Mmmm.... Hasn't been in the LAST three years I wonder what makes you think that will change in the NEXT three years.

 

If I'm understanding you correctly. You're saying that by leasing, a person could technically "save" the money and use it for other investments, because you pay less when you lease.

Why not just buy a cheaper car to begin with and not have the car payments cut into your investment budget at all?

My point is, if you have to lease a car because you want more monthly disposable income, it means you can't really afford that car; buy something cheaper. Call me old fashioned, but I prefer not to budget my income around my car payment...

 

You guys are making good points. This is a bit of an aside to the original topic, but I thought I'd chime in...

I'd say that a lot of this question of living within your means depends on individual temperament. My parents' generation hated debt with a passion. Business proprietorship notwithstanding, a mortgage was just about the only type of loan I ever heard of any of my parents' friends talk about.

I think most of America today lives with a lot more debt -- crushing debt for a lot of folks. It seems ludicrous to me for someone to buy an expensive car, maintain it, insure it, and pay taxes on it when he can't afford their own place. That said, who the hell can afford their own place anymore? I feel so badly for folks starting out these days; the price of property is OUTRAGEOUS in so many areas of the US. Now, with gas creeping up, even that's becoming a factor.

The S has fairly good resale value. That fact alone makes buying (rather than leasing) more appealing to me.

So, what am I saying? I haven't a clue. I just felt like ranting. Seriously, though, I would just recommend that if you can't afford the lease payments as disposable income, you shouldn't do it. Taking an actual loan is more "expensive" in the short-term, but it's an entirely different arrangement and could potentially be worth a little hardship.

 

yeah, you're right.....you're not understanding me correctly.

Im not talking about leasing TO GAIN more disposable income, (because you cannot afford the purchase payment), im talking about the opportunity cost of the <potential> disposable income should you lease.

 

The current lease rate is equivalent to 1.75% APR. If you were to finance the car, you'd likely be seeing a higher rate. I don't know what rates you can get on an S2K, but they were in the 3.9-4.9% range when I checked, for a 60 month loan. I have an S2K lease spreadsheet here:

http://members.cox.net/craig.hunter/s2k-lease.xls

One thing I compute is the long term cost of leasing and then buying the car at lease end. You can compare this to the cost of financing. BTW, if you change numbers in the spreadsheet at the top, just alter the monthly payment until the money factor comes out to 0.00073 and that will be in sync with the current lease deal.

In my case, it was a better deal to lease. Now, whether or not I can come up with the $20K to buy the car at lease-end is another question, if I in fact decide to keep the car.

Craig

 

***Speaking Generally, Don't Jump All Over Me***

Don't lease the car if you intend to keep it after the lease, you'll pay too much for the car. You'll end up spending about 4K than if you got a loan.

The current buy off on my car is almost 25K with 18 months left and the car is worth just over 20K.

You should lease a car only if you intend to drive a new car every 3-4 years. You're also bound to the lease and you'll be really upside down on the car if you have to break it.

If the above isn't a concern, you want to drive a new car every 3-4 years, and are resolved to always have a car payment- leasing is a great way to drive more car with a smaller monthly amount.

When it comes time to refinance your car at the end of the lease, you're still going to pay more a month on 3-4 year old car, then if you just gave it back and leased a brand new one and started over. It doesn't make sense to refinance a lease car at the end.

 

That is very true. However, if you're going to buy the car straight out at lease end, the current lease deal is quite good.

When I look at total cost to own, including all lease payments, taxes, downpyments, fees, etc, and add the residual value of the car at lease end (the buyout), it comes to $33,188 in my case.

If I paid cash for the car, it would have cost me about $31,500 out the door. So there's about a $1700 penalty in leasing. But look at the upside of the lease -- I am not committing a whole $31,500 to a car (depreciating asset) all at once. In fact, I could take a good chunk of that $31.5K and invest it, pay down debts, etc... and easily overtake that $1700 penalty.

That's what I found so compelling about the current lease deal -- they are pretty much letting you rent the car for 36 months with a very low money factor. It's a great way to enjoy the car and not commit all your money or sign up for a long term loan. In my case, the lease was a no brainer.

I don't know if I will buy the car at lease end, but I am consciously thinking about it and saving/investing money just in case. If I really love the car and have the dough, I'll buy it out at lease end and likely come out even or ahead of an outright cash purchase. That's the kind of scenerio to think about. Refinancing the car at lease end would probably not be a good idea, unless you can cover it with a home equity loan or some other deal that has an overall benefit.

Craig

 

Are you considering what the interest rate will be if you have to take out a used car loan to buy the car at the end of the lease?

 

No, I assume you'd buy it outright at lease end. If you are going to take out a car loan (probably not a good deal) then you can add that total cost in instead of the cash buyout number. That deal may not be very favorable, but it all depends on the interest rate you get.

If I keep the car, I would not be taking out an auto loan. It's either going to be cash, or some combination of cash and a home equity loan such that the interest can be deducted on my taxes.

Craig

 

[QUOTE=skier219,Sep 23 2005, 07:19 PM] No, I assume you'd buy it outright at lease end.