991 GT3 leasing?
02-15-2015, 09:41 PM
#61
GT3 player par excellence
Lifetime Rennlist
Member
Lifetime Rennlist
Member
^ u mean we CANNOT use trade in credit
don't get me all excited. that's like 50000$ differemce annually!
don't get me all excited. that's like 50000$ differemce annually!
02-15-2015, 09:49 PM
#63
From Marina del rey en route to dukes on PCH/Venice beach over 2 hours. Made a u-turn onto sunset blvd going toward ucla, then got forced to take 405 N to 101 to 10, then to Covina, just for some dinner and a movie. (yes, by then it became dinner)
FOUR AND HALF Hours, stuck in traffic, listened to top 40 songs in the sixties on channel 6.
02-15-2015, 09:53 PM
#64
Damn man. Lucky you don't get clipped by Jenner. It's gotten far worse Marina to Dukes is less than 20 miles. MOVE! Good luck.
02-15-2015, 10:15 PM
#65
RL Community Team
Rennlist Member
Rennlist Member
Holy cow, 10% tax in LA? Why do people live there!
In NJ, its only 7%, plus if you trade a car, you only pay tax on the sale price minus trade price. In a lease, you also obviously pay tax on 3 years only.
So take my case for example. I traded my M3 before taking the M5, and because the trade price (not equity) exceeded leased amount, I paid no tax on my M5. How cool is that? I love NJ.
In NJ, its only 7%, plus if you trade a car, you only pay tax on the sale price minus trade price. In a lease, you also obviously pay tax on 3 years only.
So take my case for example. I traded my M3 before taking the M5, and because the trade price (not equity) exceeded leased amount, I paid no tax on my M5. How cool is that?
I love NJ.Here in SoCal, it's a chilly 78 F. The slight ocean breeze brought it down to about 76 F.
Damn windchill.
02-15-2015, 10:21 PM
#66
Anyway, I feel bad for those suffering from the blizzard. Went to high school in Boston, had one of the worst blizzard in history. Man, that was brutal. No need to make fun of those who suffer from the natural hazards.
You know what I mean?
02-15-2015, 10:40 PM
#67
Burning Brakes
I was just in it yesterday.... I was in the car over 4.5 hours. Check this out.
From Marina del rey en route to dukes on PCH/Venice beach over 2 hours. Made a u-turn onto sunset blvd going toward ucla, then got forced to take 405 N to 101 to 10, then to Covina, just for some dinner and a movie. (yes, by then it became dinner)
FOUR AND HALF Hours, stuck in traffic, listened to top 40 songs in the sixties on channel 6.
From Marina del rey en route to dukes on PCH/Venice beach over 2 hours. Made a u-turn onto sunset blvd going toward ucla, then got forced to take 405 N to 101 to 10, then to Covina, just for some dinner and a movie. (yes, by then it became dinner)
FOUR AND HALF Hours, stuck in traffic, listened to top 40 songs in the sixties on channel 6.
02-15-2015, 10:41 PM
#68
RL Community Team
Rennlist Member
Rennlist Member
Actually the climate is so screwed up right now. It's February, we should be cold, even in LA. But now it's like a summer. The earth is definitely not behaving right.
Anyway, I feel bad for those suffering from the blizzard. Went to high school in Boston, had one of the worst blizzard in history. Man, that was brutal. No need to make fun of those who suffer from the natural hazards. You know what I mean?
Anyway, I feel bad for those suffering from the blizzard. Went to high school in Boston, had one of the worst blizzard in history. Man, that was brutal. No need to make fun of those who suffer from the natural hazards.
You know what I mean?Just a reminder that we here in SoCal pay for our nice weather.
02-15-2015, 10:50 PM
#69
02-16-2015, 12:30 AM
#71
All these lease discussions made me want to run some detailed scenarios on a spreadsheet to extract the true "cost of leasing" vs. "cost of buying" as a function of down payment, residual values, interest rates, etc.
Long story semi-short, there were some interesting conclusions:
1) Assuming the lease contract residual value is less than the "true" value at the lease end, and assuming you are always willing to purchase the car at least end if this is the case, then purchasing over a given term always costs less in the end than leasing over the same term as long as purchase interest rates are equal or less than lease rates. The intuitive explanation for this is that with a lease, you are financing the residual value of the car over the entire term, while if you are financing a purchase over a similar term, your "balance" on which you're paying interest is less on average.
2) As long as the lease contract residual value is less than the true residual value, the *lower* the contract residual value, the less the effective cost of the lease is! This may be counter-intuitive, but again it's because you are paying off more of the value of the car over the term, thus the residual value balance that you are financing throughout the entire term is less, and you are paying less total interest. No matter what the contract residual, as long as it is less than the true residual value, then when you buy the car for the contract residual, pay sales tax, and then re-sell it for the true residual value, you will recover the difference and your net cost over the life of the lease will be less if the residual value was actually lower.
3) On the flip side, the only time that leasing will cost you LESS if if the car's true residual is actually worth significantly less than the contract residual (I say significantly because it has to first surpass the elevated cost of leasing per #1 and #2 above first before it actually becomes beneficial). This is exactly the scenario folks have been talking about with the car having diminished value due to a repaired wreck. Porsche can protect themselves against this by simply pushing the residual values down. The lower the value, the less likely the scenario that a customer will be able to push a car of lesser value on them. But unfortunately for them, they make less finance interest this way, and it makes lease payments higher (similar to why a 15 year mortgage has a higher payment than a 30 year, yet a 15 year "costs" you less in the end). BUT they make out big in the event an unknown (or lazy) customer simply returns the car to them and walks away rather than buying it when it's true residual is actually much higher.
4) In reality, purchase finance rates are much lower than lease finance rates. So leases are actually substantially more expensive than purchasing, even if trying to pay all the lease depreciation up front with a balloon payment (ignoring the liability this opens you up to in the event the car is totaled).
If you blindly trust my numbers for a second, here are a few scenarios. Assumptions for all are:
Sales price: $150,000
Money Factor: 0.002 (= 4.8% APR, VERY good for a lease, and unlikely to actually happen on a GT3)
Term: 36 months
Residual value: 50%
Sales tax: 9%
Purchase financing APR: 2% (assume 36 month financing)
Assume you BUY the car at the end of the lease term for the residual value (plus tax)
Scenario 1: put $75,000 down to pay all "lease depreciation" up-front
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $166,255
Net cost of leasing: $8,045
Scenario 2: put $0 down
Total cost to own car at end of LEASE term: $180,490
Total cost to own car at end of PURCHASE term: $168,590
Net cost of leasing: $11,900
Now let's even assume a grim scenario where the lease APR and finance APR are BOTH 4.8%, AND you put $75,000 down to pay off the "lease depreciation" up front. Even in that scenario you're still paying over $4,000 for the lease over the purchase:
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $170,201
Net cost of leasing: $4,099
So why lease? To summarize:
1) You want to pay the $4,000-$12,000 difference as "insurance" that your car MIGHT be worth less than the contract residual value at the end of the term. (sounds like expensive insurance to me), or
2) You can somehow claim a tax write-off for your business on the lease costs that exceeds this difference in price, or
3) You want to minimize monthly out-of-pocket expenses (in exchange for overall higher cost of ownership)
Note than none of these calculations convert every dollar spent back into Net Present Value in today's dollars (essentially no "opportunity cost" of money is factored in, to keep things simple).
I threw this together relatively quickly so if anyone wants to poke around in the spreadsheet and find bugs or alternate conclusions please feel free: https://dl.dropboxusercontent.com/u/...uying%20v1.xls
Long story semi-short, there were some interesting conclusions:
1) Assuming the lease contract residual value is less than the "true" value at the lease end, and assuming you are always willing to purchase the car at least end if this is the case, then purchasing over a given term always costs less in the end than leasing over the same term as long as purchase interest rates are equal or less than lease rates. The intuitive explanation for this is that with a lease, you are financing the residual value of the car over the entire term, while if you are financing a purchase over a similar term, your "balance" on which you're paying interest is less on average.
2) As long as the lease contract residual value is less than the true residual value, the *lower* the contract residual value, the less the effective cost of the lease is! This may be counter-intuitive, but again it's because you are paying off more of the value of the car over the term, thus the residual value balance that you are financing throughout the entire term is less, and you are paying less total interest. No matter what the contract residual, as long as it is less than the true residual value, then when you buy the car for the contract residual, pay sales tax, and then re-sell it for the true residual value, you will recover the difference and your net cost over the life of the lease will be less if the residual value was actually lower.
3) On the flip side, the only time that leasing will cost you LESS if if the car's true residual is actually worth significantly less than the contract residual (I say significantly because it has to first surpass the elevated cost of leasing per #1 and #2 above first before it actually becomes beneficial). This is exactly the scenario folks have been talking about with the car having diminished value due to a repaired wreck. Porsche can protect themselves against this by simply pushing the residual values down. The lower the value, the less likely the scenario that a customer will be able to push a car of lesser value on them. But unfortunately for them, they make less finance interest this way, and it makes lease payments higher (similar to why a 15 year mortgage has a higher payment than a 30 year, yet a 15 year "costs" you less in the end). BUT they make out big in the event an unknown (or lazy) customer simply returns the car to them and walks away rather than buying it when it's true residual is actually much higher.
4) In reality, purchase finance rates are much lower than lease finance rates. So leases are actually substantially more expensive than purchasing, even if trying to pay all the lease depreciation up front with a balloon payment (ignoring the liability this opens you up to in the event the car is totaled).
If you blindly trust my numbers for a second, here are a few scenarios. Assumptions for all are:
Sales price: $150,000
Money Factor: 0.002 (= 4.8% APR, VERY good for a lease, and unlikely to actually happen on a GT3)
Term: 36 months
Residual value: 50%
Sales tax: 9%
Purchase financing APR: 2% (assume 36 month financing)
Assume you BUY the car at the end of the lease term for the residual value (plus tax)
Scenario 1: put $75,000 down to pay all "lease depreciation" up-front
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $166,255
Net cost of leasing: $8,045
Scenario 2: put $0 down
Total cost to own car at end of LEASE term: $180,490
Total cost to own car at end of PURCHASE term: $168,590
Net cost of leasing: $11,900
Now let's even assume a grim scenario where the lease APR and finance APR are BOTH 4.8%, AND you put $75,000 down to pay off the "lease depreciation" up front. Even in that scenario you're still paying over $4,000 for the lease over the purchase:
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $170,201
Net cost of leasing: $4,099
So why lease? To summarize:
1) You want to pay the $4,000-$12,000 difference as "insurance" that your car MIGHT be worth less than the contract residual value at the end of the term. (sounds like expensive insurance to me), or
2) You can somehow claim a tax write-off for your business on the lease costs that exceeds this difference in price, or
3) You want to minimize monthly out-of-pocket expenses (in exchange for overall higher cost of ownership)
Note than none of these calculations convert every dollar spent back into Net Present Value in today's dollars (essentially no "opportunity cost" of money is factored in, to keep things simple).
I threw this together relatively quickly so if anyone wants to poke around in the spreadsheet and find bugs or alternate conclusions please feel free: https://dl.dropboxusercontent.com/u/...uying%20v1.xls
02-16-2015, 02:32 AM
#72
Race Director
This is very good, very useful and appreciated. The expensive "insurance" which leasing offers is actually in doubt anyway if PFA were to come after you for a substantially reduced value car after a wreck, and would cost substantially more if real money factor rates are taken into consideration. Barring any significant tax dedications for leasing, I think your calculations make it clear that financing is a better option, and as always, investing the money you're saving by not paying cash so as to let it work for you while you borrow at cheap rates.
02-16-2015, 04:00 AM
#73
All these lease discussions made me want to run some detailed scenarios on a spreadsheet to extract the true "cost of leasing" vs. "cost of buying" as a function of down payment, residual values, interest rates, etc.
Long story semi-short, there were some interesting conclusions:
1) Assuming the lease contract residual value is less than the "true" value at the lease end, and assuming you are always willing to purchase the car at least end if this is the case, then purchasing over a given term always costs less in the end than leasing over the same term as long as purchase interest rates are equal or less than lease rates. The intuitive explanation for this is that with a lease, you are financing the residual value of the car over the entire term, while if you are financing a purchase over a similar term, your "balance" on which you're paying interest is less on average.
2) As long as the lease contract residual value is less than the true residual value, the *lower* the contract residual value, the less the effective cost of the lease is! This may be counter-intuitive, but again it's because you are paying off more of the value of the car over the term, thus the residual value balance that you are financing throughout the entire term is less, and you are paying less total interest. No matter what the contract residual, as long as it is less than the true residual value, then when you buy the car for the contract residual, pay sales tax, and then re-sell it for the true residual value, you will recover the difference and your net cost over the life of the lease will be less if the residual value was actually lower.
3) On the flip side, the only time that leasing will cost you LESS if if the car's true residual is actually worth significantly less than the contract residual (I say significantly because it has to first surpass the elevated cost of leasing per #1 and #2 above first before it actually becomes beneficial). This is exactly the scenario folks have been talking about with the car having diminished value due to a repaired wreck. Porsche can protect themselves against this by simply pushing the residual values down. The lower the value, the less likely the scenario that a customer will be able to push a car of lesser value on them. But unfortunately for them, they make less finance interest this way, and it makes lease payments higher (similar to why a 15 year mortgage has a higher payment than a 30 year, yet a 15 year "costs" you less in the end). BUT they make out big in the event an unknown (or lazy) customer simply returns the car to them and walks away rather than buying it when it's true residual is actually much higher.
4) In reality, purchase finance rates are much lower than lease finance rates. So leases are actually substantially more expensive than purchasing, even if trying to pay all the lease depreciation up front with a balloon payment (ignoring the liability this opens you up to in the event the car is totaled).
If you blindly trust my numbers for a second, here are a few scenarios. Assumptions for all are:
Sales price: $150,000
Money Factor: 0.002 (= 4.8% APR, VERY good for a lease, and unlikely to actually happen on a GT3)
Term: 36 months
Residual value: 50%
Sales tax: 9%
Purchase financing APR: 2% (assume 36 month financing)
Assume you BUY the car at the end of the lease term for the residual value (plus tax)
Scenario 1: put $75,000 down to pay all "lease depreciation" up-front
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $166,255
Net cost of leasing: $8,045
Scenario 2: put $0 down
Total cost to own car at end of LEASE term: $180,490
Total cost to own car at end of PURCHASE term: $168,590
Net cost of leasing: $11,900
Now let's even assume a grim scenario where the lease APR and finance APR are BOTH 4.8%, AND you put $75,000 down to pay off the "lease depreciation" up front. Even in that scenario you're still paying over $4,000 for the lease over the purchase:
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $170,201
Net cost of leasing: $4,099
So why lease? To summarize:
1) You want to pay the $4,000-$12,000 difference as "insurance" that your car MIGHT be worth less than the contract residual value at the end of the term. (sounds like expensive insurance to me), or
2) You can somehow claim a tax write-off for your business on the lease costs that exceeds this difference in price, or
3) You want to minimize monthly out-of-pocket expenses (in exchange for overall higher cost of ownership)
Note than none of these calculations convert every dollar spent back into Net Present Value in today's dollars (essentially no "opportunity cost" of money is factored in, to keep things simple).
I threw this together relatively quickly so if anyone wants to poke around in the spreadsheet and find bugs or alternate conclusions please feel free: https://dl.dropboxusercontent.com/u/...uying%20v1.xls
Long story semi-short, there were some interesting conclusions:
1) Assuming the lease contract residual value is less than the "true" value at the lease end, and assuming you are always willing to purchase the car at least end if this is the case, then purchasing over a given term always costs less in the end than leasing over the same term as long as purchase interest rates are equal or less than lease rates. The intuitive explanation for this is that with a lease, you are financing the residual value of the car over the entire term, while if you are financing a purchase over a similar term, your "balance" on which you're paying interest is less on average.
2) As long as the lease contract residual value is less than the true residual value, the *lower* the contract residual value, the less the effective cost of the lease is! This may be counter-intuitive, but again it's because you are paying off more of the value of the car over the term, thus the residual value balance that you are financing throughout the entire term is less, and you are paying less total interest. No matter what the contract residual, as long as it is less than the true residual value, then when you buy the car for the contract residual, pay sales tax, and then re-sell it for the true residual value, you will recover the difference and your net cost over the life of the lease will be less if the residual value was actually lower.
3) On the flip side, the only time that leasing will cost you LESS if if the car's true residual is actually worth significantly less than the contract residual (I say significantly because it has to first surpass the elevated cost of leasing per #1 and #2 above first before it actually becomes beneficial). This is exactly the scenario folks have been talking about with the car having diminished value due to a repaired wreck. Porsche can protect themselves against this by simply pushing the residual values down. The lower the value, the less likely the scenario that a customer will be able to push a car of lesser value on them. But unfortunately for them, they make less finance interest this way, and it makes lease payments higher (similar to why a 15 year mortgage has a higher payment than a 30 year, yet a 15 year "costs" you less in the end). BUT they make out big in the event an unknown (or lazy) customer simply returns the car to them and walks away rather than buying it when it's true residual is actually much higher.
4) In reality, purchase finance rates are much lower than lease finance rates. So leases are actually substantially more expensive than purchasing, even if trying to pay all the lease depreciation up front with a balloon payment (ignoring the liability this opens you up to in the event the car is totaled).
If you blindly trust my numbers for a second, here are a few scenarios. Assumptions for all are:
Sales price: $150,000
Money Factor: 0.002 (= 4.8% APR, VERY good for a lease, and unlikely to actually happen on a GT3)
Term: 36 months
Residual value: 50%
Sales tax: 9%
Purchase financing APR: 2% (assume 36 month financing)
Assume you BUY the car at the end of the lease term for the residual value (plus tax)
Scenario 1: put $75,000 down to pay all "lease depreciation" up-front
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $166,255
Net cost of leasing: $8,045
Scenario 2: put $0 down
Total cost to own car at end of LEASE term: $180,490
Total cost to own car at end of PURCHASE term: $168,590
Net cost of leasing: $11,900
Now let's even assume a grim scenario where the lease APR and finance APR are BOTH 4.8%, AND you put $75,000 down to pay off the "lease depreciation" up front. Even in that scenario you're still paying over $4,000 for the lease over the purchase:
Total cost to own car at end of LEASE term: $174,300
Total cost to own car at end of PURCHASE term: $170,201
Net cost of leasing: $4,099
So why lease? To summarize:
1) You want to pay the $4,000-$12,000 difference as "insurance" that your car MIGHT be worth less than the contract residual value at the end of the term. (sounds like expensive insurance to me), or
2) You can somehow claim a tax write-off for your business on the lease costs that exceeds this difference in price, or
3) You want to minimize monthly out-of-pocket expenses (in exchange for overall higher cost of ownership)
Note than none of these calculations convert every dollar spent back into Net Present Value in today's dollars (essentially no "opportunity cost" of money is factored in, to keep things simple).
I threw this together relatively quickly so if anyone wants to poke around in the spreadsheet and find bugs or alternate conclusions please feel free: https://dl.dropboxusercontent.com/u/...uying%20v1.xls
One thing missing is the MRM (Maximum Residual MSRP) value of the GT3. The residual is based on the MRM. Any amount over the MRM adds nothing to the residual. This also changes the monthly payment amount if the sale price is more than the MRM. All $$ over the MRM are divided directly by the term and quickly raise the monthly payment on highly optioned cars.
02-16-2015, 12:01 PM
#74
My understanding is the MRM just limits the residual value % to only applying up to some maximum MSRP value. This could be treated as a lower residual value % on the full MSRP, so the calcs should still hold (one can play with lowering the residual and increasing the MSRP in the spreadsheet).
Great analysis , thanks.
One thing missing is the MRM (Maximum Residual MSRP) value of the GT3. The residual is based on the MRM. Any amount over the MRM adds nothing to the residual. This also changes the monthly payment amount if the sale price is more than the MRM. All $$ over the MRM are divided directly by the term and quickly raise the monthly payment on highly optioned cars.
One thing missing is the MRM (Maximum Residual MSRP) value of the GT3. The residual is based on the MRM. Any amount over the MRM adds nothing to the residual. This also changes the monthly payment amount if the sale price is more than the MRM. All $$ over the MRM are divided directly by the term and quickly raise the monthly payment on highly optioned cars.
