LEASE VS. BUY

[Lexdiamonds]

THANKS GUYS, JUST CURIOUS

[PharmGuy]

LexDiamonds,

I'm not a fan of leasing, the only thing that is an bit attractive, is

that you pick up another new car, every 3 years. Buy, it outright, keep

it (maintain it well), and you'll see the trade at your next trade-in.

PharmGuy

P.S.--- owed a Pontiac Bonneville prior, nice car--just didn't retain any value.

[SW03ES]

Leasing is a huge bonus if you can write the car off as a business expense and/or if you would have traded the car in 3 years anyways. IMHO leasing is very misunderstood practice. Not all cars can be leased, they have to have good resale. Lexus are great to lease because you can negotiate a good deal and they hold their value...

So if you would trade it anyways and or you can write it off, lease, always.

EDIT: Oh and I'd definately lease a 300 vs buying a 4 year old 400, I just prefer new cars.

[PharmGuy]

Leasing is a huge bonus if you can write the car off as a business expense and/or if you would have traded the car in 3 years anyways. IMHO leasing is very misunderstood practice. Not all cars can be leased, they have to have good resale. Lexus are great to lease because you can negotiate a good deal and they hold their value...

So if you would trade it anyways and or you can write it off, lease, always.

EDIT: Oh and I'd definately lease a 300 vs buying a 4 year old 400, I just prefer new cars.

Good point, if you can write it off as a business expense.

PharmGuy

[MrSypher]

I have to say from my stand point that leasing is not the way to go.. Now I'm talking about me and what I do, not just any ol' joe.. Now with leasing I find I'm to restricted as to where I can go and what I can do. Now when you lease a car it's pretty much the dealers car and not yours, therefore you have to abide by what they say and stay within their parameters.. When you buy, you can do whatever, whenever you want.. Like if I leased my GS I couldn't have done the things that are done to it.. But that's just me..

[MrSypher]

If you look around I'm sure you'll beable to find a pre-owned GS for a great price.. I know this kid who just pick'd a 2000 Gs4 for $18,000 with reasonably low miles..

[reigns7703]

here's my two cents...

I would rather buy a 4 year old GS rather than lease simply because I use my car WAY TOO MUCH and put WAY TOO MANY miles on my cars to lease...and I don't have the luxury of writing my mileage off as a business expense. I usually put about 20,000 a year on my rides...so the surcharge for that kind of overage would be astronomical.

But I would say..if you could write a new ride off as a business expense...I would do it...but as for the average joe...buying would be the only option... :D

[SW03ES]

I put 20k a year on my car and I lease, my dad puts closer to 30k on his 04 LS and he leased (his company leased it for him actually) BUT we both can write it off as a business expense. Actually, the resale on the Lexus is so good that you STILL save money even after adding all the aditional miles coupled with business writeoffs, buying the car for either of us would be dumb. Plus we both like new cars every 3-4 years.

As for the surcharge, you can buy the mileage discounted in advance (Lexus charged $.10 a mile for instance) and then roll it into the lease (they'll refund you what you dont use) so for instance 20k a year over 3 years would be 15,000 extra miles, or $1500. Thats only $20 a month or so, hardly astronomical when you're STILL saving $300 or more a month by leasing. Some companies now in fact dont even charge lease overage fees, they just adjust the residual slightly to reflect the higher mileage.

Now I'm talking about me and what I do, not just any ol' joe.. Now with leasing I find I'm to restricted as to where I can go and what I can do. Now when you lease a car it's pretty much the dealers car and not yours, therefore you have to abide by what they say and stay within their parameters..

Thats a common way of thinking. Its the "I don't own it" complex. You've got to compare leasing to financing. Until you mail that last payment, its really not your car anyways. Miss some payments they'll come and take it, and with mods you may STILL have to fork money over. "Ownership" is purely an illusion unless you're going to own the car for 8,9,10 years.

You can modify a leased car, as long as you either return it to stock before you trade it in, or just expect to let them keep the security deposit. Why would you want to give them all your mods anyway? As for not being able to go where you want, go anywhere you want, if you use more of the car than you agreed, you've just got to pay. Most leasing companies will waive the mileage penalty if you lease another car through them at the end anyways.

If you don't like to mod (or even if you do) trade the car every 3-4 even 5 years now that financing is at least 5 years, even as high as 7 now, drive 15k a year or less (or even more as we've seen) and are interested in a car with high resale, leasing is a GREAT option. They even have cool lease to own deals now where once you pay so much the car is yours, but you can give it back at any time. Sort of like Rent-a-center.

Like I said, leasing is very misunderstood and is actually a great option for most car owners. I'll probably never buy a car...

[MrSypher]

Thats a common way of thinking. Its the "I don't own it" complex. You've got to compare leasing to financing. Until you mail that last payment, its really not your car anyways. Miss some payments they'll come and take it, and with mods you may STILL have to fork money over. "Ownership" is purely an illusion unless you're going to own the car for 8,9,10 years.

You can modify a leased car, as long as you either return it to stock before you trade it in, or just expect to let them keep the security deposit. Why would you want to give them all your mods anyway? As for not being able to go where you want, go anywhere you want, if you use more of the car than you agreed, you've just got to pay. Most leasing companies will waive the mileage penalty if you lease another car through them at the end anyways.

If you don't like to mod (or even if you do) trade the car every 3-4 even 5 years now that financing is at least 5 years, even as high as 7 now, drive 15k a year or less (or even more as we've seen) and are interested in a car with high resale, leasing is a GREAT option. They even have cool lease to own deals now where once you pay so much the car is yours, but you can give it back at any time. Sort of like Rent-a-center.

Like I said, leasing is very misunderstood and is actually a great option for most car owners. I'll probably never buy a car...

Well, I'm sorry if the way I think is common.. But I own all my cars.. I cut one check and that's that.. The only payments I make is insurance and yearly tax on my vehicles. So I like I said before I was talking about me.. Also with regard to modding and leasing, there's only so much you can mod to a leased car.. You cannot go all out for example and Turbo it..

[blazingounces]

This is interesting. Im only 20, and thinking of being able to just cut one check is a huge idea to me. I wasn't to fond of leasing until i just read your post SW03ES, very informative. I was also going to buy a 2000 gs3, I just wasnt sure what the payments would be on a lease for it. The one that i was looking at with a 2k down payment would be 350 a month. Im not too sure but from the lexus website the lease payment with 2k down was lik close to 500 a month. I dont know if i could afford that.

I guess leasing and financing all depends on the income one has. Im a college boy so my income = crap.

brandon

[SW03ES]

Well, I'm sorry if the way I think is common.. But I own all my cars.. I cut one check and that's that.. The only payments I make is insurance and yearly tax on my vehicles. So I like I said before I was talking about me.. Also with regard to modding and leasing, there's only so much you can mod to a leased car.. You cannot go all out for example and Turbo it..

Mike, I didnt mean any disrespect in what I said! I just meant that a lot of people think that way. Wasn't at all meant as a disparaging statement...

I had a feeling you probably paid cash for the car, thats why I said you've got to compare it to straight financing.

blazing- MOST used cars don't lease out well, but there are exceptions and outside banks are usually better than the maker's captive lease program. The issue with leasing when you're young is that it requires a lot of creditworthiness usually, and usually requires a prior car finance. Take Mike as an example, he always pays cash for his cars, obviously he has financial resources. He probably still would need a co-signer because they're really strict about that prior car credit. A lot of times even a mortgage isn't enough! I make a good income but I still needed my father to cosign. Next time I wont have that problem, I just didnt have any prior car credit.

They're also strict about the debt to income ratio...

[Lexdiamonds]

GUYS , THE ONLY THING THAT BOTHERS ME ABOUT LEASING IS EVERY 3 YEARS YOU HAVE TO COME UP WITH 3 OR 4 THOUSANDS DOLLARS JUST TO HAVE YOUR PAYMENT AROUND 4 HUNDRED DOLLARS. THE DOWN PAYMENT I MEAN. WHEN YOU FINANCE, YOU MAY PUT DOWN 4 THOUSAND, BUT EVERY 4 YEARS, YOUR GS WILL STILL BE WORTH 7 OR 8 THOUSAND FOR TRADE IN VALUE. MY PROBLEM IS IF I LEASE NOW, WHICH I WANT TO DO SO BAD BECAUSE I HAVE THE 3 THOUSAND , BUT WHAT HAPPENS IN 4 YEARS IF I DON'T HAVE ANOTHER 3 THOUSAND TO SPARE LIKE I DO NOW , I AM STUCK WITHOUT A VEHICLE, THAT IS THE ONLY THING THAT MAKES ME NERVOUS, PLUS I WANNA GET MARRIED IN 4 YEARS, I KNOW I WILL HEAR IT FROM MY GIRLFRIENDS FAMILY IF I PUT MONEY DOWN ON A NEW CAR, RATHER THAN SAVE IT FOR THE WEDDING AND RING. LOL. I LOOK FORWARD TO YOUR RESPONCES. THANKS GUYS (MIKE 21 YEARS OLD)

[MrSypher]

Mike, I didnt mean any disrespect in what I said! I just meant that a lot of people think that way. Wasn't at all meant as a disparaging statement...

I had a feeling you probably paid cash for the car, thats why I said you've got to compare it to straight financing.

blazing- MOST used cars don't lease out well, but there are exceptions and outside banks are usually better than the maker's captive lease program. The issue with leasing when you're young is that it requires a lot of creditworthiness usually, and usually requires a prior car finance. Take Mike as an example, he always pays cash for his cars, obviously he has financial resources. He probably still would need a co-signer because they're really strict about that prior car credit. A lot of times even a mortgage isn't enough! I make a good income but I still needed my father to cosign. Next time I wont have that problem, I just didnt have any prior car credit.

They're also strict about the debt to income ratio...

Steve, I didn't think you did but when I read it just sounded funny to me.. Don't worry about no offense taken.. And you are so right when you say I need a cosigner if I was gonna lease or finance.. My salesman at Lexus use to tell me to finance my cars but my credit isn't that established because of how just buy things straight out.. I've bought 6 Lexus from him and all were bought straight out.. Trust me though I'm fine with that because it's just one less bill I have to worry about at the end of the month and in the long run I save some money on finance charges...

[SW03ES]

I know 60 year old men who can't get car financing because they've never financed a car before lol

[MrSypher]

That's no good....

[SW03ES]

It makes them quote irritated lol

[1990LS400]

Whether one buys, leases, or pays cash really boils down to how one wants to spend his or her money. Leasing, like buying a car on a mortgage, is providing profits to others. There is no "free lunch". One of the easiest routes to financial independence is to avoid paying other people to use their money but to instead have other people pay you to use your money.

The "spread" between what you would pay others in interest on a lease or mortgage to use their (a bank's) money and what you would gain by having others pay you to use your money is large and can exceed 20% of your income during periods of normal interest rates. And its even worse (or better depending on your perpective) than that because of compounding. It is like increasing your income by 20% with no effort.

Don't get me wrong. There have been times when leasing a car made business sense if you could write it off. But not now and not recently.

Increasing your income in this way by avoiding debt and investing wisely will free you from fear of economic volitility, provide for a comfortable retirement, and allow you to buy just as many, if not a lot more, nice Lexus vehicles. I wish I had learned these "Finance 101" concepts at an even earlier age but it is never too late to learn.

Personally, I benefit financially when others lease or mortgage their vehicles. But who would you rather pay? Yourself or me?

[SW03ES]

But, look at it this way, what good is there in tying up $40,000 cash into a depreciating asset when half of that money can be invested in a high yield investment account and make you money?

I dont see how leasing is NOT allowing you to make more on your money vs purchasing be it a finance or a cash payment.

I've never had a financial analyst tell me leasing was a bad move. In fact I was going to pay cash for the ES, but was told by many very successful businesspeople and investors including my father that this would be foolish. Lease the car, write it off, and invest that $40,000 cash instead of putting it in the cargo hold of a sinking ship...

I've always been taught that you want to spend money on things that will MAKE you money, and spend as little money as possible on things that are going to cost you in the end. Including the writeoff, even not including the writeoff leasing costs me much less than financing or paying cash, and the money isn't tied up until the car is sold.

[1990LS400]

I did not expect my post on leasing to be particularly popular. This subject is certainly something that my wife (a CPA) and I have often discussed. We recommend that anyone considering a lease or mortgage thoroughly "run the numbers" on all three options: cash purchase, mortgage, and lease. Use the real numbers - not what you would like them to be. Consider all the tax consequences, opportunity costs, depreciation, etc. Frankly, we doubt that most people can do all this without the aid of an unbiased professional.

Even when people understand the numbers, I still hear: "But I really want this car and leasing or a loan is the only way I can afford it". Ignoring the numbers and going ahead and leasing or financing a car does not make one a bad person. My only point is that if people really understood the numbers, some of them might change their behavior and be better off in the long run. And some of them would not. It is all about personal choice and each of us has to decide for himself. I probably got on this soap box in the first place because it is very disturbing seeing so many "high income / low net worth" people who are deeply in debt.

[SW03ES]

Sure, being deeply in debt is the American way lol

You're saying that I'm not fully understanding the numbers, then help me understand them. How am I saving money by paying cash for a $40,000 vehicle, keeping it for three years and then dumping it vs leasing the same vehicle for 3 years, then leasing another one.

When you compare it to buying a cheaper or used vehicle then I can see what you're saying, but when comparing new to new I just don't get it.

You only live once, and you have to have the things in that one life that you want. I enjoy new cars, and I like a new car every 3 years or so, and thats something I'm going to have. What I dont see is how paying $500 a month for 36 months with a total outlay of $18,000 vs forking out $36,000 in cash can be considered a bad deal...

Lets say I could get $17,000 for the car after 3 years which is optomistic I've still paid out $19,000 and that extra cash has been tied up in a car for three years vs earning me money in my investment portfolio. I just dont see how thats a bad deal.

As for mortgages, if most of us waited until we'd saved $500,000 cash we'd never own a home. A home APPRECIATES in value making it a solid investment especially now. Leasing something that would MAKE you money (renting a home or apartment) vs paying on installment and building equity in that property is foolish..

A car is not an investment...

[1990LS400]

Analyzing the effect of the cash/lease/mortgage decision on a particular person's financial situation is too complex to discuss in this forum. My wife and I have spent most of our professional lives in the financial industry and we are aware that our views on this subject are different than those of the general population.

[SW03ES]

Different from the views of everyone else I've ever talked to in the financial industry also ;)

[1990LS400]

Yes, if you keep cars for a short time, leasing will be less expensive than buying. But an aspect of Lexus cars and Toyota vehicles in general is that they are incredibly reliable and can provide a wonderful driving experience over a very long time. Keeping a vehicle past its depreciable life is always less espensive than leasing and frees up money for other uses. The difference gets bigger the longer you keep a vehicle and can add up to a staggering amount. People have different goals and personally I find it very satisfying to buy a nice car, take care of it, and drive it for a long time. We kept our first LS almost 14 years and the young person we sold it to told me his neighbors think it is brand new.

The concepts regarding the acquisition of a car (value "always" falls) and a house (value "always" rises) are completely different.

The lease/buy choice is discussed in lots of financial texts and a brief overview is at:

http://www.auto-consultant.com/LeaseVBuy.html

[vevro]

The only cost effective way to own a vehicle in the United States is to find a dealer who would take you to dealer's auction, for a fee (around $200), like Manheim and help you pick out any new or used car you want, which will be at least $5,000 below any dealership's invoice. Enjoy the car for a year or two, once the auction price reaches the street price sell it and buy another. :whistles:

[SW03ES]

Yes, if you keep cars for a short time, leasing will be less expensive than buying. But an aspect of Lexus cars and Toyota vehicles in general is that they are incredibly reliable and can provide a wonderful driving experience over a very long time. Keeping a vehicle past its depreciable life is always less espensive than leasing and frees up money for other uses. The difference gets bigger the longer you keep a vehicle and can add up to a staggering amount. People have different goals and personally I find it very satisfying to buy a nice car, take care of it, and drive it for a long time. We kept our first LS almost 14 years and the young person we sold it to told me his neighbors think it is brand new.

The concepts regarding the acquisition of a car (value "always" falls) and a house (value "always" rises) are completely different.

The lease/buy choice is discussed in lots of financial texts and a brief overview is at:

http://www.auto-consultant.com/LeaseVBuy.html

So, since I'm going to wind up selling the car around 3 years anyways, then leasing is the best option for me, like I said ;)