Own vs Lease | TigerDroppings.com

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TthomasJR
New Orleans Saints Fan
Houston, TX
Member since Sep 2006
12547 posts

Own vs Lease



I've never leased a car, but my wife is considering trading in her car to do this.

What are the pros and cons?







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GEAUX DJ!
LSU Fan
Plaquemine
Member since Jan 2005
1828 posts

re: Own vs Lease


Seems like leasing is like renting... You'll never own it. But then again I think there is some leases where you can buy the car after the lease is up if im not mistaken. But for what price? It probably doesn't benefit you.





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LSURussian
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Baton Rouge
Member since Feb 2005
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re: Own vs Lease


Bottom line is leasing costs more but you get a new car every three years (or whatever the lease term is).





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the LSUSaint
LSU Fan
Member since Nov 2009
5209 posts

re: Own vs Lease


quote:

Lease


Dealer wins......you lose






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Layabout
UNO Fan
Baton Rouge
Member since Jul 2011
6885 posts

re: Own vs Lease


The biggest question you need to ask is how much mileage she puts on the vehicle. If it's not over 10-12K per year, leasing can work for you.

In general you can get a nicer car for less money than you could by purchasing it. The car will always be in warranty and you'll get a new one every three years. You'll pay sales tax only on the amount of the monthly payment, not on the total price of the vehicle.

The best way to approach leasing is to find a factory-sponsored lease deal and stick strictly to the terms as spelled out by the manufacturer. Go to the web sites of the cars you might be interested in and look for a section titled Special Offers.

Sign-and-drive leases are generally the most favorable for the buyer. This means that you put no money up front and the first month's payment is free.

I've found the best way to negotiate a lease is over the internet. Most dealers now have an internet sales manager who in my experience is not nearly as predatory as the showroom guys. Copy down the details of the manufacturer's special offer and shoot them an e-mail asking if they have vehicles available that qualify for it. Don't set foot in the showroom until you have a deal committed through e-mail.

Some of the best lease offers are from Honda and Volkswagen, but not limited to those two. You'll find the deals on the most popular selling models with the most popular equipment. Don't try to customize beyond that or you open the door for the dealer to pull all kinds of shenanigans.

Finally, treat the sale of your existing car as a totally separate transaction. It is not a trade-in.

BTW, most people who purchase and finance new cars are always under water and paying far more than they would by leasing. People who are content to drive six-year old cars with 100,000+ miles on them are the only ones who may wind up paying less.




This post was edited on 4/20 at 3:08 pm


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BACONisMEATcandy
LSU Fan
Delta, Amex, & Über Threads
Member since Dec 2007
41803 posts

re: Own vs Lease


It's for people who can't afford to own the car they want





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GenesChin
Ole Miss Fan
The Promise Land
Member since Feb 2012
11541 posts

re: Own vs Lease


Depending on expected inflation rates and future interest rates, lease to buy could save you money. It could also bone you really hard.


All depends what you are going to utilize the car for






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kywildcatfanone
Kentucky Fan
Wildcat Country!
Member since Oct 2012
18748 posts

re: Own vs Lease


Personally I think leasing is a bad idea, as you will always have a car payment, and will actually never own the car.
I suppose people who like a new car every 2 years and put less than 12K miles per year, it might be a worthwhile proposition, but if you want to save money, always buy a car.






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LSUtigerME
LSU Fan
Walker, LA
Member since Oct 2012
643 posts

re: Own vs Lease


I'm a big fan of leasing in the right situations. There's a few "prerequisites" to make leasing worthwhile. However, if you fit into these requirements, leasing can actually be more advantageous than buying. The requirements are that you want to own a new car often (desirable lease term, usually 2-4 years), can drive under the allotted mileage (10k-15k/year), do not want to modify or alter the car, and take generally good care of the vehicle. You want to make sure you fully understand the calculations involved in leasing so as to not get confused during negotiations. In general, leasing to buying the same vehicle is not better than buying outright from the beginning.

As far as using the dealer incentives, every dealer/manufacturer I've worked with has been able to apply the incentive money factor (lease "interest rate") and residual, regardless of which trim or options I choose (Toyota does calculate residual value different from most manufacturers).

I've made a simple spreadsheet to compare the total amount "invested" over the lease term in comparison to buying over the same term (assumption is you trade/sell vehicle at same time either option). From the vehicles I've compared, the lease option with manufacturer incentives can often be advantageous to buying.

Screenshot from actual Acura negotiations:


I've used this before, and it makes sense to me. It's possible that something may be missed, so I'm open to any comments.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30149 posts

re: Own vs Lease


Any car loses the most value during the first few years. Whether you lease or buy, you are paying out the arse for your vehicle.

If you don't care about this, fine. It's your money. But if that's the case then I don't see why you would care about the difference between leasing or buying. That difference is waaay less than you'd save by just driving an older vehicle.






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Mr.Perfect
Louisiana
Member since Mar 2013
5148 posts

re: Own vs Lease


quote:

People who are content to drive six-year old cars with 100,000+ miles on them are the only ones who may wind up paying less


Dead on accurate.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30149 posts

re: Own vs Lease


According to this spreadsheet, the cost of either choice for three years is about 25K. Plus financing, of course. For that price you could buy 2-3 perfectly good used vehicles, drive them for three years, and then blow them up.

If you are willing to burn that much money that's your decision but if so there is little point in worrying about saving $3K on a lease vs. buy decision.







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LSUtigerME
LSU Fan
Walker, LA
Member since Oct 2012
643 posts

re: Own vs Lease


quote:

According to this spreadsheet, the cost of either choice for three years is about 25K. Plus financing, of course. For that price you could buy 2-3 perfectly good used vehicles, drive them for three years, and then blow them up. If you are willing to burn that much money that's your decision but if so there is little point in worrying about saving $3K on a lease vs. buy decision.


Very true, though this example is quite high being an expensive and low residual SUV. Obviously buying used is much better financially. However, many people prefer new cars. There's benefits to them as well, such as reduced maintenance and warranty coverage. These things will never justify the depreciation of a new vehicle. However, even buying a used vehicle will incur some amount of depreciation plus maintenance.

Leasing is not "renting" as you see so often. It's simply financing the depreciation of the vehicle (effectively paying only for your "use" of the vehicle over the term) up front. It's a different approach, and one that lowers your cost (or increases vehicle value for equal cash flow). Leasing, even long term, can be beneficial under the assumptions (ie. in some cases two consecutive 36 month leases was financially advantageous than a single new car loan for 72 months).






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Layabout
UNO Fan
Baton Rouge
Member since Jul 2011
6885 posts

re: Own vs Lease


quote:

According to this spreadsheet, the cost of either choice for three years is about 25K. Plus financing, of course. For that price you could buy 2-3 perfectly good used vehicles, drive them for three years, and then blow them up.

First, anyone buying a $50,000 car certainly can afford to buy several used cars. The question is whether he would be caught dead driving one of them.

Second, this comparison is for an MDX with the Advanced package which is almost $10,000 more than the nicely-equipped base model. Buy or lease, you will never come close to recovering the cost of a luxury package. As I pointed out earlier, stick to the manufacturer-sponsored lease and don't try to customize it. The terms for the special-offer lease are much more favorable. From the Acura web site:

quote:

2013 MDX 6 Speed Automatic Featured Special Lease - $0 Due at Lease Signing $0 down payment, $0 down security deposit, $0 first month payment, $0 due at lease signing. $500.00 per month for 35 months thereafter. Excludes taxes, titles and fees. For well-qualified lessees. Closed-end lease for 2013 MDX 6 Speed Automatic vehicles (YD2H2DJNW) available from March 5, 2013 through April 30, 2013, available to customers who qualify for the Acura Financial Services Super Preferred or Preferred credit tier. Not all lessees will qualify. Higher lease rates apply for lessees with lower credit ratings. MSRP $44,175.00 (includes destination, excludes tax, license, title fees, registration, documentation fees, options, insurance and the like). Actual net capitalized cost $41,072.56. Net capitalized cost includes $595 acquisition fee. Dealer contribution may vary and could affect actual lease payment. Total monthly payments $17,500.00. Option to purchase at lease end $24,296.25. Must take new retail delivery on vehicle from dealer stock by April 30, 2013. Lessee responsible for maintenance, excessive wear/tear and 15¢/mile over 10,000 miles/year for vehicles with MSRP less than $30,000, and 20¢/mile over 10,000 miles/year for vehicles with MSRP of $30,000 or more.








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Poodlebrain
LSU Fan
Way Right of Rex
Member since Jan 2004
15447 posts

re: Own vs Lease


If the vehicle is going to be used for business purposes, then there are income tax implications to consider as well.





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Cold Cous Cous
LSU Fan
Obvious and pointed jeering
Member since Oct 2003
13691 posts

re: Own vs Lease


Transpose genders, and you have:

quote:

First, anyone buying a $5,000 Louis Vuitton purse certainly can afford to buy several normal purses. The question is whether she would be caught dead wearing one of them.

Exact same concept.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30149 posts

re: Own vs Lease


quote:

First, anyone buying a $50,000 car certainly can afford to buy several used cars. The question is whether he would be caught dead driving one of them.


Right, that's why I noted that if the OP is in a position to spend that kind of money, fine. But if so, why spend three seconds worrying over lease vs. buy if the difference is only a couple of grand?

If you're already committed to driving the latest model you might as well flip a coin. It's like agonizing over which kind of door handle to get on your Ferrari. At the end of the day, you're driving a Ferrari.

I suspect the only rational answer here is "lease" b/c if you really can afford this then your time is probably worth not having to hassle with negotiating a purchase every three years. Just turn in the older one and get the newer one.






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LSUtigerME
LSU Fan
Walker, LA
Member since Oct 2012
643 posts

re: Own vs Lease


quote:

Second, this comparison is for an MDX with the Advanced package which is almost $10,000 more than the nicely-equipped base model. Buy or lease, you will never come close to recovering the cost of a luxury package. As I pointed out earlier, stick to the manufacturer-sponsored lease and don't try to customize it. The terms for the special-offer lease are much more favorable.


The only terms that are determined by the manufacturer are the Money Factor and Residual Value. Typically the "specials" are for the base model because it will minimize the "X per Month" in the advertisement. Most manufacturers residualize any additional options/packages at the same rate. Toyota is one exception. In reality, this is actually beneficial to the lease because the manufacturer is giving you credit, where the typical consumer would not value the package as highly (which is what Toyota does). For example, most manufacturers retain the same X% multiplier for any model/package/options. Toyota (and typical used car consumer) will reduce that X% due to the additional packages (effectively, additional packages depreciate faster than the base vehicle).

As for the argument over the "luxury" of the vehicle in question, it's a high example, but indicative of a lease vs buy decision. $3k over 3 years is still significant. We're not talking Bentleys. It's basically a 10% savings in the "cost of ownership", not including insurance/maintenance/etc. It's also worth noting that leasing has a significant savings in monthly cash flow. For this board and the savvy investors here, that could be worth a lot more.

To the OP, do your research and ask/compare the figures. It takes fairly low MFs and high residuals (incentives) to make it advantageous. Leasing is not the "devil" most people make it out to be. Also, understand leasing is just a method of financing. You must still negotiate and haggle the price all the same.



This post was edited on 4/21 at 6:02 pm


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Layabout
UNO Fan
Baton Rouge
Member since Jul 2011
6885 posts

re: Own vs Lease


quote:

The only terms that are determined by the manufacturer are the Money Factor and Residual Value.

And if you deviate from the manufacturer lease specifications then the dealer gets to determine the residual value and you the customer get screwed.






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notiger1997
Member since May 2009
23486 posts
 Online 

re: Own vs Lease


This is one of the better threads I've seen on this subject.
I kind of like the strategy to either buy a 4 or 5 year old car or get a new one and drive it for 10 years.

To lease has never really been a viable option for me.






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