bbrc76

Leasing has tax advantages for those who are incorporated (including, but not limited to business owners) so it could be an appropriate path for some.

The greater (or root) issue here is one's risk profile. One's risk profile determines the best way to handle a given situation (one scenario being to "pass" on the given situation).

There are too many variables in one's risk profile to make generalizations that are accurate for a broad audience. At the end of the day, there are so many variables in one's risk profile equation that each person's risk profile is different...

cole328

Purry's comments were completely without basis. As a matter of fact, I AM a business owner, thus, there are significant financial advantages to leasing as you cannot write off any aspect of a purchase through a corporation (unless you take advantage of that obscure loophole that lets business owners purchase heavy duty vehicles...my neighbor just bought a hummer for that reason...stupid). So, one would be moronic to not take advantage of that tax discount, as no matter how you look at it, my after tax cost is less than someone who cannot write it off. Second, and this is obvioulsy a personal decision, I don't buy depreciating assets.....I know there is an inherent "depreciation hit" baked into a lease payment, but so what? I didn't buy the most car I could afford based on my maximum lease payment gents, as Purry would rudely like to intimate. I bought the car I WANTED, and simply elected to lease it.

purrybonker

Hey, do what you want. No attack intended, really. I'm railing against a concept, not against you.

As bbrc76 has mentioned - people have different motivations for doing different things. Some people hate the idea of trying to sell a used car or hate the stress of negotiating a trade. No problem - if those things are that important to you, go ahead and lease, so long as everyone's eyes are open. So long as the lessee understands there is a price tag associated with the added convenience.

Leasing not only costs more per se, but it also focuses the customer's perspective on the payment and dulls their perspective on the hard asset cost. This makes them less able and prepared to negotiate prices. Plus it allows them to buy a much more expensive car than they could otherwise afford to finance (payments are maybe 30% or more, lower than financing) while it hooks them on the new-car habit. Just another brick in the wall of the "borrow and spend" mentality that is hurting us all these days.

But, OTH - it has kept the US economy churning for years. So be it. Yep, no problem, we'll just keep on keepin' on.

Regardless of opinion, perspective, situation or convenience, leasing costs more than buying. Period. It can't not.

This is a zero sum equation.

Soulteacher

I know exactly what you mean and I'm sure I'm nitpicking here, but technically it's not the "borrow and spend" that's hurting us, it's the "borrow, spend, and don't pay back" that's ruining our economy.

Bankruptcies and foreclosures are the problem, not home loans and car financing per se. I financed my previous home and I financed my first car (a Daihatsu!), and there really never was anything wrong with that other than - as you say - it cost me more than paying cash, money that I simply did not have at that time.

Now, of course, even if you have the cash, financing may be a smart move as long as you invest the cash and earn a higher return than the interest you pay for the loan.

Gerg

I assumed a lease that had 29 payments remaining with a $30k end of lease buyout. I put the $30k back earning dividends (almost put it in auction-rate preferreds ) with the intent to purchase. I always keep my cars for at least 100k miles.

Chris C.

Purry - you can't make blanket statements about which costs more, it's entirely variable in each deal. A rational and intellgent approach is to use whatever financing approach costs you the least.

I've leased new several times - lease fees have gotten outrageous, ALG now sets most residuals pessimistically, and the rates are higher since you are financing the entire car and then some. Don't overlook early termination fees on 3 or 4 year leases, they are steep.

I've purchased new and sold privately - If you count all I spent this (opp cost of investment return, interest from partial financing, depreciation) route I could have leased a GT3 for that 2.5 year period.

I've bought outright 2 year-old cars and sold them for the next model (new or used) I wanted (1-3 years later). This turned out in 2 cases not to save me any expense over leasing new for the same period.

I've even leased used and sold privately/traded. This was very inexpensive at first but the financing companies caught on and added all of those fees and higher interest rates.

Bottom line - each deal depends on the fees, subsidizing if any, interest rate/MF, and value of the asset at the start and when you're "done" with it - no one method universally costs less.

In general driving a new car every 1-3 years is expensive, using 100% your own money to do it doesn't make you any smarter - although some feel better doing so. Leasing may be advantageous in that scenario if and only if you can (and do) invest the money AND receive a higher rate of return than the cost of the fes and MF associated with a lease (ignoring deductibility here which again varies widely). This isn't happening at the moment given the market is down 15-20 % in the past few months, so so much for insulating the downside risk of your asset by leasing!

The only cheap way to own a car is to buy 4 years old and drive it for 6-10 years. Anyone who thinks theres a fool proof way to own new every 1-3 years and not pay more for the luxury is blowing smoke - regardless of your preferred "financing" method

(PS - I generally try to avoid telling everyone why there's only one way to live life, and what my particular value set says about using money to enjoy it

PSS - the only thing wrong with the current scenario where under educated or unwise people were enticed to spend more than they could pay is that our government bailed out the wall street hot shots who got unethical to pad their incomes)

cole328

well said

Likemystoppie?

This poll is reinforcing the 18% leasing number. Even if it get's closer to 20%, it's still far from the over 65% for MB or BMW.

Soulteacher

+1

Money is not wasted if you enjoyed wasting it.

mooty

used to pay cash
but if you find good lease, cash is not very good if you change cars often. the tax you pay on 150k car is often more than lease interest enpense. also try to sell a 150k car yourself in private mkt. good luck. if you sell to dealer, you get raped, so leasing has many advantage that are not tax related.

mooty

some ppl lease based on business exp.
some ppl lease b/c they are stretching
some ppl lease b/c it's less headache. and they abused the sh*t out of their cars.

i know several ppl who can buy 20-30 CGT with spare cash, but they choose to lease their cars. why would you buy a car with cash when you change them in 3 months, 6 months? the tax rate in SF is around 8.75%. the sales tax alone on a 400k car makes leasing a better choice if you go through cars quickly and often.

Kevin K

I always enjoy the way these threads devolve into an "I'm right, you're wrong," must be "one right answer only" debate.

Having taught economics, finance and accounting and having also taught those subjects to smart folks with lots of money, it doesn't surprise me anymore that people can't be satisfied with the answer: "It depends." I think they fear too much analysis, too many variables and would all simply prefer one answer that ALWAYS works.

One could lay out a string of conditions under which any acquisition alternative (all cash up front, finance with minimum cash up front or lease" would make the most pure financial sense.

To those who insist that all cash up front is best, I'd agree unless the alternative use of the cash yields an equal or better return (accounting for tax). For whoever here said that such logic was a "cherry for those who don't have the capital," I'd say, wrong. It's a basic premise that can't be ignored. Given that this is a smart group, it should be part of your thinking.

To those who say that "they NEVER would buy a non-appreciating personal asset" by financing, again, wrong. Almost all personal assets (i.e not real estate and assuming that they are not precious metals or investment commodities, (i.e wine, art, pork bellies, a barrel of oil, etc.)) depreciate. Still, generally, no one pays all cash for them. But you say that those are different because the "machine in my factory" helps make me money and the car doesn't. Okay, that's true but how does that impact the decision about the cost of capital? It's the same issue: the opportunity to earn an after tax return on the money you part with by paying cash versus the after tax cost of the financing or leasing.

There just isn't one universal answer as all of us each have our own conditions, risk tolerances and income levels. The guy for whom the 997 represents a week's salary may make an entirely different decision than the guy for whom it takes a year to earn those $. For the former, the same rules apply, but the materiality of the difference isn't worth considering.

The only truly sound financial advice regarding these cars is to buy a slightly used Honda Civic instead, but we said, no way to that one for our own reasons despite the financial sense it makes.

Sorry, one more thought, last Thursday I attended the funeral of one of my college buddies - 51 years old and then a sudden heart attack. Enjoy yourselves, none of this is forever and you don't get to take anything with you as you depart whether you leased it, paid cash or were making payments.

Kevin

9974G

I paid cash for my 2007 911 and my 2008 328i. I had been driving the same car for the previous 10 years. I tend to keep my cars for a long time (minimum 100K miles).

MLindgren

I could give a **** how any of you got your cars and appreciate the good taste you have for choosing a Porsche.

I also don't care how much you make, where you live, how big your house is, whether or not your wife chose X51 twice, etc.

Now go out and drive those cars like they're meant to be driven and tell me how great it was!

purrybonker

Can I lease the woman in your avatar? Would that be more cost-efficient than paying cash?

hmm.... my head's starting to hurt...