Car Lease vs. Buy Question

Kabeetz · 03-28-2008, 11:58 AM

In New York, as in many states, you can no longer do a traditional lease, but rather a lease with an option to own.

So, you negotiate the price of the car as you would if you intended to finance, get the best price, and then lease.

People always say it is bad to put a large down payment on a lease. My question is why exactly?

If you intend to purchase the vehicle for the remaining unpaid agreed upon sale amount, doesn't it make just as much sense to put down a good sized down payment as traditional financing?

I am getting between 8-9k after payoff from insurance on the Z, so I am curious.

booey · 03-28-2008, 12:01 PM

How sure are you that you are going to elect the option at the end of the term? Assuming a 36-48 month lease, a lot can happen between then.

Kabeetz · 03-28-2008, 12:12 PM

In other words if one didn't take the option, u'd eat the lost down payment money... good point.

I total my cars before then so it's usually a non issue

booey · 03-28-2008, 12:14 PM

Lol.

Yeah that's what I was getting out. Personally, I prefer leasing just because I like to have a new car every 3-4 years and it's cheaper that way in the long run. As to down payments, I'd rather miss out on the 25-50 bucks saved every month and instead have $5k in my pocket because I can take that 5k today and invest it and make more money over the course of the lease than I would have saved by putting it on the car.

Beverly McD. · 03-28-2008, 12:16 PM

I used to have a good friend that sold cars (dead now) but I remember her telling me one time that the dealership laughed all the way to the bank when a customer took a lease versus a sale. Sorry I didn't ask her why Kab.!

Kabeetz · 03-28-2008, 12:22 PM

Quote:

Originally Posted by Beverly McD.

I used to have a good friend that sold cars (dead now) but I remember her telling me one time that the dealership laughed all the way to the bank when a customer took a lease versus a sale. Sorry I didn't ask her why Kab.!

That's why a lot of states changed the laws up... they used to be highway robbery unless u were doing it through a business for the tax benefits.

cranny · 03-28-2008, 12:27 PM

Quote:

Originally Posted by Kabeetz

That's why a lot of states changed the laws up... they used to be highway robbery unless u were doing it through a business for the tax benefits.

This is what I've always been told by my accountant. Only lease a vehicle for business purposes and tax advantages. Otherwise you come out better buying vs. leasing with anything else.

solidspine · 03-28-2008, 03:08 PM

If you are in a position to depreciated an owned vehicle or write off the lease, it always seems advantages to purchase and depreciate. Then keep the car and give it to one of your kids or relatives.

If you sell it you have to pay capital gains.

I have never leased.

Mackman · 03-28-2008, 06:00 PM

Disadvantage of a lease is if you need out early for any reason. Leases are very structured, the leasing company is the owner-gets the depreciation, and if turned in early is very costly. The penalties for early termination can be as much as 20%. If you are sure you will want it in 5 years finance it, if not lease it but never, ever, for more than 36 months. Do not put money down in a lease, it makes the payment string make less sense.

Lumberjack5.0 · 03-28-2008, 06:46 PM

Leasing can make sense if you do it right. If you get a new car every 2-3 years anyway, adn tend to take care of thenm (well, tend to avoid scatches/dings/etc) then the overall cash outlay versus buying can make sense. You have to do the math and see. Typically cars that hold their value make more sense to lease than those that don't. Also, if you understand what a lease is (paying for the depreciation of the car while you drive it) and know the money factor (the finance costs of the lease) and whatnot, it can work in your favor.

If you drive a consistent number of miles and don't go over, you will often end up paying less in the long run. Also, with the option to purchase at the end, you can figure out if it makes sense to purchase it when the term is up or whether it's best to start fresh.

It's not a simple proposition. Do what you're comfy with

TrenAman · 03-28-2008, 06:55 PM

my wife is a finance manager at a dealership, she says they will get you either way. It is the finance ppl who get you, her is the example she just gave me and would probably be pissed I am telling it how it is here...
example - buy a Z06 for 70K loaded, that is several K off sticker, so you think you are getting a killer deal. Salesman sends you to the finance office "this is who f's you, not the salesman", she gets a rate from a lender for 4.9% for 60months based on your credit score, she tells you the best they can get is 8.9% for 60months and you buy it, that is 4%of $70K for 5years, which just made the dealership $14K, not to mention extended warrantys which they normally sell for double all day long. The best advice she has is to pay cash and do not say you will pay cash until you get to the finance office, if you are not paying cash, you will get keystered

Lumberjack5.0 · 03-28-2008, 07:00 PM

Trena -- if you do your homework and know market rates, you can beat 'em. I used to sell cars. Smart consumers who don't cave get great deals. It's up to the buyer to do their homework. In this market dealers want to make deals and move units.

TrenAman · 03-28-2008, 07:31 PM

Quote:

Originally Posted by Lumberjack5.0

Trena -- if you do your homework and know market rates, you can beat 'em. I used to sell cars. Smart consumers who don't cave get great deals. It's up to the buyer to do their homework. In this market dealers want to make deals and move units.

To a point they want to move units, I mean you have a car on the lot for 9months, they will give it to you for anything to get rid of it. A unit that is in high demand, you will pay for it regardless of homework. However a normal car, a very smart buyer can get a great deal, only if you pay cash or have outside financing.

booey · 03-30-2008, 01:22 PM

Quote:

Originally Posted by TrenAman

my wife is a finance manager at a dealership, she says they will get you either way. It is the finance ppl who get you, her is the example she just gave me and would probably be pissed I am telling it how it is here...
example - buy a Z06 for 70K loaded, that is several K off sticker, so you think you are getting a killer deal. Salesman sends you to the finance office "this is who f's you, not the salesman", she gets a rate from a lender for 4.9% for 60months based on your credit score, she tells you the best they can get is 8.9% for 60months and you buy it, that is 4%of $70K for 5years, which just made the dealership $14K, not to mention extended warrantys which they normally sell for double all day long. The best advice she has is to pay cash and do not say you will pay cash until you get to the finance office, if you are not paying cash, you will get keystered

That's true about the cash. I went in with a friend of mine to the Infiniti dealership when he was going to purchase his car. He didn't tell them he was going to pay cash. He walks in and they give him the red carpet treatment, throw in free oil changes, car washes, you name it. Once he told them he was paying cash, their faces got red and barely spoke to him the entire time, lol.

jenscats5 · 03-30-2008, 03:07 PM

There ARE times where leasing can cost less than financing, but you have to figure out the cost of the car over the term of the lease/buy.......

Basically, with a lease, you are paying interest (yes, you are) + depreciation.....That determines the payment.....So you are paying the sale price less the residual (guessed end cost) + interest for "borrowing" the car for the life of the lease.....There's a worksheet the dealer uses to figure all this out & the Money factor creates your interest rate. In New York, taxes must be capped into the lease or paid in full at signing.

A down payment on a lease is a Cap Cost Reduction and all it does is lower your payment.....if your car got totalled or stolen early into the lease, the your SOL. You won't get it back. The insurance will only basically buy you out of your lease which is reduced by the CCR.....not worth putting that much money down.....

Also, the dealer has a range they can increase your money factor & it's usually 3% over the buy rate from the finance co. And leasing in NY is more expensive regardless just due to the taxes.....Westchester county is the worst.....

BTW, that NY law is BS as you can always purchase the car at the end of the lease for the residual value if you wanted to......

Worked for an auto finance co for 13 years......

Kabeetz · 03-30-2008, 10:59 PM

I live in Westchester thanks Jens. LOL

Thank you all for your input I'll have more questions/thoughts when I should be working tomorrow

TAZ · 03-31-2008, 05:15 AM

Quote:

Originally Posted by jenscats5

There ARE times where leasing can cost less than financing, but you have to figure out the cost of the car over the term of the lease/buy.......

Basically, with a lease, you are paying interest (yes, you are) + depreciation.....That determines the payment.....So you are paying the sale price less the residual (guessed end cost) + interest for "borrowing" the car for the life of the lease.....There's a worksheet the dealer uses to figure all this out & the Money factor creates your interest rate. In New York, taxes must be capped into the lease or paid in full at signing.

A down payment on a lease is a Cap Cost Reduction and all it does is lower your payment.....if your car got totalled or stolen early into the lease, the your SOL. You won't get it back. The insurance will only basically buy you out of your lease which is reduced by the CCR.....not worth putting that much money down.....

Also, the dealer has a range they can increase your money factor & it's usually 3% over the buy rate from the finance co. And leasing in NY is more expensive regardless just due to the taxes.....Westchester county is the worst.....

BTW, that NY law is BS as you can always purchase the car at the end of the lease for the residual value if you wanted to......

Worked for an auto finance co for 13 years......

This is exactly how I understood it to work. I have leased a few vehicles over the years. When I was doing it Full sized trucks were not outrageous in price and held there value well. The lease payments were very attractive. The estimated depreciation being the main factor.

The problem that I have with leases is that allot can happen in 2-4 years. A change in job or house and your planned millage can go out the window. You also have the condition of the car to factor in as they can get you in the end when you turn it in.

I prefer to own. Check your financing options out carefully before going into buy. Sometimes you can get better financing through your local banks all though nowadays the big 3 offer 0% specials if you are buying at the right time and can comply with the terms.

In all cases it pays to research the invoice pricing and run the numbers yourself before going in and making sure you know exactly what your going to pay for. I always show up with a folder full of spread sheets and info. I make them explain all costs. If I don't feel comfortable I go to another dealer and see what their workup looks like.

-TAZ

03-28-2008, 11:58 AM	#1 (permalink)
Kabeetz Gold Member Join Date: Feb 2007 Location: N.Y. Posts: 6,749 Rep Power: 230441	Car Lease vs. Buy Question In New York, as in many states, you can no longer do a traditional lease, but rather a lease with an option to own. So, you negotiate the price of the car as you would if you intended to finance, get the best price, and then lease. People always say it is bad to put a large down payment on a lease. My question is why exactly? If you intend to purchase the vehicle for the remaining unpaid agreed upon sale amount, doesn't it make just as much sense to put down a good sized down payment as traditional financing? I am getting between 8-9k after payoff from insurance on the Z, so I am curious.

03-28-2008, 06:55 PM	#11 (permalink)
TrenAman Healing to Suffer Again Join Date: Feb 2007 Location: C-Town Posts: 2,974 Rep Power: 196863	my wife is a finance manager at a dealership, she says they will get you either way. It is the finance ppl who get you, her is the example she just gave me and would probably be pissed I am telling it how it is here... example - buy a Z06 for 70K loaded, that is several K off sticker, so you think you are getting a killer deal. Salesman sends you to the finance office "this is who f's you, not the salesman", she gets a rate from a lender for 4.9% for 60months based on your credit score, she tells you the best they can get is 8.9% for 60months and you buy it, that is 4%of $70K for 5years, which just made the dealership $14K, not to mention extended warrantys which they normally sell for double all day long. The best advice she has is to pay cash and do not say you will pay cash until you get to the finance office, if you are not paying cash, you will get keystered __________________ alive to live, not to believe.

03-30-2008, 03:07 PM	#15 (permalink)
jenscats5 Some Phase of Irritated Join Date: Feb 2007 Location: Propagating some felonious BS Posts: 3,990 Rep Power: 167160	There ARE times where leasing can cost less than financing, but you have to figure out the cost of the car over the term of the lease/buy....... Basically, with a lease, you are paying interest (yes, you are) + depreciation.....That determines the payment.....So you are paying the sale price less the residual (guessed end cost) + interest for "borrowing" the car for the life of the lease.....There's a worksheet the dealer uses to figure all this out & the Money factor creates your interest rate. In New York, taxes must be capped into the lease or paid in full at signing. A down payment on a lease is a Cap Cost Reduction and all it does is lower your payment.....if your car got totalled or stolen early into the lease, the your SOL. You won't get it back. The insurance will only basically buy you out of your lease which is reduced by the CCR.....not worth putting that much money down..... Also, the dealer has a range they can increase your money factor & it's usually 3% over the buy rate from the finance co. And leasing in NY is more expensive regardless just due to the taxes.....Westchester county is the worst..... BTW, that NY law is BS as you can always purchase the car at the end of the lease for the residual value if you wanted to...... Worked for an auto finance co for 13 years...... __________________ Peanut Butter is a RIGHT, not a privilege! To Cook is to Create, and to Create well is an act of integrity and faith. Chicken....tastes like candy if candy were a chicken.

03-28-2008, 12:01 PM	#2 (permalink)
booey Caveman on Tren Join Date: Jul 2007 Location: Cali Posts: 2,069 Rep Power: 73019	How sure are you that you are going to elect the option at the end of the term? Assuming a 36-48 month lease, a lot can happen between then.

03-28-2008, 12:12 PM	#3 (permalink)
Kabeetz Gold Member Join Date: Feb 2007 Location: N.Y. Posts: 6,749 Rep Power: 230441	In other words if one didn't take the option, u'd eat the lost down payment money... good point. I total my cars before then so it's usually a non issue

03-28-2008, 12:14 PM	#4 (permalink)
booey Caveman on Tren Join Date: Jul 2007 Location: Cali Posts: 2,069 Rep Power: 73019	Lol. Yeah that's what I was getting out. Personally, I prefer leasing just because I like to have a new car every 3-4 years and it's cheaper that way in the long run. As to down payments, I'd rather miss out on the 25-50 bucks saved every month and instead have $5k in my pocket because I can take that 5k today and invest it and make more money over the course of the lease than I would have saved by putting it on the car.

03-28-2008, 12:16 PM	#5 (permalink)
Beverly McD. Gold Member Join Date: Feb 2007 Location: TEXAS Posts: 1,965 Rep Power: 294294	I used to have a good friend that sold cars (dead now) but I remember her telling me one time that the dealership laughed all the way to the bank when a customer took a lease versus a sale. Sorry I didn't ask her why Kab.!

03-28-2008, 03:08 PM	#8 (permalink)
solidspine Retired Join Date: Feb 2002 Posts: 6,622 Rep Power: 0	If you are in a position to depreciated an owned vehicle or write off the lease, it always seems advantages to purchase and depreciate. Then keep the car and give it to one of your kids or relatives. If you sell it you have to pay capital gains. I have never leased.

03-28-2008, 06:00 PM	#9 (permalink)
Mackman Gold Member Join Date: Feb 2007 Location: North Florida Posts: 505 Rep Power: 10240	Disadvantage of a lease is if you need out early for any reason. Leases are very structured, the leasing company is the owner-gets the depreciation, and if turned in early is very costly. The penalties for early termination can be as much as 20%. If you are sure you will want it in 5 years finance it, if not lease it but never, ever, for more than 36 months. Do not put money down in a lease, it makes the payment string make less sense.

03-28-2008, 06:46 PM	#10 (permalink)
Lumberjack5.0 Subpar Supplicant Join Date: Feb 2007 Location: Back to beastliness Posts: 1,877 Rep Power: 377316	Leasing can make sense if you do it right. If you get a new car every 2-3 years anyway, adn tend to take care of thenm (well, tend to avoid scatches/dings/etc) then the overall cash outlay versus buying can make sense. You have to do the math and see. Typically cars that hold their value make more sense to lease than those that don't. Also, if you understand what a lease is (paying for the depreciation of the car while you drive it) and know the money factor (the finance costs of the lease) and whatnot, it can work in your favor. If you drive a consistent number of miles and don't go over, you will often end up paying less in the long run. Also, with the option to purchase at the end, you can figure out if it makes sense to purchase it when the term is up or whether it's best to start fresh. It's not a simple proposition. Do what you're comfy with

03-28-2008, 07:00 PM	#12 (permalink)
Lumberjack5.0 Subpar Supplicant Join Date: Feb 2007 Location: Back to beastliness Posts: 1,877 Rep Power: 377316	Trena -- if you do your homework and know market rates, you can beat 'em. I used to sell cars. Smart consumers who don't cave get great deals. It's up to the buyer to do their homework. In this market dealers want to make deals and move units.

03-30-2008, 10:59 PM	#16 (permalink)
Kabeetz Gold Member Join Date: Feb 2007 Location: N.Y. Posts: 6,749 Rep Power: 230441	I live in Westchester thanks Jens. LOL Thank you all for your input I'll have more questions/thoughts when I should be working tomorrow