I just wanted to get this straightened out as I really want to get an s already but don't know if I should lease or buy. Okay so this is the question... if i leased the s with the honda lease deal and at the end of lease decided to buy, how much more money would I waste than if I would have purchased the vehicle from the beginning? I think I most likely will buy at end of lease so why is leasing considered such a bad investment by many.... even though I will be purchasing MOST LIKELY? thanx a lot and I searched and couldn't find a such specific question.

 

The simple answer is: It depends.

The not so simple answer, well, I'll take a stab and when I get bored of typing, we will see how far I got.

Is this your only car? This question is a good indicator of how able you are to control the miles you put on the car. My S2000 is not my daily driver. I only drive it on weekends, and for fun. I average about 4,000mi a year. Keep in mind that mileage is important if you lease a car. The terms of the lease allow for 12,000mi a year. If you go OVER that, you have to pay (if you return it of course.) If you pay more up front (and over the length of your lease) you can get more miles in the contract, but you are still paying for the miles. If you are going to drive more than 12,000mi a year, I would strongly urge you to buy.

I get an annual bonus from my job. It's nice to get some extra money every year, but it doesn't help me with montly payments. So I decided to lease my car to get a lower monthly payment with the understanding that along the way I would invest at least part of my annual bonuses so I would be able to pay cash for the residual. In this way, it's like a mortgage loan with a ballon payment at the end. You get a great rate up front, but it will only last so long so eventuallu you have to do something about it.

If you need to get out of a lease early, you can trade-in the car or sell it private party. It MIGHT be a little harder to do that, because you may have a slightly higher pay-off than someone with a loan.

If you like to over-pay your monthly payments to get your loans over with more quickly, then do not lease. It doesn't help you with a lease.

When I leased my car, I added up what I was paying that day, all of the payments over the term of the lease, and the residual. So I now KNEW exactly what I was paying for the car. It was roughly the same as buying a car and having a 4% loan on it. The interest from the loan would have roughly equaled what I was paying in leasing fees.

I too have every intention of buying out my lease at the end of the term. I have spoken to many people and some say it is, and some say it isn't possible to negotiate the residual at the end of the lease. I intend to try to negotiate at the end of my lease and work out an even better deal on the back-end. Even if I don't get a dime off of the residual I did not get a "bad" deal so I will be fine with it. If I can get $2-3k knocked off, all the better.

OK, I am bored now. Hope this helped.

 

I think most car-buying-tips websites have calculators that allow you to compare how much you'll spend between buying and leasing. Leasing isn't always a bad investment, provided you know what your needs are. If you think you'll buy at the end of the lease, why not just buy it in the beginning, I think you'll save money this way.

IMO, if you can't afford monthly payments of buying a car, then it is out of your price range.

 

dont lease with the intention of buying. leasing is great if you plan on trading in for a new model every x number of years.

if you are considering leasing just to lower your payment,and then buy it later, you will be tossing a good chunk of money. with most things there is a grey area, where you can lease it and get your payments down, but not so far down that you will owe a small fortune on it when it is done. its tricky to arrive at these numbers, especially if you are buying from a dealer, since we all know that they like to keep the numbers as mysterious as possible.

if its worth it to you to save a few hundered bucks on your payments and then pay out a big chunk in the end, then go for it. but from an investment stand point. that method is suicide. you never really know what financial situation you will be in in the next few years.

another way to save a good deal of money, is to buy through a leasing company. there is one called autoflex in the dallas area, but i'm sure they have something similar all over. these guys basically set thier own imaginary residual value(the value which lease payments are based) and therefor the payments can go way down. the dealer usually cant compete payment wise. but the bad news is that you will owe even more on it when the lease is over, if you decide to buy it.

so inother words its only good if you plan on leasing and turning it back in. it will most often save you even more money than leasing through the dealership means, because they have a fixed residual.

i hope that helps. it probably made it more confusing.

 

thats not entirely true - for the 4-5% of the purchase price that you may be overpaying on the term of the contract, your extra $300-$400 per month you have saved* over buying could be put to better use and give you a greater return on your investment.

Personally I would rather have 100% equity in my house


(* i know you havent saved the money per say, but merely deferred payment of it until the buy out, but for the purpose of this argument, you have a higher disposable income so i used the term saved).

 

i would say it LARGELY depends on what you are doing with the extra $200-$300 saved per month by leasing......
if you are leasing because you can't afford that extra money to buy the car outright, i'd say you shouldn't even consider getting a S2000.
if you are investing that money (e.g. 401k, mutual funds, savings account) then i'd say leasing is a small price to pay for the option of getting a new car in 3 years without the hassle of selling it.....i'm about 90% sure there will be a more desirable car than the S2000 in 3 years...at least i hope so.

 

with the very low promotional rate honda is offering on the lease, you really are not "wasting" that much.

the honest answer to your question is 2-3 years of extra interest.

 

its not just the rate you need to take into consideration - whats the residual on the current lease deal?

 

Not me. My home loan is a lower interest rate and tax deductible! That makes it effectively 3% vs. 4.75% for the car.


Also, see my sig.

 

his question was how much extra is it to lease, THEN buy.

the answer is the added interest as the amount you actually pay for the car (no interest) is the same either way. The added cost would be the interest for those subsequent years, but since the honda money factor (at this time) is so low, the interest cost in this lease is extremely low.

Effectively, you are financing the first $10K at ~2% a year, then the remaining $20K at ~6% a year for 4 years when the lease is done. If you bought today, you'd be financing $30K at ~5.5% a year for 5 years.

the actual interest cost could come very close to washing out over the terms of both loans. The principal cost is identical in both instances.