A Discussion of Differing Points of View: Is Jeep Leasing an Intelligent Choice or a Dumb One ??

[jadmt]

yes the vehicle does matter but you don't pick it based on its capabilities and limitations you pick the vehicle based on the residual value.

when you buy a vehicle, you plan on keeping, you picked up vehicle based on its capability and limitations in accordance with your needs,you don't concern yourself as much at the resale or residual value.

I guess that might be one of the reasons why leasing has not appealed to me. Anyone have an answer for my trade in question on sales tax?

 

[luthj]

There are some good total cost guides on the web. The one below indicates a net positive of nearly $2.5k for the purchase over the lease. Considering most vehicles are nowhere near end-of-life at 6 years old, it makes more sense to drive that 6 year old vehicle for another 2-3 years, saving yourself another $10k in lease payments (plus cash up front). At 8-9 years old the vehicle will have a 2-4k in residual value, and you can dump for something new.

Leases can vary dramatically though. Some will end up being much more expensive, either due to charges are vehicle return, mileage restrictions etc. Those can easily add thousands to the cost. This of course compares brand new vehicles. If you buy something lightly used, in many vehicle types that means 10-20k miles. These vehicles are often 70% of new cost with 90% of their life left.

Leasing vs. Buying a New Car

Car buyers have two financing options when it comes time to purchase a new car. Consumer Reports examines the basic differences: lease vs buy.

www.consumerreports.org

	6-YEAR LOAN	3-YEAR LEASE(S)
Monthly Payment	$416	$287
Down Payment	$2,000	-
Cash Due at Signing	-	$2,000
Interest Rate	2.9%	0.024% (Money Factor .00001)
Total Paid After 3 Years	$16,976	$12,332
Residual Value After 3 Years	-	$16,994
Total Paid After 6 Years	$31,952	$24,664 (two leases back to back, including two payments of $2,000 at signing)
Resale Value at Age 6	$9,675	You don’t have a car to sell/trade in

 

[luthj]

On a trade in, the dealer subtracts the trades value from the total cost, so you pay sales tax on the adjusted amount. Its fairly amazing that dealers can do that (they have powerful lobbying groups). Try getting that deal on any other class of product.

 

[shade]

On a trade in, the dealer subtracts the trades value from the total cost, so you pay sales tax on the adjusted amount. Its fairly amazing that dealers can do that (they have powerful lobbying groups). Try getting that deal on any other class of product.

I've never understood how that practice came to be, but I've never asked too many questions, either.

 

[AbleGuy]

I guess that might be one of the reasons why leasing has not appealed to me. Anyone have an answer for my trade in question on sales tax?

In states with ridiculously high sales tax, people often find that trading in their late model used vehicle gives them a somewhat better deal on the cost of the new one because that trade in greatly reduces the sales tax they pay on the new vehicle....compared to the hassle of selling their former rig to a third party and then paying sales tax on the full amount of the new car’s price.

 

[AbleGuy]

but I've never asked too many questions, either.

The fewer questions you ask, the fewer lies you’ll hear.

 

[BritKLR]

The best car is a paid off car. Take the monthly lease / loan payment and multiply that by whatever you wish and put that amount in your bank account. In the end, take that balance and apply it towards your retirement goal and deduct from years till retirement and enjoy.......just saying.

 

[jadmt]

so that makes leasing less attractive to me.

 

[MOguy]

There are some good total cost guides on the web. The one below indicates a net positive of nearly $2.5k for the purchase over the lease. Considering most vehicles are nowhere near end-of-life at 6 years old, it makes more sense to drive that 6 year old vehicle for another 2-3 years, saving yourself another $10k in lease payments (plus cash up front). At 8-9 years old the vehicle will have a 2-4k in residual value, and you can dump for something new.

Leases can vary dramatically though. Some will end up being much more expensive, either due to charges are vehicle return, mileage restrictions etc. Those can easily add thousands to the cost. This of course compares brand new vehicles. If you buy something lightly used, in many vehicle types that means 10-20k miles. These vehicles are often 70% of new cost with 90% of their life left.

Leasing vs. Buying a New Car

Car buyers have two financing options when it comes time to purchase a new car. Consumer Reports examines the basic differences: lease vs buy.

www.consumerreports.org

	6-YEAR LOAN	3-YEAR LEASE(S)
Monthly Payment	$416	$287
Down Payment	$2,000	-
Cash Due at Signing	-	$2,000
Interest Rate	2.9%	0.024% (Money Factor .00001)
Total Paid After 3 Years	$16,976	$12,332
Residual Value After 3 Years	-	$16,994
Total Paid After 6 Years	$31,952	$24,664 (two leases back to back, including two payments of $2,000 at signing)
Resale Value at Age 6	$9,675	You don’t have a car to sell/trade in

What is the 2000 due at signing for? That locks like a purchase in the low 20s, so your lease maybe 6 grand if the residual is that high.
With 2000 grand down your lease should be about 4k.
Of course if you fall for that lease you are getting ripped of ok

 

[luthj]

Me general take is that the only time leasing is cheaper is when there is a tax write-off involved. That generally means a personal business though. If you are one of those people who must have a new vehicle every 3-5 years, a lease may be cheaper than the endless buy, trade, roll loan balance. I do know a few people who do this. Currently with one guy is pickup trucks, and he can't resist buying a new one after the new car smell wears off in 3 years or so. So he gets a "deal" where his payments don't change, and they roll his balance, minus the trade in, and he keeps on trucking. I did some quick mental math, and told him how much that approach would cost him over his life, "shut up" was the response.

 

[shade]

Currently with one guy is pickup trucks, and he can't resist buying a new one after the new car smell wears off in 3 years or so. So he gets a "deal" where his payments don't change, and they roll his balance, minus the trade in, and he keeps on trucking. I did some quick mental math, and told him how much that approach would cost him over his life, "shut up" was the response.

It's an expensive hobby. Check the ExPo sale threads for more examples. I couldn't stand giving that much money away every month for decades.

 

[vintageracer]

I am SO GLAD I got everyone's Panties In A Wad over my comment:

Leasing is STILL just an Alternate Method of Financing a vehicle

That's how it's viewed by those in the car business. Just another way get people in a new to them vehicle, "Move the Iron" off the lot and get paid a commission on the sale!

Having said that I also did say that there can be a vehicle Lease that is a GOOD DEAL in some situations using the example of very expensive or slow moving vehicles depending upon terms, mileage restrictions and conditions.

That fact that so many poster's are so passionate about telling us why they are right about leasing versus buying is fine IF it makes you feel good to justify your purchase to the rest of us. In reality I/we could care less about the financial agreement you made to acquire your vehicle. If it makes happy and want to thump your chest about the great deal you believe you got good for you!

My point was to give a vehicle dealer perspective about how vehicle leasing is looked upon by those in the car business. Nothing more. If you "feel" attacked and wronged by that point of view so be it. Your not going to change my mind and I am not going to change your mind and that was NEVER the intent of my post. Leasing, buying or renting it's all just a way to "Move the Iron" off the lot.

Just realize that dealers like leasing vehicles as with few exceptions the terms, mileage restrictions and conditions are written HEAVILY in favor of the dealer not the consumer. Leasing also provides the OEM manufacturer and manufacturer's financing arm of their business a quick way to adjust unsold vehicle inventory to keep plants running producing vehicles. Leasing also provides the dealers with a ready fleet of lower mileage off lease used vehicles being returned and or going to auction that provides a great opportunity to purchase lower mileage used vehicle inventory for sale on their lot. After all the 4 big profit centers for franchise dealers are vehicle financing, warranty vehicle repair, customer vehicle repair and used car sales. Notice that selling new is not the in the top 4!

With volume selling now the name of the game at franchise dealers it's all about the back end money they get from the manufacturer. The more new vehicles they Sell/Lease the more Moohlah they get paid on the back end selling new cars.

Leasing is just another way that helps to make it all happen!

By the way read below:

Copy & Past DIRECTLY from the Consumer Reports article referenced above in LUTHJ's post about Buying or Leasing a New Car and I Quote:

"The low interest rates that have prevailed elsewhere for the past few years have carried over into lease contracts, which also helps moderate their cost. Interest rates are a critical part of the economics of leasing, because at the end of the day a lease is just another way to finance a car."

 

[luthj]

Car loan statistics: What Americans owe | Updated quarterly | Finder.com

All the figures you need on car loans including total debt, delinquencies, number of loans, number of Americans with auto loans and more.

www.finder.com

Americans appear to have no problem signing on the dotted line to finance a vehicle, no matter the cost.

How much we’re borrowing differs by where we’ve shopped for our new or used car:

• The average loan amount for a new car was $31,099 in 2017, averaging a $515 monthly payment.
• The average loan amount for a used car purchased at a franchise was $21,375, resulting in an average monthly payment of $398.
• The average loan amount for a used car purchased at an independent dealer was $17,002, resulting in an average monthly payment of $348.

Your new car loan could come in a low average interest rate of 5.11%, depending on your creditworthiness. However, franchise cars average a loan rate of 7.68%, while an independently used car’s rate averages 11.48% — more than double that of a loan on a brand-new car.

https://www.kansascityfed.org/en/publications/research/mb/articles/2018/auto-loan-delinquency-rates-rising

The current rise in auto loan delinquency rates is worrisome.

 

[shade]

I am SO GLAD I got everyone's Panties In A Wad over my comment:

My panties remain unwadded.
Maybe we can work something out later.

 

[MOguy]

I guess that might be one of the reasons why leasing has not appealed to me. Anyone have an answer for my trade in question on sales tax?

The state won't give you a refund. You pay tax on the negotiated price of the vehicle, trades in and down payment can reduce the loan amount put not the purchase price. Not sure if any alliances are made on trade ins.