payment by a small amount if the money down is used as a "Cap
Reduction".

Most of all, get a nice car that you'll enjoy and be proud of!!! You earned it, and you deserve it!!!

Permalink Reply by Ryan Kleinjan on October 20, 2010 at 12:03pm

I can only tell you from personal experience - it really depends on what you are going to do professionally after college. I leased a vehicle - ended up working in Field Sales - put way too many miles on the vehicle and ended up having to trade it in and paying off a substantial difference between the trade-in value and the residual.

If you know you can stay within the mileage factor - leasing gets you alot newer, more stable of a vehicle -- if you drive for commute, work-related, and social festivities - go get a late model used.

RK

Permalink Reply by JP Buzzworthy on October 20, 2010 at 1:02pm

"No to leasing" unless Commute to NEW post grad job has been established. Leasing is only smart if you are not going to exceed the allotment of miles. Other wise purchasing a two year old vehicle with under 30,000 miles is the better deal.

Permalink Reply by Scott Dreisbach on October 20, 2010 at 1:08pm

The basic rule of thumb for asset accumulation is to try and acquire the assets that appreciate and lease the ones that depreciate. Very few items depreciate more than a new car in the first 3 years, I say lease it.

Permalink Reply by Guy Manasse on October 20, 2010 at 1:10pm

Miles is always a concern with young people. You do not have a crystal ball knowing where you could end up in 1 to 4 years. I would consider a Certified Pre-owned to get the payment range closer to the lease or find a Purchase car with the great low rates.

Permalink Reply by Kevin Dyck on October 20, 2010 at 1:11pm

It depends. I've done both and I'm much happier when I get to the end of those payments and still have something to show for all those hard earned dollars used to pay for the car. There are many variables to consider such as downpayment, driving habits, monthly payment compared to monthly income. If you lease and keep the mileage down, turn it in, lease another and continue making payments, If you buy, pay it off in 4-5 years, keep the car in good shape and go another 2 or 3 years without any car payments. Use that savings for vacations, save up for downpayment on a home or just save the money Personally, I like buying..

Permalink Reply by William Bryant on October 20, 2010 at 1:36pm

IMHO I love leasing, think it's a fantastic idea. I leased a truck out of college and wish I still had it, it was great!

However, I believe as a student coming out of college it would be best if they started the habit of saving and investing. A lot of money can go towards a nice new car on a lease, and I wish I had saved and invested more of that money. It would have been a lot cheaper to pay for a used car (especially with the difference in property taxes and insurance!!!) and save the rest. Older people already have established savings accounts, but fresh college kids don't. If you took the difference between payments, taxes, and insurance on a new car lease vs a used car purchase, and put it into a 401k or something similar, you'd be in the money baby.

But, we're American and like to spend. Emotions would say lease. And most people have a hard time actually saving and investing. Just depends on what you have the motivation for.

Just my two cents

Permalink Reply by Dennis M. Sims on October 20, 2010 at 1:39pm

Terry,

EXCELLENT Illustration!!!

Permalink Reply by Mauro L Schifino on October 20, 2010 at 2:23pm

I think Terry sumed up why leasing is better.
The only thing I would like to add, is at that age, your life style can change quickly. With leasing, you are not trapped, you can get that new car/truck as your needs change.

Permalink Reply by George M. Gill on October 20, 2010 at 2:23pm

George Gill

I suggest you do a little research and look to purchase a low mileage pre-owned vehicle. No to new....you have start up bills rent, clothes, new job, insecurity of job market and current economy in general..etc.....no to leasing as you are rolling the dice on what you new driving habits will be you don't know........Ok some peace of mind with buy or lease, but depreciation on new and nothing to show at maturation of lease term and starting over....My wife and I raised 7 kids and that is the route we took in recommending them all to go that way...co-sign if needed to help them establish their credit history AND with so much to see and do as they start out of college, I wouldn't want to see them married to a car payment!

Permalink Reply by Tobias Sedillos on October 20, 2010 at 2:41pm

Your most affordable and sensible option is to buy a good used vehicle. That has decent mileage, a clean history, and qualifies for an extended warranty.