I ended up leasing the vehicle, but went through Chase. They had a more aggressive residual value and better payment than NMAC, surprisingly.

 

Unless the payments are deductable (I am a business owner) my feeling is you should not lease unless you fully realize you will be renting the car with no equity position when the lease is completed. Never expect to make any money by selling privately and paying off the residual at the end.

It is similar to renting an apartment. When the lease/rental period is completed all you have done is make the landlord richer. When you own a house you are paying yourself for the use of the house each month - creating equity.

Yes, it is less in monthy payment but more costly in the long run.

 

Flawed analogy, since houses appreciate and cars depreciate.

In both cases you are losing money.

If you plan on keeping the car 3 years, lease. Otherwise, if you're going to keep it 5 years or longer, buy.

You pay a small additional leasing fee each month, but this is offset by the fact that you don't pay tax on the entire value of the vehicle - only the portion you lease.

Neither solution should "always be used".

 

I hear this type of arguement alot. That doesn't mean it is wrong or I am right but I have a few ideas to discuss. First, yes, if you have a business and can deduct the lease payments it makes a strong advantage to leasing. But more importantly, the best "deal" for an individual is the one that cost the least money AND that you can afford.

I personally like to mulitple the total payments and add in all up front costs for a "buy" deal and then compare it to the sum of all lease payments and upfront costs and residual value. In many cases this will be slightly more or the same (in a few rare experiences I have found leases to be cheaper due to high money rates for the loan and low money rates for the lease). A few major differences are...one, it is harder (meaning it will take some cash) to get out of a lease during the first year or two. (This is not to say that if you had bought the car and attempted to sell it, that it would be easy...most likely you would lose money doing this also.) Second, having already said that the lease vs buy package can be very similiar in total cost, the main remaining difference is the size of your payment. If you can afford either, then the investment of the delta between the two payment types is an opportunity cost. If you can only afford (cash flow issue) the lease, then "borrowing too much" and putting yourself in a bad cash flow position is a very bad idea and leasing is much better for you. At any rate this are my opinions, due the math yourself....if you can't, find someone you trust who can.

MBEGuy

(one last comment....blanket statement made by others regarding putting more cash down when starting a lease as being "stupid".....maybe maybe not...I can easily give situations where it is a very good idea.)

 

As an individual (i.e. can't deduct the lease pmt.), I'd avoid leasing unless the lessor or mfg. is subsizing the pmt. via aggressive money factors &/or residual values.

The lessor gets a financial benefit out of being able to depreciate the leased property, so I'd expect them to share that benefit via a lower implied interest rate. In fact, it usually seems to work the other way around. Other added costs include gap insurance (a good idea if not absolutely required) and potentially an annual personal property tax.

It seems to me like the only advantage for an individual is to get a car he/she couldn't otherwise afford. I'd rather choose a less expensive car.

 

Not really. After the car is paid you have equity as I said, albeit depreciated rather than increasing value. After a lease you have no value in the car. If you are leasing a car every three years you are correct; both ways you lose so a lease is not real a benefit or detriment.

 

Obviously, this is a personal decision and has to be made by yourself.

But, since you asked...

I used to always buy, but now I usually lease. My reasoning is quite simple. I always lost money on purchases because I didn't keep cars long (long can by 3-5 years).

Getting out of a lease in the first few years is difficult, yes, but no different than for a purchase. The difference is that with a lease, you pay the interest/payment equally over the term. With a purchase, you pay mostly interest the first few years. Similar problems for both for the first few years. With the lease, you pay all the interest, whether you leave the deal early or not. This is unlike a purchase where you pay the balance (and any fees) only.

But for me, I like leases because in the end, I have the choice of paying off the vehicle at the end for the residual or simply walking away. In the latter case, I don't have to pay for the rest of the car. This is a huge bonus for people. The dealer wins with an excellent vehicle at a good resale price, and the owner wins with "renting" a vehicle for only about 50-60% of its original value.

Anyway, best of luck to you,
Todd

 

I have to agree with this staement by Chris S about leasing...

"It seems to me like the only advantage for an individual is to get a car he/she couldn't otherwise afford. I'd rather choose a less expensive car."

I know this is not true for everyone but most times younger people lease because they can't afford to buy the car. So just buy a cheaper car or wait a few years and buy it used.

There are pros and cons to both sides, but first you have to answer a few questions.

First, how long do you plan on keeping the car? Second, will it be your only vehicle, ie daily driver? Third, what kind of credit do you have? Fourth, how is your insurance going to be affected by this vehicle ? These are only a few questions which you need to answer in order to make the wiset decision for you.
This is just my 2 cents, hope it helps.

 

The Wall Street Journal did an article recently on cars with horrible depreciation. In each case, after 3 years, you were still better off having bought the car and sold it than to have leased it. In the long run, it seems leasing always ends up costing more. Ted Turner once joked when asked how to become a millionaire, he joking said "don't lease your car", I think he was right ( it won't make you a millionaire, it'll save you money).

 

Leasing usually lets you afford a more expensive car. If you do not plan on keeping the car for 3 or more years than lease. One thing to remember about leasing is your only allowed about 12,000 miles per year. If you go over it can get very expensive at around 36 cents per mile over the 12,000. Secondly, you will be unable to make modifications to the car. It must be returned in original condition in which you leased and if there are any problems above usual wear and tear to the car you will be required to pay to fix it.

 

This is just leasing industry propaganda. If you keep a car less than 3 years, do you really think someone else is going to eat the depreciation? Lessors may screw up on residual estimates from time to time, but most of the time they come out ahead. From a financier's perspective, leasing is quite a bit more profitable than lending...do the math on the flip side of the transaction.

 

I hope you are kidding. Lease vs. purchase determines affordability? Why don't we go to the extreme and say if you cannot afford to pay cash for a car, then you shouldn't have the car. If we use this logic, then people would have no need for credit. Leasing vs. purchasing does not equate to affordability. How to effectively spend your money is the issue.

One of the biggest reasons to lease is if you are someone that goes through cars frequently. It is usually cheaper to lease a car if you plan on turning it in, than it is to purchase it.

 

Actually, I paid cash for my S2000 and the '97 Supra TT I had before it. They're primarily weekend toys, so I don't like financing them...of course, I could have easily leased a 911 Turbo or NSX, but decided to scale down in the interest of fiscal conservatism.

 

garthg...let me know what you decide!

 

Someone on Zcar.com mentioned he was from a car dealership...and when he put the numbers into the lease calculator, he arrived at a lease payment of $500 with $1k down. This was for a $32500 Z. 15000 miles/year. I think 3 year lease, don't quite remmeber if he mentioned the years or not.

 

The NSX is an impressive car. My friend has the S2000 and loves it.