Originally Posted by Staffie Guy

I read this entire thread and was puzzled by the comment that leasing is advantageous due to the low residual. It is my understanding that the lease formula has 2 aspects-money factor (interest) and depreciation (capital cost minus residual). So wouldn't a low residual result in a much higher lease payment?

Originally Posted by edofloat

Yes, the low residual makes the payment higher. To me, it sounded like the point was due to low residual value and actually expecting the market value to be higher than the residual (significantly). The next step to lower the final cost is to find a buyer for a bunch more than the residual plus sales tax and fees. So the risk with this is that the market value needs to be higher than the residual plus sales tax and fees to buy out the lease to even begin to save any money.

Originally Posted by gcurnew

Lots of people don’t really understand that the residual at the end of a lease - which in the case of 911s is purposely set low - is simply the outstanding amount owed to Porsche. If one just gives back the car at lease end, then yes, it’s a pretty expensive way to have a Porsche in the garage. At any time prior to lease end though you can sell the car for its market value, which in the case of a 911 could be tens of thousands more than what’s owing on the lease. You pay out Porsche (dealers facilitate early buyouts of leases all the time, and don’t care where the money comes from), and pocket the difference. Alternatively, you can buy out the vehicle at lease end and sell it yourself privately, again pocketing the difference between the residual/buyout and market value. With my last 911 I sold it privately a couple of months before lease end, and the dealer cut me a cheque for about $38,000, which was the difference between the residual and what I sold it for.

Of course with a 911 purchase you can sell whenever you want and pay off the loan, but a lease has some built-in safeguards that an outright buy or a term loan don’t, the most important being that in the event of a serious accident where the diminished value (even if the car is properly repaired at a Porsche Certified body shop) is less than the residual, you can (and should) just give the car back and it becomes Porsche’s problem, not yours. In Canada at least, I also have an inexpensive insurance rider that gives me original replacement value for the entire term of the lease in the event of a total write off. With this rider in place, I have no problem putting a substantial down payment of my leased cars as - unlike many people believe - I won’t lose the DP in a write off scenario.

Yes, the MF on a lease is typically higher than a loan (the difference in Canada and some other countries isn’t nearly as large as in the U.S) but you’re only paying down the principal on a portion of the value of the car, so “costs” on a cash-flow basis are substantially lower, and you still retain all the upside in the equity of the car...assuming you’re not foolish enough to give it back to Porsche at lease end.

Leasing and selling privately don’t work for everyone, but it’s an alternative way to drive a 911 at a substantially lower overall costs - and reduced monthly costs if the alternative is financing - than many people think. The wrinkle is you have to sell the car privately at or near lease end rather than trade it or give it back. Or you can just buy it out at the ridiculously low residual value and keep it if you want. I did this with a Cayman S, then drove it another 3 years and still sold it (as I recall) for $16k or maybe $18k more than the residual buyout.

Originally Posted by AlterZgo

With respect to selling a leased car, it's exactly the same as selling a car you purchased. In my case, I sold 2 leased cars to Carmax at about 2 yrs into a 3 yr lease. Both times, I had positive equity in the leased cars even though I put zero money down. Carmax paid off the lease residual and actualy cut me a check for the amount they paid above the residual. Many people who don't lease do not realize how easy it is to dispose of a leased car and how it's basically no different than selling or trading in a car that you bought. In states like California where they give you zero breaks on sales tax, leasing almost always makes sense if you can keep the mileage at 10K/yr or less because you are only paying sales tax on each monthly payment of your lease whereas if you bought the car outright or with financing, you are paying the full sales tax in the lump sum payment up front which you can never recoup (again this is a California example with no tax credits for trading in your car).

There are many other advantages to leasing such as putting zero money down, earning interest rate at about 7% or so on your multiple security deposits if you place multiple security deposits down (those were all refunded as well when I sold the car to carmax), the fact that if you end up buying a lemon or if you get into a fender bender during the lease period, you can just turn the car in at end of lease and still only have paid 40% of the price of the car and tax on only 40% of the car, the fact that virtualy all leases have gap insruance that pays for the upside down balance of the lease agreement (there is no gap insurance I'm aware of if people buy a car that gets totaled and you are upside down on your loan).