I am planning on leasing or financing an 05 G35 sedan. My father suggested that I should lease the vehicle to see if the car runs great, and if at the end of the lease it runs smoothly then I should refinance and buy it, then I would pay less interest instead of just financing the car from the beginning. He said if you finance from the beginning then you are paying interest on the invoice price rather than when you lease it hypothetical example of what I mean (Agreed price $32000 36 months, the price drops for example 12K after 36 months then does that mean if I finance it at the end I pay interest on $20000?) I need help, hopefully one of you is an expert on this topic and you can suggest to me what should I do.

 

This would make sense, except for the fact that leases include something called a "money factor" - this money factor is basically an interest rate. It is a charge for driving the car during the lease - you pay for the use of the car (whatever price you negotiate minus the residual) plus the money factor rate.

You should really only lease if you plan on keeping a car for a very short time (24 to maybe 36 months) - this is because with a lease you can turn in the car at the end of the lease, and not be upside down on a loan (i.e. you owe more than the car is worth). If you keep the car longer, you typically have equity in the car from owing less on the car than it is worth.

-Rich

 

One last thing - you also have a "buyout" at the end of a lease - this is what you would pay for the car, and is typically figured by the residual (i.e. you don't get back any of the money that was required due to the money factor which is why I likened it to an interest rate).

-Rich

 

thanx alot for the quick advices Rich & Nuke

 

To give you a good advice, I would have to know more about your driving habits and your past auto history, length of terms etc. Leasing has it's place and I am now on my 5th. I was a finance mgr @ a dealership. i know te pro's and cons.

 

Well my credit score is outstanding at 743 points. I dont think I will drive over 10K a year. Right now we have a vehicle an 02 trailblazer that we leased brand new back in 02 for 0 down & $325 a month with tax through USBANK for 5 years and that makes it untill Jan. 2007. The maximum annual mileage is 12K but we barely reach 8K a year. The car is under my dads name so it doesnt impact me to have a leased vehicle. He regrets signing a 5 year contract for a 30K car cause it is a gas guzzler so it will be his first and last American made vehicle. Any suggestions GT?

 

Auto Lease is essentially you paying a monthly payment on the estimated depreciation of a car for the length of the lease. The money factor boils down to the finance rate as someone else pointed out.

One lease benefit that not everyone needs be concerned with is the taxes. If you lease the car and your town/state taxes it, lease would mean pay taxes on the monthly payment amount, not the regular amount of car tax. For my home state of CT, this was a BIG factor. A 35-40K G35x (my car) would be significantly more in taxes per month than my insurance costs (~$1,800+/yr).

Other than that, leasing can be had from many banks and the car dealers usually resell them anyways, so shop around banks and get the best lease numbers, then go find a car you like and negotiate purchase price normally. Always go to the dealer at the end of the month because they are almost always willing to deal to move "one more unit" by the end of that month.

Pete

 

I wouldn't suggest leasing the car if you plan on buying the car at the end of the lease, you will obviously spend more money that way.........but I would suggest leasing a car if you get tired of cars after about 3 years as I do. If you like to keep cars longer then you will be better off financing the car as you will spend less money in the long run..

I prefer to lease because I get tired of cars and I always want something new with a warranty, but to each his own.

 

Apologies in advance for the length..
Educated Opinions:
Pros:
-Leasing is the least expensive way to drive a car.
-You pay for your use of the vehicle and no more.
-Leasing is better for business reasons if you write off your vehicle for tax purposes.
-Leasing will usually yield a lower payment if you want to maintain a budget.
-Leasing is usually for a shorter term and affords you to change up more often.
-Leaves you in a good positioYour credit score should enable you to chose from
-You only pay sales tax as you go. If you do not buy out the lease, you do not have to pay the sales tax on the residual. In CA, my sales tax is 8.25%.
..there are more pros
Cons:
-Mileage restraints
-You will likely never be in a positive equity position thru out the term. We you are done with the lease you end up w/ nothing.
- Many lenders require higher liability insurance coverage, your insurance premiums wil go up a little.

There are web sites to learn more about leasing and different programs to shop leases. Usually though, the manufacturees bank will have the most aggressive programs. I Leased mine thru Infiniti Financial Svcs.

Use your Trailblazer lease for reference to the following.
A)Capitalized cost is basically the sales price which is negotiable.
B)Combine your downpayment + sum of all monthly payments and subtract it from your CC and you have C) the residual/buyout.
B) The sum of all payments, makes up for 2 things. Depreciation and leases charges. Lease charges include; the cost of money or interest, lender's insurance costs ie. gap insurance and residual insurance.
C) The residual is set by the lender interpreted as a % of MSRP. This can fluctuate with miles/yr as written in your lease.
So for example, if your future G35 has a MSRP of $36,000 and on a 39mo lease the residual is 60% the means that you will pay 40% ($14,400) in depreciation thru out the term and have a residual of 60% ($21,600). FYI, If you negotiate and get the car for $500 over invoice (check Edmunds.com for realistic amounts) say $32,400, C) will still equal $21,600, but B) will go down to around $10,800, thus your payments go down.
The G35 has had terrific resale values, so the lenders have upped the resudual %. And so we that lease our cars are driving them for little payments.

So my advice parallels what others have written. If you intend to keep the car for > 4 or 5 yrs, then purchase it and shop financing b4 you go to the dealer. Extend the warranty to last at least as long as you will be paying for it. Factory is I think 4yr/60K.
If the car might not meet future needs or you are not sure if you want to keep the car for over 3 1/2 yrs then lease it.
Ah... there is so much more to say, if you want more , let's go off line. email me gticketdriver@yahoo.com

Good luck and the G35 is a great choice period.

 

Thanks alot for the helpful tips especially GT now I know which steps to take and BTW I also visited edmunds.com and did a calculation Lease vs Buy and this is what I came up with which is not bad. The APR rate even with 4.4% will save me money in the long run.

 

It's always amazed me that people who could afford to do otherwise would lease? Does anybody know how many times a week I would get phone calls like " Hi, I wanna buy an Infiniti, BUT I'm leasing a "blah, blah," and I got two years to go...can you help me?"....or..."Hi, I wanna buy an Infiniti, but I'm leasing a "blah, blah"and I'm twenty thousand over the allowed mileage...can you help me?" The answer to both is a resounding " bend over and spread em' Jerky!" When you "buy" a car it's done so at a discounted price..minus trade plus tax, plus plates/reg., and minus your down stroke (payment). Against your 'bottom line you apply your interest by number. of months your financing for...and viola'....you're done. Now let's say two years down the road you don't like it any more and, for whatever reason, you wanna get rid of it .....NO SWEAT (provided it's worth as much as you owe). After all....IT"S YOURS to do whatever you want with!!!!!! Trade it, sell it, or whatever.....! Now about leasing...HA! Now let's say "Joe Blow" comes in and wants to lease....cool no problem. He doesn't have a lot to put down, but wants low payments (Translation...the guy's not normally somebody who could 'afford' to "BUY" the car ...so this way, with a little down stroke, it looks like he's of "substance" and CAN afford it... by way of 'smoke and mirrors'...in other words...he looks like he's 'something' he's not, and he's basically a fraud) So, the dealer figures out the "CAP COST" (selling price) applies the "RESIDUAL" (estimated value of the vehicle at the lease end), multiplies that by the "MONEY FACTOR" (the prevailing interest rate, offered by whatever financial institute doing the lease, against the number of months of the lease), and finally....last, but not least... the tax you pay MONTHLY. Okay...think you're done? NOT.....Now ya gotta,most likely, come up with the "security deposit" (first and last monthly payment w/tax), the "conception fee" (charge for checking your credit and doing the paperwork) and last of all the plate and reg. fees (yeah, ya still gotta pay for that). Don't forget one other important issue.....'GAP INSURANCE'. This is important if your rental car (lol...I mean your lease car) gets in an accident and gets 'totaled'. Well, your insurance will ONLY pay for the estimated value of the vehicle at the time of the accident...NOT for what the value of the vehicle (payments included!!!!) is to the lease company...hence "THE GAP"! So Einstein,....you're responsible for that difference (gap) legally. It can be thousand and thousands of dollars! (what the amount would've been that you put down if you financed (bought) the vehicle to begin with. Good deal huh? Okay, let's say you didn't total your car, but just got tired of it in two years. Or, you find you can't afford the payments for some reason you didn't count on when you rented (leased ) your car to begin with and wanna get out of it ....NO PROBLEM CLEM.... you just gotta pay the WHOLE G-DAMN THING OFF !!!! Cool huh? OR, let's say you do make all your payments BUT, you put on an extra 20,000 miles that you didn't count on (via job change, ya moved, or whatever)...let's see... ya owe an extra ...$3,000.00 at turn in time on top of the fines for "excessive" wear and tear. Good frigg'n deal huh? Always seems like a "no brainer" to me, but people still choose to rent..lease their cars? I just say if ya can't afford to buy it ....DON"T.....Thank you very much, JBX has left the Forum

 

The mistake most people make in figuring out the cost of a car is that use the purchase price and look no further. The cost of the car (forgetting about gas, repairs etc) is in actuality the initial price of the car less what you get back in resale, plus the loss of interest income (less the tax you would pay on the interest income) for the money you outlayed. I would measue that projected cost against the number of lease payments for the same period (plus any costs like mileage penalty, bank fees, etc). The positives for leasing are the convenience of not having to deal with resale, and somehow when you take a large sum of money out of the bank, it is never really fully replaced. If you are financing, use the same equation but add in the finance charges, and adjust the loss of interest income.

I personally am going to go down the financing route-10K down, finance 25K over 60 mos. which will leave me with around a 470 a mo. payment which I am guessing would be in the neighborhood of a lease payment. Now I have freedom to get rid of the car whenever I choose as I just pay off the loan balance with the proceeds and my balance should exceed the 10K I initially laid out.

I think this is solid practical advice.

 

Reread my post and my last statement "balance should exceed the 10K I initially layed out" could only be accurate in like the 4th or 5th yr of ownership or when loan balance is like 5K and I can get back 15K in resale. So therefore I am rescinding my last statement as I don't really think that a 4 or 5 yr old G35's resale would exceed the loan balance plus 10K if you put normal mileage on the car. But it will exceed the loan balance and give me some equity for my next car purchase.

 

It's a grey issue -- by no means black and white. The majority of people who buy their car (vs. lease) are upside down for at least the first five years. I have found gap insurance to be included in many (all?) leases these days, so it's not an incremental cost for the most part. In addition, there are many financial minds out there that would say that to finance a depreciating asset (like a car) is not a smart move, which is why paying only for the portion of the depreciation you utlize (via a lease) is the future of car buying. Who knows. For me, I've found that I can "trade in" my leased car on a new one with little $$ penalty. This is primarily due to the fact that I only lease cars with high residuals. It's what I'm trying to do right now with my '03 G - my pay-off is $2K off from my trade value, at lease for the moment. Dealer doesn't care whether your trade is leased or financed - it's whether the trade value is sufficient to "do the deal." The only major strike against leasing is in those states where you are taxed on the total sell price of the car, as opposed to taxation on the payment balance only. I'm in Illinois, where I'm hit with tax on the whole, which adds a significant cost to the transaction.