Lease Vs. Purchase
05-09-13, 07:36 AM
#16
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I bought my first Lexus last Tuesday. Actually, I leased my first Lexus last Tuesday. I traded a 2012 Mustang GT which I was upside down on, due to the fact I only had it one year. Also, the car I traded on it, BMW 550i, had negative equity too which was added to the loan. You see I am always trading cars for one reason or another, I just get bored with cars too easily. Yet, I do own a '00 Toyota Tundra and a '05 Sequoia. So the third car never gets to stick around long!
Since I rarely keep my third car longer than 2 years and I had tons of negative equity, I decided leasing was best FOR ME. I have leased before, a Maxima and a Z-4, the both worked out great, but I did trade the Maxima after 9 months! Hey, what can I say!
I've listened to Dave Ramsey on a number of occasions. He definitely gives out good and sound financial advice, but you will be sacraficing ALOT over the duration of your life. His way of doing things is not for me, too much emphasis on sacraficing during your youthful productive years to only have loads of money when you're old and retired. Sorry, but I want to enjoy the journey all the way to the end! In my journey I like to experience as many different nice cars as I can afford. You have to decide on your journey what you enjoy and DO IT! For me to drive the same car/truck and only that for 10-15 yrs just ain't gonna happen...that to me is BORING, BORING, BORING!!! Fortunately, for me I am blessed enough to do this...Thank God!!!
Loving the GS 350 by the way! Even though it sits in the garage 80-90% of the week. I've yet to read what the forum policy is on dealer recommendations, so I want here. If you PM me I'll tell you my deal. They really deserve a "shout-out".
Since I rarely keep my third car longer than 2 years and I had tons of negative equity, I decided leasing was best FOR ME. I have leased before, a Maxima and a Z-4, the both worked out great, but I did trade the Maxima after 9 months! Hey, what can I say!
I've listened to Dave Ramsey on a number of occasions. He definitely gives out good and sound financial advice, but you will be sacraficing ALOT over the duration of your life. His way of doing things is not for me, too much emphasis on sacraficing during your youthful productive years to only have loads of money when you're old and retired. Sorry, but I want to enjoy the journey all the way to the end! In my journey I like to experience as many different nice cars as I can afford. You have to decide on your journey what you enjoy and DO IT! For me to drive the same car/truck and only that for 10-15 yrs just ain't gonna happen...that to me is BORING, BORING, BORING!!! Fortunately, for me I am blessed enough to do this...Thank God!!!
Loving the GS 350 by the way! Even though it sits in the garage 80-90% of the week. I've yet to read what the forum policy is on dealer recommendations, so I want here. If you PM me I'll tell you my deal. They really deserve a "shout-out".
05-09-13, 08:05 AM
#17
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I understand the good/Bad on each option, I see it really all comes down to what makes you happy (essentials over luxuries for the future, or fun for now and less to show for it). I love my
F-Sport (although I would prefer it had some more ummph), but I do tend to buy new cars quite often due to boredom. Some say I get rid of a car when it loses that new car scent, I'm starting to think I need therapy
F-Sport (although I would prefer it had some more ummph), but I do tend to buy new cars quite often due to boredom. Some say I get rid of a car when it loses that new car scent, I'm starting to think I need therapy
05-09-13, 08:23 AM
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I understand the good/Bad on each option, I see it really all comes down to what makes you happy (essentials over luxuries for the future, or fun for now and less to show for it). I love my
F-Sport (although I would prefer it had some more ummph), but I do tend to buy new cars quite often due to boredom. Some say I get rid of a car when it loses that new car scent, I'm starting to think I need therapy
F-Sport (although I would prefer it had some more ummph), but I do tend to buy new cars quite often due to boredom. Some say I get rid of a car when it loses that new car scent, I'm starting to think I need therapy
05-09-13, 08:26 AM
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05-09-13, 10:48 AM
#20
Lexus Fanatic
You only live once, and as long as you aren't living outside your means and you won't suffer down the line for the decisions you are making today...I say enjoy your life. Life is too short and it has to be a balance between saving for the future and living the life you work for and want today.
Cars are my passion, I'm going to spend money on them, I get a lot of enjoyment out of them. Some people play golf and belong to country clubs, some people have boats, some people have vacation homes they enjoy...I drive nice cars. I'm not going to take $60,000 out of my investments that are netting me 7-10% per year to avoid paying 1.9% interest on an auto lease...thats tax deductible. THAT would be a bad deal.
And I will break down the flaws in Dave's logic
Leasing is basically renting, yes and no. It is basically renting, but you can dispose of the vehicle during the lease by selling it or trading it in during the lease term. If the car is worth more than the buyout at the end, trade it in or sell it and pocket the difference, then they are not charging you more than depreciation and interest.
And, as was previously said...nobody leases for 60 months. I would never lease a car for more than 36-39 months.
Yes you maintain the car, but maintenance during the first 3 years is cheap, and as I said you can trade out of the car so keeping it in good condition is in your interest.
I have never been charged for excess wear and tear or mileage. If you are over mileage...simply trade out of the car instead of turning it in.
You can get screwed if you don't know what you are doing. Interest rates ARE disclosed in a lease, they are disclosed as a decimal money factor which when multiplied by 2400 gives you an interest rate. Mine is 1.9%. Astronomically high? I don't think so.
I don't need federal disclosure laws to protect me in a business transaction, I am a businessman and I protect myself.
If they are mindless lemmings enough to listen to Dave Ramsey maybe. I do not get sold anything. I examine my options and I choose the best direction for myself based on my own analysis. People can try to sell me whatever they want, unless its right for me I will not buy.
Yes they do.
Correction, rich people think "How much, and how do I best leverage this purchase to make it as attractive for me financially as possible".
For instance...if I have $60,000 that is earning 7-12%...is it more attractive for me to cash out that investment to buy a car...or is it more attractive for me to lease it for $700 per month...that is tax deductible, for overall interest of 1.9%. In my situation Dave Ramsey would be wrong.
Cars are my passion, I'm going to spend money on them, I get a lot of enjoyment out of them. Some people play golf and belong to country clubs, some people have boats, some people have vacation homes they enjoy...I drive nice cars. I'm not going to take $60,000 out of my investments that are netting me 7-10% per year to avoid paying 1.9% interest on an auto lease...thats tax deductible. THAT would be a bad deal.
Originally Posted by rjm
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.
ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.
And, as was previously said...nobody leases for 60 months. I would never lease a car for more than 36-39 months.
During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.
I have never been charged for excess wear and tear or mileage. If you are over mileage...simply trade out of the car instead of turning it in.
Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.
I don't need federal disclosure laws to protect me in a business transaction, I am a businessman and I protect myself.
People get sold automobile leases because they are told that it’s what sophisticated people do.
But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash
Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car.
For instance...if I have $60,000 that is earning 7-12%...is it more attractive for me to cash out that investment to buy a car...or is it more attractive for me to lease it for $700 per month...that is tax deductible, for overall interest of 1.9%. In my situation Dave Ramsey would be wrong.
Last edited by SW17LS; 05-09-13 at 10:59 AM.
05-09-13, 11:01 AM
#21
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leasing works out if you ALWAYS buy a new car... so even if you purchase your car and after 5 years you own it outright, then go trade it in for another 5 year loan... what was the sense of purchasing?
if you like to switch cars every 2-3 years and dont drive high miles... leasing is fine...
but if you buy a car and keep it until the wheels fall off... then purchase... its a pretty easy decision
if you like to switch cars every 2-3 years and dont drive high miles... leasing is fine...
but if you buy a car and keep it until the wheels fall off... then purchase... its a pretty easy decision
05-09-13, 11:08 AM
#22
Lexus Fanatic
leasing works out if you ALWAYS buy a new car... so even if you purchase your car and after 5 years you own it outright, then go trade it in for another 5 year loan... what was the sense of purchasing?
if you like to switch cars every 2-3 years and dont drive high miles... leasing is fine...
but if you buy a car and keep it until the wheels fall off... then purchase... its a pretty easy decision
if you like to switch cars every 2-3 years and dont drive high miles... leasing is fine...
but if you buy a car and keep it until the wheels fall off... then purchase... its a pretty easy decision
Even if you do buy and finance, if you have money invested that is making more than 1.5%...and you can get a loan for 1.5%...leave your money invested and get a loan.
05-17-13, 10:36 AM
#24
Driver School Candidate
My wife and I just purchased(leased) our first Lexus, the GS350 F Sport last week and we've had this discussion many times to see what we enjoy and what we can afford to lose. Personally, the questions I narrowed down to is:
- How much do we like a car and how much are we willing to lose for that car. 5k? 10k? 15k?..etc
- Do we like to drive new cars all the time or do we like to keep or build a car for 10+ years? Keep in mind the human mind changes constantly. We may feel happy today and sad tomorrow. We may like Scion FS-R, while tomorrow, we may feel we like something more quiet and more luxury..etc.
Personally, I tend to like lease after my analysis. Lease is a good way to test a car; if you decide to keep it, the lease amount you paid can go towards the car. If you decide you don't want it, then return it and take the loss. Think about all the cars we all had bought from the lot or pretty new, used cars from a dealer, and in general, I bet most of us, including myself, lost at least 10k per vehicle. If talking car, I feel like we always lose money. It's just lease, you lose that money quicker if you decide to return it. If you keep it, you lose over time and at the end of the day when you try to sell yourself, you may have a hard time getting rid of it or lose more.
So with that said, obviously, you'll have more questions to ask before you purchase, but I don't really look at the specific residual #s or what not. C'mon, what do I care about the value of a Lexus? That doesn't kill the deal for me. I like the car and I will try to get the car I like. #s won't make me change my mind to buy a Corolla. It's a Lexus! High end luxury car(debateable..
) I just look to see if i can afford it monthly and negotiate the monthly payments to my liking and go from there. If you look at #s, in general, it's never "good" and a dealer will ALWAYS win, otherwise they're not going to sell it. If I was trying to save money, I'd get a used car.
Our issue now is we want to keep it, so the estimated amount is about $39k after our lease (in 27 months) We will try to negotiate the price when that time comes to maybe about $35k and we'll buy it. Our monthly payment right now is about $512, everything, with added protection plan w/ 3k down. It was "supposed to be" $5,500k down, but "supposedly" they had a deal and Lexus gave us $2,500. Overall selling cost was about $52k.
Sorry for the long post....
- How much do we like a car and how much are we willing to lose for that car. 5k? 10k? 15k?..etc
- Do we like to drive new cars all the time or do we like to keep or build a car for 10+ years? Keep in mind the human mind changes constantly. We may feel happy today and sad tomorrow. We may like Scion FS-R, while tomorrow, we may feel we like something more quiet and more luxury..etc.
Personally, I tend to like lease after my analysis. Lease is a good way to test a car; if you decide to keep it, the lease amount you paid can go towards the car. If you decide you don't want it, then return it and take the loss. Think about all the cars we all had bought from the lot or pretty new, used cars from a dealer, and in general, I bet most of us, including myself, lost at least 10k per vehicle. If talking car, I feel like we always lose money. It's just lease, you lose that money quicker if you decide to return it. If you keep it, you lose over time and at the end of the day when you try to sell yourself, you may have a hard time getting rid of it or lose more.
So with that said, obviously, you'll have more questions to ask before you purchase, but I don't really look at the specific residual #s or what not. C'mon, what do I care about the value of a Lexus? That doesn't kill the deal for me. I like the car and I will try to get the car I like. #s won't make me change my mind to buy a Corolla. It's a Lexus! High end luxury car(debateable..
) I just look to see if i can afford it monthly and negotiate the monthly payments to my liking and go from there. If you look at #s, in general, it's never "good" and a dealer will ALWAYS win, otherwise they're not going to sell it. If I was trying to save money, I'd get a used car.Our issue now is we want to keep it, so the estimated amount is about $39k after our lease (in 27 months) We will try to negotiate the price when that time comes to maybe about $35k and we'll buy it. Our monthly payment right now is about $512, everything, with added protection plan w/ 3k down. It was "supposed to be" $5,500k down, but "supposedly" they had a deal and Lexus gave us $2,500. Overall selling cost was about $52k.
Sorry for the long post....
05-17-13, 10:39 AM
#25
My wife and I just purchased(leased) our first Lexus, the GS350 F Sport last week and we've had this discussion many times to see what we enjoy and what we can afford to lose. Personally, the questions I narrowed down to is:
- How much do we like a car and how much are we willing to lose for that car. 5k? 10k? 15k?..etc
- Do we like to drive new cars all the time or do we like to keep or build a car for 10+ years? Keep in mind the human mind changes constantly. We may feel happy today and sad tomorrow. We may like Scion FS-R, while tomorrow, we may feel we like something more quiet and more luxury..etc.
Personally, I tend to like lease after my analysis. Lease is a good way to test a car; if you decide to keep it, the lease amount you paid can go towards the car. If you decide you don't want it, then return it and take the loss. Think about all the cars we all had bought from the lot or pretty new, used cars from a dealer, and in general, I bet most of us, including myself, lost at least 10k per vehicle. If talking car, I feel like we always lose money. It's just lease, you lose that money quicker if you decide to return it. If you keep it, you lose over time and at the end of the day when you try to sell yourself, you may have a hard time getting rid of it or lose more.
So with that said, obviously, you'll have more questions to ask before you purchase, but I don't really look at the specific residual #s or what not. C'mon, what do I care about the value of a Lexus? That doesn't kill the deal for me. I like the car and I will try to get the car I like. #s won't make me change my mind to buy a Corolla. It's a Lexus! High end luxury car(debateable..) I just look to see if i can afford it monthly and negotiate the monthly payments to my liking and go from there. If you look at #s, in general, it's never "good" and a dealer will ALWAYS win, otherwise they're not going to sell it. If I was trying to save money, I'd get a used car.
Our issue now is we want to keep it, so the estimated amount is about $39k after our lease (in 27 months) We will try to negotiate the price when that time comes to maybe about $35k and we'll buy it. Our monthly payment right now is about $512, everything, with added protection plan w/ 3k down. It was "supposed to be" $5,500k down, but "supposedly" they had a deal and Lexus gave us $2,500. Overall selling cost was about $52k.
Sorry for the long post....
- How much do we like a car and how much are we willing to lose for that car. 5k? 10k? 15k?..etc
- Do we like to drive new cars all the time or do we like to keep or build a car for 10+ years? Keep in mind the human mind changes constantly. We may feel happy today and sad tomorrow. We may like Scion FS-R, while tomorrow, we may feel we like something more quiet and more luxury..etc.
Personally, I tend to like lease after my analysis. Lease is a good way to test a car; if you decide to keep it, the lease amount you paid can go towards the car. If you decide you don't want it, then return it and take the loss. Think about all the cars we all had bought from the lot or pretty new, used cars from a dealer, and in general, I bet most of us, including myself, lost at least 10k per vehicle. If talking car, I feel like we always lose money. It's just lease, you lose that money quicker if you decide to return it. If you keep it, you lose over time and at the end of the day when you try to sell yourself, you may have a hard time getting rid of it or lose more.
So with that said, obviously, you'll have more questions to ask before you purchase, but I don't really look at the specific residual #s or what not. C'mon, what do I care about the value of a Lexus? That doesn't kill the deal for me. I like the car and I will try to get the car I like. #s won't make me change my mind to buy a Corolla. It's a Lexus! High end luxury car(debateable..
) I just look to see if i can afford it monthly and negotiate the monthly payments to my liking and go from there. If you look at #s, in general, it's never "good" and a dealer will ALWAYS win, otherwise they're not going to sell it. If I was trying to save money, I'd get a used car.Our issue now is we want to keep it, so the estimated amount is about $39k after our lease (in 27 months) We will try to negotiate the price when that time comes to maybe about $35k and we'll buy it. Our monthly payment right now is about $512, everything, with added protection plan w/ 3k down. It was "supposed to be" $5,500k down, but "supposedly" they had a deal and Lexus gave us $2,500. Overall selling cost was about $52k.
Sorry for the long post....
05-17-13, 11:11 AM
#26
Driver School Candidate
No negotiating the residual number with Lexus.
05-17-13, 12:28 PM
#27
Lexus Fanatic
Thanks for the input. I'm not doubting you, but I feel like when our lease is up, we can do something about it to negotiate something or we'll get another car. I can ask for them to lower the price. if they don't, walk out, come back in a week and buy the car at a diff price, if its still there. But then again, my wife doesn't mind just straight up keeping it if it comes to that....
If you turn it into the dealer as a lease return that dealer also may not retain the car. It may go to another dealer or go to auction. LFS gets the car back, not the dealer and the cars are allocated to dealers based on a myriad of criteria. If you trade it in instead of turn it in, then that dealer will likely retain it, but the lease turn in is different.
Last edited by SW17LS; 05-17-13 at 12:31 PM.
05-17-13, 01:41 PM
#28
Driver School Candidate
Joe's 100% right, LFS/TFS WILL NOT negotiate the buy out residual. They just won't, even if taking it back from you costs them money they will not negotiate the buyout. Many companies will, but LFS will not. I've been in that situation with LFS before and its well documented on the forum, they won't.
If you turn it into the dealer as a lease return that dealer also may not retain the car. It may go to another dealer or go to auction. LFS gets the car back, not the dealer and the cars are allocated to dealers based on a myriad of criteria. If you trade it in instead of turn it in, then that dealer will likely retain it, but the lease turn in is different.
If you turn it into the dealer as a lease return that dealer also may not retain the car. It may go to another dealer or go to auction. LFS gets the car back, not the dealer and the cars are allocated to dealers based on a myriad of criteria. If you trade it in instead of turn it in, then that dealer will likely retain it, but the lease turn in is different.
If nothing, we'll buy it as is. We love the car! But just to confirm my earlier post, this wasn't a factor for us to buy or lease. However, some may look into this as a deal breaker.
05-17-13, 11:41 PM
#29
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I'm a proud new owner of a Starfire/Cabernet FSport.
27 month lease
$550 includes taxes
$1500 drive off
$2500 Lexus
$500 Conquest credit
Selling price is below invoice @ $53k.
Anyone in need of a good dealer in the SF BayArea, let me know!
27 month lease
$550 includes taxes
$1500 drive off
$2500 Lexus
$500 Conquest credit
Selling price is below invoice @ $53k.
Anyone in need of a good dealer in the SF BayArea, let me know!
