Yeah i guess theres many ways to think about it and you guys have good input..... Well I'm 17 1/2 and work at a hospital (im a doctor!) j/k well since I still go to school and can only work so many hours per week, I don't make too much. I get paid almost 11 dollars an hour and my average paycheck comes out to 450 or more every two weeks. So I'm thinking of leasing to lower my monthly payments as I still need to pay for insurance which will be under my mothers name and me as an occasional driver with 1 point on my record. So 900 hundred a month.... I'm guessing 350 for lease payment, 250ish for insurance which leaves me with 250 for gas, food, going out and car maintenance. I also have $10,000 saved up and don't want to use it unless the occasion is called for..... So wut do you guys think? and please no bashing because of my age! lol thanx.

 

Also I don't really need a practical car as i'm still young and have no family of my own. I also want to add modifications to the car but will take off if I decide to turn in at end of lease.......... who knows wut the my08 s2000 will be like....................................

 

In this situation, leasing is most likely cheaper for you, it depends on future interest rate assumptions. Let's assume that you do not want to put any money down and you negotiated the price of the car at 30300 for both situation. Therefore the only cost is the cost of financing the car.

Leasing:
Interest on the 3 year lease ~ $1500
Bank Fee (required for the lease) ~ $600
Interest on financing the car after the lease (assumed 3 years @ 6.5%) ~ $2000

Total financing cost of lease then purchase = $4200

Outright purchase:
Assume no money down
Interest on the car (5 years @ 5.5%) ~ $5300

Savings from leasing then purchasing = $1100

The savings is in the interest rate that the car is financed at 1.75-2% from the lease for first 3 years vs 5.5 from purchasing. If you can finance the car at less about 4.5% on an outright purchase, then it will be cheaper. Finding that interest rate would be difficult.

Even if you have money to put down toward the price of the car you will still end up ahead on the lease. When leasing you can put that money in the bank and earn interest on it and use it at the end of the lease to pay down the purchase price.

Also all those possible penalties at the end of the lease like going over the allotted miles are only charged if you return the car to the finance company. If you are not returning the car, you just pay the residual value which is about 19800.

 

I think you're missing the point of my thread. I could have raided my saving account to pay for the car all at once, but at a lease rate of 1.75%, I am better off taking the lease and freeing up my money to earn interest (currently at 2.02%), be invested, or just provide me with a rainy day fund for the next three years. It just didn't make sense to dump $30K into a car up front.

At lease end, I'll have more money in the bank and can decide if it makes sense to buy the car then. I can't really say what I'll want to do in three years though. I may not be able to dump $20K into the car at that point or be able to justify it. I guess that's another thing I like about the lease -- you have plenty of time to decide if you really want to blow your wad.

Of course, this is not something to say about any lease in general. With a 0.00073 money factor on a car with 60% residual after three years, it's reasonable. I would not reccommend it on the higher MF / lower residual deals you encounter on many other cars. The S2K lease was exceptionally good, but many deals are not.

Craig

 

[QUOTE=skier219,Sep 24 2005, 09:18 PM] I can't really say what I'll want to do in three years though.

 

Your sig's link was awesome! I work in an area where you constantly see BMW 3/5/7's, Porsche SUV's, M45's, TL's, X5's, X3's, Hummers, you name it. It is also one of the lease capitals of North America. It makes me laugh. All of us should be smart, financially, and buy a car with the intention of keeping it for 7-10 years or longer. Pay on it 4 years, then drive 3 years + with no car payment. Not many of us do that, however, because you get hooked on the latest, greatest. Most people I have met that have really nice cars, lease them. They use the excuse that they want something new every couple of years (status symbol), which is also funny because they are in a longer rat rass, 'cept they don't know it.

Despite having billions, Walton still drove a pickup truck and wore clothes from his own discount store, Wal-Mart.

 

Homeowners, if you haven't already discovered the joy of a home equity line of credit, please go talk to your bank/CU. In recent years, there's been no better way to borrow money (IMO).

That said, it *still* comes down to whether or not you can afford monthly payments. In most cases, your home is an asset that increases in value over time. Cars (except very rare cases) are not. No matter what car you buy, you're basically throwing money away.

Tommy's point above is great -- the best move (i.e., least painful) with an asset that's devaluating is to buy it and keep it. So, unless you're Rockerfeller, save your money, buy the car you really love -- maybe shoot a little higher than you planned -- and keep it a good long while.

The car companies will hate you, but screw them.

 

just BUY it..... you're gonna hate it when you have to give the car back after your lease (you'll be at the dealer crying and the managers there will have to pry the keys away from you) and if you decide to buy it at that point, the dealer will rape you...



*disclaimer* i didn't read the rest of this thread.... so i have no idea what all has been talked about, i'm just replying to the very first question/message...

 

I'll agree with skier. My first S was a lease, with the intention of buying. I get a nice bonus each year, and determined that using my bonus money to make the buyout was a better deal for me than dropping a lot down up front and making payments.

For me, the difference of buy vs. lease/buy was a few hundred dollars (much more if I financed the buyout as was said by someone). Those dollars in a way are an insurance policy if I don't like the car, or decide not to keep it. Plus, I have 100% ownership in 3 years vs. 5 years if that means anything.

In my case, I was about to make the final payment, and found a used S2K in about a good as a situation as possible. So I traded a few more $$ for a lot less mileage. With a purchase, I probably would not have been able to take advantage of that.

As for the philosphical view. I think a HS student leasing a car is bad. When you leave HS and go to college, and your lifestyle changes, or your commute changes, or your work (hours or job itself) changes, you could regret being locked into a lease. Leases give people who can are stable in their environments options. (People here talked about it - using the money saved to work for more money, etc..) Considering the amount of potential change that you're likely to see in your life in the next 2-5 years, go with something more practical and with less overall risk.

 

[QUOTE=TommyDeVito,Sep 25 2005, 04:11 AM] All of us should be smart, financially, and buy a car with the intention of keeping it for 7-10 years or longer.