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Thread: Teach me about leasing

  1. #21
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    Quote Originally Posted by Misterman View Post
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    That's the other way to look at the first scenario. If lexus just offered you a better residual value, you'd pay less through your lease.

    You're not loaning free money when you put a downpayment on the front of a lease. You're reducing the amount you pay interest on. But by all means one could make the argument that I could've invested that 20k and make more ROI than I would save on interest by using it as downpayment. As I mentioned, it is based on your personal situation.
    It's basically interest free. Some leases are structured so you get 0 interest savings with a downpayment. Others limit how much you're able to put down, or restrict the interest savings. $20k down on a Mercedes lease is like $600 in savings over 36 months at 3.9%.
    Originally posted by SEANBANERJEE
    I have gone above and beyond what I should rightfully have to do to protect my good name

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    Alot of info in this thread. I'm not looking for anything real soon, but I want to be prepared to look into this route when I do.

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    Quote Originally Posted by shakalaka View Post
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    I was more thinking of scenario where the maximum allowable terms for leasing are 3-4 years whereas you can finance for up to 7-8 years. Or even better say balloon financing over 5-6 years with a residual in the end. In those cases financing payments are going to be lower than leasing payments. I guess I should have elaborated. Residuals of course play a big role in determining what the payment on a lease will be.

    Also in regards to giving a large down on a lease, sure you can do it and bring the payment down but I think that defeats one of the most important purpose of a lease. The scenario mentioned above - if you get into a crash and take a big hit on the value of the vehicle, do you just want to give it back to the dealer at the end then and lose your large downpayment? Giving a large down on a lease makes sense when you KNOW you're gonna end up either keeping the car, or buying it out and sell it privately and you're not worried about accidents, hail etc claims diminishing the value of the car. If the plan is to return it to the dealer at the end of the term or trade it in before the end, I don't think a down makes sense on a lease - unless you can't afford the monthly payments, in which case well I won't 89coupe it.

    Payments are generally still more expensive to finance for 5 years, as opposed to leasing for 3. I'm sure there is scenarios where you can contort numbers to get a bigger lease payment, but that'll be more rare.


    What's the difference if you give the car back or keep it at lease end? Or whether you have an accident or not? If you lease a 60k car, with a 30k residual on it. You are financing 30k. You can either space that 30k into payments for the entire term. Or you can put 15k down, and only space 15k into payments for the term.

    I think you might be confusing where a downpayment goes towards. It goes towards the part you're financing, not the residual.

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    Quote Originally Posted by rage2 View Post
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    It's basically interest free. Some leases are structured so you get 0 interest savings with a downpayment. Others limit how much you're able to put down, or restrict the interest savings. $20k down on a Mercedes lease is like $600 in savings over 36 months at 3.9%.

    If someones main reasoning for putting a downpayment on a lease was to save money on interest, then that would be a silly decision. But putting a down payment isn't automatically a stupid idea, like what seems to be the general consensus last time this came up.

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    Quote Originally Posted by shakalaka View Post
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    I was more thinking of scenario where the maximum allowable terms for leasing are 3-4 years whereas you can finance for up to 7-8 years. Or even better say balloon financing over 5-6 years with a residual in the end. In those cases financing payments are going to be lower than leasing payments. I guess I should have elaborated. Residuals of course play a big role in determining what the payment on a lease will be.
    fudging around with dates on the payments just masks cost of ownership further and isnít an apples to apples anymore. Sounds like a something a dealership would do to trick you into thinking you can afford a car
    Originally posted by Thales of Miletus

    If you think I have been trying to present myself as intellectually superior, then you truly are a dimwit.
    Originally posted by Toma
    fact.

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    All else equal, in what scenario would you put money down on a lease? If you can't make more than 2% or whatever on your investments, there are probably bigger issues to be dealt with.

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    Well, as we discussed in the mortgage/HELOC thread, paying down debt is zero risk, while most investments have at least some level of risk, so you need to look at your risk-adjusted return. Also, there's mental value in paying down debt and simplifying your monthly finances beyond the strict mathematics.

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    Right. If you can realize 6% interest or something on a high rate lease , which is after tax dollars, by paying a down payment you can afford on a lease that can make a lot of sense in my mind.

    That’s a pretty good ROI especially considering tax.

    Putting money down on a 0% lease (or finance). That’s just stupid.

    Key is if you can realize the rate, rage made some points on technicalities where that isn’t true. That’s obviously something to watch out for.
    Last edited by killramos; 07-26-2019 at 10:46 AM.
    Originally posted by Thales of Miletus

    If you think I have been trying to present myself as intellectually superior, then you truly are a dimwit.
    Originally posted by Toma
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    Quote Originally Posted by Mitsu3000gt View Post
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    All else equal, in what scenario would you put money down on a lease? If you can't make more than 2% or whatever on your investments, there are probably bigger issues to be dealt with.
    There is a number of reasons someone might do that. In my case, I'm not an employee, so my income might not be completely secure for the next 4 years. So I prefer smaller payments. There is a host of reasons I'm sure people could come up with on why they want a smaller payment.

    But just to put things in context based on what you said. Why would you put money down on a finance then either? Most places are 0-2% now for financing, so comparatively it is just as stupid to put money down on a fully financed vehicle as it is on a lease with that logic.

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    Quote Originally Posted by extraslow View Post
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    also, there's mental value in paying down debt and simplifying your monthly finances beyond the strict mathematics.
    no there is only math
    Originally posted by Thales of Miletus

    If you think I have been trying to present myself as intellectually superior, then you truly are a dimwit.
    Originally posted by Toma
    fact.

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    Good thread. I'm tempted to lease my next car (G80) but only if I can write off 100% of the leasing costs against driving for Uber. For 2018, I wrote off every drop of fuel, every kilometer traveled, and all vehicle depreciation against my income with my Genesis. Total deductions were just under $6000. Leasing would significantly bump that number up.
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  12. #32
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    Quote Originally Posted by Misterman View Post
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    There is a number of reasons someone might do that. In my case, I'm not an employee, so my income might not be completely secure for the next 4 years. So I prefer smaller payments. There is a host of reasons I'm sure people could come up with on why they want a smaller payment.

    But just to put things in context based on what you said. Why would you put money down on a finance then either? Most places are 0-2% now for financing, so comparatively it is just as stupid to put money down on a fully financed vehicle as it is on a lease with that logic.
    I didn't say anything about putting money down on a finance, those are your words. At 0% though I would hope nobody is putting money down on that unless they are the worlds worst investor with no other debt to pay off.

    Leasing is ideal for insecure income because if you buy the right car you are cash positive after a relatively short period of time, and lots of manufacturers have programs that allow you to return early with little or no penalty. So, if you lose your job or something you don't have to worry about taking a big hit on a car you financed. Even worse would be if you needed to sell your financed car due to losing your job and it had a big insurance claim or hail damage - you'd have to practically give it away. Most people I know working solely on commission (variable income) or worried about their jobs are leasing right now for the protection leasing offers.

    It's all just a spreadsheet at the end of the day, whatever has you coming out ahead the farthest at the end is probably the best option. I acknowledge that there are niche cases where one might make sense over the other.
    Last edited by Mitsu3000gt; 07-26-2019 at 11:00 AM.

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    Quote Originally Posted by 03ozwhip View Post
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    Due to always switching cars, I feel like leasing might be my best option for the next vehicle. What do I need to look for?

    I see that people are talking about residuals, but honestly have no clue what that means when it pertains to vehicle leasing.

    I think it just makes more sense for me, since I get rid of vehicles usually before 2 years and drive maybe 12k a year.

    Opinions and advice would be appreciated.
    I am basically the same way. Usually lease and get rid of after 2 years. Usually either have them taken over or sell them. I just sold my Tacoma lease after 20 months and got into a Wrangler lease. With the money I got back from the sale my effective payment on it was around $450/m. My Tundra lease was something ridiculous like $250/m after selling it. That was more due to USA exports affecting resale on trucks during that time though.
    I only sign up if the deal is right and it's gonna be easy to get out. That limits choices big time though. I put money down once a long time ago and never again.

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    I know so many people who finance, but end up swapping cars every 2-5 years anyway and I don't understand it. Most of those people should be leasing and enjoying a much smaller monthly payment with the laundry list of lease perks/protections.

    Even if you are going to keep your car for 10 years, you can lease the first ~4 and enjoy some protection vs zero protection.

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    Quote Originally Posted by Mitsu3000gt View Post
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    I know so many people who finance, but end up swapping cars every 2-5 years anyway and I don't understand it. Most of those people should be leasing and enjoying a much smaller monthly payment with the laundry list of lease perks/protections.

    Even if you are going to keep your car for 10 years, you can lease the first ~4 and enjoy some protection vs zero protection.
    It just depends on the numbers. I financed my C63 Black Series because for some hilarious reason it was delivered late spring with a ton of C class incentives. 0% finance, first 3 month payments free (up to $1200) so I opted for the balloon finance knowing that this car won't depreciate much, and kept my payments relatively low. Sure enough, 4 years later, I broke even on the car. Basically drove the car 4 years for free. Well, almost free, for the price of wheels and tires.

    I did pretty well on the RCF as well thanks to trunk money in October when I leased it, plus 0.5% rate. I think my effective payment over the term of ownership was something like $490/month.

    I'm losing money on my current 2 cars though, depreciate like a motherfucker. But I am planning to keep them and drive them to the ground.
    Originally posted by SEANBANERJEE
    I have gone above and beyond what I should rightfully have to do to protect my good name

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    Quote Originally Posted by rage2 View Post
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    It just depends on the numbers. I financed my C63 Black Series because for some hilarious reason it was delivered late spring with a ton of C class incentives. 0% finance, first 3 month payments free (up to $1200) so I opted for the balloon finance knowing that this car won't depreciate much, and kept my payments relatively low. Sure enough, 4 years later, I broke even on the car. Basically drove the car 4 years for free. Well, almost free, for the price of wheels and tires.

    I did pretty well on the RCF as well thanks to trunk money in October when I leased it, plus 0.5% rate. I think my effective payment over the term of ownership was something like $490/month.

    I'm losing money on my current 2 cars though, depreciate like a motherfucker. But I am planning to keep them and drive them to the ground.
    The Black Series sounds like one of the niche scenarios I mentioned earlier, but that's awesome - just a simple spreadsheet at the end of the day to see what's better financially. In your case though it sounds like you also had to make some assumptions on resale value and it's great you were right!

    How are the A-Class leases looking? I've had my eye on an A250 4matic for a while as a replacement for my current car.

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    Quote Originally Posted by Aleks View Post
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    I am basically the same way. Usually lease and get rid of after 2 years. Usually either have them taken over or sell them. I just sold my Tacoma lease after 20 months and got into a Wrangler lease. With the money I got back from the sale my effective payment on it was around $450/m. My Tundra lease was something ridiculous like $250/m after selling it. That was more due to USA exports affecting resale on trucks during that time though.
    I only sign up if the deal is right and it's gonna be easy to get out. That limits choices big time though. I put money down once a long time ago and never again.
    Ya man, even right now I wouldnt even know what a good lease deal looks like. I was thinking probably next year going for either an M car or an AMG, but I'm not sure what kid of lease rates would be any good.

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    M's and AMG's typically don't have the best lease or finance rates but they come along every now and then so it's just a matter of keeping an eye out for it.

    Why I think it makes no sense in putting money down on a lease is because you're not keeping the car in the end. So essentially you lose that large downpayment. Whereas putting money down on finance means, it's your car to keep at the end of the term. Surely you get a little bit lower payment when you put money down on a lease (approx. $100 for every $5K down) but I would rather use that downpayment elsewhere and have a slightly higher monthly lease payment than to put the down on the lease and ultimately getting nothing in return for that money except a slightly lower monthly payment.

    That's just how I look at it though, obviously different people have different perspectives about this.

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    Quote Originally Posted by shakalaka View Post
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    M's and AMG's typically don't have the best lease or finance rates but they come along every now and then so it's just a matter of keeping an eye out for it.

    Why I think it makes no sense in putting money down on a lease is because you're not keeping the car in the end. So essentially you lose that large downpayment. Whereas putting money down on finance means, it's your car to keep at the end of the term. Surely you get a little bit lower payment when you put money down on a lease (approx. $100 for every $5K down) but I would rather use that downpayment elsewhere and have a slightly higher monthly lease payment than to put the down on the lease and ultimately getting nothing in return for that money except a slightly lower monthly payment.

    That's just how I look at it though, obviously different people have different perspectives about this.
    Only reason I'm thinking of leasing M or AMG is based on never owning one and hearing horror stories of issues owning them after warranty, so it just kinda scares me.

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