Quote:
Originally Posted by BigHat
Hi,
Try a search or two. Lots to read about leasing here and in all the car sites.
I personally take offense at statements like the one you cite in a car magazine that are such generalizations that they're nonsensical. The only way that would make sense is to assume that people are generally stupid and that leasing a car is slightly more complex of a transaction, therefore stupid people have a greater chance of being screwed-- so don't lease.
Don't have time to "rebuild the watch" on the subject, but a few points to ponder.
1. A car is worth what it's worth at the end of a specific period (3 yrs, etc) no matter how it was procured. You ever hear of anyone offering extra money to the original buyer because he paid cash? No inherent disadvantage in this regard to leasing or financing. In fact, with a guaranteed residual, your max. downside is known at the start.
2. The cost of money is the cost of money. IF you understand the nuisances of leasing AND negotiate the price of the car just as hard as a cash deal, the true cost of a lease need not be a dime more than financing the car and then selling or trading it.
3. If you're determined to mod the car, leasing isn't wise. You'll get zero for the mods and probably have to pay to restore it to delivered specs. Same for high mileage drivers -- buy the miles you need at the start, they're more costly as a penalty for exceeding contracted usage.
4. Though in a perfect scenario where the residual is precisely the market value and your money factor equals the prevailing interest rates, buying the car at the end of the lease period should be a wash. Personally, I'd never enter into a lease with the thought of then buying it. If I still loved the car though and the terms for buying it made sense I can see doing it. But buying at the outset makes more sense if you're thinking you'll keep it.
5. With a degree in finance I tend to look at this subject dispassionately, but there is always an emotional aspect of every financial transaction. Some people can't get their head around "renting" their car and think those that do are reckless. Again, an emotional, baseless view, but nevertheless one that impacts their attitude. Some trash leasing indirectly; by this I mean, if you're idea of smart car ownership is to buy a CPO'd used car and drive it into the ground, the idea of taking the initial depreciation and moving on in 3 years is a "waste of money" to them. That is NOT a legit pro/con debating point on the leasing argument though. Be sure that you keep the debate on the "apples to apples" level and that's buying vs leasing the same vehicle for the same period of time.
Personally, I analyze the current situation and decide what's best. I purchased my 2011 M3 and was leasing my '07 650 vert. M cars typically have relatively crappy residuals (as the resale price stats would support as reasonable). I think many people think they're going to get abused, tracked, etc. I also think BMW and other luxury producers got killed with cars coming off lease not remotely close to the residuals in value due to the poor economy and are fudging the residuals accordingly. All of this means higher lease prices. BUT if they are in fact right about the true value of the car years out, you'll have saved zero money by buying. Personally, I'm banking on them being too conservative.
Cheers!
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Excellent summary! I fully concur on all points. This is the best analysis of auto leasing that I've read on this forum, or anywhere else; for that matter. I purchased my current E92 M3, but, the three cars I owned prior to that were leased. As BigHat wisely stated, "...analyze the current situation and decide what's best." Enough said!