leasing a hot car ? or wish you didn't ??

Discussion in 'Politics' started by marketsurfer, Dec 26, 2002.

  1. i found an interesting website for those who are contemplating leasing a hot car or seeking to get out of their current lease. www.leasetrader.com check it out.


  2. nitro



    Thx surf.

  3. rs7


    Ditto.....just what I could use. Gonna give it a try!


  4. let me know how it works for you. they are searching for a lease for me.


  5. Why lease a car with interest rates so low to buy?

    Unless you need a tax break with a business vehicle, ownership makes more sense.

    A study done a few years ago on leasing showed that the cost of buying a car on a credit card was less than leasing.

  6. dude, why buy a depriecating asset ?? with leasing you only pay for the part of the car you use. of course for the standard 777 vehicle you may be right, but for higher end cars, leasing makes sense.

  7. Leasing factors in the steep depreciation of luxury cars.
  8. rs7


    I am not sure I understand this logic. Not arguing, just trying to get a grip on the situation.

    Here is how I understand the lease. I could be wrong, so if anyone really knows......

    3 year lease on 30k car. As I understand it, the leaser is actually paying for whatever the "depreciation" will be in the first 3 years. So, for example, if the car were to be worth 15k after 3 years, then the lease will cost the 15k (plus interest). Now as far as I understand, the "residual" ....the remaining 15k of "value" left in the car after 3 years is the "buyout" price. (Of course I am sure they work in some other expenses).

    So, I would think, if this is essentially correct, then what you want is a car with a high "residual"....a car that depreciates less (in terms of percentage) than a car with a low residual.

    For an extreme example....let's say you lease a Mercedes. And if the car costs 75k new, but only depreciates 15k over the three years (not trying to be realistic...just trying to understand the concept). So that would mean that your "payment" on a lease would have to cover 15k. Plus interest (I know they don't call it "interest" but still, that is what it is).

    Then, on the other hand, you could lease a $20k Hyundai. And after 3 years, the car is only worth 5k. So it too has depreciated 15k.

    Does this mean that it costs, on a lease, the same to have a $75k Mercedes as it does to have a $20k Hyundai? If so, obviously a lease makes more sense than a purchase (under these conditions, if they are even remotely "realistic"), if you don't intend to keep the car for longer than the term of the lease. Car is under warranty, etc.

    Is my thinking completely wrong? Any real experts here? I only know that I had always purchased until recently. With the leases, my monthly costs are lower than on a purchase (not financing the full amount, just the "depreciation"). Problem is, of course that after the lease, I have no equity. But I also believe that on a purchase with, say 60 month financing, then after 3 years, there would be no "equity" either. (of course if you make a big down payment, this would not be the case, but trying to compare with a lease...on a lease, there is generally NOT a big down payment). This is when you are, as they say "upside down"....you owe more than what the car is worth.

    So, to drive a new car every 3 years, with a fairly constant monthly cost, is a lease really so bad? I know that the dealerships like to lease, so there must be an advantage to them. I just don't understand how this works. I just recently returned a leased car. A Lexus RX. The residual (the price I could have bought it at) was higher than the market value. So obviously, there was no incentive for me to buy. Why did they not take a lower offer from me? From what I understand, they will, in such a circumstance, just wholesale the car. At a lower price than I was willing to pay. Someone told me this was because they have some kind of insurance against such losses if they wholesale the car. But this doesn't seem to make sense to me. Who will issue such insurance? Who makes money how?

    Any lease/purchase experts that can explain this stuff? I am ready for a new car, and am as confused as ever.

    PS: While I was typing, this came up...which seems contrary to what I believed:

    I thought luxury cars depreciated less steeply than inexpensive cars. I don't mean the big dollar amount of just driving it off the lot. I mean the percentage of value. An "cheap" car also takes a big hit the very moment it becomes a "used car"....ie: driving it off the lot.

  9. Go to a dealer, and look at the prices on 3 year old "luxury" cars that have been leased, and see if a then 75K car with 45K miles is only 60K.

    The dealer may be selling it as a "pre-owned" luxury car with a warranty, and asking a higher price, but check out the blue book and you will see that luxury cars actually depreciate at a higher rate, as most people who can afford expensive cars don't want to buy a "used" car.
  10. rs7


    I know this is correct. What I was asking was if the principal of leasing was accurate as I understand it. Obviously I wouldn't expect my example to work in real life. I am just trying to get a grip on how a lease compares to a purchase. Seems like a big factor is how long you intend to keep a car. If you buy outright and keep a car for a very long time, then there is no way to beat that. You own the car free and clear at some point, and in theory can drive it forever.

    Also, I am not sure about your "credit card" purchase statement. Is it really likely to get a locked in credit card rate lower than a standard auto finance rate? (not to mention the zero percent deals, if they are still being done....but I am pretty sure they were from the auto manufacturers).

    #10     Dec 27, 2002