Own vs Lease

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

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.

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

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.

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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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.

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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:

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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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Transpose genders, and you have:

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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.

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Exact same concept.

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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.

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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 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.