Leasing Always Best

[pj8708]

I ran across this article on whether its best to lease or buy for the the best financial decision. Since we frequently get members who write in about this topic, I thought I would post this for future reference and with the expected comments I hope you will add, we can correct some of the obvious flat out deceptions in the article.

http://www.dailyfina...nk2&pLid=227047

From my own experience, if my leases had really worked like this over the years, I could be driving a Bently by now. I assume the author is not an independant writer.

Paul

Comments?

[SW03ES]

I am a long time leaser, but that article is full of deceptions as you said.

Makes me wonder if that woman has bought a car in the last 20 years. Financing "requires 10% down"? Since when? If anything, financing is cheaper than leasing at drive off because you don't have to pay the first month's payment.

As far as taxes, most states charge sales tax on the whole purchase price of the vehicle when leasing same as buying, MD does.

I maintain that if you are going to trade cars every 3 years or so anyways, then leasing may be a better alternative than buying, especially so if you can write a lease off as a business expense.

[nc211]

I agree with SW in that under certain situations, like say under a business ownership situation whereby the lease can be a deduction on the taxes, then it's a good route to take (assuming you've negotiated correctly in general).

In my opinion, as of today with rates so low and the market being more accepting of a 6 year term loan, financing is actually cheaper on the monthly min obligation, or close to the lease cost with the benefit of owning the car. Granted, you'll pay a tad more in interest for the longer loan term, but that assumes the monthly min is being paid to bring the 6 year term to full maturity. For instance, 3% on $30,000 costs $475 more in total between a 5 year and 6 year term, but $84 less a month on the minimum payment ($539 vs $455). So, it's really one extra monthly payment.

Not taking into consideration what the lease payment might be under the same $30,000 scenario for the same car, or the security deposit, initial down payment and so forth, I fear the lease scenario for two primary reasons, which almost burned me on my 01' Maxima before I discovered Lexus.

One - damage repairs. My Maxima got hit by a tree branch during a hurricane in 04'. It dented the roof right where the weld was for the back glass and roof, nearly impossible to fix cheaply given it's location. I thought I was looking at a $1,500 hit to the car to either fix it or pay Nissan when the lease was up. I didn't like that feeling. Luckily the inspector missed it on his turn-in report (didn't break the paint). It was a significant dent too! Not that I wasn't going to fix it, but having to have it fixed by a certain date (lease termination) was a problem.

The residual factor to buy the car after lease expiration. I got my tail handed to me on the Maxima in this regard, and it was a good lease negotiation. The value though just went through the floor when Nissan introduced the 2002 model with the bigger engine and upgraded headlights. I think residual on a $30,000 car 3 year later with 48k miles was around $15,500. I tried to sell it and even tried to trade it in, couldn't get near the residual and Nissan was unwilling to negotiate. So after nearly $11,000 in payments, I ended up with nothing except a decision I had to make at a specific date - buy the car for more than it was worth, or return it with nothing to show for it. Granted, the difference between the lease payment and the financing scenario I detailed above for a 6 year term is over $5,000 in difference favored towards the lease argument, I still didn't like the idea of having this date waiting for me to make a decision. It's because of these two issues that I'll probably never lease another vehicle again (outside of the sinking funds factor and security deposits and associated upfront costs of leasing). I prefer to have the ability to make the decision on when/where/how to replace my car when I'm ready. To me, that feeling, and not having the fear of damage looming on the horizon, is worth the extra money to finance.

But, under certain situations like SW mentions, leasing makes better business sense!

[SW03ES]

I think the issue is NC that you're not of the leasing mindset. Really if you are going to lease successfully you need to know:

1. I will wind up trading cars in 3 years anyways

2. I will not buy the car at the end of the lease

If you buy the car at the end of the lease, in general, you would have been better off to buy it in the first place. You can always simply extend the lease you have also if you need a few more months, they'll do that.

The issue with a 72 month finance vs a lease is if you know you'll want out of it in 3 years, you may be upside down.