My DS is graduating and commissioning this year. He will be going to flight school. He does not have a car and we are looking to get one. Would buying or leasing be a better option for someone in the military just starting out. I'm providing him with the down payment since he saved me tuition over the past four years. Looking at what is best for him because he will be relocated at some point.
Lease or Buy
- Thread starter goirish1
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HowstheCow
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I would personally recommend a purchase. Leases can be tricky for military especially if sent on orders overseas, granted your DS will be in flight school for a year plus. Some leases will not allow you take the vehicle permanently to another state...at least several years back when I looked. Finally, the miles allowed could be prohibitive and the excess fees exorbitant.
I have had my best luck in buying cars that are coming off of a lease. Usually 2-3 years old, low mileage, still under warranty, and the lessee ate all the depreciation...good way to get a relatively new car for much less and payments could be in the lease range or lower.
And I'll add that the lessee whose car your buying at a discount likely took really good care and had it serviced at the dealer to avoid some of those exorbitant end-of-lease fees.
I have had my best luck in buying cars that are coming off of a lease. Usually 2-3 years old, low mileage, still under warranty, and the lessee ate all the depreciation...good way to get a relatively new car for much less and payments could be in the lease range or lower.
And I'll add that the lessee whose car your buying at a discount likely took really good care and had it serviced at the dealer to avoid some of those exorbitant end-of-lease fees.
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They about covered everything in the previous posts, I would just agree that the number of miles he may put on a car and the buy out at the end could make a lease not as attractive.
Will your son be taking the USAA Starter Loan, both my sons used part of the loan for their vehicles since the interest rate was better then they could get anywhere else for a used vehicle.
Will your son be taking the USAA Starter Loan, both my sons used part of the loan for their vehicles since the interest rate was better then they could get anywhere else for a used vehicle.
Yes...he will most likely take the starter loan....but I'm able to help him with the auto for now and I work in a bank so I can get a decent rate....I would prefer he actually invest some of the starter loan so that in 5 years he has a decent down payment, put some in a retirement plan, and leave some for an emergency fund.
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One suggestion you might look into. I don't live too far from Camp Lejuene and whenever I'm in Jacksonville I see billboards, etc hawking special deals for military folks. I don't know if they're any good and they might be to just get them in the door, but it could be worth looking into at least.
KeyzCat
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I would suggest looking local . area going to, and online companies also for prices. I got fleeced by a local dealership but in 10 mins at like 2:30 am got amazing deal from an online company that delivered the car free. The dealerships 'warranties' seemed to not cover everything wrong with the car from them but the on-line car covered everything from a full 75K servicing since that was missed when they processed it to plastic clips that hold the cover thingy under the hood it was missing 3. The online one had even left some pretty expensive extras like trunk organizers in the car. We are more limited where we live but I still would look at that online company , Rental companies that sell every couple years or direct from manufacture lease sales (fleet vehicals) you know they have had great upkeep and maint with the rental/fleets and the on line place has a 100 day free everything covered warrenty. For me those things cover my biggest fears caused by ripoff used cars from dealerships. Have them really think about the things they need in a vehicle so not getting something cause it 'looks nice' but doesn't fill needs so they are needing to change out cars. Will they be needing lots of cargo space for their military gear, hobbies, activities, do they already have a family or planning one soon so need good safety for car seats, will they be doing a lot of TDYs, or need to take the vehicle home to you to keep it from sitting during deployments which lends desire for high mpgs and ability to not get gunky if sitting or have easy inexpensive moth balling. Do they need things like tow packages, bike racks, roof racks. Too often all they are thinking about is how cool it looks instead of those nit picky things.
Car buying is a lot like furniture shopping as it causes many of internal strife between family members.
USAA has a great auto buying service that I still use. They give you a dealer and the price of the vehicle. It can get you the best deal without having to really shop around.
I also would not discount leasing. I happily leased for many years but now that I live in Texas, the financial implications are different. Many leases also will allow you out if you are deployed. I would figure out what he wants and do the cost benefit analysis. Don't forget the fact that new vehicle incentives and interest rates may make buying a new car cheaper than buying one that is a few years old.
I also worked for General Motors for a long time and I can tell you the cost of a new vehicle is pretty much the same from every dealer. They may change a few 100s but there is very little mark up at the dealer level. Dealers make money on services. The savings come in the form of incentives from the manufacturers. You can find these incentives on line and see if the apply to you.
USAA has a great auto buying service that I still use. They give you a dealer and the price of the vehicle. It can get you the best deal without having to really shop around.
I also would not discount leasing. I happily leased for many years but now that I live in Texas, the financial implications are different. Many leases also will allow you out if you are deployed. I would figure out what he wants and do the cost benefit analysis. Don't forget the fact that new vehicle incentives and interest rates may make buying a new car cheaper than buying one that is a few years old.
I also worked for General Motors for a long time and I can tell you the cost of a new vehicle is pretty much the same from every dealer. They may change a few 100s but there is very little mark up at the dealer level. Dealers make money on services. The savings come in the form of incentives from the manufacturers. You can find these incentives on line and see if the apply to you.
My DS did (AROTC commissioned 2015) assumed an existing lease from someone who wanted out.
NO down payment. He may have paid a lease transfer fee, but the lease holder paid him three months' payments in advance to take it over.
Paperwork was run through Ford leasing and signed off by a Ford dealership, so no funny business.
The car was under warranty as long as he had it.
When he deployed overseas, the lease was voided. No penalty. (He knew that in advance).
His fiancee (AROTC Jan 2017) did the same thing in January.
His brother will do the same thing before heading off to CA for an internship.
I understand these guys and gals want a fly ride after four years of bumming rides or smelling the interior of a 10 year old beater. That being said, there is no cheaper way to own a car with a warranty than assuming a lease. For the love of G-d, the original lease holder paid the first year's depreciation.
This is all you need to know:
http://www.swapalease.com/
DS and DFDIL handled it all themselves so I don't know all logistics, only the legalities. Feel free to PM me and I'll answer whatever I can.
This should be a sticky.
unkown1961
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I'm with Dave Ramsey and Clark Howard - never lease and never buy new. Someone mentioned above about a used car - find a cheap reliable car with 100k miles on it so that the child/parent can pay it off and have no payments. Just not worth it having debt at this age (or any age). Good luck - buying cars is the one thing I truly despise in life. 
I couldn't agree about not putting money in a depreciating asset. But, If you buy a car with 100k, you better verify a lot of things because there is no such thing as a cheap repair anymore. Every repair adds to the cost basis of that car that was cheap on the front end.
Show me a better deal than this with a bumper to bumper warranty.
http://www.swapalease.com/lease/details/2016-Ford-Fusion.aspx?salid=1032740
This is almost the exact deal my DS had on his Ford Fusion. Yeah, when we showed up at BOLC, it looked lame among the Silverados and Cameros and BMW's, but so what. When he went overseas, he simply gave the keys to the dealership and they gave him a ride to the airport.
As a CPA, i can tell you that leasing is great if you are in business and you dont go beyond what you are allowed in mileage. Leasing personally is another story. It depends on how many miles you drive, how long you typically keep cars. There are cars out there that are expensive that the only way to own one is to lease. Having said that, I leased my son a brand car for college. It wsa a 3 year lease for a student who had 3 years left at school. I dont have to worry that it will break down and if it does, it is under warranty. I had no real down payment and I pay about 150 per month. Would it have been smarter to buy a car, probably. However, like I said, no down payment to speak off the monthly payments are minimal. As long as he doesnt scratch up the car or hurt it (fingers crossed) there shouldnt be any issues when returning it. Of course, the money is all gone and I wont get anything back when I return it to the dealership. When my son goes to UPT, I will recommend that he get a cheap used car because he is only going to be there for one year and transporting something new or relatively new is going to be a pain when transfers to a new base. You know what pisses me off, I have a digital copier in my office is that scanner, copier and fax. The lease on that is almost twice as much as the car payment. Its not that big of a copier.
That sounds nice but the one thing that isn't taught in school is how to mange money, how to stay out of debt and how to invest for your retirement . I am a CPA and I deal with lots of professionals in many different areas and I can tell u most people don't have a clue . Being a officer and college graduate doesn't necessarily do anything on that area. My son has already spent his Lt loan ten times over in his head
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I'm a CFP and totally agree with @Humey. I get this question about leasing vs buying a lot from clients who are very financially sophisticated.
Sometimes the calls come while they are still at the dealership!
Pima
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I am not sure I agree with this at all. I don't know which base he is going to for UPT, but my DS was at Del Rio aka Hell Rio. He lived on base, so day to day he may have driven the car 2 miles in total. However...like most AF bases they are in the middle of nowhere. Between San Antonio and Del Rio it is a 2 1/2 hr car ride with nothing in between. I would say he probably went to San Antonio once a month, sometime more. If the car broke down on that road trip it would be expensive and a pain in his arse. Leave the repair bill out of it, he would have to have it towed somewhere for the repairs, and rely on a friend to drive however far to pick him up so he could get back to base.
~ My DH and I were stationed at OMG NO Alamagordo. Mt. Home, Idaho and Seymour Johnson. All of these places are in areas that I would call rural. Mt. Home is 50+ miles from Boise. Seymour is @70 miles from Raleigh. This is where young lts. will go and spend their Sat. or Sunday.
DS was wise. He purchased a brand new upgraded Corolla. He got the new college discount and the military discount. Tax, tags, and the whole kit and kaboodle was @17K, plus they gave him a 0% int. loan. He drove that car from our home in VA to TX for UPT. He than drove it to his RTU at Little Rock. Drove it back to Dyess for his Op. base. The car is now 4 yrs old. He was able to pay it off early because he never had to pay repair bills and he was fiscally smart.
~ He did not do what many kids do...take the full 25K, and buy a car. He took a smaller starter loan at 2.99% and bought a modest new car with the 0% new car loan.
I am not someone that does not believe in buying used, but I am someone that agrees with the idea as others have stated car repair bills are insanely high now a day due to the number of computer chips in cars.
~ Due the math. Let's say you purchase a 5 yr old car using the starter loan of 2.99 or whatever rate. The car has 75K and costs 12K. He has to drive 1 K miles to his UPT base, but because there is no social life at the base for a 22 yo they drive every weekend to the closest "big city" that is 50 miles away. That = 5K more miles, without including driving to work everyday and PCSing how many more miles. Add in PCSing to FTU/RTU for another 6 or 9 months, and now being forced to live off base (daily commute) and within the 1st 2 yrs they are probably going to be looking at 100K miles.
~~ How much will it cost for 4 brand new tires? A new car comes with new tires, and they won't need to be replaced. The used car may already have 5-10K miles on those tires. A new car battery will not need to be replaced whereas, the used may need that to be done due to the age of the car. Keep going down the list...windshield wipers are brand new on a new car, not necessarily true for a used, same with air filters. Brake pads, drums, shoes. Serpentine belt. If a stick shift, the clutch. etc. etc. etc.
I am also confused with your statement of transporting the car.
Again, that makes no sense to me. When he PCSs they will pay for him to drive it to a new base. They will NOT transport the car unless he is PCSing overseas. If that is the case than he wants to buy the NEW car.
~ Our 1st base was in the UK. People made money this way, basically the Brits would pay way over the price you would get in the states for an American made car...I mean thousands. The reason why is simple it is a status symbol for them. You are not going to find a Dodge Ram Big Horn pick up truck there, nor a convertible Camaro or Ford Mustang, or even a Jeep Wrangler. Car buffs know that American engines in these cars are much larger than the ones they have offered in their country.
~~ Many of our friends in the UK would take their cars and right before they left they would sell the car on the economy. They would order a Volvo and take the trip to pick it up in Sweden. The trip was paid for and they bought a higher end new car without taking a financial hit because they made money off of selling a newer used car. In turn, later on they made more money again because they bought a higher end car at a lower cost.
~~~ My friends that were assigned to Germany came back with high end Mercedes and BMWs.
I am someone that agrees with the swapalease.com It is a really great program.
Humey,
Your DS is just going to start UPT. He does not know where his Operational base will be in the end. If you look at the AFROTC rated thread you will see, very few go overseas right off the bat. Even if he gets overseas, between the time he will spend on casual, plus the 54 weeks at UPT, than SERE and water survival, plus RTU, he is looking at 2 yrs at least before he will be sent operational. If he gets fighters it could be closer to 2 1/2 yrs due to IFFT. How many miles will he have on that cheap used car?
~ My DD wanted us to buy her a cheap used car. She wanted a used Honda CRV or Ford Escape. We investigated from a $$$ side. We would have to take some of it out on a loan. When we crunched the numbers, and started to look at the repair costs it became apparent we were buying new. Her car does not have all of the bells and whistles (heated leather seats), but it has what she needs (sorry for her cloth) and because she got the new grad discount and new car loan at 0%, the monthly payment for brand new was cheaper than the used. I do not live in fear that her car will break down somewhere.
~ Bullet and I do buy new. However, we own our cars for 7-10 yrs. We do not USAA car buying service anymore. We use truecar.com It is the same, but using them we always seem to get a better loan % rate. Our interest rate for our new cars have topped out at more than 0.9% rate.