Jayson

Does Lexus allow buyers to lease a CPO at reasonable rate? I asked a salesman very quickly a couple of weeks ago at our local dealership about leasing instead of buying a CPO vehicle. He responded that It's usually very close to the same price and that most buyers favor purchasing the vehicle as opposed to leasing a CPO.

Why is this?

PBEchicago

Does "CPO" mean "used"? If not, please define "CPO".

DropTop430

CPO- Cert Pre Owned

tfischer

The simple answer to your question is that, in the long run, it's almost always less expensive to buy a car than to lease it. (How do you think the lessor makes money?)

This is expecially true with respect to a used car, since the big first year depreciation factor is taken out.

My guess is that if you compute the lease payment for the CPO you are looking at and compare it to what you would pay per month on a car loan, the monthly payments would be closer than you think. Add in the computation for the value of the car at the end of the lease compared to the value of the car you own at the end of the loan term, and I'm sure you will be ahead by buying rather than leasing.

Leasing is fine if you don't have a large down payment, and many people do it just to have a nicer car through a lease than they could afford in a purchase, but lease payments will NEVER end under this plan.

Most bankers will tell you the best way to purchase a car is to pay cash at the time of purchase, even considering the time value of money. The worst is a lease. After all, who has more money in town: the landlords or the tenants?

Same with cars.

Jayson

We have a substantial down payment, BUT we will only have a need for the SC430 for about 3 years, which is why I am curious about leasing. This will not be a long term car. A new SC is just too expensive, so I that's where I came up with the idea of leasing a CPO 1 or 2 year old SC.

tfischer

If you only need the car for three years, buy it, drive it for 3 years, and then sell it. What do you think the lessor is going to do? By buying it, driving it for 3 years and then selling it you are essentially leasing it to yourself and pocketing all the profit the lessor would have made on the deal.

Generally, if a car is too expensive to buy, it's probably too expensive to lease; it's just that the no down payment and lower monthly payments hide the actual costs involved.

I have purchased many cars, especially used cars, on other than a long term basis. About 12 years ago I purchased a one year old SC400. Three years later its resale value was higher than my purchase price. There is nothing wrong with buying a car with the intention of not keeping it for ten years.

Jayson

Thank you tfischer, you've been a big help and I appreciate your input. For the record, I hate buying vehicles.....it always seems to be a lose-lose situation. I have never leased before and after your comments, you have solidified my stand I probably will never lease.

Many thanks!

JCtx

Complementing Tfischer comment, leasing is the equivalent of buying and wholesaling your car at resale. If you either trade it in or sell it yourself, you'll be ahead at the end.
Leasing also means more up-front costs to increase lessor's yield; just like a mortgage loan.
My take on leases is simple (and I don't mean it's your case): if somebody has to lease, they can't afford the car. But this country is set to find ways to extend people's credit to the limit.
Good luck man, and make a wise decision.

Doc C

I've always purchased my cars, and I agree with ELP JC and tfischer. However, I just leased an '04 NSX a month ago. The deal was too good to pass up. Acura can't beg people to take these cars and the deal (IMO) was a very good one. The effective interest rate was about 2% and the total cost in interest to me over 3 years would be about $5,900. You can't get a better loan on a new $90K sports car for better terms than that. My rationale was that because there is a new NSX coming out in '06, the depreciation on this '04 might be real bad once the new model comes out. Also, if the new model comes out and sucks (unlikely) then I'll have a copy of the last handbuilt NSXs with a perfect owner history that I can buy. If the new one is awesome, then I can walk in and throw the keys on their desk and BUY a new model, because they won't have this type deal on the new model. I'm not a fan of leasing, but I think in this case, it was a good deal. For me anyway. For $799/month, hardly anything down, and hardly any interest, I get to drive a car I've always wanted. Even a used (2000-2001) model costs more than a new SC, and I would have to face the potential nasty depreciation when the new model comes out. Just my $.02.

Jayson

We are going to buy. My wife just found a couple of CPO SC430 with about 35k miles for $45k on Autotrader. By the time we are ready to buy I am thinking those prices will be closer to $40k which would be great!

ahnj

The economics of a auto purchase vs lease is a matter of simple math. One is not always a better deal than the other.

For those who prefer to purchase a new car every three/four years, especially those in high sales-tax states, leasing can be a better deal.

This web site has good summary of benefits of leasing:

http://www.leasecompare.com/autolease101_1.php

I'm not affiliated with the above website.

Umbo

This is a slightly different but related topic. When I was first contemplating buying an SC 430 I was going to buy an '02 to save some money. I then started crunching the numbers. The '02 was only about $9K cheaper than a brand new '04. If I was to keep the car 5 yrs, then the trade in value on the '02 would be about $8K less than the '04 ( I estimated this based on kbb trade in value for other Lexus models). The ultimate difference in price was only $1K plus the interest on the $9K x 5 yrs(not much at current rates). Needless to say, I got a new one.

I also agree that leasing is just a tool to get people to buy more car than they can really afford.

Doc C

I also agree that leasing is just a tool to get people to buy more car than they can really afford. [/B][/QUOTE]


Umbo,

Obviously, you are uninformed, and blanket statements like that show your ignorance on a grand scale. Certainly, you can get more car for less monthly payment with a lease. But, for a business owner it can have big advantages. Also, where I live, the sales tax is 8%. With a lease, I can pay that out over 36 months rather than all at once. I get the use of that money in the mean time. Also, people in business lease office equipment such as copiers, computers, etc. all the time. Ted Turner once said to use other people's money and not your own for big items. I have always bought my cars. Never leased before. On certain high volume vehicles, leasing doesn't make any sense, but you need to look at it on a case by case basis, and not make all inclusive statements. In many cases, on some cars, buying the car is stupid too. Go pay cash for a Hyundai. It will depreciate so fast it will make your head spin. You will have then put your money into a place where is virtually disappears. I had $60K to put down on an NSX. That would have left me approx. $25K to finance at 3.99% for 3 years. Or, I could lease it with an effective interest rate of less than 2%, and kept my $60k in a CD that will make me 5.25% a year. So, I use Acura's car for 3 years and it only costs me a little over $5,000 in interest which will be more than offset by me having the $60k to use as I see fit, or to draw interest on which should easily offset the interest cost and possibly some of the depreciation cost. Therefore, I only pay $799/month which is about what I would have paid in loan payments even after the $60K down.
So, I didn't do a lease because I can't afford the car. I'll bet you that most Ferraris etc are leased because anyone who knows the value of cash would rather have that cash in the bank, rather than tied up in a car that depreciates like a rock. In your situation, you did the right thing using the figures you stated. If you would have paid for an '02 that was only $9K less than a new one you would have been getting screwed!! Most '02s have depreciated WAY more than $9K! Hell, there are some guys that would like to get that price for their '03s!!! The SC is a fantastic car in all ways, and is very good in holding its value, but even it can't hold up that well. I'm glad you got an SC. It is the best car I've ever owned. You won't be sorry.