Lease vs Cash vs Finance...not that simple anymore is it?
10-12-2008, 11:56 AM
#17
If you don't mind a little distance - I love heading to Leavenworth via Yakima with a visit to Chumstick highway.
Killer route.
North via HWY 9 is also fun but much more heavily policed these days.
For a quickie shot of entertainment nearby - check out Ames Lake Road.
Honestly I don't drive all that often on the street in a ummm... highly spirited fashion these days.
I'd rather auto-x or do a lapping day and really go nuts.
Killer route.
North via HWY 9 is also fun but much more heavily policed these days.
For a quickie shot of entertainment nearby - check out Ames Lake Road.
Honestly I don't drive all that often on the street in a ummm... highly spirited fashion these days.
I'd rather auto-x or do a lapping day and really go nuts.
10-13-2008, 02:13 AM
#21
Burning Brakes
Thread Starter
Simple, you could had decided to put 100k in the stock market...
...and today worth 50-60k and still giving money to the bank at your 4.5%!
If you had the cash...it would have been better to have payed the car off. This off course changes if you were smart enough to have invested your money with a greater return then the amount your paying the bank. Then again, the DOW could go up to 20,000 next year and....well, I wish I would have financed at 4.25 and put the 100k in the stock market. This is why I think the answers are a little more complex than if asked 2-3 years ago...IMHO. BTW this topic is not a topic to offend anyone who finances nor to gloat....I just thought it was alot more simple to figure this out before than now when its harder to get a good yield on your money.
abe
If you had the cash...it would have been better to have payed the car off. This off course changes if you were smart enough to have invested your money with a greater return then the amount your paying the bank. Then again, the DOW could go up to 20,000 next year and....well, I wish I would have financed at 4.25 and put the 100k in the stock market. This is why I think the answers are a little more complex than if asked 2-3 years ago...IMHO. BTW this topic is not a topic to offend anyone who finances nor to gloat....I just thought it was alot more simple to figure this out before than now when its harder to get a good yield on your money.
abe
10-13-2008, 11:14 AM
#22
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just thought it was alot more simple to figure this out before than now when its harder to get a good yield on your money.
10-13-2008, 11:49 AM
#24
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The search button is your friend! 
I'm curious as to how you guys keep briging up this topic and have not yet come to the 'real' conclusion- if you're not seeing that many of the same answers that's because- there really isn't two of the same answers!
Two people have very different buying mechanisms and logic. You should buy for YOU and now how your buddy down the street bought.
Invariablely, someone will tell you why you should have done X, Y and Z.
I run into this all the time; when someone is sitting across the table from me and wondering why I can't whip out a lease payment on a 2008 C2 versus a 2009 C2, and how come it's a little different from what I ballparked to what reality is- there's fundementals that a lot of folks don't grasp. Additionally, if you can get 4% thru your HELOC and then 're-lease it' to yourself or the business there could be some extra incentive (personally) to go with that solution or not.
It boils down to what YOUR comfortable. End of day, it's a car. It's a fun fun car. Not an investment. Do your best math, then put it to rest and get to 'burnin gas' down the street.
Mkay?
I'm curious as to how you guys keep briging up this topic and have not yet come to the 'real' conclusion- if you're not seeing that many of the same answers that's because- there really isn't two of the same answers!
Two people have very different buying mechanisms and logic. You should buy for YOU and now how your buddy down the street bought.
Invariablely, someone will tell you why you should have done X, Y and Z.
I run into this all the time; when someone is sitting across the table from me and wondering why I can't whip out a lease payment on a 2008 C2 versus a 2009 C2, and how come it's a little different from what I ballparked to what reality is- there's fundementals that a lot of folks don't grasp. Additionally, if you can get 4% thru your HELOC and then 're-lease it' to yourself or the business there could be some extra incentive (personally) to go with that solution or not.
It boils down to what YOUR comfortable. End of day, it's a car. It's a fun fun car. Not an investment. Do your best math, then put it to rest and get to 'burnin gas' down the street.
Mkay?
10-13-2008, 06:03 PM
#25
10-13-2008, 06:34 PM
#26
The search button is your friend!
I'm curious as to how you guys keep briging up this topic and have not yet come to the 'real' conclusion- if you're not seeing that many of the same answers that's because- there really isn't two of the same answers!
Two people have very different buying mechanisms and logic. You should buy for YOU and now how your buddy down the street bought....
Mkay?
I'm curious as to how you guys keep briging up this topic and have not yet come to the 'real' conclusion- if you're not seeing that many of the same answers that's because- there really isn't two of the same answers!
Two people have very different buying mechanisms and logic. You should buy for YOU and now how your buddy down the street bought....
Mkay?
But to me it’s the residual value risk that is the key component of a lease.
A lease inherently provides the dealers with an IRR based on three components, up-front payment, monthly payments and residual value. And it’s the residual value risk in cars today makes leasing something to re-consider for the consumer. But that's exactly why some of the American OEMs don't want to lease you a car anymore - they don't want the risk.
So if you lease car at a favourable rate - say 5%, and you can invest the equivalent at 5%, (all pre-tax mind you) and you can remove the residual risk (assuming you can assess the reasonableness of the residual value inherent in the lease at the inception of the lease) - you may be better off leasing. If you take car of your car, are adept at purchasing a uniquely optioned vehicle and sell it at the right time under perfect conditions, you may do better on the residual by owning it assuming you can emulate the financing of a lease. That's one of the key variables as I see it. The tax consequences under either option should be relatively neutral.
10-13-2008, 07:33 PM
#27
As for the lease / finance / cash argument, the current situation highlights the perils of trying to beat the finance rate in the market, especially for a risk averse dude like myself.
10-13-2008, 08:36 PM
#28
If there were no such things as interest or capital gains then this would be a very easy answer. Bottom line is, do you think you can get a better return on your 100K then whatever the finance/lease charges are? Also, do you plan on selling the car in 3 years anyway or keeping it for 4 - 6+ years?
10-13-2008, 08:40 PM
#29
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residual?
I recently leased for the first time ever - I am wondering how the negotiation goes at the end of the lease term - I understand that if the value is less than the residual, it is likely you can purchase the car for less than the residual - but what if the mileage is more than the residual was based upon? the one regret about leasing is worrying about mileage, though at this point it is in the ballpark.
10-13-2008, 09:25 PM
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Not sure I agree with your summary, nor do I think that the key element of leasing is really understood all the time. There is absolutely no doubt that there is an opportunity cost of capital when it comes to buying a car with cash versus financing it - that answer is the same all the time. This thread is exactly about that in context of today's financial environment; and it's an interesting debate. Given the decline in the stock market and the (today's) potential recovery, you may now be far better off investing cash that you would otherwise use to pay for a car. Now for some buyers, they have enough money so they just don't care and other buyers can finance privately with great flexibility and don't mind assuming the residual risk.
But to me it’s the residual value risk that is the key component of a lease.
A lease inherently provides the dealers with an IRR based on three components, up-front payment, monthly payments and residual value. And it’s the residual value risk in cars today makes leasing something to re-consider for the consumer. But that's exactly why some of the American OEMs don't want to lease you a car anymore - they don't want the risk.
So if you lease car at a favourable rate - say 5%, and you can invest the equivalent at 5%, (all pre-tax mind you) and you can remove the residual risk (assuming you can assess the reasonableness of the residual value inherent in the lease at the inception of the lease) - you may be better off leasing. If you take car of your car, are adept at purchasing a uniquely optioned vehicle and sell it at the right time under perfect conditions, you may do better on the residual by owning it assuming you can emulate the financing of a lease. That's one of the key variables as I see it. The tax consequences under either option should be relatively neutral.
But to me it’s the residual value risk that is the key component of a lease.
A lease inherently provides the dealers with an IRR based on three components, up-front payment, monthly payments and residual value. And it’s the residual value risk in cars today makes leasing something to re-consider for the consumer. But that's exactly why some of the American OEMs don't want to lease you a car anymore - they don't want the risk.
So if you lease car at a favourable rate - say 5%, and you can invest the equivalent at 5%, (all pre-tax mind you) and you can remove the residual risk (assuming you can assess the reasonableness of the residual value inherent in the lease at the inception of the lease) - you may be better off leasing. If you take car of your car, are adept at purchasing a uniquely optioned vehicle and sell it at the right time under perfect conditions, you may do better on the residual by owning it assuming you can emulate the financing of a lease. That's one of the key variables as I see it. The tax consequences under either option should be relatively neutral.
I recently leased for the first time ever - I am wondering how the negotiation goes at the end of the lease term - I understand that if the value is less than the residual, it is likely you can purchase the car for less than the residual - but what if the mileage is more than the residual was based upon? the one regret about leasing is worrying about mileage, though at this point it is in the ballpark.
1) whom did you lease the car thru? 2) yes, if the market value is less or the market is (soft) on the car- depending on the bank; they'll renegotiate the buy-out price. 3) if you're buying the mileage doens't come into play BUT and I say BUT- depending on the bank; some are 100% slime, and they'll argue that they must know what the miles are before they quote you. Walk away from a bank like this. 4) don't worry about your mileage too much, typically with a 911 you can trade up half way thru the lease. In most situations- with out any negetive equity.
and 5) I'm sure most of you can find a better way to make money then off your car. Just drive the damn thing and enjoy it.
