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IMO. if you could get a low fixed APR, you're slightly better off (slightly). However, you are insulated from fluctuations in interest rates. If you went with the lease option, what would you do if the economy tanks and we get 70's style inflation? The used car rates could get up to 12-15%.

However, having said that, to get a similar payment as a lease, you would need to look at 72 months which has a large interest penalty. There is no easy answer unless AHFC offers a 0.9% on the Fit. Otherwise, the lowest payments today would probably be the lease.

 

I would guess that, in many cases, you'd end up paying more in the long run; however, the only way to know for certain is to actually do the math for your particular situation and see what comes out. If you're not pretty certain you'll want to keep the car at the end of the term, the lease might make more sense than buying it outright and then selling/trading it in on something else in a few years...although Fits have traditionally held their value quite well.

I think the simplest way to avoid having the dealers give you too much of a run-around with numbers is to pay cash or to arrange financing beforehand with a bank or credit union. (You generally prearrange the terms for a loan for up to some maximum amount, and then be free to get any new car that's less than that.) That way, all you have to deal with is the price of the car and the value of your trade-in if you have one. If there are any special manufacturer's offers on the car, you might get a better interest rate through the dealer, but I don't think that's all that likely for the Fit in the near future as there's currently a pretty strong demand for them and rather constrained supplies.

There's a real freedom to saving up and paying cash if you can possibly manage; that way, whatever unexpected things the future holds, you won't lose the car and you won't have to worry about payments.

 

^^ Yeah, I guess if you know you'll keep it, go with a loan but be prepared for a higher monthly payment (than a lease). If the loan monthly payment isn't doable, I guess you have your answer.

 

Consider that with a lease and subsequent purchase you are buying a car and paying for the salaries of the people at the leasing company who are holding the paperwork. There is no way that this will cost less than an outright purchase.

Leases are only useful for people who want a car for a short time and who can write it off as a business expense. If you are leasing for the low start price you are better off finding another route.

 

Leases are usually only beneficial to someone (a business) who can write off the costs. That leaves the up front money for other business use. Leases will state how much mileage you can put on the vehicle and if you exceed it, the penalty is very high. You have low up front costs but when the lease is finished you also have nothing as the vehicle goes back to the lease holder. You are responsible of any damage or rehabillition costs.

 

Thanks that information was very

 

There are cautionary tales for all transactions, but I want to touch on some of what you've said. Full disclosure: I'm in the business at Acura. First the mileage penalty. Standard leases are 10K, 12K and 15K per year. Excessive mileage is charged at 20 cents per mile if the car is over $30K and 15 cents if under (this is at Acura but I'm guessing it's similar for Honda). Thus, the penalty is not 'that' high unless you grossly miscalculate your needs.

Also, you don't actually have "nothing" at the end. The balance is lower than the original purchase price so your payments must have gone 'somewhere' right? There is a finance charge but the buyout has had a portion of the payments applied. But because you haven't paid for all of the car, it would go back to the leasing company if you don't purchase the buyout. From this POV, there is 'nothing' at the end, but you have had the usage of the car for the previous 3 years.

As for end of lease reconditioning. At Acura there is a standard wear and tear allowance that lets things like door dings slide (a ding is smaller than a quarter, and one per panel). Beyond this, they provide up to $750 of excessive wear and tear before they start to bill you. This money can be used for new tires, bumper scrapes etc. If you're leasing a new Acura, they'll double the allowance to $1500. This policy is new for Acura, but I assume its the same for Honda but have not confirmed it yet.

Having said all this, please note the in the case of the OP, if he were to lease then purchase the car at the end, little of it applies. No mileage if over, and no wear and tear charges. This is because they only apply if the car is returned to AHFC. If you buy it, at the end, they (AHFC) don't care how many miles it has since its not 'their' car anymore.

Everyone needs to do their research, and for the OP, I think the loan is a better choice unless the payments are simply too high. But we've leased every car we've owned since '97 and have never paid a penny in mileage or wear and tear charges (and this includes the early ones when the allowance was only $100). Anyway, my 2 cents.

 

Here's some info on leasing:
If you go over your miles, you pay. If you come in under your miles you don't get money back, though you've already essentially paid for those miles in your lease payments.


One advantage of leasing (and there might be only one, for most people) is that it's lemon-protection. If your car turns out to be a really awful car you can just hand them the keys at the end and walk away (after probably getting nickel-and-dimed for everything they can- door dings, mismatched tires, etc.). If you'd bought the car and three years later it was not doing well (or the entire model year had a bad reputation) you wouldn't do very well selling it.

 

Of course car salesmen want you to go with the method that lets them sell you the same car twice!

They love leases because it lets them throw wave prices at people and then sell the car again while it's still close to new.

 

Leasing and then buying the leased vehicle is the most expensive way to own a vehicle, period. Plus, for me, a general "problem" with leasing is that there are more variables/points of negotiation than with a traditional sale: residual value, mileage, cap cost reduction, various fees, etc. Each of these variables is a point at which someone (bank, dealer, lease company) stands to make money to the detriment of the consumer. That's not saying that a consumer can't make a decent deal on a leased vehicle, but I suspect the average consumer doesn't make out very well.

 

I know quite a few people that don't care to keep cars longer than a few years because that's just how they are. They like new stuff and don't want to deal with selling or trading the car in. If they go on long road trips they just rent a car so it's easier to calculate mileage usage or they take their S/O's car or whatever.

If I were one of those people i'd definitely lease. I am not one of those people though.

I think this is the only way leases make sense, that or like previously stated the car can be written off as a business expense.