Quote:
Originally Posted by retiredguy123
As I understand it, when you buy a car, you make a down payment and pay interest on the remaining balance, if there is a balance. But, when you lease a car, there is no down payment or it is reduced, so, there is more risk to the dealer. The person who is leasing the car pays more because there is more risk of loss to the dealer. That risk is not free. That is why leasing is the more expensive option.
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Depending on what you want at the end of the lease period, leasing could save money.
For a $50,000 vehicle (easy, round number)
Lease:
- $5,000 down (I have never leased but I assume you don't get this back)
- $500/month for 36 months = $18,000
- $23,000 total and you walk away from the car
Buy:
- $10,000 down
- $940/month (this is the pmt for a 48 month loan) -> $34,000 after 36 months
- $44,000 total but ...
--- $11,000 balance still needs to be paid
--- $23,000 trade-in value back into your pocket
- $32,000 total and you walk away from the car
Buy with cash: $50,000 cash - $23,000 trade-in = $27,000 total and you walk away.
Of course, different down payments, interest rates, and loan periods change the calculations.
This assumes you walk away from the vehicle at the end of 36 months. If on the other hand you keep the vehicle then eventually the loan is paid off, your monthly cost drops to $0, and buying is less expensive.
A new car every three years - leasing is cheaper
Keep a car for five years - buying is cheaper