-J-P-L-

And it's no wonder. "Cheap" cars like the Corolla now start at $20K for a base model. That means if you did the recommended 36 month term, it would be $625/mo. How many people buying economy cars can afford $625/mo?

If you're able to get 0% financing, I see no issue doing a 60 month term (usually the longest available at 60 mo). In fact, it's smarter as you have more liquid cash along the way to invest or put to other better use.

riredale

My current understanding of auto leases may be incorrect. Is it the case that, at the end of the lease period, the driver has the right to buy the car for a given price that does not necessarily reflect actual market value, and if that market value is higher then he can turn around and sell it and pocket the difference? If so, then what if market value is lower than the price indicated in the lease documentation? My understanding is that there is a penalty for excess mileage, but what about other factors, such as the model being discontinued by the manufacturer?

I would have assumed that the writer of the lease would put in language about the Bluebook value at the end of the lease but perhaps that's not how it's done.

JDR76

Johnhav430

This is why I think times have changed. When you ask how many people buy a Corolla for $625/mo., I would guess < 1%. They would put a 50% downpayment and likely get it into the low $300's. 36 mos. later they own the vehicle, and being a Corolla, they might be set for another 17 years.

The one thing from friends that I've always found offensive about leasing, is being responsible for taxes, and maintenance, and you don't own this asset. I've never heard of an apartment where the renter pays the maintenance and taxes, that would be insanity unbridled. Unless I am wrong, you can't even replace your registration/license plate yourself, when you lease a car, you need involvement by the owner.

4TehNguyen

iTrader: (1)

yea leasing is a joke, too restrictive. You get nickel and dimed on the mileage, any rock chips, scratches. Its even stupidier if you like to mod cars

Johnhav430

I am always looking for a deal. Brother texts me, Bens has a 2012 E63 AMG he is selling, 90k miles, it's in Houston. He's getting a new one. I reply I am interested, sight unseen he says he's original owner, no accidents. My offer, I'll pay whatever kbb shows as wholesale, minus 10%. Crickets. If I had to worry about leasing or financing, I couldn't make an instant decision like that. Don't get me wrong I'm still going to check if accidents, service history, etc. But I am ready on a whim, because I always wanted a E63. imho I would rather decide where my cash goes, rather than the other way around, let me see what $350/mo. can get me, where the finance co. makes the decision on what I can get.

bitkahuna

iTrader: (20)

holy out of touch, batman... while you're right that almost no one would have/want a $625 payment on a corolla (and not sure what calculation you're doing, looks like 36 mos 20K and $625 would mean over 7% interest!), almost no one considering a corolla is going to put half down. they might have a trade-in so i guess that would be part of it, but most people don't want to take any money out of their own pocket to add as down payment. especially with very low interest rates, there's no point. so probably a more realistic scenario is the $5-7K trade-in, and financing for 48-60 months. $13k financed at 4% for 3 years is a $384 payment.

one way or another, they are, just not explicitly.

as far as leasing, i'm in my first experience with it with the g90... and for me it's nice to know what i pay and that i couldn't care less about depreciation or trade-in value down the road. all maintenance is included and the valet for service means i never set foot in the dealer. i guess those last 2 things would be the same with buying, but as i have no interest in owning any vehicle long term, i think leasing's going to be my go forward way of having transportation until a self-driving car just shows up when i need it and i can see good riddance to any buying or leasing.

Diesel350

Not necessarily. Your source does not indicate mean, median or mode. I'd like to see specfic details on the majority of auto loan terms.

Johnhav430

Maybe, that's my rule, 50% or more down, or don't do it, or get something cheaper. I don't want a car loan if possible. Like when this E63 came out of nowhere this AM, I know what a 2012 goes for ballpark. I know the guy trying to sell it, he's a C level guy who would have zero time to really drive, he'd be at work 10-14 hrs/day, like 6 yrs. younger than me same HS. So if I can get it below wholesale I'll take it. I'm not going to borrow for that amount, esp. not for a 5th car. It has to be discretionary from savings. But you said to buy amazon instead of putting money down, right? My response was there's really a time and place and I wouldn't do that now. Maybe in the late 90's or early 00's with respect to amazon.

arentz07

Considering the default loan length suggested by most loan providers as well as car dealership personnel is 60, I am sure that the average is at least 60.

Besides, Edmunds says that the most common loan term (and probably, the median) is 72 months. Edmunds cites the need for down payments as a reason why these loans are popular. Rather than make a down payment, people opt to just stretch the term instead so that their monthly budget is less-affected by the car purchase.

https://www.edmunds.com/car-loan/how...r-loan-be.html

Toys4RJill

geko29

It absolutely does indicate mean. That's the definition of the word "average". I made an educated guess on the median, based on the fact that loans are available from 12-96 months There's a lot more space between 12 and 70 (or even between 24 and 70, if you agree that 1 year loans are exceedingly rare) than there is between 70 and 96, so if the average is 69.5, it is highly likely that the Median is at least 70.

And it turns out I was exactly right: https://www.edmunds.com/car-loan/how...r-loan-be.html

So now we know the mode as well, and it's 72. If the mean is 69.5, the mode is 72, and the second most-common length is 84, it's mathematically impossible for the median to be below 60.

Experian breaks it down even further

76.2% of new loans are for a term of 61 months or longer. This is broken down into 41.3% 61-72 months; 33.6% 73-84 months, and 1.3% 85-96 months.
Just 6.2% of new loans are 4 years or less.

They also break it down by borrower risk. The shortest average loan length is in the "super prime" category, and even that is over 5 years, at 63.7 months. They have the overall average pegged at 69.03 months, pretty close to the Edmunds figures.

-J-P-L-

You really think Corolla (or similar) buyers are putting 50% down? No way. Most are likely putting very little or no cash down. The main down payment amounts to their trade-ins which I would say most trades are much less than $10K when getting into a new Corolla.

As far as comparing to apartment rental. Taxes and maintenance is built into your rent payment. The owner doesn't take a loss when it's time to pay taxes. The owner prices the rent at a level that considers all costs (to pay mortgage, maintenance, taxes, etc. and still come out ahead).

When you rent a car, you pay taxes. In a lease, I'm almost certain you only pay the tax on the depreciation portion that you're paying for the car. Why would you get out of taxes through leasing? Maintenance for 3 years is primarily just oil changes and tire rotations. Again, it's totally reasonable that the lessee would be responsible for this. Although companies like Toyota are giving free maintenance for 2 years.

My math included typical sales tax (which you shouldn't finance but was just showing total cost) and about a 4% interest rate. But yes, your example is probably typical. Most people buying a Civic or Corolla can't afford much more than maybe $350 a month. Plus there's insurance, maintenance, and gas.

FatherTo1

OMG, the average car loan is that much, even at over five-year term?!?! Geez, we've never had a car loan that high, and never longer than 48-month. Even at 48-month term we paid it off early.

I haven't read through the rest of the responses but I disagree that a car loan is the priority bill. Seems more like cell phone bill, which can be hundreds a month for some folks, is the first bill people will make sure to pay. Even if your car gets repossessed, if you have a cell phone you can dial Uber (which could be cheaper than $550 per month).

Johnhav430

LOL I live in PA and we have competitive power supply cos., I look at them as CLECs are in the telecom world. And they sound like 3 guys in a room, rented at that, with zero assets. I.e. brokers. But look at say a larger scale of this when PR had their disaster. Anyway, for whatever reason, over the last 3+ mos, the local aka incumbent was cheaper than the competitors. With the rate going to 7.1 kwh effective today, I locked in 18 mos. @ 6.3 kwh, with no term fees. That is a fraction of a penny, and more of a move out of principle, because in the summer when our central AC goes buck wild maybe we'd consume 800 kwh. Do the math. My philosophy is I always want to pay less than you, and earn more than you hahahahahahaha on average.

The one where I am weak is cable tv, I admit it. Because I want to watch every Phila. Flyers game, I don't cut the da** cord or fiber. Even with a discount through work it ends up being $149/mo. And my wife says cut it, we don't need it, but I don't do it. To your cell phone analogy.

The main gist of this thread, imho, is that there is nothing wrong with having a car payment forever. I think that is a fundamental change over the way our grandparents looked at it. That beautiful no older than 35 mo. old vehicle, that saves us from embarrassment, is worth way more than the sacrifice on making payments.

What dawned on me today is that stock market play portfolios still potentially make more in a day than we do at work--that hasn't changed. I looked at VMW today and thought it's like shooting fish in a barrel. That co. paid out a special dividend of over $26/share earlier this year, and the stock is again at a historical high (my experience is that Wall St. is so efficient that dividends are accounted for by share price and esp. noticeable when a share goes ex-div). Once in a while life throws us a bone. I'm gonna keep chugging without a car payment as long as I can, and again, that's me. Doesn't make it right, doesn't make it wrong. Just all observations. And when one day I get a corvette, if I do, again, has to be 50% or more down, and would want to get the payment down to $400/mo. at 36 mos., and only if rates are low.

edit: because you mentioned cell phone, I just thought of this. My employer pays us a stipend for our "cell" phone which really is a smart phone tether the employee deal. This means, you can call me 24/7/365. But, practically speaking, that does not happen and it really means that based on today's pricing, the employee and spouse has free cell service. Now, what if said employee loses their phone, it stops working, and they simply don't feel like getting another one. Now they are not reachable and they are getting reimbursed for the recurring cost but not the cost of the device. I used to prefer having a co. phone but not anymore since that gives full access to the usage, call record, data records, etc. If I were given a co. phone, that means I'd have to carry 2 and would now have increased expenses since no more stipend...