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How does car leasing work ?
- Thread starter deftron
- Start date
You basically pay for the depreciation of a car..for example say we have Car A that costs $50,000 and will cost $35,000 in three years, a decrease of $15,000. Then say you want to lease it for the duration of the three years, you'd simply end up paying $15,000 over the three years in monthly payments.
Now also say there's another car that costs $30,000 to begin with, and after three years it's depreciated in half to $15,000. You'd still end up paying $15,000 over the three years for this car.
So in the end, you'll end up with much more "car" for the money. And plus with a slower depreciating car you'd of course end up with a better more valuable car.
Now also say there's another car that costs $30,000 to begin with, and after three years it's depreciated in half to $15,000. You'd still end up paying $15,000 over the three years for this car.
So in the end, you'll end up with much more "car" for the money. And plus with a slower depreciating car you'd of course end up with a better more valuable car.
what you pay is the difference between the initial value of the car and what their book says the car will be worth, plus interest.
of course, you could do the same thing buying a car. but we all know that selling a car is a pain in the arse. so people do the lease thing and get raped because after an hour of negotiations the dealer just puts it back to list price anyway. then charges you a higher rate than agreed on. but the math in a lease is so complicated that you can't tell!
of course, you could do the same thing buying a car. but we all know that selling a car is a pain in the arse. so people do the lease thing and get raped because after an hour of negotiations the dealer just puts it back to list price anyway. then charges you a higher rate than agreed on. but the math in a lease is so complicated that you can't tell!
The ideal lease is one in which you pay no money down, get a low money factor (interest rate) and the length of the lease corresponds with the warranty coverage on the car. So, they pay for all repairs and you get a new car every 3-4 years without needing a big downpayment or high monthly payments. The downside is, of course, that you always have a car payment and you never enjoy the benefits of ownership.
Leasing is a good, sensible option for very few people. If the company is paying for the car or if you can claim car payments as tax deductions (salesperson or real estate agent) or if you just can't afford to buy any car, then it may make sense to lease.
There are a few advantages though:
1) If you do it right, then your leased vehicles will always be under warranty.
2) Since the car is under warranty, you will always know the amount you pay for the car.
3) Allows someone to get into a more expensive car than they would otherwise be able to afford.
4) Get to switch cars every few years.
The disadvantages:
1) In the end will probably pay a lot more for vehicles than someone who finances thier car and keeps it for years.
2) Will never have an asset than can be traded or sold for financial benefit.
3) Mileage limitations.
4) Problems with "wear and tear" clause when turning the vehicle in.
5) Severe limitations if you need to move or change vehicles.
6) Leases have so many elements that the salespeople have many, many ways to make their money off you.
There are a few advantages though:
1) If you do it right, then your leased vehicles will always be under warranty.
2) Since the car is under warranty, you will always know the amount you pay for the car.
3) Allows someone to get into a more expensive car than they would otherwise be able to afford.
4) Get to switch cars every few years.
The disadvantages:
1) In the end will probably pay a lot more for vehicles than someone who finances thier car and keeps it for years.
2) Will never have an asset than can be traded or sold for financial benefit.
3) Mileage limitations.
4) Problems with "wear and tear" clause when turning the vehicle in.
5) Severe limitations if you need to move or change vehicles.
6) Leases have so many elements that the salespeople have many, many ways to make their money off you.
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