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I want to acquire a car and I think a lease would make sense, because my use case is low annual mileage and I only want it for two or three years. I do NOT want a new car, because used is fine and I'd rather save the money.

Using this depreciation calculator, I researched the drop in value of a car from, say, year 3 to year 6 and it looks something like this:

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When I looked up a more expensive car, the numbers were higher, but the shape of the curve was roughly the same and the difference between the starting and ending values was about the same.

When you lease a car, do you pay for anything other than the change in value of the car over the lease period? If an expensive car loses the same dollar value over 3 years as a cheaper car, does that mean that the monthly payment would be the same?!

Example:

A 3 year old vehicle costs $35,000 and is estimated to be worth $28,000 3 years from now.

Another 3 year old vehicle costs $28,000 and is estimated to be worth $21,000 3 years from now.

(Round numbers, of course.)

The dollar value depreciation is the same, so does that mean the cost of the lease is the same? Or are there other costs that are proportional to the value of the vehicle?

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    There is something very wrong with that chart. No way is a ten year old car worth 40% of the new price. Feb 23, 2022 at 19:26
  • @DJClayworth - Exactly. Nearly 50% just after 3 years, in my real life example. Even with low miles. Feb 23, 2022 at 20:21
  • @DJClayworth I thought it sounded high, but it seemed so authoritative. Do you know a way to get more reliable numbers? I don't want to have to go through the entire process of choosing a vehicle, negotiating the price, and securing financing before finding out what the real numbers are. Feb 25, 2022 at 16:14
  • What this chart might be is the purchase price of a car of the given age from a dealer, and specifically the price of used cars of the given age right now.. That's unfortunately different from what you would get for the car if you sold it in N years time, especially given the hugely inflated prices of used cars right now. Feb 25, 2022 at 16:16

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You said you want to lease, but you don't want a new car. Leases are typically for new cars, and in effect, you pay for the most expensive fraction of the car's life.

My daughter needed a car, and we got a 3 year old car off lease. It only had 18,000 miles (which is on the very low side) but was just over 1/2 the price of the same car when new. It's a model with a typical life of over 150,000 miles. The graph you posted doesn't reflect my own experience. Likely different for different model cars.

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  • The quick then slow depreciation is exactly why I want used, and I know that it might be hard to find a bank that does this, but I'm just trying to understand the financials here. I don't know that this graph is valid, but I have no reason to doubt it either. Feb 23, 2022 at 15:48
  • Ok. So you want a car coming off lease, as I said I did? Yes, banks will give you a loan on a used car. The rate will likely be a bit higher, but you still save quite a bit vs buying new. Hypotheticals are great, but I'd find the make/model of the car I want to buy, and see what's actually available now. Feb 23, 2022 at 17:05
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Yes

  • You pay interest since you are essentially financing the car.
  • Many leases have "free" maintenance agreements that are baked into the cost
  • There is sometimes an "acquisition fee" that covers the dealer's "administrative costs"

Also when you end the lease there can be mileage, wear-and-tear- and disposition fees (the cost of the dealer to get it ready for resale).

If an expensive car loses the same dollar value over 3 years as a cheaper car, does that mean that the monthly payment would be the same?!

Not sure what you mean here - they depreciate at similar rates, but an expensive car will have a larger absolute depreciation in general. Some expensive cars may depreciate at a lower rate (trucks vs sports cars, for example) but probably not so different that the absolute difference would be lower for an expensive car.

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  • I wasn't comparing vehicles differing by many tens of thousands of dollars, but more or less the same model and year, but with a still meaningful difference in value, like one is more luxurious than the other or has less mileage. I will update the question with an example to make it more clear. Feb 23, 2022 at 15:55

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