Triple-H

I have never leased a car so I have no experience.

I have a deposit down on an '02 S2. I'm planing to put 20K down in cash and then take out a car loan for the balance.

Is there any advantage to leasing a car when you know up front that you will be keeping it?

I'm not so much interested in a lower monthly payment I'm interested in the lowest overall cost.

Thanks!

chroot

Don't EVER lease if you can purchase.

Leasing only has one purpose: to lower monthly payments. Leasing is a fancy term for 'renting.' You have to give the car back, in the same condition, in a few years. The money you pay each month goes out the window.

- Warren

chroot

An addendum: the lowest overall cost is always to purchase in full, in cash.

You can do almost as well as full-in-cash by paying a healthy down payment and making significant monthly payments -- the faster you pay it off, the less interest you will ultimately pay.

With 20k down and a good 1k/mo. monthly payment on the remainder, you'll pay off your car in something like 12 months. With a one-year 5% APR loan you'll end up paying something like $600 in interest.

- Warren

Infidel

I used to think so, but that isn't neccessarily true. Leasing can be cheaper, but only under certain limited conditions. Here are the facts:

- You only pay sales tax on your payment, NOT the overal price of the car
- You can typically get an effective APR on a lease that is at least 2 points lower than typical financing
- You can enter a lease with almost 0 down
- You don't own the car, but you have the option to buy the car at lease end, so if you plan on doing that anyway, the question is moot.

The real drawbacks are:

- You are locked in on your monthly payment, and you can't pay it down faster as in traditional financing
- Since you're paying sales tax on each payment, you are being taxed on the principal + interest

The best way to get a lease is to go for the term that has the lowest Money Factor (usually 36mo), and negotiate the residual value as LOW as possible. You want a low residual because you end up paying less in interest and the cost of buying the car at lease end will be less.

You usually can negotiate your lease payment UP to reduce your residual.

Leasing CAN be cheaper than financing, but only when you can't pay down a traditional loan faster than the minimum payments, and even then only for the first 2-3 years (which is fine, get a shorter term lease, then buy it out later).

Since you have 20k in your pocket, in your situation you will most likely be better off just financing. The only way a lease will help you is by letting you put very little down and investing the rest of your cash into a mutual fund that's making more than the APR that you're paying out on your lease. However, considering this market, you may not want to do that.

Triple-H

Thanks guys!
I suspected with my 20k down, the best way was to go with a traditional new car loan that allows me to make payments plus get in extra principal payments when I can.
I drove a CRX-Si for 12 years; the S2000 is a big purchase for me. Where others may be contemplating a Porsche, an Audi (so much for taste), a BMW, an Acura, etc., I don't have their financial freedoms.

s2kskibum

best of luck with your purchase. Having 20K down is impressive - don't cut yourself short!

norice

What he said. Basically, if you really know what you are doing you can sometimes negotiate a lease deal that will be better than financing.

Dealers love leases because there are a multitude of ways in which they can bamboozle a customer. How many people really know what 'money factor' means, or what a reasonable residual value for a particular model of car is going to be. And then there are the bogus closing or bank or acquisition fees tacked on. What is worse, most people leasing do not realise that they can still negotiate purchase price - most people leasing typically pay MSRP.

Given the massive amounts of money Americans spend on cars and trucks it is amazing how clueless they are about the entire process. Look at all these idiots taking advantage of these wonderful sounding 0% financing deals. Do these people not realise that this financing is in lieu of manufacturer rebates and that the amount of the rebate is typically higher than the amount of interest they would pay if they got a standard loan? Many of the trucks and SUVs that consumers are now rushing to buy have had generous rebates in place for years.

chroot

In my opinion, almost all of the car-financing processes have been put in place to confuse the consumer to the point of frustration and complaisance. If they throw enough jargon at you for long enough, you'll finally just believe it, give up, and pay out.

I'll just stick with my simple purchase concept:

1) Buy, don't lease
2) Negotiate low purchase price and low APR
3) Pay it off as quickly as you can reasonably afford

Seems pretty simple compared to all the money-factor and residual mumbo jumbo... maybe next time I'll bring a tax attorney to the dealership.

- Warren

boiler

Wall Street will tell you if it appreciates in value, buy it. If it depreciates, lease it.

mingster

amen. thank god for wall street