Good God, you all post long a$$ replies on an easy topic. I got tired of reading all the replies, so if this has all been explained, I apologize. Leasing is a loan. Whatever your interest rate is, ask yourself, "can i use that money I'm saving to earn more than what they are charging me to loan it to me?" On top, you get a new car every 2-3 years, and you don't want invest in something that depreciates, invest in a home that will appreciate.

 

Leasing is not a loan. It's financing a rental.

 

Leasing is just about never a good financial idea, even after taxes and everything is factored. Simply, the total price of your lease is going to be higher than the depreciation. (How else are the companies going to make money otherwise?) Basically your $35,000 coupe will have to be worth $15,000 in 39 months to not be worth the purchase. For a car to lose over 50% of it's value over 3 years is just not going to happen (except maybe to a Suzuki).

 

Most people are doing 2 year leases these days. I haven't done a 3 year lease since the late 90s. I don't know many people who would consider a 3 year lease. Generally, it's not a good idea.

The way the lender makes money is rather simple.

 

iko, when you lease a car, infiniti or nissan or whoever allows you to take that car without paying for it; that's a loan. As for ctzp's reply, the residual value depends on a couple of factors, mine was 73% on a 2 yr. typically, anything 50-something % is pretty good. Everyone is entitled to their opinion, this is just mine.

 

My calculations always show buying coming out ahead of leasing. I think I was looking at $10k per year if I leased and $7k if I bought (not counting tying up my cash...although, I'm glad it wasn't in the stock market this past week). There are quite a few variables/assumptions so the estimates are pretty rough.

Dealers love leasing because they're sure they'll see you again in 24 months. Listen to their sales pitch...in one breath they'll say, "at the end of your lease you can walk away and not have to worry about getting rid of the car". Then in their next breath they'll say, "or you can buy it for a really low price if you decide you want to keep it".

And if you only have one car it's pretty tough to bargain when your lease is up. Plus it can cost a lot if you don't time the mileage correctly.

And don't forget that you can right off the sale tax.

 

The following aren't opinions. They are facts.

A lease is not a loan. It's a lease which is a contractual rental agreement. At the end of a loan you own the vehicle. At the end of a lease you return it.

wrt ctzp's comment, I'll disagree. Leasing is a great financial vehicle. In particular for people who write off the expense.

 

How can you make this type of generalized comparison when you're not taking into account tying up your cash? Not taking into account turnover of a new car every couple years this is a key reason why most people in luxury automobiles lease.

Anyone who is interested in pride of ownership, keeping the car after the lease ends, etc. shouldn't be leasing in the first place.

As for mileage, most people will tell you if you're putting on high mileage it's also financially advantageous to lease. You have pre-negotiated the depreciation. It's a known quantity vs. trying to dump a high mileage used car on a market that is rife with dirt cheap loans and leases on new cars.

When it comes to writing anything off, if you're doing it as a business expense then leasing is the only way to go, period. You can write off the entire payment. No amortizations, no calculation of depreciating assets, etc.

You're right about dealers liking leases. It lends itself to consistent repeat business. Although to be fair in the past 6 leases, I've only done it twice with the same manufacturer once. Does anyone get a "pitch" about leasing? I never have. I would think this is for first time or inexperienced consumers.

 

Leasing isn't always higher than depreciation... most of the time, the total price of the lease will be lower than actual depreciation. <= that's what we mean by "subvented" lease rates.

The G37 residual is 77% for 24 months... does anyone really think you could trade in a G37 2 years from now and get more than 77% of what you paid for it? (Don't forget the financing charges & sales tax paid).

Lots of cars sell for 50% or under of original value, not just Suzuki cars - not to mention cars that have been in accidents. If you lease a car and get into an accident, you simply get it fixed by an authorized shop and drop that car off at the dealership at the end of term... no reduced market value to worry about.

Leasing vs. buying isn't really so complicated:
1) Take the lease numbers:
http://www.leasecompare.com/auto_lea...hp?f=18&t=2990

2) Plug the numbers into a calculator:
http://leaseguide.com/calc.htm

3) Compare the cash outlay vs. financing the same car, and see which option is cheaper over a fixed period of time.

If you're just plain uncomfortable with leasing - that's understandable. But there are situations where leasing is just a less costly choice (I didn't say "better", just cheaper).

 

That's why I say my estimates are pretty rough. For me, I don't have the time to work that extra money so it would be in an online savings account making less than 4%. So for $40k over 2 years we're looking at $1,600. By the time I pay taxes on it we're looking at less than $500 per year. Pretty negligible when I can only guess within a couple grand what my car will be worth.
I don't follow you here. What's the difference between turning in a lease and trading in a car you own?

My point is, if you estimate that you're going to drive 30k miles and you only drive 25k, you just wasted of your lease. Probably around $1200 worth.

I'm just talking as an individual. Although, I believe you have to choose between righting off your sales tax or state tax.

 

If you look at the residuals offered nowadays, you do come out ahead with leasing on some models, especially if you count the hassle factor of trying to sell your car for a fair market price. if you are going to drive the same car for more than 3-4 years, then buying is your best option. But then u might as well buy a low mileage 1 year old, used car; let someone else take that depreciation hit.

If I wanted a new car, I would lease. If leasing did not make financial sense, then I would be better off buying used (low mileage), since the residual would probably drop way too fast on that model anyway

I miss those days where those residual values were so overvalued, u could get some awesome lease deals back then!

I actually managed to drive a 2004 GTO for a couple of years on a payment of < $200, with zero down (GM bonus points). A 350 HP beast. I liked the car so much that I bought a used 2005 GTO, sold it recently since I decided to take a long break.

 

Here is a question:

If you owned a piece of equipment or a car, why would you lease it to someone instead of selling it to them.

Take anything you currently own and ask yourself why you would do that??

Banks and other lending agencies look for a good yield on their loans (as would you) and leasing provides lower risk to their portfolios, allowing higher profits.

There are very valid scenarios for leasing, but people should understand that the financial institutions and mfgs like it for, more product pushed, higher return on investment, lower overall risk. None of which you will notice is cheaper for the consumer.

If you start from that premise, then look at the deciding factors for why you want to lease as a consumer, then OK.

Lower monthly outlay
Drive a car you could not normally afford to
Turn cars over quickly
Do not care about the long term or overall cost, equity, etc.

 

Like I've said before... this isn't a philosophical debate. Examine at the numbers, then decide which is a better deal for your personal situation.

In some instances it's better to lease, often it's better to pay cash, and in other cases - better to finance. And at other times, it's best not to own a vehicle at all and walk/take public transportation if possible.

Do the math and do what makes the most sense. This should be a numbers game, not about a lifestyle choice.

 

Normally, people don't buy luxury items for anything else BUT a lifestyle choice.

 

Agreed.

But whether you buy or lease, it's the same car... lifestyle choice is the same.