[QUOTE]Originally posted by 2004S2000
After the lease period, you may be able to re-negotiate the residual and buy the car for far less than what is indicated.

 

Wow thats weird, I did not know that, I wonder why they are illegal in some states, when in fact a lease is just that a balloon payment. In a balloon loan, you also decide when YOU want to get rid of the car, with our cars since they hold their value so well, the balloon loan is a perfect way to take advantage of that situation, lower monthly payment, and a high probability that you can sell your car for a good price. Just like it was mentioned earlier, "If" and "May" are always never going to work in your favor, I always assume a worse case scenario when it comes to selling cars privately or trading them in, lowest price you can get usually is what you end up with. With that in mind, I think a balloon loan is a perfect more economical alternative to both leasing and traditional loans. YOur combining the benefit of low monthly payment with the benefit of selling the car at any time and making money back while lowering your insurance at the same time.

 

Few things.

1) Honda Finance does not re-negotiate lease residuals (has nothing to do with the dealer, they are not the lender).

2) Ballons and leases are both "residualized" payment plans. They both use the ESTIMATED value of the car car at the end of the term as the upaid balance (Residual in a lease and Ballon note in the purchase). Because of this, your local bank will probably not be more competative since they won't "take a chance" and go higher on the residual than Honda Finance will. Lower residual = higher payments.

3) This difference may vary from state to state, but where I am, if you purchase on a balloon, you pay the total sales tax on the purchase (30K x 4.16%). If you lease, you pay sales tax on the monthly payment ONLY. The residual is not taxed until you purchase it.

This may also vary from finance company to finance company. Someone mentioned that "with a balloon, you chose when to sell" I haven't sold a car on a balloon in a long time, but what happens if you reach the end of the term, and you don't have the money to purchase the balance? You then have to sell the car for the balance, or refinance it. Do all balloons have a "turn in option?" I'd hate to think that you could reach the end of the term and not have the money to pay if off and they repo the car!

4) You can sell you leased car at any time. Call up the finance company and see what it's worth, add the sales tax and pay it off and then sell it as needed. Will you owe more than the car is worth? Probably. Since leases are usually short term, if you are selling, you are trying to sell in the highest depriciation time (first or second year?). If you put little down on a 60 month loan, and try to sell in 1-2 years, you'll owe more than it's worth too. Universal truth: Method of payment has NO bearing on future value.

5) As for selling youself.............. people hate talking to car salesmen. A lot of people hate being a car salesmen. Many of them do not want to hassle putting the car in the paper to sell it. Many professionals can make more money by going to work, than they can make selling vs. trading. Each person will determine this themselves, and we are in no position to assume.

 

Ok, I decided against leasing and will probably go to another dealer. I will update mid to end of next week. thanks the help everyone.

 

Colin,

I never found out what residual Honda Finance was using, but in regards to other lenders in my area, the Residual I got with my credit union was higher than what the lenders where offering on leases that I inquired on. In Miami, I paid full tax on the $31000 up front, and when you opt to pay the balloon you are not taxed. With most balloon's you have the option at the end of the term to either turn it into your lender no questions asked (mileage and wear and tear are looked at, and then fees are assessed accordingly, in my loan's case there is a $250 turn in fee), or you can sell it privately or trade it in as long as you get more for your vehicle than what the balance on the loan including the balloon is, or refinance the balloon. You can sell out of a lease at any time, but in my area most lease companies assess penalties, the lowest quote I got for early termination was about $750 in fee's, plus like you stated, you will most likely owe money, and since in a lease you cannot build equity into it, any extra money paid in gets returned to you at the end, at least with a balloon you have the ability to reduce the depreciation hit by increasing your monthly payment. I like your comment on selling cars privately, you put it very well, and thats they way I feel too, I do not want to hassle with selling a car, I usually just hit the local Carmax and get KBB trade in value no questions asked, therefore I know ahead of time exactly what numbers I am working with.

 

I leased an 03' in June of 03.
36 months.
12K a year.
1st month down, security waived.
360$ a month.

 

Before leasing MY04, I did all the math for buying the car outright, leasing, or leasing then buying the car after the lease period. Leasing followed by buying does cost more in the long term, until you factor in buying an extended warranty, at which point the difference is significantly minimized. More significantly, it costs less to lease the car for 3 or 4 years then get another lease at comporable costs than it does to buy the MY04 with the best extended warranty. So don't forget to factor in warranty and maintenance costs if you buy. If you are going to keep your car for 10 years, then buying it will save you some money, but you'll be out of warranty after 7 years. We have a new Saab and MY04 both leased for less than 900 a month, with no service costs at all on the Saab. Buying could have costs 1400 a month easilly. That's a savings of 18,000 over three years compared to buying the two cars.

 

I was under the impression after a lease is up, most lease companies will not issue a new lease on a 3 year old vehicle, thus you have to refinance the balance and since the vehicle is older and with more miles, the interest rates for loans are higher, thus making the overall price higher, than just buying the car out right. In my case I do not intend to keep the vehicle for longer than 3 years so I went with the balloon loan with the understanding that I would be getting rid of the vehicle before 3 years.

 

this lease is bullshit. there is no way you can get a 3yr lease on an S2000 for $360/month with taxes with only first payment down.....

 

That does seem pretty low, I work for the store and buy at cost and I'm not that low....