Quote:
Originally Posted by DJKapeesh
More great advice,
but what if someone does not have a company? Any scenario where leasing a car then buying it out at the end of the lease is cheaper than buying?
I have also never leased a car so don't exactly understand how the lease buy out dynamics work? If you don't have the cash up front can you still use a private loan to buy the vehicle at the amount allotted?
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leasing is not cost efficient 9/10 times. The times it is, is when depreciation is more than the cost of the lease.
Ex: (Hypothetical round numbers for ease of understanding) Guy buys Porsche for $200k. In 2 years, Guy wants to sell Porsche, but depreciation is 25% in those 2 years. Guy takes a $50k loss due to depreciation.
Guy leases Porsche for 24 months @ $1500/month with $10k down. At the end of the lease, guy is out $36k in Lease payments and $10k for the downpayment. Total out of pocket is $46k, so this would be the cheaper option.
For the people that just cant afford a car, and think leasing for 3yrs at $300/month then buy the car back at a ridiculously high price, this is a bad decision. This is the typical lease scenario where someone is trying to live outside their means, and the dealer takes advantage of it through low lease payments. The dealer always makes out in the end on a lease, no matter how you look at it.
My sister in law leases her cars, and for a $40k SUV, will pay $16k+/- over the term of the lease, another 5k in the downpayment/fees, and at the end of it, have the option to buy the car back at 75% of its original price ($30k). So if she does that, she just paid $51k for a $40k SUV, or lost $11k over the depreciation (16+5-10).
As for buying out the car at the end of the lease, it depends on the car, but most times, it is not going to make financial sense to do it. Also, you can get a loan on it; it is similar to buying a used vehicle.