O/T LEASING OR BUYING
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Racer
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From: Nashville, TN
O/T LEASING OR BUYING
After all these years, and these gazillion car aquisitions, I still don't understand the benefits of Leasing as upposed to buying, or vice-versa.
My wife is OOT visiting family, and is about to get her dream car as a surprise birthday present (645i Conv). I'm trading in her '04 GX470. I was going to pay cash for the balance....one of the dealeship salesmen suggested a 1 pay lease, another suggested a conventional 36 month lease.
She'll keep the car at least 3 years, and will drive about 15k per year.
I'm writing off the PCar as my business car. Paying cash for the balance is not a problem.
What would you guys suggest.
My wife is OOT visiting family, and is about to get her dream car as a surprise birthday present (645i Conv). I'm trading in her '04 GX470. I was going to pay cash for the balance....one of the dealeship salesmen suggested a 1 pay lease, another suggested a conventional 36 month lease.
She'll keep the car at least 3 years, and will drive about 15k per year.
I'm writing off the PCar as my business car. Paying cash for the balance is not a problem.
What would you guys suggest.
Last edited by RLandis; Aug 5, 2005 at 10:03 PM.
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From: Ridgefield, CT
The term (3 years) and mileage (15K per year) put her in the sweet spot for a lease. I'm assuming the one pay lease deal would be separate from the trade/sale of the GX and would allow the dealership to write you a check for the fmv of the GX or you would sell it privately.
However, IMO there is NO reason to trade in a car (and give up your equity) toward a lease in an effort to lower your monthly lease payment. In that situation, at the end of the lease, you would end up with nothing and would need to start the process all over again.
I would consider trading the GX (if you don't want to bother selling it privately) and FINANCING the balance of the BMW over as short a term as you can live with. Rates are still quite low and the BMW is likely to hold its value through the term of the loan so you will have something of value at the end. You can also finance the BMW on a home line (assuming you are disciplined enough to make a payment every month against the line) and thereby take advantage of the tax deductbility of the loan interest.
However, IMO there is NO reason to trade in a car (and give up your equity) toward a lease in an effort to lower your monthly lease payment. In that situation, at the end of the lease, you would end up with nothing and would need to start the process all over again.
I would consider trading the GX (if you don't want to bother selling it privately) and FINANCING the balance of the BMW over as short a term as you can live with. Rates are still quite low and the BMW is likely to hold its value through the term of the loan so you will have something of value at the end. You can also finance the BMW on a home line (assuming you are disciplined enough to make a payment every month against the line) and thereby take advantage of the tax deductbility of the loan interest.
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Racer
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From: Nashville, TN
Originally Posted by dmgcfg
You can also finance the BMW on a home line (assuming you are disciplined enough to make a payment every month against the line) and thereby take advantage of the tax deductbility of the loan interest.
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Richard - Check out the lease site below. Key in your ZIP, and since you already know what make and model you want click on the GO button on the left. Then choose the appropriate year, make and model from the drop down boxes and select the term in months and the mileage per year. You will get the monthly lease payment. Click on the payment and see the details of the lease, residual value, etc. Much lower payments than if you were buying and paying installment payments.
Cap cost reduction is capital cost reduction (down payment to reduce the amount financed) and money factor is the cost of money. To determine interest rate take money factor times 24 (Example: money factor 0.00305 X 24 = 0.0732 = 7.32%). I hope this helps.
http://www.leasecompare.com/
Cap cost reduction is capital cost reduction (down payment to reduce the amount financed) and money factor is the cost of money. To determine interest rate take money factor times 24 (Example: money factor 0.00305 X 24 = 0.0732 = 7.32%). I hope this helps.
http://www.leasecompare.com/
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I've leased plenty of cars in the past and I used to write off the lease payments through my business. I also used to want a new car every 3 years, and my mileage was always low.
A few years ago that changed and I started putting 15-20K miles a year on the car so I bought the 2004 Porsche.
I like the idea of leasing when you are in and out of a car in 3 years, you only pay for what you use.
Rob
A few years ago that changed and I started putting 15-20K miles a year on the car so I bought the 2004 Porsche.
I like the idea of leasing when you are in and out of a car in 3 years, you only pay for what you use.
Rob
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Richard, if you have a home equity line of credit and have enough money to pull out you can withdraw the money from that equity credit line and then pay "cash" for the BMW. You then have an equity credit line balance that you are paying (with interest) every month and that is considered a "2nd mortgage" to which you can deduct the interest paid when you file your taxes. For me (and my wife) our next car we will just pay cash for so there is NO interest to pay. Our rationale for this thinking is that we could invest to $100K or pay cash for a $100K car. But, unless your investment is GOING to return at least what you would have paid in interest it doesn't make sense. Besides, we hate to owe anything in our house. Don't carry any balances around here! But to each his own. Question to ask yourself is do you think she will want to get rid of it in "36 months and 45K miles"???
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From: Ridgefield, CT
If you own a home, you can sign up for a home equity credit line. As an example, let's say your home has a market (appraised) value of $500K and your mortgage is $250K. Banks will typically let you borrow 80-90% od your home appraised value or in this example, $400-$450K total. This would leave you with the ability to borrow, let's say, $150K on you equity credit line. These lines are used by folks to finance home improvements, educations, BMWs 
, etc. So you are borrowing against the equity in your house basically. These loans typically require a monthly "interest only" payment and this interest is tax deductible. Therefore, if you borrow at 5% and you are in the 40% tax bracket (fed and state combined), your after tax cost is really only 3%. But I think you would want to pay principal along with the interest every month so that when you sell the car you are not left with the original principal amount on your equity credit line. Does this help??
, etc. So you are borrowing against the equity in your house basically. These loans typically require a monthly "interest only" payment and this interest is tax deductible. Therefore, if you borrow at 5% and you are in the 40% tax bracket (fed and state combined), your after tax cost is really only 3%. But I think you would want to pay principal along with the interest every month so that when you sell the car you are not left with the original principal amount on your equity credit line. Does this help??
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Wow! In the time I was typing my response, Rob and Tim beat me to a reply!
NEWMAN!
Also, we are thinking about leasing our next SUV since we can't imagine keeping it for more than 3 years and that way we can just give it back and only paid for what we used like Rob said.
NEWMAN!
Also, we are thinking about leasing our next SUV since we can't imagine keeping it for more than 3 years and that way we can just give it back and only paid for what we used like Rob said.
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Originally Posted by LVDell
Wow! In the time I was typing my response, Rob and Tim beat me to a reply!
NEWMAN!
Also, we are thinking about leasing our next SUV since we can't imagine keeping it for more than 3 years and that way we can just give it back and only paid for what we used like Rob said.
NEWMAN!
Also, we are thinking about leasing our next SUV since we can't imagine keeping it for more than 3 years and that way we can just give it back and only paid for what we used like Rob said.
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From: Ridgefield, CT
I'm in agreement with all of the comments by Rob and Dell. If you are headed toward leasing, the one pay is worth looking at if you have the cash. You basically pay the entire lease up front but the dealer "shrinks" the interest out. In other words, the one pay amount should be a few grand less than the sum of the monthly lease payments. At this point, the money factor that Tim mentions comes into play. If you have the cash for the one pay but think you can invest it (as Dell suggests) at a higher rate than the money factor, then go with a monthly lease payment. Your interest income on the cash can be put toward your monthly lease payment and you will have your cash left at the end of the lease (of course you will pay tax on your investment earnings). I think we've beat this horse to death! 
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Richard - If you do decide to lease, then do your homework. Do not, I repeat, do NOT lease through the dealer! I am leasing my wife's 2005 MB CLK and the MB lease was going to be $120 higher that the lease I got through Lease Compare. Same car price, same term length, but MB money factor was much higher and the residual was much lower, so I would have ended up paying for more depreciation. I am also leasing the P-car. I was looking at a new Silver '04 996 at the local dealer (which I didn't buy) and the Porsche Lease was going to be $75 higher than the lease through Lease Compare.
Also, negotiate the price of the car just as if you were buying the car, because you ARE buying the car. Then contact your leasing company. They will handle the rest after the normal paper work.
If you use or have access to Microsoft Excel, PM me with your email address and I will send you a spreadsheet that calculates and explains all of the components of a lease.
Also, negotiate the price of the car just as if you were buying the car, because you ARE buying the car. Then contact your leasing company. They will handle the rest after the normal paper work.
If you use or have access to Microsoft Excel, PM me with your email address and I will send you a spreadsheet that calculates and explains all of the components of a lease.
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From: KC ex pat marooned in NY
Henry Ford once said;' Buy appreciating assets and rent depreciating ones'. Bis wise leasing makes alot of sense. In our practice we lease our cars, the practice pays in pretax dollars(up to 75% tax deductable), minimal down payment, usually 0 down/0 sec deposit to minimize upfront out of pocket money. Only pay for what you use, walk in three years to a new car with a full warranty. P cars f that up because they form an emotional attachment, then you can just buy it as a perk at lease end at residual value, while the practice/bis has actuually paid for half the car and you're the only one whose ever driven/farted in or anything else in that car. Kind of like getting a car at 1/2 price in a way. Only good for a car you really want to keep long term, ie a porsche for example.
Leasing is not for everyone, works well in a medical practice, but NYS laws have f'd up leasing up here but good.
I've leased my personal cars in the past as well, esp if they are disposable (family SUV, etc), use it/ drive it for three years, then get a nice new car and start over. Never stuck with a car you don't really want long term, no resale hassles, only pay for what you use when the car is fresh. Perfect for the wife that is hard on cars, like mine. Most women don't really form a meaningful relationship with a car anyway, they're ready for a new one every three years. they'll be some other car she likes more in three years when this one is ratted out, trust me Richard.
Good luck.
Leasing is not for everyone, works well in a medical practice, but NYS laws have f'd up leasing up here but good.
I've leased my personal cars in the past as well, esp if they are disposable (family SUV, etc), use it/ drive it for three years, then get a nice new car and start over. Never stuck with a car you don't really want long term, no resale hassles, only pay for what you use when the car is fresh. Perfect for the wife that is hard on cars, like mine. Most women don't really form a meaningful relationship with a car anyway, they're ready for a new one every three years. they'll be some other car she likes more in three years when this one is ratted out, trust me Richard.
Good luck.
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I agree with all comments and would simply add that the 2 largest benefits to leasing are that if the car is for business purposes then most of the lease can be a tax deduction. But assuming you can buy through a homequity line that benefit may be realized with an interest deduction. I think there are limitations as to what you can deduct on homequity interest so check that one out.
The other benefit is the option to purchase. If the resale on the car falls out of bed you don't buy at the end and if the value is there then you do buy. You are not playing the market as you would if you actually bought the car.
That option may be worth something to you. I know a lot of people who leased and then found out the car was worth less than the residual at lease end. SO the leasing company took the hit in those cases when the cars were turned back in. Or the leasing company let the leasees buy for less than the residual, a win for the leasee again.
The other benefit is the option to purchase. If the resale on the car falls out of bed you don't buy at the end and if the value is there then you do buy. You are not playing the market as you would if you actually bought the car.
That option may be worth something to you. I know a lot of people who leased and then found out the car was worth less than the residual at lease end. SO the leasing company took the hit in those cases when the cars were turned back in. Or the leasing company let the leasees buy for less than the residual, a win for the leasee again.
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From: KC ex pat marooned in NY
Porsche financial actually has a program called MVP, market value pricing as opposed to residual value pricing (higher). In an attempt to retain the customer, avoid auction (PAG despises auctions), they will offer the car back to the dealer or customer at market value, 100% of dealers know about this program, 75% participate.
Not sure I would use a home equity line to buy a car, and still pay for it years after it is gone, leveraging your home against it.
Not sure I would use a home equity line to buy a car, and still pay for it years after it is gone, leveraging your home against it.