Leasing a TT

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That's an oxymoron. The leasing company is obviously buying an asset which depreciates, and making money by doing so.
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Mark

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Yeah, but the leasing company is making YOU pay for the depreciation.
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Thank you for making my point.
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Mark

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On Tue, 28 Oct 2003 11:26:11 -0500, Mark Allread

What the leasing company is actually doing is loaning you the car for a period of time and charging you for depreciation and interest. As I mentioned in an earlier post you can beat those rates by a bunch if you spend your own cash up front.
However, if you are borrowing the money then the bank is essentially buying the vehicle (it is a secured loan and the vehicle goes to them in a default situation) and charging you interest. Same thing applies here about beating the rates with your own money.
Again, run the numbers for your specific situation and vehicle to find out if it makes sense for you. You are ignoring the actual numbers already posted from real vehicles and situations.
Scott
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Don't want any stinking equity in a depreciating asset. I'd rather put my equity money in something that appreciates, and only pay for what I use in an automobile (a lease). An automobile is a very poor savings account -- you get back a lot less than you put in.
I appreciate it when a captive lease company with deep pockets decides to give me a great lease deal. In fact, in the last few years, the lease deals from captive lease companies have been very agressive (read, they lose money) and I've been happy to watch for them and take advantage of them.
Al -------------------------
wrote:

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First off, remember that all my calcs assume not keeping the car more than 3 years. And that you drive it around 15kmi/yr. You are always better off keeping the car if you plan on driving it for many years, that is why one of my cars is purchased and will be driven for 10+ years.
On Sat, 25 Oct 2003 09:49:04 +0100, "Hairy One Kenobi"

Audi for example has a true bumper-to-bumper warranty covering wear items for 3 years on all new cars (purchased or leased). I just had my rotors replaced yesterday under warranty. Why they chose to offer such complete coverage I do not know, as brake rotors and pads are usually excluded on warrantys.

Ok, lets look at this one.
Using the internet wayback machine (www.archive.com) I looked up the price of an Audi a6 2.7T Quattro from 2000, a likely candidate for a vehicle about to come off lease. It went for $47,580.
LOAN The tax at 8.6% would be $4100, for a total purchase price of $51,680. Auto loan rates at that time were around 8% here, so the payments would have been $1620, a total payment over 3 years of $58300.
LEASE Same price and tax rate, figure an unfavorable interest rate of %8.5 (When I leased my rate was actually closer to loan rates than that). Say they missed the residual value a little in their favor at $23000. That gives you a payment of $931/month for a total payment of $33527.
Figuring it out: Current Kelly Blue Book for that vehicle in Excellent condition with 45kmi (what a lease would allow) is $23,360. Total amount spent if you sell it at market is $58300-$23360 = $34940.
In this case the lease came out slightly better than loan, real numbers would probably be even closer but favoring the loan rather than the lease.
Now, let us add in another factor. Take the difference in monthly payments $1620-$931 = $689/month Put it in to something with a return of %2APR and you would have $25,584 in savings as well.

Yes, but you could have taken that same $11k and made your first 11.8 lease payments.
-----------------------
So, how would you beat the lease for a 3yr car? Pay the residual value up front, finance the rest ( $51680 - $23360 $28320 ), monthly payment $887, total cost for the car $31,968. You could probably get %3 return on the $23360 you paid up front (and got back when you re-sold the car) for an additional $2166 in lost opportunity - total cost $34134.
Scott
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wrote:

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wrote:

Ha! Sounds like an interesting deal - you don't get /anything/ like that over here. All-in-all, though, this should be neutral in your calculation.

Unfortunately I can't see where this figure came from. Are you saying that a lease company will give you a car for three years, at a profit/cost/finance rate of 0.5% per annum?
Wow.
I can see why you would want to lease a car - with a company operating at such slim margins, why even /consider/ a purchase? That's very different to over here.
First off, the purchase price is considered (heavily discounted, because the lease company takes cars in bulk). He then adds a finance percentage, and a chunk for profit. He then subtracts the expected Trade auction residual (he's not going to offer you "book" price - after all, if you don't take the car off of his hands, that's his only recourse). I don't know the US market, but over here that would tend to be 15-25% less than book (in your example, call it $4600 rather than $360). Feed /that/ into the calculation, and that's quite a percentage..

Ah. That's GBP 11k - call it a rate of 1.62 (back then) for $18k. Now remove that from the purchase price and adjust interest payments (that's 37% of the price that you suddenly don't have to finance. Over here, you (like the lease company) would still have to pay the full 17.5% of VAT on that.
Sounds like, where you are, you don't (in other words, it's not as neutral as over here - in the UK, the lease company would gain a little, courtesy of its larger discount). So let's take that directly off the price and (being brutal), simply multiply-down the monthly cost to $1020 per month.
Let's now up the rate on the lease vehicle to reflect the sort of difference you would see in the UK (assuming the same 0.5% return rate for the company) - and, at the same time, assume that they get a large fleet discount (thereby making my life easier by cancelling them out ;o)

Well, in the example above, you are now comparing remarkably similar amounts of money; using a similarly brutal approach to rates, that savings account now drops to $3300, against ownership of a car worth $23360.
So why the big difference?
Well, as you point out, the first time that you buy a car outright, you lose-out. You finance the depreciation up-front, rather than monthly (as you do with a lease).
Given that the BMW was most definitely the worst-depreciating car that I have ever owned, let's take my losses and spread them over six years (again, assuming three years per car)
At a total outlay or GBP 20550 and a residual of GBP11k (53.5% - arrrggghhh!), we get $15,500. I'm not going to attempt to work out the potential ROI on that, as there are too many variables (particularly if you invested in technology companies at the time, and kept the shares! ;o)
So let's simply take half of that figure off of the value of the asset at the end - $3300 vs. $15600.
That's narrowed the margin, but is assuming that I won't buy another car.. you can effectively spread the initial cost of the initial asset ad infinitum. (I actually paid it off in two years, rather than three, but let's not go there!)
The most important thing to come from this is, I think, "YMMV".
Lease vs. purchase is very much a personal thing, depending upon a lot of factors. As a rabid car nut in a decent job, I probably (no, let's make that *definitely*) spend a higher proportion of my take-home on a car than would Mr & Mrs 2.4 Children.
For, say, a more typical young chap trying to drive a car that he can't afford to buy, the story is different - a lease makes the car /attainable/. He doesn't get anything out of it - excepting the experience of driving said car for three years - but considers it a worthwhile use of his money.
We all make choices on how to spend our money. Probably quite similar ones, given where we're talking :o)
H1K
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On Sun, 26 Oct 2003 08:30:37 -0000, "Hairy One Kenobi"

Good summary of the whole discussion.
The primary reason I lease is tht I tried the purchase/resale thing for both my long (10 or more years) and my short (4 or less years) cars and found the lease is easier one me for the short term car and the purchase is tremedously better for the long term car. The third car is a cash purchase beater truck for home improvement projects and dump runs.
Though, if VW brings a new 2-seater mid-engine rear-wheel drive car over here I just may switch to 2 long term cars, a beater "family" car, and a beater truck.
Scott
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wrote:
...

I try for as high a residual value as possible. If that value is higher than the actual market then there is a liability (on the delar's part), if the value is lower than actual market, it is an asset (on your part if you chose).

When I did my own calcs that number was more like 6 years to break even (assuming a 3 year loan vs a 3 yr lease). That is including the resudual value in the 6yr old car at that point, maybe it is 9yrs if you assume zero residual value, though even 9 yr old cars have significant resale if you are buying a good car.
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