Lose your house if you can’t make your car payments doesn’t seem like a very good plan. Economies go south, stock markets crash, your home is your most valuable asset and if times get hard, the one you want to most protect. I live in an upscale community of 81 homes, in the 2007/2008 Recession almost 25% of people in our community lost their homes due to the inability to pay their mortgages. It was bad. Be careful on debt load.

 

Just so you have a comparison of what IRS audits are like at a F100 company, the IRS keeps staff on site all 52 weeks of the year. They audit us continuously. When they close the audit for year X on Friday, they open the audit for year X+1 on Monday. We have to provide them office space (locked of course) and we provide them with contractor badges to come & go as they please, and of course we provide them with full internet access.

One of our IT networking engineers went to the VP of Tax to complain about the contractors (not knowing they are IRS employees), and the IT guy said, "Your contractors are using our internet resources, spending the day on eBay and Amazon and Bring a Trailer and some of them on **** sites, and it is far beyond the company's personal use policy, so if you don't get them under control, we're going to cut off their internet access."

The VP of Tax replied, "you have to leave them alone. They are IRS auditors. And, every minute they waste on the internet is a minute they are not auditing us."

 

If your house has 100% equity for example and you take out only $150K from it to buy your 992, your monthly payments are only going to be around $722 per month basing on a 30yr amortization at 4.1% interest rate. Are you going to miss a $722 monthly payment? And you have the flexibility of prepayment and paying it off sooner if you want. A $722 payment is better than a $2500 monthly payment on a lease for example. I am just saying only if you have equity in your home and you can obviously do this if you can afford the monthly payments.

 

I would NEVER lease a 911 of any variant, the resale value is too high on them. Smart money buys the car.

I currently have three Porsches (and a Ford pickup). I don't finance or lease any of them, because they are all more than I need, so I pay cash for them. My home is paid for as well and has substantial equity that I will never tap into for reasons stated preveiously..

I took a different tack than many. Rather than buying things I could not afford during my lifetime, I took cash from my job (equal to what you would likely view as a monthly car payment) and invested it in companies that made me far more money than my wages from my job. People say "How did you do that?" Well, I simply got a subscription the Wall Street Journal and have read it every day for many years. It's surprising what you can learn from that. I had no formal training in the Stock Market and never once spoke to a financial advisor. I bought Apple stock before they made the iPhone. I bought Nvidia before the became the darling of the bitcoin crowd - that sort of thing.

But don't get me wrong - I've owned a 911 since I was 23 years old, and now I'm 70 so there have been many Porsches (including several I wish I had kept). Most were older, used, and affordable and they were just as much fun as the new ones. I didn't get my first brand new one until I was 54 years old - and that was a Boxster! You can drive Porsche without going into big-time debt, and certainly do so without putting a Second on your House, which is still your most valuable asset and should not be used as a piggy bank in my opinion. That's been my way, and it has worked for me.

 

That's a GREAT story! My business was very small and I only had one office (mine) so they were working right next to me - literally. It was nerve-wracking and boy-howdy, I never wanted to experience that again so I made sure I kept exceptional paperwork and stayed to the letter of the law after that experience was over. For that reason, I never bought or leased anything but the trucks I used in my business, and didn't even take a company computer home.

 

Always get this info when leasing (approximate APR by multiplying money factor by 24). Otherwise it's like financing without asking for APR and only looking at a monthly payment.

Leasing is convenient when you are very likely to keep the car a short time, guarantees how much you pay, protects against (unlikely) big accident depreciation and diminished value hit, and has some tax benefits IF you have the right occupations. However leasing is not the best financial option vs. traditional auto loan (similar to how auto loan costs more than paying cash). Leasing is very expensive if you need to get out before the term ends. If you have to ask if leasing is good for you then it is probably not.

I like leasing and treating my cars as multi-year monthly rentals, especially when interest rates were low. It's a fixed and guaranteed financial cost when we flipped our multiple cars every 3 years. However when interest rates went up a few years ago, it became very expensive so we financed our last car. I would not lease now.

P.S. Never put extra money down when leasing (cap cost reduction). You're only pre-paying against the monthly payments and there is no financing savings.

 

If my old self could speak to my young self I'd say leasing my first new 911 was among the dumbest financial moves I could make. But then I would point out the memories of driving that car while I was young are irreplaceable. There's a fine line between living well and spending money foolishly.

 

I've been playing with the Edmunds Car Lease Calculator a lot recently. It generally does a great job of plugging in the base money factor, market pricing, and residual based on the car you pick. It assumes $0 cap cost reduction and includes sales tax. I've been shuffling our cars around and it's good way to get an idea of what a new car might lease for. See a car drive by that looks interesting? hmmm
https://www.edmunds.com/calculators/car-lease.html

Been thinking of finally scratching the 992 itch with a pdk cab and I'm pretty sure I'll be over it within three years. In CA there's no sales tax credit so a $150k car will have a $13,875 sales tax and you don't get any of it back. Lease rates are 8.8% for a base Carrera. To get an idea of how much more a Porsche lease would cost, if you insert 0.0021 in as the money factor which is equivalent to 5%, it's about $400/mo less or $14,400. You would pay only 32% of the $13,875 sales tax based on the residual, or $4440. So for those leasing in CA, it's only about a $4k penalty to lease which isn't bad with the benefit of having a set residual. I won't even include the magic we masters of our universe could do with extra $50k cash we don't tie up in the 992.

How does Porsche handle lease returns with equity? Honda made it more difficult by not allowing to trade it to another dealer. I had to buy it and pay the sales tax making it harder to use the equity on a trade-in.

 

I can't speak to Porsche Credit but I understand your Honda Finance example as many of the OEM Captive Lenders tightened their policy in 2022 as all of a sudden just about every lease had equity, in many cases massive equity, at the end of the lease term.

When Leasing from a Captive Finance company (Porsche Credit, Honda Finance, GM Financial, etc.), the consumer Leasing the vehicle has the 1st right rights on a buyout at Lease End. The selling dealer has the 2nd right.to purchase. When neither purchases the Captive then sells the vehicle. Some use "closed auctions" which limit the dealer participation to their "OEM branded" dealers. In 2022 some Lenders began holding consumers to the letter the law on lease returns vs. what they had customarily allowed.

When returning leases had a good deal of equity many (but not all) of the OEM's, Captives and Dealers wanted a piece of that. So they began placing restrictions on end of lease buyouts and/or early lease termination (like you observed with your Honda lease). You may not like that but they are within their contractual rights.

I'm been in auto finance for 40 plus years working at both major banks and a couple of OEM captives. What I tell folks is that the lender always is subject to adverse selection on Lease Returns. When the Lease has 5% negative equity or more then lender seems to get nearly everyone back. When the Leases have 5% or more positive equity they seem to never get any of them back!!!

 

Mikey, I'm generally pro Leasing for the comments you made plus others.

I do have to disagree with your last comment. You are reducing the interest payments (cost) when you make a 'Cap cost" reduction.

When you calculate a lease payment, there are basically 2 steps.

1. You take the total Capitalized cost (total selling price, less any down payment, etc.), subtract the residual value and then divide by term to figure the depreciation payment.

2. You then figure out the Lease rate fee. You take the Capitalized Cost plus the residual then multiply by the Money Factor.

So when you make a Cap Cost reduction you are lowering the payment on both the depreciation payment and the monthly money factor charge fee. With say a $5k cap cost reduction you are saving the interest charge on that amount of money.

 

Wow, thank you. Great information from an insider.

 

Leasing a sports car at nearly 9% interest, without the benefit of a business expense deduction, is totally bonkers in my opinion.

 

My casual understanding over the years was that leasing cap cost reduction did not reduce finance/interest. I could very well be incorrect, so thank you for flagging.

1. https://www.automotivetrainingnetwor...cap-reduction/ : The primary advantage of Cap Reduction is that it reduces monthly lease payments by lowering the amount financed.
2. On the other hand, https://www.thecarconnection.com/car...nt-on-a-lease/ : Unlike an auto loan, where a down payment decreases the amount you borrow and therefore decreases the interest charges and overall cost, a down payment on a lease doesn’t decrease the cost of borrowing.

Regardless, when leasing always get, or verify you have gap insurance. Otherwise in the (unlikely) event of a total loss you will lose all your equity (your personal auto insurance only pays what you owe on the vehicle, not what the car is worth). Many auto make financing units, like VW/Porsche Credit, automatically include gap insurance in their leases. If not, adding gap insurance to your personal auto insurance policy is a very small amount.

 

Multiple security deposits (MSDs) reduce the money factor. Not every vendor allows them, I leased all my BMWs that way and it saved alot of money. No money down + MSDs.

 

The answer is right there in the name: Capitalized Cost Reduction.