Win or Lose (Lease / Rent vs Buy)

[Grimley1968]

The only way I've ever seen where a lease is a good option is for companies that need fleet vehicles for employees, and the company would rather not own those vehicles. That makes good sense to me.

For personal vehicles the math definitely favors ownership, whether it's financed or bought with cash. It's a no-brainer to me, but then I've never bought a brand new car in my life. When I do, though, someday, I want ownership of that vehicle after the note is paid.

 

[21stamps]

The only way I've ever seen where a lease is a good option is for companies that need fleet vehicles for employees, and the company would rather not own those vehicles. That makes good sense to me.

For personal vehicles the math definitely favors ownership, whether it's financed or bought with cash. It's a no-brainer to me, but then I've never bought a brand new car in my life. When I do, though, someday, I want ownership of that vehicle after the note is paid.

After it is paid. That's why people should buy. To someday not have a payment on that car. Would you buy a brand new car and trade it in every 2-3 years?

 

[RustySpork]

After it is paid. That's why people should buy. To someday not have a payment on that car. Would you buy a brand new car and trade it in every 2-3 years?

I suppose the only real right answer here is because we can!

 

[21stamps]

That's the thing, I haven't wasted any money. I can't really comprehend how you don't see that. What if you wanted a Bugatti Veyron (I know, bad example since it's out of production) but you could only afford a Ford Fiesta, would you settle for a Fiesta, or would you find a way to leverage the assets you have to build better assets until you were able to achieve your goal of owning a Bugatti? So what if the net cost is a few bucks, the long term benefit grossly outweighs any small amount of change you lose up front.



Who says that's my only car, and that I'm not building up my next asset? You'll note that all of my cars were under warranty the whole time.



Sales tax is literally minuscule in the grand scheme of things, you spend more in two nights at a Deluxe resort. I'm not sure why you're so focused on that.

Right, it's called saving and investing. That's how you could get what you wanted.
It worked for you, that's great. It would have worked with a higher result the other way, just for future reference.

What I spend on a vacation is something for me..sales tax and interest is not something for me..it's something that I will definitely minimize if have an alternative.

Budgeting a certain amount for a vacation doesn't mean that you should just spend any amount of money in daily life because "well, on vacation".lol. No thanks. I spend where and when I see fit. I throw enough money away on daily Starbucks..that doesn't mean that I should eat at Panera everyday as well.

I suppose the only real right answer here is because we can!

Ok. Have fun with that.

 

[DizArielFan]

It depends sometimes, for example, I would only lease a BMW, since I would never keep it past 3 years. A honda accord? With a dependable manual transmission, that I would finance.

 

[Dad 2 M & M]

Why tie up money that could be earning more elsewhere?

Any reason why you never pointed out, being a finance guy, you could invest the difference in the lease payment and car note? Over the term, and point out what it would be worth, with compound interest? And the taxes.....ummmm....they ARE embedded in a lease.....got to have a new car every 2 - 3 years? Okay, you are both going to lose.....unless, somehow, a car appreciates....

 

[Dad 2 M & M]

It depends sometimes, for example, I would only lease a BMW, since I would never keep it past 3 years. A honda accord? With a dependable manual transmission, that I would finance.

well done

 

[RustySpork]

Any reason why you never pointed out, being a finance guy, you could invest the difference in the lease payment and car note? Over the term, and point out what it would be worth, with compound interest? And the taxes.....ummmm....they ARE embedded in a lease.....got to have a new car every 2 - 3 years? Okay, you are both going to lose.....unless, somehow, a car appreciates....

She did point that out, and I poked fun at it saying she would just spend it at Disney.

So a Bugatti Veyron appreciates? I don't know, as I've never heard of that model, so I assume it's a luxury car.... I'm asking, it APPRECIATES?

Yes.

And, didn't hear you mention anything other than trading in your car...and of course, always coming out better. So, you go to the dealer, get max $$$ for your trade in, and then pay the minimum $$$ for the new car, right? Okay, let's go with paying the minimum for the new car....and in the same deal, the dealer is paying you maximum for your trade in? Both happen in your deal?

You don't come out "better". The only way to come out ahead is to take a bus or walk everywhere you go. Yes, you can get max $$$ for a trade, and pay minimum $$$ for the new car.

If you know a dealer that gives you max for your trade in, and simultaneously allows you to purchase at a minimum...is it the same dealer that helped you every time? Or different dealers?

I shop dealers, and don't use the same one unless they make the better offer.

Miffed I didn't see you mention the BEST way to have any chance of coming out ahead: You SELL your 36 month old car (uhhh, of course your string of cars appreciated, not just one during those multiple 36 month periods) for max $$$ to someone in the open market. That IS the way to get max $$$, not from some dealer. Then go to the dealer and work out that minimum deal.

I did mention selling though, about one page ago. Cars always depreciate until you get into the limited / collector class, and even then they lose before they gain.

You quote "So what if the net cost is a few bucks, the long term benefit grossly outweighs any small amount of change you lose up front." REALLY?? How is there a net cost? Net means after all is considered....Long term benefit with a net cost? A net cost is a cost, not a benefit. Blew it with one word "net"!! And you don't "lose change" with any benefit, in your case "long term benefit"......guess that sounded clever

There is a net cost due to the immediate depreciation from driving the car off the lot, taxes, and interest; but if you need to have a car anyway it's an acceptable loss since you're gaining a car and some amount of equity to roll forward (or an asset to sell). @21stamps seems to think it's a total loss, but it isn't.

Fact of the matter is, I would never lease, and if I was buying a new car, I would, ABSOLUTELY finance for at least 3 years, maybe 4. At least one of you pointed out $30k at 2.4% over 36 months = less than $1,200 interest. My guess is anyone with 700 credit score could do better than 2.4%.....

Right.

Love that "better than I deserve guy".....saying to pay cash? Uh. okay....I have no discipline and I have a paid off car? I heard that fellow advise someone to pay off their mortgage with their 401K....because he would not borrow money to invest in a 401K, so it just made sense to pay off the loan?? Really, which would be worth more at retirement? A house, or a 401k (even investing passively in Index funds)?

Funding a mortgage with a 401k? Thanks but NO THANKS!

 

[Lets Respect]

I haven't read the whole thread yet, but put me in the lease camp. I stay well under the miles so that's not an issue. I like always having a new car. Most importantly, I cannot stand when those big repair bills start rolling in around year 5 and the car becomes a money pit. It also gives me flexibility to upgrade or downgrade as I wish every three years. I'll never buy again

 

[Dad 2 M & M]

delete

 

[RustySpork]

Didn't realize you were over-simplifying to that degree, as using the word net is what threw me....net happens at the bottom line (it is the bottom line), a transaction that had a net cost failed....unless going into the transaction one knew it would be a cost, and thus reduced to cost as much as possible to result in a lower net cost.

By missing a Bugati as being an appreciable asset ...... with that being the case, I guess the @21stamps Ford Fiesta for a daily driver vs. transactions with intent to climb higher into the realm of dream car made perfect sense. And wasn't an uhhh "apples to oranges" comparison......I just hit the corporate staff meeting bingo there....also had "it is what it is", "drill down", transparency", and leverage" diagonally on my card!!

Yeah, that's a poorly chosen word there. It's just not easy to explain to someone who doesn't understand basic amortization and equity principles that a loss of $5k in equity on a $20k asset while keeping the asset that still has $15k in value at the end of the term is much better than taking a total loss of $15k.

 

[Dad 2 M & M]

I haven't read the whole thread yet, but put me in the lease camp. I stay well under the miles so that's not an issue. I like always having a new car. Most importantly, I cannot stand when those big repair bills start rolling in around year 5 and the car becomes a money pit. It also gives me flexibility to upgrade or downgrade as I wish every three years. I'll never buy again

Psycho factor of safety, reliability if often ignored when comparing $$$.

Not big on cars here, and minimize purchase as much as possible. I since my mid 30s, I have made it a point to own two autos, with one being a truck. Just blew up my '97 Ranger at well above 400,000 miles, and "replaced" it with my my eldest M's old car...she needed a new more reliable one. So now I'm driving a 2002 Jeep (as my "truck") with 250K + and a 2000 Honda with 375K+ miles. I have two autos in case, and it is ALWAYS likely, one has broken down. That way I have something to drive until I've made repairs on the other.

I'd rather break down on the side of the road than buy a new car, but for my wife, or either M & M, I have to provide/assist in safe, reliable etc.....no way is it OKAY to risk their safety
So I get your reasons for leasing....

Well done

 

[Dad 2 M & M]

***edit***delete

 

[21stamps]

Any reason why you never pointed out, being a finance guy, you could invest the difference in the lease payment and car note? Over the term, and point out what it would be worth, with compound interest? And the taxes.....ummmm....they ARE embedded in a lease.....got to have a new car every 2 - 3 years? Okay, you are both going to lose.....unless, somehow, a car appreciates....

So a Bugatti Veyron appreciates? I don't know, as I've never heard of that model, so I assume it's a luxury car.... I'm asking, it APPRECIATES? Leverage Assets? Build better Assets? A car is an asset? Like wealth building asset? Yeah......Pay the lease payment for three years, save the difference, and put that toward the Bugatti?

And, didn't hear you mention anything other than trading in your car...and of course, always coming out better. So, you go to the dealer, get max $$$ for your trade in, and then pay the minimum $$$ for the new car, right? Okay, let's go with paying the minimum for the new car....and in the same deal, the dealer is paying you maximum for your trade in? Both happen in your deal?

If you know a dealer that gives you max for your trade in, and simultaneously allows you to purchase at a minimum...is it the same dealer that helped you every time? Or different dealers?

Miffed I didn't see you mention the BEST way to have any chance of coming out ahead: You SELL your 36 month old car (uhhh, of course your string of cars appreciated, not just one during those multiple 36 month periods) for max $$$ to someone in the open market. That IS the way to get max $$$, not from some dealer. Then go to the dealer and work out that minimum deal.

You quote "So what if the net cost is a few bucks, the long term benefit grossly outweighs any small amount of change you lose up front." REALLY?? How is there a net cost? Net means after all is considered....Long term benefit with a net cost? A net cost is a cost, not

Didn't realize you were over-simplifying to that degree, as using the word net is what threw me....net happens at the bottom line (it is the bottom line), a transaction that had a net cost failed....unless going into the transaction one knew it would be a cost, and thus reduced to cost as much as possible
By missing a Bugati as being an appreciable asset ...... with that being the case, I guess the @21stamps Ford Fiesta for a daily driver vs. transactions with intent to climb higher into the realm of dream car made perfect sense. And wasn't an uhhh "apples to oranges" comparison......I just hit the corporate staff meeting bingo there....also had "it is what it is", "drill down", transparency", and leverage" diagonally on my card!!

You don't come out "better". The only way to come out ahead is to take a bus or walk everywhere you go.

Okay, I guess that is the only way....

I just checked out that Bugati Vey thingy...it does look like a cool car...

It's easy to attempt to look at things numerate and equally easy to miss the psych factor in auto purchases. Again, I wouldn't lease, but for those who have to have a new car every 2 - 3 years, there is more than a numate value to the purchase. Safer, more reliable, I have the newer cool car, the rush of the purchase, etc.....

Same with working up to the Bugati thingy (assuming that is the ceiling), there is a psycho value in place, and the person's utility (economic utility) comes into play.

Dollars, cents, Present Value, Future Value, payment, interest can all be used in a financial discussion......

Getting way off topic (if you want to call this thread topic).....This thread is a derivative (thank you for moving/creating it) of another thread littered with zingers from the "better than I deserve guy". That guy gives psychological advice with uhhh financial tidbits sprinkled in...and calms stressed people. By the way, I hope everyone knows many of the calls come in are "internal", so that fellow can act as if he's fielding a call.

In our current times, speaking just in a financial sense, it is STUPID to pay cash for an auto or home when money is currently FREE ..... everyone gets mixed up in depreciation, tax, etc and loses sight how FREE money is now with an interest rate that doesn't outpace even a low risk muni or money mkt, much less a mod risk investment.

Been in banking too long here, way TOOOO long. Last, way of tangent here...

A savings account.... a SAVINGS account....yes everyone, do it!!! Park your money at my bank so I can use it!!! Why does anyone need a SAVINGS ACCOUNT? They'd spend it if it was in their checking account? YES

Banks know that, we used to REALLY push savings accounts back in the day.....

I'm confused. I don't know where the Ford Fiesta vs Veyron comparisons came from. I'm not even going there because it is such an out of the norm example. That's one of the hottest cars in the world and very few people own them. Again, I don't know why that would be a point of discussion.

As for investing the difference, I did mention that. More than once.
Leasing is never going to rank high in a "smart financial decision" compared to buying a car and keeping it for several years.
BUT- if you are a 3 year trade person, then it is the wiser decision.
Your comment about taxes- taxes on a lease are not the same as a purchase. You only pay taxes on the difference between selling price and the pre set pay off amount at the end of the lease. Not the entire selling price as in a purchase. They aren't just "rolled in to the payment", you know about them upfront, and the best thing to do is pay them upfront.

Bottom line- people trick themselves into thinking "I have a little equity! I came out ahead!" In reality though, had they let that difference in taxes and payment work for them over that 3 year time period.. then they actual would have come out ahead. There's no reason to take a 36 month loan out and trade your car within that time.
This is only buy vs lease in a 2-3 year trade scenario...even 4.

 

[Laketravis]

In our current times, speaking just in a financial sense, it is STUPID to pay cash for an auto or home when money is currently FREE ......

That pretty much sums it up.

 

[RustySpork]

I'm confused. I don't know where the Ford Fiesta vs Veyron comparisons came from. I'm not even going there because it is such an out of the norm example. That's one of the hottest cars in the world and very few people own them. Again, I don't know why that would be a point of discussion.

As for investing the difference, I did mention that. More than once.
Leasing is never going to rank high in a "smart financial decision" compared to buying a car and keeping it for several years.
BUT- if you are a 3 year trade person, then it is the wiser decision.
Your comment about taxes- taxes on a lease are not the same as a purchase. You only pay taxes on the difference between selling price and the pre set pay off amount at the end of the lease. Not the entire selling price as in a purchase. They aren't just "rolled in to the payment", you know about them upfront, and the best thing to do is pay them upfront.

Bottom line- people trick themselves into thinking "I have a little equity! I came out ahead!" In reality though, had they let that difference in taxes and payment work for them over that 3 year time period.. then they actual would have come out ahead. There's no reason to take a 36 month loan out and trade your car within that time.
This is only buy vs lease in a 2-3 year trade scenario...even 4.

I've already proven that notion wrong six ways from Sunday. I'm sorry to say this and please don't be offended, but you really don't understand the basic principles of finance and equity very well for someone who works in finance. There is simply no mathematical equation to come out ahead by lighting your money on fire.

 

[Dad 2 M & M]

I'm confused. I don't know where the Ford Fiesta vs Veyron comparisons came from. I'm not even going there because it is such an out of the norm example. That's one of the hottest cars in the world and very few people own them. Again, I don't know why that would be a point of discussion.

As for investing the difference, I did mention that. More than once.
Leasing is never going to rank high in a "smart financial decision" compared to buying a car and keeping it for several years.
BUT- if you are a 3 year trade person, then it is the wiser decision.
Your comment about taxes- taxes on a lease are not the same as a purchase. You only pay taxes on the difference between selling price and the pre set pay off amount at the end of the lease. Not the entire selling price as in a purchase. They aren't just "rolled in to the payment", you know about them upfront, and the best thing to do is pay them upfront.

Bottom line- people trick themselves into thinking "I have a little equity! I came out ahead!" In reality though, had they let that difference in taxes and payment work for them over that 3 year time period.. then they actual would have come out ahead. There's no reason to take a 36 month loan out and trade your car within that time.
This is only buy vs lease in a 2-3 year trade scenario...even 4.

I really wasn't making any point other than the thread had went on multiple tangents....the Bugati and Ford Fiesta are somewhere in this thread, and had little to do with each other....that was the point. As is the "point" in comparing a lease with a purchase with the intent to trade up every 2 -3 years. There is little to compare as both work for some and are seen as mindless to others.....

Same with comparing taxes....they are NOT the same on a lease as a purchase...agreed...again, same point as to the comparison of lease to purchase...no comparison IS the point.

By the way, I get in the lease you are not taxed on what you don't purchase...over-simplified you pay as you go, and tax is collected on the residual sale when THAT purchase happens....I get that...

I agree with your last point, as the "comparison" was a 3 year lease vs buy and trade up......I do say two different financial "products" at work here, and little to compare. A step further to point out the lease was for a daily driver and the purchase was for intent of trade up to a dream that would not be used as a daily driver....

Peace

 

[Dad 2 M & M]

That pretty much sums it up.

Right on....don't post on this thread again, please...I've been on this blog for a while now, and have dreamed of creating a thread that makes it to 100 comments....I only have 1 to this day (NCAA Football a few years back).....this thread is at 80....oops, I made it 81 and it can't make it to 100....dah hee HEE

 

[21stamps]

I really wasn't making any point other than the thread had went on multiple tangents....the Bugati and Ford Fiesta are somewhere in this thread, and had little to do with each other....that was the point. As is the "point" in comparing a lease with a purchase with the intent to trade up every 2 -3 years. There is little to compare as both work for some and are seen as mindless to others.....

Same with comparing taxes....they are NOT the same on a lease as a purchase...agreed...again, same point as to the comparison of lease to purchase...no comparison IS the point.

By the way, I get in the lease you are not taxed on what you don't purchase...over-simplified you pay as you go, and tax is collected on the residual sale when THAT purchase happens....I get that...

I agree with your last point, as the "comparison" was a 3 year lease vs buy and trade up......I do say two different financial "products" at work here, and little to compare. A step further to point out the lease was for a daily driver and the purchase was for intent of trade up to a dream that would not be used as a daily driver....

Peace

My point is this- you can achieve that dream without tying up your money in a loan that you are paying interest on, take interest out- still tying up money that could be earning for you elsewhere. That's where people mislead themselves.

Peace

 

[Laketravis]

Every time I walk into a new car showroom I'm amazed at how many financial geniuses work there.