s.hasan546

That doesn't apply to everyones situation. 2 of my cars are financed and 1 is leased right now. I can afford to pay them off in cash but WHY would i? Im paying 1.54% for 60 months on 1 car loan and 2.9% for 60 months on another. I make roughly 9% on my money right now. Why would i pay it upfront when rates are so cheap?

Leasing makes sense for LOTS of people. I leased my GTI b.c i knew i wouldn't drive more than 12k/year and i wanted to replace it every 3-4 years. It was $175/month less than a brand new gti. Im MUCH better off in leasing it for 36 months than financing it and selling it in 36 months. Buying it in cash and selling it in 36 months is just as bad. At least with a closed ended lease you cap your depreciation. I know my GTI will be worth less than what the residual value they gave me. Also when you lease you ONLY pay tax on the depreciation. So if you buy a car and sell it in 36 months your shafted out of the 100% of the taxes.

CERTAIN companies (BMW is the perfect example) lease amazingly well from jacked up residual values.
Also your not locked into a lease these days. Swapalease and leasetrader made it pretty simple to get out of.

Anrosphynx

I think your numbers are out of wack. 9% return on money is extraordinary. You won't find many people that are getting that in conventional investments. If I put my money in the bank, i get .1 percent interest. CDs are 1 percent. MOST people are not getting 9 percent, so although this may work for you, it does not work for the vast majority of people.

Leasing does NOT make sense for alot of people. Although most leases are 3-4 years, the average age of a car on the road is over 10 years. This means that people tend to keep cars for a long period of time. By having to turn in your car every 3-4 years, you are turning it in just as your depreciation is leveling off. Further, its at this 3-4 year mark where most people are starting to have equity in their cars (if they buy).

Leasing only truly makes sense for people that can use leases for tax purposes. For those that are able to fully utilize the tax benefit, then yes, leases makes sense. For the vast majority of the public, they do not.

As another poster just said, typically leases are ways for people that cannot afford a car, to get into a car that they would not be able to finance and purchase. Power to people that do that, but in my opinion, these people would have been better off purchasing a slightly used car and driving it for a longer period of time. Status and perception make people do stupid things though.

QUIKAG

I've paid cash for my last several vehicles, but I leased the CTS-V. Why? Huge lease promotions, sales tax credits, and other incentives made the lease payment so cheap (relatively speaking) that it made sense to lease versus buy outright. I got a 36 month 15k/mile year lease and I'm going to beat the crap of this car (mechanically), have a blast with it, and return it with less money out of pocket than buying one and riding the depreciation curve for 3 years.

Was it my cheapest option for a daily driver? No, but it will be one of the most fun daily drivers I can think of and the payment is a neglible amount to me.

There is no right or wrong answer to leasing, financing, or paying cash. There are a hundred variables that go into the equation and it's up to the individual to run the numbers, weigh them against their priorities, and make the right decision that works best for them.

Ludedude

I think your numbers are out of wack. 9% return on money is extraordinary. You won't find many people that are getting that in conventional investments. If I put my money in the bank, i get .1 percent interest. CDs are 1 percent. MOST people are not getting 9 percent, so although this may work for you, it does not work for the vast majority of people.
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You're doing it wrong. I'm just sayin'

Anrosphynx

I think your numbers are out of wack. 9% return on money is extraordinary. You won't find many people that are getting that in conventional investments. If I put my money in the bank, i get .1 percent interest. CDs are 1 percent. MOST people are not getting 9 percent, so although this may work for you, it does not work for the vast majority of people.
[/quote]

You're doing it wrong. I'm just sayin'
[/quote]

Unlike the other poster, i am not going to brag about my return on investments. I am very happy with my investments.
However, what i am trying to illustrate is that (in my opinion) MOST people are not getting this type of rate of return. If you look at conventional investment vehicles, they are not anywhere close to 9 percent rate of return.

smurf2k

Just because you write the check once (at purchase), does not mean you are not incurring cost monthly.

If you buy at 30k with cash and sell for 10k in cash after 5 years, you have effectively written a 333$ check per month.

In accounting and in business, it's written off monthly as depreciation.

How many here have kept cars for 5+, 7+, 10+ years? not I ......

Jdrum1

It’s psychological for me; it’s easier for me to write one big check than a small one every month. It also ensures that I don’t get myself into a situation I can’t afford in the long term; if I can’t pay cash for it, I can’t afford it. I also like the gratification of paying cash (like I did for my s2k).

I know I’m not the norm, but I do buy cars with the intention of driving them for many years.

How many American get themselves into trouble because they buy more car than they can afford? How many get because they saved and paid cash for their car?

s.hasan546

when you use words like "typically" you make it seems like its the norm that a majority of people who lease can't afford their car. i think its the other way around. I think most people can afford the car easily. They just choose the better "financial" decision within their criteria. Most of the time leasing a car has stricter credit standards (bmw) than financing. BMW does a majority of their sales (60%) i believe in leases. So your telling me all these people can't afford their cars? BMWFS has taken some hits on overvalued residuals but they have a pretty good track record against defaults.

and if you think investments mean .1 in a checking or 1 percent in a CD you need some help with your investments.

Every investment that can make you some money will have some risk associated with it. But their are conservative funds out there that will net you 3-5%. New car loans can be had for damn near 1.5%. Rates will never be this low. In todays market, financing is the way to go for the financially savvy.

s.hasan546

Exactly. People need to stop generalizing each option as either "you can't afford it" or "this is for dumbasses; etc".
There are reasons why these methods exist.

VTECorona

If you lease, make sure you are 110% sure you will enjoy the car for the life of the lease and that your mileage will stay within your allowable range. I just got out of a bad situation with a lease (due to unexpected life events) that ended up costing me thousands to get out of. Like someone said above, you are stuck with that vehicle for the life of the lease, and stuck to its terms. Some lease companies will only let the originating/selling dealer purchase/trade-in it (Ford) so you cannot even trade it to a different dealer or sell it privately and payout the lease. I will never, ever, lease a car again unless I have a DD and the lease is simply a weekend\play car OR if I plan on buying the car at the end.