denniscasey

Would appreciate comments to let me know if my logic is correct in following where I compared lease to purchase. As we know there are pros and cons to both depending on many things so I am not making any comments on one being "better" than other. I just want to clearly understand leasing vs buying because as mentioned in an earlier post I have no experience in leasing, have always purchased cars.

I went to Porsche dealer and explained just what I said above. We did a pro forma analysis on 2015 Cayman S costing roughly $78,700. I live in state where sales tax for lease is levied only on amount of lease, not on full sales price of car. So with lease I pay $2,200 in sales tax vs $5,200 for purchase (tax rates also different lease vs buy). I did 27 months with 5000 miles per year. I tried to come up with total costs (excluding maintenance) at end of 27 months assuming I could "sell" car for residual value ($55,800 in this case) at end of 27 months in case of buying car. Lease payments $1,081 per month, down payment for lease $4,000. On purchase side I assumed down payment of $35,720 so I financed $43,000 for 27 months at interest rate of 2.4% available here.

At end of day the total costs associated with lease were $35,427 and total costs for buying car were $30,227 (assuming I could sell car for residual value of $55,800). So I am thinking it costs me an extra $5,200 to lease car for this term vs buying car and then selling car at end of 27 months.

Is this logic correct?? Porsche business manager agreed with this, but that made me wonder if I did it correctly.

Again, this "analysis" does not consider other reasons for leasing vs buying, I just wanted to get a feel for extra cost associated with leasing. Porsche guy told me Porsche basically makes their profit on leasing via money factor (interest they charge on lease payments) and maybe other things like gap insurance, acquisition fee ($995 in this case) and maybe some other "hidden" fees he did not tell me about. There is a $350 disposal fee also at end of lease if I do not get another Porsche. Thank you for comments.

Spokayman

The results of your analysis hinge largely on the "residual value" that you are using.
I don't know if $55,800 is the amount the car would be worth in 27 months with about 11,000 to 12,000 miles on the odo.
That figure seems low to me, but I don't follow resale values of newer cars, and a quick internet search didn't reveal anything.
I don't know if you have taken into account the time value of money in your analysis.
The $35K down payment would earn some return in 27 months even if invested conservatively. This would be a small plus for the side of leasing.

I think that you have generally answered your question though. You know leasing costs more. It may be only $4K more or it may be $8K more. It depends on the residual or value in 2-3 years.
You have to weigh the extra thousands you will spend to have the ease of just turning over the keys at the end of the lease. It may be worth it to you, and to others it will not.

PCA1983

I think it's because Porsche does not subsidize leasing the way many other mfrs do. Another possible gotcha with a lease is whether u can get out of it without paying extra charges for what is deemed by them to be more than normal wear and tear. And u must do the maintenance their way. You could get dinged on something like brake or tire wear, or a small dent or scrape, or some kind of interior stain or damage. It's their call at the end of the lease, not yours.

denniscasey

Thank you for comments and I agree. Spokeyman you are right about residual value being important variable in my calculations. I think Porsche puts residual value on the low side so they maximize difference between purchase price and residual (big determinant of payments). On the other hand, if one decides to keep the car you can buy it for residual value. So if Porsche gives low residual value and market is actually higher value at lease end or during lease you can buy car at a good price. On the other hand if market value is lower than residual value you just turn car in at lease end.

And PCA1983 I agree a big unknown is what happens when I turn car in--are they going to ding me for a bunch of minor items. Not a good indicator, but with leasing being so popular I am thinking the abuse at turn in time may not be so bad or word would get out.

By the way, I did go back to Porsche dealer and talk to another one of their finance people. She pointed out that "acquisition fee" of $995 was folded into monthly payments ($995 profit for Porsche) and "sales tax" was included in "down payment." I had added those separately so basically double counted. Making that correction difference between leasing and buying car (in my particular analysis) ended up being $1945 instead of $5000 as I had in my first post. So I don't know if first person I talked to did not really understand the lease vs purchase comparison of what--certainly not in his best interest to let me think leasing "costs" $5000 more vs purchase.

Admittedly I over-analyze, but do like to understand options available.

thomapa1

My feeling is that if you are overanalyzing lease vs purchase to see which is the most attractive financially...you will likely drive yourself insane before arriving at a clear analysis.

Wife leased about 5 cars and we enjoyed being able to fix a monthly cost, rarely worry about unexpected maintenance costs, swap to something else in 3 years as our family needs changed.
We bought a car 6 years ago...as soon as we made the last payment, we sold it and leased again. Wife has zero tolerance for the unexpected $1k maint. bill.
Leasing costs more in the end - but not a whole lot when you take everything in.

Identify your priorities first - then go with lease vs buy

Lease =
you like to drive different cars every few years
you want to avoid maintenance costs
you drive a consistent # of miles per year

Purchase =
you want to save money in the long run
you can tolerate car downtime and repairs, unexpected bills
you like keeping your car for a long time

Spokayman

I've never leased a vehicle, so I don't understand the finer details of the plans.
But, how is it that you don't have to worry about maintenance costs on a leased car?
Certainly you cant avoid maintenance costs. Maintenance has to be done and it costs money. Is it figured into the lease payment?

Likewise, how is it that a purchased car has downtime and a leased car doesn't?

From what I can see the only purpose of leasing instead of purchasing seems to be the ease with which you can rid yourself of the car in a 2-4 year period. It might be easier to turn in a leased car, but it is typically not very difficult to trade in a late model car either.

On the other hand, if all that we have to worry about is deciding to lease vs purchase a new Porsche, we are doing pretty well financially.
And if we're doing well financially, what's a $1,000 to $2,000 repair/maintenance bill compared to $1000/Mo lease or purchase payments?

thomapa1

Generally,
you will lease a car for 3 years - therefore, a safe assumption is that you will never be hit with big repair bills...a set of tires and oil changes.
If you buy a car, you will typically hold for 8-10 years. After the factory warrantee expires, you carry a greater risk of things going wrong. Greater maintenance may be timing belt change, water pump, control arms, shocks, wheel bearings, A/C, brakes, and who knows what else. You will likely never get this deep into maintenance with a leased car that you only hold for 3 years.
Sometimes you get lucky and have a low maintenance vehicle for 10 years - many times, it does not go this way.
So either you spend more to constantly swap your leased cars and avoid costly maintenance, or you hold your car and have to manage the unknowns.
It is simple.

Dr.Bill

As a general rule, leasing (aka renting) is always the most expensive way to drive a car. There are some rare exceptions - like when you can deduct it as a business expense. Me, I hate to borrow money for 'toys'.

Spokayman

You are comparing apples to oranges there.
I was comparing two different ways to possess a late model car.
One can always buy the car instead of leasing and trade it in (or sell it yourself) every 3-5 years saving the money that you would be paying to "rent/lease" it. Maintenance should be the same either way.

I was trying to answer the OP's question regarding cost of leasing analysis, and the best answer I could offer is that it depends upon the residual value.

But the overall point is that leasing is more expensive because the concept of leasing is "renting", and the renter is in business to make a profit off of the rentee. As a general concept I don't believe it is in my best interest to rent anything short of a rarely used piece of equipment I need such as a lawn aerator, high CFM compressor, etc.

I think the OP is wise to try to determine the true cost of leasing vs purchasing, and to that end there might be info on the internet that would help organize his thoughts and math for a good comparison.

manitou202

Leasing basically comes down to the residual and the money factor (interest rate). If you can get a low money factor, and you only plan on keeping the car for the lease period, they can work out pretty well.

I typically lease my daily driver because I like to drive new cars, I typically drive only 10K per year, and I don't mind having a fixed car payment. At the end of the lease, I typically take my car to CarMax for a trade-in price. If it's more than the residual, I trade it in and walk away with extra cash. If it's less, than I simply turn the car in at the end of the lease and walk away knowing that I paid less in depreciation than what was estimated. Either way, not a bad deal.

However, I purchased my Cayman S instead of leasing for one primary reason. I wanted to be able to get rid of the car at any time for financial reasons or in case I wanted a different toy. I've had mine for 6 months and I'm already dreaming about my next Porsche, but who know I might still have it 5 years from now. But I want the flexibility.

denniscasey

Thanks to all for informative comments. As mentioned by many of you, I am basically trying to see full costs leasing vs buying. Then beyond the quantitative things are the qualitative reasons for leasing or buying which sort of fits into the "it depends" category. And as mentioned also by forum I am thinking the main cost contributors to leasing cost is the residual value and money factor that Porsche sets and where most of their lease profit is--and residual value vs market value at end of lease can determine what you do with car at end of lease (including buying it if you really like it).

Of course the big unknown at end of lease is whether or not your dealer plays fair or tries to stick you with a bunch of costs--that is where dealer rep counts.
Thanks again.