Lease haters, consider this.

[Phil Pugliese]

THIS. if you add up my lease payments, combine it with my buyout AND the $500 extortion/buyout "fee," the passat would end up costing $18,700 (that is assuming i pay the residual in cash with no borrowing expenses, of course). i would have been hard pressed to get that kind of deal if i were buying.

Plus it gives you an "out" 3 years (or whatever the lease is) in if you decide you don't want or like the car.

[dcmix5]

Most people work from, oh, 16 years old to, say, 66 years old. So let's just say 50 years of earning potential to keep it simple. This money is finite.

In those 50 years, he (or she, but remember, keep it simple) will earn no more, no less, than $X,xxx,xxx.00, and he is free to apportion such funds as he sees fit. Let's forget inflation and/or price increases for purposes of this exercise.

Say that our guy decides to budget $15,000 for his annual transportation needs. His three quarters of a mill spent by the end of his earning career represents a significant portion of his earning power.

By buying, even suffering depreciation, he will have equity in his purchases over the years. By spending money on the depreciation of someone else's asset, he will have nothing to show for his transportation budget. It's still an expense, mind you, money he would have spent regardless.

But buying a new car, and holding on to it, will ALWAYS make more sense than leasing. Buying a USED vehicle, and letting someone else take the depreciation hickey, makes even more sense, but many folks prefer the certainty of a new, OEM-warrantied vehicle over a pre-owned one.

Some people don't care for the long-term view, and consider leasing a viable alternative to ownership, without considering the finite amount of money they will earn in their lifetime. Whatever. These are people who think they know how the accumulation of assets works, but they really don't. However, they are happy in the short-term, and that's just fine.

Continue the discussion, though, this is always amusing...

Your cute little story lacks a few things.

1. Our guy would possibly have equity, but only if he sells. Hanging on to a car that has equity in it does nothing for you monetarily, and by the day, that equity is dwindling.

2. You have not factored in repair expense, though if someone were to budget $15k a year for transportation, I imagine they would have a hunk of **** that requires some extensive repair bills.

3. With a lease, I don't have to budget a damn thing. I have my payment, gas and a free ride if anything breaks under the warranty. I don't have the time, patience or sort of job that would allow me to call in because my equity-laden car wouldn't start for the 12th time this year.

[fbobberts]

Plus it gives you an "out" 3 years (or whatever the lease is) in if you decide you don't want or like the car.

Yep- you gotta want the car you buy (outright) and make your peace with the idea this is it for quite awhile. I've done this well, with 3 nine year cars - but I also sold new cars at 15 and 18 months that I didn't like. The toasting on those two mistakes was epic.

I've been driving for 32 years and I've had 9 daily drivers with some overlap (in detroit I kept two cars, as many do) and some other toys not included. But my record in general does not support the idea that I will go the distance with car purchases. Like I said- I can see how leasing would work.

[SchnellFowVay]

there is no guarantee of beauty of flipping downside onto the lease company.

the residual could be miscalculated in the other direction, wherein you would have had over-paid for the depcreiation.

its not an arbitrary or fixed value.

again, cost of use averages out again

You can always buy the car off lease for the residual. So let's say you get a lease with a 63% residual, but the car is really worth 70% at the end of the lease. You can buy the car for 63% and then turn around and sell it for 70%. There are some transaction costs in the there, but it doesn't change the fact that in a lease, you can capture much of teh equity "upside," while flipping the downside onto the lease company.

[Phil Pugliese]

You can always buy the car off lease for the residual. So let's say you get a lease with a 63% residual, but the car is really worth 70% at the end of the lease. You can buy the car for 63% and then turn around and sell it for 70%. There are some transaction costs in the there, but it doesn't change the fact that in a lease, you can capture much of teh equity "upside," while flipping the downside onto the lease company.

Not that simple. Let's say the 63% residual is $12K, you have to pay tax on that 12K and titling fees, which vary from state to state but lets say on average it is $1K..that eats up that difference that you could make. If you are buying to flip, the best you will probably do is break even. Let alone does that person have $13K that they want to tie up.

We haven't even discussed the advantages of multiple security deposits and other ways of buying down the money factor to save money. We can save that for "Leasing 201" classes.

[SchnellFowVay]

Not that simple. Let's say the 63% residual is $12K, you have to pay tax on that 12K and titling fees, which vary from state to state but lets say on average it is $1K..that eats up that difference that you could make. If you are buying to flip, the best you will probably do is break even. Let alone does that person have $13K that they want to tie up.

We haven't even discussed the advantages of multiple security deposits and other ways of buying down the money factor to save money. We can save that for "Leasing 201" classes.

Had you bought the thing initially, you would have already paid the tax. And you don't necessarily need to pay titling fees (depending on your state) if you line up a buyer and just do the entire transaction at once.

[Phil Pugliese]

Had you bought the thing initially, you would have already paid the tax. And you don't necessarily need to pay titling fees (depending on your state) if you line up a buyer and just do the entire transaction at once.

Lease you pay the tax on the portion you are using so actually it is broken down in two parts. Some states it is more, some states it will work out to be about the same. YMMV state to state.

You cannot just line up the buyer at the same time, technically it is not your car to sell, it is the banks, otherwise you are "jumping title" states do frown upon it since it is illegal. Now, if you can buy the car for $12K and someone else is OK with paying $13K for it and giving you the $1K on the side as a "finders fee", good luck with that but that is also bordering on illegal.

[fbobberts]

Lease you pay the tax on the portion you are using so actually it is broken down in two parts. Some states it is more, some states it will work out to be about the same. YMMV state to state.

I'm listening- usually pays to when someone else knows more- how do you go about pinpointing those great residual deals? I would guess you can line up a couple of different cars you like at change over and sometime like Aug-Sept just go and find which one at which place you can get the best residual and terms with. And just keep pounding them down. But it sounds like you found deals even they did not know they could offer.

How?

[Waarp]

Are you guys seriously considering all this malarkey when u lease? If you are even leasing lol. The last several post must read like a leasng agreement.

Reminds me of that Seinfeld line when he was renting a car..."did you see the size of that document its like the declaration of independance, who's gonna read that?"

[SchnellFowVay]

Lease you pay the tax on the portion you are using so actually it is broken down in two parts. Some states it is more, some states it will work out to be about the same. YMMV state to state.

You cannot just line up the buyer at the same time, technically it is not your car to sell, it is the banks, otherwise you are "jumping title" states do frown upon it since it is illegal. Now, if you can buy the car for $12K and someone else is OK with paying $13K for it and giving you the $1K on the side as a "finders fee", good luck with that but that is also bordering on illegal.

It's not illegal at all. What in god's name are you talking about?

You wouldn't believe some of the legal ways I have sold cars. I actually created a notional principal contract at one point for my friend to sell my old GTI. Obviously it's easier to do this stuff when you're a lawyer, but either way .. .

[jepva]

Lease you pay the tax on the portion you are using so actually it is broken down in two parts. Some states it is more, some states it will work out to be about the same. YMMV state to state.

You cannot just line up the buyer at the same time, technically it is not your car to sell, it is the banks, otherwise you are "jumping title" states do frown upon it since it is illegal. Now, if you can buy the car for $12K and someone else is OK with paying $13K for it and giving you the $1K on the side as a "finders fee", good luck with that but that is also bordering on illegal.

Not necessarily - depends on the state. In VA we pay full sales tax up front and it is added to the cap cost (or not if you pay it down upfront). There is no additional tax if you decide to buy the car.

[Black R]

I haven't read the whole thread yet, but...

Years back I did the math on a lease vs purchase at 60 months and I came out ahead if I leases for 3 years and them did the buyout afterwards.
Even if I didn't want the car after the lease expired (which I did), it made more economical sense to buyout and then turn around and sell the car privately.

Now this was with one of those factory backed lease specials, so your experience may vary.

$349/mo lease vs financing $24,800.

[Phil Pugliese]

Not necessarily - depends on the state. In VA we pay full sales tax up front and it is added to the cap cost (or not if you pay it down upfront). There is no additional tax if you decide to buy the car.

Leasing when it comes to tax does vary tremendously from state to state. Personally having to pay tax on the whole auto value instead of just the lease usage cost would be a strong consideration in the lease vs. purchase decision. Now that you mention it, I do recall Virginia being wacky when it comes to leasing. Pa, added an additional 3% on the lease payments. Jersey was one of the better ones. Delaware just really over thought it.

[rockhog]

You can always buy the car off lease for the residual. So let's say you get a lease with a 63% residual, but the car is really worth 70% at the end of the lease. You can buy the car for 63% and then turn around and sell it for 70%. There are some transaction costs in the there, but it doesn't change the fact that in a lease, you can capture much of teh equity "upside," while flipping the downside onto the lease company.

Because lease options exist as a way for financiers to give you an advantage , by way of making hasty, arbitrary residual calculations.

A buyer could sell the car at favorable depreciation and incurred negligible differences in cost-of-usage. advantage = wash

A buyer could sell the car at unfavorable depreciation, and have incurred higher differences in cost-of-usage. advantage = lessee (wash, due to transactional cost)

A buyer could sell the car early, and regardless of depreciation, have incurred less cost than a lessee breaking contract, due to lessee's contractual penalties. advantage = buyer


There's a plus to every minus. Any scheme that gets a person into a car is a win for the manufacturer and the bank. You haven't discovered the secret route to gaming the system. Want something? youre gonna pay for it; deal with it

[bbk]

The more I read here, the more I'm glad I just negotiate a price & pay cash up front for our cars.

[tjl]

Perhaps it would be more useful if the lease advocates made a thread as to how to determine if leasing is a better or worse deal than buying (and cash versus financing) based on the conditions specific to the person and car. For example:

Predictable amount of time person will keep the car?
Predictable mileage to be driven on the car?
Relative level of subsidies for lease, rebates for buying, incentives for financing for that particular car?
Lease restrictions on moving residence?
Creditworthiness and how it affects lease money factor and financing interest rate?

[SchnellFowVay]

I find it amusing that most of the lease defenders in this thread have a new/nearly-new nicer/premium German car in their profile. The term "$30,000 millionaire" would apply to many of the defenders.

You have got to be kidding me. I assume that this was aimed at least partially at since I have two 1-series in my signature.

What makes you presume that I cannot afford the cars? Further, what makes you presume that I leased both of them?

I love it when people get personal in here.

And just so you know, I deal with wealthy people for a living. Nearly all of them lease new cars every 3 years.

[jepva]

You have got to be kidding me. I assume that this was aimed at least partially at since I have two 1-series in my signature.

What makes you presume that I cannot afford the cars? Further, what makes you presume that I leased both of them?

I love it when people get personal in here.

And just so you know, I deal with wealthy people for a living. Nearly all of them lease new cars every 3 years.

Yea, it's really funny to hear people from the conventional/old school finance ways automatically assume you're poor or can't afford the cars and that you're a financial mess when they hear that you lease.

I think there's actually data out there that shows most leasers actually have a higher annual income and better credit scores. For leasing in general, you're required to have a higher score than conventional loans. There's a reason most higher end luxury cars are sold on leases. Also funny hearing from that guy on "accumulation of assets"...buying a bunch of depreciating cars with cash is the last thing I would ever do with my money. I'll save my cash for investments and real estate, thank you.

[sethgood]

Not that simple. Let's say the 63% residual is $12K, you have to pay tax on that 12K and titling fees, which vary from state to state but lets say on average it is $1K..that eats up that difference that you could make. If you are buying to flip, the best you will probably do is break even. Let alone does that person have $13K that they want to tie up.

We haven't even discussed the advantages of multiple security deposits and other ways of buying down the money factor to save money. We can save that for "Leasing 201" classes.

Wut.

[IgorRGTI]

Wut.

Putting down multiple security deposits will lower your money factor, thus lowering your monthly payment. However, unlike putting money down to lower your cap cost and not getting it back, you get your security deposits back at the end of the lease.

[Lawrider]

Hold up. Most banks (if not ALL) require full coverage as long as they hold the lien.

They'd be suckers not to. Also, even owning the car outright- comprehensive could be worth it, provided it isn't an absolute POS.

Especially if it's your only vehicle. It's much better the INS co write up a fatty check to replace the car right away, than to be "saving up" for a new car all over again.

Sorry should have been more specific, yes paying full cash for the car so that there is no lien. Did that with a 04' TSX. Just tossing it out there as another cost consideration.

[GolfVIDriver]

Sorry should have been more specific, yes paying full cash for the car so that there is no lien. Did that with a 04' TSX. Just tossing it out there as another cost consideration.

What? You are saying you'd willingly spend $20,000+ on a new car and NOT Put full comprehensive coverage on it?

Call me crazy but I put full coverage on my 91 SHO. My limit for full coverage is $1,000. Below that I'll stick with liability only.

[Shomegrown]

What? You are saying you'd willingly spend $20,000+ on a new car and NOT Put full comprehensive coverage on it?

Call me crazy but I put full coverage on my 91 SHO. My limit for full coverage is $1,000. Below that I'll stick with liability only.

I planned on doing liablity only on my Dakota - but was shocked to find out that collision w/$500 deductable was less than $10 more per month with Progressive. At that price, you're silly not to IMO.

[SchnellFowVay]

I planned on doing liablity only on my Dakota - but was shocked to find out that collision w/$500 deductable was less than $10 more per month with Progressive. At that price, you're silly not to IMO.

Don't waste your breath. I have a feeling that a guy who throws down all-cash on a valuable used car, only to determine that comprehensive coverage is not worth it, is not the kind of guy that will listen to advice.

But who are we to opine. We are apparently $30,000 millionaires.

[vasillalov]

I am very thankful for all the people who love to lease their cars. Without them (to absorb the depreciation) how can the rest of us get their hands on a slightly used, properly maintained 1 or 2 year old cars that have dropped in price?

I bought my 335i when it was 1 year old with just 3,520 miles for $17K LESS than what it was originally sold for. Not bad for a fully loaded car with 3 years remaining of full warranty, maintenance and BMW Assist included.

[Phil Pugliese]

I am very thankful for all the people who love to lease their cars. Without them (to absorb the depreciation) how can the rest of us get their hands on a slightly used, properly maintained 1 or 2 year old cars that have dropped in price?

I bought my 335i when it was 1 year old with just 3,520 miles for $17K LESS than what it was originally sold for. Not bad for a fully loaded car with 3 years remaining of full warranty, maintenance and BMW Assist included.

That does you logic have to do with leasing?

[vwpiloto]

You have got to be kidding me. I assume that this was aimed at least partially at since I have two 1-series in my signature.

What makes you presume that I cannot afford the cars? Further, what makes you presume that I leased both of them?

I love it when people get personal in here.

And just so you know, I deal with wealthy people for a living. Nearly all of them lease new cars every 3 years.

I couldn't agree more. I was all set on buying my car, but the lease deal was just too good to pass up. Knowing that I wouldn't want to keep the car for more than 3 years, factoring in the great lease offer, it became a no brainer. But there are those who don't want to look at it objectively and seem to think that those who purchase are somehow superior in some way. Fbobberts has it right with his comments. It depends on the situation and whether you're planning on having that car for the long term.

[SchnellFowVay]

I am very thankful for all the people who love to lease their cars. Without them (to absorb the depreciation) how can the rest of us get their hands on a slightly used, properly maintained 1 or 2 year old cars that have dropped in price?

I bought my 335i when it was 1 year old with just 3,520 miles for $17K LESS than what it was originally sold for. Not bad for a fully loaded car with 3 years remaining of full warranty, maintenance and BMW Assist included.

How is this even possible? I constantly see the BMW dealers out here selling 36k cars that are 3 years old and off-lease for ~80% of MSRP.

Did you know someone at the dealership?!

[seadoo2006]

How is this even possible? I constantly see the BMW dealers out here selling 36k cars that are 3 years old and off-lease for ~80% of MSRP.

Did you know someone at the dealership?!

Nope ... you just live in the wrong part of the US ... move to the MidWest ... our used auto prices are far more reasonable than you West Coasters and East Coasters.

[Shomegrown]

How is this even possible? I constantly see the BMW dealers out here selling 36k cars that are 3 years old and off-lease for ~80% of MSRP.

Did you know someone at the dealership?!

Probably a salvage branded car.

[bbk]

How is this even possible? I constantly see the BMW dealers out here selling 36k cars that are 3 years old and off-lease for ~80% of MSRP.

Did you know someone at the dealership?!

Really? How is that even possible? I cannot fathom paying that much for a used BMW.

Jeez, why not just buy a new one? The buyer almost certainly will get something knocked off the sticker & if the car is financed, the interest rate will almost certainly be lower on a new car, making the total price difference between new & used even less.

[vasillalov]

Probably a salvage branded car.

Not really, but I'll let you have that illusion for a while.

[vasillalov]

Nope ... you just live in the wrong part of the US ... move to the MidWest ... our used auto prices are far more reasonable than you West Coasters and East Coasters.

That!


..and it's not like we have thousands of cars like that available under our noses. It took me 3 months of solid searching and calling to find my car. I put a $500.00 deposit before I even saw pictures of it online, let alone seen it. There are discounts like that, you just have to be patient and jump on the opportunity without hesitation when it presents itself.

[Chris_V]

I find it amusing that most of the lease defenders in this thread have a new/nearly-new nicer/premium German car in their profile. The term "$30,000 millionaire" would apply to many of the defenders.

Whatever you want to believe, moron.

[Sporin]

We've been having this discussion here for 15 years and the more things change, the more they stay the same....

• People comparing leases to buying a car and keeping it forever; these are 2 totally different goals/plans.
  
• People who think because leasing doesn't work for "them" that it is a bad idea for everybody.
  
• People who clearly have no idea how leasing works arguing vehemently against leasing.
  
• Self-righteous cash-only buyers.

carry on.