Lease return story...somewhat OT, but maybe of interest
09-03-2001, 01:48 PM
#11
New Member
Thread Starter
Join Date: Aug 2000
Posts: 456
Likes: 0
Received 0 Likes
on
0 Posts
It's much harder to sell a car that has problems
than to early return it. Also, as I stated earlier, on a 4 year lease or purchase, for the first 2 1/2 years or so, you'll have more principal paid if you lease and/or you'll have paid less into the car overall. You'll own "more" of the car than if you finance the whole thing.
It still comes down to what's best for you, but I'm finding that, if the rates are comparable, there's no reason to purchase a new car instead of leasing it for some period with a well-negotiated residual value purchase if everything looks well at the end of that period.
It still comes down to what's best for you, but I'm finding that, if the rates are comparable, there's no reason to purchase a new car instead of leasing it for some period with a well-negotiated residual value purchase if everything looks well at the end of that period.
09-03-2001, 02:35 PM
#12
Elder Member
Join Date: Mar 2000
Posts: 2,175
Likes: 0
Received 0 Likes
on
0 Posts
Every lease/purchase calculator I've used has said otherwise...
using the numbers applicable to my particular transaction, and the method I use to self finance, which I won't go into in detail, every single time the outright purchase based on low interest financing beats the lease handily.
This may change if you can deduct lease payments as a business expense.
BTW, where are you getting a guaranteed 24% a year anyway, that's an absurd assumption.
This may change if you can deduct lease payments as a business expense.
BTW, where are you getting a guaranteed 24% a year anyway, that's an absurd assumption.
09-03-2001, 05:53 PM
#13
AudiWorld Super User
Join Date: Mar 2000
Posts: 5,266
Likes: 0
Received 0 Likes
on
0 Posts
Gee, 8% is almost 24% (right). Someone please generate a realistic comparison to settle debate!
But, a simple test of reasonableness suggests that leasing is not a good method, at least if (1) it is not deductable, (2) you plan to keep the car more than 3 years, and (3) decent financing is available. Discount financing is another matter, because usually you can decline that and get either a price cut or a lease discount.
Think about it: the dealership begs you to change your purchase into a lease. Begs you. Why? Because owning is a waste of money? Come on! When they lease, THEY own it. You pay, and lose flexibility to get out of the lease, and lose equity in the car, compared to buying.
And leasing is complex, and presented to you in such a way in part to hide how it ends up costing you more. Leasing is not cheaper! Only people who want a justification for swapping cars every 3 years think it is.
Think about it: the dealership begs you to change your purchase into a lease. Begs you. Why? Because owning is a waste of money? Come on! When they lease, THEY own it. You pay, and lose flexibility to get out of the lease, and lose equity in the car, compared to buying.
And leasing is complex, and presented to you in such a way in part to hide how it ends up costing you more. Leasing is not cheaper! Only people who want a justification for swapping cars every 3 years think it is.
09-03-2001, 06:35 PM
#14
New Member
Thread Starter
Join Date: Aug 2000
Posts: 456
Likes: 0
Received 0 Likes
on
0 Posts
I have no clue where the 24% came in
...but I'd LOVE to find out. All I can say is that I'm paying ~800/month with zero down on my fully loaded 4.2. If I had financed, I would've needed a down payment of a few thousand, plus my notes would be $1200/month. Since I'm likely to want another car in 4 years, $400 x 48 months is a nice savings, plus I won't have to bother with selling the car. $19,200 less I'll shell out. Even if I drive an extra 90,000 miles @ 20 cents/mile, I'm doing well. Use the calculator at the www.audiusa.com site...at 9% APR, leasing is $762/month vs. 1229/month for purchasing, with zero down. An extra $400/month to own a 4-year old car? No...I'll pass...
09-03-2001, 07:10 PM
#15
AudiWorld Super User
Join Date: Nov 2000
Posts: 12,697
Likes: 0
Received 0 Likes
on
0 Posts
I'm with you Stone-man...
On a $40k loan, I'm obligated to just under $800/mo for 5 years, although, it will be paid off within 2 years as I pay $1-2k per month. At the end of 4 years, I will have a car, that with financing, I laid out ~$53k and will be worth in the mid $20k, I assume, reasonably. My net outlay will be ~$583 per month x 48 months with 20k "allowance" per year. Net outlay ~$28000 + the "loss" of income earning potential of the $10k downpayment I made, which could vary from significant loss (couple thousand dollars) to a savings (based on this past years investments).
This, vs a ~$800/mo payment x 39 months with a 15k/year mile allowance...and then, if I drove 20k a year, I'd give them $3250 just to get rid of the car. Net outlay $34450.
I spend less overall, and get to keep the car an additional 9 months, hmmm...I like purchasing. I have no tax advantages available so leasing doesn't offer any benefit whatsoever.
This, vs a ~$800/mo payment x 39 months with a 15k/year mile allowance...and then, if I drove 20k a year, I'd give them $3250 just to get rid of the car. Net outlay $34450.
I spend less overall, and get to keep the car an additional 9 months, hmmm...I like purchasing. I have no tax advantages available so leasing doesn't offer any benefit whatsoever.
09-03-2001, 10:47 PM
#17
AudiWorld Super User
Join Date: Nov 2000
Posts: 12,697
Likes: 0
Received 0 Likes
on
0 Posts
You are right...to each his own...but just to beat the dead horse one more time...
Your lease at 48 months only makes things worse for the lessee:
48 x $800 = $38400, plus
$4000 mileage penalty for 20k/year
=$42400 outlay vs. my previously mentioned $28000-$32000 outlay.
Again, for some the numbers work, but for high-mileage drivers, I cannot see anyone who leases doing better than a buyer unless there is a tax advantage.
Wilfred, I hope you don't take this as any personal attack or anything, obviously a lot of people agree with you that leasing works better for them, I think more people lease than buy, actually. Good luck, hopefully you won't have any reason to return it early...it is sweet.
48 x $800 = $38400, plus
$4000 mileage penalty for 20k/year
=$42400 outlay vs. my previously mentioned $28000-$32000 outlay.
Again, for some the numbers work, but for high-mileage drivers, I cannot see anyone who leases doing better than a buyer unless there is a tax advantage.
Wilfred, I hope you don't take this as any personal attack or anything, obviously a lot of people agree with you that leasing works better for them, I think more people lease than buy, actually. Good luck, hopefully you won't have any reason to return it early...it is sweet.
09-03-2001, 11:25 PM
#18
New Member
Thread Starter
Join Date: Aug 2000
Posts: 456
Likes: 0
Received 0 Likes
on
0 Posts
We're all friends here, Finman.
One of the things I love about Audiworld is that we can all get together and discuss things WITHOUT it getting personal.
I guess I just don't see how you get to a $32K max. outlay when, even at 0% APR, the AudiUSA site says you'd be paying 1100/month for 48 months = 52800. Now of course if you prepay, you'll do better. It's pretty hard to prepay in the middle of a lease.
Seriously, help me understand why, at the end of 48 months, you'd be that far ahead.
http://www.audiusa.com/financial/calculator.htm
Enter 0.1% for the APR, which gives the purchase the most advantage. Select an A6 4.2 and 15000 miles/year for the lease.
lease = 762.82, retail = 1031.27/month
48 months = 36615.36 for lease, 49500.96 for purchase. Let's say that I go 4000 miles over per year, at 20 cents/mile = $3200 in mileage charges. 39815.36 is my final damage at the end of the 4 years. The purchaser has put 9685 more into the car. Now, he does OWN it, but it's a 4-year old car with 80,000 miles on it.
By leasing, I've had 268.45/month that I could invest at 5% APR or better. With simple interest, I'd have 15462.72 saved up. That's 30% of the original price of the car. So, by leasing, I have most of the equity in the car in my pocket. If I do something simple like a GNMA, I'd get 8% and have ~$20K saved up.
Is it better to have a car with 80,000 miles or 15-20K with which to buy the car/start a new lease? If I can do this three times and not spend my savings, I can buy the car for cash at the end of the third cycle.
If you buy, you're still one drunk driver away from losing all of your equity. The insurance company can always "total" the car. Once a car has been in an accident, it's never the same again. If it's on a lease, you have gap insurance and, if you're not hurt, have the advantage of not saying the car was 20,000 miles over your lease limit.
Does this make sense or am I forgetting something? I honestly do want to understand your point.
I guess I just don't see how you get to a $32K max. outlay when, even at 0% APR, the AudiUSA site says you'd be paying 1100/month for 48 months = 52800. Now of course if you prepay, you'll do better. It's pretty hard to prepay in the middle of a lease.
Seriously, help me understand why, at the end of 48 months, you'd be that far ahead.
http://www.audiusa.com/financial/calculator.htm
Enter 0.1% for the APR, which gives the purchase the most advantage. Select an A6 4.2 and 15000 miles/year for the lease.
lease = 762.82, retail = 1031.27/month
48 months = 36615.36 for lease, 49500.96 for purchase. Let's say that I go 4000 miles over per year, at 20 cents/mile = $3200 in mileage charges. 39815.36 is my final damage at the end of the 4 years. The purchaser has put 9685 more into the car. Now, he does OWN it, but it's a 4-year old car with 80,000 miles on it.
By leasing, I've had 268.45/month that I could invest at 5% APR or better. With simple interest, I'd have 15462.72 saved up. That's 30% of the original price of the car. So, by leasing, I have most of the equity in the car in my pocket. If I do something simple like a GNMA, I'd get 8% and have ~$20K saved up.
Is it better to have a car with 80,000 miles or 15-20K with which to buy the car/start a new lease? If I can do this three times and not spend my savings, I can buy the car for cash at the end of the third cycle.
If you buy, you're still one drunk driver away from losing all of your equity. The insurance company can always "total" the car. Once a car has been in an accident, it's never the same again. If it's on a lease, you have gap insurance and, if you're not hurt, have the advantage of not saying the car was 20,000 miles over your lease limit.
Does this make sense or am I forgetting something? I honestly do want to understand your point.
09-03-2001, 11:34 PM
#19
New Member
Thread Starter
Join Date: Aug 2000
Posts: 456
Likes: 0
Received 0 Likes
on
0 Posts
I see the difference...
You're putting $10K down. With the lease, I put 1 months' lease payment + security deposit.
You're putting up $1-$2K/month to pay off your loan quickly. I *wish* I could do that!
...and you're presuming the car will have a worth in the mid-$20's after 4 years, with 80,000 miles. What if you have an accident or a major failure? Would an Audi really maintain 50% of its value after 4 years, with high mileage?
You're putting up $1-$2K/month to pay off your loan quickly. I *wish* I could do that!
...and you're presuming the car will have a worth in the mid-$20's after 4 years, with 80,000 miles. What if you have an accident or a major failure? Would an Audi really maintain 50% of its value after 4 years, with high mileage?
09-03-2001, 11:58 PM
#20
AudiWorld Super User
Join Date: Nov 2000
Posts: 12,697
Likes: 0
Received 0 Likes
on
0 Posts
The $32k net outlay is after I sell it at 4 years...
and hopefully, I sell it for $25k which I then use to put down on the new RS6 
If you really do all that savings and earning with the difference in the lease vs purchase monthly payment then a lease approaches the residual value of the car at 4 years. Perhaps my estimate of $25k is optimistic, but 47% at 4 years is usually OK, especially if mileage can be kept in the sub 80-85k range and of course, if the car is in perfect condition. (I got 40% at 6 1/2 years for my Integra with 113k and perfect condition).
One mistake I think people make is that they often say that one who buys loses access to make money off that $50k, immediately, while the one who leases, puts little up front and has access to the $50k the whole time. The buyer often doesn't pay all at once and essentially does the same as the lessee, but just pays more per month, so they both have this theoretical $50k laying around making money, just the buyer dips in deeper each month. This assumes there is a stockpile of $50k laying around earning money.
There are many programs and formulas that calculate this much better than my crude, off the top of my head examples, probably, in the end, many of these scenarios are only a couple thousand different over 4 years...so big deal.
The way I did it was not necessarily normal. With a $50k fee, out the door, I paid $5k on a zero-interest credit card, paid $5k in "cash" which then got converted to a 4% credit card, and paid $40k with a bank loan at 7.3%.
When my bonus came in, I paid off the credit cards, only accruing $100 interest and payed down the bank loan somewhat to where, by the time I'm done paying for this bad-boy, I will have paid approximately $2200 in interest, not too bad...but it's a big chunk every month for a year and a half. So, true, after 1 to 1 1/2 years, I lose access to $50k I could've had, if I saved it...yeah, right but just by minimizing payment of a 7.3% interest, I've made money given this ****ty market. Actually, what I should've done was cash in investments (that have since lost 15-20%) paid the whole thing at once, and repurchased them now at the lower price...damn, if I only had my crystal ball back.
Funny, or not so funny, you bring up the drunk driver thing...I don't think she was drunk, but on approaching an red light which turned green, on the way home today, some woman blew through about 2-3 seconds after my light turned green...fortunately, the guy in the IS300 who was stopped at the light and started to go, was paying attention (despite being on a cell phone and stepped on his brakes...at the same time, my wife screamed as she saw the car going through the light...not that it was the closest call ever, but if I was 1 second closer to the intersection or the ****ty driver was 1/2 second later going through the light...we would've been blasted...T-bone baby...just goes to remind me how close death or dismemberment can be. Whew!
I'm going to find one of those calculators...but there are a lot of factors they don't address (such as investment income, etc.).
Take it easy
If you really do all that savings and earning with the difference in the lease vs purchase monthly payment then a lease approaches the residual value of the car at 4 years. Perhaps my estimate of $25k is optimistic, but 47% at 4 years is usually OK, especially if mileage can be kept in the sub 80-85k range and of course, if the car is in perfect condition. (I got 40% at 6 1/2 years for my Integra with 113k and perfect condition).
One mistake I think people make is that they often say that one who buys loses access to make money off that $50k, immediately, while the one who leases, puts little up front and has access to the $50k the whole time. The buyer often doesn't pay all at once and essentially does the same as the lessee, but just pays more per month, so they both have this theoretical $50k laying around making money, just the buyer dips in deeper each month. This assumes there is a stockpile of $50k laying around earning money.
There are many programs and formulas that calculate this much better than my crude, off the top of my head examples, probably, in the end, many of these scenarios are only a couple thousand different over 4 years...so big deal.
The way I did it was not necessarily normal. With a $50k fee, out the door, I paid $5k on a zero-interest credit card, paid $5k in "cash" which then got converted to a 4% credit card, and paid $40k with a bank loan at 7.3%.
When my bonus came in, I paid off the credit cards, only accruing $100 interest and payed down the bank loan somewhat to where, by the time I'm done paying for this bad-boy, I will have paid approximately $2200 in interest, not too bad...but it's a big chunk every month for a year and a half. So, true, after 1 to 1 1/2 years, I lose access to $50k I could've had, if I saved it...yeah, right
but just by minimizing payment of a 7.3% interest, I've made money given this ****ty market. Actually, what I should've done was cash in investments (that have since lost 15-20%) paid the whole thing at once, and repurchased them now at the lower price...damn, if I only had my crystal ball back.Funny, or not so funny, you bring up the drunk driver thing...I don't think she was drunk, but on approaching an red light which turned green, on the way home today, some woman blew through about 2-3 seconds after my light turned green...fortunately, the guy in the IS300 who was stopped at the light and started to go, was paying attention (despite being on a cell phone
and stepped on his brakes...at the same time, my wife screamed as she saw the car going through the light...not that it was the closest call ever, but if I was 1 second closer to the intersection or the ****ty driver was 1/2 second later going through the light...we would've been blasted...T-bone baby...just goes to remind me how close death or dismemberment can be. Whew!I'm going to find one of those calculators...but there are a lot of factors they don't address (such as investment income, etc.).
Take it easy