Is leasing throwing your money away?

Is leasing throwing your money away?

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Dear Dave,

We have leased our last couple of vehicles and to me it seems like we’re just throwing our money away. At the end of the three-year term we have nothing. What is your take on buying new cars or leasing? What is the best way financially to go about getting a vehicle?

Anna

Kankakee, Ill.

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Dear Anna,

Well, to start with I’ve got to tell you that I’m a boy and I love cars. However, I have found as I run the numbers on cars that they are the largest purchase Americans make that goes down in value. We buy a larger purchase with our home, but typically it goes up in value. Kiplinger’s Personal Finance Magazine says that a new car will lose 60% of its value in the first four years. Well, that doesn’t work. Turning $30,000 into $11,000 is not a good plan. So financially speaking, and common sense agrees, if you’ll pay cash to buy a two-year-old car with very low miles in near perfect condition, you will let someone else take the bulk of the value loss. That is what the typical millionaire does. Very few millionaires lease cars – or as we call it, fleecing a car – because it is the worst deal on the car lot. Consumer Reports, Consumer Federation of America and Smart Money Magazine have all done articles on the “fleece” and the fact that it’s a rip-off. It is good only for the dealership. It is a high rate of interest; of course the interest rate is never disclosed.

The bottom line is that you’re buying a new car that’s going down in value and you’re financing it expensively, but they offer a low monthly payment, which is all a lot of people look at. You’re almost renting your car and at the end you turn it in and you have nothing. So I would buy a two-year-old or older vehicle – whatever I could get paying cash.

Dave

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Unknown problem with new house?

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Dear Dave,

We purchased a house and, unknown to us, there was a leak in the basement. Our homeowner’s insurance is refusing coverage because it’s classified as a pre-existing condition. The home shield policy purchased by the seller won’t cover it. The person who sold me the house said they had this problem fixed. Am I going to have to go back to the person who supposedly repaired the problem in the past to get them to repair this correctly? The leak is obvious and appears to have been going on for some time.

Todd

Nashville, Tenn.

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Dear Todd,

I think you probably need to address this with the person who sold you the house. The seller hired the repairman and told you the basement was in good condition. You live in a state that has seller disclosure rules. According to the law the seller must disclose anything wrong with the house if he knows about it.

I would call an attorney and ask what rights you have. Then I would call the seller and his agent and ask for a meeting. Over a cup of coffee, you can very tactfully and calmly tell them that a reasonable person would have known this basement was leaking and they failed to disclose that. Tell them you’ve been misled and the seller will pay to repair this. If he doesn’t, you will have a judge assist him in paying to repair this. Now, I don’t just hire an attorney and start beating on people. I sit down, talk to them, give them the chance to be reasonable and do the right thing. But if they’re not willing to do the right thing, then you have to be prepared to take legal action.

It’s possible the seller may be able to take action against the person who did the repairs. However, unless the seller transferred warranty to you when you purchased the house, I don’t think you really have any action you can take against the repairman. Now, I’m not a lawyer and you need to consult one to be sure, but from my real estate background I can tell you there are some serious seller disclosure laws in your state that make the seller liable if they were aware this was happening and didn’t disclose it. Just make sure you know your rights before you talk to the seller.

Dave

Disclaimer: Questioner’s identities have not been verified by Dave $ays column or this Website.

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