Lease vs. Purchase?

[MadMan4BamaNATL]

So take the exact vehicle...one option you lease (and buy at the end of your lease), the other option you buy (aka loan) front the begining.

When it is all said and done and the vehicle is fully purchased which option was cheaper.

In other words, my understanding is that a lease will cost you more overall if you keep the vehicle at least till it's paid off.

You are correct, in that scenario with normal parameters, yes, the lease would cost more, but that's not the end of the math.

Think about these things. If you lease for 36 months, then finance for another 36-60 months, sure, that's not smart money and the back end is fraught with risk when the vehicle is worth less (in theory).

However, if you lease for 36 months, then finance for 24-36 with no down payments, you actually come out spending about the same if not less.

That said, I did not factor in car payment levels here. Depending on someone's financial situation, the car payment could be prohibitive.

For instance, my Bronco financed at maybe 2% or even 3% if rates go up, for 60 months will cost $1026.00 per month. This is on a $61K Bronco with taxes. To many guys, that's far too much to pay for a car payment. Doesn't bother me in my situation, but that's not important here, nor does it sound good. In this situation, even if you don't have much of a down payment, maybe leasing for 36 months, then financing for 36 more would help since the lease payment would drop to around $840.00 which is still a lot, but it's a $61K purchase.

Any $1000 in down payment is roughly $20 per month off. So, although a payment of $1000 is eye watering for a Ford, parting with $5000 or more takes away your liquidity and puts it into a very risky vehicle. For most normal people, having $5000 or more in cash for whatever you may need it to do for your car is worth more than saving $100 or so per month.

Again, this is crazy talk because crossing the $1000 mark has a mental element that many can't accept; and I understand this fully.

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[da_jokker]

I plan on purchasing with a loan. I plan on keeping the vehicle for a number of years and will not be paying in cash as the financing options (0-4%) are less than I could make return wise in the market.

Granted, this will be the most expensive vehicle (and first new vehicle!) I have ever purchased! I'm a cheapskate and my wife still can't fathom the fact that I am paying $55K for something that doesn't even have power seats...

This is dilemma as well. I planned on buying it out right, but financially, I can make more money in the market if I leave it invested.

Issue is, I hate monthly commitments because you never know what's going to happen in a 5 year time period. One time Monies is my preferred option.

If I look at my monthly liabilities, I can't swing an $800 payment. If you look at my Banking Balance, I can easily buy the Bronco.

I've bought my last 4 cars outright, 2 of them brand new, and not having a car payment is really nice.

If anything, I'll do like I have done in the past...decide how large of a car payment I feel like having (< $200), and pay whatever is needed down to make that happen.

The unknowns are how much is the Bronco going to already cost me monthly in Gas and Insurance.

 

[bigjwalt]

Planning to pay cash. Its a depreciating asset, so I'll just bite the bullet and pay the 50K upfront. That is unless a bank will loan me money at 0%

 

[jaruss01]

The lease payments shown on Ford website are arguably some of the worst lease deals I have seen in the 100+ vehicles I have looked into over the years. It gets increasingly worse the higher up you go. Rule of thumb is $100/mo per $10k (with nothing down, 36 mos, taxes and fees out of pocket). The FE is low $60k and is around a $1,000 month (after you roll in the down payment and go to 36 mos)!! That's atrocious. And I thought the Defender was bad...My two vehicles have a combined MSRP of $85k and COMBINED monthly lease payments of $670/mo. Granted they are very good lease deals, but Ford wants $8xx/mo for my loaded OBX with a $59k sticker...same terms, apples to apples comparison

I am purchasing...and will put $27-$28k down to back into a $500/mo payment, to mimic a good lease and put my mind at ease.

 

[da_jokker]

You are correct, in that scenario with normal parameters, yes, the lease would cost more, but that's not the end of the math.

Think about these things. If you lease for 36 months, then finance for another 36-60 months, sure, that's not smart money and the back end is fraught with risk when the vehicle is worth less (in theory).

However, if you lease for 36 months, then finance for 24-36 with no down payments, you actually come out spending about the same if not less.

That said, I did not factor in car payment levels here. Depending on someone's financial situation, the car payment could be prohibitive.

For instance, my Bronco financed at maybe 2% or even 3% if rates go up, for 60 months will cost $1026.00 per month. This is on a $61K Bronco with taxes. To many guys, that's far too much to pay for a car payment. Doesn't bother me in my situation, but that's not important here, nor does it sound good. In this situation, even if you don't have much of a down payment, maybe leasing for 36 months, then financing for 36 more would help since the lease payment would drop to around $840.00 which is still a lot, but it's a $61K purchase.

Any $1000 in down payment is roughly $20 per month off. So, although a payment of $1000 is eye watering for a Ford, parting with $5000 or more takes away your liquidity and puts it into a very risky vehicle. For most normal people, having $5000 or more in cash for whatever you may need it to do for your car is worth more than saving $100 or so per month.

Again, this is crazy talk because crossing the $1000 mark has a mental element that many can't accept; and I understand this fully.

So say this...and I appreciate the math cuz I don't know it.

Say I lease now, do whatever I want to my Bronco and put whatever miles I want irrigardless of the lease rules, but when the lease is up, I just pay it off in cash.

Reason being is the money I would have spent buying the bronco initially, has been sitting in VOO/VTI for those 3 years making me money.

Would the lease still make the better choice?

 

[MadMan4BamaNATL]

So say this...and I appreciate the math cuz I don't know it.

Say I lease know, do whatever I want to my Bronco and put whatever miles I want irrigardless of the lease rules, but when the lease is up, I just pay it off in cash.

Reason being is the money I would have spent buying the bronco initially, has been sitting in VOO/VTI for those 3 years making me money.

Would the lease still make the better choice?

In that scenario, the lease option is very attractive, given that the Bronco isn't badly damaged or a lemon.

If you just pay cash at the end, just remember that would drain your liquidity (cash on hand), but there won't be a ton of depreciation after the first 36 months and the Bronco should hold value fairly well.

Financing for 24 months is safer, but you know your finances much better than I do. I'm speaking generally in case there are guys out there who will be purchasing the Bronco and earn less than $75K per year. If that's you, you should hold on to as much cash as you can.

Your mention of investing the money during the lease instead of just in a savings account is very smart money.

 

[BD1]

Rule of thumb is $100/mo per $10k (with nothing down, 36 mos, taxes and fees out of pocket).

I use this same rule of thumb. Excellent advice. Very quick way to determine if a lease is a good deal.

I once leased a Jeep JK with this formula and then when it was time to return the Jeep I was upside right because the Jeep resale values were so good. So I had about 8K of equity for a new Jeep.

 

[Headsong]

Another dead and beaten horse.

I'm not even reading the posts. I'm a biz accountant and tax guy. Others will disagree, but let me explain this clearly: leasing does NOT release you from liabilities. Leasing DOES factor in some rather pawn shop interest rates in the internal computations, so you're still borrowing, and at much higher rate. At the end of the lease, you are responsible for the residual value.

If you're in biz, leasing can be a nice way to write off a vehicle a bit faster, perhaps, than buying and taking depreciation. BUT, with heavy SUV's (4 door, V6, 10 pd) that is a non-starter since you can write it off in one shot.

For individuals, leasing makes sense only if you can't scrounge a downstroke or are comfortable with having a payment for the rest of your life and just flipping every time. Dumb way to handle your money, but it's your money.

Knowing is half the battle.

 

[Cheshire]

DEBT = SLAVERY

Having 3 diplomas in Finance/Economics, I learned long ago that U.S. consumer debt is great for the economy, but terrible for the individual. Nothing was better for my general happiness and peace of mind and lifestyle than going debt free 25+ years ago. Equally satisfying was growing savings and investment from that point. If I want something, I buy it, but generally prefer to not buy 'stuff'.

CASH BUYER - Base 2.7L Sasquatch (No frills bargain!)

Reading about people assuming payments nearing $1000, taking 6-7 year loans, scraping together down payments on loaded Badlands they can't really afford ALL MAKE ME CRINDGE! Most people on this forum have ordered high level trims with all the extras, while the majority can't really afford it. Over the months people have crept from Base to Black Diamond to Badlands and somehow rationalized the price increases. Kudos for Ford in the way they built the trim levels and option packages. Many have succumbed to this marketing genius by paying as much as they can possibly afford. If you don't have the money - NO PROBLEM - Ford Credit and others will gladly load you up with as much debt as you are willing to GULP down.

And leasing, HA, don't get me started!

 

[level3looper]

I figured people who lease do it to always have a new car and not worry about repairs over time.

My rough thinking is that after cost of repairs over about 10 years, buying my cars saved me thousands especially since I don't care about fender benders and such. Maybe the financial and auto industry guys have some math\stats on this? I'm not good at finances so I could be very wrong . I would love to see if anyone has some solid numbers on long term ownership costs over lease\loan.

 

[Headsong]

DEBT = SLAVERY

Having 3 diplomas in Finance/Economics, I learned long ago that U.S. consumer debt is great for the economy, but terrible for the individual. Nothing was better for my general happiness and peace of mind and lifestyle than going debt free 25+ years ago. Equally satisfying was growing savings and investment from that point. If I want something, I buy it, but generally prefer to not buy 'stuff'.

CASH BUYER - Base 2.7L Sasquatch (No frills bargain!)

Reading about people assuming payments nearing $1000, taking 6-7 year loans, scraping together down payments on loaded Badlands they can't really afford ALL MAKE ME CRINDGE! Most people on this forum have ordered high level trims with all the extras, while the majority can't really afford it. Over the months people have crept from Base to Black Diamond to Badlands and somehow rationalized the price increases. Kudos for Ford in the way they built the trim levels and option packages. Many have succumbed to this marketing genius by paying as much as they can possibly afford. If you don't have the money - NO PROBLEM - Ford Credit and others will gladly load you up with as much debt as you are willing to GULP down.

And leasing, HA, don't get me started!

Well put. And leasing puts you into slavery. Best is to begin finding a way to buy and hold, pay off, begin a vehicle replacement fund so that over time, you can pay cash or nearly so. Freedom! (Unless Ford offers 2% or better financing, in which case, I'll keep my money and use theirs.)

 

[PatientlyWaiting]

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.

 

[Headsong]

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.

The Sport? LOL.....people are castigating here until they can't afford the gas....lol. And when they put a soft top on that thing....................hmmmmmmmm.

 

[PSUTE]

On the fence. Never leased. Got the first model year jitters though...

 

[Headsong]

On the fence. Never leased. Got the first model year jitters though...

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.

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