Do you like driving newer cars? Do you drive less than 12K miles/yr? You should consider leasing.

For your situation (putting $20K down + excellent financing terms available + you appear to keep cars for a long time) buying is a no brainer.

Jimbo

 

And this would be the same Wall Steet that told us that technology stocks were not overvalued when NASDAQ was at 5000?

Leasing for an individual is very different from corporate leasing. An individual cannot write off a lease payment as an expense.

 

[QUOTE]Originally posted by Triple-H
[B]I have never leased a car so I have no experience.

I have a deposit down on an '02 S2. I'm planing to put 20K down in cash and then take out a car loan for the balance.

 

Everyone is making this issue much too complex. Triple-H stated he was planning on keeping the car long-term and wanted the option that would cost him the least money over time to own the car. That option is financing the car with the $20K down. Leasing is ideal for those wanting a new car every few years or those trying to buy more car than they should(in my opinion).

As for Infidel's post, most of that info is inaccurate. For example, leasing laws vary greatly from state to state, and I have never seen a residual that is negotiable. In Texas, for instance, state sales tax is assessed on the full purchase price of the vehicle, and assessed again on the residual value if purchased at the end of term.

 

You guys are great, thanks!

I know shit about about one of the most important things in my life, money. I'm going to do more investigating based upon the ideas that have been shared. Maybe I should put less down and try to invest the rest of my savings.

Keep the ideas coming!

 

A lease is a rental agreement. There is almost no reason for individuals to lease anything when you can buy it. The advantage of a lease is almost always to do with capital outlay. You don't have to buy it to drive it and so you don't need to make a large down-payment. So you could lease 4 or 5 cars for that same $20K up front and not have to worry about selling them in a few years time. However you will pay through the nose and the only way to get out of a lease before the expiration is to sell it at a huge loss (subsidize someone elses payment since they could go out and lease a brand new one for the same as you are paying). If you compare the lease rate (calculated in $/$1000) over the period of the lease you realize that by the end you could have bought it for the same price and actually still own it.

A lease is a pure expense (you own nothing but a payment schedule) and thus completely deductable. If you are self employed that's good except when you consider something called depreciation. I'm not sure what the depreciation rate for cars is but it's either 3 or 5 years (probably 5). So you can deduct some portion of the asset's value from your income as a deduction each year for 5 years. You do of course still have the car, unlike a lease. The interest on the loan is an expense so it too is deductable. If your loan is front loaded, you will have written off most of the interest and value in the first couple of years. While you can deduct 100% of a lease you also pay 150% compared to owning it. If you are not in this situation you SHOUNLDN'T EVEN LOOK AT LEASING.

Dealers want to lease. That's why they push it. They make sooo much money on leasing it's rediculous. Don't find yourself on the back end of that equation. Think about it, they get to sell the car twice.

 

3H,
Traditionally leasing is more expensive than purchasing because you (the lessee) are not the entity that shoulders the risk of what the car is worth at the end of the lease. Generally, any entity that has to shoulder additional risk (the lessor) needs to be compensated, and in this case the compensation is more money (so it's fair).
However, because leasing can be so mysterious, some car companies have used it in an unorthodox method to lower prices (two tier pricing) without having to lower the price to people willing to buy at full boat. I call these leases

 

[QUOTE]Originally posted by gearhead28
[B]Everyone is making this issue much too complex.

 

Exactly right...... Most everyone will agree that the great american dream is owning their home (not renting). Well, I think likewise that owning their car too would be preferred, and not renting. I like keeping things in the ASSETS column. If I want to pay for a ride that I will not own, I'll go to the Carnival...>>> Kevin

 

Right now, given the going interest rate (finance) and the going "rate factor" (lease) I'm not sure I want to plop down a large down payment. Your borrowing cheap money right now. And therefore, I would tend to want to keep most of mine.

In most cases you can negotiate a good rate either way. Be careful either way. Many dealers will sell you a car at discount and then purchase your financing at a cheaper rate than what they sell it to you for. I've caught several dealers over the years trying to make money on my financing. Rate factors are especially tricky. Ask the dealer to get you the best rate he can, and then, before you sign, call a couple of banks or leasing companies and find out what their current leasing rate is. Try Chase Auto Finance..they are usually competive on both finance and lease.

Leasing has one advantage I think is worth considering. Even if you have the resources for a purchase it may be more prudent to keep your cash flow at a comfortable level. You can lease the car for three years, and if your residual is low enough, you can finance the car for a 5 year term following your lease and keep your payments about the same. If you plan to keep the car a long time...what the heck.

Free advise here. If your purchasing and have good credit, anything over 7% on a finance is too much. If your leasing anything over a .0035 rate factor is too much.