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      04-16-2008, 07:21 PM   #67
jdcolombo
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Originally Posted by TagMan View Post
Not exactly the case! Your post sounds very detailed and knowledgable, making you look like an expert... but in the end your conclusion is incorrect and your reasoning is flawed.

With some exceptions, usually attributable to manufacturer incentives, leasing is generally a more expensive proposition.

Sorry... but there are numerous websites devoted to the question of leasing vs. purchasing. The vast majority of these true experts conclude that leasing is a more expensive mechanism and has its advantages if there is a write-off, or if the manufacturer has offered an advantageous lease program for incentive purposes.

Of course, a huge advantage for leasing is the ability to sacrifice any equity and lower the down payment and overall cash flow, thus opening the doors of availability to many folks that would otherwise find conventional purchase financing prohibitive.

There are therefore advantages to each mechanism, but it's incorrect to mis-state those advantages or to spin leasing to be more cost-effective in circumstances where it is not.
It would be very helpful for everyone if you would explain, with an example and appropriate computations, EXACTLY why I "mis-stated" anything or "spun" leasing into a more cost effective option. I think I said that buying is almost always cheaper if you hang on to a car for more than three years. But, IF the interest rate on a lease is the same as on a purchase loan (not always true - for example, the interest rate on a 1-series lease is currently terrible), and IF the residual value on the lease is the same as what you'd get by trading it or selling it, and IF you actually do trade or sell your car at the end of three years (a typical lease term) rather than keep it, then leasing is usually financially cheaper, because you are not paying finance charges on a loan to buy a portion of the car you'll never use and will not "get back" with equivalent interest. Admittedly, leases often BECOME more expensive because people drive excess miles (which almost always are overpriced in relation to the actual additional depreciation - essentially charging for a lower residual value), beat up their cars (again, an issue of residual value) and so forth. But if you do not do these things, under the assumptions I stated, leasing will be cheaper.

Prove me wrong.

You might also explain why anyone in their right mind would want to build up "equity" in an asset that is worth less every year you own it. Building equity in a house makes sense, because houses appreciate (traditionally); if your house goes up in value 10% each year, buying it is a very good financial decision.

But a car does not appreciate, ever (well, maybe some collectors cars do). Cars eventually are worthless. Buying a car is like buying toilet paper. You use it up; it doesn't get worth more. Saying you have equity in a car is like going out and buying $50,000-worth of toilet paper so you can say you have "equity" in a pile of toilet paper. Yes, you do - in the sense that at the moment, the toilet paper is worth more than any debt you have on the toilet paper. But once you use the toilet paper, it's worthless and so is your "equity." Same for a car.

John C.

PS. Here's a web site that does in fact explain leasing pretty well.

http://www.leaseguide.com/lease03.htm
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      04-16-2008, 07:22 PM   #68
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      04-16-2008, 10:06 PM   #69
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Quote:
Originally Posted by jdcolombo View Post
It would be very helpful for everyone if you would explain, with an example and appropriate computations, EXACTLY why I "mis-stated" anything or "spun" leasing into a more cost effective option. I think I said that buying is almost always cheaper if you hang on to a car for more than three years. But, IF the interest rate on a lease is the same as on a purchase loan (not always true - for example, the interest rate on a 1-series lease is currently terrible), and IF the residual value on the lease is the same as what you'd get by trading it or selling it, and IF you actually do trade or sell your car at the end of three years (a typical lease term) rather than keep it, then leasing is usually financially cheaper, because you are not paying finance charges on a loan to buy a portion of the car you'll never use and will not "get back" with equivalent interest. Admittedly, leases often BECOME more expensive because people drive excess miles (which almost always are overpriced in relation to the actual additional depreciation - essentially charging for a lower residual value), beat up their cars (again, an issue of residual value) and so forth. But if you do not do these things, under the assumptions I stated, leasing will be cheaper.

Prove me wrong.

You might also explain why anyone in their right mind would want to build up "equity" in an asset that is worth less every year you own it. Building equity in a house makes sense, because houses appreciate (traditionally); if your house goes up in value 10% each year, buying it is a very good financial decision.

But a car does not appreciate, ever (well, maybe some collectors cars do). Cars eventually are worthless. Buying a car is like buying toilet paper. You use it up; it doesn't get worth more. Saying you have equity in a car is like going out and buying $50,000-worth of toilet paper so you can say you have "equity" in a pile of toilet paper. Yes, you do - in the sense that at the moment, the toilet paper is worth more than any debt you have on the toilet paper. But once you use the toilet paper, it's worthless and so is your "equity." Same for a car.

John C.

PS. Here's a web site that does in fact explain leasing pretty well.

http://www.leaseguide.com/lease03.htm
Thanks for the reply.

I'll follow up with you when I have a little more time, but I don't want to just blow this off. It's too important to do that. So, for now, let me just explain in the most simplistic way that there are two ways to go:

1. Make lease payments and have NOTHING at the end of the lease term.

2. Make purchase payments and OWN the remaining value of the vehicle at the end of the term.

Because I am strapped for time, here is an exerpt from Edmunds Leasing vs. Buying guide...
Everything in italics is exactly Edmunds' words, not mine. I have omitted the used car scenario as it does not apply here. Here you go...

Simply put, car leasing is more expensive in the long run. However, here is an easy way to look at it.

Buying New or Used or Leasing — The 10-year picture

In the following example, we show you what it costs to buy and own a new or used car or to lease a car for 10 years. In these examples, we assumed that the car was worth $20,000 when new and was financed at a 6 percent interest rate. Also, in each case, a down payment of $1,000 was made. These figures are estimates to give you a comparative feeling for these different car financing scenarios.

If You Buy Your Car: Purchase your car with the help of an auto loan, and you will make higher payments for the first five years, but then you will own it. Over 10 years, this averages $191 a month or a total cost of $22,920, not including insurance, maintenance and the like.

If You Lease Your Car: Purchase your car with the help of an auto loan, and you will lease more than three times, each time making an initial payment of $1,000 and monthly payments of $323. For 10 years, this is a total of $41,760.


Clearly, car leasing is the most expensive way to go.

Source: Edmunds

There you have it! I tend to agree with the "KISS" (keep it simple, ------) approach. I agree with Edmunds that leasing is the most expensive way to go. And, I have sometimes seen overly complicated and analytical perspectives on the old topic of leasing vs. buying. Keeping it simple is best, and no matter how you spin it, leasing is generally more expensive, with the major exception of the business write-off... and even under that scenario, the vehicle can still be purchased and be used as a write-off as well.

Now, as I said earlier, leasing can have its advantages form a lifestyle perspective, and there is nothing wrong with that... it just comes at a price. :smile:
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      04-17-2008, 12:10 AM   #70
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Quote:
Originally Posted by TagMan View Post

Buying New or Used or Leasing — The 10-year picture

In the following example, we show you what it costs to buy and own a new or used car or to lease a car for 10 years. In these examples, we assumed that the car was worth $20,000 when new and was financed at a 6 percent interest rate. Also, in each case, a down payment of $1,000 was made. These figures are estimates to give you a comparative feeling for these different car financing scenarios.

If You Buy Your Car: Purchase your car with the help of an auto loan, and you will make higher payments for the first five years, but then you will own it. Over 10 years, this averages $191 a month or a total cost of $22,920, not including insurance, maintenance and the like.

If You Lease Your Car: Purchase your car with the help of an auto loan, and you will lease more than three times, each time making an initial payment of $1,000 and monthly payments of $323. For 10 years, this is a total of $41,760.


Clearly, car leasing is the most expensive way to go.
Why bother to buy a car after 10 years - why not just buy one and keep it for the rest of your life - or why own one at all. Not owning a car is the best financial decision.

I think you are making over-generalizations. From a practical standpoint, you need to look at the numbers for leasing and buying each and everytime you are looking at getting a new car. It depends on a number of factors which option makes the most sense.
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      04-17-2008, 12:23 AM   #71
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Quote:
Originally Posted by angkor View Post
Why bother to buy a car after 10 years - why not just buy one and keep it for the rest of your life - or why own one at all. Not owning a car is the best financial decision.

I think you are making over-generalizations. From a practical standpoint, you need to look at the numbers for leasing and buying each and everytime you are looking at getting a new car. It depends on a number of factors which option makes the most sense.
I agree that every time a new car is considered the situation takes on a new twist. And the comparisons may not always represent real-life scenarios in many of the examples. But there are many, many examples to research, if anyone is inclined to do so. Personally, I really don't care that much about the topic. But there are those that do care and need to know the facts, and I think they should get accurate and helpful information that will work best for their situation.

As for me... I simply purchase my cars when I want to. I need my freedom... I don't ever want to be locked into any kind of lease!

But, anyone can Google the topic and discover tons of information out there. The concensus is that overall, and not in every case, purchasing tends to be a better financial decision... but leasing offers a terrific means for people to drive more expensive cars with minimized cash flow, and that can be a big advantage to many people.

That said, in the end the only thing that really matters, in my personal opinion, is what works best for each individual.
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      04-17-2008, 07:37 AM   #72
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Originally Posted by TagMan View Post
Thanks for the reply.


Simply put, car leasing is more expensive in the long run. However, here is an easy way to look at it.

Buying New or Used or Leasing — The 10-year picture

In the following example, we show you what it costs to buy and own a new or used car or to lease a car for 10 years. In these examples, we assumed that the car was worth $20,000 when new and was financed at a 6 percent interest rate. Also, in each case, a down payment of $1,000 was made. These figures are estimates to give you a comparative feeling for these different car financing scenarios.

If You Buy Your Car: Purchase your car with the help of an auto loan, and you will make higher payments for the first five years, but then you will own it. Over 10 years, this averages $191 a month or a total cost of $22,920, not including insurance, maintenance and the like.

If You Lease Your Car: Purchase your car with the help of an auto loan, and you will lease more than three times, each time making an initial payment of $1,000 and monthly payments of $323. For 10 years, this is a total of $41,760.


Clearly, car leasing is the most expensive way to go.

Source: Edmunds

There you have it! I tend to agree with the "KISS" (keep it simple, ------) approach. I agree with Edmunds that leasing is the most expensive way to go. And, I have sometimes seen overly complicated and analytical perspectives on the old topic of leasing vs. buying. Keeping it simple is best, and no matter how you spin it, leasing is generally more expensive, with the major exception of the business write-off... and even under that scenario, the vehicle can still be purchased and be used as a write-off as well.

Now, as I said earlier, leasing can have its advantages form a lifestyle perspective, and there is nothing wrong with that... it just comes at a price. :smile:
I don't want to prolong the debate. Actually, I think we probably agree on virtually everything. But note that your example uses 10 years of ownership. That's not the case I asked you to prove. I asked about a case in which a person held a car only for 3 years, with equivalent interest rates and residual values between a lease an ownership. Again, I said in my original post that buying is always cheaper if you keep a car over 3 years.

So I don't think ultimately we disagree.

John C.
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      04-17-2008, 07:56 AM   #73
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Quote:
Originally Posted by jdcolombo View Post
I don't want to prolong the debate. Actually, I think we probably agree on virtually everything. But note that your example uses 10 years of ownership. That's not the case I asked you to prove. I asked about a case in which a person held a car only for 3 years, with equivalent interest rates and residual values between a lease an ownership. Again, I said in my original post that buying is always cheaper if you keep a car over 3 years.

So I don't think ultimately we disagree.

John C.
John, thanks again. Of course neither one of us wants to beat a dead horse here, but I did mention that I would further respond with more info when time permitted. When possible, I would like to eventually follow up on the 3-year comp that you spoke of.
Regards,
TM
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      04-17-2008, 09:22 AM   #74
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From what I understand, they will not cpo cars that had dinan software installed. I'm very curious if I can pay the extra $1k for the extended warranty up front and not have it voided when I do the dinan software upgrade.
yea I wouldn't think they would honor it but maybe you could hide it when you bring it back in like get a dummy script that will fool their diagnostics
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      04-17-2008, 09:27 AM   #75
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But then I'm 12yrs older and have only gotten to experience two cars. Life's too short for 2 cars every 12yrs.

Wow, thinking about that, my son will be in high school in 12yrs. Only having 2 cars in that amount of time would be criminal ... I'd go insane with new car/technology/power lust.
Thats a good point...I have had my car for 6 yrs and it hasn't been so bad for me but I'm not the kind of guy who always needs the new hot thing. I'm getting one of these because I think its quality and I would love to keep it for 6 yrs. Also keep in mind that further in to the future epa will tighten up on cars that are fast just for the sake of being fast. You might not be able to have one of these forever, but if you own it...you own it.
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      04-17-2008, 09:38 AM   #76
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Another thing for me about leasing is that a little bit of me dies everytime I get a rock chip and ding if I owned it. It's a different mentality when it's a lease (at least in my little fantasy world).
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      04-17-2008, 11:32 AM   #77
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Another thing that you have to consider as part of the cost of leasing is the put option that you have. This option comes at a price, and can be partly why money factors are usually higher that a loan rate. As part of the analysis, you have to value how much this put option is worth to you. I have bought and leased cars over the years, and it all depends on how important the put option is, meaning the ability to give the car back. Of course, if you are going to keep the car for a long time, then purchasing the car makes sense. However, for financially savvy folks who can deploy the extra cash left (in a lease) into a higher yielding asset and change cars often, leasing can be the best way to go.
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      04-17-2008, 12:35 PM   #78
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However, for financially savvy folks who can deploy the extra cash left (in a lease) into a higher yielding asset and change cars often, leasing can be the best way to go.
With a nickname like sonusfaber I figured you'd get this part.

I'm assuming you own a pair (of speakers that is).
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      04-17-2008, 04:08 PM   #79
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With a nickname like sonusfaber I figured you'd get this part.

I'm assuming you own a pair (of speakers that is).
Yes, a pair on Concertos :smile:. You into audio too?
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      04-17-2008, 05:08 PM   #80
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Used to be into it. Then moved towards home theater. It kind of went into a lull when when HD discs were in their infancy.

Now, it's about 1ers all the time.

The Concertos are nice. I've always liked the finish on Sonus Faber speakers.
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