car leasing/buying thread

Quote from 420 : At no point did I state nor imply that I disliked leases. If it suits your wants/needs, then by all means do it. I was simply answering your question and I stand by what I said. Nonetheless, it's still not a slick deal considering that no matter the terms, you are either coming away with nothing or paying far more for the car at lease termination than you would have had you simply negotiated a good buy price from the start. Besides, if your monthly payments are comparatively low, you likely have an inflated residual value.

This is where I completely disagree with you. How are you over paying if it is the same as financing?

Quote from 420 : Nonetheless, it's still not a slick deal considering that no matter the terms, you are either coming away with nothing or paying far more for the car at lease termination than you would have had you simply negotiated a good buy price from the start.

why are you focusing solely on what happens at the end of the lease & ignoring the 3+ years, where the OP enjoys a car that would otherwise be unaffordable?

Right - the point of a lease is not to come away with something, it's to not have ANYTHING at the end. No repair costs, no new tires, no transmission issues, no out of warranty repairs. I pay no maintenance, no repairs - just a monthly payment. At the end of the lease I just give it back, get another new one & continue making payments.

A car is an EXPENSE - an ongoing expense. Some people prefer the hit & miss costs of ongoing repair & maintenance as the car gets older. I prefer a regular, known cost every month - that's part of my budget & it will never go away.

It's no different than renting a condo vs. buying a house - nothing to worry about with the condo except the monthly payment.

What do you guys make of this article? Personally, I would never trust a mortgage broker.
http://activerain.com/blogsview/9...their-cars

Ever wonder why the financing plan of choice for luxury vehicles is LEASING instead of BUYING? No, it isn't because people who drive BMW's can't afford to BUY their cars!

It's because people who HAVE CASH, understand CASH. They understand that CASH should be parked in things that appreciate, not things that depreciate. Which is why you are much more likely to see a Mercedes that is leased than a Toyota Corolla.

Did you know that such a high percentage of people lease BMW's that when the factory doles out a financing incentive, it's only applicable to BMW leases? The guy who pays cash or does a purchase gets no incentive and is literally subsidizing the guy who leases!

Why does it take so much less cash to lease?For starters, in California, sales tax is NOT paid up front on a lease, it's paid on every payment. If you buy a $65,000 Mercedes in most of our urban counties, $5525 will be added right on to the top of the purchase transaction (8.5%). If you only keep the car for a year, this will add $460 a month to the cost to drive the car, so purchasing definitely does not make sense if you FLIP CARS.

By contrast, the same tax paid on a $700 lease payment would be $59.50 per month, even if you end the lease at the end of the first year!

Lease payments are about 30-40% LESS than purchase payments. This is because you are only paying for the part of the car you actually use. The residual, (or value of the vehicle left over at the end of the lease), is only paid for if and when you decide you want to buy it. And yes, at that time you do owe sales tax on the residual only if you buy the car.

But here's the BEST PART, and something almost never mentioned about auto leasing. The lender assumes 100% responsibility for the value of the vehicle at the end of the lease. That's right, if the vehicle ends up being worth less than the stated purchase option, you don't have to buy it. If the vehicle is worth more, you can capture your equity by buying the car, or selling it to someone else.

So let's go back to the guy who purchased:

1. He paid all of his sales tax up front

2. He made higher payments for the same car

3. When he got to the end of 3 years, he still owed more than the car was worth and guess what? It's his problem and not the bank's. Can you say "upside down"?

And they guy who leased? He just pulled up to your office in his Mercedes. He wants to buy some real estate from you.

Quote from magoomba : So let's go back to the guy who purchased: 1. He paid all of his sales tax up front 2. He made higher payments for the same car 3. When he got to the end of 3 years, he still owed more than the car was worth and guess what? It's his problem and not the bank's. Can you say "upside down"? And they guy who leased? He just pulled up to your office in his Mercedes. He wants to buy some real estate from you.

that sounds good, but where are the numbers of outright buying vs leasing and then buying?

Car price is $30,000
Tax is 7%
APR is 1% money factor (.00041667)
Residual is 40%


Lease deal, we really sweet talked our guy and had no lease aquisition fee or disposition fees. We got a 40% residual and 1% APR when monthly payments translates to a money factor of .00041667 and then lets say 3 years of payments

This comes to 36 payments of 553.73 (including tax), for a total of 19,934.28 (including taxes). If you want to buy the car after 36 payments it will cost you $12,000 + tax.

So the total costs are:

if you don't buy at the end: $19,934.28
if you buy it without financing: $32,774.28
if you buy it and finance it at 1% at the end for 24 months: $32,908.44



Finance deal, much more straight forward, you finance $32,100 @ 1% for 60 months. $32,922.60



Now keep in mind that this assumes that there aren't any lease aquisition fees, disposition fees, nothing else is "financed" in the lease (which will increase your tax liability effectively paying tax on items that may normally aren't taxable). Also doesn't take into the normal mileage limitations and costs. Different states it might make more sense in than others to do lease, for instance if sales tax rate was 0% this actually helps the leasing more since you aren't paying tax on the first 36 months of "rent charge".

So my verdict is that leasing could be a better deal and could be a worse deal. Just like someone said before someone might want to rent a Condo rather than own a house. The cost difference shouldn't be much more or less if done correctly, but everyone's situation is unique. Simply have to run the numbers that you can get and see if it is worth it. The only thing I know is that penfed offers a finance rate of 1%, but I'm not sure what sites will offer lease details on their rates. Usually residual values are predetermined and not negotiable, but I guess there might be some moron finance guy doing a residual rate that is flexible and giving you a better deal if you don't want to ever "own".

That is my 2 cents.

My thoughts are lease/finance/buy outright aren't in themselves better than the other two.
It all comes down to the individual deal.
Problem with leases is they are so obfuscated, it'd take a PhD to figure out what you're actually paying.
For this reason I don't like leases, but someone with good negotiating skills and a keen eye on numbers could possibly score a deal.

Quote from johnfoe : Car price is $30,000 Tax is 7% APR is 1% money factor (.00041667) Residual is 40% Lease deal, we really sweet talked our guy and had no lease aquisition fee or disposition fees. We got a 40% residual and 1% APR when monthly payments translates to a money factor of .00041667 and then lets say 3 years of payments This comes to 36 payments of 553.73 (including tax), for a total of 19,934.28 (including taxes). If you want to buy the car after 36 payments it will cost you $12,000 + tax. So the total costs are: if you don't buy at the end: $19,934.28 if you buy it without financing: $32,774.28 if you buy it and finance it at 1% at the end for 24 months: $32,908.44 Finance deal, much more straight forward, you finance $32,100 @ 1% for 60 months. $32,922.60 Now keep in mind that this assumes that there aren't any lease aquisition fees, disposition fees, nothing else is "financed" in the lease (which will increase your tax liability effectively paying tax on items that may normally aren't taxable). Also doesn't take into the normal mileage limitations and costs. Different states it might make more sense in than others to do lease, for instance if sales tax rate was 0% this actually helps the leasing more since you aren't paying tax on the first 36 months of "rent charge". So my verdict is that leasing could be a better deal and could be a worse deal. Just like someone said before someone might want to rent a Condo rather than own a house. The cost difference shouldn't be much more or less if done correctly, but everyone's situation is unique. Simply have to run the numbers that you can get and see if it is worth it. The only thing I know is that penfed offers a finance rate of 1%, but I'm not sure what sites will offer lease details on their rates. Usually residual values are predetermined and not negotiable, but I guess there might be some moron finance guy doing a residual rate that is flexible and giving you a better deal if you don't want to ever "own". That is my 2 cents.

Its pretty easy to see why this one looks like a good deal. They are willing to sell you the car @ 60% depreciation at the end. That's some serious depreciation for just 3 years with low miles.

Buy a car with more reasonable expected depreciation (30-40%) and financing would come out ahead.

Quote from okashira : Its pretty easy to see why this one looks like a good deal. They are willing to sell you the car @ 60% depreciation at the end. That's some serious depreciation for just 3 years with low miles. Buy a car with more reasonable expected depreciation (30-40%) and financing would come out ahead.

Agreed on this. I've never done a lease with residual of less than 70%.