jk335

Hi Gang,

My dad now has decided to go for a 2005 model. SC430. Wow, what a car. I have posted before regarinf a 2004. Well we have both options avaliable to us/

2005 SC430 Retail 64,000, selling price...?

We have a price of $812.00 per month, zero down 39 months. 2002 lease is being turned in 6 months early. Is this a decent lease price for a 2005 sc430?

Incidently, another dealership was offering a 2004 sc430 for the same price, same trade in. So having an 05 is a good deal i believe. They are also letting us pick the color we want, so i really comes down to price I guess. So should we jump at this, or walk away guys?

I'll be on the board if you guys have any comments, and then I will relat them to my dad. Thanks for your insight!


JR

LeslieRC

LeslieRC

This follows my last reply which inquired about purchasing instead of leasing. I currently own 2 automobiles, one being my `04 SC430, but I have leased vehicles in the past - the last about a decade or so ago. I stopped leasing when I made the decision that leasing wasn't for me - the cost of borrowing money became much cheaper and I wanted to have an equitable interest in something that I was paying (a lot of money) for. There used to be a rule-of-thumb that leasing made sense for people who turned over their vehicles every 2-3 years, but now interest rates would seem to favor purchasing over leasing. That said, however, it strikes me that leasing vehicles still makes good sense if the person leasing is an entrepreneur or a business and the vehicles will be used in connection with the business. In such cases, the vehicles and any related costs (lease, maintenance, fuel, etc.) are capital expenditures of the business and can probably be written-off for income tax purposes.

Think about it - $812 x 36 months is $28,632 cash, and you don't own the vehicle! You can't even write it off. Best of all, at the end of the lease Lexus will take the car back, certify it (because under the lease you're required to treat it better than if you owned it), and sell it back to you or to someone else.

Buy, don't lease. You can probably get a good deal on an `04 (or an `02 or `03 that's coming off lease!).

tfischer

And, even when you buy, they still let you pick the color you want.

I hate it when the car delivered is orange and the dealer says "too bad for you."

LeslieRC

Yeah, for $63K, I would expect to pick the colour I wanted!

jk335

So I ended up getting the car leased for 806 a month, 39 month lease fees and pament due at drive off. 2005 leases a lot better than 04. Got 6000 or so off. 59000 even on price, from 65000 or so...

i'll post some pics tomorrow when we have the car

tfischer

I'm no expert at leasing costs, but if you pay 806/month for 39 months, then you have paid $31,343 over the course of 3 years and 3 months. At the end of that time, you return the car to the lessor, who then has a used car worth about $48,000. (based on the "retail" value of my 2002 model now, which is about 3 years old).

So the lessor paid 60,000 for the car, collected over 31,000 during the lease period, and then sells it as a used car for about 48,000, for a total income stream of 79,000 on a 60,000 investment. Even discounting the time value of money, and even allowing for a sale at less than the "average retail," that's a pretty nice deal for the lessor.

If you paid $60,000 right now to buy the car outright, and sold it in 3 years for 45,000, you would have paid about $15,000.00 (less the time value of the money) for the honor of driving the car for the three year period, or less than half the cost of leasing it.

This can't be right, can it?

What have I missed?

jk335

You are not taking in to account that this deal is with zero down. Very important fact I might have forgotten to tell you and the crew (thanks again for your awesome responses). I do not know of a deal where I could buy the car for 800 a month, without a hefty hefty down payment. I reviewed what a buy might have been, based on a deposit of 5000.

Plus you are forgetting the fixed interest rate of about 4.25 on that money as well. For me, I wanted zero down, just drive away fees. Think I did a nice job for my dad.

How much did you put down to get your monthly payment...

lkirchner

1. How long do expect to keep this car? 2. Is the car going to be for personal use or can it be written off as a business expense? If the answer to #1 is 3 years or less and the answer to #2 is can be written off , then lease is a good decision. If not, you have been hooked by the leasing monster. Few dealers/manufacturers lose money leasing and this is not a scenario where everyone wins. Typically the lessee is the loser.

I know people will swear by leasing because they say they do not have their money tied up and can get better returns with it elsewhere. That is a weak argument and car ownership of any type is a bad place to put any money. However regarding the last comment "Do as I say not as I do"

tfischer

JK:

The down payment is not relevant to the price/resale value of the car.

Interest is a (pretty accurate) reflection of the time value of money, which I stated that I did not take into consideration. If you borrow money to buy the car, you pay interest on the borrowed amount. If you pay cash, then you have to add into your computation the interest that you would have earned if you still had that money working for you (also called, I think, lost opportunity cost). A full analysis of the costs of a purchase compared to a lease would have to take this into account, as well as the depreciation speed of the individual vehicle, and lots of other factors, and who has that kind of time.

However, since a consumer generally pays interest at a higher rate than he earns interest (I'd love to borrow 5 grand at 5% interest if I could put it into a CD paying 7%), it is usually cheaper to pay cash for a purchase than it is to borrow the money for the purchase. This is true whether you have the cash available or not.

Leasing is just another way to borrow money to pay for the purchase. The big difference is that the lessor borrows to buy the car, lets you use it for a few years, then he sells it used at the end of the lease. He sets up all the terms so that he makes money on the whole deal (sells it for a number larger than purchase price less sale price plus lease payments, minus transactional costs). That's why you can't "buy" the car for $800/month. With a lease, you are only buying 3 years out of the car's life expectancy (I kept my last Lexus 10 years, and sold it to my brother 3 years ago).

Why not cut out the middle man (lessor), buy the car yourself, and then sell it on the market after 39 months? That's what the lessor is doing and he is making a profit. Essentially you are paying a premium, and a large one, for the ability to do this deal with nothing down. As far as I can tell, the extra $15,000 you pay over the course of the lease suggests that you are paying $5,000.00 per year to avoid making a down payment, which seems steep to me.

For all of these reasons (and to answer your last question) I put enough money down so that my monthly payment would be $0.00.

Leases are useful in certain situations, which is why they exist, but I don't think the costs of leasing are ever less that the costs of buying, owning and selling over the same period of time.

JCtx

You didn't miss anything buddy, other than adding the upfront fees , which makes the picture even worse. Lease is a means to buy something you can't afford, plain and simple; especially now that the IRS rules changed, even for businesses. You're better off buying, any way you do it, especially with the very low interest rates available today, as you also pointed out, I believe.

Manufacturers lure customers into leasing with the 'zero down' gimmick, but as you calculated, they pay dearly for the 'privilege'. It's a very nice way for manufacturers to unload excess inventory at a very attractive future profit (a kind of investment, really). Dealers make a killing too with all those extra 'upfront' fees.

Financial gurus have always said if you want a luxury car, you should be able to write a check for it. Actually, that should apply to ANY car: Have only 10 grand? Buy a $10K car. Can't understand the debt mentality in this country. I remember my buddies buying a house right after graduation. I waited 5 years to pay cash for my first (guess who has a better house now, and with no debt?). Same with cars. I've always bought what I can afford, which means paying cash. With debt, you're always making somebody rich.

Okay, I'm done. Later.

LeslieRC

Enjoy!

jk335

Thanks guys. My dad is thrilled... By the way, leasing is best for him. He owns his own business and can write to off... Its legit, and a better method than buying. I agree that paying for the car in full must be a nice thing, but who has 65,000 to spend on just a car?

Why not spend this on a cruise, or a vacation for a few years.

at 31,512, he's getting a nice ride for three years. If he wants to buy out he car, sell it, he can still come ahead because this car had a great residual value....Highest at the beginning of the model year.

Buy out is 33,888. So if he buys it, then sells it, wouldn't he make 8000 if he sells it for 4000?

Leasing is just another form of ownership at the end of 3 years. Time value of money plays a key role. Are these valid points? Different schools of though, but one thing in common, great car.


I love the center star caps for the 18's. They make those 18's look hot. Although I am partial to the chrome plates, since the car debuted with those wheels. Some find them ugly, I think they are stylish. Told dealer to include the plates in the delivery.

PICS tonight.

Thanks gang!

tfischer

There are no different schools of thought when it comes to math, except maybe in public schools, where we all want to feel good about our answers, whatever they are.

If your dad has paid about 31,000 in rental payments and about 34,000 in the buy-out, then he has 65,000 in the car. If he sells it for 40,000, then he has "lost" 25,000. I don't think he can make $8,000.00 any way you look at it.

The risk in any lease is the establishment of the residual value of the car at the end of the lease term. Some leases fix that amount, others allow the value at that time to be determined by a formula or by the existing market. If your lease gives an unconditional option to purchase at the end of the lease for $33,888, and if that seems low, it's because the lessor is adding in the profit he has made on the montly payments over the 39 months.

You ask "who has 65,000 to spend on just a car?" but I am more curious as to who has $31,000 to spend on just 3 years for the temporary use of a car which should last 10 to 15 years.

jk335

tfischer: are you really asking for a debate on leasing? Is what this whole thread was about.

Flame shield on...

1. Leasing is a write off when you own a private enterprise. Tax advantages can be worked into the equation. I am now refering to my old tax law book, I'll look this up for you and prove it on a legal level if you would like.
2. A car that lasts 15 years is going to have a heck of a lot of repairs and service. We had a 1995 SC400 which we kept until 2000. great car, expensive to repair... Leasing lets you out of those problems earlier. Sure the car will go 100,000 miles, but after that, if a car starts to break, tires wear out, belts need to be replace, its not rocket science to figure out the bills will be high. Check Lexus prices for maintainence...ouch.
3. I disagree with your point about residual value. You have forgotten one important peice of the puzzle...money factor...thats whats making this lease so attractive. Lexus for oct has a great MF on this car.
4. Wear and tear with Lexus....they take cars back with scratches, bumps and all sorts of fun things. You can literally drive a car the way you want, and the dealer will always want to sell a new car. Believe me, little stuff, they just don't care as much as bmw, or Mercedes on trade in.
5. The person who leases 31000 worth of a depreciating asset might be one who....a. enjoys a new car every three years. b. does not want the hassle of fixing/ upgrading a car. c. Might buy the car at the end, and still come a head if its sold for a better profit. After 3 years, if that car is worth more than 33,000, and its bought and sold to someone, a leasor may make his money right back.

Schools of thought usually refer to different methods of living/paying for things. Nothing to do with Mathematics. By the way though, back in college years ago, I was great at Calculas, so I think I can handle this stuff..

Flame shield off..

Anywho, lets quit quibbling about leasing and get back to the conversation of SC430, a great car in its own right...