need_TQM

I've never really seen that wisdom when it referrs to car leases. I ran the numbers both ways before I got my '09 - they were within a hundred dollars either way. The Lease companies know that the vehicle depreciates, and they are not going to eat that cost - they pass it on to you in the monthly payment (apparently except for BMW, which is eating costs

In buying you take the risk that the car will depreciate more, where in a lease your costs are fixed...

irenesbob

Yeah - but if you are a weak seller like I am you can get screwed. I don't ever want to deal with trading-in or negotiating a sale. I either say "go away - no!" or "OK - I'll take it". Those are my "on" and "off" buttons when it comes to selling a car. For me the lease offers certainty and either I go for it upfront or I don't. but I know the precise numbers will stay the same. Again, "different storkes..."
Another point: Many people when they run lease vs. buy numbers consider the buy as a cash deal. In fact if you take $40,000 out of the bank to buy it there is an opportunity cost associated with that $40,000 that is now gone. Not saying you make that assumption but I believe many people do.

av_audi

Financing a car over 72 mos with no down payment is an uncommon scenario. Let's say a more likely scenario is that you finance $25K over 3 years at 4%. You end up paying $42.7K, not $47,7K. Now I also think you should be able to get more than $10,800 for this car. Probably closer to $14-16K, if not more. So right there, your estimated difference of $1000 shot up to my estimate of $10-11K. I couldn't tell where you are, but in CA, registration is far higher during the first 3 years than during years 4-6, enough to add probably another $1K. Now let's say you spent a generous extra $3K on maintenance. You are still $8-9K ahead by my estimate. That's still just $110/mo, but that shows exactly what is wrong with this mentality. It's also less than $4 a day, but somehow that translates to $8-9K later on.

Now I know my argument was for six years only. But chances are, you can drive this car another year or two with no problem, while leasing another year or two means another $6K or $12K. Chances also are that you will drive less than 12K/year and your car will have maybe 60K miles at the end of year six, when it still a relatively new car.

Now I am not arguing that people shouldn't want to have a new car every 3-4 years. If that is what they want, then they have every right to pay for it. But that doesn't change the fact that keeping a car 6 years or more is typically less expensive than leasing every 3 years.

jperryrocks

When you have too high of a residual, the bank gets LESS of your money each month. They have a $50,000 vehicle that you are using, and if they send a car off the lot with too high of a residual value, they lose money.

Audi's are holding value incredible well on the used market.

I see used 2009 Q5's out there 2 years old for 38k when you can buy a new one for 43k.

Used S5's that were 60k new are still 50k two years later. Just beacuse a car has a very high resale, it doesn't mean the bank is going to give you a high residual.

The bank has a time value of money and they need a fair profit on their car while your drivng it.

av_audi

Btwy, what happens with a lease when you get into an accident? Is gap insurance a must? And how often do dealers hit you with fees if you have dings and scratches on your car, especially if you don't lease another car from them? I am just curious.

av_audi

That time worn advice is indeed gobbledygook. It's is almost meaningless. Do we lease appliances, cloths, furniture? Spend within your means and according to your own priorities, and you will be fine, even if others don't agree with your priorities.

irenesbob

If you finance only $25,000 on a $40,000 MSRP car you are putting big bucks down up front so the cost comparison is immediately blown IMHO. I do agree running a car for a long time probably is cheaper, but dealing with repairs, days in the shop for brakes, tires, etc. is something I do not want to deal with. I fall into the category at this point of those willing to pay more to have new every few years. My friend bought a used CRV a few years ago for $18,500 at a point when she could have bought a new one for $23,500 and was so happy she saved $5,000. So far, by her own admission, she has spent close to $2,500 on brakes, tires and other items she would not have on the new one. To me buying used or keeping for a long time is like slow, incremental torture. I'd rather take the hard pill upfront and just spend a few dollars (or a lot - lol) more every month.

irenesbob

All Audi leases have gap insurance included on the quoted monthly lease. In terms of damage charged at turn-in my experience shows it varies, but probably does not cost you mare than the loss in the value of your car if you owned it. I mean that if there are two 2008 A4's with 25,000 miles and one has a bunch of dings and curb rash that the other does not, a buyer will pay less for that one. I have a policy for excess damage on my 2010 A6 that will pay me up to $2,500 for charges Audi assesses as "excess wear" at lease turn in. The Audi site lists what they mean by normal wear and tear and in some senses it is fairly liberal. Dents have to be longer than credit card (for exmaple) before they charge for them. Still to me the $595 for the policy was worth it if only for the fact that it covers tires with less than 1/8" tread on them (I expect to be right there at the end of my lease). Four new tires alone would set me back about $1,100 in the NYC area.

av_audi

Btwy, I think there are some other secondary factors one could look at for leasing. Let's say you barely drive 6-7K a year. You will be returning an essentially new car at the end of three years. Make that a barely broken in car . But if you milk nearly all your mileage allocation, does that mean you had to constantly watch yourself not to go over it, restricting yourself a little in the process?

Now if you are like me, leasing isn't even an option because I drive 22-23K/year. I am closing on the 200Kmile mark, and while the only thing I need within the next few weeks are new tires, my front shocks have slightly softened, and in 6-12 months, I ought to have a full blown timing job done if I want to keep the car longer. So by spending about $1500, my car should be good for 2, and maybe even 3 other years, with a few interspersed expenses. But after some time, almost all of us want something new, and I perfectly understand that this time period is 2 years for some, 6 years for others, and that some can even stretch it to 10-15 years.

irenesbob

Fair point, but remember the "order of magnitude" of the price and the expected maintenance-free life of cars vs. dishwashers, etc. has to be considered. Generally, when one buys a washing machine or a sofa the expectation is that it will last for at least 10-15 years, cost nothing to maintain and then basically have no resale value: you just toss it. With a $40K to $50K car the thing immediatley loses thousands of dollars as you take it off the lot and it needs constant maintenacne, repair and replacement of consumables (brake pads, tires, filters, etc.) over its lifetime, increasingly so the older it gets. This is not an apples to apples comparison you make.