Lease vs Finance for vehicles, school me.

[Mitsu3000gt]

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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.

Not many people are giving the vehicle straight back to the dealer for the calculated residual unless it's a last resort/emergency or they have enough money that they just don't care. There are plenty of situations where early trade-ins make sense (or are incentivised), and they aren't necessarily bad deals at all. It's nice to have so many options whilst enjoying all the protections of a lease.

The $4XX I paid to end my lease early is pretty reasonable IMO. Not sure what other brands charge. Cost me a lot less than I would have had to pay for damage (windshield) if I gave the car back to the dealer, so it was a no-brainer even before calculating the rest. If you're getting a new car from the same dealership, the fee is usually waived as well. If I had financed, the only difference is I would have had less money for investments and none of the protection leasing gets you.

As I said earlier, it's just a TCO calculation + whatever the many advantages and protections of a lease are worth to you. If you plan to invest the extra cash flow compared to financing (this is what I do), you need to take that into account as well. If there are huge incentives one way or another, that can obviously change things on a case-by-case basis, but that is very rare in my experience. From what I can tell, most people do not really understand leasing so they avoid it. I can't see myself ever financing a car again unless the incentives are such that they make the car so much cheaper that they somehow outweigh all the protections/options a lease offers.

Also, looking at all the lemon car threads on Beyond (and other forums) over the years too has been a nice reminder of why I will always lease. You avoid all of that BS with no real downside if you end up the unlucky recipient of a vehicle like that.

[suntan]

Yeah I get the appeal. At six months remaining they will definitely start offering incentives to move you to a new vehicle.

Just keep in mind they're just moving numbers around to convince you. They're still making as much money as they would if you kept the lease for the additional six months and then you went in and got another car.

I'm still wondering where you're seeing all these awesome lease rates though.

[The_Rural_Juror]

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

You're not really spending $100k if the bank loans you $90k.

[Mitsu3000gt]

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Yeah I get the appeal. At six months remaining they will definitely start offering incentives to move you to a new vehicle.

Just keep in mind they're just moving numbers around to convince you. They're still making as much money as they would if you kept the lease for the additional six months and then you went in and got another car.

I'm still wondering where you're seeing all these awesome lease rates though.

They can only manipulate the numbers if you let them. If you are always negotiating based off dealer cost, there really isn't much they can do to fool you. Often times they're more worried about volume/kickbacks and locking you into their service department than a few hundred dollars on a new vehicle sale.

My last lease was at 0.9% (Honda), I don't think rates like that are uncommon. I bought out the car out and sold it privately for 80% of the purchase price after ~3.5 years.

[rage2]

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

Again, have to look at the TCO on the whole deal, and not look at the stigma of "payments forever". On a high residual low interest lease, tack on loyalty discounts, get discounts applied to the principal without moving the residual, you're paying for just the depreciation, and tax on just the depreciation. In some cases your TCO on a lease like that is lower than buying a car, then selling it at the same time because you're paying tax on the entire purchase price and can not recoup it. My RC-F was such a scenario, working out the numbers, I paid less to own it for 2.5 years than to purchase it and resell it. But yes, for car swappers it's good IF you find the right deal.

Not that it matters now, there are no good lease deals around.

[killramos]

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

Nope apparently it means you are 10X more balanced in your life

[Mitsu3000gt]

Just to add to the above, many people (not all) are only keeping their financed cars for 5-7 years as well, so even though they are financing, they often end up having a perpetual car payment as well - the only difference being they have no protection from unforeseen events or damage, and the payments themselves are higher.

[you&me]

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Again, have to look at the TCO on the whole deal, and not look at the stigma of "payments forever". On a high residual low interest lease, tack on loyalty discounts, get discounts applied to the principal without moving the residual, you're paying for just the depreciation, and tax on just the depreciation. In some cases your TCO on a lease like that is lower than buying a car, then selling it at the same time because you're paying tax on the entire purchase price and can not recoup it. My RC-F was such a scenario, working out the numbers, I paid less to own it for 2.5 years than to purchase it and resell it. But yes, for car swappers it's good IF you find the right deal.

Not that it matters now, there are no good lease deals around.

There are still some good lease deals around, but that's not only based on residual values, but more importantly, resale values. Constantly rolling negative equity into the next vehicle is a great way to shoot your TCO through the roof. On the other hand, being in an equity position at the end of one lease can either be viewed to offset your TCO for that lease, or significantly reduce the TCO on your next lease, whichever way you want to look at it...

[rage2]

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There are still some good lease deals around, but that's not only based on residual values, but more importantly, resale values. Constantly rolling negative equity into the next vehicle is a great way to shoot your TCO through the roof. On the other hand, being in an equity position at the end of one lease can either be viewed to offset your TCO for that lease, or significantly reduce the TCO on your next lease, whichever way you want to look at it...

If you take resale value into account, that’s an advantage regardless of lease finance or cash. It wouldn’t make leases a better value for TCO. That’s what we’re discussing right? The stigma of leases being poor value?

[you&me]

Well sure, it's always good to have better resale value.

High residual values are great, but so many leases these days are open that a high residual can backfire if the resale values don't support the residual and you end up in a negative equity situation... Not your problem if the lease is closed, but like I said, more often than not, leases are open these days. Ultimately, if I had to choose one or the other, I'd prefer strong resale value over a high residual.

[speedog]

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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.

Nickel, invest in nickel. You know someone will approve of that and I only said the evil word twice so no Beetlejuice-like appearance of said someone.

[rage2]

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High residual values are great, but so many leases these days are open that a high residual can backfire if the resale values don't support the residual and you end up in a negative equity situation... Not your problem if the lease is closed, but like I said, more often than not, leases are open these days. Ultimately, if I had to choose one or the other, I'd prefer strong resale value over a high residual.

WUT? I have never heard of an open end lease unless you do a used vehicle lease. All new vehicles that I've done and helped with family are all closed end leases.

Since this is an educational thread:

Open End Lease - You *have* to buy out at end of term.
Closed End Lease - You don't have an obligation to buy out at the end of term. Walk away cleanly if you want to. AKA the shitbox insurance.

[Aleks]

All leases that you get from manufacturer's finance arms are closed. I have only ever come across a handful of open leases (Ford and GM), but those were through third party companies. We actually discussed open ended Raptor leases on here a few months ago.

I this ES is only considering closed lease through Ford finance here. So nothing to worry about.

[you&me]

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All leases that you get from manufacturer's finance arms are closed. I have only ever come across a handful of open leases (Ford and GM), but those were through third party companies. We actually discussed open ended Raptor leases on here a few months ago.

I this ES is only considering closed lease through Ford finance here. So nothing to worry about.

Yeah, it was the Raptor lease that I was thinking of, but if 'normal' F150s are through Ford Credit, no worries like you said.

[benyl]

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Just to add to the above, many people (not all) are only keeping their financed cars for 5-7 years as well, so even though they are financing, they often end up having a perpetual car payment as well - the only difference being they have no protection from unforeseen events or damage, and the payments themselves are higher.

Wut? At the end of 5 years, or even 7 years, there should be some equity in the car if you financed. That should lower your payment on the next car if all things are equal. Not only that, but you can choose not to get a new car. With a lease, you have no choice if you don’t have the cash for the buyout.

The biggest morons are the ones that lease for 5 years. That’s basically renting a car beyond your means.

[benyl]

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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.

Have you met Shakalaka? He will tell you a the opposite. He makes money on new car leases and flips cars every 3-6 months. He defies the laws of economics. Lol he can find those deals everywhere.

[max_boost]

Damn so many comments and everything covered. Leasing use to be my specialty.

[ExtraSlow]

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Damn so many comments and everything covered. Leasing use to be my specialty.

Now you are a pure rental kind of guy.

[The_Rural_Juror]

So are you going to buy it or lease it?

[RawB8figure]

Buy a used truck that is $25,000.