Car Buy vs Lease Pros and Cons if we have the cash

[Anonymous]

We are getting a new Volvo SUV. The price out the door if we were to purchase will be nearly identical to the NPV of lease payments + residual at. 4.5% discount rate. We’ve never leased before but are open to it because:

PROs
1. Keeps our cash flexible
2. Never owned a Volvo and want to make sure it’s not a dud
3. Possibly easier to negotiate slightly better terms at the last minute if we lease because it seems dealerships make money via financing

But there are also CONs:
1. We have the cash and a 4.5% discount rate is kind of high? I guess. We don’t have much other debt besides for a cheap mortgage.
2. Worried we won’t keep the car clean / nice enough (we don’t have a garage and have a toddler)
3. Hassle of more paperwork and logistics now and later. We aren’t likely to want to upgrade and get the new best thing in 3Y. Drove our last car for >10Y.
4. Gap insurance may be slightly more expensive?

Any other pros and cons we should consider?

[Anonymous]

I don’t want to double post but would this be better in Money and Finance?

[Anonymous]

Anonymous wrote:We are getting a new Volvo SUV. The price out the door if we were to purchase will be nearly identical to the NPV of lease payments + residual at. 4.5% discount rate. We’ve never leased before but are open to it because:

PROs
1. Keeps our cash flexible
2. Never owned a Volvo and want to make sure it’s not a dud
3. Possibly easier to negotiate slightly better terms at the last minute if we lease because it seems dealerships make money via financing

But there are also CONs:
1. We have the cash and a 4.5% discount rate is kind of high? I guess. We don’t have much other debt besides for a cheap mortgage.
2. Worried we won’t keep the car clean / nice enough (we don’t have a garage and have a toddler)
3. Hassle of more paperwork and logistics now and later. We aren’t likely to want to upgrade and get the new best thing in 3Y. Drove our last car for >10Y.
4. Gap insurance may be slightly more expensive?

Any other pros and cons we should consider?

For this reason alone we don't lease. I'm not worried about it being a dud, you will have a warranty and you will know before the warranty expires if the car is a dud. Unless you want to constantly be cycling new cars, buying is better and don't let the lease-crazies fool you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We are getting a new Volvo SUV. The price out the door if we were to purchase will be nearly identical to the NPV of lease payments + residual at. 4.5% discount rate. We’ve never leased before but are open to it because:

PROs
1. Keeps our cash flexible
2. Never owned a Volvo and want to make sure it’s not a dud
3. Possibly easier to negotiate slightly better terms at the last minute if we lease because it seems dealerships make money via financing

But there are also CONs:
1. We have the cash and a 4.5% discount rate is kind of high? I guess. We don’t have much other debt besides for a cheap mortgage.
2. Worried we won’t keep the car clean / nice enough (we don’t have a garage and have a toddler)
3. Hassle of more paperwork and logistics now and later. We aren’t likely to want to upgrade and get the new best thing in 3Y. Drove our last car for >10Y.
4. Gap insurance may be slightly more expensive?

Any other pros and cons we should consider?

For this reason alone we don't lease. I'm not worried about it being a dud, you will have a warranty and you will know before the warranty expires if the car is a dud. Unless you want to constantly be cycling new cars, buying is better and don't let the lease-crazies fool you.

OP here, thanks. This is good advice and realistic. I don’t know why we’re so tempted by the lease. It feels like testing the waters a bit before diving into the deep end on a luxury vehicle but there’s still a huge liability in the lease contract. Do other people just lease because they don’t have the cash or the NPV is better? Is it unusually bad lease terms to have the two match so closely, good, or average? Does anyone else do this math?

[Anonymous]

People with money lease because they want a new car in 3 years. Don’t let them tell you it’s less expensive.

[Anonymous]

We just leased an EV since we imagine the technology and options will be greater in 3 years and we can reassess. Also the tax benefits only accrued if we leased.

[Anonymous]

Anonymous wrote:We just leased an EV since we imagine the technology and options will be greater in 3 years and we can reassess. Also the tax benefits only accrued if we leased.

The looser/different rules for getting the EV tax credit in leases (e.g. no income and country of manufacture restrictions) is an legitimate consideration in favor of leasing.

[Anonymous]

OP here. Agree on the rebate being a factor in the lease decision. The NPV of payments in a lease scenario even with the rebate is almost exactly even with purchasing outright at a discount rate of 4.5%… it just doesn’t seem like a great deal since we have the cash? We’re really torn and may just not buy a car for a while longer. Other feedback welcome on whether the lease NPV is usually better than buying outright or if it’s just that people don’t usually have the cash. Thanks all for the responses!