Car Lease - 45K car - zero down?

[Anonymous]

I just did the calculation on an ES 350 that had an MSRP of $45000, residual value of $23000, money factor of .002992. 3 year lease. Payment of $810. I probably wouldn't do it. Not worth it (and I am not against all leases). BMW tends to be cheaper to lease because their residuals are better. Maybe look at a 3 series?

[Anonymous]

I think the IS is actually one of USNWR's top lease deals for June. The money factor you're using seems very high.

[Anonymous]

Anonymous wrote:I think the IS is actually one of USNWR's top lease deals for June. The money factor you're using seems very high.

I looked it up. It was the ES. Maybe the IS is better.

[Anonymous]

We have leased cars on multiple occasions.

There is no pat answer as to whether it is better to lease than to buy. As a general rule if you are going to keep a car for many years it probably makes more sense to buy. But that is not always the case because even when you lease you can still buy the car at the end of the lease. So you would have relatively low payments during the lease term and then can exercise the option to buy the car at the end of the term.

The factors that go into whether a lease would make sense is the capitalized cost - what you are paying for the vehicle - the money factor (in other words the interest rate) and the residual percentage that is a percentage of the MSRP. Dealers usually play around with the cap cost, the money factor and sometimes options that they try to add to the cost. They may also try and jack up the acquisition fee (bank fee) and dealer processing.

Those who say that leasing is always a mistake are just plain wrong. It is as ludicrous as saying that buying a house is always better than renting one.

[Anonymous]

We leased because we have some money tied up in non liquid assets. We figured that if we bought the car at the end of the lease, we would pay the price of the car minus 3 years. The money we paid for the lease would be about the same as if we had purchased it in the first place. We lost some money in the transaction, but we are older and could not wait until we saved up the money. Worked for us. we are buying the car after the lease.

[Anonymous]

Anonymous wrote:OP - if you are a young person trying to build your wealth, I'd strongly suggest against leasing or buying an expensive car. Go buy a Camry or an Accord. Save the money.

How does an Avalon compare to these?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Leasing, IMHO, is simply stupid. End of the day, you have nothing to show.

I have always maintained that it is a vehicle to drive a car that you can't afford or one that is too impractical to own long term (both of which are poor decisions). I am honestly interested in what PP posted above. Do the numbers work in some circumstances or not? Every time I have looked at it you end up spending tens of thousands over the course of 10-15 years if you lease several cars back to back rather than buying one and driving it into the ground.

OK, let's try the following hypothetical:

Ted is about to graduate from graduate school and has obtained a decent first job in his field. Pay is ok for a new hire, but not that high objectively, with room to increase substantially over the next few years. Ted has substantial student loans, no money in the bank, and $4,000 in credit card debt. His grandmother has offered him $2,000 to use to lease or buy a car.

Ted has never owned a car before, but needs one for his job. He may have to drive clients or his boss around, and so had a strong desire for a new car. He would really love to own a BMW 3 series some day, but recognizes now is not the time. He decides on a Honda Civic. He goes to the dealer who tells him he can either lease the Civic for $129/mo with $2,000 due at signing, or buy the Civic for $279/mo with $2,000 down.

Ted asks you whether he should lease or buy. What do you tell him?

I would tell him to lease the civic, pay of his credit card debt, and, if he is in strong financial shape at the end of the Civic lease term, purchase a BMW.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Leasing, IMHO, is simply stupid. End of the day, you have nothing to show.

I have always maintained that it is a vehicle to drive a car that you can't afford or one that is too impractical to own long term (both of which are poor decisions). I am honestly interested in what PP posted above. Do the numbers work in some circumstances or not? Every time I have looked at it you end up spending tens of thousands over the course of 10-15 years if you lease several cars back to back rather than buying one and driving it into the ground.

OK, let's try the following hypothetical:

Ted is about to graduate from graduate school and has obtained a decent first job in his field. Pay is ok for a new hire, but not that high objectively, with room to increase substantially over the next few years. Ted has substantial student loans, no money in the bank, and $4,000 in credit card debt. His grandmother has offered him $2,000 to use to lease or buy a car.

Ted has never owned a car before, but needs one for his job. He may have to drive clients or his boss around, and so had a strong desire for a new car. He would really love to own a BMW 3 series some day, but recognizes now is not the time. He decides on a Honda Civic. He goes to the dealer who tells him he can either lease the Civic for $129/mo with $2,000 due at signing, or buy the Civic for $279/mo with $2,000 down.

This is how we are approaching getting a new car soon. We have been a single car family and it has caused significant hardship to the point that we need a second car. I'm concerned about getting a high car payment or fixing a junker so we will be leasing. It will be for 2-3 years. I don't consider it a good idea for 10+ years but in the short term it works

Ted asks you whether he should lease or buy. What do you tell him?

I would tell him to lease the civic, pay of his credit card debt, and, if he is in strong financial shape at the end of the Civic lease term, purchase a BMW.

[Anonymous]

Why don't you just email a dealer and ask? Would take you 3 minutes. I don't understand people who ask questions like this one.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It depends on the car and the residual value.

this is the right answer. The cost of the lease is the cost of the car less the residual value times the money factor, so change any one of those factors and you change the monthly payment.

With a few exceptions (like people who can deduct lease costs as a business expense, people who plan to buy a new car every three years, and some electric vehicle leases), leases are generally a bad financial move. In fact, big car payments are an easy way to blow a hole in your monthly budget so I'd encourage you to think twice or 3x about whether that's really the best use of money for the next 3-5 years.

I used to work for a large automotive company that had an in house finance shop, and agree with these PPs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Leasing, IMHO, is simply stupid. End of the day, you have nothing to show.

I have always maintained that it is a vehicle to drive a car that you can't afford or one that is too impractical to own long term (both of which are poor decisions). I am honestly interested in what PP posted above. Do the numbers work in some circumstances or not? Every time I have looked at it you end up spending tens of thousands over the course of 10-15 years if you lease several cars back to back rather than buying one and driving it into the ground.

OK, let's try the following hypothetical:

Ted is about to graduate from graduate school and has obtained a decent first job in his field. Pay is ok for a new hire, but not that high objectively, with room to increase substantially over the next few years. Ted has substantial student loans, no money in the bank, and $4,000 in credit card debt. His grandmother has offered him $2,000 to use to lease or buy a car.

Ted has never owned a car before, but needs one for his job. He may have to drive clients or his boss around, and so had a strong desire for a new car. He would really love to own a BMW 3 series some day, but recognizes now is not the time. He decides on a Honda Civic. He goes to the dealer who tells him he can either lease the Civic for $129/mo with $2,000 due at signing, or buy the Civic for $279/mo with $2,000 down.

Ted asks you whether he should lease or buy. What do you tell him?

I would tell him to lease the civic, pay of his credit card debt, and, if he is in strong financial shape at the end of the Civic lease term, purchase a BMW.

If the premise is he is going to buy a new car in three years then of course it makes sense to lease. But the point is that if he had substantial student loans, I find it hard to believe it will make sense for him to buy a BMW in 3 years. I know lawyers who graduated law school with six figure debt and got big firm salaries and the smart ones used those ridiculous salaries to pay down debt, save (for retirement, down payment, etc.) and avoided lifestyle creep/golden handcuffs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Leasing, IMHO, is simply stupid. End of the day, you have nothing to show.

I have always maintained that it is a vehicle to drive a car that you can't afford or one that is too impractical to own long term (both of which are poor decisions). I am honestly interested in what PP posted above. Do the numbers work in some circumstances or not? Every time I have looked at it you end up spending tens of thousands over the course of 10-15 years if you lease several cars back to back rather than buying one and driving it into the ground.

OK, let's try the following hypothetical:

Ted is about to graduate from graduate school and has obtained a decent first job in his field. Pay is ok for a new hire, but not that high objectively, with room to increase substantially over the next few years. Ted has substantial student loans, no money in the bank, and $4,000 in credit card debt. His grandmother has offered him $2,000 to use to lease or buy a car.

Ted has never owned a car before, but needs one for his job. He may have to drive clients or his boss around, and so had a strong desire for a new car. He would really love to own a BMW 3 series some day, but recognizes now is not the time. He decides on a Honda Civic. He goes to the dealer who tells him he can either lease the Civic for $129/mo with $2,000 due at signing, or buy the Civic for $279/mo with $2,000 down.

Ted asks you whether he should lease or buy. What do you tell him?

I would tell him to lease the civic, pay of his credit card debt, and, if he is in strong financial shape at the end of the Civic lease term, purchase a BMW.

If the premise is he is going to buy a new car in three years then of course it makes sense to lease. But the point is that if he had substantial student loans, I find it hard to believe it will make sense for him to buy a BMW in 3 years. I know lawyers who graduated law school with six figure debt and got big firm salaries and the smart ones used those ridiculous salaries to pay down debt, save (for retirement, down payment, etc.) and avoided lifestyle creep/golden handcuffs.

Fine, so let's remove the BMW part. I think I'd still tell him to lease the Civic and wait three years to buy a car, even if it is another Civic. I would expect the value of him having an extra $150/mo to use to pay down his credit card debt in 2015-2017 is greater than the marginal value of him having his first paid off car loan in 2019 instead of 2022.

[Anonymous]

Buy a 2012 used car for about $17k.

[Anonymous]

^^ Yep. Buy a CPO Lexus with warranty coverage and save yourself a ton of cash. A Lexus with some miles on it is not a concern; they're built to last.

[Anonymous]

Anonymous wrote:Buy a 2012 used car for about $17k.

How does this address the issue at all? The point is that there's a higher monthly cost to owning than leasing, and in certain circumstances, that money could better be spent on other things.