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At what point does leasing a car become more economically sound than financing?

SunnyD

SunnyD

Belgian Waffler
What criteria makes leasing a vehicle a more attractive option than financing a car? Ever.

I r 😕
 
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People who live close to work and/or in a densely populated city don't drive as often or as far. In this case leasing works out very well. There's no way in hell that'd work for me as I've put 31k miles on mine in ~1.5 years.
 
monthly lease expense + monthly maintenance expense + time value of money + tax benefits from monthly lease expense < monthly car payment + monthly maintenance expense + tax benefits from depreciation expense - (amortized gain on sale of vehicle)


IMO
 
If you are in the habit of selling your car every 3 years for a new one it makes more financial sense. Of course, it makes the most sense to keep your car for a long time as depreciation flattens out.

It also makes sense if you own a business. You can write off the lease as an expense rather than depreciate a vehicle you purchased.
 
Leasing is the same as renting; you have a pile of receipts afterwards that paid for the vehicle for someone else.

Lease for 3 years; spend close to the same for payments; smaller deposit up front; and repeat the cycle again. with leasing as previously stated, you have to be concerned about mileage. That could easily cost you $10-15 day depending on driving habits for the last 6 months of a lease.


After 6 years, you still have nothing from leasing.
After financing; you now have a car with no payments.


Leasing is only good for an individual that can write off the payments/costs against income or gets reimbursed for mileage.
 
How often do you get a new car on a buy? calculate out the present disconted value of money for that period in car payments (youll probably have more zeros the longer it is, also inclde what you'd be able to sell it for) vs the present discounted value of leasing a series of the same vehicle over he same time period. Keep in mind lease terms might not be so good later so thats a risk you take. Also keep in mind maintenance difference between lease and buy and calculate accordingly.
 
Apple Of Sodom said:
If you are in the habit of selling your car every 3 years for a new one it makes more financial sense. Of course, it makes the most sense to keep your car for a long time as depreciation flattens out.
Click to expand...

I would argue that the time period may have extended to 5 years, as lease terms have gotten much better in recent years.

I'm still a fan of "buy and hold", or "buy used and hold" strategies for cars.
 
Apple Of Sodom said:
If you are in the habit of selling your car every 3 years for a new one it makes more financial sense. Of course, it makes the most sense to keep your car for a long time as depreciation flattens out.

It also makes sense if you own a business. You can write off the lease as an expense rather than depreciate a vehicle you purchased.
Click to expand...

no it doesn't. i did the math when i bought a car this past year and after 3 years if it would have cost me significantly more to lease a car than it would have had i purchased the car and sold it. but that also is taking into consideration that you can estimate the value of the car in 3 years.

basically a lease never makes financial sense. it is more of a convenience for those who have the luxury of being able to lease. but if those people who do like the convenience, had instead purchased and sold the car, they would have made out in the long run.

leasing is also a way that people can drive cars they can't financially afford to purchase. but just because you do lease does not mean you can't afford to purchase.
 
It's been debated ad nauseum in the garage...

But in a nutshell, there is no real replacement fiscally for buying a reliable, modest priced car (new or used, price and expected life is key here) and driving it for 10+ years.

That being said, if you have disposable income and routinely like to be in something different every couple years then leasing is reasonable option. Between lack of maintenance, updated fuel economy, saftey, options, ect it's a way to stay in the latest and greatest without losing your ass on trade in values.

Plus some lease deals are simply more competitive than others. It's hard to argue a $199 a month, low money down lease on a decently equipped Accord or Camry assuming you are within the annual mileage allowance. Most of those types of leases are nothing more than 0% financing over the length of the lease and depending on the buyout of the vehicle you can buy it outright for a very reasonable amount. The only catch is state dependent and how they handle sales taxes on leased vehicles.
 
In general...

if

new car within 3 years
drive less than 12,000miles/year
keep car stock
lease deal high residual value (might not represent reality)
don't qualify for the best financing rates (less than 4%)

then lease.

if

keep car for as long as possible
drive more than 12,000miles/year
like to modify car
lease deal low residual
qualify for great financing rates

then buy

Best option, buy used but you run the risk of

unknown treatment of the car
unknown maintenace of the car
not the best warranty
not the exact options you want
 
When you lease a car, the bank and the dealer profit. When you buy a car with financing, the bank and the dealer profit but you get the car in the end. When you buy a car with cash only the dealer/manufacturer profit.

All the financial stuff is middlemen, there is never any profit in using them, ever, unless maybe if a large corporation must always lease new cars for appearances, that type of thing.
 
purbeast0 said:
leasing is also a way that people can drive cars they can't financially afford to purchase. but just because you do lease does not mean you can't afford to purchase.
Click to expand...

This, which is why they can't afford a good car to begin with anyway, because they can't stop throwing money down the financial middleman money pit. Layaway is bad in the long term, wat? You ARENT supposed to carry a credit card balance? You mean leasing a car I couldn't otherwise afford is a bad idea instead of actually owning a car that I CAN afford?!
 
go down to AVIS or National Rental car and just rent one for the next 6 years. hell with that plan you can change out vehicles weekly! what a bargain!!!


pro tip; car companies NEVER want you to pay off your car. once you make that final payment you are no longer a monthly revenue stream for them. So they made leasing "attractive" to the masses and the masses have fallen for it.
 
My friend who's loaded, leases both his cars (brand new Lexus). That way he gets a new one every 3 years. If you're not worried about $ it makes sense, since you don't have to go through the hassle of buying/selling.
 
KIAman said:
unknown treatment of the car
unknown maintenace of the car
not the best warranty
not the exact options you want
Click to expand...

i disagree, certified used is a great way to buy a car. the chump before you just ate $5,000+ in depreciation and with car fax you know how well the vehicle has been taken care of.
 
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OverVolt said:
This, which is why they can't afford a good car to begin with anyway, because they can't stop throwing money down the financial middleman money pit. Layaway is bad in the long term, wat? You ARENT supposed to carry a credit card balance? You mean leasing a car I couldn't otherwise afford is a bad idea instead of actually owning a car that I CAN afford?!
Click to expand...

LOL. There's a thing called disposable income. Some people have it. Some people don't. The ones that do can chose to spend it on food, sporting events, clothes, video games, hifi speakers, vacations, whatever. I could have paid cash for the last couple cars I had but instead I've had super low lease payments of $190-$240 a month depending on the car. I like having different vehicles every couple years.

I know people with $150-$250 a month cell phone plans. $100+ Dish or cable TV subscriptions. $15-$20 a month Tivo fees. Ect.

Leasing isn't saving money, but it's not this bottomless pit of financial inneptitude that so many people think it is. It's a choice and depending on the deal isn't a terribly high priced one.
 
bigrash said:
My friend who's loaded, leases both his cars (brand new Lexus). That way he gets a new one every 3 years. If you're not worried about $ it makes sense, since you don't have to go through the hassle of buying/selling.
Click to expand...

even being loaded leasing is silly. just write a check and buy it. leasing is just as much of a pain in the ass is buying and selling. have you ever returned a leased car? its a ordeal.
 
OutHouse said:
even being loaded leasing is silly. just write a check and buy it. leasing is just as much of a pain in the ass is buying and selling. have you ever returned a leased car? its a ordeal.
Click to expand...

Returning it and signing a new lease at the same time is probably pretty smooth...😉
 
I would think it has to do with what you can write off on your taxes, as you can write off depreciation on a car or the total lease amount. Combine that with the fact that some leases include scheduled maintenance, especially on high-end vehicles and you can come out ahead if you have to replace vehicles periodically (whether its having a nice car for clients, or you put high clicks on them).
 
OutHouse said:
even being loaded leasing is silly. just write a check and buy it. leasing is just as much of a pain in the ass is buying and selling. have you ever returned a leased car? its a ordeal.
Click to expand...

No it's not. Toyota in particular was easy. "Hi I'm hear to drop off my lease". Dealer "Ok". They took my info, checked the miles, and that was it. In and out in 5 minutes.

With Mazda I had a guy come out and do a quick appraisal, it was about 20 minutes of time. I had a pretty decent scrape & dent in the side and bumper that was probably $1500+ worth of body damage & repair if I needed it worked on. I had a $200 overage charged. Not a big deal.

When it was time to return I simply walked to the dealer, gave them the appraisal paper and the check for $200 and walked out.
 
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