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I agree with 1200RT, never put money down on a lease to reduce your capitalized cost. If you total your car, no one is going to reimburse you. Put it in your bank account to pay your monthly payment.
I agree with 1200RT, never put money down on a lease to reduce your capitalized cost. If you total your car, no one is going to reimburse you. Put it in your bank account to pay your monthly payment.
Exactly. And hopefully get some [minimal] interest on the money in the account. Its better than nothing, especially if the interest yield is more than the money factory (interest) on the lease).
Just make sure you distinguish the 2 types of "money down": Capital Reduction (non-refundable); and Security Deposit (refundable at end of lease). Cap Reduction is like a big upfront pre-payment on your lease, so it has Sales Tax charged! If you're in a high-tax state like Cali, you're not getting the full value of the $$ you've shelled out. To me paying thousands upfront really is a con game for the dealership & also for you the buyer. You're fooling yourself into thinking you can lease a more expensive car than you can truly afford. Anyway just fyi, for every $1k you put down, you shave off around $30/month on your lease. So in your example of $5k down, the actual monthly cost with $0 cap reduction is somewhere in the range of $229/month (150+79).
Some ppl prefer to pay $0 down (and some even with $0 extra drive off costs, ie Sign & Drive), but certain luxury manufacturers like BMW actually reduce your money factor/interest rate by a tad if you put down MULTIPLE security deposits (up to 7x). Financial gurus have actually calculated that the interest reduction is worth over 10% annualized in the bank, so savvy leasee's always try to max out the security deposits if they have extra cash on hand & the leasing company allows it. If they don't have a discount program, you should try to have them waive the security deposit. Often they'll do it if you've leased with the company before.
Excellent points and tips for leasing were brough up in the past couple of posts. These are the types of things very few people consider or even realize when it comes to leasing.
Excellent points and tips for leasing were brough up in the past couple of posts. These are the types of things very few people consider or even realize when it comes to leasing.
Hence the pain I feel when everyone jumps on the "leasing sucks" bandwagon. The financial protection while leasing far trumps any negatives.
Hence the pain I feel when everyone jumps on the "leasing sucks" bandwagon. The financial protection while leasing far trumps any negatives.
Your points were spot on. I think most people have a negative view of leasing don't really understand how to use it properly. Some of them have also probably been burned by getting into a lease they didn't understand making their opposition that much stronger and personal. Still others don't grasp the concept of why you would want to pay for something you don't own.
I don't think leasing is for everyone, but depending on someones personal situation it may be a MUCH better option then buying.
Your points were spot on. I think most people have a negative view of leasing don't really understand how to use it properly. Some of them have also probably been burned by getting into a lease they didn't understand making their opposition that much stronger and personal. Still others don't grasp the concept of why you would want to pay for something you don't own.
I don't think leasing is for everyone, but depending on someones personal situation it may be a MUCH better option then buying.
yep, kinda similar to renting a home vs buying one. Sometimes the situation makes sense to rent, sometimes not.
And i see leasing a car similar to renting a home/apt.... which is why we never put cash into any lease we do
yep, kinda similar to renting a home vs buying one. Sometimes the situation makes sense to rent, sometimes not.
And i see leasing a car similar to renting a home/apt.... which is why we never put cash into any lease we do
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.
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.
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.
Quote:
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".
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.
When I leased my '09 Nissan Rogue I put 0 down, 0 first payment, 0 tax and license. A true sign and drive. I have the option to buy the car for $14,000 at the end (Sept 1st 2012) and right now they are getting $21,000 for cars like mine on their lots with similar mileage so I consider that a good deal.
I just got a letter offering to waive the last 3 lease payments plus give me $1000 cash back, plus 0 down sign and drive for a brand new Rogue. I won't be purchasing a new car as long as these deals are out there.
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