I've leased a 2 Honda Accord LX this decade for $1,500 down and $169/month and nothing down and $199/month.
Got to drive a new car for a couple years with a payment that is half of a purchase payment. It might be dumb but it worked okay for me.
good chatter thx
Steve_Jones said:Duke said:parker said:Duke said:parker said:I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
It's like renting instead of buying a house.
Leasing a vehicle makes sense under 1 of 2 conditions:
- You're the kind of person who wants a new car every 2-3 years, no matter what.
- You can lease it through a business and write it off your taxes.
Under those circumstances leasing makes financial sense.
1. Is just dumb unless you just make so much money that it doesn't matter to you.
2. I don't get this either and I do own a business. An expense is still an expense. So you spend $20,000 to save $4,000 in taxes. That's still $16,000 less income than if you'd paid the taxes.
It's $16,000 less income than if you'd paid the taxes... except how much of that $16,000 would you have spent on a owning a vehicle over the same timeframe as the lease? You can't just ignore that cost.
Actually if you do it right you can make money on a business lease. Assume it's a $400 lease payment, 3 years, 45k miles. Each year you spend $4800 in payments but can deduct $8400 as a mileage expense.
I spend $0 in payments and deduct about $10,000 in mileage expenses.
parker said:Steve_Jones said:Duke said:parker said:Duke said:parker said:I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
It's like renting instead of buying a house.
Leasing a vehicle makes sense under 1 of 2 conditions:
- You're the kind of person who wants a new car every 2-3 years, no matter what.
- You can lease it through a business and write it off your taxes.
Under those circumstances leasing makes financial sense.
1. Is just dumb unless you just make so much money that it doesn't matter to you.
2. I don't get this either and I do own a business. An expense is still an expense. So you spend $20,000 to save $4,000 in taxes. That's still $16,000 less income than if you'd paid the taxes.
It's $16,000 less income than if you'd paid the taxes... except how much of that $16,000 would you have spent on a owning a vehicle over the same timeframe as the lease? You can't just ignore that cost.
Actually if you do it right you can make money on a business lease. Assume it's a $400 lease payment, 3 years, 45k miles. Each year you spend $4800 in payments but can deduct $8400 as a mileage expense.
I spend $0 in payments and deduct about $10,000 in mileage expenses.
Did you buy the car? I'm trying to figure where you're getting new cars for free.
In reply to yupididit :
I've bought two new cars in my life. 1998 Neon R/T that I drove to 450,000 miles and a 2009 Cobalt SS turbo that I ran to over 250,000 miles. My current business vehicle is a 1998 4Runner that I bought for $5000 in 2018. I've put just shy of 100,000 miles on it.
My point is that at the end of a lease you don't have anything, that money is gone and you have literally nothing. If I finance a car, at the end of the payment period I have a car. I can either continue to drive it with no more payments (which is what I do) or sell it and have money in my pocket.
My FR-S is paid off. I have zero debt except for the mortgage on my home. How would that work with a lease? Emotionally if someone just wants a new car all the time and is willing to pay, then go for it. It just doesn't make financial sense. Earlier someone mentioned being on fixed income. If I'm on a fixed income I certainly don't want to be locked into a payment forever.
In reply to parker :
Oh okay. Some people feel more secure when driving a new car daily. And paying for the security is financially sensible.
In reply to parker :
You are not NOT making sense. Different people value different things. New car style vs no payments. Warranty vs maintenance costs.
In reply to parker :
You are right about it being cheaper to run an old car than a new one. It has to do with value. The value of time, of security. I have a 2021 CRV (leased) that I know I can go out and push the button and drive it anywhere worry free. I have a 95 suburban that I paid in full the day I got it. It's been trouble free and never left me anywhere. I have also fixed a ton of stuff on it and when I take it on a long trip I am always making a back up plan in my mind. I can send my wife and kids off to anyplace on that CRV and not worry about it making it there. That's worth a payment to me (and I guess worth the note that I could just buy it if I wanted to). But I live in upstate NY, by the time I got done making payments on that car it's on the downward part of its life. I have had 3 in a row without any down payment or increase in payment so I keep getting a new vehicle for the same $ out of pocket. If I bought the first one I would now be driving a 7 year old CRV that would be beat (upstate NY) and great I own it but what's that worth?
I guess the point of the thread is why aren't lease prices dropping since the residual value is so high. I think it's 2 reasons. 1- stated earlier the actuaries think it's coming back down. 2- it's supply and demand and psychological, people are used to a certain payment, there isn't a reason to lower the payment because there is low supply and high demand. To make the math work and the lease payments stay the same the residual has to be kept low. I suspect a lot of lemmings just give the car back at the end of the lease regardless of the residual versus current market so the leasing company (or manufacturer) makes out because most people give the car back anyway.
parker said:In reply to yupididit :
I've bought two new cars in my life. 1998 Neon R/T that I drove to 450,000 miles and a 2009 Cobalt SS turbo that I ran to over 250,000 miles. My current business vehicle is a 1998 4Runner that I bought for $5000 in 2018. I've put just shy of 100,000 miles on it.
My point is that at the end of a lease you don't have anything, that money is gone and you have literally nothing. If I finance a car, at the end of the payment period I have a car. I can either continue to drive it with no more payments (which is what I do) or sell it and have money in my pocket.
My FR-S is paid off. I have zero debt except for the mortgage on my home. How would that work with a lease? Emotionally if someone just wants a new car all the time and is willing to pay, then go for it. It just doesn't make financial sense. Earlier someone mentioned being on fixed income. If I'm on a fixed income I certainly don't want to be locked into a payment forever.
I lease, I currently have two cars (one of mine and the other is my wife's) that are leased. 3 years ago I leased my first car. The math worked out like this. I was going to buy a 3 year old sedan CPO and keep it for 6 years like I had done with my previous car. The anticipated depreciation, maintenance, interest paid on the loan, etc. compared to the lease payments (plus down payments, disposition fees, etc.) was around $10k over 6 years. For that $10k ($1667/yr) I get to always drive two new cars instead of one used car; I have the latest safety and tech refreshed every 3 years; a car that is under factory warranty and supported by dealerships that include service loaners, etc. Finally, I get a thrill out of shopping for a new car, I get to do it more often.
In reply to parker :
You and your twin brother go in to get matching F150s. His is black and yours is blue, but they are the same truck other than color. They each sell for $50,000.
You buy. With your excellent credit and a down payment of $10,000 (assuming a rough out the door of $55,000 including sales tax on the whole price, registration, fees), you are financing $45,000. On a 60 month note, you're paying around $800 per month at 2.5% interest.
Your brother leases. He drives 12k miles per year, and does a 36 month lease. Ford says the F150 has a 60% residual with 12k at 3 years old = $30,000. Your brother borrows the difference, plus taxes on only the part he is using, registration and fees. Call it $52,000 with everything included - $30,000 residual = $22,000 x interest at 36 payments. He puts $0 out of pocket, and assuming a 2.5% interest rate is paying around $635 per month.
3 years into a 5 year note you owe about $18,000. Plus you put $10,000 cash down upon which you have earned nothing (total = $28,000 plus lost interest income). 3 years in he can buy his for $30,000. You would think he was worse off, but keep in mind his payment was also $165/mo cheaper netting him nearly $6000 in lower payments over the same term.
Net effect, he is better off. This is how and why leasing works.
Why would manufacturers give the advantage to lessees? So they have a nice renewable source of clean use vehicle inventory for dealers to sell.
I've worked in both auto retail and now auto lending for a total of 21 years. My wife's Wrangler is leased for exactly the reasons above.
In reply to parker :
So in addition to the $5k paid for the 4 runner, what have you spent on maintenance and repairs? Purchase price, maintenance, and repair have to all be considered if the comparison is going to even come close to being apples to apples.
As for the finance aspect related to fixed income, if someone has limited funds and little/no savings then a lease can provide a fixed payment that can be budgeted for every month. They then have reliable transportation to get to work and no risk of having to pay for unexpected repairs since they will always be driving a vehicle that is under warranty. The maintenance will most likely just be oil changes, so no big ticket expenses like brake jobs or tires.
It really creates a low risk situation, while it does lock them into what will essentially be a perpetual monthly payment, it also protects them from catastrophic failures and unexpected expenses that could reek havoc on limited finances.
parker said:My point is that at the end of a lease you don't have anything, that money is gone and you have literally nothing. If I finance a car, at the end of the payment period I have a car. I can either continue to drive it with no more payments (which is what I do) or sell it and have money in my pocket.
While this is true, assuming the deals are equal (same interest rate, rebates, etc) you didn't pay as much to lease the car as you would have to purchase it, and the difference is exactly what the car was projected to be worth when the lease was over.
case 1: you finance a car. Car is $30K, you pay $6K in interest (*) on a 3 year loan with a payment of $1000/month. After three years you own the car and let's say it's worth $15K.
case 2: you lease the same car. Car is $30K, you take a 3 year lease with a residual of $15K. You pay the same $6K (because you're borrowing the same amount of money for the same amount of time), so you lease it with a monthly payment of $583. After three years you give the car back.
So yes, you don't own the car at the end, but that's because you didn't have to pay for it.
This analysis is different from Loweguy5's because he's assuming a more normal 5 year loan, whereas I'm selecting one that's the same length as the lease.
(*) this works out to about a 12% interest rate -- not realistic at the moment, but I picked it just to make the math easy and it doesn't really make any difference in the end)
In reply to Loweguy5 (Forum Supporter) :
Doesn't every state have their own tax laws on leased cars?
In reply to parker :
When you lease a car, you're not paying the same payments as if you were buying it.
If you get a $45k car that has an estimated $30k residual value when the lease term is up, you are only paying for the $15k that you are "using". With an open end lease, you have the option of buying (a thing many people are doing right now), with a closed end lease, you walk away.
It's no different than buying the car for $45k with a $30k down payment, really, except the down payment is the car, which they get back.
In reply to parker :
Why do you need to have something? What makes that worth more? Even when you buy a car, there's a cost per mile that is factored in.
For you- no, leasing makes no sense- but not many people are willing to buy a car and run it until it's dead. And using a used car as an example of why leasing is bad is faulted- since someone has to buy that car new at some point.
Again, the details are in the math and being honest with yourself- not just "I don't have anything" reaction.
Just using the basics of driving a car- we've leased the cheapest lease we could for a long time- pretty much under $200/mo. Over a decade, that's $24,000. All of those cars had new prices of over $30,000. So if the car is not worth at least $6000 after a decade, leasing has been a better value to us. And that ignores the 5-7 years you have to pay for repairs all on your own (and the new tires that you buy once or twice).
One factor that is good for owning a car until it's dead if insurance.
Paying for transportation isn't just about having a car in hand.
That's not to say that leasing isn't abused- when you see people lease cars for prices that they can only afford to buy it, just to get something special- that's where leasing can really get someone in trouble. A $400 new car payment may get you an Edge or a $400 lease payment may get you a Mercedes. If all you can afford is $400/mo, leasing up to that limit is a very bad idea.
If leases include repairs and tires then I can kind of see it. I just enjoy not having a payment forever.
That payment pays for a hell of a lot of maintenance and repairs. Knock on wood, I've never had a huge repair on anything except the 1987 4Runner I had that went through 3 supposedly indestructible 22RE's. The 1998 4Runner has needed an alternator (which cost less than $200 and I changed in 10 minutes) and tires. The only car that ever left me stranded besides the 1st gen 4Runner was the Cobalt SS that I bought new. The radiator hangs low and it smacked the ground on an unexpected dip. Since it was a new, special model nobody had a radiator and I got to spend three extra days in Socorro, New Mexico waiting for one to be shipped. In 110,000 miles the FR-S has needed nothing but tires, oil and a spark plug change. The spark plug would probably be pricey if you paid someone to do it. I don't know as necessity from when I was young taught me to do everything myself.
Why lease out a car for $200 per month when you can sell it for $30,000 cash right now? Cheap leases are there to move metal, and there's no need to do that now, it leaves the lot without any persuasion.
In reply to parker :
Leases are 2 or 3 years. And 10.5-15k miles per year. So the most miles a lease will drive is 45k miles. Not many cars wear their tires out that fast for nominal use. I got about that out of my Miata over it's 200k miles. As for repairs, warrantees are about 36 months- so if something breaks, it's covered.
Also, one should never extrapolate their ability to fix stuff to the general public. Let alone change their own oil. (which I've not done on a new car for a long time). There are people who are like you who should not touch their cars to keep them going- which is evidenced by the number of PO's are evil and terrible posts that we have here.
chaparral said:Why lease out a car for $200 per month when you can sell it for $30,000 cash right now? Cheap leases are there to move metal, and there's no need to do that now, it leaves the lot without any persuasion.
OEM's see the ability to move stuff easier. Dealers see the ability to sell a car twice, and get profit twice on the same vehicle. Math works for them, too.
In reply to parker :
Your examples and logic aren't based on buying a new car and having it in warranty. Nor does it align with the average consumer. I would never have time to maintain my car and my wife's car myself. I rather drop them off at the dealer and get an oil change and pick it up when I have the time. I have some brakes and shocks they need to go on my Expedition and I have to thread a needle to find time to do it myself. I might just drop it off and get it done somewhere.
My projects and toys I work on myself but I go weeks and months before I work on them. It took me a year to reinstall the supercharger on my Jaguar.
In reply to yupididit :
You are correct. I averaged about 50,000 miles per year on my new cars. Warranty didn't last long. Fortunately I maintain my vehicles and breakdowns are virtually nil. Most of my life I could not afford to pay someone to work on my stuff. I had to learn to do it myself. Now I don't trust someone else to do it right. And most stuff is much quicker for me to do myself than schedule a time to drop off and pick up. I can change my oil in less than 10 minutes. I hate getting new tires mounted because of the time involved.
In reply to parker :
I can do most things myself. When I was younger I couldn't afford to have things done but now I can. If I can afford to have toys then I can afford a few hundred bucks to have someone do work that I don't have time for on my daily drivers. I honestly hate working on my dd's and love working on my toys lol
I put 30k miles on my Expedition in the last 11 months lol. My wife's accord is only 2.5 years old and she just hit 30k miles now she wants one them nice volvos lol.
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