New Car: Ever make sense to lease?

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TravelforFun
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Re: New Car: Ever make sense to lease?

Post by TravelforFun » Tue Oct 31, 2017 6:50 pm

sambb wrote:
Mon Oct 30, 2017 9:39 pm
Im so glad i have leased. The invested money went up big in markets this year, and has easily paid the payment on my lease.
Lease was 100% the best move by FAR.
Would you have felt the same about the lease had the stock market been going down?

TravelforFun

ncbill
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Re: New Car: Ever make sense to lease?

Post by ncbill » Tue Oct 31, 2017 7:05 pm

bottlecap wrote:
Tue Oct 31, 2017 2:53 pm

Here are Edmunds best lease deals of October: https://www.edmunds.com/car-leasing/mon ... deals.html All require some money and fees down and all are at least 22 cents a mile, which is not cheap.

JT
Those are the national offers. They are only a starting point for negotiation, e.g. you never want to pay anything "down" ($0 CCR)

See leasehackr [sic] for advice, makes/models that are currently "leasing well" and actual deals posted.

Non-Tesla EVs in particular (currently the Bolt) are a much better deal leased than bought.

visualguy
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Re: New Car: Ever make sense to lease?

Post by visualguy » Tue Oct 31, 2017 8:24 pm

For cars with good lease deals in states with high sales taxes (like CA), you actually need to hold the car for 6+ years to see a financial benefit from buying and then trading in. Even at 6 years, it's kind of a wash unless you manage to sell the car privately for significantly more than trade-in value (who wants to spend time on that...) There's also the risk of an accident diminishing that resale value, or a change in technology such as the move to EV. The big benefit happens when you hold the car for extra years beyond the 6 years. 10+ years makes a significant difference, but many don't want to drive the same car for that long anyway or deal with maintenance/repair hassles which can be frustrating indeed.

finite_difference
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Re: New Car: Ever make sense to lease?

Post by finite_difference » Tue Oct 31, 2017 8:29 pm

thangngo wrote:
Tue Oct 31, 2017 1:20 pm
finite_difference wrote:
Mon Oct 30, 2017 9:33 pm
If you can lease for $150/month or under (all included), then I would not call it the most expensive. That’s not a bad deal. Never say never.

Can you give an example for $150/month lease all inclusive? Did you factor in first payment? some might charge $3k to $5k on top of the $150/month payment.
I specifically said all included. So if they charge $5k on top of that, then of course that increases the price a lot. That’s an extra $139/month so almost double.

It’s definitely possible to find a lease for $150/month (all included). I’ve read about them on here and you’ll see posters discuss it above. Of course most leases are more than that, and then you’re paying a premium, and that’s why leases are usually not a good idea. (And it depends on the car too.) For example at $200/month (all included) you’re paying a decent premium but it’s not necessarily a terrible deal. I definitely wouldn’t want to pay more than $200/month though.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

finite_difference
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Re: New Car: Ever make sense to lease?

Post by finite_difference » Tue Oct 31, 2017 8:41 pm

warner25 wrote:
Tue Oct 31, 2017 6:20 am
I think it's fascinating that consensus here now is that a major technological revolution will wipe out the value of ICE cars within 5-10 years. We just bought a new ICE that I plan to keep for the next 10-20 years, so that's disconcerting, but I also welcome a shift to all self-driving cars as much as anyone. But 10 years ago seemed like peak oil and the end of gasoline as a reasonable source of energy for a car, and now gas prices are still 1/2 of what they were back then, so we'll see... I'm marking this thread to revisit in 2022.
Honestly I think the change to self driving will be even more revolutionary than the change from ICE to EV.

I think you should buy the safest car you can afford that meets your needs and then keep it for at least 12 years or 150k miles. And maintain it well.

In 5 years EVs will be better than today, but then you’ll want to wait 5 more years for better self-driving capabilities, even longer range, cheaper home chargers, better charging network, etc. So there’s always something better coming.

It could be that once self driving really takes off that you don’t even need a car anymore. You can just schedule an UberAuto EV to shuttle you around like a personal chaffeur, which will potentially cause the entire used car/ICE/non AI car market to crater — but I don’t think they’ll ban your ICE car anytime soon. You’ll be able to drive it another 20 years at least and get plenty of value out of it.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

ABS
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Re: New Car: Ever make sense to lease?

Post by ABS » Wed Nov 01, 2017 10:14 am

There is a major flaw being perpetuated by some posters on the characteristics of a lease. Its a false belief that manufacturers/lessors/financial institutions are absorbing the depreciation risk of a vehicle. As someone who was in the automobile business, both with a manufacturer and on the financial side, I can tell you unequivocally that residual values are projected VERY conservatively and a cushion of safety is added on. The lessor is in the business of making money (and leases are very profitable). If a vehicle has high residual value, the lessor is not taking much of a risk; the customer is better off profiting from the eventual sale of the vehicle.
In the few instances that a mistake is made, the lessor will make every effort to sell you the car at stated residual value or ding you whatever they can for "excessive wear and tear". Too many mistakes and they will get out or be forced to get out of the leasing business; its happened a few times.
There is a very narrow opportunity for leases to be financially attractive - when the government offers humongous incentives or the manufacturer is stuck with hard to sell vehicles. Some of the leases offered in California reflect this scenario.
If cash flow is an issue, leasing may be the only alternative. But if you take a deep dive into the variables of a lease - acquisition cost, residual values, cost of money, transaction costs, leasing is an expensive alternative. Leasing is not the only avenue to write off business use of a vehicle. The IRS allows you to expense business mileage on a per mile basis or you can depreciate the vehicle and write off the business portion of maintenance and other expenses.

sc9182
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Re: New Car: Ever make sense to lease?

Post by sc9182 » Wed Nov 01, 2017 10:55 am

Agree with general consensus that "buy and hold long term" makes sense - not only for appreciating assets such as stocks/ETFs/funds, this also applies for depreciating assets (autos) too :-)

Now that the disclaimer is over, there are some "select" circumstances when Lease could make sense.

Here - you gotta use market-timing (big no-no on in boglehead world!), external/promotional/marketing rebates, discounts, incentives, price-improvements, state/federal rebates etc to nail your deal. Leasing may work (ie., financially makes sense) some times, won't work every-time, even for so-called "experts".

In stock investing, market timing is taboo - because the unknown future values, and future/potential risks of holding a single/individual stocks. Where as in leasing-world, you could "try" to optimize your costs, prices, finance-rates, payments, among other fees upfront. If it doesn't work, you can always walk-out without making a deal (not so easy for newbies!). Always recommend doing ZERO down (or just the first-month payment)

However, there are certain non-financial advantages with leasing, such as:
1) Leasing a Luxury car (most likely, high depreciation) for low monthly payment
2) Leasing an "un-reliable" but cool car (you wouldn't want to hold a bag-of-bolts if you plan to hold long-term)
3) Business deductions (most often business miles could come-out ahead; but we are talking about high-end vehicle lease in this case!
4) You are forced to lease - there are limited run/trial technologies: such as very-early on EVs (GMs EV1 anyone?), Fuel Cell technologies (Toyota Mirai), and some limited market-place Natural-gas type vehicles (where the refueling network sucks, or future unknown)
5) In some states, the manufacturer's captive financing ARM's provide Sales "tax credits" - in essence, all you are paying-for is monthly payment, NO/limited Tax overhead!! (Texas comes to mind)
6) Packaging - you could roll Pre-Paid maintenance, and some manufacturers residualize these (ie., your cost is 40-50% of the quoted price for that "maintenance services package"). At times multiple-security-deposits MSDs may provide cool 8% guaranteed return on investment., also lead to "tax-credit"
6) You LOVE leasing new/safer luxury cars :-) (so long your paying under 1% of MSRP per month, with ZERO down, as frequently quoted on leasehackr; and have GAP insurance automatically paid/covered in the lease!). Never lease nearing-to or beyond manufacture warranty period !!

There are other lifestyle items we can discuss - but want to elicit the financial aspects of the lease.

Yankuba
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Re: New Car: Ever make sense to lease?

Post by Yankuba » Wed Nov 01, 2017 11:10 am

Re: the discussion about ICE vs. electric, there is some recent press on the challenges of supplying enough materials for the car batteries:

https://jalopnik.com/we-may-not-have-en ... 1820008337

alfaspider
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Re: New Car: Ever make sense to lease?

Post by alfaspider » Wed Nov 01, 2017 11:17 am

I don't think Electric taking over ICE is really much of a risk factor for a someone looking to buy a new car today and hold it for 10 years. Even without the EV factor, unless it's a very rare limited model or ultra-exotic, a car is going to be worth a tiny fraction of the new purchase price in 10 years. Perhaps ICE cars will be worth 30% less than they otherwise would have, but that just means your car is worth $3,500 instead of $5,000. Not a game changer if you are running the economics on a $25,000 purchase.

One thing to consider on lease vs buy: some states tax lessees on the entire value of the vehicles, others just tax the lease payment. The effective tax rate on leases in states that tax the entire value can be quite high.

S&L1940
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Re: New Car: Ever make sense to lease?

Post by S&L1940 » Wed Nov 01, 2017 12:12 pm

How about an area like south Florida with a ton of aging drivers?
Owning a car for 10+ years may be extremely optimistic - forget car longevity, what about driver longevity?
And then there is the driver's ability (meaning mental and physical capability), some of us probably should have been off the road years ago!
Thinking here is a situation where short term, low mileage leases, can make a lot of sense.

And let's hear it for self driving cars - owned or leased - that have automatic turn signals programed in...
Don't it always seem to go * That you don't know what you've got * Till it's gone

investor997
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Re: New Car: Ever make sense to lease?

Post by investor997 » Wed Nov 01, 2017 12:21 pm

Yankuba wrote:
Wed Nov 01, 2017 11:10 am
Re: the discussion about ICE vs. electric, there is some recent press on the challenges of supplying enough materials for the car batteries:

https://jalopnik.com/we-may-not-have-en ... 1820008337
Not only this, but what about our grid infrastructure? Twice now in the past twelve months, the transformer that serves my neighborhood went up in smoke, causing extended power outages. Most recently it was from hot weather and high power demand due to central A/C usage. What will happen when that kind of power draw happens on a daily basis during overnight hours when people charge their cars at home?

investor997
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Re: New Car: Ever make sense to lease?

Post by investor997 » Wed Nov 01, 2017 12:30 pm

IMHO, when it comes to new vehicles, buy-and-hold only makes financial sense when keeping it for a long time - perhaps ten or more years. Otherwise, manufacturer incentives tend to boost lease residuals artificially, resulting in a lower monthly depreciation payment compared to owning/financing.

The challenge with buy-and-hold is choosing a vehicle with longevity and durability as priority #1. As vehicles become more complex, this becomes increasingly difficult. Right off the bat, most German cars can be eliminated due to their high levels of mechanical and electrical complexity. Once they hit 5 or 6 years in age, the repair bills start piling up. BMW in particular never ceases to amaze me in their inability to figure out how to keep a valve cover gasket from leaking oil everywhere.

visualguy
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Re: New Car: Ever make sense to lease?

Post by visualguy » Wed Nov 01, 2017 1:17 pm

investor997 wrote:
Wed Nov 01, 2017 12:30 pm
BMW in particular never ceases to amaze me in their inability to figure out how to keep a valve cover gasket from leaking oil everywhere.
They don't really care that much about what happens beyond the warranty+CPO warranty period, which is 5 years. They never claim that their cars are very durable. Their marketing message is about performance, handling, and luxury, not durability. Lexus does claim long-term durability, and they do seem to deliver on that, but BMW offers cars that are more fun!

If you don't drive much (say, up to 6-7K miles/year) you can keep even most BMW models for 10 years without too much trouble. If you drive more miles, leasing is your friend with these cars.

Teague
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Re: New Car: Ever make sense to lease?

Post by Teague » Wed Nov 01, 2017 1:33 pm

Some have stated concerns that we will transition to electric vehicles over the next ten years or so, and therefore the safest move, financially, is to lease, and not get stuck with an internal combustion engine. So I wondered what that transition period might look like.

One thing that occurred to me is that there would be a lot of gasoline no longer being sold. A glut of gasoline if you will, as demand plummets. The oil companies will adjust of course, and they are already doing this, but that will take some time. What will the price of gasoline look like per gallon? $2.00? $1.00? Twenty-five cents? Will there be a year or two when they will pay me, just to haul some of the stuff away?
Semper Augustus

pshonore
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Re: New Car: Ever make sense to lease?

Post by pshonore » Wed Nov 01, 2017 1:57 pm

ABS wrote:
Tue Oct 31, 2017 9:41 am
From a financial perspective leasing NEVER makes sense.
1) Leases are based on projected/estimated miles. If you drive less miles, you do not get credit and the leasing company comes out ahead. If you exceed the miles allowed, you get whacked with extra mileage penalties. Some lessors may cut you some slack but only if they can hook you into another lease.
2) Even if you have minimal scratches or dings at turn in, watch out! The leasing company will try and squeeze what ever they can out of you; they need to maximize profit on the resale of the car.
3) Leases are focused on selling monthly payments; unless you are persistent and dig deep enough the true costs are hidden or obfuscated - cost of the vehicle, interest rate, residual value, penalties.
4) Lease costs are based on acquisition costs, interest rate and residual value. So you, the lessee are paying a premium for the lessor taking a "risk" on the residual value. That risk is for the most part pure baloney. Leasing companies, like insurance companies are in business to minimize risk. Caveat - the government can distort market conditions by offering ridiculous incentives for vehicles like electric cars.

Unless there is a primal or emotional need, own your vehicles till the wheels drop off or there is a safety reason to get another vehicle. Bogleheads' mantra of " costs matter" applies to vehicles as well.
To me, none of those numbers matter. What does matter is the down payment added to the monthly payments added to the residual. Compare that to what you could buy the car for new (not MSRP) . In some cases, leasing will cost more but not always. Ignore sales tax, documentary fees and registration as those are likely a wash whether you're leasing or buying. However, if you're going to puts lots of miles on a lease, its probably not the best approach.

visualguy
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Re: New Car: Ever make sense to lease?

Post by visualguy » Wed Nov 01, 2017 1:59 pm

Teague wrote:
Wed Nov 01, 2017 1:33 pm
Some have stated concerns that we will transition to electric vehicles over the next ten years or so, and therefore the safest move, financially, is to lease, and not get stuck with an internal combustion engine. So I wondered what that transition period might look like.

One thing that occurred to me is that there would be a lot of gasoline no longer being sold. A glut of gasoline if you will, as demand plummets. The oil companies will adjust of course, and they are already doing this, but that will take some time. What will the price of gasoline look like per gallon? $2.00? $1.00? Twenty-five cents? Will there be a year or two when they will pay me, just to haul some of the stuff away?
It will be a gradual transition. Supply will be scaled down gradually as demand is decreased.

randomguy
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Re: New Car: Ever make sense to lease?

Post by randomguy » Wed Nov 01, 2017 2:28 pm

ThePrince wrote:
Mon Oct 30, 2017 9:12 pm
RRAAYY3 wrote:
Mon Oct 30, 2017 9:06 pm
Need a new car end of December

Love AWD ... but also loving the new Civics. Live in North East, so weather is an issue ...

Are there ever any reasons to lease vs buy? I have the money to buy - just wondering if it’d be better to pay less monthly and invest the difference.

Or do Bogleheads always buy their cars?
Never. A car lease is the most expensive form of vehicle ownership.
Have you compare pricing out leasing to say buying and selling a new car every 2-3 years? Leasing isn't the problem. It is driving a new car every 2-3 years.

Leasing is a clear win in a couple of cases
1) Writing it of as a bussiness expense. The rules tendt to favor that versus amortization
2) EV leases in states with large tax credits. You would have a lease requiring something like 7k of payments over 2 years and get a 5k tax credit from the state. 2k to run a car for 2 years is a pretty darn good deal

2m2037
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Re: New Car: Ever make sense to lease?

Post by 2m2037 » Wed Nov 01, 2017 2:31 pm

Slacker wrote:
Mon Oct 30, 2017 11:24 pm
I have a family member with an irrational phobia of cars that have more than 50,000 miles. They were buying new cars every 3 years as soon as the old car was just about to hit 50,000 and they would sell the car to the dealership as a trade in. I mentioned that they should probably consider a lease...so they leased their current car, but instead of getting the same class of car at a much lower cost they used that opportunity to "upgrade" to luxury class of vehicle since the monthly payments were the same :oops:

Oh well, I tried to save them some money considering how they purchase cars.
Maybe a lease never makes sense for this family member of mine.

If you were considering a plug-in hybrid vehicle for your next purchase, a lease may make sense due to rapid changes in technology. If you were getting a regular internal combustion engine vehicle just go with something 2-3 years old.
Well, they are getting more "car" for the same money. So while you might not have helped them save money, you helped them stretch their dollar, if you could call it that.

2m2037
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Re: New Car: Ever make sense to lease?

Post by 2m2037 » Wed Nov 01, 2017 2:48 pm

I am paying $180.55/month with $0 down for a 36mth/36k mile lease of a 2017 Chevy Volt with a few options over the base trim. This figure is post all rebates available. This works out to be $2,167 a year. I get to charge my car for free at work, and I can probably go a couple of days on a full charge. Some weekends I travel a little further so I might have to put in $5 of gas for that extra 150 or so miles. Call it $2,500 a year TCO, excluding insurance. Free dealer maintenance and covered by bumper to bumper warranty for the duration of the lease.

I have friends with V6s who spend close to $150/month in gas alone for less miles traveled. Factor in maintenance and depreciation and I think I'll come out way ahead.

Also, I don't think I could go back to a car without a reverse camera... :oops:

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dm200
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Re: New Car: Ever make sense to lease?

Post by dm200 » Wed Nov 01, 2017 3:03 pm

My opinions and knowledge:

1. Under certain circumstances, when leasing for business, there may be benefits (because of taxes and related). If for business, check with an accountant/CPA. I do not believe leasing makes financial sense for personal use.

2. A lease (under the covers) is a balloon loan amortized over a long period and a guaranteed value at the end of the lease.

3. To get the optimum value in a lease, you need to use as close to the allowable mileage as possible. You never know when/if the future use changes.

4. If you need or want a different type vehicle, early termintaion of a lease can be costly.

5. If you own or finance a car, and you get a new one -- you never need to personally deal with the original dealer or the bank/credit union where you have the loan. With a lease, at termination, you must deal with the leasing folks -- who have the chance to "hard sell" another lease.

6. Projections of the guaranteed final value of a vehicle are not perfect. Some folks have lucked out and the leasing company has greatly missed on the valuation and a few folks got a good deal. I view this as a crapshoot and cannot be predicted or counted on.

Bottom line (my opinion) for personal use never lease.

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dm200
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Re: New Car: Ever make sense to lease?

Post by dm200 » Wed Nov 01, 2017 3:04 pm

I have friends with V6s who spend close to $150/month in gas alone for less miles traveled. Factor in maintenance and depreciation and I think I'll come out way ahead.
How is your low cost of fuel in any way related to a lease? Wouldn;t it be the same for a purchased/owned (possibly financed) car?

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Re: New Car: Ever make sense to lease?

Post by S&L1940 » Wed Nov 01, 2017 3:43 pm

Teague wrote:
Wed Nov 01, 2017 1:33 pm
One thing that occurred to me is that there would be a lot of gasoline no longer being sold. A glut of gasoline if you will, as demand plummets. The oil companies will adjust of course, and they are already doing this, but that will take some time. What will the price of gasoline look like per gallon? $2.00? $1.00? Twenty-five cents? Will there be a year or two when they will pay me, just to haul some of the stuff away?
my first fill up was at $0.25 in 1957.
BUT, I was then getting 10MPG, now factor in inflation, and today we get gas at Costco or BJs that could almost equal 1957 costs.
Don't it always seem to go * That you don't know what you've got * Till it's gone

Rupert
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Re: New Car: Ever make sense to lease?

Post by Rupert » Wed Nov 01, 2017 3:49 pm

warner25 wrote:
Tue Oct 31, 2017 6:20 am
I think it's fascinating that consensus here now is that a major technological revolution will wipe out the value of ICE cars within 5-10 years. We just bought a new ICE that I plan to keep for the next 10-20 years, so that's disconcerting, but I also welcome a shift to all self-driving cars as much as anyone. But 10 years ago seemed like peak oil and the end of gasoline as a reasonable source of energy for a car, and now gas prices are still 1/2 of what they were back then, so we'll see... I'm marking this thread to revisit in 2022.
Me too. I won't believe the EV hype until I start seeing EV full-size trucks rolling off the assembly lines. Here in flyover country, every other vehicle on the road is still a truck, and I see maybe one EV a week on the road here. I actually know the guy driving that EV. His name is Phil.

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Re: New Car: Ever make sense to lease?

Post by beachteen » Wed Nov 01, 2017 6:01 pm

Planning to buy a new car and then sell it and buy another new car every 2-4 years is overall a poor financial decision for most. If you are planning on doing exactly that leasing can be cheaper than buying. Buying the same car and keeping it for 6 years is going to be cheaper in the long run. The cars with the best lease incentives are not the same as the cars with the lowest cost of ownership

Dandy
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Re: New Car: Ever make sense to lease?

Post by Dandy » Thu Nov 02, 2017 8:00 am

I have never leased a car and don't expect to. I think from a financial standpoint it would be rare for it to be a good thing. It is hard enough to buy a car for a good price when you have to negotiate the purchase price and maybe the trade in price and any finance terms - even when you do good research. Now add the complexity of a lease e.g. down payment, length of the lease, trade in value, monthly lease payments and mileage limitations, excess mileage per mile charge, etc. Also factor in that when you turn the car in the dealer can assess fees for any scratches, dents etc.

So here is what I fear: "Oh I'm afraid to tell you Mr. Dandy that that dent will require about $1,200 dollars for us to fix. But, I'll talk to our manager and see whether he might agree to waive that charge if you agree to lease one of our new models" Why not have a nice cup of free coffee in our customer lounge until I get back to you.

Too much leverage for the dealer. Too many terms to negotiate and dealers do this every day and you don't. You have to deal with them at time of lease and at time of lease ending. I think if I wanted to have a new car every 3 years I'd buy and then sell myself after 3 years either in a trade in or sell it privately. Of course, for many, affording to buy a new car outright is a real stretch to the savings or budget.

If I were a dealer I'd love leases. Get to sell new cars, lots of terms to negotiate and my team knows how to use that to our advantage and after 3 years I'll see the customer again and likely have another sales opportunity where I have the advantage. If he buys the car that is good but I may never see that customer again.

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Re: New Car: Ever make sense to lease?

Post by technovelist » Thu Nov 02, 2017 8:08 am

RRAAYY3 wrote:
Mon Oct 30, 2017 9:06 pm
Need a new car end of December

Love AWD ... but also loving the new Civics. Live in North East, so weather is an issue ...

Are there ever any reasons to lease vs buy? I have the money to buy - just wondering if it’d be better to pay less monthly and invest the difference.

Or do Bogleheads always buy their cars?
I have a case where it cost me very little to lease, in 2008.

It was a 4-year closed-end lease for a total purchase price of $44,000, at an interest rate of 1.9%, so I paid about $1,800 in total interest during the lease term. The leasing company paid the sales tax, which was also about $1,800, making that a wash.

When I bought the car at the end, I paid $20,000 (the remaining value), which resulted in a sales tax of $800.

So in essence I paid $800 for the put option to return the car at the end if I didn't like it. Since it was my first (and so far only) sports car, as I have always bought sedans in the past, that seemed like a reasonable cost for that option.

BTW, I still have it and it is still fun to drive.
In theory, theory and practice are identical. In practice, they often differ.

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dm200
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Re: New Car: Ever make sense to lease?

Post by dm200 » Thu Nov 02, 2017 8:28 am

Some of the lease deals I see and hear really puzzle me - they look too good to be true. I conclude there must be a "catch".

My "logic" includes:

1. If there are more organizations/people involved, there must be higher costs. Leasing involves more organizations/people and they do not do anything for no compensation.

2. I know that the leased cars are financed by various types of lenders. That financing costs the leasing companies money. For indoviduals with good credit, auto loans have very low rates.

3. I know that leasing is a balloon loan calculation with a guaranteed value at the end of the lease. In a previous life, I did those calculations.

So, except for the tax benefits of leasing for business use, I have to conclude that leasing (on average or balance) is not financially beneficial to the individual getting the car vs purchasing for cash or financing the car with low rate new auto financing. Who (and how) is paying for the added costs if leasing is financially beneficial?

visualguy
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Re: New Car: Ever make sense to lease?

Post by visualguy » Thu Nov 02, 2017 3:36 pm

dm200 wrote:
Thu Nov 02, 2017 8:28 am
Who (and how) is paying for the added costs if leasing is financially beneficial?
It's not that simple... Manufacturers (such as BMW) subsidize the residual on the lease in many cases, thus making the terms attractive to the customer. There is something in it for the manufacturers - they don't do it because they are nice. The main benefit they get for these decreased margins is increased volume.

They keep tweaking the lease terms to achieve higher profits by hitting the right trade-off between margins and volume. They use sophisticated modeling to adjust the various lease terms on a regular basis for different models and model years. For customers who lease at the right time, this can be advantageous. For example, BMW lease terms tend to be less good early in the model year, quite good in the middle, and even better toward the end of the model year.

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dm200
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Re: New Car: Ever make sense to lease?

Post by dm200 » Thu Nov 02, 2017 3:43 pm

visualguy wrote:
Thu Nov 02, 2017 3:36 pm
dm200 wrote:
Thu Nov 02, 2017 8:28 am
Who (and how) is paying for the added costs if leasing is financially beneficial?
It's not that simple... Manufacturers (such as BMW) subsidize the residual on the lease in many cases, thus making the terms attractive to the customer. There is something in it for the manufacturers - they don't do it because they are nice. The main benefit they get for these decreased margins is increased volume.
They keep tweaking the lease terms to achieve higher profits by hitting the right trade-off between margins and volume. They use sophisticated modeling to adjust the various lease terms on a regular basis for different models and model years. For customers who lease at the right time, this can be advantageous. For example, BMW lease terms tend to be less good early in the model year, quite good in the middle, and even better toward the end of the model year.
I imagine much of this is kept for "internal use". Maybe someone has direct, inside knowledge.

I do know that many larger credit unions ran their own leasing programs, but some (perhaps many) stopped doing them because they ended up losig money on the program (or at least not making a sufficient income). I think the problems they encountered were setting the wrong residual value. Maybe (don't know) they did not get the best deals from the manufacturers/distributors of the vehicles?

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Re: New Car: Ever make sense to lease?

Post by 2m2037 » Fri Nov 03, 2017 4:04 pm

dm200 wrote:
Wed Nov 01, 2017 3:04 pm
I have friends with V6s who spend close to $150/month in gas alone for less miles traveled. Factor in maintenance and depreciation and I think I'll come out way ahead.
How is your low cost of fuel in any way related to a lease? Wouldn;t it be the same for a purchased/owned (possibly financed) car?
My point was that it sometimes makes sense to lease. In my case, it made sense to lease a hybrid vehicle, as opposed to leasing an ICE vehicle or holding on to my outright-owned vehicle. :sharebeer

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Re: New Car: Ever make sense to lease?

Post by 2m2037 » Fri Nov 03, 2017 4:08 pm

visualguy wrote:
Thu Nov 02, 2017 3:36 pm
dm200 wrote:
Thu Nov 02, 2017 8:28 am
Who (and how) is paying for the added costs if leasing is financially beneficial?
It's not that simple... Manufacturers (such as BMW) subsidize the residual on the lease in many cases, thus making the terms attractive to the customer. There is something in it for the manufacturers - they don't do it because they are nice. The main benefit they get for these decreased margins is increased volume.

They keep tweaking the lease terms to achieve higher profits by hitting the right trade-off between margins and volume. They use sophisticated modeling to adjust the various lease terms on a regular basis for different models and model years. For customers who lease at the right time, this can be advantageous. For example, BMW lease terms tend to be less good early in the model year, quite good in the middle, and even better toward the end of the model year.
I agree, they don't do it because they are nice, but they do it because they can. They probably cannot offer the same subsidies on a purchase. As a consumer what the manufacturer gets out of it is irrelevant; you have to decide what works out best for you.

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Re: New Car: Ever make sense to lease?

Post by dm200 » Fri Nov 03, 2017 4:14 pm

imperio wrote:
Fri Nov 03, 2017 4:08 pm
visualguy wrote:
Thu Nov 02, 2017 3:36 pm
dm200 wrote:
Thu Nov 02, 2017 8:28 am
Who (and how) is paying for the added costs if leasing is financially beneficial?
It's not that simple... Manufacturers (such as BMW) subsidize the residual on the lease in many cases, thus making the terms attractive to the customer. There is something in it for the manufacturers - they don't do it because they are nice. The main benefit they get for these decreased margins is increased volume.
They keep tweaking the lease terms to achieve higher profits by hitting the right trade-off between margins and volume. They use sophisticated modeling to adjust the various lease terms on a regular basis for different models and model years. For customers who lease at the right time, this can be advantageous. For example, BMW lease terms tend to be less good early in the model year, quite good in the middle, and even better toward the end of the model year.
I agree, they don't do it because they are nice, but they do it because they can. They probably cannot offer the same subsidies on a purchase. As a consumer what the manufacturer gets out of it is irrelevant; you have to decide what works out best for you.
I wonder if there is any way for the consumer to find out the net after subsidy of a vehicle in a lease to compare apples to apples?

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Re: New Car: Ever make sense to lease?

Post by 6bquick » Fri Nov 03, 2017 10:55 pm

Top99% wrote:
Tue Oct 31, 2017 7:17 am
People have already covered the lease Vs buy angle so I will address the AWD Vs FWD angle. Unless you need to scale steep snow covered hills on a regular basis FWD + winter tires will be fine. If you Google "winter tires Vs AWD" you will find numerous articles on how winter tires make a huge difference. I realize I live where there is no winter weather now but I did learn to drive in Canada and got by just fine on RWD + winter tires.
+100!

I drove a miata thru 8in of snow on a regular basis (apt complex driveway) for two years. The thing was plowing snow the entire way. Never once got stuck. Had i not experienced it myself i'm not sure i'd believe it, but snow tires, not even studded ones, are miracles of modern science. DW and i both drive subarus now, but they still both get snow tires for 5mo out of the year. 1k per car in wheels/tires is worth the exponential increase in all dynamics of vehicle performance in sub 40F temps.

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Re: New Car: Ever make sense to lease?

Post by NYC_Guy » Fri Nov 03, 2017 11:30 pm

Rupert wrote:
Wed Nov 01, 2017 3:49 pm
warner25 wrote:
Tue Oct 31, 2017 6:20 am
I think it's fascinating that consensus here now is that a major technological revolution will wipe out the value of ICE cars within 5-10 years. We just bought a new ICE that I plan to keep for the next 10-20 years, so that's disconcerting, but I also welcome a shift to all self-driving cars as much as anyone. But 10 years ago seemed like peak oil and the end of gasoline as a reasonable source of energy for a car, and now gas prices are still 1/2 of what they were back then, so we'll see... I'm marking this thread to revisit in 2022.
Me too. I won't believe the EV hype until I start seeing EV full-size trucks rolling off the assembly lines. Here in flyover country, every other vehicle on the road is still a truck, and I see maybe one EV a week on the road here. I actually know the guy driving that EV. His name is Phil.
To be clear, it’s not about “EV hype”. I don’t think ICE cars will disappear in 3 to 5 years. My point is different. If you think you may want to buy an EV car in a few years (and you need a new car now), consider a lease of a car with good residual value. That lease may give you a valuable option to move into EV when the major car companies start bringing product to market. From personal experience, EVs are awesome. I ain’t ever going back...

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Re: New Car: Ever make sense to lease?

Post by ad2007 » Tue Mar 13, 2018 11:53 am

eye.surgeon wrote:
Tue Oct 31, 2017 12:40 pm
I'm surprised how little comment there is on a clear advantage for leasing for some people , deducting the lease as a business expense if able. I can and I do. It saves me thousands a year over buying. Often I will buy them at the end of the lease.
Thought you were a surgeon? How are you able to lease a car and allocate the whole amount towards business use?

My accountant told me that since I'm driving the car back and forth from home and offices ect, I have to keep accurate mileage between offices (not home to office or last office to home) and am only allowed to deduct those miles. So the whole lease amount can't be paid by the office.

I was also told I could (since the the owner of the business) make a car lease a benie for my position - but then I still have to pay taxes on the amount the business pays for that lease - as that would fall under my compensation. Too much trouble, so I never bothered.

But I do lease.

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Re: New Car: Ever make sense to lease?

Post by ad2007 » Tue Mar 13, 2018 11:55 am

Jack FFR1846 wrote:
Tue Oct 31, 2017 7:31 am

Part of the reason that leases are not usually favored here is that it's ok to buy a 3 year old Camry and keep it for 15 years, which a lease would never work out for. Ironically, it seems to also be ok to buy a $125k Tesla because.....well.....gotta keep the coal workers in jobs supplying 1/3 of the power generators in the US.
That's really funny about the Tesla

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Re: New Car: Ever make sense to lease?

Post by Watty » Tue Mar 13, 2018 12:27 pm

S&L1940 wrote:
Wed Nov 01, 2017 12:12 pm
How about an area like south Florida with a ton of aging drivers?
Owning a car for 10+ years may be extremely optimistic - forget car longevity, what about driver longevity?
And then there is the driver's ability (meaning mental and physical capability), some of us probably should have been off the road years ago!
Thinking here is a situation where short term, low mileage leases, can make a lot of sense.

And let's hear it for self driving cars - owned or leased - that have automatic turn signals programed in...
Having a leased car is a problem if the owner dies or has to give up driving since that does not automatically end the lease.

With a owned car the car can just be sold if your needs change.

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Re: New Car: Ever make sense to lease?

Post by eye.surgeon » Tue Mar 13, 2018 12:39 pm

ad2007 wrote:
Tue Mar 13, 2018 11:53 am
eye.surgeon wrote:
Tue Oct 31, 2017 12:40 pm
I'm surprised how little comment there is on a clear advantage for leasing for some people , deducting the lease as a business expense if able. I can and I do. It saves me thousands a year over buying. Often I will buy them at the end of the lease.
Thought you were a surgeon? How are you able to lease a car and allocate the whole amount towards business use?

My accountant told me that since I'm driving the car back and forth from home and offices ect, I have to keep accurate mileage between offices (not home to office or last office to home) and am only allowed to deduct those miles. So the whole lease amount can't be paid by the office.

I was also told I could (since the the owner of the business) make a car lease a benie for my position - but then I still have to pay taxes on the amount the business pays for that lease - as that would fall under my compensation. Too much trouble, so I never bothered.

But I do lease.
I have 6 offices, a surgery center, and take call for multiple hospitals. While it is true that miles driven to and from your primary work are not deductible, miles driven from office to office during the day, which I do every day, and miles driven to hospitals responding to on-call duties that are separate from your primary office responsibilities, are deductible. Therefore a significant part of my lease, but not all of it, is deductible. I do pay taxes on the non-work related miles as it is considered compensation from my practice similar to income.

I am not an accountant and I would discuss your specific situation with your accountant.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

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Re: New Car: Ever make sense to lease?

Post by Spirit Rider » Tue Mar 13, 2018 1:13 pm

ThePrince wrote:
Mon Oct 30, 2017 9:12 pm
Never. A car lease is the most expensive form of vehicle ownership.
As in all things in life never say never. In all financial choices there are things that can and have been mis-priced. This is can be true of leases.

It would be better to say in almost all cases it is more expensive to lease than buy. I have purchased five cars in 40 years and not one was lease. In every case, I compared a cash purchase, down payment with a loan and a lease. In all of the cases a cash or loan were the best financial choice and the lease was not.

However, I have helped individuals looking to buy a new car, lease instead. They were cases where a perfect alignment of Waived Acquisition Fees, Capitalized Cost Reductions, Insanely High Residual Percentages and/or Ridiculously low money factors ( .000375).

Bogleheads tend to like absolute mantras which are not really helpful. In addition to yours; you should always max your tax-advantaged retirement accounts (not), all debt is bad (not), Vanguard is always the best choice for your investments (not), etc...

Instead you should evaluate any financial decision based on the individual fact and circumstances at that time.

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Re: New Car: Ever make sense to lease?

Post by Darth Xanadu » Tue Mar 13, 2018 2:02 pm

I haven't seen my particular circumstances posted yet, so I'll just say that for me, leasing was a good option when I took a new job in the suburbs, and didn't have a car as I previously took public transit to work. I didn't know how the gig would turn out, and so having flexibility to end the car payments after 2 years was a hedge on my part.

I ended up staying at the job and buying out the lease, so it likely cost me a bit more than had I just negotiated the purchase up front but I needed to pay for the option.
"A courageous teacher, failure is."

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Re: New Car: Ever make sense to lease?

Post by Loik098 » Tue Mar 13, 2018 2:39 pm

Rupert wrote:
Wed Nov 01, 2017 3:49 pm
warner25 wrote:
Tue Oct 31, 2017 6:20 am
I think it's fascinating that consensus here now is that a major technological revolution will wipe out the value of ICE cars within 5-10 years. We just bought a new ICE that I plan to keep for the next 10-20 years, so that's disconcerting, but I also welcome a shift to all self-driving cars as much as anyone. But 10 years ago seemed like peak oil and the end of gasoline as a reasonable source of energy for a car, and now gas prices are still 1/2 of what they were back then, so we'll see... I'm marking this thread to revisit in 2022.
Me too. I won't believe the EV hype until I start seeing EV full-size trucks rolling off the assembly lines. Here in flyover country, every other vehicle on the road is still a truck, and I see maybe one EV a week on the road here. I actually know the guy driving that EV. His name is Phil.
+1

Also don't get the EV talk around here. Don't care how many innovations are coming....gas stations aren't going to completely disappear in 10 years. As much as companies like GM (are incentivized to) talk about going all-electric, the list of top 20 cars sold in 2017 included exactly ZERO EVs. Once an EV cracks the top 20 list, then maybe I'll listen to the "hype" as that means that consumer demand might be starting to match industry expectations. But I don't see that happening within even the next 5 years.....not when the top cars sold are trucks and SUVs.

Also, why would I care what my ICE is worth 10-20 years from now if I'm keeping it until it dies?

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Re: New Car: Ever make sense to lease?

Post by Boglegrappler » Tue Mar 13, 2018 2:47 pm

I've never leased a car yet, but have mildly considered it based on the idea that in three years or so I might want something different or have different circumstances.

It occurs to me that there could be an unfilled niche in the market for people like me. I'd be willing to do a deal where I paid up front (as though I were purchasing the car), but only for the three years. That way I would avoid the charge of renting someone else's capital instead of using my own, and the rest of the terms about mileage and condition could be roughly the same.

I doubt there are enough of me to make a decent market for that as opposed to staying with the current structure.

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Re: New Car: Ever make sense to lease?

Post by mountain-lion » Tue Mar 13, 2018 3:12 pm

Boglegrappler wrote:
Tue Mar 13, 2018 2:47 pm
It occurs to me that there could be an unfilled niche in the market for people like me. I'd be willing to do a deal where I paid up front (as though I were purchasing the car), but only for the three years. That way I would avoid the charge of renting someone else's capital instead of using my own, and the rest of the terms about mileage and condition could be roughly the same.
Single payment leases are not uncommon, and are typically less expensive than normal leases--but more expensive than buying the car outright.

https://www.cartelligent.com/blog/when- ... make-sense

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Re: New Car: Ever make sense to lease?

Post by Dendritic Tree » Tue Mar 13, 2018 3:15 pm

I agree that leasing an EV may make sense, if only because battery and electric motor technology is so rapidly evolving that an EV is much more rapidly obsolete compared to a similar ICE vehicle. I leased a non-Tesla EV relatively cheaply for 3 years ($300/mo for a fully-loaded Mercedes EV). The car was wonderful to drive, but the range was utterly outmoded by the end of the lease now that the newer generation of EVs has 3x the range.

This is all predicated on the idea that there’s a lot of value in driving an EV for you. Of course in absolute terms buying the Boglehead standard used Toyota will have a lower total cost of ownership (although I didn’t pay a cent for fuel or electricity for my EV due to the wide availability of free public charging, and EVs require essentially zero maintenance beyond tire rotation). I’m a total convert to the joy of electric driving, but I freely acknowledge that there is no joy in driving for some people, just something that people have to deal with to get from point A to B. The 5-year old beige Camry is perfect for those people.

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Re: New Car: Ever make sense to lease?

Post by wrongfunds » Tue Mar 13, 2018 3:20 pm

Once you reach a point in life where you no longer want to do any unplanned maintenance such as new tires or new brakes or new battery AND your driving mileage has gone down significantly, I can see how somebody would just start doing the leases for the rest of their life. I don't think I will ever reach there myself but I understand perfectly why some of my friends have started leasing their vehicles. Mind you, these are all the guys who like me have kept their vehicles for decade or more in the past and were always purchasing purchasing sensible Japanese cars.

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Re: New Car: Ever make sense to lease?

Post by madbrain » Tue Mar 13, 2018 3:32 pm

wrongfunds wrote:
Tue Mar 13, 2018 3:20 pm
Once you reach a point in life where you no longer want to do any unplanned maintenance such as new tires or new brakes or new battery AND your driving mileage has gone down significantly, I can see how somebody would just start doing the leases for the rest of their life. I don't think I will ever reach there myself but I understand perfectly why some of my friends have started leasing their vehicles. Mind you, these are all the guys who like me have kept their vehicles for decade or more in the past and were always purchasing purchasing sensible Japanese cars.
Even with mileage well below the average (8000 miles a year), I still had to replace all tires on a 2012 Leaf I leased for 3 years. The state of the roads around here is just terrible and takes a huge toll on tires. Brakes had to be fixed as well, which I consider a design issue with the Leaf.

I also had to replace the 12V starter battery recently on my 2015 Volt at 2.5 years. Not sure why. This never happened so early on any car before. This one is purchased, not leased. I also had to replace all tires already as well at roughly the same time.

Maintenance still has to be done regardless, even on a lease, or you will be penalized when you return the car.

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Re: New Car: Ever make sense to lease?

Post by mouses » Tue Mar 13, 2018 3:48 pm

Do I understand correctly that if you lease a car, you're responsible for the cost for all the maintenance and repairs and insurance just as if you owned it, plus the lease cost, and at the end of the lease you have zero equity?

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Re: New Car: Ever make sense to lease?

Post by ssquared87 » Tue Mar 13, 2018 3:58 pm

mouses wrote:
Tue Mar 13, 2018 3:48 pm
Do I understand correctly that if you lease a car, you're responsible for the cost for all the maintenance and repairs and insurance just as if you owned it, plus the lease cost, and at the end of the lease you have zero equity?
Depends on the car. Most cars include a 3yr/36k mile bumper to bumper warranty. Some cars are 4yrs/48k miles. Thats for repairs.

Some brands (BMW) include maintenance as well (oil changes, brake fluid etc).

The warranty/maintenance plans are usually the same whether you chose to buy or lease the vehicle

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Re: New Car: Ever make sense to lease?

Post by Spirit Rider » Tue Mar 13, 2018 3:59 pm

mouses wrote:
Tue Mar 13, 2018 3:48 pm
Do I understand correctly that if you lease a car, you're responsible for the cost for all the maintenance and repairs and insurance just as if you owned it, plus the lease cost, and at the end of the lease you have zero equity?
Yes, but... Generally, leasing is just a form of alternate financing.

Confusing the issue is that some the brands with higher leasing percentages have free maintenance programs. However, this applies whether you purchase outright or lease.

Further complicating the issue is some brands have offered free maintenance as a lease promotion.

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Re: New Car: Ever make sense to lease?

Post by DC3509 » Tue Mar 13, 2018 4:01 pm

mouses wrote:
Tue Mar 13, 2018 3:48 pm
Do I understand correctly that if you lease a car, you're responsible for the cost for all the maintenance and repairs and insurance just as if you owned it, plus the lease cost, and at the end of the lease you have zero equity?
No. Leased cars are always new cars and covered by warranties for most major items. You can also add in other maintenance/repair plans to cover the costs of things not covered by the warranty. There are debates on leasing forums whether these are good deals or not -- probably depends on the car, etc. But if you do buy these plans, you know your entire cost of the car up front.

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