Is Leasing A Bad Or Bold Financial Move?

[USCmagnacumlaude]

Hi Everyone,

I'm about ready to retire (aka hand down to my son) my 99 RX300 and thinking about a new one. I understand that investing in a depreciating item isn't advisable. I like the idea of lower monthly payments as compared to financing, but at least my finance payments would ultimately result in me owning something whereas years of paying on a lease and all I get is a receipt.

Is there a simple answer to this?

I appreciate your input,

Thanks!

[1990LS400]

Why am I speculating that your Magna !Removed! Laude was not associated with a business degree?

There are plenty of "Buy vs. Lease" articles on websites like Yahoo Finance and Kiplinger that you can review. DO NOT trust the buy vs. lease calculators at car dealerships - they are sometimes (always?) rigged to make the most profit for the dealership.

Personally I can't imagine financing or leasing a vehicle unless the outlay could be charged off as a business expense. The only way my CPA wife and I have bought cars for the past few decades is to save the money up, buy our vehicles with cold hard cash and then keep the vehicles 10 to 15 years. Well that's not exactly correct. My wife did charge something like $25,000 of her Prius purchase last year on credit cards to get frequent flyer miles and then she paid off the $25,000 the next month without paying any interest. I have assumed that there were undisclosed incentives from Toyota that allowed the dealership to do that and still make a profit since we paid substantially under invoice for the car.

I suppose I might "finance" a vehicle if I got a super good deal on the purchase and a zero interest loan. But that doesn't happen since I would have to pay more or forgo rebates/incentives to get a zero interest loan. I really don't like the idea of any monthly payments other than utility bills.

[USCmagnacumlaude]

Thanks, Dark Helmet. Sound advice. You're right, my degree is in Communication and we didn't cover dollars and cents much at all. In fact my alternate handle is USCTrojaninDebt. ;)

The new RXs are just so shiny and pretty. I went to a dealership and was shocked at the numbers they threw at me, so in my due diligence I contacted an online leasing broker, some www.theleaseoutlet.com and the numbers were a lot better. I don't know if I'm sold on the concept of leasing, yet it seems like that's what everyone is doing.

[LEXIRX330]

If you could write the lease payment off you may be better off to lease.

I have leased one car and honestly didn't like it much. Just something about being locked into the miles and length of time I had to keep the car that I didn't like. But I keep my cars like new and like to get new cars often so leasing is something I still consider.

[pj8708]

If anyone thinks leasing or financing an automoble has a potential advantage over the other will be sadly dissipointed.

Purchasing a car is one of those things in life that you will always loose money on. All purchase venues are for the use of the buyer because most of us , (except Jim) do not have enough cash to plunk down and buy the car. So it's payments plus interest. IMHO, either save up the full amount in cash, or take a deep breath and get over the fact that every time you buy a car your going to loose money.

[USCmagnacumlaude]

Sounds like the smartest move might be to keep the old RX. That or I could do like Dark Helmet and marry a CPA ;)

[1990LS400]

Sounds like the smartest move might be to keep the old RX. That or I could do like Dark Helmet and marry a CPA ;)

Yes, keep the RX and let that slacker son of yours buy his own car.

Or maybe buy a slightly used (off lease?) and less expensive car. I have to say that our Toyota Prius is a phenomenal and fascinating vehicle (super nice fuel economy too) which I like more than the RX loaners I've been provided by the Lexus dealer. Maybe one of those would suit you? Your location does say "California" - aren't Californians required to drive Priuses?

And, no, we didn't get to the point of being able to pay cash for cars through extraordinarily high levels of income. We simply learned to make monthly car payments to our own "reserve funds" set aside specifically for car purchases - month after month, year after year. We do the same for home repairs with our "house fund" and with our various retirement funds. Fortunately, my wife and I are of fairly like minds on these issues. If anything, I'm the one who is attracted to "bright and shiny" temptations but I'm pretty good about lying down until the feeling passes.

We definitely don't "follow the herd" when it comes to financial matters and, so far, haven't been effected by ups and downs of the economy as much as many people although we've had our share of job and financial losses over the years. The herd sometimes stampedes over a cliff and I've learned that I don't at all like splattering on the rocks below when that happens.

I know it's not that simple. People have different psychological needs and goals. What works for us will not work for others. Everyone has to find his/her own way.

[USCmagnacumlaude]

Dark Helmet, you're certainly right on at least one point - ever since I bought my son the Razer Tiamat 7.1 Surround gaming headset he wanted for Christmas...supreme slacker!

Prius is definitely popular here in California, my dad drives one too, I just can't get past the Jetson space vehicle look of it. No offense, its a great car.

I used to own a GS300, but my boyfriend totaled it. ! I'd love to have a newer GS, but don't particularly like the latest body style. At any rate, my only real complaint with the RX I have is that hamster wheel sound in the air vent. Well, that and its not a GS.

[pj8708]

Tesla.........all electric, 0-60 in under 3 seconds. And Looks very cool. I see one in my future if I ever move off the "Little House on the Prairie !"

Paul

[USCmagnacumlaude]

Agreed, Tesla is a hot car! Get ready to have a wallet appendectomy though.

[LEX-SV]

Isn't the wait for a Tesla nearly 4 months or so?

[USCmagnacumlaude]

Not sure but I think Tesla is the only car store I've seen in a shopping mall.

[pj8708]

Your oh so right Nicole. Its like all new technologies, advances in manufacturing times, even when it was finaly proven that those in the industry of producing raw fibers for the making of many types of cloth, could actually "raise and control the quality and quantity of silk threads. These "break throughs" are always laden with high exspense because someone had to put in a great deal of money to supply the inventors and developers funds to pay for all those salaries and enevitable failures.

I have never been able to decide whether we, meaning humans, are just naturaly afraid of whats new, or suspicious of something which at first we don't quite understand. Something I imagine would be like the Sudanese "Lost Boy's" segment shown on "60 Minutes" Sunday night, January 20, 2014. These boys had never seen a light bulb. And were nervous about touching the light switch that made the bulb go on and off. They had never seen a toilet and could'nt figure it out. But they giggled little children as they stood there and watched the water go round and round. Maybe the most perplexing thing for "The Lost Boys" was understanding the need for a fork or spoon. As a way of coping with so much stress and beeing taken from a barbarian war zone

where they were being burchered and slaugtered by the 100's/ , half way around the world.

Being cautious is a good thing. Being irrational or fearing to the point of paranoia is not good. All of us here on the LOC know that we are a little like the "Lost Boy's from Sudan. This decade ahead is going to be filled with lighting speed technology movement. All of us members will have a big advantange in that as we ccontinue to exchange information and lend a hand to one another, we will be far better equiped to be ready for what ever the automotive world thinks up.

Paul

[USCmagnacumlaude]

From car stores in shopping malls to leasing a car online, the auto industry is far from stagnant. We've already embraced PARKTRONIC and letting cars park themselves, I'm guessing it won't be long before we allow them to drive themselves, too.

[lenore]

Leasing in all cases is a bad deal financially, Consumers Report, and a long list of Debt free folks agree. Purchasing is always better especially with a low or no interest loan. Cash is supreme.

[LEX-SV]

Yes, low interest auto loans in 0% to 1.99% range have to be considered today, for those with better yielding uses of cash.

[USCmagnacumlaude]

Unfortunately I don't have the means to plunk down all the money on a new or used Lexus, so unless I decide to eat humble pie and keep my 99 RX...I'm still enticed by this build my own car online and its delivered to my front door step, www.theleaseoutlet.com

[1990LS400]

Yes, low interest auto loans in 0% to 1.99% range have to be considered today, for those with better yielding uses of cash.

That assumes that the purchaser has enough cash to comfortably buy the vehicle outright but chooses to invest the money elsewhere more profitably. I agree. A person should never finance a vehicle that he/she could not comfortably purchase with his own money.

But how easy and reliable is it to obtain an after tax yield on an investment that exceeds the nondeductible interest paid on a car loan? Let me know how and you can be my and my CPA wife's financial planner. :whistles:

[LEX-SV]

Yes ^, that assumes the purchaser has enough other semi-liquid investments (yes, including cash), stocks, mutual funds and bonds that perform at a better rate than 1.99% annually. No, not just cash.

It's not that hard for those of us with strong tech stock portfolios to exceed an after tax gain of 1.99% annually, no big accomplishment. If your wife's CPA financial planner can't do that, get another one (consider a well-qualified advisor, even if non-CPA). btw-I don't do much consulting, although I've done some for corporations at a very high billable rate, (lol, no thanks, I'll politely decline on being your wife's financial planner).

Yes, leasing makes more sense for some self-employed professionals for tax reasons (as mentioned in post #4). And buying new lux cars is very expensive with any method of payment/financing (as mentioned in post #5)

[1990LS400]

Yes ^, that assumes the purchaser has enough other semi-liquid investments (yes, including cash), stocks, mutual funds and bonds that perform at a better rate than 1.99% annually. No, not just cash.

It's not that hard for those of us with strong tech stock portfolios to exceed an after tax gain of 1.99% annually, no big accomplishment. If your wife's CPA financial planner can't do that, get another one (consider a well-qualified advisor, even if non-CPA). btw-I don't do much consulting, although I've done some for corporations at a very high billable rate, (lol, no thanks, I'll politely decline on being your wife's financial planner).

Yes, leasing makes more sense for some self-employed professionals for tax reasons (as mentioned in post #4). And buying new lux cars is very expensive with any method of payment/financing (as mentioned in post #5)

I'm not talking about exceeding the difference between the after tax returns between a particular fortunate technology stock portfolio and the nondeductible cost of a car loan. I'm talking about the difference between a reasonably conservative overall investment portfolio and the nondeductible cost of a personal car loan.

Don't starting feeling too "flush" with money just because we have another bubble in the stock market going on. The "real" average overall return from the stock market has hardly changed in a hundred years adjusted for inflation.

[LEX-SV]

Nobody is feeling flush about stock performance in the bubble(s), at least not here. Not that anybody cares about the offtopic elementary school financial advice with the 100 year window (adjusted for inflation) anyways, lol.

Some good points brought up here on the topic, being lease vs purchase, thankfully.

[lenore]

Maybe a better choice would be a newer, but used vehicle with a CPO Warranty....Oh yes, buying used is king, and not paying the depreciation. Lots to pick from, and far better on the pocket.

[LEX-SV]

^ good recommendation to consider.

I purchased my IS350 as CPO in late 2008, and the Lexus service and support has been excellent for 5 years at my original dealership.

[USCmagnacumlaude]

My 99 RX has 109,850 miles on it and I'm astounded at how problem-free it is. I'd have to thoroughly agree buying a CPO Lexus, or even one that's older and not CPO, is a pretty sound decision. They go forever...

[pj8708]

This topic is like energy. It never goes away, doesn't die, and just when you think you've seen the last of it, it pops up in yet another form of energy.

Since 1972, I have leased, bought, leased, bought used, and any combination there-of, including 2013 when I went ahead and just paid cash for both our 2013 RX and 2013 ES.

Every one has their own system/ prefered method for determining what is the best way to get the best car deal., and regardless of what others say, at some point it's best to listen to all, narrow down what matches your expectation and resorces and make a desision. INMO, The choice of a Lexus is a good decision. (I do not work for the company. I and everyone in the club are dedicatied volunters)

Good luck,

Paul