6 ms·

This same principal can be applied to buying or leasing a car. When I first graduated college and had my first "adult" job I wanted to purchase my first car.

This same principal can be applied to buying or leasing a car. When I first graduated college and had my first "adult" job I wanted to purchase my first car. The general mantra I heard was "Leasing is throwing money away". I ended up financing my first car, (used) thinking I was making the correct financial decision. The problem with someone fresh out of college buying or financing a car is they really have no idea what they're next 3-5 years have in store (change in cities, jobs, etc). My friends who went the leasing option were making considerably lower monthly payments and were able to move on to another car at the end of the year with no difficulty, or could move to another city without carrying a multi-year financial obligation. I ended up moving to Europe before I had even completely paid off the car and had to sell it at a loss. I wish I could go back and simply lease a car for my first few years out of school before I figured out where my career would take me.

meric 8y ago
In life people make mistakes. Picking the wrong finance option for the first car is a relatively small one. :)
maccard 8y ago
If you had moved to Europe with a lease, you probably wouldn't have been able to hand over the car and walk away (unless you were at a certain point in the lease), so you would have been on the hook for the lease payments.
- ShadowFaxSam 8y ago
  True, but the average term of a lease is only 24-36 months while the length of term for financing a car is 60-84 months. (I had a 72 month plan). So you can get out of a lease much earlier, and if you do exit early, you typically only have to make the next 6 months of payments.
  - BoorishBears 8y ago
    To be fair, not long ago 24 months was the common loan term. Now people are getting 7 year and even 9 year loans. We live in a time when you can finance a 400$ watch for 2 years. The renewed focus on chipping away at people’s monthly income is almost impressive.
    - spicymaki 8y ago
      That is not even the worst of it. There are people leasing vehicles (more expensive vehicles then they could buy) without saving the money they need to put down on a new vehicle after the term is up. Worse yet they drive the car past the mileage limits and then after the term is up they then roll the old lease into the financing for a new lease. It is a vicious cycle.
  - maccard 8y ago
    A 6 year finance plan is quite a long term. I financed my first car over a 3 year term. You could equally have taken out a 72 month lease and been stuck in the same (possibly even worse) situation. > if you do exit early, you typically only have to make the next 6 months of payments. Two things here. 1) I doubt that most leases will let you terminate the contract that early, and 2) if you can, you still have 6 months of payments, which if you compare to the loss you made on your car selling it, the numbers probably compare (deliberately). Ultimately, you made medium term financial commitment and that's a bad decision if you need to exit it early.
    - ShadowFaxSam 8y ago
      A 3 year term would not have been possible at my then current salary to finance the car. The standard term period (when I was buying) was 5-5.5 years. In hindsight its easy to look back on what I could have done differently, but I guess that's point. When first graduating, I wouldn't recommend entering into even a medium term financial commitment as things can change so quickly within your first few years in the professional world.
      - spicymaki 8y ago
        You could have also purchased a used vehicle at a 3 year term. I bought a new vehicle out of college and paid an high interest rate with expensive insurance over a 5 year term. It would have been great to reinvest that savings into the future.
scarface74 8y ago
Until you get a new job where the commute is causing you to put more miles on your car than the lease allows....
Aaargh20318 8y ago
If you're talking about leasing/financing, then I'm assuming you're getting a new car. Why does your first car out of college have to be a new car ? Why not just buy a cheap used car outright ? You can get something that'll last you a couple of years for €1000.
- ShadowFaxSam 8y ago
  I did buy a used car, just a more recent, nicer model. At the time, I thought I would hold on to this car for years, so I went for a step up in quality as well. After working low level internships and restaurant jobs, its easy to get a little too ambitious at age 22 when you sign that first contract with an annual salary.
- gambiting 8y ago
  So I can tell you the rationale for why my sister is getting a brand new car straight after uni - she lives in a foreign country, with no family/friends around and zero car maintenance skills. So it's far easier to buy a new car on a very low monthly finance, where she knows that if anything happens she has warranty for 4 years + full assistance, no need to risk getting ripped off at some random garages. Plus the car is far far safer than some old beater you could buy for little money, which means the insurance at her young age is really cheap. I fully support that decision.
  - BeetleB 8y ago
    How much would it cost you to find out who the most reliable mechanics in the city are? And to learn the (very, very) basic maintenance skills? I think paying $1000 for that knowledge would more than cover it. Why pay a lot more not to gain that knowledge?
- drblast 8y ago
  Often when you're living month-to-month without savings it's feasible to buy a new car but not a used one. The loan terms on new cars are usually more favorable and you don't have to worry as much about something expensive on the car failing and leaving you without transportation. I was a couple months out of college when the old car I owned needed about $3000 in repairs that I didn't have. My options were payday loan, buy a new car, or buy a much cheaper used car and hope that it didn't end up needing $3000 in repairs. New car was the easy choice, and I fully understood at the time that if I could scrape together $3000 it would be much better to repair the car I owned. It's like buying cheap sneakers from Walmart that you know won't last. Doesn't matter if it's a bad decision if that's all you can afford.

meric 8y ago

In life people make mistakes. Picking the wrong finance option for the first car is a relatively small one. :)

maccard 8y ago

If you had moved to Europe with a lease, you probably wouldn't have been able to hand over the car and walk away (unless you were at a certain point in the lease), so you would have been on the hook for the lease payments.

ShadowFaxSam 8y ago
True, but the average term of a lease is only 24-36 months while the length of term for financing a car is 60-84 months. (I had a 72 month plan). So you can get out of a lease much earlier, and if you do exit early, you typically only have to make the next 6 months of payments.
- BoorishBears 8y ago
  To be fair, not long ago 24 months was the common loan term. Now people are getting 7 year and even 9 year loans. We live in a time when you can finance a 400$ watch for 2 years. The renewed focus on chipping away at people’s monthly income is almost impressive.
  - spicymaki 8y ago
    That is not even the worst of it. There are people leasing vehicles (more expensive vehicles then they could buy) without saving the money they need to put down on a new vehicle after the term is up. Worse yet they drive the car past the mileage limits and then after the term is up they then roll the old lease into the financing for a new lease. It is a vicious cycle.
- maccard 8y ago
  A 6 year finance plan is quite a long term. I financed my first car over a 3 year term. You could equally have taken out a 72 month lease and been stuck in the same (possibly even worse) situation. > if you do exit early, you typically only have to make the next 6 months of payments. Two things here. 1) I doubt that most leases will let you terminate the contract that early, and 2) if you can, you still have 6 months of payments, which if you compare to the loss you made on your car selling it, the numbers probably compare (deliberately). Ultimately, you made medium term financial commitment and that's a bad decision if you need to exit it early.
  - ShadowFaxSam 8y ago
    A 3 year term would not have been possible at my then current salary to finance the car. The standard term period (when I was buying) was 5-5.5 years. In hindsight its easy to look back on what I could have done differently, but I guess that's point. When first graduating, I wouldn't recommend entering into even a medium term financial commitment as things can change so quickly within your first few years in the professional world.
    - spicymaki 8y ago
      You could have also purchased a used vehicle at a 3 year term. I bought a new vehicle out of college and paid an high interest rate with expensive insurance over a 5 year term. It would have been great to reinvest that savings into the future.

scarface74 8y ago

Until you get a new job where the commute is causing you to put more miles on your car than the lease allows....

Aaargh20318 8y ago

If you're talking about leasing/financing, then I'm assuming you're getting a new car. Why does your first car out of college have to be a new car ? Why not just buy a cheap used car outright ? You can get something that'll last you a couple of years for €1000.

ShadowFaxSam 8y ago
I did buy a used car, just a more recent, nicer model. At the time, I thought I would hold on to this car for years, so I went for a step up in quality as well. After working low level internships and restaurant jobs, its easy to get a little too ambitious at age 22 when you sign that first contract with an annual salary.
gambiting 8y ago
So I can tell you the rationale for why my sister is getting a brand new car straight after uni - she lives in a foreign country, with no family/friends around and zero car maintenance skills. So it's far easier to buy a new car on a very low monthly finance, where she knows that if anything happens she has warranty for 4 years + full assistance, no need to risk getting ripped off at some random garages. Plus the car is far far safer than some old beater you could buy for little money, which means the insurance at her young age is really cheap. I fully support that decision.
- BeetleB 8y ago
  How much would it cost you to find out who the most reliable mechanics in the city are? And to learn the (very, very) basic maintenance skills? I think paying $1000 for that knowledge would more than cover it. Why pay a lot more not to gain that knowledge?
drblast 8y ago
Often when you're living month-to-month without savings it's feasible to buy a new car but not a used one. The loan terms on new cars are usually more favorable and you don't have to worry as much about something expensive on the car failing and leaving you without transportation. I was a couple months out of college when the old car I owned needed about $3000 in repairs that I didn't have. My options were payday loan, buy a new car, or buy a much cheaper used car and hope that it didn't end up needing $3000 in repairs. New car was the easy choice, and I fully understood at the time that if I could scrape together $3000 it would be much better to repair the car I owned. It's like buying cheap sneakers from Walmart that you know won't last. Doesn't matter if it's a bad decision if that's all you can afford.