Is this smart to do or not?

**BuckyBadger** · 08-29-2012, 06:52 AM

Originally posted by rtmc View Post

I make $2,500 every month (net).

I make an extra $500 doing overtime...but that is not a guaranteed monthly income.

I can work part time and make around $960 a month...but that is not guaranteed monthly income either.

As of now, what is guaranteed monthly income is $2,500.

If (hypothetically) everything goes really well and i am lucky (with the overtime and part time), i can make a net income of $3,720 every month.

I have free accommodation that is provided to me by the company i work for. So i don’t have to pay rent or anything else that comes with the apartment like electricity etc.

I have an obligation to pay $1,000-1,500 everything month every month for at least 5 years to my parents for a loan they gave me.

Now, based on my financial situation... Can i lease out a car?

How much it will cost me:
I will have to pay a down payment of $5,000. I will borrow the $5,000 and pay it back in installments of $1,000 per month for 5 months. On top of that, i have to pay 900 every month for 5 years. After 5 years, the last payment will be $14,000.

Basically, i will pay $1,900 every month for 5 months.

After that, i will pay $900 every month for 5 years.

So the first 5 months, i will end up with $400 ($1,820 if i am really lucky) at the end of the month.

After that i will end up with $1,600 ($2,820 if i am really lucky) at the end of the month for 5 years.
Then i pay $14,000 and I’m done with paying for the car.

Is this a smart, ok or a dumb decision?

Leasing a car is rarely if ever a good idea, but lets tease this out a little bit anyway.

There are a number of issues with your plan.

1) You are thinking only in the vein of monthly payments. Can I afford this monthly payment. That's a very dangerous way to think. You need to think about the overall cost, not just what it would cost you monthly.

2) Am I insane, or are you talking about a car costing about $70,000??

$5,000 + ( 60 * $900 ) + $14,000 = $73,000

Granted I'm ignoring the interest, but is this really the price you're talking about? You want to buy a car that more than TWICE your annual salary? And have a car payment that is more than half of your monthly income??

3) You also have no savings, since you would have to borrow the $5,000 down payment? And how, prey tell, are you going to come up with $14,000 at the end of 5 years?

Okay, I was going to try to make this more of an illustration of why leasing isn't a good idea, but this is just such an insane post I'm having trouble believing that it's for real...

So I suppose my answer is:

No, you shouldn't lease a $70,000 car for 5 years on a $30,000 salary. (ETA: and I fell I should also mention that you should not lease a $70,000 car even if you made your maximum potential salary of $44,640.)

**bjl584** · 08-29-2012, 07:00 AM

That's a horrible idea. Leasing aside, you are talking about spending over $68,000 on a car on an income of $2500 a month.

What you should do is look to buy a car. If you must finance, then make sure that the payment does not exceed 10% of your monthly takehome. In your case, that is $250. Also, don't finance the car for more than 36 months. Disregarding interest and a downpayment, you shouldn't spend more than $9000 on a car based on your income.

**debtupset** · 08-29-2012, 07:33 AM

I agree with the other posters. Bad idea. If you really have that much extra each month, save up and buy a good, pre-owned, certified car with cash! Save $1500 a month and in 9 months, own a nice car.

**rtmc** · 08-29-2012, 08:13 AM

You see, i am already spending $480 per month on transportation to and from work. $192 if i take the bus.
So i figured it would be better if i got this car.

**bjl584** · 08-29-2012, 08:21 AM

Originally posted by rtmc View Post

You see, i am already spending $480 per month on transportation to and from work. $192 if i take the bus.
So i figured it would be better if i got this car.

It probably is a good idea to get a car. Just not that car. As I said earlier, you should be looking to buy a car for no more than $9000.

**BuckyBadger** · 08-29-2012, 08:33 AM

You can get A car without getting THAT car. What kind of car is it, if you don't mind me asking. Most luxury type vehicles in that price range aren't particularly fuel efficient, so you'll be spending hundreds every month to keep the thing running.

We make eight times what you make and we have three cars, and the three cars together (brand new) didn't cost as much as the one car you want to buy.

**witchkizzle** · 08-29-2012, 08:42 AM

I'm going to agree with everyone else here and say it is a horrible idea to do that.

$900 a month for a lease payment??

Similar to another poster, my wife and I make 5 times what you make and our two cars combined cost us $28,000 and are paid off.

I'm wondering if this is even for real.

**Like2Plan** · 08-29-2012, 08:52 AM

Originally posted by witchkizzle View Post

I'm wondering if this is even for real.

+1... I wonder as well. The OP didn't factor in car insurance, upkeep or maint. If the car costs as much as some have speculated, I doubt the OP would have any money left over to eat after all the car expenses were accounted for.

**Wino** · 08-29-2012, 08:57 AM

I think it is a great idea.

Signed,
The car salesman
and
the car dealer
and
the repo man
and
the car dealer lawyer
and
that kid who hated the OP since 4th grade

**BuckyBadger** · 08-29-2012, 11:10 AM

Where's the OP? I must say that I'm curious as to the specific car in which he is interested...

**disneysteve** · 08-29-2012, 11:22 AM

Originally posted by rtmc View Post

I make $2,500 every month (net).

I have an obligation to pay $1,000-1,500 everything month every month for at least 5 years

Can i lease out a car?

How much it will cost me:
Basically, i will pay $1,900 every month for 5 months.

After that, i will pay $900 every month for 5 years.

I sure hope this was a joke.

You earn $2,500. You have to pay your parents at least $1,000 and want to lease a car that will initially cost you $1,900. That gives you income of $2,500 and expenses of $2,900 not counting anything other than the parent loan and the car. So you'd be $400 in the hole before buying anything like food, gas, clothing, insurance, etc.

Did you fail arithmetic?

Rule of thumb for buying a car: Monthly payment should not exceed 10% of your income, so $250/month for you, and that should be for no more than 3 years. That puts you at a maximum car purchase of $9,000 plus any down payment. And it is NOT a down payment if you have to borrow it.

**KingS** · 09-20-2012, 09:02 AM

I think you are better off just taking public transportation.

When you own/lease a car, there are additional expenses that comes with it such as car insurance, registrations, maintenance, and fuel. When you add everything up, you will definitely be paying more to drive a car.

**tasha123** · 09-20-2012, 11:37 PM

Originally posted by bjl584 View Post

That's a horrible idea. Leasing aside, you are talking about spending over $68,000 on a car on an income of $2500 a month.

What you should do is look to buy a car. If you must finance, then make sure that the payment does not exceed 10% of your monthly takehome. In your case, that is $250. Also, don't finance the car for more than 36 months. Disregarding interest and a downpayment, you shouldn't spend more than $9000 on a car based on your income.

I agree with this statement that if you are going to finance, then it should be not more than 10% of your monthly takehome. But one more thing that if the finance period less than 24 months, then you can increase your it by 15%, but more than this is such a horrible idea.

Is this smart to do or not?