I am gonna jump on this lease deal
07-09-13 | 07:32 PM
#16
Lead Lap
Joined: Aug 2006
Posts: 547
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From: Los Angeles, CA
I'm not sure I get how it works in the US so I'm puzzled why it's so wrong putting money down.
In Canada, putting money down on a lease can make financial sense. You reduce the amount of the lease that is subjected to the lease interest. These rates (3.9%) currently for a 48 month lease are higher than any savings or "guaranteed" investment these days (1% if you're lucky) if you were to invest the money instead.
So if the lease amount owed for the 48month period is $25K, with 0 down, you pay 3.9% interest on the entire 25K over the period which makes your total cost about $30K with interest. If instead you were to put $5K down, you now owe 20K, over the period, and interest is now on the smaller amount (20K) which saves you close to $1K in interest over that period.
In Canada, putting money down on a lease can make financial sense. You reduce the amount of the lease that is subjected to the lease interest. These rates (3.9%) currently for a 48 month lease are higher than any savings or "guaranteed" investment these days (1% if you're lucky) if you were to invest the money instead.
So if the lease amount owed for the 48month period is $25K, with 0 down, you pay 3.9% interest on the entire 25K over the period which makes your total cost about $30K with interest. If instead you were to put $5K down, you now owe 20K, over the period, and interest is now on the smaller amount (20K) which saves you close to $1K in interest over that period.
Most people lease cars because they do not intend to buy the car at the end of the lease. You are putting 5k down on something you ave absolutely no ownership interest in. I lease my cars, have no intention to buy them at end of lease and I put minimum drive off fees down. Why would I want to put down 5k on something that I am essentially renting? If I am going to put 5k down on a car I would do so in a purchase and not a lease.
This guy needs to negotiate a better price for the car. If he does that will reduce his downpayment and monthly lease payment.
Come to an agreement with dealer on cost of car, then you talk various finance options.
07-09-13 | 08:10 PM
#17
The pursuit of F
Joined: Jul 2006
Posts: 8,296
Likes: 297
From: Toronto, Canada
Most people lease cars because they do not intend to buy the car at the end of the lease. You are putting 5k down on something you ave absolutely no ownership interest in. I lease my cars, have no intention to buy them at end of lease and I put minimum drive off fees down. Why would I want to put down 5k on something that I am essentially renting? If I am going to put 5k down on a car I would do so in a purchase and not a lease.
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So why put money down? Well, you have to think of it like this. You will be paying a fixed total amount + interest (i.e. 25K + interest) for using the car over the term and interest agreed upon. If you're not putting $5K down today, you're still putting it down spread out over the lease term plus (worse) you're paying interest on it. It's basic math. To further illustrate this, take this extreme - you pay one lump sum upfront for the lease term (put 25K down), your monthly payment with interest is now 0$ over the term and therefore your lease costs you only 25K (no interest paid).
Of course, your point of view to not put money down on a lease makes sense if lease rates are 0% or below investment interest rates (i.e. 1% these days). So the cost of 25K over the lease term to "rent" the car will cost you 0$ in interest (or close to it) while you can invest your money @ 1% and make a little bit of cash over that term.
07-09-13 | 08:25 PM
#18
Thread Starter
Driver
Joined: Jun 2013
Posts: 134
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From: NY
Originally Posted by SW13GS
I would never do that deal in a million years. $5k down on a lease? I wouldn't even pay the taxes and tags...roll it all in. As others have said, you are just prepaying rent. Put the $5,000 in a savings account and make some payments out of it...at least you keep your hands on the money.
The only thing I would ever pay upfront is taxes and tags, even then I never have...but its the only thing that I can accept a reasonable argument for doing.
Quote:
I cannot afford a $1k monthly payment if I were to buy with no down at all.
I think maybe you should reevaluate whether or not you can afford the car. Putting a bunch of money down on a lease to where you can swallow the payment, then planning on buying it at the end and presumably financing it for another 6 years to keep the payment low is not a smart financial decision. If you are going to buy it...buy it upfront and stomach the payments. Even if you had to finance it for 72 months you'd be better off.
According to my calculations buying with $5k down, taxes and tags rolled in, and 4% rate (you can do WAY better if you have halfway decent credit) your payment is $880. If you can get 2.5% (bet you can) its $848.68.
72 Months at 4.5% its $759.10. At 3% its $726.56.
$848.68X60=$50,920.80+$5,000 down= $55,920.80. Cost to buy and finance at 2.5% for 60 months.
Lease:
$498.50X26=$12,961+$5,000 down= $17,961. Cost to lease for 27 months.
Then you buy it at $34,000+ taxes and tags AGAIN, 9% is $37,560.
$37,560+$17,961= $55,921=cost to lease and buy assuming you bought out at cash. My guess is you won't do that, you'll finance again for 60 months
$37,560 financed for 60 months at 6% (rates WILL be higher in 2 years, used car purchases are always a higher rate, no CPO rates for buying your own lease return. Payment is $726.14.
$726.14X60=$43,568.40 Cost to lease, then buy and finance for 60 months=$43,568.40+$17,961=$61,529.40.
As you can see, the only way it makes sense is if you pay cash for the buyout, and even then you just break even. If you have $37,000 lying around, put that $37,000 down on the purchase now and your payment is only $280.76
Quote:
Originally Posted by thejaperu
You could always purchase the GAP insurance if you're afraid of totaling it.
Gap insurance won't reimburse you for prepaid rent, it only comes into effect if he owes more than the insurance payout.
The only thing I would ever pay upfront is taxes and tags, even then I never have...but its the only thing that I can accept a reasonable argument for doing.
Quote:
I cannot afford a $1k monthly payment if I were to buy with no down at all.
I think maybe you should reevaluate whether or not you can afford the car. Putting a bunch of money down on a lease to where you can swallow the payment, then planning on buying it at the end and presumably financing it for another 6 years to keep the payment low is not a smart financial decision. If you are going to buy it...buy it upfront and stomach the payments. Even if you had to finance it for 72 months you'd be better off.
According to my calculations buying with $5k down, taxes and tags rolled in, and 4% rate (you can do WAY better if you have halfway decent credit) your payment is $880. If you can get 2.5% (bet you can) its $848.68.
72 Months at 4.5% its $759.10. At 3% its $726.56.
$848.68X60=$50,920.80+$5,000 down= $55,920.80. Cost to buy and finance at 2.5% for 60 months.
Lease:
$498.50X26=$12,961+$5,000 down= $17,961. Cost to lease for 27 months.
Then you buy it at $34,000+ taxes and tags AGAIN, 9% is $37,560.
$37,560+$17,961= $55,921=cost to lease and buy assuming you bought out at cash. My guess is you won't do that, you'll finance again for 60 months
$37,560 financed for 60 months at 6% (rates WILL be higher in 2 years, used car purchases are always a higher rate, no CPO rates for buying your own lease return. Payment is $726.14.
$726.14X60=$43,568.40 Cost to lease, then buy and finance for 60 months=$43,568.40+$17,961=$61,529.40.
As you can see, the only way it makes sense is if you pay cash for the buyout, and even then you just break even. If you have $37,000 lying around, put that $37,000 down on the purchase now and your payment is only $280.76
Quote:
Originally Posted by thejaperu
You could always purchase the GAP insurance if you're afraid of totaling it.
Gap insurance won't reimburse you for prepaid rent, it only comes into effect if he owes more than the insurance payout.
Honestly, I do intend on purchasing the car by the 28th month at full cash payout, or put at the very least 50% down on the remaining $34k, unless I find something really wrong with it which I highly doubt.
The car costs as much as my salary so I'm not in a position to put much down. But I really like this car and its gonna be my first car that I'm purchasing completely on my This is why leasing seems like a very affordable option for me.. Yes maybe i should purchase a cheaper car but there is nothing out there that really interest me.
This is why leasing is sounding good for me.
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07-09-13 | 09:59 PM
#19
Lead Lap
Joined: Jun 2013
Posts: 559
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From: Bay Area, CA
I would find a cheaper car. I used to do that when I was way younger. I would get a car that was worth more than what I made. Then one day I got smart and drove a cheap paid off car for a while. I saved my money and bought a house which is an appreciating asset verses a depreciating asset like a luxury car. If you start while your young then by the time you are 30-40 you will be well off.
55K in 27 months is a house/condo down payment.
Last edited by John510; 07-09-13 at 10:03 PM.
07-09-13 | 10:25 PM
#20
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Joined: Feb 2013
Posts: 558
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From: GA
I would find a cheaper car. I used to do that when I was way younger. I would get a car that was worth more than what I made. Then one day I got smart and drove a cheap paid off car for a while. I saved my money and bought a house which is an appreciating asset verses a depreciating asset like a luxury car. If you start while your young then by the time you are 30-40 you will be well off.
55K in 27 months is a house/condo down payment.
55K in 27 months is a house/condo down payment.
Granted, you can never think of a car as an asset unless you are buying certain ferraris and the like.
07-09-13 | 11:17 PM
#22
Rookie
Joined: Jul 2013
Posts: 97
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From: NV
John510 has it right. If you can save up $55k in 2 years, you should absolutely do so and invest in a house that will make money over a car you can't really afford and that will lose money.
Of course, if we were being sensible, we'd all be buying Toyotas instead of Lexii.
07-10-13 | 12:26 PM
#23
Lexus Fanatic
Joined: May 2012
Posts: 58,383
Likes: 2,794
From: Maryland
I appreciate you crunching the numbers which I too did.
Honestly, I do intend on purchasing the car by the 28th month at full cash payout, or put at the very least 50% down on the remaining $34k, unless I find something really wrong with it which I highly doubt.
The car costs as much as my salary so I'm not in a position to put much down. But I really like this car and its gonna be my first car that I'm purchasing completely on my This is why leasing seems like a very affordable option for me.. Yes maybe i should purchase a cheaper car but there is nothing out there that really interest me.
Honestly, I do intend on purchasing the car by the 28th month at full cash payout, or put at the very least 50% down on the remaining $34k, unless I find something really wrong with it which I highly doubt.
The car costs as much as my salary so I'm not in a position to put much down. But I really like this car and its gonna be my first car that I'm purchasing completely on my This is why leasing seems like a very affordable option for me.. Yes maybe i should purchase a cheaper car but there is nothing out there that really interest me.
I know it may not seem like it now, but you have your whole life to drive expensive cars. Don't hurt yourself now by doing something foolish. Wait, save, and re-explore this purchase when you've got more cash and more income.
07-10-13 | 12:45 PM
#24
Lexus Champion
Joined: Jan 2005
Posts: 19,966
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Buying or leasing this car in your situation would be crazy IMHO. You cannot afford this car at this time, nobody making $45-$50k should buy a $50,000 car. You're talking about 10% of your gross monthly income going towards renting a car.
I know it may not seem like it now, but you have your whole life to drive expensive cars. Don't hurt yourself now by doing something foolish. Wait, save, and re-explore this purchase when you've got more cash and more income.
I know it may not seem like it now, but you have your whole life to drive expensive cars. Don't hurt yourself now by doing something foolish. Wait, save, and re-explore this purchase when you've got more cash and more income.
07-10-13 | 12:53 PM
#25
Lexus Fanatic
Joined: May 2012
Posts: 58,383
Likes: 2,794
From: Maryland
My math is wrong. If his income is $50k, his gross pay is $4,167...meaning his $500 lease payment is 12% of his gross monthly income. His taxes and such are probably 35% for state, local, SS, so that leaves $2,709 after taxes, so his car payment (lease payment) is 19% of his take home income. Thats nuts.
07-10-13 | 05:10 PM
#26
Pole Position
Joined: Oct 2004
Posts: 3,379
Likes: 4
From: Maryland
Buying or leasing this car in your situation would be crazy IMHO. You cannot afford this car at this time, nobody making $45-$50k should buy a $50,000 car. You're talking about 10% of your gross monthly income going towards renting a car.
I know it may not seem like it now, but you have your whole life to drive expensive cars. Don't hurt yourself now by doing something foolish. Wait, save, and re-explore this purchase when you've got more cash and more income.
I know it may not seem like it now, but you have your whole life to drive expensive cars. Don't hurt yourself now by doing something foolish. Wait, save, and re-explore this purchase when you've got more cash and more income.
My math is wrong. If his income is $50k, his gross pay is $4,167...meaning his $500 lease payment is 12% of his gross monthly income. His taxes and such are probably 35% for state, local, SS, so that leaves $2,709 after taxes, so his car payment (lease payment) is 19% of his take home income. Thats nuts.
Listen to this wise person.I know you're young and you want to drive something new and fun NOW, but it's just not worth it. You'd be better off getting a used (or new) fun car for $20-23k (and they're out there).....and then 2 or 3 times a year when you really have the itch for something brand new, then just rent something nice for a special weekend for a few days. You can rent Porsches and BMWs for reasonable sums (around $125-150/day) in most states, along with Infinitis, Camaros and Mustangs. And there's nothing like driving a rental German car....you can beat the hell out of it (donuts in parking lots, drive like a bat out of hell), and then just turn it back in.
Save your money, wait until your earning more (and this will be your incentive to move up fast!
), and get a reasonably fun car in your price range today.
Last edited by KevinGS; 07-10-13 at 06:31 PM.
07-10-13 | 07:14 PM
#28
Driver
Joined: Mar 2012
Posts: 123
Likes: 0
From: FL
Those people didn't put 55k down so they couldn't pay their payments. If they'd kept at their payments, their houses would be appreciating again by now. Houses are long-term investments.
John510 has it right. If you can save up $55k in 2 years, you should absolutely do so and invest in a house that will make money over a car you can't really afford and that will lose money.
Of course, if we were being sensible, we'd all be buying Toyotas instead of Lexii.
John510 has it right. If you can save up $55k in 2 years, you should absolutely do so and invest in a house that will make money over a car you can't really afford and that will lose money.
Of course, if we were being sensible, we'd all be buying Toyotas instead of Lexii.
The way I see it is, after I'm done paying for my Toyota, and save enough money to buy another Lexus at least 50% cash, I'll do it, otherwise it does not make any sense to spend so much money on a car no matter how much I make, some of you may disagree, but when you come from a lower middle class family you eventually grow up and learn to appreciate every dollar you make.
In other words, I could still be paying for the IS250 but instead I'm going to be traveling more, which is far more valuable than a Lexus
A car is a car in the end.
07-10-13 | 07:16 PM
#29
Driver
Joined: Mar 2012
Posts: 123
Likes: 0
From: FL
Also, if I were to LEASE a luxury car, I would lease an Audi or BMW which give you maintenance unlike Lexus. You get very nice looking cars and no worries on reliability that you would have if you purchased them.
The only Luxury car I would finance would be Lexus.
The only Luxury car I would finance would be Lexus.
07-10-13 | 08:26 PM
#30
Thread Starter
Driver
Joined: Jun 2013
Posts: 134
Likes: 1
From: NY
thanks everyone for talking from experience and giving some advice. I'll think it over and see what I can do. saving up for a bigger house, nice vacation, etc. is probably a better idea.
decisions, decisions.....
Posted from ClubLexus.com App for Android
decisions, decisions.....
Posted from ClubLexus.com App for Android