Teach me about leasing

[killramos]

Stop looking at vehicles like they are investments and you will be much happier

[bjstare]

This quote is hidden because you are ignoring this member. Show Quote

Anyways, on the other note, if you are self-employed, I recall lease payment is better for tax business write offs

I believe this is highly dependent on what your business is. It often doesn't stand up well to scrutiny under audit (my understanding is mileage write off is easier to justify).

[shakalaka]

So for lease you can write off up-to a max of $750/month basically no questions asked. So whatever the payment, that's the maximum write-off allowable. You don't need to factor the mileage or anything for a lease. Mileage comes into play if you own or finance the vehicle and then based on the mileage you depreciate the value accordingly. For pick-ups you can write-off 100% of the value over the set number of years (5 I think but not sure). With lease you then get that option to either pick and choose whether 750/month gets you a better advantage or the mileage w/o. That's my understanding of it all anyway.

[ThePenIsMightier]

This quote is hidden because you are ignoring this member. Show Quote

You put the risk on depreciation on the leasing company instead of taking it yourself.

You pay for this reduction in risk.

Are there people who lease who are counting on the dealer's anticipated buy-out price being wrong at the end of the lease, so they can purchase the vehicle for much cheaper than comparables would be?
Is "residual" the correct term for "price to purchase the car when your lease is over"?

There must be people who study this and know certain models where the manufacturers guess wrong. It could also work the other way where as an extreme example, (in the past) if I chose to lease a Ferrari GTC4-Lusso for 24 months at $7,000/month I'd have only spent $168k after two years and the car would've depreciated like a stone and lost more like $250k of its value. Return the keys and say "let's do that again".
There's no way the dealers don't adjust after they fuck up, right?

I bet this is the least clear thing I've written in weeks. I'm so tired.

[killramos]

You know what I say about betting against people who have access to more information than you do

[littledan]

Well I think it worked out ok for those of us that jumped on that super cheap F150 lease in early 21. These are the rough numbers:

MSRP ~$70,000
Purchase price after dealer and factory order incentives: ~$58,000
Residual value (buyout price) at end of 24mo lease: $47,000
Lease cost (total of monthly payments and down payment or just lump sum payment): ~$11,500

So at the end of the lease period, we have spent $11,500. The option now is to buy it out for $47,000 or walk away. Comparables due to the fucked up market are probably in the $55,000 or $60,000 range

So buy truck for $47K + GST = $50k and sell for $55k and make back $5k

Or buy truck for the $50k and you are getting a "discount" vs buying at market price

Had the market gone the other way and tanked during that 24 mo, then the market value might be something like $40k. So at that point, it would not make sense to buy out the lease for more than a comparable at market value. Unless you have sentimental value or something like that.

[ercchry]

I like to think of it as an option to buy

Not only do you have the residual value part of it, but also lemon issues and accidents. If anything goes sideways with ownership you can place that back onto the dealer.

Take BMW for example, lease includes all maintenance, you know the fixed cost of ownership for the entire term. They are also a Brand that’s very sensitive to vehicle history, you can buy wear and tear coverage too. If you end up loving the car, you can then purchase it, but if not you can turn that thing in with a giant claim on the carfax, no tires or brakes, windshield, etc left and warranty expiring within days/months and that’s that.

If you turn over cars often that flexibility is great. If you finance the same vehicle over a classic 5yr+ term your payment is higher and if you go to turn it in at the frequency of a shorter 3-4yr lease term the wholesale offer will most likely be close to $0 equity anyways, but that offer is also variable based on the above metrics that are not an issue with a lease.

If you end up leasing over some strange market factors (like the last couple years) you also still have the ability to sell the vehicle to someone else for above that residual value if it’s worth more.

So less cashflow (potentially easier/more favourable business write off), guaranteed maximum cost of ownership, known expenses, and the flexibility to take advantage of favourable shifts in market conditions

[Buster]

This quote is hidden because you are ignoring this member. Show Quote

You know what I say about betting against people who have access to more information than you do

What do you say, Misterman?

- - - Updated - - -

This quote is hidden because you are ignoring this member. Show Quote

Are there people who lease who are counting on the dealer's anticipated buy-out price being wrong at the end of the lease, so they can purchase the vehicle for much cheaper than comparables would be?
Is "residual" the correct term for "price to purchase the car when your lease is over"?

There must be people who study this and know certain models where the manufacturers guess wrong. It could also work the other way where as an extreme example, (in the past) if I chose to lease a Ferrari GTC4-Lusso for 24 months at $7,000/month I'd have only spent $168k after two years and the car would've depreciated like a stone and lost more like $250k of its value. Return the keys and say "let's do that again".
There's no way the dealers don't adjust after they fuck up, right?

I bet this is the least clear thing I've written in weeks. I'm so tired.

Do better. Be better.

[riander5]

This quote is hidden because you are ignoring this member. Show Quote

Well I think it worked out ok for those of us that jumped on that super cheap F150 lease in early 21. These are the rough numbers:

MSRP ~$70,000
Purchase price after dealer and factory order incentives: ~$58,000
Residual value (buyout price) at end of 24mo lease: $47,000
Lease cost (total of monthly payments and down payment or just lump sum payment): ~$11,500

So at the end of the lease period, we have spent $11,500. The option now is to buy it out for $47,000 or walk away. Comparables due to the fucked up market are probably in the $55,000 or $60,000 range

So buy truck for $47K + GST = $50k and sell for $55k and make back $5k

Or buy truck for the $50k and you are getting a "discount" vs buying at market price

Had the market gone the other way and tanked during that 24 mo, then the market value might be something like $40k. So at that point, it would not make sense to buy out the lease for more than a comparable at market value. Unless you have sentimental value or something like that.

This isn't because you leased. If you paid cash or financed you'd be in the same position.

You are 'ahead' because you got lucky on timing, not your financing choice.

[ThePenIsMightier]

This quote is hidden because you are ignoring this member. Show Quote

You know what I say about betting against people who have access to more information than you do

I'm a big fan of your theory.
But when significant new models come out, the info GM has is a lot less than the mountains of data on something like a Sierra. They must really blow it from time to time.

[Buster]

This quote is hidden because you are ignoring this member. Show Quote

I'm a big fan of your theory.
But when significant new models come out, the info GM has is a lot less than the mountains of data on something like a Sierra. They must really blow it from time to time.

Car manufacturers can subvent the lease by artificially elevating the residual. This drives down the payment and is an alternative type of incentive. Exotic car leases are almost always different. They are "open" leases and you are responsible for the difference in market value and the stated residual. Often you can pick whatever residual you like so that you can determine what your payment is.

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

Car manufacturers can subvent the lease by artificially elevating the residual. This drives down the payment and is an alternative type of incentive. Exotic car leases are almost always different. They are "open" leases and you are responsible for the difference in market value and the stated residual. Often you can pick whatever residual you like so that you can determine what your payment is.

I don’t know why the hell they even market open term leases… just call it what it is.. financing + balloon payment

[Buster]

This quote is hidden because you are ignoring this member. Show Quote

I don’t know why the hell they even market open term leases… just call it what it is.. financing + balloon payment

tradition i guess... maybe some accountants prefer to have the title in the leasing company's name

[you&me]

This quote is hidden because you are ignoring this member. Show Quote

Are there people who lease who are counting on the dealer's anticipated buy-out price being wrong at the end of the lease, so they can purchase the vehicle for much cheaper than comparables would be?
Is "residual" the correct term for "price to purchase the car when your lease is over"?

There must be people who study this and know certain models where the manufacturers guess wrong. It could also work the other way where as an extreme example, (in the past) if I chose to lease a Ferrari GTC4-Lusso for 24 months at $7,000/month I'd have only spent $168k after two years and the car would've depreciated like a stone and lost more like $250k of its value. Return the keys and say "let's do that again".
There's no way the dealers don't adjust after they fuck up, right?

I bet this is the least clear thing I've written in weeks. I'm so tired.

Exotic car leases are almost exclusively open ended, which means the lessee is obligated to buy out the car at the end of the term, regardless of the market value... There is no giving it back.

Typically, these are done with very conservative residuals, so the lessee can still end up in an equity position (because if he were to default, the lessor is on the hook, so they drive those values into the ground).

For something known to depreciate like a Lusso, you'd probably be looking at a huge cap cost reduction / down payment (probably ~25%) and a 36 month residual in the range of 30%... On a $400k car, that's $100k down and a buyout of $120k in 36 month, so your payments are... Yep, about $7k per month... Roughly the cost of Killy's daycare... supposedly.

IF you luck out, and the Lusso is worth $200k in 3 years, well then you can buy it out, pocket $80k and mentally write down the cost of your lease... But there's really no just handing the dealer a big steaming pile of negative equity.

[Buster]

unpossible!

I'm told that high end cars don't depreciate and never will.

[you&me]

This quote is hidden because you are ignoring this member. Show Quote

unpossible!

I'm told that high end cars don't depreciate and never will.

I just followed the rapidly depreciating example Mr. Mightier used...

There's lots of ways to play the game, and win.

[littledan]

This quote is hidden because you are ignoring this member. Show Quote

This isn't because you leased. If you paid cash or financed you'd be in the same position.

You are 'ahead' because you got lucky on timing, not your financing choice.

That would only be accurate if you could purchase cash or finance for the same sales price as the one in the lease. I.e. at the time, nobody was getting $58k purchase prices on the $70k MSRP trucks. They were in the $65 or higher range. So you came out at least $7k higher by leasing on that particular deal.

[KISS_ME]

Can I ask for more details on leasing for a sole proprietorship? I see some comments on max lease rates for self employed, i assume that means the same as sole proprietorship? is there an income level to the sole proprietorship before it makes sense to lease?

my wife has a small business making ~30K a year. does leasing make sense in this case?

[16hypen3sp]

Have you guys ever switched from leasing to financing? Essentially buying the car out and financing the residual? I just did this with my G80 but it seemed kind of weird to me. Had to sign a BOS as the seller so the dealership bought it. Then sold it back to me. Did this last Friday.

Is that right?

Genesis Finance is still waiting for the lump sum residual amount from the dealer.

[killramos]

I mean you had to scratch their back somehow for their used department to give you financing.