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Old 03-13-2012, 01:12 PM
 
Location: Full Time: N.NJ Part Time: S.CA, ID
6,116 posts, read 12,503,176 times
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Quote:
Originally Posted by MeInDenudinFL View Post
Your case studies doesn't make sense.



You can't come out with equity with $0 down. That ain't gonna happen without large down payment. Then if you want to put large down payment, you could as well buy it.

The negative equity doesn't make you to come out on the top--that's by design and where most people won't undnerstand about leasing.

Having said that I agree that leasing is a great option for some who understand it and is suitable for their situation.
I put $0 down (well, maybe 1st payment and reg) and walked with $1,000 at the end of the lease after flipping the car AND paying sales tax when buying from the bank - so, it did happen. I can dig up the sale docs and original lease contract to provide exact docs, but the point was that you retain the ability to capitalize on positive equity at the end of the lease, just like you could if you stayed above water on a finance.

Negative equity (the manufacturer's negative, not the consumer's) absolutely has you come up on top, compared to a traditional finance. You have paid the car down to an amount higher than the actual depreciation. Had you have been financing the vehicle, that negative equity would be on you. Additionally, if the bank had made an accurate depreciation hedge, you would have paid more of the car than you did (based on a deflated residual percentage).
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Old 03-13-2012, 03:58 PM
 
Location: WI
3,961 posts, read 10,971,793 times
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Quote:
Originally Posted by 1200RT View Post
Its only similar if you are concerned about depreciation on your residence. If your car was more or less guaranteed to appreciate (or at least hold value), buying would make sense. Since that cannot be said about 99.9% of the cars on the market today, buying makes little sense.

Consider this (both situations I have been in personally):

a) You lease a vehicle, and it is worth MORE than the residual value at the end of the lease. You buy the vehicle outright and hang onto it -or- flip it and make money. This is tough due to sales tax, but if the manufacture's hedge was way off, it can happen. I did this in 2009 on a VW GTI and made about $1k on the flip even after taxes.

b) You lease a vehicle and it is worth LESS than the residual value on the open market. You've paid the vehicle down to an amount higher than the value, so you're coming out on top. You turn the lease in and let the manufacturer deal with the "negative equity".

Now consider an auto loan: after 36 months, depreciation is unknown at time of contract (when you buy the car). 3 years in, if you're not in an equity position, that negative is on you (or on your GAP company).

There is no other way to protect yourself from depreciation other than leasing. It makes no sense to take the hit personally on a depreciating asset personally - I will give that risk to the bank 100% of the time.

Again: if it turns out the car held value better than expected, you can always buy the car and consider yourself in pretty good shape, but remember, you gave the bank the risk until you bought them out of their stake.
good points. We've leased a fair amount of our vehicles and we actually made a couple G's when our 4runner was up which was a pleasant surprise.
When i sold cars i thought (with the right program) it made the most sense. I saw tooooo many people come in after 3-4 years on a loan, still buried in their cars, and watched them swap that upside down balance onto their next car loan... and they'd have to do it yet again later on.
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Old 03-13-2012, 04:03 PM
 
Location: Full Time: N.NJ Part Time: S.CA, ID
6,116 posts, read 12,503,176 times
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Good point - there are other arguments out there, but burying negative equity in a lease has always made sense to me. I've never had to do it, but if done, once the lease is up, you're free and clear of the negative. All you're doing is rolling the negative and paying off monthly, but at least you can walk away clear when the lease is over. The problem is most GAP companies only protect 110-120% (of msrp) so in this case it may make sense to put some money down to protect yourself.
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Old 03-13-2012, 06:25 PM
 
1,963 posts, read 5,599,028 times
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Interestingly, because of the sky-rocketing values in the used car market I know 2 ppl this yr who've bought out their cars at their lease's residual value & then flipped them on Craigslist for $2k to $4k more. I think the automakers are now adjusting their depreciation rates to reflect this & highly doubt you can do this again in 3 yrs time. The upside is that with higher residual values comes cheaper monthly payments, which is good news to many aspiring professionals who were seeing "near-luxury" cars leasing at $500, $600 just a couple yrs ago.
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Old 03-13-2012, 07:55 PM
 
Location: South Jersey
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We leased once and never again.. Leased for 4 years and then liked the car so much we bought it and 6 years still paying for it
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Old 03-13-2012, 09:21 PM
 
Location: Denver, CO
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In your opinion, does leasing (and buying the extra miles up front) make any sense at all if you drive more than average, like say 15-20k mi a year depending on the year?
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Old 03-13-2012, 09:39 PM
 
Location: Full Time: N.NJ Part Time: S.CA, ID
6,116 posts, read 12,503,176 times
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Quote:
Originally Posted by vegaspilgrim View Post
In your opinion, does leasing (and buying the extra miles up front) make any sense at all if you drive more than average, like say 15-20k mi a year depending on the year?
Yes - it actually makes MORE sense since [used correctly] leasing is intended to protect against depreciation, and miles equal depreciation. Putting 60-80k miles on a car in 3-4 years and then selling it almost guarantees a low trade in (or other sale) value.

It certainly depends on the price of up-front miles, but I would rather hand the keys of a high mileage car to the bank and walk away rather than try to get all the money for the car at a dealer or selling yourself.
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Old 03-13-2012, 10:34 PM
 
Location: Denver, CO
3,135 posts, read 11,831,109 times
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Subaru does 18k/year leases. I was quoted around $310/mo for a '11 Legacy Premium CVT Sunroof/AWP ($25k MSRP) with $0 down for 39 months, 18k/year.
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Old 03-14-2012, 02:38 AM
 
105,895 posts, read 107,860,524 times
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i wouldnt do a no money down lease because you can get screwed and never know what happened.

back in the 1990's i needed a 2nd car for a shorrt period of time so i decided to take advantage of nissans 299.00 a month altima special..

i forgot the exact amount of the down payment but the lease was 39 months..

in my infinite wisdon i decided to shorten the lease to 36 months since i just had 2 nissans with alternators fail just outside the warranty period.

the next thing that happened is the closer gave me the speech about why i shouldnt put any money down. you know the usual stuff, if its stolen you lose the money you put in.

so having had a car stolen i decided to shake hands and drive off.

well that payment ended up well over 400 bucks a month.

my friend who owns a dealership couldnt even figure out how the deal shook out after we changed the origonal deal.

all i know is im sure they got me good internally once we changed the terms of the origonal 299.00 for 39 months and it cost me far more by not going with the origonal deal.

perhaps if i was home and had a chance to review the deal i might have realized it changed greatly but the fact is when your sitting in that chair with the closer you cant figure a thing out paper work is flying by so fast in front of you..
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Old 03-14-2012, 05:48 AM
 
Location: WI
3,961 posts, read 10,971,793 times
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Quote:
Originally Posted by mathjak107 View Post
i wouldnt do a no money down lease because you can get screwed and never know what happened.

back in the 1990's i needed a 2nd car for a shorrt period of time so i decided to take advantage of nissans 299.00 a month altima special..

i forgot the exact amount of the down payment but the lease was 39 months..

in my infinite wisdon i decided to shorten the lease to 36 months since i just had 2 nissans with alternators fail just outside the warranty period.

the next thing that happened is the closer gave me the speech about why i shouldnt put any money down. you know the usual stuff, if its stolen you lose the money you put in.

so having had a car stolen i decided to shake hands and drive off.

well that payment ended up well over 400 bucks a month.

my friend who owns a dealership couldnt even figure out how the deal shook out after we changed the origonal deal.

all i know is im sure they got me good internally once we changed the terms of the origonal 299.00 for 39 months and it cost me far more by not going with the origonal deal.

perhaps if i was home and had a chance to review the deal i might have realized it changed greatly but the fact is when your sitting in that chair with the closer you cant figure a thing out paper work is flying by so fast in front of you..

that can and does happen. Likely Nissan was "helping" the lease rate on the back end to move that model, rather then it just being a standard lease calculated out over 39 months. They would set up special residual rates or the money factor (%) to get the payments down where they need it to be, but when a customer wants to make a change then it's back to the drawing board and they will use regular data to come up with your new payment.
Unfortunately when one sees a good rate published, ideally that's what you go for and dont try to make changes if they can be avoided
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