I have never leased a car because I usually keep them for 6-8 years.

When I had my G in for service, I listened to a salesman explain leasing to a guy looking at a M45. I think he said they were using a 59% residual value but i didn't catch the length it applied to.

 

You make it sound as though selling a leased vehicle is as easy as selling one that you own. In order for selling a leased vehicle to make any financial sense, you've got to execute the sale at the end of the lease. Otherwise you'll have to pay penalities for early termination of your lease. Also, believe it or not, but in some states they make you pay a sales tax on the leased vehicle and then another sales tax on the residual value if you decide to buy the leased vehicle. MD use to be that way up until about four years ago.

So the guy who sells a leased car has a very small window to sell his car. I know of one case where a friend of mine tried to sell his leased Porsche, but he wasn't successful. He had a couple of offers, but wasn't able to sell it for over the residual price, despite the fact that he had some upgrades on his car. So prior to returning his leased car he had to replace his upgraded wheels with the OEMs and he had to remove a few performance mods.

 

I guess not all of us can be loaded as you. To some Few hunrded dollars means a lot and to some not. I can understand 20-50 dollar difference, yes that number is most likely not of a factor. But few hundred dollars a month means that extra vacation or an extra few thousand towards savings. Few hundred means you can either go get M3 or Civic.
I'm sorry but i just dont see your logic on that from my stand point of view.

 

I have it risk-laddered with an AMEX broker I've had for 5 years. He's been as high as 9%, but I haven't had a year under 5%. Again, MY situation, I had to weigh the high probablity of a continued gain of ~5% vs. investing in a guaranteed -15% return.
Money factor was something like .0012 through Wells Fargo. They were cheaper than IFS because I've been with Wells for 15 years, auto-deposit, auto-deduct, etc... Comparing a finance rate to a lease rate is not valid as the principal is different. I looked at $ to $ at a given time.Again, MY situation. I make significantly more than my wife, so our tax bracket gets watered down. Yeah, taxes stink, but the tax on interest earned is better than paying interest on a rapidly depreciating asset IMO. Risk is already addressed above.

You asked for a "Hypothetical example," and I gave you a specific one which you now try to apply to everyone as in, "Most of us will lose at least 40% of the 5% after taxes..." The only point I was trying to make, as objectively as possible, is there are cases where it does make sense. If it didn't, I wouldn't have done it. I've earned every penny I have, which I spend, save, and invest as judiciously as I can. That said, a this car is a luxury item in excess of my need for a vehicle. To that end, we are all earning interest every day we drive. I enjoy the hell out of it and am certain you do the same .

 

Macgyver: Thanks for the reply. I only financed a car on one occassion and that happened to be the last car I bought: an Audi TT. The reason is that Audi offered a 1.9%/2 year finance rate and at that time the no risk part of my portfollio was paying around 4%. So it was a no brainer. Otherwise I always pay cash. When I bought my Porsche 996, many of my friends thought that I was crazy to have all of that money invested in a rapidly depreciating asset. After the 2001 stock market debacle however, they saw that my strategy wasn't as stupid as they thought.

BTW the money factor you specified comes out to around 2.9%. That is way, way below anything that was ever quoted to me.The best I was ever offered was a little over 6%.

 

I'm with clinty, paying cash for the last few cars I've bought. The only thing I find financially worse than buying a depreciating asset is borrowing money and paying interest to do it (0% financing would entice me though). Instead of analyzing risk vs. buy, I encourage everyone to do a future value analysis on your car payments. See how much $$ you'd have at age 55 or 60 if you didn't make big monthly car payments (as one now in that age range, I wish I would have done it 30 years ago when I was buying, and financing, a car every 2 years). Then see what you'd have if you scaled back to lower payments or cars you could pay cash for, and then held your cars longer. The numbers can get pretty big (e.g., $100/month invested at 8%, the low end of the long term stock market average, for 30 years yields $150,000).

Everyone has to decide what is important to themselves, how much they're willing to spend on a car, and what they're willing to sacrifice to get it. I just think everyone needs to look at as many facts as possible facts before making those decisions.

Let the flaming begin.

 

jgainnm: No I think you've got it right. The problem is when we were in our 20s our mindset is a lot different than what it is when we are in our late 40s+. I see some of the young guys where I work drive around in leased E46 M3s with lease payments aprroaching $800 a month, and I know that their salaries are in the $60 - $70K range. If they leased a Toyota Corolla for less than $200 a month, and invested the remaining $500+ for around 25 years in some stock index fund, you'd be talking about some serious money.

But I have to confess when I was 25 years old, I focussed on the here and now and not how much money I might have when I reached 55. So driving some hot car was far more appealing to me when I was 25, than the concept of having a lot of money in 30 years if I drove something inexpensive.

 

I agree with you old timers Younger people are not concerned with saving. We all want the best and we could care less how much we have saved. Poor judgement on most but thats the perks of being young and stupid. DOnt get me wrong, some think differently. Personally i think when you get into your mid, late 20s you start thinking differently.
You tend to look at what is apealing to you. Thats why all these guys at your company driving around in m3's, i'm sure they also have their parents money to fall back on.
I started investing money about 4 yrs ago and now i think about investing even more in order to save up for the future. Granted there are things i want now, that i know i will never buy in the future because my age, gf/wife will not allow me. Its all about sacraficing one thing for another. Just have to face that you will not be able to have everythig in life.

I think if you do everyuthing in moderation you do ok. spend a little, save a little live a little. To much of one thing can be bad.

 

Not all things can be bought in cash. Sometimes its just better of financing. You still need to build up your credit history.

Beside, most people dont want to live for the future they want to live for now. You never know what can happen tomm or the day after. I would not want to save every penny today, because i still want to have some sort of a lifestyle. I'm not saying i'm spending crazy money on going out or on gadgets/toys, but i try to keep myself happy and still save as much as i can.

 

2 things:

1. I see leasing like insurance on the blackjack table. If they are offering it, its only b/c it benefits them. In this case, leasing benefits the stealers b/c, in the end, they make more money on the same car. Good for stealers = Bad for purchaser.

2. I couldn't stand driving a car that wasn't mine. Always looking at wear and tear and wondering how the stealer will interpret it. Always looking at my mileage. Most people I know who lease have to garage the car the last few months of the lease or else pay those hefty mileage fees.

So...unless you are for sure keeping the car for only 3 years and don't plan on moddig it...then leasing may be for you. Otherwise, buy it and enjoy YOUR car.

Flame away

 

To say that one way (lease vs. buy) is better than another shows ignorance.

The big difference for me was that I lease this to my business. I can write off the entire cost of the lease against my business as opposed to depreciating the car over 7 years according to the government MACRS schedule. If I bought the car, I would only have been able to write off a portion of the car according to IRS depreciation schedule. Regardless of the true residual value of the car at that time. With a Lease, the entire payment gets written off. I could have even taken the $.405 per mile allowance, but that even saves me less.

Also, if you buy a $20000 car in the business name, and the car depreciates to $10000K both in base residual value and depreciation schedule according to the IRS, you are screwed when you sell it. If you can get $12000 for the car, you can still only sell the vehicle for the base residual value or you have to refile your taxes depreciated on the car. Unless you want an audit.

Plus, in some states, you must carry the maximum level of insurance 250/500 for a lease and much lower levels for a purchase 30/60. The premium on the insurance alone can factor into the buy vs. lease decision.

Lease vs. Buy depends on individual circumstances.

 

This opinion was stated so often I got mouse cramps from quoting it. Anyone want to offer a theory or evidence that this is in any way correct? The only advantage I can think of is that someone else sells the car for you.

 

It sounds like you have made some very wise decisions and managed to come out ahead. I'm not opposed to a bank or a dealer making money, it's business after all, but having your pants pulled to your ankles (Or feeling like it) sucks no matter what. Here's to fending that off .

Yeah, I was a VPP customer, so even for a lease, IFS was supposed to cut some kind of deal. Wells blew them out ot the water by about $45 a month. The down side is a $475 turn-in, but still in the + for me.

Take care .