Leasing a TT
#11
Guest
Posts: n/a
Re: Leasing a TT
"Tha Ghee" <grewatson@yahoo.com> wrote in message
news:3f98308a$0$52153$a0465688@nnrp.fuse.net...
> > Leases make sense for 3 type of folks:
> >
> > 1) Get to drive a car that you could not afford the payments on to
> > purchase. (You really should buy something you can afford if you are
> > in this group)
> >
> > 2) You want the newest car at all times (for whatever reason) and
> > wouldn't keep your car past 3 years if you bought it anyway.
> >
> > 3) You are writing it off as a business expense or other tax reason
> > (though this usually coolapses down to reason 2 if you think about it)
<snip>
> your forgetting a few things, there's a set value at the end of the lease,
> so there's an asset. With a lease the interest is lower so are the taxes,
> and with that savings you can invest it and make your money back. The
most
> important there are no repair cost, to get "money/value" out of a purchase
> the vehicle must be kept 9 years or 3 leases. I was told a lease is like
> dating and purchase is a marriage
If that were true, then why would the lease company bother leasing-out the
cars..?
The main argument for leases that I've heard (YMMV) is that one can afford a
more expensive car for the same payment, or the same car for a lower
payment. If you are the type of person who doesn't want an asset, and
ditches it as soon as the warranty expires, then all power to your elbow..
OTOH, things like excess mileage can eat any savings, and there may be other
impacts - e.g. having to seek permission from the owner before driving
abroad.
The set [balloon] value at the end is calculated by the leasing company, and
includes their discount, interest on the money they've spent, and profit.
You don't get something for nothing. Naturally, you will have to pay for all
repairs to the car before handing it back (if you don't then it'll be even
more expensive). And, generally, the service costs.
Not sure where taxes come into this..?
--
Hairy One Kenobi
Disclaimer: the opinions expressed in this opinion do not necessarily
reflect the opinions of the highly-opinionated person expressing the opinion
in the first place. So there!
news:3f98308a$0$52153$a0465688@nnrp.fuse.net...
> > Leases make sense for 3 type of folks:
> >
> > 1) Get to drive a car that you could not afford the payments on to
> > purchase. (You really should buy something you can afford if you are
> > in this group)
> >
> > 2) You want the newest car at all times (for whatever reason) and
> > wouldn't keep your car past 3 years if you bought it anyway.
> >
> > 3) You are writing it off as a business expense or other tax reason
> > (though this usually coolapses down to reason 2 if you think about it)
<snip>
> your forgetting a few things, there's a set value at the end of the lease,
> so there's an asset. With a lease the interest is lower so are the taxes,
> and with that savings you can invest it and make your money back. The
most
> important there are no repair cost, to get "money/value" out of a purchase
> the vehicle must be kept 9 years or 3 leases. I was told a lease is like
> dating and purchase is a marriage
If that were true, then why would the lease company bother leasing-out the
cars..?
The main argument for leases that I've heard (YMMV) is that one can afford a
more expensive car for the same payment, or the same car for a lower
payment. If you are the type of person who doesn't want an asset, and
ditches it as soon as the warranty expires, then all power to your elbow..
OTOH, things like excess mileage can eat any savings, and there may be other
impacts - e.g. having to seek permission from the owner before driving
abroad.
The set [balloon] value at the end is calculated by the leasing company, and
includes their discount, interest on the money they've spent, and profit.
You don't get something for nothing. Naturally, you will have to pay for all
repairs to the car before handing it back (if you don't then it'll be even
more expensive). And, generally, the service costs.
Not sure where taxes come into this..?
--
Hairy One Kenobi
Disclaimer: the opinions expressed in this opinion do not necessarily
reflect the opinions of the highly-opinionated person expressing the opinion
in the first place. So there!
#12
Guest
Posts: n/a
Re: Leasing a TT
On Thu, 23 Oct 2003 15:48:21 -0400, "Tha Ghee" <grewatson@yahoo.com>
wrote:
....
>> Leasing a car at the begining of a new body style helps, as you get a
>> higher residual value.
>>
>> Scott
>
>your forgetting a few things, there's a set value at the end of the lease,
>so there's an asset.
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).
>important there are no repair cost, to get "money/value" out of a purchase
>the vehicle must be kept 9 years or 3 leases. I was told a lease is like
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.
wrote:
....
>> Leasing a car at the begining of a new body style helps, as you get a
>> higher residual value.
>>
>> Scott
>
>your forgetting a few things, there's a set value at the end of the lease,
>so there's an asset.
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).
>important there are no repair cost, to get "money/value" out of a purchase
>the vehicle must be kept 9 years or 3 leases. I was told a lease is like
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.
#13
Guest
Posts: n/a
Re: Leasing a TT
On Fri, 24 Oct 2003 00:02:32 +0100, "Hairy One Kenobi"
<abuse@[127.0.0.1]> wrote:
>"Tha Ghee" <grewatson@yahoo.com> wrote in message
>news:3f98308a$0$52153$a0465688@nnrp.fuse.net...
>> your forgetting a few things, there's a set value at the end of the lease,
>> so there's an asset. With a lease the interest is lower so are the taxes,
>> and with that savings you can invest it and make your money back. The
>If that were true, then why would the lease company bother leasing-out the
>cars..?
>
>OTOH, things like excess mileage can eat any savings, and there may be other
>impacts - e.g. having to seek permission from the owner before driving
>abroad.
>
>The set [balloon] value at the end is calculated by the leasing company, and
It is not ballon, baloon means a payment you MUST make at the end of
term. You would only make that payment if you chose to keep the car
(this only makes sense if the residual is below current market and you
do it to turn a profit).
>Naturally, you will have to pay for all
>repairs to the car before handing it back (if you don't then it'll be even
>more expensive). And, generally, the service costs.
I would be repairing any damage even if it were my car I was
purchasing. Here in the US the rule-of-thumb seems to be if the dent
is smaller than a quarter (unit of currency here), then you do not
have to repair it for lease purposes.
Also, most cars sold here (and certainly any worth leasing) have at
least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
everything but tires and gas).
>Not sure where taxes come into this..?
This may also be specific to the US. There is sales tax here (8.6% in
my area). If you sell your own car then buy a new one you immediately
pay sales tax on the new one based on it's full cost (and the person
that bought your car pays sales tax on the amount they paid).
For tax purposes a lease is also a purchase, however, you a little of
the sales tax with each payment. You only end up paying taxes on the
part of the car you 'use', and you get to pay it over time with no
interest as the sales tax is not financed in at the beginning (always
better than paying up front).
<abuse@[127.0.0.1]> wrote:
>"Tha Ghee" <grewatson@yahoo.com> wrote in message
>news:3f98308a$0$52153$a0465688@nnrp.fuse.net...
>> your forgetting a few things, there's a set value at the end of the lease,
>> so there's an asset. With a lease the interest is lower so are the taxes,
>> and with that savings you can invest it and make your money back. The
>If that were true, then why would the lease company bother leasing-out the
>cars..?
>
>OTOH, things like excess mileage can eat any savings, and there may be other
>impacts - e.g. having to seek permission from the owner before driving
>abroad.
>
>The set [balloon] value at the end is calculated by the leasing company, and
It is not ballon, baloon means a payment you MUST make at the end of
term. You would only make that payment if you chose to keep the car
(this only makes sense if the residual is below current market and you
do it to turn a profit).
>Naturally, you will have to pay for all
>repairs to the car before handing it back (if you don't then it'll be even
>more expensive). And, generally, the service costs.
I would be repairing any damage even if it were my car I was
purchasing. Here in the US the rule-of-thumb seems to be if the dent
is smaller than a quarter (unit of currency here), then you do not
have to repair it for lease purposes.
Also, most cars sold here (and certainly any worth leasing) have at
least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
everything but tires and gas).
>Not sure where taxes come into this..?
This may also be specific to the US. There is sales tax here (8.6% in
my area). If you sell your own car then buy a new one you immediately
pay sales tax on the new one based on it's full cost (and the person
that bought your car pays sales tax on the amount they paid).
For tax purposes a lease is also a purchase, however, you a little of
the sales tax with each payment. You only end up paying taxes on the
part of the car you 'use', and you get to pay it over time with no
interest as the sales tax is not financed in at the beginning (always
better than paying up front).
#14
Guest
Posts: n/a
Re: Leasing a TT
"Scott" <spam784@spam.spam> wrote in message
news:besipv0l59uu6ed7702l4dhe1gl676kcd3@4ax.com...
> On Fri, 24 Oct 2003 00:02:32 +0100, "Hairy One Kenobi"
> <abuse@[127.0.0.1]> wrote:
> >"Tha Ghee" <grewatson@yahoo.com> wrote in message
>
> >news:3f98308a$0$52153$a0465688@nnrp.fuse.net...
> >> your forgetting a few things, there's a set value at the end of the
lease,
> >> so there's an asset. With a lease the interest is lower so are the
taxes,
> >> and with that savings you can invest it and make your money back. The
>
> >If that were true, then why would the lease company bother leasing-out
the
> >cars..?
> >
> >OTOH, things like excess mileage can eat any savings, and there may be
other
> >impacts - e.g. having to seek permission from the owner before driving
> >abroad.
> >
> >The set [balloon] value at the end is calculated by the leasing company,
and
>
> It is not ballon, baloon means a payment you MUST make at the end of
> term. You would only make that payment if you chose to keep the car
Er.. yep. (Thought that was what I said? Sorry..)
> (this only makes sense if the residual is below current market and you
> do it to turn a profit).
>
> >Naturally, you will have to pay for all
> >repairs to the car before handing it back (if you don't then it'll be
even
> >more expensive). And, generally, the service costs.
>
> I would be repairing any damage even if it were my car I was
> purchasing. Here in the US the rule-of-thumb seems to be if the dent
> is smaller than a quarter (unit of currency here), then you do not
> have to repair it for lease purposes.
> Also, most cars sold here (and certainly any worth leasing) have at
> least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
> cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
> everything but tires and gas).
Interesting. In Europe (and specifically the UK), falling-off-the-road and
replacing any part that wears isn't covered by a warrenty.
> >Not sure where taxes come into this..?
>
> This may also be specific to the US. There is sales tax here (8.6% in
> my area). If you sell your own car then buy a new one you immediately
> pay sales tax on the new one based on it's full cost (and the person
> that bought your car pays sales tax on the amount they paid).
> For tax purposes a lease is also a purchase, however, you a little of
> the sales tax with each payment. You only end up paying taxes on the
> part of the car you 'use', and you get to pay it over time with no
> interest as the sales tax is not financed in at the beginning (always
> better than paying up front).
In the UK, we pay 17.5% Value Added Tax ["VAT"] - sales tax by any other
name. It doesn't matter whether you're a private individual or a fleet
manager, you still get to pay it. OTOH, fleets get much larger discounts
than individuals. OTOOH, a leasing company also has a bigger profit margin..
One argument that I'm surprised hasn't come up is that, when you buy a car,
you end up with an asset. This can, of course, be traded-in on your next
car - reducing the amount you have to save/borrow. With a lease, you simply
pay to /use/ a vehicle..
Just as a comparison, let's take a UK example. Using Google, the first
company in the list will lease you a 225TT Roadster for £435 a month; that's
over three years, with a maximum mileage of 10k per annum. Total outlay:
£15,660.
In my case, I bought my 225 (now 270 - I wouldn't have been able to chip a
lease car!) in Holland for £24,616 (excluding custom number plate and,
unlike the lease example, fully loaded. If I'd have got the exchange rates
just right, I'd have saved an additional £750. C'est la vie!).
Subtract £11k from the sale of my old BMW, and we get an outlay of £13,616,
or £378 per month.
It gets even more scary if we ignore the BMW and instead look at the
residual value of the TT I own outright - there's one up for sale 14 miles
from me (according to AutoTrader) - same year, similar spec, double the
mileage, £20.5k asking price. Even if we knock off a grand for mine being an
import, that's just £5,116 for three years, or £142 a month.
Note that I'm assuming you have to pay for your own insurance on both
vehicles. I /believe/ that's the case..?
Still, makes yer think, dunnit..?
H1K
news:besipv0l59uu6ed7702l4dhe1gl676kcd3@4ax.com...
> On Fri, 24 Oct 2003 00:02:32 +0100, "Hairy One Kenobi"
> <abuse@[127.0.0.1]> wrote:
> >"Tha Ghee" <grewatson@yahoo.com> wrote in message
>
> >news:3f98308a$0$52153$a0465688@nnrp.fuse.net...
> >> your forgetting a few things, there's a set value at the end of the
lease,
> >> so there's an asset. With a lease the interest is lower so are the
taxes,
> >> and with that savings you can invest it and make your money back. The
>
> >If that were true, then why would the lease company bother leasing-out
the
> >cars..?
> >
> >OTOH, things like excess mileage can eat any savings, and there may be
other
> >impacts - e.g. having to seek permission from the owner before driving
> >abroad.
> >
> >The set [balloon] value at the end is calculated by the leasing company,
and
>
> It is not ballon, baloon means a payment you MUST make at the end of
> term. You would only make that payment if you chose to keep the car
Er.. yep. (Thought that was what I said? Sorry..)
> (this only makes sense if the residual is below current market and you
> do it to turn a profit).
>
> >Naturally, you will have to pay for all
> >repairs to the car before handing it back (if you don't then it'll be
even
> >more expensive). And, generally, the service costs.
>
> I would be repairing any damage even if it were my car I was
> purchasing. Here in the US the rule-of-thumb seems to be if the dent
> is smaller than a quarter (unit of currency here), then you do not
> have to repair it for lease purposes.
> Also, most cars sold here (and certainly any worth leasing) have at
> least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
> cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
> everything but tires and gas).
Interesting. In Europe (and specifically the UK), falling-off-the-road and
replacing any part that wears isn't covered by a warrenty.
> >Not sure where taxes come into this..?
>
> This may also be specific to the US. There is sales tax here (8.6% in
> my area). If you sell your own car then buy a new one you immediately
> pay sales tax on the new one based on it's full cost (and the person
> that bought your car pays sales tax on the amount they paid).
> For tax purposes a lease is also a purchase, however, you a little of
> the sales tax with each payment. You only end up paying taxes on the
> part of the car you 'use', and you get to pay it over time with no
> interest as the sales tax is not financed in at the beginning (always
> better than paying up front).
In the UK, we pay 17.5% Value Added Tax ["VAT"] - sales tax by any other
name. It doesn't matter whether you're a private individual or a fleet
manager, you still get to pay it. OTOH, fleets get much larger discounts
than individuals. OTOOH, a leasing company also has a bigger profit margin..
One argument that I'm surprised hasn't come up is that, when you buy a car,
you end up with an asset. This can, of course, be traded-in on your next
car - reducing the amount you have to save/borrow. With a lease, you simply
pay to /use/ a vehicle..
Just as a comparison, let's take a UK example. Using Google, the first
company in the list will lease you a 225TT Roadster for £435 a month; that's
over three years, with a maximum mileage of 10k per annum. Total outlay:
£15,660.
In my case, I bought my 225 (now 270 - I wouldn't have been able to chip a
lease car!) in Holland for £24,616 (excluding custom number plate and,
unlike the lease example, fully loaded. If I'd have got the exchange rates
just right, I'd have saved an additional £750. C'est la vie!).
Subtract £11k from the sale of my old BMW, and we get an outlay of £13,616,
or £378 per month.
It gets even more scary if we ignore the BMW and instead look at the
residual value of the TT I own outright - there's one up for sale 14 miles
from me (according to AutoTrader) - same year, similar spec, double the
mileage, £20.5k asking price. Even if we knock off a grand for mine being an
import, that's just £5,116 for three years, or £142 a month.
Note that I'm assuming you have to pay for your own insurance on both
vehicles. I /believe/ that's the case..?
Still, makes yer think, dunnit..?
H1K
#15
Guest
Posts: n/a
Re: Leasing a TT
In article <5Oqmb.611$sP5.6075@newsfep4-glfd.server.ntli.net>, Hairy One
Kenobi <abuse@[127.0.0.1]> writes
>"Scott" <spam784@spam.spam> wrote in message
>news:besipv0l59uu6ed7702l4dhe1gl676kcd3@4ax.com.. .
>> Also, most cars sold here (and certainly any worth leasing) have at
>> least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
>> cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
>> everything but tires and gas).
>
>Interesting. In Europe (and specifically the UK), falling-off-the-road and
>replacing any part that wears isn't covered by a warrenty.
Not by a manufacturers warranty, but wear & tear is covered by all
maintained lease contracts, although malicious or accident damage must
be fixed by the lessee.
--
Toby
Kenobi <abuse@[127.0.0.1]> writes
>"Scott" <spam784@spam.spam> wrote in message
>news:besipv0l59uu6ed7702l4dhe1gl676kcd3@4ax.com.. .
>> Also, most cars sold here (and certainly any worth leasing) have at
>> least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
>> cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
>> everything but tires and gas).
>
>Interesting. In Europe (and specifically the UK), falling-off-the-road and
>replacing any part that wears isn't covered by a warrenty.
Not by a manufacturers warranty, but wear & tear is covered by all
maintained lease contracts, although malicious or accident damage must
be fixed by the lessee.
--
Toby
#16
Guest
Posts: n/a
Re: Leasing a TT
On Sat, 25 Oct 2003 09:49:04 +0100, wrote:
> Still, makes yer think, dunnit..?
All valid points, but much easier is this:
A leasing company buys the car at the beginning,
and sells it at the end. They make a profit
doing so. If you lease, that profit is coming
from you. If you buy, the equivalent of that
profit is staying in your pocket.
It really is as simple as that. Individual cases
can vary, the residual value can be higher or
lower than expected, etc., but overall, leasing
is NOT advantageous for individuals (there may be
some tax benefits for corporations). With a lease,
you're paying to avoid the hassle of selling a
used car at the end.
--
Mark
> Still, makes yer think, dunnit..?
All valid points, but much easier is this:
A leasing company buys the car at the beginning,
and sells it at the end. They make a profit
doing so. If you lease, that profit is coming
from you. If you buy, the equivalent of that
profit is staying in your pocket.
It really is as simple as that. Individual cases
can vary, the residual value can be higher or
lower than expected, etc., but overall, leasing
is NOT advantageous for individuals (there may be
some tax benefits for corporations). With a lease,
you're paying to avoid the hassle of selling a
used car at the end.
--
Mark
#17
Guest
Posts: n/a
Re: Leasing a TT
"Toby Groves" <news@iconia.org.uk> wrote in message
news:2QgeNKAUQlm$Ewiy@iconia.org.uk...
> In article <5Oqmb.611$sP5.6075@newsfep4-glfd.server.ntli.net>, Hairy One
> Kenobi <abuse@[127.0.0.1]> writes
> >"Scott" <spam784@spam.spam> wrote in message
> >news:besipv0l59uu6ed7702l4dhe1gl676kcd3@4ax.com.. .
> >> Also, most cars sold here (and certainly any worth leasing) have at
> >> least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
> >> cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
> >> everything but tires and gas).
> >
> >Interesting. In Europe (and specifically the UK), falling-off-the-road
and
> >replacing any part that wears isn't covered by a warrenty.
>
> Not by a manufacturers warranty, but wear & tear is covered by all
> maintained lease contracts, although malicious or accident damage must
> be fixed by the lessee.
In maintained leases, yes.
Didn't realise that anyone was buying such things on a *personal* basis,
these days - can't recall seeing one recently. Weren't they hideously
expensive, even when compared with franchised dealer servicing costs?
As I said - not really in the market myself, as it doesn't make particular
financial sense, even at my current miniscule mileage.
H1K
news:2QgeNKAUQlm$Ewiy@iconia.org.uk...
> In article <5Oqmb.611$sP5.6075@newsfep4-glfd.server.ntli.net>, Hairy One
> Kenobi <abuse@[127.0.0.1]> writes
> >"Scott" <spam784@spam.spam> wrote in message
> >news:besipv0l59uu6ed7702l4dhe1gl676kcd3@4ax.com.. .
> >> Also, most cars sold here (and certainly any worth leasing) have at
> >> least a 3yr bumper-to-bumper warranty. The cars I tend to lease also
> >> cover all scheduled service for 3 yrs (oil, wipers, XXkmi service,
> >> everything but tires and gas).
> >
> >Interesting. In Europe (and specifically the UK), falling-off-the-road
and
> >replacing any part that wears isn't covered by a warrenty.
>
> Not by a manufacturers warranty, but wear & tear is covered by all
> maintained lease contracts, although malicious or accident damage must
> be fixed by the lessee.
In maintained leases, yes.
Didn't realise that anyone was buying such things on a *personal* basis,
these days - can't recall seeing one recently. Weren't they hideously
expensive, even when compared with franchised dealer servicing costs?
As I said - not really in the market myself, as it doesn't make particular
financial sense, even at my current miniscule mileage.
H1K
#18
Guest
Posts: n/a
Financial Calcs for loan vs lease (was: Re: Leasing a TT)
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"
<abuse@[127.0.0.1]> wrote:
>Interesting. In Europe (and specifically the UK), falling-off-the-road and
>replacing any part that wears isn't covered by a warrenty.
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.
>One argument that I'm surprised hasn't come up is that, when you buy a car,
>you end up with an asset. This can, of course, be traded-in on your next
>car - reducing the amount you have to save/borrow. With a lease, you simply
>pay to /use/ a vehicle..
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.
>Subtract £11k from the sale of my old BMW,
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
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"
<abuse@[127.0.0.1]> wrote:
>Interesting. In Europe (and specifically the UK), falling-off-the-road and
>replacing any part that wears isn't covered by a warrenty.
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.
>One argument that I'm surprised hasn't come up is that, when you buy a car,
>you end up with an asset. This can, of course, be traded-in on your next
>car - reducing the amount you have to save/borrow. With a lease, you simply
>pay to /use/ a vehicle..
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.
>Subtract £11k from the sale of my old BMW,
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
#19
Guest
Posts: n/a
Re: Financial Calcs for loan vs lease (was: Re: Leasing a TT)
"Scott" <spam784@spam.spam> wrote in message
news:3mnmpvk03j2kblruvkf77s44417vro34dj@4ax.com...
> 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"
> <abuse@[127.0.0.1]> wrote:
> >Interesting. In Europe (and specifically the UK), falling-off-the-road
and
> >replacing any part that wears isn't covered by a warrenty.
>
> 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.
>
>
> >One argument that I'm surprised hasn't come up is that, when you buy a
car,
> >you end up with an asset. This can, of course, be traded-in on your next
> >car - reducing the amount you have to save/borrow. With a lease, you
simply
> >pay to /use/ a vehicle..
>
> 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.
>
> >Subtract £11k from the sale of my old BMW,
>
> 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
>
#20
Guest
Posts: n/a
Re: Financial Calcs for loan vs lease (was: Re: Leasing a TT)
"Scott" <spam784@spam.spam> wrote in message
news:3mnmpvk03j2kblruvkf77s44417vro34dj@4ax.com...
> 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.
OK - that's one major difference. Average mileage in the UK is around 12k
per annum. Lease prices tend to be quoted at 10l per annum.
> On Sat, 25 Oct 2003 09:49:04 +0100, "Hairy One Kenobi"
> <abuse@[127.0.0.1]> wrote:
> >Interesting. In Europe (and specifically the UK), falling-off-the-road
and
> >replacing any part that wears isn't covered by a warrenty.
>
> 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.
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.
> >One argument that I'm surprised hasn't come up is that, when you buy a
car,
> >you end up with an asset. This can, of course, be traded-in on your next
> >car - reducing the amount you have to save/borrow. With a lease, you
simply
> >pay to /use/ a vehicle..
>
> 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.
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..
> 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.
>
> >Subtract £11k from the sale of my old BMW,
>
> Yes, but you could have taken that same $11k and made your first 11.8
> lease payments.
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)
> 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.
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 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 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 )
H1K
news:3mnmpvk03j2kblruvkf77s44417vro34dj@4ax.com...
> 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.
OK - that's one major difference. Average mileage in the UK is around 12k
per annum. Lease prices tend to be quoted at 10l per annum.
> On Sat, 25 Oct 2003 09:49:04 +0100, "Hairy One Kenobi"
> <abuse@[127.0.0.1]> wrote:
> >Interesting. In Europe (and specifically the UK), falling-off-the-road
and
> >replacing any part that wears isn't covered by a warrenty.
>
> 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.
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.
> >One argument that I'm surprised hasn't come up is that, when you buy a
car,
> >you end up with an asset. This can, of course, be traded-in on your next
> >car - reducing the amount you have to save/borrow. With a lease, you
simply
> >pay to /use/ a vehicle..
>
> 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.
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..
> 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.
>
> >Subtract £11k from the sale of my old BMW,
>
> Yes, but you could have taken that same $11k and made your first 11.8
> lease payments.
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)
> 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.
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 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 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 )
H1K