[BrianL99]

Originally Posted by dewilson58

Please share the math.

1. Typically, more expensive/luxury vehicles (Lexus, i.e.) have higher re-sale values (read that as higher residual value). The "use portion" (MSRP minus Residual) is lower.

2. When you lease, you are not amortizing the entire vehicle, you're only amortizing the portion of the vehicle you're using. (Go back to my analogy of the "ice cube". You're only paying for the melting + "interest only" on the balance.

In some respects it's like an "interest only mortgage" + the "use portion". You are never paying down the principal (beyond the difference between purchase price & residual value).

Toyota Camry is often about the cheapest car to lease. Why? They hold their value. MSRP minus Residual is small. Some manufacturers "cheat" the system, by buying "insurance" for an artificially high residual value. Those situations are usually a great lease deal. VW used to do it all the time, with Jettas. Chrysler often does it with their SUV's.

BMW is the fastest depreciating brand in the USA (I drive one, not so smart). They're expensive to lease, because MSRP - Residual, is high.

[BrianL99]

.....

[dewilson58]

Originally Posted by BrianL99

1. Typically, more expensive/luxury vehicles (Lexus, i.e.) have higher re-sale values (read that as higher residual value). The "use portion" (MSRP minus Residual) is lower.

2. When you lease, you are not amortizing the entire vehicle, you're only amortizing the portion of the vehicle you're using. (Go back to my analogy of the "ice cube". You're only paying for the melting + "interest only" on the balance.

In some respects it's like an "interest only mortgage" + the "use portion". You are never paying down the principal (beyond the difference between purchase price & residual value).

Toyota Camry is often about the cheapest car to lease. Why? They hold their value. MSRP minus Residual is small. Some manufacturers "cheat" the system, by buying "insurance" for an artificially high residual value. Those situations are usually a great lease deal. VW used to do it all the time, with Jettas. Chrysler often does it with their SUV's.

BMW is the fastest depreciating brand in the USA (I drive one, not so smart). They're expensive to lease, because MSRP - Residual, is high.

That's not math................that's

"Toyota Camry is often about the cheapest car to lease. Why? They hold their value." Kinda funny statement...............They hold value for both lease & buy.

[BrianL99]

Originally Posted by dewilson58

That's not math................that's

"Toyota Camry is often about the cheapest car to lease. Why? They hold their value." Kinda funny statement...............They hold value for both lease & buy.

Which is exactly why they are generally cheap to lease.

I'll try it another way.

If you BUY an automobile, you buy the entire car and you own what's left of it, when you're done with it. You have some amount of equity, but you paid for it.

If you LEASE an automobile, you only "buy" what you're going to use. When you're done with it, it belongs to someone else. You have no equity, because you didn't pay for it.

If an automobile has a particularly high resale value (residual), you can often lease that car for a lower monthly payment than it would cost to buy it.

I could show you the math, but if you don't understand the basics concepts between "leasing" vs "buying", the math won't help.

[dewilson58]

Originally Posted by BrianL99

Which is exactly why they are generally cheap to lease.

I'll try it another way.

If you BUY an automobile, you buy the entire car and you own what's left of it, when you're done with it. You have some amount of equity, but you paid for it.

If you LEASE an automobile, you only "buy" what you're going to use. When you're done with it, it belongs to someone else. You have no equity, because you didn't pay for it.

If an automobile has a particularly high resale value (residual), you can often lease that car for a lower monthly payment than it would cost to buy it.

I could show you the math, but if you don't understand the basics concepts between "leasing" vs "buying", the math won't help.

These are cut & paste statements.

Facts: You "buy" the entire car with a lease (as with a purchase). Part of the lease financing costs are behind the scenes, not disclosed and is carried by the lessor.....but still paid by the lessee.

Net, net, net............the residual value for a leased auto is less than the resale value of the auto because the lessor include costs, including costs to get rid of the leased auto.............another undisclosed lease cost.

From a macro view, someone else (lessor) is not going to incur costs for the benefit of a lessee to use the auto. The lessor is making money on the lease a/k/a making money on the lessee. Non-disclosures and marketing makes lessee feel good, and people fall for it.

But, some enjoy the lease.

[BrianL99]

Originally Posted by dewilson58

These are cut & paste statements.

Facts: You "buy" the entire car with a lease (as with a purchase). Part of the lease financing costs are behind the scenes, not disclosed and is carried by the lessor.....but still paid by the lessee.

Incorrect.

"You" do not buy the whole car, the Leasing company does.


Sort of misleading.

".... but still paid by the Lessee". The Lessee re-pays the interest (as part of his payment) for the entire car, but does not amortize the entire car.


You must have found those quotes on "Leasing for Dummies" or one of those sites that doesn't want to confuse people with too many details.

[dewilson58]

Originally Posted by BrianL99

Incorrect.

"You" do not buy the whole car, the Leasing company does.


Sort of misleading.

".... but still paid by the Lessee". The Lessee pays the interest (as part of his payment) for the entire car, but does not amortize the entire car.


You must have found those quotes on "Leasing for Dummies" or one of those sites that doesn't want to confuse people with too many details.

Funny.....thinking they are paying the interest out of the goodness of their heart and not charging it one why or the other. Somebody fell for the slick marketing.

I enjoyed the laugh.

[CoachKandSportsguy]

Originally Posted by bragones

New technology is worth paying for. My new vehicle will pull itself over if it detects that I’ve become unconscious, it will correct me if I swerve, and it will stop me both forward or backwards if I’m about to crash into an obstacle or person. Thankfully, I haven’t needed those features but nice piece of mind to know they are there. With a 6 year warranty, hoping it won’t be junk in that time frame, so no repair worries.

Comfort from irrational fear sells well, doesn't it?

You haven't needed it, but on the very remote possibility that something MIGHT happen, so lets add all the battery draining tech and potential maintenance costs, in dash nav, but most people use their cell phone, auto emergency calling, etc, all bundled together to be sure to increase prices.

Yes, we had technology additional warranty coverage, and it was declined when a sensor stopped working, because they said we caused the sensor damage. But the car did get hit by lightning, and then the electronics all went to junk. However, there was one sensor that was blown up which they didn't fix, which was required to keep the AWD front and back spin rates proper. Car started eating tires, so we had to trade it in, turned to junk sooner than expected.

All cars are future junk, whether you own it or not. The key to inexpensive vehicle ownership is to own it outright for as long as possible, thereby incurring no incremental ownership cost, as insurance, fuel, maintenance is always being paid or consumed by driving.

good luck, and I don't assign any judgmental value on your particular car ownership, cheap, expensive, whatever, unless its a Tesla.

[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.

[BrianL99]

Originally Posted by dewilson58

Funny.....thinking they are paying the interest out of the goodness of their heart and not charging it one why or the other. Somebody fell for the slick marketing.

I enjoyed the laugh.

In case you haven't noticed, the sale and/or leasing of automobiles, is the Poster Child for "Smoke & Mirrors".

Although other industries are catching up since Consumer Laws were gutted 30 years ago, but I suspect the Auto industry will always maintain it's leadership in the "bait & switch" division.

[Bill14564]

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.

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

[JRcorvette]

Originally Posted by wayneman

On some of the forums i read a lot of villagers lease their vehicles. At our ages 60-? does it pay to lease over buying? Especially for people who have the money and wish to have a new vehicle every 2-3 yrs. I know financial advisors always stress not to have debt but, if you really don't care and have no heirs why not spend your money!!

Cars depreciate so much and so fast that if you want to drive something new or different every 2-3 years then Lease. But do your homework before you sign a lease. Not all leases are equal. There is a lot of information online that give you the ins and outs of leasing. Also it might be better to get a lease with little or no money down and have higher payments. If you decide to buy look around for something a year or two old with low miles because it has taken the depreciation hit!

[Marathon Man]

Every time I see an ad for new cars on TV, it tells me what I can lease it for and never what I can buy it for. Clearly the dealers want us to lease. That is why I buy.

I could do the math, but I'm sticking with the above.

[dewilson58]

Originally Posted by Bill14564

Lease:
- $5,000 down (I have never leased but I assume you don't get this back)

Downpayment, Non-refundable.

[retiredguy123]

Originally Posted by Bill14564

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

A few assumptions that I don't agree with. First, you are assuming that the initial value of the vehicle is $50K for leasing or buying. But, as a cash buyer who is willing to walk out the door, I expect to get a better price than someone who is leasing. Also, I never trade in a vehicle when buying. If you maintain a vehicle in tip top condition, you can sell it to a private buyer for more money than the trade-in value. Also, what do you do when the dealer wants to discount the residual value of a leased vehicle due to nitpicking defects and charge you for them?