Plan On Leasing Rx400

[HHRP]

Hey guys,

I plan on leasing RX400, want to go test drive it tomorrow.

What would you suggest me to look for? What do you think a reasonable price should be for 3 years?

Any advice is appreciated.

[silvercorvette]

I have no idea what you mean by look for, and prices can vary in different parts of the country. IS there a big demand for hybrids in FL, what about demand? Do you want to keep the car after three years or dump it for a newer one? I like to change cars often so I lease, I dumped my RX after less than 2 years on a three year lease because I wanted a GS. I really loved the RX hybrid, I just wanted a change to something else. But if you plan on keeping the car and buying it after the lease ends you can’t just consider payments you also have to consider buy back cost. Low payments with a high buy back will cost more in the long run if you keep it but is irrelevant if you aren’t keeping it.

I have made a bit of a miscalculation with the GS 450 H because I was positive I was going to dump it after the lease but after owning it a few months I like it so much I may keep it.

By the way do not think that I got rid of the RX so quickly because it wasn’t a good car, it was one of the best cars I ever owned, I just didn’t want or need an SUV anymore.

[HHRP]

Thanks for feed back. I don't know if there a big demand on H here. I would not want to keep it long time. Looks like cars depreciate fast and to me it's not worth keeping them for a long time. I'm just wondering what % of the retail cost they normally want to charge you on like a 3 year term.

[SW03ES]

Actually if they depreciate fast...it makes sense to keep them longer.

But Lexus vehicles hold their value pretty well.

[HHRP]

Why would it make sense to keep a passive depreciating asset longer while it's depreciating fast?

[SW03ES]

Because it depreciates quickly within the first 3 years or so and then the depreciation slows way down, all new cars are that way, especially luxury cars.

So if You buy car A for $50,000 and at the end of three years its worth $25,000 its cost you $25,000 to drive it 3 years, or $8,333 a year.

After 3 more years it may be worth $17,000, so for a total of 6 years its cost you $33,000 to drive it, or $5500 per year.

If you buy car B for $50,000 and sell car A after 3 years for $25,000, at the end of three years car B is now worth $25,000, so its cost you $50,000 to drive a total of 6 years across two cars, or $8,333 a year.

So over 6 years of ownership keeping car A costs $33,000 whereas selling car A and buying car B halfway through costs you $50,000.

Thats why you want to keep a vehicle longer to extend out the depreciation schedule.

Now, the absolute cheapest way to do it is to buy a car 3 years old, that $50,000 car costs you $25,000 to start and then its worth $18,000 in 3 years, $12,000 in another 3 years. So its cost you $13,000 to drive that car 6 years, or $2,167 per year.

New car depreciation is always front heavy within the first 3 years.

Now, leasing does not just mean you pay that $25,000 to drive it three years, its more than that because of the way interest is calculated on a lease. Lease payment on an RX400h is probably going to be around $850 a month, 12k miles, nothing down. So for 36 months the cost for the lease would be $30,600, the $5,600 between that figure and the $25,000 residual is the profit for doing the lease. So if you lease it for three years and then buy it, it costs you $55,600 to buy a $50,000 vehicle. Hence why if you're going to buy it...you should just buy it from the start unless you can write the lease off for business.

If you really are concerned about the depreciation of a luxury car, you should buy a used one a least 3 years old. I like new cars so I buy new, but even I am strongly strongly considering buying one 3 years old next time.

BUT, you have to understand that what you are proposing, buying one and not keeping it long and buying a new one is the absolute most expensive way to drive any car...but especially a luxury car.

[lwleedy]

Very Well Put!!!! the only thing to add is sometimes it is easier to Lease a car under your business than buying it.

However, I bought mine

Lenny

Because it depreciates quickly within the first 3 years or so and then the depreciation slows way down, all new cars are that way, especially luxury cars.

So if You buy car A for $50,000 and at the end of three years its worth $25,000 its cost you $25,000 to drive it 3 years, or $8,333 a year.

After 3 more years it may be worth $17,000, so for a total of 6 years its cost you $33,000 to drive it, or $5500 per year.

If you buy car B for $50,000 and sell car A after 3 years for $25,000, at the end of three years car B is now worth $25,000, so its cost you $50,000 to drive a total of 6 years across two cars, or $8,333 a year.

So over 6 years of ownership keeping car A costs $33,000 whereas selling car A and buying car B halfway through costs you $50,000.

Thats why you want to keep a vehicle longer to extend out the depreciation schedule.

Now, the absolute cheapest way to do it is to buy a car 3 years old, that $50,000 car costs you $25,000 to start and then its worth $18,000 in 3 years, $12,000 in another 3 years. So its cost you $13,000 to drive that car 6 years, or $2,167 per year.

New car depreciation is always front heavy within the first 3 years.

Now, leasing does not just mean you pay that $25,000 to drive it three years, its more than that because of the way interest is calculated on a lease. Lease payment on an RX400h is probably going to be around $850 a month, 12k miles, nothing down. So for 36 months the cost for the lease would be $30,600, the $5,600 between that figure and the $25,000 residual is the profit for doing the lease. So if you lease it for three years and then buy it, it costs you $55,600 to buy a $50,000 vehicle. Hence why if you're going to buy it...you should just buy it from the start unless you can write the lease off for business.

If you really are concerned about the depreciation of a luxury car, you should buy a used one a least 3 years old. I like new cars so I buy new, but even I am strongly strongly considering buying one 3 years old next time.

BUT, you have to understand that what you are proposing, buying one and not keeping it long and buying a new one is the absolute most expensive way to drive any car...but especially a luxury car.

[SW03ES]

Very Well Put!!!! the only thing to add is sometimes it is easier to Lease a car under your business than buying it.

I covered that ;)

...unless you can write the lease off for business.

Whole lotta reasons why leasing makes sense for business, the tax benefits, if the vehicle is leased in the businesses name then its considered an expense not a liability, etc.

Thats the drawback to looking at 3 year old pre-owned cars...can't lease them for business. Well...you can but its expensive.

[HHRP]

Thanks for a write up SW!

I actually would like to lease it for business. However, I'm not sure about how beneficial deductions will be... I have heard that if you lease it for biz and your wife is on the car too then you can only expense out half the leasing cost. What if I pay whole lease amount cash and deduct it from my business in one year is it possible? Or you would have to split in into years? Thanks

[SW03ES]

I don't believe thats true, but you would have to ask an accountant. The fix is easy though...just don't put your wife on the lease. My name is the only name on the title of my car.

The one pay lease is an excellent question too, one I wanted the answer to as well. You should ask an accountant about that too, I've never done a one-pay lease.