Should I buy out my lease (Merged Threads)?
08-29-18, 12:01 PM
#31
One thing that is often overlooked in all this is, if you are paying $6,000 a year to lease the car with a 12,000 mile a year lease, you have already agreed to pay $.50/mi during the lease period. So how big a deal is it to pay $.25/mi for extra miles?
09-01-18, 08:08 AM
#32
Instead of focusing on monthly payments going forward or over-mileage charges, focus on total out-of-pocket cost for buying the current car vs. a new car. Any dealer can fudge the numbers for monthly payments to make it look like one is better than the other, so looking at total cost is the only way you can objectively compare the two options.
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ravenuer (09-01-18)
09-01-18, 08:35 AM
#33
There is no doubt about that.
The reason why Lexus dealers and Lexus corporate like doing lease deals is that there are many more factors to consider in a lease deal than there are in a sale deal, and, if the customer neglects to properly evaluate any of those factors, there is likelihood of extra profit for Lexus and for the dealer.
In a lease deal, the customer needs to consider, not only the negotiated price of the vehicle, the money factor, and the residual value, but there it is also important to make an accurate estimate of how many miles need to be included in the lease deal. If the customer chooses a lease that includes more miles than will actually be driven, that customer will be paying more for the lease than he/should be and will be, at the end of the lease, returning a car that is actually worth more than the contract's residual value, which allows for more profit when that vehicle is re-sold. On the other hand, if the number of miles driven is significantly higher than what is called for iin the lease terms, there is extra profit in the $.25/mile excess mileage fee. Then, too, there is extra profit in acquisition fees, surrender fees at the end of the lease, etc. And, when the dealer offers to roll the remaining portion of a lease into a new lease, even more factors that are difficult for most to evaluate are introduced into the deal, and, thus, there is even more opportunity for profit generation that is not immediately apparent to the person who is doing the lease.
The reason why Lexus dealers and Lexus corporate like doing lease deals is that there are many more factors to consider in a lease deal than there are in a sale deal, and, if the customer neglects to properly evaluate any of those factors, there is likelihood of extra profit for Lexus and for the dealer.
In a lease deal, the customer needs to consider, not only the negotiated price of the vehicle, the money factor, and the residual value, but there it is also important to make an accurate estimate of how many miles need to be included in the lease deal. If the customer chooses a lease that includes more miles than will actually be driven, that customer will be paying more for the lease than he/should be and will be, at the end of the lease, returning a car that is actually worth more than the contract's residual value, which allows for more profit when that vehicle is re-sold. On the other hand, if the number of miles driven is significantly higher than what is called for iin the lease terms, there is extra profit in the $.25/mile excess mileage fee. Then, too, there is extra profit in acquisition fees, surrender fees at the end of the lease, etc. And, when the dealer offers to roll the remaining portion of a lease into a new lease, even more factors that are difficult for most to evaluate are introduced into the deal, and, thus, there is even more opportunity for profit generation that is not immediately apparent to the person who is doing the lease.
When leasing there is only one winner.....the dealer.
09-01-18, 08:18 PM
#34
There is another winner though - you! You pay the brunt of depreciation for the chance to drive a new car every 2/3 years. Although if you stay with the same brand, the generation changes every 6 years, which kind of defeats the point of leasing?
09-04-18, 10:22 AM
#35
Driver School Candidate
In the same sense, why pay more money to stay at a more expensive resort while you can pay significant less for a local motel, business class vs basic economy flight?
It's getting from point A to point B, some people prefer better, safer and more luxurious experience so they're willing to pay more.
09-04-18, 01:18 PM
#36
Lead Lap
That's not necessary true. You pay more money to get better experience.
In the same sense, why pay more money to stay at a more expensive resort while you can pay significant less for a local motel, business class vs basic economy flight?
It's getting from point A to point B, some people prefer better, safer and more luxurious experience so they're willing to pay more.
In the same sense, why pay more money to stay at a more expensive resort while you can pay significant less for a local motel, business class vs basic economy flight?
It's getting from point A to point B, some people prefer better, safer and more luxurious experience so they're willing to pay more.
09-04-18, 02:18 PM
#37
Driver School Candidate
When you buy a car, you'll stick with it 6-7 years or more.
For example: if you bought a 2016 ES, you'll keep driving it for the time being. However, if you leased, you can return it and switch to the newer, state-of-the-art 2019 ES.
For example: if you bought a 2016 ES, you'll keep driving it for the time being. However, if you leased, you can return it and switch to the newer, state-of-the-art 2019 ES.
09-04-18, 02:46 PM
#38
Lead Lap
I bought a 2013 ES. In 2016, I traded it for a new (2017) ES. What I got in trade for the 2013 ES was essentially what the residual value would have been for that car had I not bought it but, instead, leased it.
Either way, I would have ended up with a new car after 3 years, and the value of the 2013 as a trade in was virtually the same as what it would have been as a lease return. It is just 2 different ways to get to the same outcome.
09-04-18, 03:20 PM
#39
Driver School Candidate
People buy car to keep, not to trade in 3 years. I remember there's a chart showing cost of ownership at 3 years, 6 years and 10 years. Lease vs buy break even at around 5-6 years.
You forgot you paid full tax on the purchase in 2013, while you should only pay around 50% of that tax if you leased your ES from the beginning [tax* (sale price - RV)], plus whatever interest accumulated for that $50k loan (assuming you finance)
In addition, cars like BMW have very high RV to keep the payment down (sometime only $300/month for a near 50k car), so at year 3, the lease would cost significantly less than the money you have to pay if you purchase.
You forgot you paid full tax on the purchase in 2013, while you should only pay around 50% of that tax if you leased your ES from the beginning [tax* (sale price - RV)], plus whatever interest accumulated for that $50k loan (assuming you finance)
In addition, cars like BMW have very high RV to keep the payment down (sometime only $300/month for a near 50k car), so at year 3, the lease would cost significantly less than the money you have to pay if you purchase.
09-05-18, 06:21 AM
#40
Lead Lap
And, no, I didn't pay interest because I paid cash for both cars.
Further, by buying, instead of leasing, I didn't have to pay additional lease acquisition fees, surrender charges, or other profit padding charges that typically come with a lease or that are more easily hidden in the more complicated terms of a lease contract.
If you want to believe that there is value for you to lease cars, that is fine, but the reality is that, for most, leasing is the more costly option than buying.
09-05-18, 06:30 AM
#41
People buy car to keep, not to trade in 3 years. I remember there's a chart showing cost of ownership at 3 years, 6 years and 10 years. Lease vs buy break even at around 5-6 years. You forgot you paid full tax on the purchase in 2013, while you should only pay around 50% of that tax if you leased your ES from the beginning [tax* (sale price - RV)], plus whatever interest accumulated for that $50k loan (assuming you finance)
In addition, cars like BMW have very high RV to keep the payment down (sometime only $300/month for a near 50k car), so at year 3, the lease would cost significantly less than the money you have to pay if you purchase.
In addition, cars like BMW have very high RV to keep the payment down (sometime only $300/month for a near 50k car), so at year 3, the lease would cost significantly less than the money you have to pay if you purchase.
All in all it comes down to this:
You need a new car (for whatever reason) every 3 or so years LEASE
You want to drive a car that otherwise you couldn't afford ( Paying only depreciation) LEASE
You want to accrue assets BUY
09-05-18, 09:31 AM
#42
Driver School Candidate
Over a 6 years span, I'd get to drive 2 new cars vs 1 car for a few thousands dollars more than the purchase route.
@lesz: you paid full tax on your 2013 ES too and you're lucky that the fair market value of your 2013 ES is the same as its RV lease (it's actually more common to have lease RV higher than fair market value at year 3). Also, not a lot of people have 50k cash or willing to commit 50k no interest to a car.
You can google lease vs buy calculator to see for yourself.
09-05-18, 11:28 AM
#43
hoak83, different states have different laws for sales tax. You are looking at it from California point of view.
09-05-18, 11:36 AM
#44
Yes, I paid full tax on the purchase of the 2013, but, when I traded it in, the trade-in value of the 2013 reduced the amount of sales tax that I had to pay on the purchase of the 2017 to less than half of what it would have been had I previously had a lease and, thus, didn't have a car to trade-in. So, any consideration of sales tax is pretty much of a wash between buying and leasing.
And, no, I didn't pay interest because I paid cash for both cars.
Further, by buying, instead of leasing, I didn't have to pay additional lease acquisition fees, surrender charges, or other profit padding charges that typically come with a lease or that are more easily hidden in the more complicated terms of a lease contract.
If you want to believe that there is value for you to lease cars, that is fine, but the reality is that, for most, leasing is the more costly option than buying.
And, no, I didn't pay interest because I paid cash for both cars.
Further, by buying, instead of leasing, I didn't have to pay additional lease acquisition fees, surrender charges, or other profit padding charges that typically come with a lease or that are more easily hidden in the more complicated terms of a lease contract.
If you want to believe that there is value for you to lease cars, that is fine, but the reality is that, for most, leasing is the more costly option than buying.
09-05-18, 01:06 PM
#45
Driver School Candidate