Lease vs. Purchase?

[Darforce]

Leasing is not a waste of anything.

You're paying for the time you use it. Leasing also keeps your loan/debt ratio low. Leasing is only an option if you have good credit, which gets you the best money factor. Leasing takes on far less risk in case you damage the vehicle or end up with a first year run dud. Finally leasing helps those who want to maintain a level of liquidity with finances since it isn't smart to put money down on a lease; maybe $1000K is ok.

Businesses rarely purchase vehicles new because why would you take on a depreciating tool unless the vehicle IS the business? Leasing keeps your payments low up front, then you have options on the back end if you would like to keep your car and finance for an extra 24-36 months.

That said, I'm purchasing the Bronco with a loan with maybe just $2K down because I don't like down payments in case the vehicle gets totaled or flooded. Also, I don't want to think about mileage on the Bronco and I plan to keep it indefinitely as a toy although it will be a daily driver for at least 3 years.

Even if you modify your lease, it's not a big penalty in most cases and if you keep the ride, you've limited a lot of uncertainty.

This isn't advice, just some options to consider from a PhD Economist who works for a large private investment brokerage..... that's all.

Years ago, I watched my friend who had a loan on lemon of a car try to trade in for a new car, but could never get the equity on her car and the loan amount to even out enough for it to be a wash. For that reason, I always lease. It makes the most sense to me. There is always the option to buy at the end with the money you put in going towards the principal, so the argument that you are “throwing your money away” is just silly. I’ll decide whether to buy or lease when I see the payment amounts on paper.

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[RubyRuin]

I will be financing the Bronco, but I've done a few leases for vehicles that may have questionable depreciation rates/risk of quick obsolescence since I tend to get new vehicles every 2-3 years.

 

[Darforce]

Won't matter. Let's supposed worst case: It's a piece of crap. Guess what? When you go to hand it back with the keys, it won't make the residual value!!!! You pay either way.

I have never had a lease where there was a clause that said if the Residual value was less you had to pay the difference. Pretty sure that is not a thing. It is estimated up front and agreed upon when you sign the contract. If its worth more at the end you can buy it for more than it’s worth or usually the dealer will buy it and cut you a deal.

 

[RubyRuin]

I have never had a lease where there was a clause that said if the Residual value was less you had to pay the difference. Pretty sure that is not a thing. It is estimated up front and agreed upon when you sign the contract. If its worth more at the end you can buy it for more than it’s worth or usually the dealer will buy it and cut you a deal.

Same. As long as you pay all the monthly due over the agreed term, you just turn the vehicle in within the last 30-60 days, pay the disposition fee and walk away. I'd be curious to know what lender does this if this is actually a thing.

 

[Headsong]

Same. As long as you pay all the monthly due over the agreed term, you just turn the vehicle in within the last 30-60 days, pay the disposition fee and walk away. I'd be curious to know what lender does this if this is actually a thing.

Good to know. Been a while since I had one myself, so that's good to know. You have an out, then.

 

[bloominguez]

I'll probably buy, with a loan, even though I could pay cash. If the money is cheap enough, why not? Let investments earn more than I'm paying in loan interest. I don't have anything against leases, but as someone who keeps vehicles for a long time they're not for me.

The thing always amazes me about leases (I've helped multiple people buy/lease cars) is how people tend to blindly accept the published lease payments. Don't. Just don't. You should still negotiate!!! People seem to think that because leasing is not buying, they can't or shouldn't negotiate a purchase price. Nothing could be further from the truth.

When you lease, you're paying for the use of a car for a period of time and a certain amount of mileage. You calculate the lease payments by the initial cost of the vehicle and the agreed-upon ending value of the vehicle, and the cost of money. You may not be able to influence the residual value of the vehicle at the end of the lease, the lender may determine that. But you can negotiate the purchase price and you can shop for a lower interest rate.

Even though you're leasing, negotiate for a lower purchase price. Search for a lower interest rate. Get the dealer to specify both explicitly, and with that information verify their lease payment calculation (it's not hard, there are spreadsheets, online calculation sites, calculators, etc. that can all do it).

 

[Schnabby]

I like to put 50% down and finance the balance to try to work a better deal, then after 2 years pay off the loan. If no deals or good interest rates on the loan am prepared to pay in full.

 

[lakesinai]

I've leased and purchased, and there are times when each is a good choice. A $51,500 Bronco can be leased over 48 months for about $519/month with $5150 down. Good cash flow. Buy at the end, or walk away in 4 years and buy/lease the 2026 model Bronco. Buy bigger tires at purchase, and save the stock tires for when you turn in the vehicle in 2025 or 2026. Keep any accessories for your next Bronco.

When leasing, you do have mileage and condition restrictions, but if its not perfect condition and there are fees, you can pay the fees or keep it with a new loan.

To purchase Your $51,500 Bronco, and keep the payment at about $519/month over 72 months, you'll need to put $19,000 down in cash or trade! Thats steep for some. If the vehicle stays popular, you may have some significant trade equity at the 4 year mark to buy your next Bronco . . . Or keep it till paid off at 72 months and beyond! But if you like what you own, its yours to modify as you please, unless limited by warranty if you care.

All good choices, with a mix of pencil-pushing, luck and guesswork about how I'll like the car and its future value to me and to the market.

The one wild card to me is the EV-ICE conundrum. Will a truly reliable EV be available in 4 years, making our ICE vehicles obsolete? Or less valuable? Or is that further away in time and ICE will "always" be in demand. Ford is going the Hybrid route for now with F150. How will that affect future Bronco valuations if there's a reliable 2024 Hybrid or Plug in Bronco? If i want to hedge my bets, a 4 year lease is safe, but i could lose out on a hefty trade-in value!

A penny for your thoughts . . !

 

[AZ_Liberty]

I'm going to pay cash while the dollar is still worth something and think about another car once I hit around 250,000 miles or my left knee gives out, whichever comes first.

 

[Zenithon]

I leased a new car in 1985...never again! This will also be my last new vehicle(66 1/2 yo). I'll be down to Bronco, 68 Torino, 17 Ultra classic CVO.
Enjoy your new Bronco I know I will

Love that you're still counting fractions of a year! I tried to talk my 80 3/4 year old father into getting one, but he's content with his 1995 Jeep. I'll let him take mine for a spin. Enjoy that Bronco.

 

[HighBadSquatch]

I'll be leasing, I don't see any need to mod a badlands with sasquatch as it already has everything I would do and more. Also I can drive it for a few years and either keep it in the end or get a new one in 25 or 26 depending on upgrades or different options available at that time. First run of a new model (I know tried and tested platform and components from other vehicles) might have some quirks or bugs that I won't have to worry about because I'm set up to switch to a new one in a few years anyway.
Side note... If doge, xlm, cardona, matic or telcoin 10X or more I'll just buy cash and not care lol.

 

[Efthreeoh]

Leasing is not a waste of anything.

You're paying for the time you use it. Leasing also keeps your loan/debt ratio low. Leasing is only an option if you have good credit, which gets you the best money factor. Leasing takes on far less risk in case you damage the vehicle or end up with a first year run dud. Finally leasing helps those who want to maintain a level of liquidity with finances since it isn't smart to put money down on a lease; maybe $1000K is ok.

Businesses rarely purchase vehicles new because why would you take on a depreciating tool unless the vehicle IS the business? Leasing keeps your payments low up front, then you have options on the back end if you would like to keep your car and finance for an extra 24-36 months.

That said, I'm purchasing the Bronco with a loan with maybe just $2K down because I don't like down payments in case the vehicle gets totaled or flooded. Also, I don't want to think about mileage on the Bronco and I plan to keep it indefinitely as a toy although it will be a daily driver for at least 3 years.

Even if you modify your lease, it's not a big penalty in most cases and if you keep the ride, you've limited a lot of uncertainty.

This isn't advice, just some options to consider from a PhD Economist who works for a large private investment brokerage..... that's all.

I don't have a PhD, but on occasion I have slept at a Hotel 6 when the river floods.

The only true metric to judge the economic value of owning and using a vehicle either by purchasing it or leasing it, is the total cost of ownership divided by the total miles driven. Total cost of ownership is all of the dollars spent procuring and operating the vehicle: acquisition price, fuel cost, and maintenance. Acquisition price is the delta between total purchase price and the total resale price.

Owning a vehicle that has low maintenance costs and low operating costs over a long period and several hundred thousands of miles is usually the best economic choice for individuals.

 

[Efthreeoh]

Purchase. If Gas and inflation keep rising, and these MPG numbers I'm seeing on this board are correct, I'm going to have to trade it in on something more economical. 21 MPG at $4.00 a gallon is going to be tough. I'm not saying that will happen. I just like having a way out.

Get ready to bend over then. You'll remember fondly of the days of $4 gasoline.

 

[MadMan4BamaNATL]

I don't have a PhD, but on occasion I have slept at a Hotel 6 when the river floods.

The only true metric to judge the economic value of owning and using a vehicle either by purchasing it or leasing it, is the total cost of ownership divided by the total miles driven. Total cost of ownership is all of the dollars spent procuring and operating the vehicle: acquisition price, fuel cost, and maintenance. Acquisition price is the delta between total purchase price and the total resale price.

Owning a vehicle that has low maintenance costs and low operating costs over a long period and several hundred thousands of miles is usually the best economic choice for individuals.

You're correct friend, but those are some favorable parameters you describe there and only become real at the end; not so clear at the start of the acquisition which is why although businesses tend to put a ton of miles on a vehicle, they still lease them. Miles overage really isn't that expensive when you do the math.

Whether to lease or buy is often a very deeply held personal decision which is why I said my post was not advice, only information on options and things to consider.

Personal situations can change any variable and there is no sure way to totally remove risk unless you just elect to not purchase a vehicle and take the bus.

However, vehicles are very personal purchases in the United States. Some just drive whatever and don't care, then there are car guys or gals who will pay what is necessary because they can and want the best experience driving and everything that comes with being a petrol head.

 

[Efthreeoh]

You're correct friend, but those are some favorable parameters you describe there and only become real at the end; not so clear at the start of the acquisition which is why although businesses tend to put a ton of miles on a vehicle, they still lease them. Miles overage really isn't that expensive when you do the math.

Whether to lease or buy is often a very deeply held personal decision which is why I said my post was not advice, only information on options and things to consider.

Personal situations can change any variable and there is no sure way to totally remove risk unless you just elect to not purchase a vehicle and take the bus.

However, vehicles are very personal purchases in the United States. Some just drive whatever and don't care, then there are car guys or gals who will pay what is necessary because they can and want the best experience driving and everything that comes with being a petrol head.

Well, businesses have tax incentives to lease motor vehicles, so it's not a fair comparison for individual personal transportation.

Again, for personal transportation cost, the only metric to use for comparison and evaluation between models, vehicle types, acquisition method, is cost-per-mile (i.e. how many dollars spent to travel X amount of miles).

This methodology covers whether you own a personal vehicle or use public transportation. For most scenarios, there is enough data to calculate the expected cost-per-mile. For example, even though the Bronco is a brand new vehicle, it still is made of commonly sourced parts from Fords supply chain and is based on the Ranger somewhat. It is also built in a legacy Ford factory with the Ranger. So it would be a fair assumption to think the Bronco would be similar in cost for maintenance (including repair) as the Ranger. Fuel cost is easy, EPA rating times unit cost of gasoline times miles driven. The EPA fuel MPG page standardizes all cars (even EV) as "cost to drive 25 miles". All such data (not a comprehensive list that I've provided as example) can be used in addition to the cost of leasing vs. buying to calculate an estimated total lifecycle cost.

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