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Actually, you could.
However, let's take the example of one of my previous leases.
Good old GM set the residual too high.
So $105k car. They set the residual at $65k after 36 months.
So I paid the depreciation and a little interest.
At the end of 36 months, turns out the car was worth $49k.
So....I buy the car at $105k and sell it for $49k...losing $56k? (provided I could even get full $49k on trade in)
Or...I pay the depreciation and OOPS, if they are wrong, that's THEIR problem? That's $16k of NOT MY PROBLEM. Plus...whoosh...off disappears the car without any muss, fuss, or hassle on my part.
Next time around, they set the residual...too low. True story. Backlash from eating it on leases of previous years. Oh, crap. Now I have equity in the car. Either I buy it from them from the too low price and sell it at a profit OR I just get out of it early (before the owe me money) and a get a new car early (the option I chose).
If you have an ounce of savvy, it can really work out better than buying.
I've made that exact same point two or three times in this thread, so I'm not sure what you're getting at.
My point is, you could buy new and trade every time the warranty runs out and get the same result. You don't have to lease.
Yes, but when you buy the monthly payments are higher. I looked at both leasing and buying my current vehicle. Leasing is the much less expensive option if planning to keep the vehicle for 30-36,000 miles.
Actually, you could.
However, let's take the example of one of my previous leases.
Good old GM set the residual too high.
So $105k car. They set the residual at $65k after 36 months.
So I paid the depreciation and a little interest.
At the end of 36 months, turns out the car was worth $49k.
So....I buy the car at $105k and sell it for $49k...losing $56k? (provided I could even get full $49k on trade in)
Or...I pay the depreciation and OOPS, if they are wrong, that's THEIR problem? That's $16k of NOT MY PROBLEM. Plus...whoosh...off disappears the car without any muss, fuss, or hassle on my part.
Next time around, they set the residual...too low. True story. Backlash from eating it on leases of previous years. Oh, crap. Now I have equity in the car. Either I buy it from them from the too low price and sell it at a profit OR I just get out of it early (before the owe me money) and a get a new car early (the option I chose).
If you have an ounce of savvy, it can really work out better than buying.
Well, while you clearly benefit in the case of the inflated residual, in the second example, it is really just recovering your money. The residual was set too low, so the lease payments were higher, and you gained equity.
Well, while you clearly benefit in the case of the inflated residual, in the second example, it is really just recovering your money. The residual was set too low, so the lease payments were higher, and you gained equity.
I think that is a fair way to look at it. Leasing sets your downside risk. If the OEM sets the residual too high, you paid less than the actual depreciation of the vehicle during that time (that happened on my recent CMAX Energi lease). If the dealer sets the residual too low, then your monthly payments are higher, but you benefit from added equity at the end of the transaction. Given the interest rates on leases are fairly close to purchase interest rates, there is not much risk in overpaying on the financing piece, maybe if the lease had a $2K lease turn in fee or something. But I am not seeing a whole lot of downside to the leasing concept.
Out of warranty cost for replacing a Subaru CVT is closer to $8k.
It was only $2200 for my Acura But I was already payment-free for several years by then. I got 8 payment-free years out of my Baby after the loan was paid off.
But I am not seeing a whole lot of downside to the leasing concept.
There's as much downside to leasing as there is to buying, it just comes in different ways. It's simply a different way to acquire and drive a vehicle. It's not for everyone, but if you fit within certain parameters (such as knowing you'll want a new car every 2-3 years, OK with always having a car payment, even a small one, don't drive an absurdly large amount), it's a viable option that should be explored without any pre-conceived notions or without silly blankets statements like "leasing is fleecing!" or "leasing is ALWAYS a bad deal."
My current car they offered me 7.5k miles a year, but 10k was only 30 bucks more a month, so I just did that.
Turns out I'm only averaging about 5800 miles a year.
But I have multiple cars.
Thanks. We are considering getting a new car, but leasing hasn't really been on our radar. We drive between 3,000 and 6,000 miles per year, depending on the car and its usage.
Leasing guarantees your vehicle costs for the set terms (years/miles). You know to the penny what the car will cost you before you drive off the lot.
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But I was already payment-free for several years by then. I got 8 payment-free years out of my Baby after the loan was paid off.
