Your school system must suck!
eq·ui·ty (ĕk'wĭ-tē)
n., pl. -ties.

1. The state, quality, or ideal of being just, impartial, and fair.
2. Something that is just, impartial, and fair.
3. Law.
   1. Justice applied in circumstances covered by law yet influenced by principles of ethics and fairness.
   2. A system of jurisprudence supplementing and serving to modify the rigor of common law.
   3. An equitable right or claim.
   4. Equity of redemption.
4. The residual value of a business or property beyond any mortgage thereon and liability therein.
5.  
   1. The market value of securities less any debt incurred.
   2. Common stock and preferred stock.
6. Funds provided to a business by the sale of stock.

 

Because I want a new car every 3 years

 

I lease to see if I like the car. Hard to tell in 2 test drives. If o like it after 3 years i buy it. I f not go for something new. Not the most economical but it works for me.

 

Yes, it does suck. That's why I read books not in the school system to understand assets and liabilities.

So to put this altogether, when someone says "I want equity to show for my payments", what they're talking about is the residual value of the vehicle. That means the car has still depreciated no matter what. And by definition, if an entity is not making you money (as an asset does), then the entity is a liability (costing you money).

And in the end, they can sell the vehicle to get back a fraction of the cost/payments. But of course, you'd have to start all over again with a new car once it's sold.

IMO, I've learned from this cycle of purchasing and to me, it's not worth it. Since I also own a business, it makes more sense to lease a car and not purchase outright, unless I have a great attachment to it - but then I'd be putting too much emotion into the purchase and the business decision is not a smart one.

 

$40,000 at 4% per year is $1,600 PER YEAR. After Tax, that's about $1,000 per year or $2,000 over the 2 years. That's $83/month off the price of a 2 year lease. That has to be factored in to your calculation.

Also, in some cases, the lease money factors are lower than what you can get in a finance deal. When these low money factors are combined with aggressive residuals, leasing could make sense even outside of the benefit of getting a new car in 2 years. An even bigger bonus is when the car you are interested in is selling at much less than MSRP, since the residual % is based off of MSRP. You get to take advantage of that full savings off MSRP into your monthly payment.

You have to do the math. There's no definitive answer to the lease vs. buy question.

 

My response was not to argue the difference between leasing and buying or what a liability is. I was addressing your attempt to call me out on what equity is. My point is that equity is equity. The same goes for a house or any other asset. Sure houses/ businesses normally appreciate (some folks in Cali may beg to differ however). But even if an asset depreciates or is a liability; that doesn't mean that you can't have equity. For me, equity is a potential safety net. If my financial situation changes in the future (because who knows how the financial tide could turn) I feel better about having some equity in my vehicle or any other asset than if I am leasing a vehicle that I may have to turn in or buy out at the end of the lease.
Under many circumstances a lease could very well cost you more money than a purchase. I tend to keep my vehicles for 4 to 5 years sometimes longer. In such cases it typically costs less to purchase than lease. I always put down enough to remain right side up throughout the term of my auto loan. Normally when I trade for another car my monthly payment is less than what is wason my previous one because of equity.

For others leasing is the way to go, if they know for sure that they will trade often, and /or if they plan to invest the money that they are saving each month on a lease vs a purchase.

It is up to each individual to decide what is best for themselves.

 

I think I'm beginning to understand what your definition of equity is..and maybe even the general sense of that. It's money/value that can be taken out, like when people who have paid their house in full but would like to take a loan out by their house's equity to generate some cash flow. The thing is, a loan is a loan and you still have to pay it out regardless if your financial situation is good or bad. It gets worse when it's depreciating and you're upside-down.


Well, that's the thing. It doesn't make too much sense to lease any vehicle for more than 2 years, given the residual value decreases with each year, thus the possibility of paying more by the month.

What I've found is that leasing is good when you don't want to pay maintenance on a five year old car, especially one that needs high maintenance. It's more of a convenience factor than anything else. With the amount of miles that I put on yearly, for me, it's also a good idea to own a vehicle that doesn't get used as often, only when I need to offset some of the mileage from the leased vehicle.

Of course! I agree with you!

 

Not according to my calculations. Check this out for example.

I don't see how being forced to get a new car in exactly 2 years is much of an advantage. Purchasing allows you to get a new car any time you want.

I think it would be fun to do some examples. Do you consider this a good deal on a lease?

 

I think most people here just lease because in today's financial market... thanks Bears Stern... it is rather difficult to sell a car for what it "may" be worth... at least according to the Edmunds/KBB.

For a lot of people it's a prepaid level of convenience, and fun. I'm pretty sure most people that opt for leasing don't like driving the same car for longer than 2-3 years. Combine that with the hassle free leasing return, and you've got a winner.

I recognize that there are instances where buying would be better (at least in a perfect, predictable world). However, due to the fact that there is a lot of uncertainty (as in getting in an accident), most people would rather lease and not have to deal with selling the vehicle, dealing with dealerships or having people come to your door... at the end of the day it's a personal decision, and whatever that person's decision is hopefully is right for them.

I know I'm probably paying more in a lease, but the benefits greatly outweigh the negative aspects for me... and I get a new shiny car in 2 years...

 

Ya, if you keep doing lease you will be paying that monthly until you drop dead

That's wrong, assuming 35% tax bracket and 4% interest rate with 40k saving
1 Year: 41040
2 Year: 42107.04
3 Year: 43201.82
4 Year: 44325.07
5 Year: 45477.52

assuming 25% tax bracket and 4% interest rate with 40k saving
1 Year: 41200
2 Year: 42436
3 Year: 43709.08
4 Year: 45020.35
5 Year: 46370.96

 

Actually the quoted Infiniti national offer is not really a good deal at all. A car like that should be in the low 400's/month with zero cap reduction - only licensing, acq fee & first payment due at signing.

While you may not see the advantage of being "forced to get a new car in exactly 2 years", it's very much an advantage to others, myself included. Leasing also lets you get into a new car any time you want as well. When you're financing, you request a payoff amount, for a lease you get a buyout amount... different words for a similar thing.

It sounds like you know you're planning to keep a car for a long time - and in that case, leases may not make sense. But judging from the number of cross posters among the various internet car forums, I'd speculate that among the mentioned population, car ownership is becoming shorter vs. longer.

Again, the "math" has to be done with a term in mind. Lease vs. buy should not be an emotional decision - it should be a dollars & sense one... and for those folks who plan to drive a G37 during only the warranty period, the March lease numbers look more attractive vs. financing an untitled, new one.

 

Haha damn, I'm definitely one of the more lease illiterate people here, but after reading all of this, I'm beginning to think I should've leased. I'm hardly putting any miles on my car, and although the initial plan was to have it for about 4 or 5 years, I most certainly wouldn't object to swapping it for another one in a couple years. My family has never leased before, but with good reason since we've kept all our cars for at least 7 years, which is why I'm so unfamiliar in this area. I guess I'll have to crunch the numbers later and put sense into all this. Since I went through VPP, it's not like I can sell my car for another few months anyway.

So in my situation, I bought on 11/17/07 and have put about 2800 miles on the car so far. Hypothetically, say I wanted to sell my car so I can lease another one, then it would be better for me to do it as soon as possible to minimize depreciation, correct? Or would going from financing to leasing be a bad move?

 

Seriously people... why is this so hard to understand?

1. There are factors which may not be able to be quantified, which go into the lease v. buy decision. It is not simply a matter of money...

2. At the time I got my car, I sat down with myself, and asked.. "self, how long would you see yourself driving this car?"... Self answered... " at most 3 years until I get bored and get something else."

As a result, I had to sit down and see how much my total ownership experience (3 years) would cost me under a lease and under a buy agreement. For the buy decision, I had to estimate how much I would be able to unload my car for after 3 years. For me (although it may be different for you now), it was a matter of a few hundred dollars per year in favor of buying. However, due to those unquantifiable factors (see #1), I decided that leasing would be the better option. Sure, I am paying roughly 600-1000 more for the time I have the vehicle, but I gain peace of mind in that if I do get into an accident, my valuation of my risk doesn't go out the window...

And as a response to the person above that's saying I'll be paying until I'd dead... I'll only be paying until I no longer want to be in a new car every 2-3 years. It is an expense that I am fortunate to be able to afford... and driving a new car has a certain value for me that your valuation doesn't take into account. After your rationale, you would buy 1 car, and run it until the thing needs to be towed to the scrap yard... that would be the only time you'll get rid of your ride.

3. Leasing v. Buying is an individualized decision. Sit down with your financial consultant (not the dealer's), and run the numbers taking into account the different intangibles. You'll see which one makes most sense to you. If both are equal, go with leasing, it's a prenegotiated expense with little or no risk.

 

It will be interesting to see how the perspective change if in fact we see some economic hard times and inflation.

The lease concept is what got all these people into the housing trouble they are in. ARMS, interest only (depreciation only??), etc.

Yes, a different industry but the point is that people fundamentally wnat what they can not afford.

Since they can not walk in plop 10K down and get a good monthly payment which would allow them to own something and yes even have some equity....they instead pay little to nothing down, and sign up to pay not only the expected depreciation but a premium on top of that.

Lease cars have a lot of margion in them when you see them for sale after the lease, because they try to structure them that way.

And let's not get started on what the true cost is which you will not know until you go to turn it in and rack up the charges.

Then there is the lease default fee if something should happen and you cannot finish it out.

I have not been upside down on a car in 20+ years because I do not buy one that I can not afford and I am not signing up for the "car payment until dead" program. I would rather invest in another rental property, house flip, business investment.

But then we are an instant gratification society these days. Time will ultimately tell us the answer to this question.

If you are making under 100K a year you have no business driving a 45k sport coupe around. You should be investing in your future and your retirement.

25% of people between 29 - 39 still need and take money from their parents, and that number is 33% if you widen the range to 19-39.

Guess it is tuff to make rent on your apartment when you have that big lease payment on your 45K sport coupe, and you can damn sure bet there is no saving happening.

Well, I feel better now.

 

That's a very convoluted way of saying a big chunk people on this forum have no business driving a G37, since I'm sure the average G owner doesn't make a six figure salary. If you crunch the numbers and can afford it, why not? Life is too short, live it up while you can (of course as long as it's within your means). I've seen too many people living with regret, and I figure I don't want to be one of those people. I'll admit I'm not making 100K, but I'm lucky enough not to be making rent payments and having a minimal amount of bills to pay, and I'm still investing a considerable amount into my retirement, so I feel it's within my range of affordability. I won't argue that a car should probably take a back seat in my list of priorities, but hey, you never know what tomorrow may bring. My car might've been a slight impulse buy, but I'm still happy I did it, and it's one more thing I can check off the list of things I want to do in my life.