Exactly! Like I have said twice already it is all about what you are looking for as options and outcome. There is no blanket statement about whether leasing is good or bad. I was one of those people who said leasing was bad no matter what for a long time. I spent basically half a day educating myself on ALL of the ins and outs of how leases work and what the benefits and drawbacks were.

 

That is high my G35x with Nav/Tech/Prem and Wood is 0 down and $588 for 39 months!

 

I know this is easier said than done, but try to buy your car with cash if possible. I am going to have my G35 paid for in about a year, and then I am going to KEEP it and put the $500/month car payment into a money market account for 3 years.

I'll have $18,000, plus interest, plus the trade-in value of the G (Maybe $15k?). That gives me $33,000+ to buy my next car in full. I will look for a 1 or 2 year old $40k+ MSRP car and purchase it outright. Talk about a good feeling.

 

True, but we seem to change cars every few years. The longest we have had a car is 3 years. Just seems to work out that way. I'm trying to keep that in mind while planning to keep it longer. I intend to keep it for a long time but the reality based on our past is that we won't. I figure it is an investment in my hobby and in a weird way in my marriage. Trey and I really do a lot more stuff as a couple since we got the cars. Hopefully in a year or so when Lee can handle it better, it can be a family affair.

 

Huh? You do realize that you're the one that paid that extra to reduce what is owed on the lease, no?

Besides the special terms (such as mileage penalties, option to return the car at an agreed upon value, etc), the payment structure from leasing a car is IDENTICAL to that of purchasing a car over a virtual term with a final lump sum payment after X years (in the form of the car).

Thus in general, from a maximum net present value standpoint, the decision to lease versus buy should come directly from the available cost of money of each. For example, if you can get a 2% cost of money on a lease but only a 5% on a purchase, then go with the lease.

 

I Just was reading this thread and I want to tell you that you are ABSOLUTLY 120% wrong about wanting the residual to be lower. The higher the residual value, the less the car will depreciate, the less you pay monthly on your lease. It doesnt make sense to want it to be lower just so you can owe less at the end of the lease. In that case you are just paying more monthly then you would have been if the residual were higher, so at the end the buy out technically isnt less, you just paid more during the lease. And you do not come out of less with equity. When your lease is up there is no way that you will have equity in the car to trade it in and use towards your next purchase. Banks do not structure leases that way. If they did they would be losing money in the long run. The point in leasing is to drive it for the agreed term and then give it back, not buy it out. There are other fees invovled with leasing besides residual and money factor that affect your payment such as rental fees and taxes. Im sorry trey's wife, but whoever told you that you want the residual value to be low as possible was misleading you terrible. I promise you as I am in the business and am actually very prominent in it as well. If there are any other questions that you need answers feel free to pm me and I can give you car buying 101, I promise ill be giving you the CORRECT info.

 

No one told me that. I read as to how the leases are figured, etc and I know what killed us on the previous time we leased. Taking those two things into account, I came to my own conclusion as to what I thought best for our situation. I won't claim that to be the best for everyone but I think everyone should educate themselves about how a lease is figured and what that means at the end, etc and decide for themselves based on their situation. Just my opinion.

 

unfortunatly you will be "killed" at the end of any lease if you plan on having positive equity at the end. The only way to have some kind of equity in a car is to finance it and put a TON of money down. Remember cars are depreciators not appreciators, no matter what the situation is. Look at like this, every attractive lease out there is considered attractive because it is a cheap monthly payment; if you check the residual and money factors of these cars with low payments residuals are usually high and money factors low. When i leased my S it was expensive because the residual was 1 point lower then the X model and the money factor was ALOT higher.

Think of it like your buying a house. Imagine the residual value being the price of the house (the higher the value, the lower the price of the house) and the money factor being the interest rate your paying on your mortage.

Also keep in my mind trey that putting alot of money down on a lease ( which i strongly strongly DO NOT recommend) can alot of times change the residual's and money factor of the lease.

BTW trey, can you explain to me what you mean by "killed" on your last lease. What exactly did you try to do that made this happen. End it early or something, explain a little more so I can try to help you out with this issue.

 

The last lease we had started in 2000 and I don't remember all the details to hash through. Trey and I had said we would never lease again because of the BS we dealt with when getting rid of the car. I appreciate the offer but I don't really want to get into all the things we dealt with in a public forum.

 

ok well good luck with everything...like i said if you need any help pm me...

 

Maybe logik can straighten me out if I'm wrong, but I believe that when you are leasing a car, you are essentially paying only the depreciation of the car, plus interest. The less the car depreciates (i.e., higher residual value), the lower the lease payment.

 

Rule of thumb: Buy something that appreciates, lease something that depreciates. Cars depreciate. Unless you plan on keeping the car for 10 years, lease the car. But lease it for 36 months or less. Anything longer than that kinda defeats the whole value proposition of the lease IMO.

 

The following is prompted by another thread but since it technically belongs in this one I am posting it here. I have a feeling it will be multiple posts as I believe there is a per post character limit (hopefully I'm wrong).

Ok, I opted previously not to type this entire thing out as 1) it is my personal business and 2) I have a lot of other things to do and didn’t really feel like taking the time. Seeing as it is alleged that my thoughts have no basis in logic; I am taking the time to lay ALL of this out here. I apologize if it is a bit long for some.

The first car that we ever lease was in 2000 and it was a Chrysler 300M. At the time, Trey really wanted the car and we were looking to get the smallest payment possible so we weren’t too worried about the other factors concerning leases. We got the car with a great cheap monthly payment and we were thrilled. Fast forward to 2 years later (on a 3 year lease) and you are then looking at people who want to get out of that car for various reasons. Seeing as we had another year on the lease and the car was over on the mileage, we were limited in our options. We decided to trade the car in on a truck. Now we come to the problems with the lease we had. Regardless of whether you lease a car or finance a car, the process of trading it in works basically the same way. Your car is evaluated and they tell you what they will give you for said car – regardless of the buyout or what you owe. I think most people are following this as common knowledge thus far.

Well the wonderful HIGH residual on the car that gave us those lovely smaller payments was now our biggest enemy. The buyout on the lease was the almost $19K residual plus the last year’s worth of payments plus an early termination fee. That doesn’t sound unreasonable as to how the payoff is figured or anything. So here is the problem, the car was only worth about 16 – 17K. Like I said, now that nice high residual is one hell of big liability. After this horrid experience I swore that I would NEVER lease again for any reason.

Fast forward again to about 6 months ago when I started figuring out what I was going to do about the ’07. Seeing as from our past experience we had never kept a car longer than 3 years and most more in the range of 2 years, leasing is really a better option in many cases. So I decided I would do some research on the subject and see if anything I found changed my mind or gave me some other options. I found a few websites and literally spent two afternoons reading as much as I could read about the subject, making notes, and cross referencing to check for internet BS (a step I would recommend to anyone for any research you do). After doing all of this research I came to quite a few conclusions based upon my situation, etc. First of all I decided that a lease was not in fact the greatest mistake anyone could make even after a previous disaster of an experience.

So, my biggest concern regarding a lease was what the options would be if I wanted or more importantly NEEDED to get out of the lease. I realize that my financial situation right now may well be very different in a year more and nothing is guaranteed – especially when you are a one income family. I didn’t want to be in the situation again where I had to dish out even more money (that I would likely not have in an emergency) just to get out of a lease because of terms that didn’t fit my needs – thus my statement of wanting a lower residual on the lease. I wanted to get a lower residual that would leave me in a better position relative to the *actual* value of the car. I didn’t want to be sitting on a car that was worth $25K in 2 years with a buyout of $35K.

Now, does a lower residual give you higher monthly payment? Absolutely! Do you thereby pay more to “rent” the car during the term? Absolutely! Do most people want a higher residual and lower payment? Absolutely! Is that the best way to go about things? Most times, yes, it is but not always and not for everyone. I wanted the piece of mind of not being in a bad situation later on down the road. I would never want a super low residual on a lease because it is a waste – just something in line with the *actual* value of the car at the end. Car companies will often increase the residuals to get payments low so more people can lease the car – but they are then sitting on a situation similar to what happened to us in our first lease. There are a lot of people who aren’t interested in paying a little more for that piece of mind factor. I completely respect that and it is a choice everyone has to make for themselves. I choose to pay for it. I have also strongly considered that I may decide to keep the car in the end and that is yet another reason the lower residual is on your side. Earlier in the thread I believe I gave the link for the best site I found for the full overall picture on leasing – good and bad. Take some time and read through this site and they explain very clearly the pros and cons of all sides of leasing so that you can determine what best fits your financial situation. www.leaseguide.com.

If anyone still feels that I have made a decision based on a lack of logic then that is certainly their right. I don’t expect everyone to agree with me on this. That is the great thing about the fact that humans have minds of their own – they are able to have different opinions. I will, however, not sit idly by and let it be assumed that I didn’t bother to research or think before forming my opinion.

 

Your decision was obviously well thought out, although most people share the opposite philosophy--i.e., high residual = lower payment = good. Your experience with the 300 is not uncommon. People want to get out of leases early for various reasons. (I ended the lease on my '06 coupe one month early, if that counts, but the dealer "ate" the last payment.) Some folks will give you the hard line of "if you intend to end it early, you shouldn't be leasing that car in the first place." Or, "if you're going to buy the car after the lease is up, finance it instead of leasing it." The bottom line of what works for you can be different than what may work for others. I think there is an implied factor in your logic--that you feel COMFORTABLE doing things your way. After all, next to the mortgage, a car payment is usually the next biggest expense. There is a lot to be said for piece of mind.

Noah

 

OMG I just read through my post and I had left out a sentence in one area. I edited it and now it makes more sense to what I meant. Anyone who read it - please reread the next to last paragraph again. Sorry about that.