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Confused by some of the hate on the lease option. Seems wise for those wanting Low Down and Lower Monthly Payments

JessD05

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My personal opinion of who I thought leases were for other than business cars.....

For those who are really kind/gentle to their vehicles, drove little and wanted a new car every couple years.
A full purchase financing with making minimum payments would cause them to be upside down every 2years when they wanted to trade-in for new.

I never fit that bill so I’ve never researched them.
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Boxer4

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Lease is stupid.

Here is the math.

$52,370 Bronco (lease price)
$51,725 (Purchase price)
1611325083105.png

48 Month lease:
$5173 Down payment - 10500 Mileage limit
$594/month

84 Month Loan
$5173 Down payment - No mileage limit
4.69% x 84 (Current navy federal)
$651/month

You can own it for $57 more a month.

After 4 years of the 7 year (84 month) loan, you would owe $21,791. If you only put 40k miles on it, and Bronco holds value like wrangler, the Bronco could be worth as much as 35k retail or $30k on Trade. That's about $10,000 in trade equity you can use to upgrade to a better Bronco!

That's why i don't like leasing.

Here is what the amortization table for the 84 Month loan.

Years - Payoff amount
1 years: $40,727
2 Years: $34,708 (Possibly even on trade)
3 Years: $28,401 (Ready to trade)
4 Years: $21,791
5 Years: $14,865
6 years: $7,606 (We are in "just pay it off" territory)
7 Years - Paid off

OH and if you are willing to make a higher payment and do a shorter term, it gets much better and the rates go down.

$51725 with $5,173 down.
48 Months, 2.19% $1,013/month Cost of Loan: $2111
60 Months, 2.19% $819/month Cost: $2637
72 Months, 2.79% $702/month Cost: $4058
84 Months 4.69% $651/month Cost: $8148

A 72 Month loan is far better than a 84 Month loan, but an 84 Month loan can net you trade equity where a lease cannot.

Think of it this way. In four years you would have paid $28,152 for the Lease and not get any of it back in trade or $31,485 towards the loan and get at least $5,000 back in trade equity.

Either way you can get a new car every 4 years.
Looks like you used a OBX 2 Dr-
@BravoV4 posted the residuals at 51 % after 4 years. So I'm thinking it would be worth about $26,380. For what it's worth this lease has a 5.25% interest rate.
 

Squatch

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Do you pay tax twice if you lease and then buy the vehicle at the end if the lease??? That’s nuts
The tax you pay on the leased portion is only on the amount of the lease and not the full value of the vehicle, so if you choose to buy it at the end: 1. you shouldn't have leased to begin with AND 2. you have to pay tax on the purchase/lease-end price that you didn't pay tax on in the beginning.

Now if you are planing on returning the vehicle they will put that car under a microscope and look for every detail plus a $350 return fee which is pretty standard for all makes.
Ford Red Carpet Lease:

  • No, no return fee should be assessed
  • No microscope in my experience; they use third-party inspection companies
  • This is where WearCare for, usually, a few buck per month will save you a ton of headache
  • Even if you "re-up" and get another leased vehicle or buy a vehicle, they still have it inspected in the same manner
I'm a big fan of Ford Red Carpet Leases, because they are different. ALL leases are unique to the lender more so than simple auto loans virtually varying by just the interest rate.

I also think that the only time(s) I will ever lease again are when I know with a 99% certainty that I do NOT want that vehicle at the end of the lease.
 

OvrLnd99

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My wife and I have leased and used conventional financing for several vehicles over the years. For us, leasing is a way better option. We know we are going to trade a vehicle in after 3-4 years (sometimes sooner). With a lease (and zero down - which is what we always do) we have a lower payment, full warranty, and GAP protection for the entre time we have the vehicle. We have never had an issue with being over on our miles (always make sure we have the right amount of miles allowed on the lease), and have never had to pay a fee when turning in or trading the vehicle. We have had leases with Ford, Nissan, GM, and Jeep. The difference in payment often times is more than $200 per month. For our particular situation it works out like this - put nothing down -> get a lower lease payment than finance -> trade in -> put nothing down on new car -> get a lower lease payment than finance -> trade in... We don't need to worry about having a certain amount of money to put down on the car (since we don't put a down payment) and we always end up with lower payments than if we used conventional financing. We save money every month, and save money with the down payment. Also, all of my trucks and the two Wranglers I leased I modified (added bumpers, and/or lift, and/or changed tires and wheels) and have never been penalized for it. Also, before anyone else adds their 2 cents, no I did not do major rock crawling with my trucks or Jeeps, but we did take them off road for off grid camping and overlanding type trips. They were not just mall crawlers with never speck of dirt on them. They were used for what they were intended to be used for and modified to fit what we needed.

Everyone will have their own opinion, and will use whatever numbers or examples to explain and justify why they are right. You need to do what is best for your particular situation. Weigh out the pros and cons of each option and do what you and your family feel the most comfortable doing. Other people will be happy to tell you how you should spend your money, but in the end, it is your money. Use it how you see fit.
 

Squatch

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your math is correct. Lease vs purchase, makes little difference, often lease incentives are higher actually.

The most expensive behavior is to flip new cars every 2-3 years. You eat the bulk of the depreciation over and over. Leases are associated with that behavior, so they get the flack.

but purchasing and trading a car every 3 years is just as bad (or worse), but most people are not well versed in depreciation analysis.
You rarely see those same people giving so much flack for eating out at restaurants, drinking alcohol excessively, smoking, or doing just about any other thing which brings limited temporal enjoyment. All of which have horrible residual values and can lead to similar headaches at the end. I enjoy driving new cars that somebody else hasn't farted in yet... or at least it's very unlikely and I can suspend my disbelief.
 

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broncoskip

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Looks like you used a OBX 2 Dr-
@BravoV4 posted the residuals at 51 % after 4 years. So I'm thinking it would be worth about $26,380. For what it's worth this lease has a 5.25% interest rate.
$5k trade equity at 51% residual. Not bad, would make a nice down payment on a 2025 Bronco.
 

BEM-S4

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I knew we were closer together on this than it seemed! Yes, if you have decided that you want a new car every three years (for whatever reasons that make sense to you, obviously they are valid and you understand the attendant costs), then leasing can be a good thing, especially if you get a favorable residual. No argument here. My misunderstanding was in taking your remark that it really didn't matter one way or the other as a blanket statement for everyone rather than a specific statement for your situation. I apologize for my misreading of your post and my subsequent response
No problem whatsoever... this is far from a perfect form of communication. Cars by in large are NOT good financial decisions, it's really about making the least bad decision if that makes any sense. It's also important to be a bit flexible when leasing e.g. if you absolutely must have a specific car no matter what the mitigating factors the math sometimes falls apart.

For mom given her non-financial requirements, we typically end up with BMWs since they set their residuals VERY high to drive volume (typically 5+ points higher than Audi). If you then lease a car with a few miles on it that has never been titled you get an added benefit with an outsized discount. But again it's all about finding the deal not hunting for a specific car. She cares about blind spot assist, awd and 4 doors and literally couldn't care less about anything else. The last time I did this for her the 3-series I mentioned before leased better (like $125 / mo better) than a VW she liked that was $15K less. For her it's much less about certain car and much more about no headache or worry transportation subject to a few different parameters. Couldn't care less if BMW, Audi, Benz, Volvo, whatever.
 

BabaYaga

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The tax you pay on the leased portion is only on the amount of the lease and not the full value of the vehicle, so if you choose to buy it at the end: 1. you shouldn't have leased to begin with AND 2. you have to pay tax on the purchase/lease-end price that you didn't pay tax on in the beginning.



Ford Red Carpet Lease:

  • No, no return fee should be assessed
  • No microscope in my experience; they use third-party inspection companies
  • This is where WearCare for, usually, a few buck per month will save you a ton of headache
  • Even if you "re-up" and get another leased vehicle or buy a vehicle, they still have it inspected in the same manner
I'm a big fan of Ford Red Carpet Leases, because they are different. ALL leases are unique to the lender more so than simple auto loans virtually varying by just the interest rate.

I also think that the only time(s) I will ever lease again are when I know with a 99% certainty that I do NOT want that vehicle at the end of the lease.
Thanks for the info. First time i’ll be leasing with ford and red carpet will
Be my first request to the sales rep.
 

Coldsmoke

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Yeah....leasing versus financing is much like a religious discussion. The thread has a number of great points and good advice, as well as having some comments that's crazy assed shit about how it works.
No sense me adding to the confusion other than to say leasing options are like a pair of fine Italian shoes: They're not for everyone and if it doesn't fit right, they hurt like hell. ?
 

Squatch

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Thanks for the info. First time i’ll be leasing with ford and red carpet will
Be my first request to the sales rep.
No problem. That's just the name for Ford Credit's lease, btw. I just got so used to saying it, because, especially 20 years ago, it is a great lease of the lease options in my opinion.
 

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atonge40

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yes, and this is where people completely miss the trap of leasing. You think you made $1500 to $4000 on each of those vehicles. Obviously the residual was too low on the lease, means your payments were too high as they are based on that residual. Over the 36 or 48 months or whatever the length, you paid more every month than if the residual was right (probably more than $100 a month too much). At the end of the lease the total extra in payments you made each month is more than the amount you 'profited' when selling. It is like paying $10000 in income tax and getting a $5000 refund. People gleefully shout out that they got $5000 refund! When the reality is they over paid that money during the year, there was no gain or 'making', you just recovered some of the money your overpaid on the lease payments by buying and selling at the end.

Go and look at what you paid in total for the lease and add the cost of buying the vehicle at the end. That is what you paid for the vehicle. Now, figure out what it would have cost you to finance and purchase the vehicle over the same amount of time. (the result is the same, you paid differently each month, but the vehicle is paid off at the same moment in time, You will find a rather large difference in favor of buying from the start. The closer the number, the less money you lost by leasing and then buying the car for resale. I suspect if you did that, you would no longer be claiming you 'made' any money buying and selling at the end of a lease. The cost is hidden in the payments and not broken out so that you can easily see it. A lot of people miss it. anyway, once you get the difference in numbers, divide it by the number of months from getting the car to getting the title and that is how much extra you wasted on the lease each month.
Again, this really depends on the total costs. On those VWs, my total cost was less on a lease than a buy. I did the math before deciding. My Ranger is the same. On both it's because there was incentives available for leasing and not buying. On the Ranger, the difference between lease and buy incentives was almost $4000. I am not suggesting that this is the norm, but it can happen.
 

Techun

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Someone probably mentioned it in the last 5 pages, but never, ever put money down on a lease.
 

BEM-S4

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Someone probably mentioned it in the last 5 pages, but never, ever put money down on a lease.
Just to be clear for leasing-newbies... you are referring to a cap cost reduction that is a big no-no. However MSDs (multiple security deposits) are up front money that you contractually get back at the end and they buy down your interest rate. Those are usually VERY good to do if you can tie up the cash.
 

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yes, and this is where people completely miss the trap of leasing. You think you made $1500 to $4000 on each of those vehicles. Obviously the residual was too low on the lease, means your payments were too high as they are based on that residual. Over the 36 or 48 months or whatever the length, you paid more every month than if the residual was right (probably more than $100 a month too much). At the end of the lease the total extra in payments you made each month is more than the amount you 'profited' when selling. It is like paying $10000 in income tax and getting a $5000 refund. People gleefully shout out that they got $5000 refund! When the reality is they over paid that money during the year, there was no gain or 'making', you just recovered some of the money your overpaid on the lease payments by buying and selling at the end.

Go and look at what you paid in total for the lease and add the cost of buying the vehicle at the end. That is what you paid for the vehicle. Now, figure out what it would have cost you to finance and purchase the vehicle over the same amount of time. (the result is the same, you paid differently each month, but the vehicle is paid off at the same moment in time, You will find a rather large difference in favor of buying from the start. The closer the number, the less money you lost by leasing and then buying the car for resale. I suspect if you did that, you would no longer be claiming you 'made' any money buying and selling at the end of a lease. The cost is hidden in the payments and not broken out so that you can easily see it. A lot of people miss it. anyway, once you get the difference in numbers, divide it by the number of months from getting the car to getting the title and that is how much extra you wasted on the lease each month.
What Trap? Just trying to help people understand they have choices at lease end. So the bank sets the residual too low. Buying or leasing, a used car is worth what it is worth. Lease "A" simply turns the car in at the end -walks way and thus overpays. Lease "B" sells at market price and recaptures the overpayment on the depreciation fee. What about the other part of the lease payment -the finance fee? With the Bronco money factor rates we are talking about $ 2.08 a month per $1000. So inaddition to a $4000 recapture you would also gain $8.32 month.
On the hand, it can go south for the bank. What's the residual against market on an Bronco if gas goes to $5.00 in 4 years?
In the ending, it is all about the selling price and money factor?
 
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BD1

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your math is correct. Lease vs purchase, makes little difference, often lease incentives are higher actually.

The most expensive behavior is to flip new cars every 2-3 years. You eat the bulk of the depreciation over and over. Leases are associated with that behavior, so they get the flack.

but purchasing and trading a car every 3 years is just as bad (or worse), but most people are not well versed in depreciation analysis.
Exactly.

There is a lot of misunderstanding in this thread. We are buying/leasing a depreciating asset. In many situations leasing can make more sense depending on how long you plan to keep your vehicle and the miles you drive.

I lease and buy (or borrow) and look at each vehicle separately. I will say if you are going to lease don't accept the dealers first option. You can negotiate the lease and also look at other leasing companies with better residuals and money factors (interest rate). The Ford web site lease with a implied interest rate of 6% is a terrible lease with the residuals they are offering.
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