mikedozz

guys, I think some may have missed the point of this thread, its not to see if leasing is better or worse than financing, it was to see if you would continue to lease a GS if the lease payments continued to go up.

Yang1815

iTrader: (1)

Is that extra money going to affect your daily life in anyway?

Are you going to think about the extra money you could use for this and that at all?

Would you care paying for that extra money for the GS?

If you said "yes" to any of the above then don't do it.

Bushwack

Now that's a lame comment. We all know over the course of the past 20+ years, a conservative diversified portfolio would get you a 8-10% return. Will your 50K in cash "invested" in some sheetmetal do the same?

And no, I will not retire at the age of 50. I'm 45 and have been financially secure since I was 38.

Cut-Throat

Well Banks and other financial institutions must be really lame also if they would lend money to you at 7% when they can easily get an 8-10% return.

You do understand Risk vs. Reward, don't you?

250-awd

I am a taker, and I know for a fact that it is a cheaper way of buying a car.

Yang1815

iTrader: (1)

Cheaper compared to what? That's the question here.

rominl

iTrader: (4)

i am still waiting for solid numbers

Cut-Throat

The leasers can't you give you solid numbers because they are basing their arguments on Investment returns that risk principal. And no one knows what those returns will be in the future.

Any returns that guarantee principle will show that paying cash for your car is the cheapest way to go.

250-awd

These are some calculations my friend and I ran today during class in our 10 min break so look through them and tell me what you guys think. We MAY have made a mistake somewhere so if anyone wants to challenge the numbers please do so. Last time we did this type of comparison, we came out with leasing being cheaper by about 7K but this time it was more than that for some reason. All the rates and numbers were taken directly off the Lexus.ca website and we did not touch anything. We just inputted the desposit/down payment amounts and the term and just plugged the numbers and PV them.

CAR IN COMPARISON: 2007 LEXUS IS 250AWD W/ PREMIUM LEATHER PACKAGE AND SUNROOF. MSRP - $47,050.00 CAD PLUS 14% TAX = $53,637.00

LEASING AMOUNTS AND TERMS


SECURITY DEPOSIT: $4,500

DOWNPAYMENT: $0

DUE ON DELIVERY: $7,091.12 (FIRST MONTLY PAYMENT, SECURITY DEPOSIT, FREIGHT, REGISTRATION FEE, FUEL TAX, AC TAX, ETC)

INTEREST RATE: 3.10%

TERM: 48 MONTHS

MONTHLY PAYMENTS: $730.62

RESIDUAL: $22,584.00 (PLUS TAX OF 14%)



FINANCE AMOUNTS AND TERMS

SECURITY DEPOSIT: N/A

DOWN PAYMENT: $4,500

DUE ON DELIVERY: $13,310.00 (DOWN PAYMENT, SALES TAX (14%), AC TAX, FUEL TAX, REGISTRATION FEE) *FREIGHT IS ROLLED INTO COST OF CAR

INTEREST RATE: 4.50%

TERM: 48

MONTHLY PAYMENTS: $1,171.19

RESIDUAL: N/A



* PERIOD RATE FOR CALCULATIONS HAVE BEEN SET TO .6% WHICH IS A FAIRLY LIGHT NUMBER.

PRESENT VALUE CALCULATIONS - LEASE

SECURITY DEPOSIT: $4,500

DUE ON DELIVERY: $7,091.12 (INCLUDES SECURITY DEPOSIT LISTED ABOVE)

MONTHLY PAYMENTS: $30,392.93

RESIDUAL: $16,017.44 (22,584.00 PLUS TAX OF 14%, MUNUS SECURITY DEPOSIT OF $4,500, PRESENT VALUED)

TOTAL PRESENT VALUE OF CASH OUTFLOWS: $53,500.02 = TOTAL COST OF BUYING CAR IN TODAY'S DOLLARS ASSUMING YOU CAN EARN INTEREST AT A RATE OF APPROX. 7.4%



PRESENT VALUE CALCULATIONS - FINANCE


DOWN PAYMENT: $4,500 (SHOULD HAVE TAX ADDED TO IT BUT WHAT THE HECK)

DUE ON DELIVERY: $13,310.00 (INCLUDES DOWN PAYMENT LISTED ABOVE)

MONTHLY PAYMENTS: $48,720.12

RESIDUAL: $0

TOTAL PRESENT VALUE OF CASH OUTFLOWS: $66,530= TOTAL COST OF BUYING CAR IN TODAY'S DOLLARS ASSUMING YOU CAN EARN INTEREST AT A RATE OF APPROX. 7.4%


NOW IF YOU TAKE THE DIFFERENCE BETWEEN THE FINANCE AND LEASE PAYMENTS AND INVEST THEM, THEN YOU HAVE EVEN A BIGGER DIFFERENCE WHICH IS HOW IT REALLY
SHOULD BE DONE BUT THE POINT IS PROVEN WELL ENOUGH THIS WAY I THINK AND IN THE END OF BOTH SCENARIOS YOU COME OUT OWNING THE CAR.

250-awd

For those paying cash, you are not as bad off but still beind by far. And that is not even calculating the ride-off of the lease payments vs the amortization of your car which would be a significant difference especially after the first year or two.

Cut-Throat

Well, I see lots of confusing numbers in your example. Why don't you just post the link to the calculator and let us have a go at it.

First your example is for an IS and this is a GS forum

Second your monthly payments don't add up to your total monthly payments

Third on your finance example you say that the 13,310 includes the 4500 but then you add it in again to come up with $66530

Fourth - You have a special lease interest rate that is lower than the finance rate. You probably will find out that rate 'disappears' when you try to negotiate a discount price on your vehicle. There are all sorts of games that dealerships will play with interest rates and terms, once you start negotiating a discount price.

Fifth - Please show me where I can get 7.4% on my Money.

Sixth - Your Sales Tax is 14% - This is way outside the level of taxation for about 95% of the folks on this forum.

movinquick

iTrader: (1)

i was always told that leasing makes the car more affordable for those who can't buy it. leasing makes sense to me. if you buy a 50k car, at least you know how much you're going to pay for the use over the course of the term of the lease. i think it's good and cheaper for a person who doesn't drive a ton of miles and wants a new car every few years. plus, have you guys ever tried to find a buyer for a $30k (after 4 years of financing) car? its not an easy task finding a qualified buyer.

250-awd

I can do the numbers for a GS if you want but it will ALWAYS be the same. It is just simple finance, NOT economics. Economics has nothing to do with it. The reason the monthly payments don't add up is that they are present valued which is the proper way of comparing streams of cash flows. You are right in the 3rd point which is why we came out roughly 5k over our first numbers which were around 7k savings, which is still significant. The point with the interest rates is noted, however that is why i didnt discount the car and took msrp so that interest rates would reflect the true interest rates. The tax rate of 14% makes no difference, 14% is a percentage and therefor will only affect the difference by a percentage all around on both calculations and will in the end cause the difference to be the same amount, as a percentage of the total car's value.

As far as 7.4% goes, you must be joking. Banks (in canada at least, offer 4% guaranteed if you go with one of the non-physical branch banks (AMEX, ING, etc). 7.4% is a joke and I have NEVER had a cumilative annual return less than 9% with my financial advisor. Mind you I am 21 and have only been investing for 4 years or so but still, I have never had less than 9%. EVER. Anyone in finance will tell you that 7.4 is a fairly conservative rate.

If I am wrong, please, somebody correct me because A) I did these calculations with my TA at university during our finance class so it would be hilarious if we both were wrong. and B) because, well it is just impossible. haha.

What a lot of people do is just add up the payments and come up with what they THINK is the cheaper, they do not take into account a little something called interest and present values of cash flows. I could have easily added another $1,000 in the difference between leasing and financing if i had an extra 5 minutes but didn't have patience.

Cut-Throat

That is what the dealer is hoping - that you won't have the patience to do the math. The 3.10% on the lease is not a real number. Yeah, you could get that if you pay sticker price and don't negotiate. - In fact most of those numbers on the Lexus site are not real - They're sales tools.

This sounds like a speech given by a tech stock holder in the late 1990's - right up until his portfoilo imploded. Just show me where I can get 7.4% with a guarantee of principal. You'll see people lining up in droves. Why would anyone buy U.S. Treasury notes when they pay about 5%? Wait until your investments go negative and you're still paying a financial adviser.

Also, The sales tax is charged up front on buying the car, where the lease it is charged by the month. - So it does make a difference. Less money to invest. - If it doesn't make a difference - just use zero percent and you'll see.

BTW - Why would you pay a financial adviser, when over 90% don't perform as well as an index fund?

Cut-Throat

Yup, you're right! - Monthly payments are lower! - The dealer likes leasing too, they make more money!