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      05-17-2022, 08:03 PM   #45
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Dealer is not necessarily playing you but he's working out a deal that works for both of you. He needs inventory to sell so wants your car back. In return, he's letting you benefit from positive equity. It's sort of like you trading In a car, paying off loan and making a profit. With $50K market price, he intense to make $3K on the car.

Look at the math this way: $30K in residual plus $15K in remaining payments, your total liability today is $45K. With $2K equity, dealer is offering you $47K. Behind the scenes, he will take $45K and offset it against the liability by paying off the residual and $15K in payments. Upfront, he's giving you $2K to roll into the new car. You can choose to cash out and not get a new car and keep that $2K.

In order to figure out if $47K offered to you is fair, do a check with Carvana and Carmax to see what they would have offered you.
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      05-18-2022, 07:39 AM   #46
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Quote:
Originally Posted by tranquility View Post
+1 exactly. Look how relatively confusing leasing is, and amazing still many ppl argue in its favor. It's just common sense, anytime someone lends money, they're gonna have make profit outta that also.
They also make a profit out of financing, so unless you're paying cash it jus comes down to the terms. I am generally not in favour of leasing because it tends to lead to folks paying for huge depreciation every 3 to 4 years but it has it's advantages. The first, as in our case, is it keeps the tax man happy as there are no arguments re. depreciated value. Secondly, finance rates are and terms are sometimes better than buying and third, if there is an accident, you don't take the hit on value after a repair.

So leasing to own is one thing and leasing perpetually is another.
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      05-18-2022, 08:06 AM   #47
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Originally Posted by Alfisti View Post
They also make a profit out of financing, so unless you're paying cash it jus comes down to the terms. I am generally not in favour of leasing because it tends to lead to folks paying for huge depreciation every 3 to 4 years but it has it's advantages. The first, as in our case, is it keeps the tax man happy as there are no arguments re. depreciated value. Secondly, finance rates are and terms are sometimes better than buying and third, if there is an accident, you don't take the hit on value after a repair.

So leasing to own is one thing and leasing perpetually is another.
I dunno man. I prefer to buy outright. Leasing is too complicated and worse than financing in most cases simply because it's like renting usually.
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      05-18-2022, 08:30 AM   #48
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Originally Posted by tranquility View Post
I dunno man. I prefer to buy outright. Leasing is too complicated and worse than financing in most cases simply because it's like renting usually.
It's really not complicated at all, i don't understand your reluctance. I am not saying to always makes sense but if buying new you'd be mad not to cross shop against a lease to buy agreement.

You're only renting if you don't buy the vehicle at lease end.
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      05-18-2022, 08:32 AM   #49
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Quote:
Originally Posted by itrocks4u View Post
Dealer is not necessarily playing you but he's working out a deal that works for both of you. He needs inventory to sell so wants your car back. In return, he's letting you benefit from positive equity. It's sort of like you trading In a car, paying off loan and making a profit. With $50K market price, he intense to make $3K on the car.

Look at the math this way: $30K in residual plus $15K in remaining payments, your total liability today is $45K. With $2K equity, dealer is offering you $47K. Behind the scenes, he will take $45K and offset it against the liability by paying off the residual and $15K in payments. Upfront, he's giving you $2K to roll into the new car. You can choose to cash out and not get a new car and keep that $2K.

In order to figure out if $47K offered to you is fair, do a check with Carvana and Carmax to see what they would have offered you.
OK you've finally done it for me, they are th enumbers I was struggling with. So OK, I see where they are coming from, i had sorta written off the owed monies on the existing term in place of pushing out for a further 2 years. But I see it now.

Definitely cheapest option for me is to pay $30K for a vehicle we can then drive another 5 years easily.
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      05-18-2022, 09:41 AM   #50
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Quote:
Originally Posted by tranquility View Post
I dunno man. I prefer to buy outright. Leasing is too complicated and worse than financing in most cases simply because it's like renting usually.
What's so complicated about it?

Which method of purchasing a vehicle is best really depends on multiple factors - your own situation, your goals, and market conditions.

If interest rates are very low, why not use their money to purchase (lease or finance) rather than pay cash? If residual rates are artificially high (a classic BMW move), why not lease and enjoy the lower cost of ownership if you're planning to get a new car in 3-4 years time anyway? Or perhaps you want to mitigate your risk of ownership and decide to lease in the beginning, then buy it out at lease end. What if incentives offered by the manufacturer heavily influence leasing? On the other end of the spectrum, if interest rates are high, residual values are low, then sure it may make sense to pay cash for the car. It all really depends.

On top of that there's risk tolerance. Leasing places all of the risk of ownership on the financing arm. If you get into an accident, the hit to resale value is the financing company's problem. If you had purchased the car, that hit becomes your problem. And beyond just getting in accidents, leasing removes the speculation of future value of the car. The residual value is set in stone within the contract at time of signing. If for whatever reason the car's future value drops like a rock, you're protected and it's the financing company's problem to deal with a severely depreciated car. On the other hand, if you're leasing and the market is insane (as it is now), and the resale value is significantly higher than the predetermined residual value, you can simply buy out the car and sell it with equity.

There is no single argument for or against any method of ownership. It all depends, and each method has its pros and cons which are highlighted in different situations.
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      05-18-2022, 02:44 PM   #51
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Call your leasing company and get current pay-off. You can buy a lease out at any time, and current value is generally a proportion of full tern over how many payments have been made, plus some termination fees. It works a lot like a regular loan, you don't have to ride it to the end, and what you owe changes by the day. I bought out my last 3yr leased car at th 1-1/2 year mark, and was a better buy out price than I expected due to the way they helped with lease capitalization (upfront price reduction for the lease) on top of my trade in. I just refinanced it at the point.

With pay-off in hand, then you now how much *equity you really have. If they ask, just say you are refinancing. That $2K may be a good deal, or a horrible one. Get buyout before you ponder this any longer, things will become much easier to calculate.
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      05-18-2022, 06:41 PM   #52
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Quote:
Originally Posted by Alfisti View Post
OK you've finally done it for me, they are th enumbers I was struggling with. So OK, I see where they are coming from, i had sorta written off the owed monies on the existing term in place of pushing out for a further 2 years. But I see it now.

Definitely cheapest option for me is to pay $30K for a vehicle we can then drive another 5 years easily.
$30K is the residual value in Nov 2023. If you buy out today, you would likely be paying around $45K, given that you have not reached the end of the lease.

I think you should either:

(i) continue with the lease until Nov 2023 and buy it out then. If something goes wrong with the car in the next 1.5 months, you'll have a way out. Before buying it out though, assess how much expenses do you need to incur i.e. extended warranty, new brakes, new tires? What is all that adding up to?

(ii) Negotiate a higher equity roll-up with the dealer now. If they can sweeten the deal for you, why not jump into a brand new car now?
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      05-18-2022, 06:59 PM   #53
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Quote:
Originally Posted by Alfisti View Post
It's really not complicated at all, i don't understand your reluctance. I am not saying to always makes sense but if buying new you'd be mad not to cross shop against a lease to buy agreement.

You're only renting if you don't buy the vehicle at lease end.
I'm against the concept of renting if it's avoidable. I'm not saying it's 'complicated' as in it's all Greek to me, just that vs buying outright ofc it is, otherwise why are we having this many posts about your OP?


Quote:
Originally Posted by wtwo3 View Post
What's so complicated about it?

Which method of purchasing a vehicle is best really depends on multiple factors - your own situation, your goals, and market conditions.

If interest rates are very low, why not use their money to purchase (lease or finance) rather than pay cash? If residual rates are artificially high (a classic BMW move), why not lease and enjoy the lower cost of ownership if you're planning to get a new car in 3-4 years time anyway? Or perhaps you want to mitigate your risk of ownership and decide to lease in the beginning, then buy it out at lease end. What if incentives offered by the manufacturer heavily influence leasing? On the other end of the spectrum, if interest rates are high, residual values are low, then sure it may make sense to pay cash for the car. It all really depends.

On top of that there's risk tolerance. Leasing places all of the risk of ownership on the financing arm. If you get into an accident, the hit to resale value is the financing company's problem. If you had purchased the car, that hit becomes your problem. And beyond just getting in accidents, leasing removes the speculation of future value of the car. The residual value is set in stone within the contract at time of signing. If for whatever reason the car's future value drops like a rock, you're protected and it's the financing company's problem to deal with a severely depreciated car. On the other hand, if you're leasing and the market is insane (as it is now), and the resale value is significantly higher than the predetermined residual value, you can simply buy out the car and sell it with equity.

There is no single argument for or against any method of ownership. It all depends, and each method has its pros and cons which are highlighted in different situations.
All I know is like the other guy said, if one is financially astute, then they shouldn't be changing cars like changing underwear cuz they're gonna take the hit every time they get into a new car; so I guess if we already start w a financially non-astute person who insists upon doing that, sure, I guess that leasing may be a viable option for lessening the gouging. All this other stuff about low rates, possible accidents?!, etc, is just distracting from the fact that for whatever reason the buyer doesn't have the cash upfront or that they have it tied up or 'think' they can make better use of it...which leads to the question, why the heck is the lender lending $ when they could supposedly easily make much more in the stock mkt or whatever the borrower thinks is so awesome? In any event, by lending the dealer is gonna make additional profit off of that, so unless there's a freak deal going on, it will always be way more expensive than buying outright and usually worse than financing I would venture.
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      05-19-2022, 07:37 AM   #54
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Quote:
Originally Posted by tranquility View Post
All I know is like the other guy said, if one is financially astute, then they shouldn't be changing cars like changing underwear cuz they're gonna take the hit every time they get into a new car; so I guess if we already start w a financially non-astute person who insists upon doing that, sure, I guess that leasing may be a viable option for lessening the gouging. All this other stuff about low rates, possible accidents?!, etc, is just distracting from the fact that for whatever reason the buyer doesn't have the cash upfront or that they have it tied up or 'think' they can make better use of it...which leads to the question, why the heck is the lender lending $ when they could supposedly easily make much more in the stock mkt or whatever the borrower thinks is so awesome? In any event, by lending the dealer is gonna make additional profit off of that, so unless there's a freak deal going on, it will always be way more expensive than buying outright and usually worse than financing I would venture.
I don't agree with the financially astute comments. There's a spectrum. You can be financially astute but have a passion for cars. Those who say a car is a bad investment clearly don't have passion for cars. Using that logic, any luxury purchase (vacations, nice clothes, fine dining) is a no-no because they're not purchases a "financially astute" individual would make.

Why are banks lending $ when they could make more in the stock market? If you have to ask that question then you truly don't understand how financial systems work. Lending money out to credit-worthy lendees is a low risk money generator, and allows the banks to hedge against market volatility. That doesn't mean they DON'T invest in the market as well.. they absolutely do. But diversification is the name of the game.

Leasing doesn't automatically mean the individual doesn't have the cash up front. In some cases, sure that's the case. But if you are actually financially astute, you know when to purchase something using which method depending on the situation. Truly financially astute individuals understand that finances don't adhere to rules set in stone, and are instead fluid based on market conditions.
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      05-19-2022, 08:16 AM   #55
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Quote:
Originally Posted by tranquility View Post
I'm against the concept of renting if it's avoidable. I'm not saying it's 'complicated' as in it's all Greek to me, just that vs buying outright ofc it is, otherwise why are we having this many posts about your OP?
You're just not listening at all. You have an option to buy the car out, if I buy this car at the end of the 4 year lease period i'd have paid no more than buying it outright except I put the best part of $40K to work for me elsewhere rather than dump it on a car.

The thread is busy because a) it's been hijacked and b) i am tossing up options, but the option to buy it remains and again, at no higher cost than it would have been to purchase it outright 2.5 yrs ago.
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      05-19-2022, 08:19 AM   #56
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Quote:
Originally Posted by itrocks4u View Post
(ii) Negotiate a higher equity roll-up with the dealer now. If they can sweeten the deal for you, why not jump into a brand new car now?
I think answer to that is no matter how much the dealer tries to come to the party, it will cost more to lease again than to just buy this car given the super low miles (7K miles right now, expected to be at 15K miles by lease end) so wearables like brakes and tyres will not be on the table.
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      05-19-2022, 03:04 PM   #57
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Originally Posted by Alfisti View Post
I think answer to that is no matter how much the dealer tries to come to the party, it will cost more to lease again than to just buy this car given the super low miles (7K miles right now, expected to be at 15K miles by lease end) so wearables like brakes and tyres will not be on the table.
Yes - one other metric you should assess is what the total cost of the car is when buying out the lease compared to new one.

For example $830 x X-months + $30K residual VS price of a brand new car with taxes and fees out the door. For some leases, the money factor tends to be so high that you end up paying more in interest than actual value of the car.
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      05-19-2022, 03:21 PM   #58
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Yeah it is virtually identical to buying outright but I have that $40K against my LOC and/or working elsewhere so should finish in front.
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      05-19-2022, 04:25 PM   #59
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Quote:
Originally Posted by wtwo3 View Post
I don't agree with the financially astute comments. There's a spectrum. You can be financially astute but have a passion for cars. Those who say a car is a bad investment clearly don't have passion for cars. Using that logic, any luxury purchase (vacations, nice clothes, fine dining) is a no-no because they're not purchases a "financially astute" individual would make.

Why are banks lending $ when they could make more in the stock market? If you have to ask that question then you truly don't understand how financial systems work. Lending money out to credit-worthy lendees is a low risk money generator, and allows the banks to hedge against market volatility. That doesn't mean they DON'T invest in the market as well.. they absolutely do. But diversification is the name of the game.

Leasing doesn't automatically mean the individual doesn't have the cash up front. In some cases, sure that's the case. But if you are actually financially astute, you know when to purchase something using which method depending on the situation. Truly financially astute individuals understand that finances don't adhere to rules set in stone, and are instead fluid based on market conditions.
Well, we'll have to agree to disagree w your definition of 'financially astute'. For the most part, ppl leasing/financing don't have the cash upfront, that's the reality.


Quote:
Originally Posted by Alfisti View Post
You're just not listening at all. You have an option to buy the car out, if I buy this car at the end of the 4 year lease period i'd have paid no more than buying it outright except I put the best part of $40K to work for me elsewhere rather than dump it on a car.

The thread is busy because a) it's been hijacked and b) i am tossing up options, but the option to buy it remains and again, at no higher cost than it would have been to purchase it outright 2.5 yrs ago.
How can leasing 4 years=the same as buying outright unless they not charging interest? Now don't tell me about variables like you going out and making some killer profit w your freed up $40K as that's not the pt and it's not a given. Ofc being a borrower is more costly than not being in debt, that's the whole pt, businesses don't lend out money for free.

Anyway, that's enough talk about leasing for me, not interested in that at all but GL w your decision.
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      05-19-2022, 06:10 PM   #60
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Quote:
Originally Posted by chad86tsi View Post
Call your leasing company and get current pay-off. You can buy a lease out at any time, and current value is generally a proportion of full tern over how many payments have been made, plus some termination fees. It works a lot like a regular loan, you don't have to ride it to the end, and what you owe changes by the day. I bought out my last 3yr leased car at th 1-1/2 year mark, and was a better buy out price than I expected due to the way they helped with lease capitalization (upfront price reduction for the lease) on top of my trade in. I just refinanced it at the point.

With pay-off in hand, then you now how much *equity you really have. If they ask, just say you are refinancing. That $2K may be a good deal, or a horrible one. Get buyout before you ponder this any longer, things will become much easier to calculate.
+1
Call and get your buyout number. $2k in equity seems like the dealer is low-balling you on the current value of your vehicle.
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      05-19-2022, 08:16 PM   #61
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Quote:
Originally Posted by tranquility View Post

How can leasing 4 years=the same as buying outright unless they not charging interest? Now don't tell me about variables like you going out and making some killer profit w your freed up $40K as that's not the pt and it's not a given. Ofc being a borrower is more costly than not being in debt, that's the whole pt, businesses don't lend out money for free.

Anyway, that's enough talk about leasing for me, not interested in that at all but GL w your decision.
You're talking cash???????? Like paying cash money? Why on god's green earth would anyone with good credit pay cash over the last 10 years? I borrowed at barely 2pc, I saved 53% by taking that $50K and moving it to RRSP and even then that earned 19%. It was near free money man.
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      05-19-2022, 09:50 PM   #62
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I see rationalization and over complication in this thread.

Lowest cost, as was indicated is a goal, is to pay cash and drive the vehicle until it turns to dust.

To do otherwise is a higher cost scenario, with other positive and negative aspects.
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      05-19-2022, 11:30 PM   #63
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I see rationalization and over complication in this thread.

Lowest cost, as was indicated is a goal, is to pay cash and drive the vehicle until it turns to dust.

To do otherwise is a higher cost scenario, with other positive and negative aspects.
In a vacuum... sure.

In reality paying cash up front might be the most expensive way to purchase a car when you consider time value of money... especially in times when money is cheap. Again, there's no single set in stone best/cheapest way to purchase a car. The best way to purchase it depends on many variables.

An argument can be made that paying cash up front is the SIMPLEST way to purchase a car... but simple doesn't necessarily equal cheapest.
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      05-19-2022, 11:55 PM   #64
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Quote:
Originally Posted by wtwo3 View Post
In a vacuum... sure.

In reality paying cash up front might be the most expensive way to purchase a car when you consider time value of money... especially in times when money is cheap. Again, there's no single set in stone best/cheapest way to purchase a car. The best way to purchase it depends on many variables.

An argument can be made that paying cash up front is the SIMPLEST way to purchase a car... but simple doesn't necessarily equal cheapest.
OK. What is the lifetime lowest total cost of automotive utilization in your view?
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      05-20-2022, 12:24 AM   #65
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Last two cars I financed at 0%. Could have payed cash up front...but why? 0% is absolutely ridiculous.
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      05-20-2022, 12:47 AM   #66
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OK. What is the lifetime lowest total cost of automotive utilization in your view?
Well like I said... it depends. What are the terms of the purchase... are there incentives for financing/leasing... what are interest rates... what does the market look like, what is the opportunity cost of paying cash, etc. Depending on many variables.. paying cash upfront, financing, or leasing... either of the 3 can be the best/worst way to pay for a car. Blanket statements generalizing the cheapest way to pay for a car are meant to simplify things, not necessarily actually provide the lowest cost option.

Now talking specifically about lifetime utilization, then I'll agree that keeping a car long term is generally (not always) the lowest cost way. However it's how you pay for the car that varies, and often times paying cash up front could be the costliest when considering opportunity cost and time value of money.
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