[Eastwood]

I've always wondered this, as I could never figure it out.

After all you're paying monthly installments to rent a car, that eventually you will have to give back.

Why not just buy a car? Then you can re-sell, and at least you have something under your name.

When you lease a car it doesn't even belong too, if anything happens the stealership can take it back, and you're left with nothing.


So basically I ask, why did you choose to lease? And what advantages, if any, are there to leasing?

EDIT: Can this be moved to Off-Topic?

[dachinesedude]

This basically sums it up:

Perhaps the greatest benefit of leasing a car is the lower out-of-pocket costs when acquiring and maintaining the car. Leases require little or no down payment and there are no upfront sales tax payments. Additionally, monthly payments are usually lower, and you get the pleasure of owning a new car every few years.

With a lease, you are essentially renting the car for a fixed number of months (typically 36-48 months). Therefore, you pay only for the use (depreciation) of the car for that period, and you are not forced to absorb the full depreciation cost of the vehicle. Leasing a car will never put you in an upside-down position.

Leasing also provides an alternative when buying a car is not an option. Most banks will not lend more than $30,000 for a car loan. If you are planning to acquire a car worth more than that, leasing may be your only option.

Finally, for business owners, leasing a car may offer tax advantages if the vehicle is used for business purposes.

[LowTEC]

Some people probably have 6 grand in the pocket now, and they want a brand new 30k car. So what's the other way around for them?

[TRDood]

maybe they don't want to keep the car for long

for me, even if i had the money, i would not pay 50k straight cash for a BMW all at once.
i'd rather lease it because 1. i will have more choices in a few years when my lease is over, 2. i can spend that other 40k elsewhere investing, 3. if i ever sell the car within 5 years, i am going to get a big dep hit

[Harvey Specter]

Pros;


- Cheaper payments compared to financing
- It's easier, in most cases, to get approved for a lease compared to financing
- Don't have to worry about getting stuck with a lemon or trying to sell a car that's been in an accident or has a big ass ICBC claim
- You can drive a new car every 2-3 years
- You can drive the crap out of the car and walk away from it at lease ends.


Cons;

- You don't own the car
- Might have to put a big down payment
- You might end up paying extra if you drive in excessive of the allowed km's
- Very hard to get out of a lease unless you find someone to take over it.
- Can't pay off a lease so this might be an issue for someone trying to secure another loan (e.g for a house or business)
- Some buyouts are higher compared to the actual market value of the car when your lease is up
- You might get raped with fees for damages

[thumper]

leasing seems to be a popular choice if you are a gangster. get it shot full of bullet holes and return the car without a damage deposit?

[hotjoint]

leasing seems to be a popular choice if you are a gangster. get it shot full of bullet holes and return the car without a damage deposit?

:lol :haha:

[Blinky]

Some people probably have 6 grand in the pocket now, and they want a brand new 30k car. So what's the other way around for them?

Maybe my sarcasm detector isn't working. Finance the purchase.

Other cons:
- Long-term, leasing a car is more expensive than buying. This assumes that the purchased car is kept for at least 5 or so years. The longer the purchased car is kept, the greater the difference paid.
- interest rates for leasing programs are usually higher than comparable finance
- IMO, leasing is often a form of living beyond one's means

[Presto]

I'd like to be able to pay off the car after 5 years through financing and then not have any car payments until the vehicle runs into the ground. 1 more year to go!

[heleu]

A lot of people (at least in my industry) have a car allowance. The allowance usually only covers a lease because I believe it's considered a tax writeoff for the company.

Of course, it's still a taxable benefit, but you definitely still come out ahead.

[cococly]

THe most obvious benifit is you DO NOT need to care about the unexpected deperciations on your new car, since you have already sign a contract with a fixed rate.

And, if your leased car has minor problem, you do not need to bother about fixing them, you just return it to the dealer and off you go. You can lease another new car after that.

I am having an Interest Rate of 0.9% for my lease at the moment. Much lower than most Imports. Much lower than financing the car.

[unit]

if you have a lot of money, and find it convenient to own a new car for 4 years, dont have to bother selling it, and can just lease a new car 4 years later again and again. also your car is always always going to be under warranty so you never have to stress over unexpected breakdowns, etc..

[thumper]

I am having an Interest Rate of 0.9% for my lease at the moment. Much lower than most Imports. Much lower than financing the car.

whoa. when i bought my car vw credit had 0.9%APR financing last year but that's since long gone :o

[L-S-D]

good read , ive always wonderd my self about this

[kyo]

finance % are usually lower than lease %. (or the same)

for example, go to honda.ca and look up on like the super common civic coupe or something:

finance for 36mth = 0.9%
lease for 36mth = 1.9%

but yeah, i do agree on all the other benefits of leasing. just not the interest rate as financing do usually give u a better rate i think?. (correct me if i'm wrong)

[freakshow]

Generally, there are only 2 reasons why you choose to lease over finance.

1. It's a business expense. This allows you to write off the amount of the car for tax purposes.

2. It's cheaper. Generally, IF you'll be changing cars every ~3 years or less, the total amount you pay in your lease will end up being less than the amount that you will lose in the depreciation of your car when you sell it.

[Blinky]

You can write off part of the car (if it's a business expense) when financing/cash purchasing too. However amount allowed to be written off for a lease is "greater". It's been a while since I've looked carefully, but there's effectively a lower cap on how much of the amount can be written off on a purchase vs. lease, so that's another plus for leasing.

[Mwing]

i lease cars becoz i can write off my income tax since im self employed

another reason is you pay tax on the car only if you use it, if you finance a car, you pay the entire tax of the car, while you lease it, you pay only when you drive the car, after the lease term ends, whatever remaing (the buy out) isnt taxed and you jsut return the car.

also, i dont consider lease is a like renting a car, the lease payment is kinda like the depreciation of the car, think of this way:

you buy a 2009 tsx for 40k including pdi and all charges now, with tax, 44.8k
after 4 years, the tsx may worth 18k
so you paying 26800 including tax over 4 years

say you lease the same 09 tsx now, with 0 dwon payment, 3.9%, i got a quote of $580 tax in for 48 months, buy out is 16k something, you are paying 27840 over 4 years with interest.

if you finance the same car, you pay say 3k more for interest (maybe more i dunno), so add 3k to 26800 = 29800, over 4 years, with higher monthly payments, and the hassle to sell the car when you want to change

the buyout price is basically what dealer predicts the market price of the car after your lease is over, say you lease a car with a high resale value = lower lease monthly payments, so the lease monthly payments is basically the depreciation of the car, since most cars depreciate anyway

if you want to own the car for a very long time, then buy the car or finance it, if not lease is a good option if you can write off your income tax or you own a company.

[SuperSlowSS]

Also if the market value drops like what happened with the usd not too long ago. Your lease is protected, since they set the residual value when you buy the car.

Basically if you plan to own the car for a long time, you are better off buying it. But for short ownership, like 3-4 years... you should look into leasing if the rates + residual value are good.

[kc1337]

Some people like to drive new cars every 3-4 years.

[!LittleDragon]

Leasing is basically paying the depreciation. If you buy a car and sell it 3-4 years later, you'll suffer a loss anyways. With leasing, the loss is set and negotiated with the dealer... Just give the car back after and walk away.

Say you lease a $60,000 car for 3 years at $1000/month, you'll pay $36,000 during the lease period and you have the option to buy it out for another $24,000 at the end of the lease. That means the dealer expects the car to be still worth $24,000 after 3 years. If you don't want to buy it out, the dealer can take that car and sell it for $24,000. If the market value after the lease is higher than $24,000, let's say $30,000, you can buy it out for $24,000 and flip it for more. If the market value after 3 years is lower than the buyout price, give it back to the dealer and let them take the hit.

This is why GM doesn't lease anymore, they were expecting all these SUV's to have a decent value after the lease but when gas prices soared, everyone was walking away at the end of the lease and the demand and value for gas guzzlers wasn't there anymore so market values tanked and GM was taking a huge hit for every lease return.

If you plan to drive the car to the ground before dumping it then take whatever route you want.

[Rich Sandor]

Pros;
- Cheaper payments compared to financing


Not always. Some vehicles do not lease out well due to rates & residuals.


Cons;
- Some buyouts are higher compared to the actual market value of the car when your lease is up



If the market value after the lease is higher than $24,000, let's say $30,000, you can buy it out for $24,000 and flip it for more. If the market value after 3 years is lower than the buyout price, give it back to the dealer and let them take the hit.


Having equity in a lease is a BAD thing. I'm absolutely amazed at how the import manufacturers have been able to sucker people into thinking that it's a GOOD thing to have to buy out your lease and sell it to get your money back. Think about it.. all that means is that you've paid too much every month on your lease payment. Leasing is a better deal if the manufacters take a hit on the lease end value instead, which means your monthly payment is lower, and you don't have to try to get your money back at the end of the lease.

Some people think that leasing is like renting and that it's always better to buy. Well yeah, it is like renting, except you're not renting a HOUSE that increases in value, you're renting a CAR that is constantly DECREASING in value. A lot of old people can't seem to wrap their stupid traditional heads around this concept. (These are usually the same people who think their old junker trade is worth stupid money)

Now, some people don't like the COMMITMENT that leasing demands - and that's a very valid point, especially if you might be moving around or needing to change vehicles before your lease is up. It's better to finance in that case.

Basically if you change vehicles every 2-3-4 years, leasing is great. If you tend to keep your cars for 10+ years, and/or tend to modify them, go with a purchase instead.

If you do go into a dealership thinking about leasing, don't expect to get a really nice car for ~$300 a month. It's basic math - $300 x 36 = $10,800. That's about what a $16,000 MSRP car leases out to, depending on rates & residuals. Also, calculated residuals drop every quarter. So, if you're leasing, you want to get the current model year, as soon as possible, unless the lease rates are still really high.

[b-dub]

So, if you're leasing, you want to get the current model year, as soon as possible, unless the lease rates are still really high.

Isn't it the opposite?

For ex. I was looking at a M3 sedan. There was an 08 on the lot that could be had for something like 1.9% lease rate + 10k discount where as the 09 model was (i think) 5.9% and smaller discount.

Wouldn't it make sense to lease the 08 instead of getting the 09?

Whereas if I were to buy the car, it would be (can't say better) but acceptable to buy the 09 because it's a newer car, thus you can sell it for more later on down the road?


*sigh*
Almost all the car companies are taking away leasing and moving towards financing and balloon payments. Before the whole US $ drop, BMW had the best lease deals. They would have 57-58% residual (which means you only paid 43% of the car in the first 36 years and you could give the car back to them) and free maintenance. Now their residuals are closer to 50-52%, I guess this works better if you are buying out the car but why not just finance?

edit: I talked to my CA last month and he was telling me that each lease return that was coming back, BMW would take a hit of 5-30k on each of those vehicles. Cars like 7-series/M5/M6 were the worst because they depreciated alot + the price adjustment that BMW made to be on par with American vehicles = big hit.

[Rich Sandor]

If you can get a low lease rate AND a big discount on an '08 than it would far overshadow the lower residual and make it a smoking deal.

BMW is doing some creative stuff with their incentives right now. They will feel the pain in 3 years.

[Blinky]

Rich, just out of curiousity, does a salesperson make more on a lease or a purchase? Equal? PM is ok if you don't want to discuss publicly.

PS - a house depreciates (unless it's a character home - whose "appreciation" will probably be destroyed by maintenance and renovations) - it's the land that appreciates, which really makes me question condoinsanity - but that's a different topic.

[Rich Sandor]

The salesperson makes money on the difference between invoice and sale price.

Unless the manufacturer is giving out spiffs (bonus pay) for selling a lease or finance, it doesn't make any difference to the salesman.

The big advantage to leasing for a salesperson, is you get the chance to sell another vehicle to the person after 3 years. You can imagine a salesman who's been on the business for 10+ years, every month they have X amount of lease returns, many of which they can turn into another sale..

[Meowjin]

I personally believe who ever leased a plus 50grand car in the past 2 years has won, because i know several 2 year luxury cars are worth 50-75% less. You win if you paid less than 50%

[q0192837465]

I still don't like how rigid leases are. When you lease is up, you have to make a decision on whether to lease a new car orget rid of it or wuever. Basically forcing you to make a decision even if the deals r super crappy. Financing will allow you to take ur time and plan slowly on how you wanna proceed. If money is tight, keep the car for a year or 2 longer.

I agree that leasing is living beyond ur mean. And seriously, those rates mean jack. With all those fees taken into account, the REAL interest rate is much higher than wut they claim to be.

[quasi]

Leasing works best for me. I put lots of mileage on domestic trucks which depreciate fairly quickly. Instead of buying it I do 2 or 3 year leases. This way the vehicle is pretty much maintenance free besides oil changes, brake and tires. I get rid of them before the mileage is stupid high and I'm never driving a vehicle more then 3 years old. My company also writes it off.

[Rich Sandor]

I still don't like how rigid leases are. When you lease is up, you have to make a decision on whether to lease a new car orget rid of it or wuever. Basically forcing you to make a decision even if the deals r super crappy. Financing will allow you to take ur time and plan slowly on how you wanna proceed. If money is tight, keep the car for a year or 2 longer.

I agree that leasing is living beyond ur mean. And seriously, those rates mean jack. With all those fees taken into account, the REAL interest rate is much higher than wut they claim to be.

You actually have MORE choices when you lease than if you finance. You also know when your lease is going to be up, so you have time to look around and see what's out there before your lease is up. You can also extend your lease with most companies by a few months if you absoulutely need to, you just pay the extra depreciation. If money is tight, you can get into a cheaper car when the lease is up.. but if you're financing, you are forced to keep paying the same (higher) monthly payment unless you sell it, at which point you will take a huge loss on depreciation. You actually have LESS choices if you finance.

Also, the rate is what the rate is, nobody can charge you a "fake" rate. What does happen is that the marketing department has $XXXX that they can play with, and either they can give you $XXXX off the price, or give $XXXX to the credit branch to reduce the interest rate, or some combo of that. That is always changing, but usually the monthly payment is pretty much the same.

And honestly, most people wouldn't know a good deal if it slapped them across the face and said: "I'm a GOOD DEAL, BITCH!"

I've seen people pay $6000 over invoice and they were the happiest customers in the world, and then I've seen customers buy a car for well UNDER invoice and still think they were getting ripped off. :confused:

A "good deal" is all about perception.

[Harvey Specter]

One of my friends leased a Charger SRT-8 just before Chrysler dropped the leasing late and his payments came out to almost $900/month (with tax). It sounded like a good deal for a $50,000+ car but the problem now is the car, like all Chrysler products, have dropped so much in value that he could have went out and financed the same car with a lower monthly payment.

[BlackZRoadster]

maybe they don't want to keep the car for long

for me, even if i had the money, i would not pay 50k straight cash for a BMW all at once.
i'd rather lease it because 1. i will have more choices in a few years when my lease is over, 2. i can spend that other 40k elsewhere investing, 3. if i ever sell the car within 5 years, i am going to get a big dep hit

leasing a bmw for say 3/4 years, is not only gonna be 10k, typically on a lease i'd say ur paying for half the car on a 4 year lease including the downpayment

[What_the?]

here's a question... if the car gets into a bad accident i.e. greater than $2000 worth... if it's fixed, would the company care at the time of lease return as long as everything's fixed?

Because if they don't, I see this as a plus for leasing, since if this car were financed, that big accident would surely drop the price of the car if you were to try to sell it... but if you could just return it, the accident would not affect you at all...

so the thing is, would that accident or multiple accidents matter on a lease return?

[Harvey Specter]

here's a question... if the car gets into a bad accident i.e. greater than $2000 worth... if it's fixed, would the company care at the time of lease return as long as everything's fixed?

Because if they don't, I see this as a plus for leasing, since if this car were financed, that big accident would surely drop the price of the car if you were to try to sell it... but if you could just return it, the accident would not affect you at all...

so the thing is, would that accident or multiple accidents matter on a lease return?

Nope, they don't care as long as the car has been fixed.

[.Renn.Sport]

One of my friends leased a Charger SRT-8 just before Chrysler dropped the leasing late and his payments came out to almost $900/month (with tax). It sounded like a good deal for a $50,000+ car but the problem now is the car, like all Chrysler products, have dropped so much in value that he could have went out and financed the same car with a lower monthly payment.

thats why its only smart to lease cars with high residual

[Rich Sandor]

thats why its only smart to lease cars with high residual

Yes and no. You want the residual to be as high as possible, but that's not the only consideration. If the lease rate is well over 10%, then that might cancel out the nice high residual. You have to look at the whole picture.

[heleu]

Nope, they don't care as long as the car has been fixed.

Really? The residual must plumet though. Doesn't that affect the resale value? The dealership would have to declare it.

[What_the?]

if this is true indeed, then that's a huge plus for leasing

i've known people who've owned their cars for like less than 6 months only to have it go through an accident which would totally drop the car's residual value

that part works well then :)

[Harvey Specter]

I'm sure it hurts the resale value but that's one reason why most people stay away from lease returns because you have no idea how the cars been driven. And I've been leasing for years now and the last 3 cars I've returned had some sort of claim on it and I've never had a issue with the leasing company. My brother had a leased out 2003 325i a few years back which had almost $10,000 worth of claims on it when he returned it and BMW never asked one question when the car was returned. As long as the damage has been repaired the leasing company will not say anything.

The whole claims or the car been a lemon is the reason why I listed "- Don't have to worry about getting stuck with a lemon or trying to sell a car that's been in an accident or has a big ass ICBC claim" as one of the pros about leasing.