IS300 purchase vs lease
05-21-17, 04:07 PM
#31
Or the he thinks the buyer is payment conscious. He's using the down to drive the payment down to make the lease more attractive. OP, give us all the numbers on the lease. Monthly payment, drive off, negotiated cost of the car, residual, terms. Then we can see if it's a good deal. Your mentioned you want to keep the car for 6 years. That's on the cusp of the lease vs buy debate IMHO. I've done a 6 year projection on 2 leases vs 1 purchase (60 mo. finance), and the out of pocket only differs by a few thousand, including selling the car after 6 years. With 2 three year leases you would never be out of warranty, and you would be driving a new car in 3 years. You would also be LOCKING IN the value of you car(s) in those 6 years. In the event that your IS300 depreciates faster than the least term stipulation, you would be losing more money by purchasing. Keep in mind that I did this 6 year projection for a $85k car and that few thousand difference is insignificant especially for a span of 6 years, but for less expensive cars it might be more of an issue.
05-21-17, 04:30 PM
#32
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That's what I meant. The dealer knows the buyer is payment conscious.
05-21-17, 06:12 PM
#33
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I don't have any paperwork in front of me unfortunately. All I know us what I mentioned in this thread. Think dealer mentioned 22k to buy car at end. That was about $3500 more than it would cost me to purchase the car now.
I see the points about having a new car in 3 years but after 3 I have nothing to show for it. If I buy, I do have something obviously so still a little torn....
I see the points about having a new car in 3 years but after 3 I have nothing to show for it. If I buy, I do have something obviously so still a little torn....
05-21-17, 11:52 PM
#34
Lease:
$5000 down
398/month
36 months= $19,328 total expenses for 3 years.
Do that again for a total of 6 years with two leases and that's $38,656 total.
Whats the sticker on the car? $45k? lets say you get it down to $43k
$13,500 trade
$4050 in tax
$500 docs
That comes to $36,050 financed.
at 1.9% that's $630.30 a month for 60 months.
$630.30 * 60 = $37,817 in payments.
Your payments plus your trade in = $51,317.99
Now, you want to put 96k miles on it? Looking at 6 year old IS350s in good condition, they are going for about $13k private party according to KBB. Very Good condition for $14,600.
Lets assume very good condition for you car.
total paid - selling price at end of term = cost of ownership
$51,318 - $14,600 = $36,718
This does NOT include maintenance and repairs after 50k miles. Tack on another $1k for that, and that's being conservative.
$37.7k is what it will cost you to own this car for 6 years.
$38.6k is what it will cost you to lease two cars for 6 years.
You save about $900 over 6 years buying the car. That's $12 a month in savings.
Again, this is for 6 years.
Lease:
If you are business owner, this is a NO BRAINER. You save much more deducting your entire lease payment. Financed cars are only interest and depreciation deductible.
You are paying $900 to drive a brand new car in 3 years if you lease.
You are securing your depreciation with the lease. Even if the auto industry tanks and your car is only worth $10k instead of $14k, it won't matter to you.
You will have a warranty for 6 years with a newer car instead of only 4 with an older car. (Lexus is a 4yr/50k warranty iirc)
Another reason to go for the lease: Don't go $5k down. Take that full $13.5k and invest or pay off other debt. A payment of debt at x% interest is a return on investment on x%. It's almost impossible to beat.
You have a student loan? Whats your interest on that?
Purchase:
If you plan to keep the car beyond 6 years, you aim to save even more for a purchase. About $400 a month compared to leasing a new car. Subtract $1500 a year for maintenance.
That's to buy a car with 3 years worth of depreciation. You want to keep the car for 6 years, right? See my math above. Depreciation will catch up to you in 6 years.
Last edited by ragingf80; 05-22-17 at 12:06 AM.
05-22-17, 06:21 AM
#35
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Above is the exact calculation I've been talking about.
05-22-17, 07:42 AM
#36
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Thanks everyone for the extremely detailed responses. As for financing, I would most likely only have to finance 10k at the most, most likely just pay it off so I wouldn't have to worry about any interest.
05-22-17, 08:23 AM
#37
Your interest paid for financing $32k is $1700.
You would be saving $1210 by financing only $10k. That's ~$50/month in savings over 6 years.
Again I ask, do you have a student loan? Do you have any debt at all? your interest on your car loan is only 1.9%. Most credit cards are ~13-22%, student loans are ~6%.
Are you paying more than $50/mo in interest charges for your other debt? If so, then you don't want to finance just $10k. That $13.5k could be used to pay off your other debts. You are losing more money otherwise.
An S&P500 usually yields higher than 1.9%. In fact, for 2016 it was 9.84%. If you invest that $13.5k you would have made $132 instead of reducing your interest by $41.80 (1.9% interest on $32k vs $10k). Essentially, you lost nearly $100 of earning potential by financing $10k instead of $32k.
05-22-17, 08:32 AM
#38
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Your interest paid for financing $10k is $490.
Your interest paid for financing $32k is $1700.
You would be saving $1210 by financing only $10k. That's ~$50/month in savings over 6 years.
Again I ask, do you have a student loan? Do you have any debt at all? your interest on your car loan is only 1.9%. Most credit cards are ~13-22%, student loans are ~6%.
Are you paying more than $50/mo in interest charges for your other debt? If so, then you don't want to finance just $10k. That $13.5k could be used to pay off your other debts. You are losing more money otherwise.
An S&P500 usually yields higher than 1.9%. In fact, for 2016 it was 9.84%. If you invest that $13.5k you would have made $132 instead of reducing your interest by $41.80 (1.9% interest on $32k vs $10k). Essentially, you lost nearly $100 of earning potential by financing $10k instead of $32k.
Your interest paid for financing $32k is $1700.
You would be saving $1210 by financing only $10k. That's ~$50/month in savings over 6 years.
Again I ask, do you have a student loan? Do you have any debt at all? your interest on your car loan is only 1.9%. Most credit cards are ~13-22%, student loans are ~6%.
Are you paying more than $50/mo in interest charges for your other debt? If so, then you don't want to finance just $10k. That $13.5k could be used to pay off your other debts. You are losing more money otherwise.
An S&P500 usually yields higher than 1.9%. In fact, for 2016 it was 9.84%. If you invest that $13.5k you would have made $132 instead of reducing your interest by $41.80 (1.9% interest on $32k vs $10k). Essentially, you lost nearly $100 of earning potential by financing $10k instead of $32k.
05-22-17, 08:52 AM
#39
Your total savings will be about $2000 over 6 years if you finance 10k on a new car for 5 years. That does not include maintenance and repairs for 2 years and 46k miles out of warranty.
05-22-17, 09:31 AM
#40
Lexus Fanatic
You are looking at it the wrong way. That will reduce your interest. You've already paid the residual money from your old car plus interest and taxes. That's money out of your pocket.
There is no free lunch. You are PAYING for that car to have "something to show for it".
Lease:
$5000 down
398/month
36 months= $19,328 total expenses for 3 years.
Do that again for a total of 6 years with two leases and that's $38,656 total.
Whats the sticker on the car? $45k? lets say you get it down to $43k
$13,500 trade
$4050 in tax
$500 docs
That comes to $36,050 financed.
at 1.9% that's $630.30 a month for 60 months.
$630.30 * 60 = $37,817 in payments.
Your payments plus your trade in = $51,317.99
Now, you want to put 96k miles on it? Looking at 6 year old IS350s in good condition, they are going for about $13k private party according to KBB. Very Good condition for $14,600.
Lets assume very good condition for you car.
total paid - selling price at end of term = cost of ownership
$51,318 - $14,600 = $36,718
This does NOT include maintenance and repairs after 50k miles. Tack on another $1k for that, and that's being conservative.
$37.7k is what it will cost you to own this car for 6 years.
$38.6k is what it will cost you to lease two cars for 6 years.
You save about $900 over 6 years buying the car. That's $12 a month in savings.
Again, this is for 6 years.
Lease:
If you are business owner, this is a NO BRAINER. You save much more deducting your entire lease payment. Financed cars are only interest and depreciation deductible.
You are paying $900 to drive a brand new car in 3 years if you lease.
You are securing your depreciation with the lease. Even if the auto industry tanks and your car is only worth $10k instead of $14k, it won't matter to you.
You will have a warranty for 6 years with a newer car instead of only 4 with an older car. (Lexus is a 4yr/50k warranty iirc)
Another reason to go for the lease: Don't go $5k down. Take that full $13.5k and invest or pay off other debt. A payment of debt at x% interest is a return on investment on x%. It's almost impossible to beat.
You have a student loan? Whats your interest on that?
Purchase:
If you plan to keep the car beyond 6 years, you aim to save even more for a purchase. About $400 a month compared to leasing a new car. Subtract $1500 a year for maintenance.
That's to buy a car with 3 years worth of depreciation. You want to keep the car for 6 years, right? See my math above. Depreciation will catch up to you in 6 years.
There is no free lunch. You are PAYING for that car to have "something to show for it".
Lease:
$5000 down
398/month
36 months= $19,328 total expenses for 3 years.
Do that again for a total of 6 years with two leases and that's $38,656 total.
Whats the sticker on the car? $45k? lets say you get it down to $43k
$13,500 trade
$4050 in tax
$500 docs
That comes to $36,050 financed.
at 1.9% that's $630.30 a month for 60 months.
$630.30 * 60 = $37,817 in payments.
Your payments plus your trade in = $51,317.99
Now, you want to put 96k miles on it? Looking at 6 year old IS350s in good condition, they are going for about $13k private party according to KBB. Very Good condition for $14,600.
Lets assume very good condition for you car.
total paid - selling price at end of term = cost of ownership
$51,318 - $14,600 = $36,718
This does NOT include maintenance and repairs after 50k miles. Tack on another $1k for that, and that's being conservative.
$37.7k is what it will cost you to own this car for 6 years.
$38.6k is what it will cost you to lease two cars for 6 years.
You save about $900 over 6 years buying the car. That's $12 a month in savings.
Again, this is for 6 years.
Lease:
If you are business owner, this is a NO BRAINER. You save much more deducting your entire lease payment. Financed cars are only interest and depreciation deductible.
You are paying $900 to drive a brand new car in 3 years if you lease.
You are securing your depreciation with the lease. Even if the auto industry tanks and your car is only worth $10k instead of $14k, it won't matter to you.
You will have a warranty for 6 years with a newer car instead of only 4 with an older car. (Lexus is a 4yr/50k warranty iirc)
Another reason to go for the lease: Don't go $5k down. Take that full $13.5k and invest or pay off other debt. A payment of debt at x% interest is a return on investment on x%. It's almost impossible to beat.
You have a student loan? Whats your interest on that?
Purchase:
If you plan to keep the car beyond 6 years, you aim to save even more for a purchase. About $400 a month compared to leasing a new car. Subtract $1500 a year for maintenance.
That's to buy a car with 3 years worth of depreciation. You want to keep the car for 6 years, right? See my math above. Depreciation will catch up to you in 6 years.
Keeping it for 10 years minimum is the best option for the OP if he is going to buy the car.
05-22-17, 09:43 AM
#41
Lexus Fanatic
I'm only earning 1.05% in my savings account (a few years ago I got 3% on a 12 mo. cd but my wife and I were limited to $10k combined, at the largest CU in the nation), so I would prefer to pay cash, than to finance at even 1.9%....again just my .02 things have to be kept separately, I maintain $X in cash, whether or not I could get more than 1.05% in equities, etc., because throw darts at the wall and we can do better than that if we pick the right day....
05-22-17, 09:48 AM
#42
Lexus Fanatic
Good for you. Not having a lot of debt and paying off the credit cards is a wise decision.
I think it would be fair for the OP to see a calculation of owning the car for a full 9 years versus leasing the (three of) same car for 9 years. Or better yet, go to 12 years of having the car versus having a lease for 12 years. The OP is sort of going it wrong by wanting to buy and then trade the car after 6 years. The advantage of buying car and getting all the payments over with is that once its paid, you can do whatever you want with the car, you can keep it, sell it, trade it, donate it, give it away, destroy it, sleep in it, etc etc. So many things can change from year 4-12 that having that car paid off and owning can be worth it.
Keeping it for 10 years minimum is the best option for the OP if he is going to buy the car.
I think it would be fair for the OP to see a calculation of owning the car for a full 9 years versus leasing the (three of) same car for 9 years. Or better yet, go to 12 years of having the car versus having a lease for 12 years. The OP is sort of going it wrong by wanting to buy and then trade the car after 6 years. The advantage of buying car and getting all the payments over with is that once its paid, you can do whatever you want with the car, you can keep it, sell it, trade it, donate it, give it away, destroy it, sleep in it, etc etc. So many things can change from year 4-12 that having that car paid off and owning can be worth it.
Keeping it for 10 years minimum is the best option for the OP if he is going to buy the car.
My brother says that I purchased a 1998 Maxima and am still driving it, so you're saying he should have leased instead? To which he replied, c'mon, your brother is the exception, he obviously doesn't care about what kind of car he's driving....
Maybe that's the key.
05-22-17, 09:51 AM
#43
Lexus Fanatic
my younger bro's buddy is a partner at a big 4. He made this statement when my sis in-law bought her '17 A4: "Only idiots buy cars, they're depreciating assets. Why would anyone put money into such a thing as that?"
My brother says that I purchased a 1998 Maxima and am still driving it, so you're saying he should have leased instead? To which he replied, c'mon, your brother is the exception, he obviously doesn't care about what kind of car he's driving....
Maybe that's the key.
My brother says that I purchased a 1998 Maxima and am still driving it, so you're saying he should have leased instead? To which he replied, c'mon, your brother is the exception, he obviously doesn't care about what kind of car he's driving....
Maybe that's the key.
05-22-17, 10:25 AM
#44
Lexus Fanatic
If you're going to buy a car and happily drive it for 9, or 12 years you will save money vs leasing. As I've said before its around 5 years where if you buy new and trade then or earlier than that it starts to be cheaper to lease.
05-22-17, 10:25 AM
#45
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Good for you. Not having a lot of debt and paying off the credit cards is a wise decision.
I think it would be fair for the OP to see a calculation of owning the car for a full 9 years versus leasing the (three of) same car for 9 years. Or better yet, go to 12 years of having the car versus having a lease for 12 years. The OP is sort of going it wrong by wanting to buy and then trade the car after 6 years. The advantage of buying car and getting all the payments over with is that once its paid, you can do whatever you want with the car, you can keep it, sell it, trade it, donate it, give it away, destroy it, sleep in it, etc etc. So many things can change from year 4-12 that having that car paid off and owning can be worth it.
Keeping it for 10 years minimum is the best option for the OP if he is going to buy the car.
I think it would be fair for the OP to see a calculation of owning the car for a full 9 years versus leasing the (three of) same car for 9 years. Or better yet, go to 12 years of having the car versus having a lease for 12 years. The OP is sort of going it wrong by wanting to buy and then trade the car after 6 years. The advantage of buying car and getting all the payments over with is that once its paid, you can do whatever you want with the car, you can keep it, sell it, trade it, donate it, give it away, destroy it, sleep in it, etc etc. So many things can change from year 4-12 that having that car paid off and owning can be worth it.
Keeping it for 10 years minimum is the best option for the OP if he is going to buy the car.