Several have received their cars and considered leasing
01-29-2014, 04:26 AM
#16
In the scenario where the car is worth significantly more than the residual you just sell the car prior to the lease end. I have never had a problem doing this in the past. The only issue is the opportunity cost of the capital, but that would be even higher on a purchase.
In addition in states like California there are sales tax advantages because you only pay the tax on the payment and not the entire cost of the vehicle. If your residual is $70K you are not paying tax on that $70K which around $6K in savings. This is even greater if you turn your cars quickly. For example $100K car with payments of $1300/mo (BMW M5) that you sell after 1 year you have only paid $1200 in sales tax vs. $8600 for the purchase. That means you saved about $600/mo in tax costs.
In most instances (excluding Porsche) the cost differential between purchasing and leasing is essentially zero not counting the tax advantage. Once you add in the tax savings it will usually, but not always, tip towards leasing.
This will prove out whether you keep your cars 3 years or 8 years on high end vehicles. Take a look at a 2006 Mercedes S500. MSRP was around $95K with a current value of $15K. Total paid out the door including tax was probably around $100K including tax. Assuming NO finance costs (paid cash) $85K in depreciation plus non covered warranty expense will put your actual cost around $1000-1200 per month depending on how reliable the car was and no major issues out of warranty.
For the same cost you could have had a brand new car every three years (not too difficult to find an S550 lease in this range) without the hassle of dealing with warranty issues and gotten the latest in tech etc. In addition this does not include the opportunity cost of capital where your return on that $100K would have been 43% (S&P 500) since 2006. Another way of looking at it is ~$350 of your month payment would have been covered by the returns on your investment.
Not saying that leasing or buying is better or worse, but take emotion out of it and talk about the real numbers and costs.
In addition in states like California there are sales tax advantages because you only pay the tax on the payment and not the entire cost of the vehicle. If your residual is $70K you are not paying tax on that $70K which around $6K in savings. This is even greater if you turn your cars quickly. For example $100K car with payments of $1300/mo (BMW M5) that you sell after 1 year you have only paid $1200 in sales tax vs. $8600 for the purchase. That means you saved about $600/mo in tax costs.
In most instances (excluding Porsche) the cost differential between purchasing and leasing is essentially zero not counting the tax advantage. Once you add in the tax savings it will usually, but not always, tip towards leasing.
This will prove out whether you keep your cars 3 years or 8 years on high end vehicles. Take a look at a 2006 Mercedes S500. MSRP was around $95K with a current value of $15K. Total paid out the door including tax was probably around $100K including tax. Assuming NO finance costs (paid cash) $85K in depreciation plus non covered warranty expense will put your actual cost around $1000-1200 per month depending on how reliable the car was and no major issues out of warranty.
For the same cost you could have had a brand new car every three years (not too difficult to find an S550 lease in this range) without the hassle of dealing with warranty issues and gotten the latest in tech etc. In addition this does not include the opportunity cost of capital where your return on that $100K would have been 43% (S&P 500) since 2006. Another way of looking at it is ~$350 of your month payment would have been covered by the returns on your investment.
Not saying that leasing or buying is better or worse, but take emotion out of it and talk about the real numbers and costs.
01-29-2014, 01:33 PM
#17
Rennlist Member
[QUOTE=Nick;11087056]
Porsche allows you to make a one-time lease payment. When you do this, you don't pay the "rent" portion of the lease, aka Porsche's profit/interest/whatever you want to call it. This makes the one-time lease payment something like 80% of the sum of the monthly payments.
In essence, it's an interest free 3-year loan on just the residual value amount and you only pay the sales tax on the depreciation.
It's a no brainer.
From Porsche's site: The Single Payment Lease is an additional alternative to an outright cash purchase. Through this option, you make a one-time payment for the full lease amount, which is generally less than the sum of the payments in a conventional lease. This gives you the flexibility of keeping the cash you would have used in an outright purchase while retaining your end-of-term options.
In essence, it's an interest free 3-year loan on just the residual value amount and you only pay the sales tax on the depreciation.
It's a no brainer.
From Porsche's site: The Single Payment Lease is an additional alternative to an outright cash purchase. Through this option, you make a one-time payment for the full lease amount, which is generally less than the sum of the payments in a conventional lease. This gives you the flexibility of keeping the cash you would have used in an outright purchase while retaining your end-of-term options.
01-29-2014, 04:32 PM
#19
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I must be too simple to understand this, but even with tax advantages, the leasing cost doesn't seem to many sense to me on a car which depreciates very little like the gt3. If you look at 2 year old gt3, they are selling at most at $20k off msrp. I was ball-parked a monthly lease of approx $2700 for 24 mo + a downpayment of $5k if memory serves me. That's almost $70k in total.. Take a base gt3 at $131k - $70k = $61,000. Where can anyone find a $61k 2012 gt3????
Purchase cash or finance this car, then sell it if you must.. Leasing doesn't make any sense. Where am I wrong here?
Purchase cash or finance this car, then sell it if you must.. Leasing doesn't make any sense. Where am I wrong here?
Jokes aside though, if they set the residual artifically low at 52% for the GT3, then it makes no sense unless you plan on buying at lease end. otherwise you are pissing money away.
ordinarily though in CA - if you lease and run through your business it can be better than buying and you can play the residual game. If its too high - you won as you paid for less depr than you should have. And you paid low sales tax and not on the entire purchase price of car.
01-29-2014, 05:09 PM
#20
Nordschleife Master
Porsche allows you to make a one-time lease payment. When you do this, you don't pay the "rent" portion of the lease, aka Porsche's profit/interest/whatever you want to call it. This makes the one-time lease payment something like 80% of the sum of the monthly payments.
In essence, it's an interest free 3-year loan on just the residual value amount and you only pay the sales tax on the depreciation.
It's a no brainer.
From Porsche's site: The Single Payment Lease is an additional alternative to an outright cash purchase. Through this option, you make a one-time payment for the full lease amount, which is generally less than the sum of the payments in a conventional lease. This gives you the flexibility of keeping the cash you would have used in an outright purchase while retaining your end-of-term options.
In essence, it's an interest free 3-year loan on just the residual value amount and you only pay the sales tax on the depreciation.
It's a no brainer.
From Porsche's site: The Single Payment Lease is an additional alternative to an outright cash purchase. Through this option, you make a one-time payment for the full lease amount, which is generally less than the sum of the payments in a conventional lease. This gives you the flexibility of keeping the cash you would have used in an outright purchase while retaining your end-of-term options.
01-29-2014, 05:18 PM
#21
Nordschleife Master
This is correct. I believe the vast majority of people end up trading in the car for a value above the residual at the end of their lease term, or buying the car out to keep or resell.
01-29-2014, 06:05 PM
#22
Rennlist Member
That is interesting. I did some reading, and basically you are paying for all of the depreciation during the lease term up front plus interest on just the residual amount. Doing some rough calculations, it equates to about $7500 saved over a 3 year term on a GT3, or about 10% savings by the end of the term compared to a monthly lease payment
But. Be careful what you read on the internet.
01-29-2014, 06:11 PM
#23
Nordschleife Master
01-29-2014, 06:31 PM
#24
Nordschleife Master
Scenario 1 single payment lease: You pay ONLY depreciation
133,000 x .49 = $65,170
Scenario 2 single payment lease: You pay depreciation plus interest on residual
.003 x (133,000-65,170)= $203 interest per month on residual
$203x36 months = $7308 total interest paid
$65,179 + $7308 = $72,487
Scenario 3: You do traditional monthly lease payments
.003 x 133,000 = $399 per month interest
$399 + (65,170/36) = $2209 per month or (x 36) $79,524 over the entire term
I left taxes out for the sake of simplicity
