Lease vs Finance for vehicles, school me.

[Mitsu3000gt]

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Just because my train of thought is I have no idea why you would lease if you aren’t returning. and if you lease wear and tear is a consideration. Wear and tear protection is just another added cost to leasing that is money burnt if you don’t return.

It's often a better decision to lease even if you aren't going to return because you get ~4 years of free insurance should something happen to the vehicle or should your life plans change, you aren't on the hook for anything. Maybe you get into a major accident 2 years in that was $1 away from a write-off so the insurance company decides to repair it, now instead of being stuck with a pile of garbage with a $25K repair bill that nobody wants, you don't have to worry about it at all. I think a lot of people either don't understand how huge of a perk this is or how that works. Or maybe 2 years in you decide you want the new model that just came out. There is just so much flexibility.

Leasing is better in most scenarios IMO. Even if you plan on keeping the vehicle forever, you might as well enjoy the protections of a lease as long as you can, then just buy it out at which point you can either pay cash or finance the balance if you want to continue with payments.

Acceptable wear & tear is also quite generous on most leases. The main things you can't do are return it with tires below 50% or a cracked windshield, everything else is pretty generous in terms of rock ships, scratches, swirl marks, door dings, etc. If you know you have kids and a trailer that are going to be really hard on the vehicle, that is an ideal case for leasing.

The only time a lease really doesn't make any sense is if you are an extremely high KM driver. At the end of the day though it's a TCO calculation, sometimes there are huge incentives that make financing more attractive, but you still get all the risk.

[Tik-Tok]

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free insurance should something happen to the vehicle or should your life plans change, you aren't on the hook for anything.

It's not free, you're paying a higher rate to lease, but it's good insurance none the less.

[Mitsu3000gt]

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It's not free, you're paying a higher rate to lease, but it's good insurance none the less.

You aren't necessarily paying a higher rate to lease. The last vehicle I leased was at a lower rate than was available through the finance department. Often times it's simply better, plus the insurance is a pretty huge perk at least IMO.

[RX_EVOLV]

Only leased once so I might not be 100% correct on this, but I think there are other disadvantages with leasing:

1) if you need to get rid of the car early before the lease terms are over, you will have to pay out the rest of the payments first, which is inclusive of the interest costs for the full term, and then the residual amount. With financing, it's just whatever principle is left.

2) I think some actually have an early termination fee? If you transfer the lease to someone else, there's a decent (>$1K?) lease transfer fee as well. If you bought a wear and tear protection package, I think there's a fee to transfer that to the new owner as well.


3) At the end of the lease, if you decide to keep the car but need to finance to buy out the residual, you will only get bank rates (5%+?). Might be better to lock in the 1.9% finance rate otherwise...

[88CRX]

Guys, he posted the rates.... they are lower to finance.

Finance rates up to 72 months 1.9%
Lease rates up to 48 months 2.9%

ES, what are the 4 year finance rates? Probably even cheaper then the 72 month 1.9% rate.

But basically you compare total costs of finance vs lease and that 'extra' for the lease is your get out of jail insurance where you can dump the vehicle back to the manufacturer in 4 years for whatever reason. Multiple hail claims, accident claims, car is a POS always breaking down, etc. If its close, within $1k I'd probably lease again (our current vehicle we finances cause the difference was too high + we plan on keeping the vehicle longer term).

Also like others said plan on throwing new tire on it (the lease agreement states the minimum tread depth required) and you will need a new windshield so factor those costs in to your comparison now. Basically the lease agreement tells you what damage is acceptable so it shouldn't be a huge surprise at lease end. If you take care of your vehicle it should just be tires/windshield, if youre an animal get ready to pay up.

[Mitsu3000gt]

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Only leased once so I might not be 100% correct on this, but I think there are other disadvantages with leasing:

1) if you need to get rid of the car early before the lease terms are over, you will have to pay out the rest of the payments first, which is inclusive of the interest costs for the full term, and then the residual amount. With financing, it's just whatever principle is left.

2) I think some actually have an early termination fee? If you transfer the lease to someone else, there's a decent (>$1K?) lease transfer fee as well. If you bought a wear and tear protection package, I think there's a fee to transfer that to the new owner as well.


3) At the end of the lease, if you decide to keep the car but need to finance to buy out the residual, you will only get bank rates (5%+?). Might be better to lock in the 1.9% finance rate otherwise...

1) This depends. Sometimes it's free to end the lease early if you're moving into another vehicle. If you want to abandon the lease early, a lot of the time the dealer will want your car on the used lot so they will pay you something above the current residual for it to just take it back. Or, you simply buy out the vehicle entirely and sell it yourself at market value if you want to get out of the lease early. You have lots of options here. The cost to break a lease isn't too bad but that varies by manufacturer (I imagine the luxury brands are higher). In my case, I bought out my lease early and sold it on the private market and was farther ahead than if I had financed the car. After 3.5 years I got back ~80% of the purchase price, and enjoyed all the protections of a lease over that same period.

2) Termination/transfer fee is not too bad, mine was $4XX. Not sure about wear packages - the damage agreements were generous enough for me.

3) I think a lot of people have access to cheaper money than 5+% but I guess not everyone. If you're in that much trouble at the end, chances are you were in over your head to begin with.

[Aleks]

Trucks have good residuals, the rate is low, lease all the way. Makes no sense to lease an F150 for 48 months though. Residuals are such that the monthly payment for 36 and 48 months is basically the same.

Lease it for 36 months, 0 down. Keep $25k in that investment, growing at 5% per year. After 3 years is up if you love it, pull out the investment and buy it out. Think of it as a 3 year test drive. 3 years is a long time, lots can change in you personal situation and society...
If the truck is smashed up, turns out to a be a bit of a lemon, you have an easy out. Definitely have them throw in lease end protection. This is pretty cheap insurance. Another tip is get the replacement insurance on it. Say the worst happens and your truck is written off, you basically get all the payments you made on it back.

[The_Rural_Juror]

OP is unschoolable. HELOC and get a Raptor.

[killramos]

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OP is unschoolable. HELOC and get a Raptor.

Need a ballin’ 500k house in Aspen to HELOC

[silvercivicsir]

Will 500k even buy you a Condo in Aspen?

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Need a ballin’ 500k house in Aspen to HELOC

[The_Rural_Juror]

Who wants to live in the 66th ranked neighbourhood on Avenue magazine?

[never]

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Will 500k even buy you a Condo in Aspen?

Only if your car is worth <$10K.

[suntan]

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It's often a better decision to lease even if you aren't going to return because you get ~4 years of free insurance should something happen to the vehicle or should your life plans change, you aren't on the hook for anything. Maybe you get into a major accident 2 years in that was $1 away from a write-off so the insurance company decides to repair it, now instead of being stuck with a pile of garbage with a $25K repair bill that nobody wants, you don't have to worry about it at all. I think a lot of people either don't understand how huge of a perk this is or how that works. Or maybe 2 years in you decide you want the new model that just came out. There is just so much flexibility.

Leasing is better in most scenarios IMO. Even if you plan on keeping the vehicle forever, you might as well enjoy the protections of a lease as long as you can, then just buy it out at which point you can either pay cash or finance the balance if you want to continue with payments.

Acceptable wear & tear is also quite generous on most leases. The main things you can't do are return it with tires below 50% or a cracked windshield, everything else is pretty generous in terms of rock ships, scratches, swirl marks, door dings, etc. If you know you have kids and a trailer that are going to be really hard on the vehicle, that is an ideal case for leasing.

The only time a lease really doesn't make any sense is if you are an extremely high KM driver. At the end of the day though it's a TCO calculation, sometimes there are huge incentives that make financing more attractive, but you still get all the risk.

Buying or leasing new is mostly a losing proposition for the purchaser unless the vehicle is kept for a long time.

If you're trading in after two years on a lease, dude you're so fucking far upside down the dealership will love you forever.

Paying money for the privilege to end the lease is an almost ludicrous action, I can't see how this would benefit anyone other than the seller.

I'm not sure where you're finding current lease incentives that don't suck. The financial market for personal vehicle leasing evaporated. And QE made sure it never came back.

[rage2]

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If you're trading in after two years on a lease, dude you're so fucking far upside down the dealership will love you forever.

Not always the case, aside from dealer loving me forever getting into a new car so often. I'm never upside down when getting out of a vehicle. That's just silly when it comes to TCO. But you can take advantage of loyalty get out early clause if you want a newer vehicle AND be ahead on a lease.

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There are a lot of tricks to maximize a lease. I take advantage of the early termination clause, basically I can get out of a lease 6 months before it’s over if I move into another lease without penalty (why I’m “locked” into Mercedes). The sweet spot for residual rates are 36 month leases, while 24 is pretty poor. By moving 6 months early, I’m effectively getting a 36 month residual rate at 30 month terms.

[Masked Bandit]

Assuming the capital is available, what's the downside of just paying cash? Lost opportunity of investment gains, maybe? Would you be able to avoid a bunch of the stupid finance / doc fees and such?

[suntan]

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Not always the case, aside from dealer loving me forever getting into a new car so often. I'm never upside down when getting out of a vehicle. That's just silly when it comes to TCO. But you can take advantage of loyalty get out early clause if you want a newer vehicle AND be ahead on a lease.

You're basically paying a car payment forever until the end of time then. Which is fine if you always want a new vehicle.

[killramos]

Everyone knows if you spend more than 10k on a car you are living beyond your means.

[ExtraSlow]

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Assuming the capital is available, what's the downside of just paying cash? Lost opportunity of investment gains, maybe? Would you be able to avoid a bunch of the stupid finance / doc fees and such?

In my particular situation, I could buy about half this vehicle in cash, but not the whole thing right now. I usually pay cash, but this time will need some financing.

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Guys, he posted the rates.... they are lower to finance.

Finance rates up to 72 months 1.9%
Lease rates up to 48 months 2.9%

ES, what are the 4 year finance rates? Probably even cheaper then the 72 month 1.9% rate.

3,4,5 and 6 year finance rates are all 1.9% from ford currently.

[you&me]

What if you spend $100k on a car? Are you living 10 of your means?

[ExtraSlow]

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Trucks have good residuals, the rate is low, lease all the way. Makes no sense to lease an F150 for 48 months though. Residuals are such that the monthly payment for 36 and 48 months is basically the same.

Lease it for 36 months, 0 down. Keep $25k in that investment, growing at 5% per year. After 3 years is up if you love it, pull out the investment and buy it out. Think of it as a 3 year test drive. 3 years is a long time, lots can change in you personal situation and society...
If the truck is smashed up, turns out to a be a bit of a lemon, you have an easy out. Definitely have them throw in lease end protection. This is pretty cheap insurance. Another tip is get the replacement insurance on it. Say the worst happens and your truck is written off, you basically get all the payments you made on it back.

I'm actually leaning towards this, primarily so I can keep more money in appreciating investments. I will have the finance folks run some numbers for me.