Lease vs Finance Discussion

[MarkyMark]

Some people say they got a screaming deal of $XX, because that is indeed a great price, until you learn that's the negotiated LEASE price and they leased the car. Up until yesterday, the Stinger had up to $6,800 in lease cash dealers could use to lease certain models. But some people don't want to say they leased it, rather, they want to talk about how great their negotiating powers were in bringing down the price. I get it. Dealers are great at making the customer feel they got a great/special deal. That's their job. And sometimes that dead on correct, other times not so much, but everyone feels they got a deal. But there is a reason lease cash is massive. Because it's a lease and we all know what that means...

 

[Chris]

Yep, and it's the internet so I don't really believe anything unless I see proof. ( Including how many BMW's someone may or may not owned wink wink)

 

[MarkyMark]

Yep, and it's the internet so I don't really believe anything unless I see proof. ( Including how many BMW's someone may or may not owned wink wink)

Bing! Circle gets the square! Pick again! (Hollywood squares quote - meaning you nailed it!)

 

[Kia Stinger]

Yah, it's difficult to understand his comment (you can read it either way)... Also, some people say they got a screaming deal of $XX, because that is indeed a great price, until you learn that's the negotiated LEASE price and they leased the car. Up until yesterday, the Stinger had up to $6,800 in lease cash dealers could use to lease certain models. But some people don't want to say they leased it, rather, they want to talk about how great their negotiating powers were in bringing down the price. I get it. Dealers are great at making the customer feel they got a great/special deal. That's their job. And sometimes that dead on correct, other times not so much, but everyone feels they got a deal. But there is a reason lease cash is massive. Because it's a lease and we all know what that means...

How does that work with buy back at the end of the lease? Does that $6,800 get washed away somehow or do you actually end up buying the car and have that savings become more - I don't know - real...?

 

[iclicku]

How does that work with buy back at the end of the lease? Does that $6,800 get washed away somehow or do you actually end up buying the car and have that savings become more - I don't know - real...?

The lease cash doesn't wash away or get tacked back on at the end of lease. You either buy it out for the residual or pay disposition fee and return it. The residual is something set in stone at the beginning based on the MSRP.

To be more specific, my option at the end of my lease is to 1) pay $27287 and own it or 2) pay $400 and turn it back in.

 

[Kia Stinger]

The lease cash doesn't wash away or get tacked back on at the end of lease. You either buy it out for the residual or pay disposition fee and return it. The residual is something set in stone at the beginning based on the MSRP.

Thanks. I've never done a buy back. I've always been excited about getting into "the new car".

 

[iclicku]

Here is some math to consider...

The total amount of payments for my lease is $679.80 x 36 which is $24,472.80

My residual is $27,287 which I can choose to finance at the end of the lease. With tax it will come to $29,789. Let's say hypothetically my rate is 2.84 and I choose to pay it off in 24 mo. The total of my payments would be $30,678.

Now with the $24,472.80 from my lease payments plus $30,678 I have to pay to own it we come to a grand total of $55,150 over 5 years.

If I were to originally finance the car for 5 years at MSRP at the same rate (2.84) I would be paying $62k (52k msrp + 10% tax + finance)
for the car total.

 

[Kia Stinger]

Here is some math to consider...

The total amount of payments for my lease is $679.80 x 36 which is $24,472.80

My residual is $27,287 which I can choose to finance at the end of the lease. With tax it will come to $29,789. Let's say hypothetically my rate is 2.84 and I choose to pay it off in 24 mo. The total of my payments would be $30,678.

Now with the $24,472.80 from my lease payments plus $30,678 I have to pay to own it we come to a grand total of $55,150 over 5 years.

If I were to originally finance the car for 5 years at MSRP at the same rate (2.84) I would be paying $62k (52k msrp + 10% tax + finance)
for the car total.

Math makes me crazy... <where's the runaway emoticon?>

 

[MarkyMark]

How does that work with buy back at the end of the lease? Does that $6,800 get washed away somehow or do you actually end up buying the car and have that savings become more - I don't know - real...?

With a lease, there is a set cost of what the car will sell to you for after 24/36/48 months. You know this up-front before you sign the lease, and you know what the value of the car is based on. No rebates, washed away money, etc... it's all known and those figures are exactly what they are.

Example:
Stinger GT1 AWD: $46,005
Negotiated Lease Price: $42,000
Down: $3,000
Monthly: $350
Term: 36 months
36 months of payments = $12,600
Residual Purchase Price (after 36 months): $27,500

Now, what makes this so horrible if you don't benefit from leasing or purchasing? Add the $3k down, plus the $12,600 mostly and you are up to having put in $15,600 into a rental for 3 years and the purchase price is still $27,000...

Not getting it yet? $27,000 + $15,600 = $42,600

A. That's $600 more than the lease price you negotiated (in many cases it's much worse than this)
B. The car, after 3 years, is nowhere NEAR worth $42,600!!! It is NOT worth $27,500 after 3 years! It's worth FAR LESS!!!

So you paid 3 years on a car value, and now what's left plus what you paid it's worth more?! No. If you owned it and drove it for 3 years and 36k miles, it would be worth about $20k - 22k... Cars depreciate about 50% (4% overall average), and luxury cars depreciate even more so (most of them - this is the average mind you).

My understanding is there is a huge write off incentive for the leasing agent (bank) and all kids of money for the dealer and manufacturer of course, because the lease figure has HUGE interest in it and now you the lucky lease person can buy the 3 year old car with it having zero depreciation in it. Ack! And refinance it all over again.

I am NOT a lease guy, can you tell? ; )

 

[iclicku]

Sorry...lol. I'm bored...

 

[Kia Stinger]

With a lease, there is a set cost of what the car will sell to you for after 24/36/48 months. You know this up-front before you sign the lease, and you know what the value of the car is based on. No rebates, washed away money, etc... it's all known and those figures are exactly what they are.

Example:
Stinger GT1 AWD: $46,005
Negotiated Lease Price: $42,000
Down: $3,000
Monthly: $350
Term: 36 months
36 months of payments = $12,600
Residual Purchase Price (after 36 months): $27,500

Now, what makes this so horrible if you don't benefit from leasing or purchasing? Add the $3k down, plus the $12,600 mostly and you are up to having put in $15,600 into a rental for 3 years and the purchase price is still $27,000...

Not getting it yet? $27,000 + $15,600 = $42,600

A. That's $600 more than the lease price you negotiated (in many cases it's much worse than this)
B. The car, after 3 years, is nowhere NEAR worth $42,600!!! It is NOT worth $27,500 after 3 years! It's worth FAR LESS!!!

So you paid 3 years on a car value, and now what's left plus what you paid it's worth more?! No. If you owned it and drove it for 3 years and 36k miles, it would be worth about $20k - 22k... Cars depreciate about 50% (4% overall average), and luxury cars depreciate even more so (most of them - this is the average mind you).

My understanding is there is a huge write off incentive for the leasing agent (bank) and all kids of money for the dealer and manufacturer of course, because the lease figure has HUGE interest in it and now you the lucky lease person can buy the 3 year old car with it having zero depreciation in it. Ack! And refinance it all over again.

I am NOT a lease guy, can you tell? ; )

I'm never buying a car again. I think I was born to be chauffeured.

 

[MarkyMark]

Here is some math to consider...

The total amount of payments for my lease is $679.80 x 36 which is $24,472.80

My residual is $27,287 which I can choose to finance at the end of the lease. With tax it will come to $29,789. Let's say hypothetically my rate is 2.84 and I choose to pay it off in 24 mo. The total of my payments would be $30,678.

Now with the $24,472.80 from my lease payments plus $30,678 I have to pay to own it we come to a grand total of $55,150 over 5 years.

If I were to originally finance the car for 5 years at MSRP at the same rate (2.84) I would be paying $62k (52k msrp + 10% tax + finance)
for the car total.

Would you pay $30,678, for a 3 year old used Stinger? That's a question. Used Stingers will be going for around $25k at that point. But there is comfort in you owning it. Know, any damage, depreciation from an accident, you'll pay that in full when the lease is up.

Are you stateside? 2.84% is pretty bad on a new car. Kia has 1.9%, but on a Stinger, good credit, .9% financing...

If you purchase, you can pay it off in 5 years? Yes? With the lease, likely 8 years (3 years lease, 5 years payment plan). Odds are you will be upside down come year 6-8, and that is a dangerous place to be.

Clark Howard has a rule: If you cannot afford to pay off a car in 3.5 years, you cannot afford it. It's a great rule to live by IMHO. Good luck!

 

[iclicku]

I guess I didn't make my post clear enough.

I said hypothetically I could purchase the car at the residual by financing at 2.84% using today's used car rates. Plus I said I was going to pay off the remaining note in 2 years making my total time to pay off the car 5 years...

I am comparing the 5 year cost to finance vs lease in my particular situation.

Ultimately in this one scenario 55k < 62k.

 

[Kia Stinger]

We've gone off topic and this is no longer about what you paid for your Stinger. So I'd like to move the off-top posts into a new discussion.

What shall I name the new discussion? Lease vs Finance?

 

[iclicku]

Sounds good to me!

 

[redgt]

Here is some math to consider...

The total amount of payments for my lease is $679.80 x 36 which is $24,472.80

My residual is $27,287 which I can choose to finance at the end of the lease. With tax it will come to $29,789. Let's say hypothetically my rate is 2.84 and I choose to pay it off in 24 mo. The total of my payments would be $30,678.

Now with the $24,472.80 from my lease payments plus $30,678 I have to pay to own it we come to a grand total of $55,150 over 5 years.

If I were to originally finance the car for 5 years at MSRP at the same rate (2.84) I would be paying $62k (52k msrp + 10% tax + finance)
for the car total.

You didn't put 1 cent down on lease? If they were willing to drop the cap cost on a lease they would do the same on a purchase. Also the lease buyout example would have a $1278/month payment for 2 years. You are going to pay that much for a 3 year old car?

Your purchase example has you paying full msrp with used a used car finance rate. I paid less than MSRP and got .90% which is unheard of on a used purchase

 

[iclicku]

You didn't put 1 cent down on lease? If they were willing to drop the cap cost on a lease they would do the same on a purchase. Also the lease buyout example would have a $1278/month payment for 2 years. You are going to pay that much for a 3 year old car?

Your purchase example has you paying full msrp with used a used car finance rate. I paid less than MSRP and got .90% which is unheard of on a used purchase

I did not put a cent down on the lease. I never do. And you are correct that my finance payments would be $1278 for a 2 yr note. You are incorrect in assuming they would apply the lease cash on a financed vehicle. The promo doesn't apply. There aren't any rebates for financing...just a 0.9% Apr for 60 mo.

My point that in MY particular situation, the total cost between leasing+2yr financing costs less than just financing 5 years from the beginning.

And I am using worst case scenario numbers for financing rates for a top tier credit. Plus not everyone is part of a CU or has Navy Federal.

Using your suggestion of 0.9% the total cost to finance @ msrp ($52,475 + 10% tax) is 59k.

Let's be even more generous to the finance scenario and assume I could get invoice on the car right now which is 49k for the GT2 AWD with destinstion. The total cost to finance for 5 years at 0.9% comes in at 55k.

So at this point my scenario is the same as getting invoice.

I'm not talking about the whole affordability angle here guys. I'm talking about how the numbers play out for a 5 year loan or 3yr lease + 2yr loan.

I'll reply to further questions about the numbers and will refrain from getting into a philosophical debate on what someone said you can afford or should be allowed to spend on your possesions.

 

[redgt]

679/month lease payment includes sales tax?

sales tax is really 10% in WA? ouch

 

[iclicku]

Yes that includes all fees. And to be accurate it comes to 10.3% if you live within a certain zip near Seattle. And yes WA taxes suck but hey at least we don't have state income tax... :/

 

[redgt]

paying 679 for months 1-36 and then 1278 for months 37-60 seems a little backwards but if you are happy with the deal that's all that matters