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The Troubling Aspect Of Leasing

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Old 10-15-2017, 12:47 PM
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Default The Troubling Aspect Of Leasing

Recently posted statistics revealed that almost on third of new cars are leased. I'm in that category and I'm convinced for a number of reasons, this make the most sense. However, if you love driving your leased vehicle, there's always that one troubling aspect, the mileage factor. I opt for the 10K per year, as that has served me well to date. With that said, I still find myself "calculating" the monthly miles I'm driving similar to watching my weight. I just picked up my new R two weeks ago and hit 1K on the clock in short order. Now, my wife and I are planning a 1500 road trip. I'm all in on this and will adjust during the winter. Maybe it's just me, as it relates to my obsessive behavior!? Good news is, there was considerable therapeutic relief from composing this thread !
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Old 10-15-2017, 02:33 PM
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I am curious in why you would lease it in the first place?
I come from a place of getting the car you love and drive it until it dies on you. Many people told me to lease it and after a while we figured out the issue: they are more than happy to have the car for say, 4 years, and after that turn it in or buy and sell it, and make back X amount of money, which they'd suggest is more than what you'd have to pay to eventually own the car. But that to me just doesn't sound right because all the money you paid to lease it until then is basically evaporate. Sounds a bit too expensive a price to pay to have the car for 4 years.
Sure, you have no assurance that you still want to keep that car after 4 years, but that is why I want to make the right choice and buy the car I love. I know some people want a "new" car every 4-5 years so maybe there's what sets up apart.
I totally get what you mean Tahoe Dave. What happens if you tip into 10+ in one year? I would do approximately 12K a year which makes leasing not a good option when I last checked.
Do you use that as your only car?
BTW no you're not obsessive, just careful. There is nothing wrong with a little planning.
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Old 10-15-2017, 02:46 PM
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The argument for leasing (apart from gimme a new model every three years) is that depreciation becomes someone else's problem, particularly where that is a "drops like a rock" factor. Or using the residual value to get into something that ordinarily you wouldn't or couldn't justify buying (SVR). Or not having to deal with out of warranty stuff, but JLR have led the pack with the 5 year 60K deal Elite, including servicing and roadside.

The mileage limit isn't enforced per year, it's total over the life of the lease so it's not unnatural that in the honeymoon stage you might put on more than the expected "quota" and it evens out in the longer term. Obviously if you estimate your annual miles to be 15K then leasing probably isn't for you. As to mileage overage, again some say it works out cheaper to pay the overage charge than deal with the negative equity if you bought it new.

I looked into leasing but Texas taxes the whole price on the vehicle on the monthly payment unless you can wangle some dealer incentives to offset that. I didn't find out about that and I also wanted to be able to make changes to MY car, not the one I was renting so I opted for a one year old one previous owner choice to offset the falling knife depreciation to some degree. While the leasing numbers I have seen for SVR models on the lot being cleared make me mildly green, overall I'm happy with what I have.

Maybe I'll revisit leasing next time. My annual mileage is easily under 10K.
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Old 10-15-2017, 03:20 PM
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Quote:
Originally Posted by Westwood View Post
I am curious in why you would lease it in the first place?
I come from a place of getting the car you love and drive it until it dies on you. Many people told me to lease it and after a while we figured out the issue: they are more than happy to have the car for say, 4 years, and after that turn it in or buy and sell it, and make back X amount of money, which they'd suggest is more than what you'd have to pay to eventually own the car. But that to me just doesn't sound right because all the money you paid to lease it until then is basically evaporate. Sounds a bit too expensive a price to pay to have the car for 4 years.
Sure, you have no assurance that you still want to keep that car after 4 years, but that is why I want to make the right choice and buy the car I love. I know some people want a "new" car every 4-5 years so maybe there's what sets up apart.
I totally get what you mean Tahoe Dave. What happens if you tip into 10+ in one year? I would do approximately 12K a year which makes leasing not a good option when I last checked.
Do you use that as your only car?
BTW no you're not obsessive, just careful. There is nothing wrong with a little planning.
The lease solves for warranty issues, as well as makes possible a new ride every (approx) 3 years. This is one of three cars as such, I use it accordingly. As with other leased cars, I'll nail the mileage on the nose. Just felt the need to put this "out there" to see if my observation was shared by anyone else or just mine.
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Old 10-15-2017, 03:32 PM
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If you only plan to keep the F Type for 3 to 4 years you would have to be crazy to buy. The depreciation is savage on these cars and is far greater than the residual lease payments. The depreciation on the cash purchase has also evaporated in the same way that lease payments have.

Buying only makes sense if you are keeping the car long term, or buying something that barely depreciates like a Porsche GT3 / GT4 / 911 R etc
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Old 10-15-2017, 03:45 PM
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I think this has been well covered in other threads here and on many auto forums. You either defend leasing or defend buying and so be it. One of the strong incentives for me to lease is that I am not tempted to modify the car. I spent a fortune on my Vette, adding a Lingenfelter package, upgrading the interior, the suspension, the exhaust, the shifter, and so on. It was fun and enjoyable but I reached the point of just wanting a turnkey approach to motoring. I wanted a good deal for a lease, but only relative to other leases. I did not care what it cost compared with buying. I am just fed up with trying to sell cars when the buyer assumes he has to haggle. I am pleased to just pay for the ability to turn in the car and walk away.
Larry
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Old 10-15-2017, 03:46 PM
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Another glitch in leasing is the lase return "normal" wear and tear. Some dealers can be nasty a..holes and ding you for every microscopic piece of "road rash" and other small dings, etc.
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Old 10-15-2017, 03:52 PM
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Originally Posted by Jayt2 View Post
Another glitch in leasing is the lase return "normal" wear and tear. Some dealers can be nasty a..holes and ding you for every microscopic piece of "road rash" and other small dings, etc.
And the flip side to that is - try trading a car in, better get the Vaseline out as the dealer bends you over.

Or, sell the car privately and have to deal with endless amounts of time wasters who make ridiculous low ball offers.
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Old 10-15-2017, 04:57 PM
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Quote:
Originally Posted by stmcknig View Post
The argument for leasing (apart from gimme a new model every three years) is that depreciation becomes someone else's problem, particularly where that is a "drops like a rock" factor. Or using the residual value to get into something that ordinarily you wouldn't or couldn't justify buying (SVR). Or not having to deal with out of warranty stuff, but JLR have led the pack with the 5 year 60K deal Elite, including servicing and roadside.
The statement above is misleading. Leasing doesn't in ANY way "get rid" of the depreciation. That is a fallacy. People whom lease DO, in fact, shoulder the burden of depreciation. It's just buried in their lease payments. What leasing DOES do is to remove the uncertainty of the value of the car AFTER the lease period has been concluded. That means that should the car depreciate more than the manufacture originally projected, the lessee is not on the hook for it as they can simply turn the car back over to the dealership. As an example, the convertible '17 Rs' currently have a 54% residual rate after 33 months. That is 46% depreciation that the lessee IS paying.

Quote:
Originally Posted by stmcknig View Post
The mileage limit isn't enforced per year, it's total over the life of the lease so it's not unnatural that in the honeymoon stage you might put on more than the expected "quota" and it evens out in the longer term. Obviously if you estimate your annual miles to be 15K then leasing probably isn't for you. As to mileage overage, again some say it works out cheaper to pay the overage charge than deal with the negative equity if you bought it new.
Most lessees simply pay the overages at the end and don't actually worry themselves that much about the miles per year. Doing it this way they are paying for the miles. They just are differing that payment until the end of the lease (33 months for most).

I have never leased but am not trying to avoid it. Rather, I have been able to pay for my vehicles and have equity in them at the end of the payments. However, not everybody are able to handle make $900/month payments for 60 months.

Last edited by ndabunka; 10-16-2017 at 03:06 PM.
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Old 10-15-2017, 05:00 PM
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Quote:
Originally Posted by Tahoe Dave View Post
The lease solves for warranty issues, as well as makes possible a new ride every (approx) 3 years. This is one of three cars as such, I use it accordingly. As with other leased cars, I'll nail the mileage on the nose. Just felt the need to put this "out there" to see if my observation was shared by anyone else or just mine.
Another fallacy tied to leasing. The service on these vehicles is 5 years, 50K miles so.. all costs are borne to the dealer regardless of the ... method of financing.
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Old 10-16-2017, 03:19 AM
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I've done both and currently own both our cars. Had enough free cash to get low interest and big down payment. The Jag at 4 years old has just crossed the line where my dn payment is recovered. I guess sort of like a 4 year lease but my payment was lower. In my case it is important for me to be able to get out of our cars quickly if some health issue causes our retirement to change. Old age problem!
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Old 10-16-2017, 11:44 AM
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Leasing is not for everyone but if you understand what it is you might be more inclined to lease than finance.

First some comments on what has been stated here.

Understand that the factors that affect the value of a vehicle at any point in time include the model and colors/options, condition, market factors, history, age, and mileage.

You pay for depreciation (age factor) whether you lease, finance, or purchase outright. A vehicle begins depreciating as soon as it drives off the lot of the dealer. After X years and X miles it is worth the same regardless if it was leased or financed. With a lease you are essentially paying the depreciation, fees and interest on the money over the term of the lease. With a finance you are paying the fees and interest on the money over the term of the loan with depreciation not being factored into the deal. The depreciation is realized when you get out of your finance agreement.

You pay for miles whether you lease, finance or purchase outright. By 'pay for miles' I mean that mileage is one of the factors affecting value so you 'pay' for it regardless. If you finance you can drive as many miles as you want. If you lease you can drive as many miles as you want simply by paying the charge per mile for the mileage over that of the lease agreement if you go to the end of the term and turn the car in.

Regardless of finance or lease there is a payoff that can be obtained at any time if you decide you want to trade it in earlier than your full term, so you are not locked into keeping the vehicle if you want to get another one. In either case you could be 'upside down' (owe more on the car than the trade value) but this difference can be factored into a new vehicle finance or lease if you wish.

So why do I say you might be more inclined to lease if you understand it? Because of the following.

With a lease you are passing all risk to the manufacturer. All risk of future value is the biggest risk they assume. With a lease you know exactly what the cost to purchase that car will be at the end of the lease term. Period. The cost to purchase it will not be impacted by damage, modifications, mileage or any other factor. You can purchase it at the end of the lease term for the cost stated when you sign the lease paperwork. With financing you will own the car at the end of the finance contract but have no idea what it will be worth.

All risk of future value due to an accident is passed to the manufacturer as well. Just as with financing, you are required to carry insurance to cover the cost of repairs, but with leasing if you have a major accident there is no adjustment at the end of the term as long as the car is repaired back to original specs. When you finance, the value of the vehicle will be reduced depending on the severity of the accident as it is reported to Carfax, Equifax, etc.

All risk of future value based on market conditions, color, options, etc. is passed on in the same way. Think VW Diesel. If you had purchased a brand new VW Jetta Diesel a week before the news the impact on value would be painful. If you had leased the car it is a non-issue. Just turn it in at the end of your lease and walk away.

Looking at the cost of leasing vs. the cost of purchasing can be interesting. Look at two leases vs. a 6 year finance on an F-Type for example. Over that 6 year term if you leased you would pay almost the same as financing when you consider taxes, fees, interest, and 'depreciation'. That is assuming you have no out-of warranty repairs which could be a costly assumption. WIth the lease you will be in warranty for the entire 6 years, not so with financing.

With the lease you will have the benefit of two new Jags over that time period instead of just one. That could be a great benefit. Think of the options this year with the new 4-banger and the 300 Sport. If your lease ended this year you could choose one of those for your next car. Also consider the rapid changing pace of technology in the cars. Not just the screens but the technology of engines, components, handling, etc. Great to have that as an option.

These are just some of the differences and I'm sure food for much discussion. I'm not advocating one or the other as everyone's situation is different, but for many a lease will come out on top as the preferred way to drive a car in today's market.

Hope this helps....

Last edited by MaineJagMike; 10-16-2017 at 11:46 AM.
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Old 10-16-2017, 12:23 PM
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I'm retired and like the idea of a new model every 3 or 4 years...so leasing is attractive to me in that sense.

Also, being retired with several other cars at my disposal, I find I average only around 2500 miles/year and my current 3 year old F-Type has just 7700 miles on it...even when I was working I'd still only do about 5500 miles/yr. average.

I signed up for 7500 miles/year knowing full well I probably won't get anywhere close to those miles.

I keep my cars in pristine condition so usually to find wear & tear on my cars, you'd need to pull out the microscope...again, a good candidate for leasing.

Lastly, both the Jaguar and upcoming S5 Coupe were/are first year models and sometimes, that can be unsettling for a buyer, another reason why I chose to lease rather than buy.
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Old 10-16-2017, 02:45 PM
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I'm retired and like the idea of a new model every 3 or 4 years...so leasing is attractive to me in that sense.

Also, being retired with several other cars at my disposal, I find I average only around 2500 miles/year and my current 3 year old F-Type has just 7700 miles on it...even when I was working I'd still only do about 5500 miles/yr. average.

I signed up for 7500 miles/year knowing full well I probably won't get anywhere close to those miles.

I keep my cars in pristine condition so usually to find wear & tear on my cars, you'd need to pull out the microscope...again, a good candidate for leasing.

Lastly, both the Jaguar and upcoming S5 Coupe were/are first year models and sometimes, that can be unsettling for a buyer, another reason why I chose to lease rather than buy.
You are right about leasing if you like to get into a new car every 3 or 4 years.

Signing up for more miles than you will drive is something I don't normally recommend if you are close to a lower mileage tier, would rather see you sign up for 5,000 miles if you expect to drive close to that and pay the difference if you go over. Just have to do the math and see what makes more sense, it could cost more if you drive closer to the next tier up.

When you are ready for your next one you should compare the market value of the car as a 'trade' vs. just turning it in for a new one as you MAY have equity there. In which case you could use that equity toward the inception fees on a new lease.
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Old 10-16-2017, 03:26 PM
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My 2012 BMW X5d is 5 years old and has 75K miles. That means that I have $20K in equity in my BMW X5d that can be used as a down payment on an F-Type purchase. If I leased, my payments over that period would have been pretty similar (within $50/month) so instead of $20K in equity, I would have saved $3K which, even if I had invested it in the stock market, would have still been far, far less.

This does not mean that I would not consider a lease so I am not against them but in the same breath, those weighing these two choices should FULLY understand the purchase angle as well as the leasing angle. For example, should I decide to lease this time I can take that $20K and place it in the stock market and earn interest on those $'s going forward.

One thing not mentioned above is that should you beat the crap out of the lease, the leasing company WILL charge you for the condition the car is returned in so, yes it could cost you MUCH more than planned at lease turn in. There are lots of stories of poor repairs, excess mileage and abuse that HAS cost many lessees big $s.
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Old 10-16-2017, 03:45 PM
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I view leasing as another tool to get a good deal. While it certainly isn't for everyone (especially if you drive over $15k/year) leasing can significantly lower your costs in certain cases.


Another thing to keep in mind is that some cars lease better than others. For example, there have been some amazing lease deals on the F-Type while Porsches generally don't lease well. The best deal I ever heard of for an F-Type base was just a hair under $400/month before tax with 0 down for 36 months with 10k/year miles. At that price, it is hard to justify buying that car new.


Also, in some states like California you pay sales tax on the amount of the lease not the whole car. When you are talking about cars costing close to $100k, the sales tax can be close to $10k and you lose it the second you drive off the lot!
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Old 10-16-2017, 04:14 PM
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In my experience, I think some may understate the difficulty in obtaining the "equity" in a sale. In my case, I live in an area that while not remote, is 2.5 hours from the nearest large population center. Selling a used car, especially one as low volume as a Jag, is never easy in my area. I have had some success with things like Craigslist and auto forums, but patience is required. Trading is just another way to feel like you should take a jar of Vaseline with you. Yes, I have gotten fair trade-in prices, using common benchmark websites. But I do not feel that I have ever gotten a phenomenal net deal with a trade. The best feelings have always been with a plain purchase, no trade.
Leasing just eliminates all of the hassle, uncertainty, difficulties and feeling that I could have done better. I just calculate what I can afford or want to pay for a lease payment and turn in the car at the end of the lease. It probably is not the lowest cost option, but it is the lowest aggravation, by far.
Larry
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Old 10-16-2017, 04:21 PM
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You will always get taken to the cleaners on trade-in unless you skip it and go private sale. However, market for private sales is limited to sub 20K - most people don't have cash sitting around to buy F-type and too lazy to apply for financing on their own. Dealerships make it easy for them.
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Old 10-16-2017, 06:28 PM
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You will always get taken to the cleaners on trade-in unless you skip it and go private sale. However, market for private sales is limited to sub 20K - most people don't have cash sitting around to buy F-type and too lazy to apply for financing on their own. Dealerships make it easy for them.


You make a good point. I have seen many private sales where the listed price is significantly lower than that of similar cars from a dealer. People just don't want to deal with the hassle of getting loans and going to and from a bank.


Also, I should mention that leases need to be negotiated. I have seen plenty of horrible leases where the customer was taken to the cleaners and would have been better buying the car outright.
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Old 10-16-2017, 06:30 PM
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Originally Posted by ndabunka View Post
My 2012 BMW X5d is 5 years old and has 75K miles. That means that I have $20K in equity in my BMW X5d that can be used as a down payment on an F-Type purchase. If I leased, my payments over that period would have been pretty similar (within $50/month) so instead of $20K in equity, I would have saved $3K which, even if I had invested it in the stock market, would have still been far, far less.

This does not mean that I would not consider a lease so I am not against them but in the same breath, those weighing these two choices should FULLY understand the purchase angle as well as the leasing angle. For example, should I decide to lease this time I can take that $20K and place it in the stock market and earn interest on those $'s going forward.

One thing not mentioned above is that should you beat the crap out of the lease, the leasing company WILL charge you for the condition the car is returned in so, yes it could cost you MUCH more than planned at lease turn in. There are lots of stories of poor repairs, excess mileage and abuse that HAS cost many lessees big $s.
Not sure I am following you on this one. You wouldn’t have been able to lease a BMW X5 for 5 years. You would have either leased for up to 3 years, paid essentially the depreciation for that period and either: a) bought the car out at lease end, b) turned the car in and walked away or c) entered into a new lease agreement and had a brand new car at the 3 year mark.
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