Is there any thread or faq that explains how leasing works?

bootlegger

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Leasing a car is not negotiable, you agree to their terms. Really the only way to make money is if the lender misjudges the residual value at the end.

Pluses for a lease is other than gas, oil, tires, filters and windshield wipers, the lender pays for maintenance. Minuses are restrictions on mileage and non negotiable terms. Another way to look at it, is if you’re planning on keeping the car longer than three years, it doesn’t make much sense.
I made almost $5k off of my WRX STI lease. Lease was ending, and I noticed it retained value really well. Ended up buying out the lease, then trading in for $5k over what I owed. Had I sold it outright, I would have pocketed $6-7k. Don't expect to ever luck out like that with a Mustang.

 

YOLO

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I made almost $5k off of my WRX STI lease. Lease was ending, and I noticed it retained value really well. Ended up buying out the lease, then trading in for $5k over what I owed. Had I sold it outright, I would have pocketed $6-7k. Don't expect to ever luck out like that with a Mustang.
WRX is one of the few cars that keeps its value.

In fact, I think Subaru still has some great trade-in deal going?

I've seen used WRXs going for more money than a New one, still trying to figure that out.
 

IronG

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A quick example but Zodiac has it perfect above.

Depreciation is what it is. It's equally applicable to someone who owns and someone who leases. If a car is predicted to be worth 50% of MSRP in 3 years, it doesn't matter if you've leased it or own it...your $40K has turned into $20K. In the case where your car does not depreciate that much, you come out ahead either way. In the case where your car depreciates more than 50%, the lease may come out ahead because now you can "walk away" from a car valued @ $17k.

Below is the picture of a lease vs buy calculator with a slightly subsidized lease. Not a Mustang, at least not right now. But rather a Lexus. The lease program in the example below has chosen to subsidize the lease by (1) offering a higher residual than actual expected depreciation and (2) waiving the lease fees. This is not fantasy, this happens often with certain cars! My last car (Lexus IS350 F-Sport) had (1) subsidized lease interest rate (called Money Factor), (2)paid me a cash rebate greater than purchase rebate and lease fees combined, (3) had 0 deposit and (4) predicted below normal depreciation.

You can see the net cost to lease is lower by about $1500. This includes asset value and investment value.

Lease_Example.jpg

The calculation is full of errors and or assumptions. 1., you have the purchase at a higher interest rate, 2. where is the local tax being applied in the lease? Most states apply taxes based on your payment 3. Where did you get the depreciation % from? 4. what is the investment rate of return?
5. How are you determining the residual?

Also, you may no mention of that fact that when you finish your payments on a purchase, you can sell it and make some of you money back. There is no such option with a lease unless you decide to buy it out at the end which is highly unadvisable.

The only time a lease is better than a purchase is if you purchase a car when you make the last payment, however if you keep the car for a few more years you will save even more money. There are some good reasons to lease, but over a 20 stretch you are forced to pay more money. Granted, you will have access to more new cars, but I think the point here is, is it cheaper or more expensive to lease and to me it is unquestionably cheaper to purchase.
 

Zodiac

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Except the question wasn't whether or not it was cheaper. The question was for explaining how leasing works. Instead he gets a bunch of people that tell him it's wrong because they don't know how to lease. Look it's not for everyone, should be the end of discussion. He's better going to a forum that can provide him with the information he is looking for, rather than half the bullshit posts here.
 

IronG

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Except the question wasn't whether or not it was cheaper. The question was for explaining how leasing works. Instead he gets a bunch of people that tell him it's wrong because they don't know how to lease. Look it's not for everyone, should be the end of discussion. He's better going to a forum that can provide him with the information he is looking for, rather than half the bullshit posts here.
Well you are not totally wrong.

OP, I did a quick search on the net for how to lease a car. I found many sites that have info, but below is a link to Edmunds. I took a quick look and it covered it pretty well. Good luck whether you lease or purchase.

https://www.edmunds.com/car-leasing/10-steps-to-leasing-a-new-car.html
 


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Edmunds forum is a great resource for getting the residuals and money factors being offered for the month as well as whatever incentives. Independent lease cash is amazing if you lease through a 3rd party vs the manufacturer.
 

sdiver68

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The calculation is full of errors and or assumptions. 1., you have the purchase at a higher interest rate, 2. where is the local tax being applied in the lease? Most states apply taxes based on your payment 3. Where did you get the depreciation % from? 4. what is the investment rate of return?
5. How are you determining the residual?
All your questions are answered in the post. I gave you the math and a point to the calculator used which has the definitions of each field.

1) Yes, most long term loan are at a higher rate versus shorter loans due to the risk profile.
2) In the Calculator, it applies tax to both the Purchase and Lease calcs
3) I clearly stated it was an example but based on calculating dozens of leases, and in the end it doesn't matter to the math.
4) When you ask questions like what is investment rate of return and why does it apply to a lease, it shows you really don't understand. In the buy scenario you are paying $784/month. In the lease scenario you are paying $543 and thus have $241/month to invest @ 7%, which is lower than the 100 year SP500 average rate of return and much lower than the same over the last 10 years.
5) Answered in my post...it's 3 year sample depreciation with a captive finance subsidy.
 

IronG

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All your questions are answered in the post. I gave you the math and a point to the calculator used which has the definitions of each field.

1) Yes, most long term loan are at a higher rate versus shorter loans due to the risk profile.
2) In the Calculator, it applies tax to both the Purchase and Lease calcs
3) I clearly stated it was an example but based on calculating dozens of leases, and in the end it doesn't matter to the math.
4) When you ask questions like what is investment rate of return and why does it apply to a lease, it shows you really don't understand. In the buy scenario you are paying $784/month. In the lease scenario you are paying $543 and thus have $241/month to invest @ 7%, which is lower than the 100 year SP500 average rate of return and much lower than the same over the last 10 years.
5) Answered in my post...it's 3 year sample depreciation with a captive finance subsidy.
All I can say is lol. You think because I asked you what investment rate was I did not know. A quick google can tell you that. Just make the terms the same. 3 year vs 3 year. It is obvious to me you don't really care about the actual cost. All you want to do is try to manipulate the numbers to try to prove your point. Jeez, no wonder people hate dealing with car salesman. Typical "just tell me the monthly payment and I will work the numbers routine. You also don't factor in things like miles. You are restricted to mileage or you pay a penalty. True there is a penalty for mileage on a purchase for when you do eventually sell it, but it is a much smaller hit not to mention the fact that you kept it twice or 3 times longer.

I guess you can lead a horse to water, but can't make him drink. Go ahead and lease a car every 3 years and waste you money, but it is your money to waste I guess :-)
 

sdiver68

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All I can say is lol

I guess you can lead a horse to water, but can't make him drink. :-)
You are right. Horse-water. We will agree to disagree.

The math however is not subjective, it stands. For any proposed lease vs buy situation you can use that tool to guide you on which is financially better.
 

IronG

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You are right. Horse-water. We will agree to disagree.

The math however is not subjective, it stands. For any proposed lease vs buy situation you can use that tool to guide you on which is financially better.
Ok we agree on something!

One other point, you are not factoring in the trade in. So in the scenario where you only lease versus purchase and you go with 3yrs for both, which one wins when you add in the 20k for the trade up front on the purchase. It will lower the payment significantly.
 

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This isn't a debate for lease vs buying. It was questions about leasing, if you don't like leasing or know how it works, then obviously this thread isn't for you. Move along you aren't adding anything into this thread at all.

It's like a manual vs auto thread.
 

IronG

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This isn't a debate for lease vs buying. It was questions about leasing, if you don't like leasing or know how it works, then obviously this thread isn't for you. Move along you aren't adding anything into this thread at all.

It's like a manual vs auto thread.
So you are saying that if someone wants to lease a car, they should or would not want to know what it will cost them? You are only looking at one piece of the puzzle. If I were going to take on a financial burden, I would want to know all the facts. Maybe you need to move on?
 

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No that's not what I'm saying.

Please I'd love to see where I said that, please provide that info for me thanks!

I'm saying he should be left to make that decision versus internet armchair financial experts. He was looking for info about leasing, that is all. Not financial gains on the stock market.

It doesn't matter to me anyway. A Mustang doesn't lease well so I wouldn't even consider it.
 

IronG

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No that's not what I'm saying.

Please I'd love to see where I said that, please provide that info for me thanks!

I'm saying he should be left to make that decision versus internet armchair financial experts. He was looking for info about leasing, that is all. Not financial gains on the stock market.
So again I think you are missing how the internet and forums work. Just because I already supplied an answer directly answering the OP's question, does not mean that myself and others can't continue the conversation. especially when it is relevant to the topic. I am unsure why you are commenting at all as you seem only interested in muting others in the exchange of ideas. Maybe you should just avoid this thread?
 

Zodiac

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Love how you're trying to turn this around. The OP asked for information about leasing, I provided him with info and a link to research. What have you provided the OP?
 

 
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