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For maximum convenience, lease a car with low depreciation every 2 years, e.g. Toyota Camry.
Your car never gets old, never has a failure out of warranty, and you just turn it in for a new one every 2 years. My mother in law did this for the final 20 years of her life. Of course she was able to easily afford this perpetual rent payment.
However, if your goal is to minimize costs, buy a used car like hers coming off a private lease for cash and drive it for 15 years.
The total will always be =/> the original cost of the car (capitalized cost).
Then how do you explain this. I negotiated a lease for a 2014 RAV4 Limited(for my son) back in September. The end deal was this. $3600 down+$225/mo for 24 month with a residual of $21000 or so. The MSRP for the vehicle was $30K, which is exactly the sum of all payments. There is not even room for finance charge in there (although I am sure the dealer has incentives built-in). The book value for a 2 year old RAV4 is almost certainly more than $21K. He will come ahead if he buys decides to buy at the end of the lease. Now, 4 months later we leased a Highlander and that didn’t come out as good.
Then how do you explain this. I negotiated a lease for a 2014 RAV4 Limited(for my son) back in September. The end deal was this. $3600 down+$225/mo for 24 month with a residual of $21000 or so. The MSRP for the vehicle was $30K, which is exactly the sum of all payments. There is not even room for finance charge in there (although I am sure the dealer has incentives built-in). The book value for a 2 year old RAV4 is almost certainly more than $21K. He will come ahead if he buys decides to buy at the end of the lease. Now, 4 months later we leased a Highlander and that didn’t come out as good.
You are basing this on MSRP. If you did a purchase instead of the lease, I am pretty sure you would have negotiated a price less than MSRP.
If the residual value is lower on the lease then you already paid it in depreciation in the course of the lease. If you are leasing a vehicle with low residual then you are not coming out ahead on the lease, but have an opportunity to gain back what you have already "overpaid" by market standards.
Leasing in NEVER designed to be beneficial to buy out. NEVER.
Low residual means it already depreciated and you paid for it in the payments/lump sum of the lease.
High residual means you paid less depreciation and will pay more for it at lease end.
The total will always be =/> the original cost of the car (capitalized cost).
I may not be designed to benefit a buyout at the end but there are times where it does. I've known quite a few people who end up with equity at lease end. Its all about doing your homework and choosing the right vehicles to lease.
Friend of mine leased a Subaru Forester a few years back and ended up with almost $3k in equity.
Last edited by louie0406; 03-04-2015 at 07:39 AM..
I walked away with $5500 in equity with the lease on my 2010 S4 when it was up in 2013.
Quote:
Originally Posted by louie0406
I may not be designed to benefit a buyout at the end but there are times where it is. I've known quite a few people who end up with equity at lease end. Its all about doing your homework and choosing the right vehicles to lease.
Friend of mine leased a Subaru Forester a few years back and ended up with almost $3k in equity.
I may not be designed to benefit a buyout at the end but there are times where it is. I've known quite a few people who end up with equity at lease end. Its all about doing your homework and choosing the right vehicles to lease.
Friend of mine leased a Subaru Forester a few years back and ended up with almost $3k in equity.
that is true. You can end up with equity. Leasing companies can never perfectly predict the used auto market 3 years out. I remember one of my cars was worth 4k more than the buy out. Another times, it was 1k less than the buy out.
Used car markets change all the time....usually along with the economy.
Then how do you explain this. I negotiated a lease for a 2014 RAV4 Limited(for my son) back in September. The end deal was this. $3600 down+$225/mo for 24 month with a residual of $21000 or so. The MSRP for the vehicle was $30K, which is exactly the sum of all payments. There is not even room for finance charge in there (although I am sure the dealer has incentives built-in). The book value for a 2 year old RAV4 is almost certainly more than $21K. He will come ahead if he buys decides to buy at the end of the lease. Now, 4 months later we leased a Highlander and that didn’t come out as good.
As the post immediately following yours stated, capitalized cost is the cost you base the lease off of and it does not have to equal the window sticker. It will be in your lease agreement, look it up. You can see if it was a good deal.
I negotiate my leases (when I leased) based on invoice. Simple and a good deal.
I walked away with $5500 in equity with the lease on my 2010 S4 when it was up in 2013.
Nice! . Out of curiosity, did you take the cash and jump into another lease or did you buy it out?
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