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Most people I have spoken to who have, have always said it was a bad thing for them and they would never do it again.
I have also heard that a lease could be advantages if you are planning to keep the vehicle at the buyout point because of the lower initial payments and then taking out a used car loan for the buyout amount. Is this just a line of crap? In my mind it just seems like the interest could be a killer because there would be more of it.
The Titan is going to be about $30k, I would like to say I have half of that in cash, but there is no way in hell that is true because I just paid off my S. I would really like to keep my monthly as low as I can and I'm not fooling myself, I'm not going to be able to pay it off in 3 or 4 years. Just keep in mind; I will own this vehicle for 10 years.
Thoughts other than I'm a dumb ass for buying it at this time?
Yes, its a line of crap (at least the way I figured it out it was).
I lease my S. The cost of lease payments, plus my buyout in cash was about $200 difference than financing over 5 years. However, if I do not pay cash, and take a loan out for the final payment (for me, 21,002), I end up spending a few thousand extra in interest.
Think of it this way - You agree on a price. Let's say 30,000. You make payments to buy. You will pay off 30,000 over the length of the loan, and the interest accordingly. On a lease, its the same thing, the residual buy-out is a guess at the value of the car when the lease is up. That, plus your principal portions of the lease payment total the 30,000. The extra money in the payment is the interest portion.
You should be able to have them work the numbers and tell you the monthly lease payment, TOTAL of lease cost, and the residual. Also ask for the total cost with interest for a 48, 60 or even 72 month loan. Compare the two and see.
Something that I'm sure is questionable is that you are comparing dollars at different points in time, ie. 36/39 month lease, vs 48/60/72 month loan. Also consider that a used car loan is typically more expensive than a new car loan, but using a home equity loan/line could provide some tax benefits, and thereby reduce the overall interest cost for the 'buyout loan'. Lastly, depending on the leasing company, the residual may be negotiable. I don't believe Honda Finance negotiates, but others do.
Funny thing is, now that I really started sinking my teeth into this issue, I may be able to lock in a loan through Nissan at 2% interest. I should be able to verify this tomorrow. Here was the email reply.
HI AGAIN:
I DO NOT HAVE THIS TRUCK IN STOCK NOR DID I FIND IT ON THE DEALER LOCATE SYSTEM. IT WOULD LIST FOR $30300.00 AND ITS INVOICE IS 27392.0 I WOULD SELL IT FOR $100.00 OVER INVOICE. THERE IS EITHER $1000.00 CUSTOMER CASH OR 2% UP TO 60 MONTHS. IF YOU SEND ME A FAX NUMBER I WILL SEND FULL INFORMATION ON THIS TRUCK. LOOKING FORWARD TO HEARING FROM YOU SOON.
I emailed right back and said $27,492 with a loan to buy at 2% sounds too good to believe. Please confirm numbers.
Wow Nissan must be piling a whole lot of money on the truck bed to move these. Invoice + 2% financing for 60 months? How come they don't sell better? Seems like a nice truck.
Another advantage of a lease is that you get the choice to buy it out or not.
If you base that purely on financial reasons, the only way you would buy out the vehicle is if it is worth more than the buyout, taxes considered. If you give it back, its most likely because the market value of the car is much less than youve paid, which means youve avoided greater than expected depreciation and youve had cheaper payments than the real cost of purchasing the vehicle would have been.
Getting out of a lease early is painful as assuming the residual is accurate, youve been paying equivalent depreciation payments when in reality, depreciation is greater than youve been paying. Thus, the car is worth less than what the book value shows; time to ante up. BUT, all thats really happened is that youve NOT payed the appropriate depreciation for the time used. Youve been underpaying. Still painful.
Id consider the only real downsides to leasing are: you cant take insurance off the vehicle if you want (my NSX is stored but I still have to pay full insurance), and two, if you mod it, and it gets stolen, insurance will only cover the book value of the car.
But the choice to hand it back, cheaply, at the end of the lease is worth something also.
02-10-2005, 10:58 AM
Lease question for all you smart money bags...
