Lease or Finance?
01-22-2011, 07:55 PM
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Lease or Finance?
What are everyone's thoughts on this? I have never leased but have ordered a new turbo and I am kind of thinking about it. My build date is 3/25 so I will probably get it mid april. Though I got rid of my C2S after 3 years, I am not entirely sure I would get rid of the turbo that quickly. Any thoughts?
01-22-2011, 08:21 PM
#2
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personally - neither - the depreciation (lease) is too painful - only way for me to enjoy a pcar is to pay for it cash - if you lease it you have no choice but to give it back - the lease is going be what - close to $2000 a month I bet - $24000 a year, 3 year lease $72000 - OUCH
you asked!
you asked!
01-22-2011, 08:34 PM
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personally - neither - the depreciation (lease) is too painful - only way for me to enjoy a pcar is to pay for it cash - if you lease it you have no choice but to give it back - the lease is going be what - close to $2000 a month I bet - $24000 a year, 3 year lease $72000 - OUCH
you asked!
you asked!
The only answer is that there is no one-size-fits-all answer. There is an inherent cost whether you pay cash, finance or lease. Ultimately, that cost may or may not be materially different depending upon the buyer's circumstances. For example, if the OP is a business owner then leasing may have an advantage for him to the extent that the lease payments are tax deductible.
01-22-2011, 08:42 PM
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I'll take this off topic a bit.
Once upon a time I wrote a check for $80k for an '06 C2S Cab. Within weeks a friend leased a simliarly equipped and mileage '06 C4S Cab. After a few years of happy ownership for both of us, his lease was getting set to mature this month but he decided to walk away and get something else.
His all-in payments for that C4S would have been around $120k if he had chosen to keep the car.
$120k vs. $80k, its not hard math for me. Personally, I figure it makes sense to lever actual investments, but Porsches and other toys do not fall into that category. But I also tend to keep my cars for a long time, so its easy for me to take the moral high-ground in the realm of auto-financial morality - my weaknesses are more in the areas of wine, women and song.
In terms of lease vs. finance - lease is the greater evil (all things being equal) because the you carry the interest on a greater capital burden over a longer period of time. Essentially with a lease you interest service the non-depreciating capital cost while amortizing the depreciating capital cost over the term of the lease. Big price to pay for the convenience of indulging one's self-indulgence out of car-boredom after a couple of years.
A lousy but handy example is a 40 year mortgage vs a 20 year mortgage. To some people (like me), leasing because you can't afford to finance or pay cash should be a bit of a wakeup call.
BTW, after considering the numbers, the C4S guy wrote a check for his new toy, a 6.3 AMG. Never to lease again...
Once upon a time I wrote a check for $80k for an '06 C2S Cab. Within weeks a friend leased a simliarly equipped and mileage '06 C4S Cab. After a few years of happy ownership for both of us, his lease was getting set to mature this month but he decided to walk away and get something else.
His all-in payments for that C4S would have been around $120k if he had chosen to keep the car.
$120k vs. $80k, its not hard math for me. Personally, I figure it makes sense to lever actual investments, but Porsches and other toys do not fall into that category. But I also tend to keep my cars for a long time, so its easy for me to take the moral high-ground in the realm of auto-financial morality - my weaknesses are more in the areas of wine, women and song.
In terms of lease vs. finance - lease is the greater evil (all things being equal) because the you carry the interest on a greater capital burden over a longer period of time. Essentially with a lease you interest service the non-depreciating capital cost while amortizing the depreciating capital cost over the term of the lease. Big price to pay for the convenience of indulging one's self-indulgence out of car-boredom after a couple of years.
A lousy but handy example is a 40 year mortgage vs a 20 year mortgage. To some people (like me), leasing because you can't afford to finance or pay cash should be a bit of a wakeup call.
BTW, after considering the numbers, the C4S guy wrote a check for his new toy, a 6.3 AMG. Never to lease again...
01-22-2011, 08:46 PM
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Cars depreciate equally painfully irrespective of how they're financed...
The only answer is that there is no one-size-fits-all answer. There is an inherent cost whether you pay cash, finance or lease. Ultimately, that cost may or may not be materially different depending upon the buyer's circumstances. For example, if the OP is a business owner then leasing may have an advantage for him to the extent that the lease payments are tax deductible.
The only answer is that there is no one-size-fits-all answer. There is an inherent cost whether you pay cash, finance or lease. Ultimately, that cost may or may not be materially different depending upon the buyer's circumstances. For example, if the OP is a business owner then leasing may have an advantage for him to the extent that the lease payments are tax deductible.
My dentist's partner just got nailed back five years for writing off leases on expensive wheels.
"tell me again why you need a Bentley Azure to go back and forth to the dental lab?"
01-22-2011, 08:49 PM
#6
Here is how I look at leasing. When you serially lease over a 2 or 3 years period you are continually amortization the steepest part of the depreciation curve time and time again. I understand that for some the money isn't an issue and the flexibility and convenience of getting a new care frequently may overwhelm the monetary irrationality. Leasing may make financial sense if you can run it through a business. Just my 2 cents.
01-22-2011, 08:52 PM
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Yeah, that's the boiler-plate excuse. Tax write-off. The taxman is not likely to have too much of a sense of humor about a plumber needing to write-off the lease on a 911 turbo.
My dentist's partner just got nailed back five years for writing off leases on expensive wheels.
"tell me again why you need a Bentley Azure to go back and forth to the dental lab?"
My dentist's partner just got nailed back five years for writing off leases on expensive wheels.
"tell me again why you need a Bentley Azure to go back and forth to the dental lab?"
Last edited by swajames; 01-22-2011 at 09:23 PM.
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01-23-2011, 04:57 AM
#9
The above advice is incredible simplisitc.
Here's some reasons it may make sense to lease:
1) you are transferring the risk of depreciation to the lessor. If the car is worth more at lease end then you can purchase it. If worth less you can simply walk away and let the lessor take the loss.
2) if your vehicle is involved in an accident and you own it then the resale value wil be severely diminished. If leased then it's someone else's problem. No need to worry about "diminished value" at resale time.
3) a highly optioned car will be worth little more than a base vehicle at trade in time but if the car is leased then all (or nearly all) of the options are included in the residual value of the car as this is calculated as a percentage of MSRP.
4) lease interest rates are often heavily subsidized by the vehicle's captive finance company. Lease residuals are also frequently subsidized in a similar manner with residuals frequently greater than what the market would bear in a resale situation. The lease companies can do this because they purchace lease insurance should the car return a lower residual than what the lessee was quoted.
5) if you purchase a vehicle you are no less immune to depreciation than if you lease and (in many cases as I have indicated above) the depreciation is actually greater.
Here's some reasons it may make sense to lease:
1) you are transferring the risk of depreciation to the lessor. If the car is worth more at lease end then you can purchase it. If worth less you can simply walk away and let the lessor take the loss.
2) if your vehicle is involved in an accident and you own it then the resale value wil be severely diminished. If leased then it's someone else's problem. No need to worry about "diminished value" at resale time.
3) a highly optioned car will be worth little more than a base vehicle at trade in time but if the car is leased then all (or nearly all) of the options are included in the residual value of the car as this is calculated as a percentage of MSRP.
4) lease interest rates are often heavily subsidized by the vehicle's captive finance company. Lease residuals are also frequently subsidized in a similar manner with residuals frequently greater than what the market would bear in a resale situation. The lease companies can do this because they purchace lease insurance should the car return a lower residual than what the lessee was quoted.
5) if you purchase a vehicle you are no less immune to depreciation than if you lease and (in many cases as I have indicated above) the depreciation is actually greater.
01-23-2011, 08:48 AM
#11
The above advice is incredible simplisitc.
Here's some reasons it may make sense to lease:
1) you are transferring the risk of depreciation to the lessor. If the car is worth more at lease end then you can purchase it. If worth less you can simply walk away and let the lessor take the loss.
2) if your vehicle is involved in an accident and you own it then the resale value wil be severely diminished. If leased then it's someone else's problem. No need to worry about "diminished value" at resale time.
3) a highly optioned car will be worth little more than a base vehicle at trade in time but if the car is leased then all (or nearly all) of the options are included in the residual value of the car as this is calculated as a percentage of MSRP.
4) lease interest rates are often heavily subsidized by the vehicle's captive finance company. Lease residuals are also frequently subsidized in a similar manner with residuals frequently greater than what the market would bear in a resale situation. The lease companies can do this because they purchace lease insurance should the car return a lower residual than what the lessee was quoted.
5) if you purchase a vehicle you are no less immune to depreciation than if you lease and (in many cases as I have indicated above) the depreciation is actually greater.
Here's some reasons it may make sense to lease:
1) you are transferring the risk of depreciation to the lessor. If the car is worth more at lease end then you can purchase it. If worth less you can simply walk away and let the lessor take the loss.
2) if your vehicle is involved in an accident and you own it then the resale value wil be severely diminished. If leased then it's someone else's problem. No need to worry about "diminished value" at resale time.
3) a highly optioned car will be worth little more than a base vehicle at trade in time but if the car is leased then all (or nearly all) of the options are included in the residual value of the car as this is calculated as a percentage of MSRP.
4) lease interest rates are often heavily subsidized by the vehicle's captive finance company. Lease residuals are also frequently subsidized in a similar manner with residuals frequently greater than what the market would bear in a resale situation. The lease companies can do this because they purchace lease insurance should the car return a lower residual than what the lessee was quoted.
5) if you purchase a vehicle you are no less immune to depreciation than if you lease and (in many cases as I have indicated above) the depreciation is actually greater.
Tom
01-23-2011, 11:52 AM
#13
I like you're idea, and that's what I did. I'm leasing my new Countryman to the business, though. Best of both worlds...hopefully I'll keep the P-car for a while; at least that's the plan.
01-23-2011, 01:12 PM
#15
Burning Brakes
