about to lease a new 2010 Prius... need help

Whoever said Financial Advisors do not recommend leases is NOT a financial advisor. Whether or not leasing is for you is dependent on a lot of things...including:

Do you like to trade your car often?
Do you want to avoid out-of-warranty repairs without purchasing an extended warranty?
Do you own your own business?

If you really do the math a subvented lease deal (such as those being offered now on Prius) can make a lot of sense for the right person.

For those who cling to the idea that purchase is always preferable to leasing I have a test...If you know the definition of solipsism and you still think purchase is always superior to leasing then congrats you are right...If you believe purchase is always right and you have to look up the definition of solipsism then you are talking out of your butt! Only the ignorant, a solipsist or borderline personality can truly belive they are always right without looking into all aspects of a problem. The ignorant will learn and perhaps become more informed...the solipsist or borderline will never learn and will never believe...such is the world we live in that disorders of solipsism and borderline personality seem to be multiplying aroung us.

 

It is indeed confusing, and you're right they really aren't "comparable". Multiplying the money factor by 2400 though gets the consumer to an APR figure that they will find familiar to compare.

Yeah thats just an impossible situation to compare...I feel for you...

+1 to Penny's Dad...

 

Well said.

 

After a bit of thinking - I now understand why they do it.

To calculate monthly interest you would use = Principal*IntRate/(100*12).

Capitalized cost is the "principal" on which we are paying interest at the beginning of the lease. Residual is the principal at the end of the lease. So, the "average" principal is (Capitalised Cost + Residual)/2.

So, (Capitalised Cost + Residual)*IntRate/(2*100*12) = (Capitalised Cost + Residual)*IntRate/2400 = (Capitalised Cost + Residual)*MoneyFactor.

Hmmm ... why don't the various sites that explain lease show this simple calculation ?

Not that, that has ever stopped me from trying

My Nissan Leaf Forum • View topic - Leaf - Lease vs Buy : A purely financial comparison

 

When you lease a car you do not own it, the leasing company does. When you finance a car you own it and there is a lean from the bank that is providing financing. It is very easy to sell and pay off the bank. It is a huge mess trying to get out of a lease. Some claim it is impossible.

Are you claiming you cannot deduct a car you purchase as a business expense? This is far from true. You can deduct miles or the deprecated value of the car. Most often you can deduct more then you can with a lease.

Most people do not own their own company and if they lose their job and have to drive farther, the miles will kill them.

I think Clark Howard has a little better reputation then your financial advisor.

I have to ask. Did you get an extended warranty on your lease? You seem to push them both.

 

That is particularly poor advice. We all know plug-in Prius is coming in a year or two.

 

Apparently you are confusing Solipsism Syndrome and Solipsism.

[ame="http://en.wikipedia.org/wiki/Solipsism"]Solipsism - Wikipedia, the free encyclopedia[/ame]

 

Depends on the leasing company. Buying a car out or selling a TFS lease is very easy. I've done it.

If you deduct miles you cannot deduct depreciation or any other costs associated with the car. Its either the mileage deduction or the actual expenses deduction.

If you drive a LOT of miles, then theres no benefit to a lease because you want to just take the mileage deduction.

But, if you drive 20k miles or less, if you add up your fuel, repairs and maintenance, detailing, insurance, tolls, AND the lease payments...the savings can be bigger. The less miles you drive...the bigger the difference in the deduction.

Another thing to bear in mind is if you buy the car and depreciate it, then sell it in 3 years...you may have to pay some of the depreciation back when you sell the vehicle. If you lease...you don't.

Its not perfect or cut and dried, you have to look at each individual situation to see whether it makes sense or not.

The type and classification of the car makes a difference too...

I never said that a lease was right for "most people" I said it was right for me, and may be right for others depending on their situation. Unlike you, I don't tell people what to do when I have no idea what their situation is.

LOL! You don't even know my financial advisor.

My financial advisor has made me a fairly wealthy man...Clark Howard hasn't done much for me lately so you can keep him.

Of course not, that would have been stupid. I'd never buy it anyways until the end of the warranty.

And again...don't put words in my mouth. All I have said was I have had good luck with extended warranties, and while these cars are very reliable they are not flawless in my experience.

 

Let me get this strait. You leased a car for 3 years and had to sell the car before the lease was up?

Why?

Did you lease another car from the same lease company? If not how much hell did you go through? Why would any lease company let someone out of a lease unless they were going to make money and lease you another car?

Did you have to pay off the lease, then buy the car from the lease company, then sell the car to someone? I bet there were a lot of fees to do this.

It is not easy to get out of a lease unless you are leasing another car from the same company. It is very easy to sell a car you purchased and owe money on.

I question a lot of your advice. Leasing and extended warranties only benefit the dealer, leasing company and car manufacture.

 

What part of the car business doesn't benefit the car manufacturer?... Sell you car and take the bus.

 

You are just being intellectually lazy. Show the calculation that says financing is better than leasing.

 

Lexus includes GAP -- Toyota makes it optional.

 

Using the lease sheet posted above it shows leasing a $30,000 Prius with zero down comes to $500 a month for 3 years.

If you purchased a the same car at $30,000 at 4.5% and zero down your payment is $559 a month for 5 years

1st year lease 12*$500 = $6,000
2nd year lease 12*$500 = $6,000 rolling total $12,000
3rd year lease 12*$500 = $6,000 rolling total $18,000
4th year lease 12*$500 = $6,000 rolling total $24,000 (get a new car and get zero for the pervious car)
5th year lease 12*$500 = $6,000 rolling total $30,000
6th year lease 12*$500 = $6,000 rolling total $36,000
7th year lease 12*$500 = $6,000 rolling total $42,000 (get a new car and get zero for the pervious car)
8th year lease 12*$500 = $6,000 rolling total $48,000
9th year lease 12*$500 = $6,000 rolling total $54,000
10th year lease 12*$500 = $6,000 rolling total $60,000 (walk away with zero)

1st year purchase 12*$559 = $6,708
2nd year purchase 12*$500 = $6,708 rolling total $13,416
3rd year purchase 12*$500 = $6,708 rolling total $20,124
4th year purchase 12*$500 = $6,708 rolling total $33,540
5th year purchase 12*$500 = $6,708 rolling total $40,248
6th year purchase 12*$500 = $6,708 rolling total $40,248
7th year purchase 12*$500 = $6,708 rolling total $40,248
8th year purchase 12*$500 = $6,708 rolling total $40,248
9th year purchase 12*$500 = $6,708 rolling total $40,248
10th year purchase 12*$500 = $6,708 rolling total $40,248 (you end with a car you own and can keep or sell)

Leasing comes to $60,000 over 10 years and you get zero money for the car.

Purchasing comes to $40,248 over 10 years and my last car I sold used for $4,500 with 305,000 miles. Most people would get more. New balance is $35,748

Difference of leasing vrs. buying over 10 years is a $24,252 saving buy purchasing. It is foolish to buy or lease a car every three years. Leases force people to get a new car every three years.

Here is the math on the warranty. Buy a brand new car. Spend $1,000 on an extended warranty. Drive like I did. Zero repairs from 0 to 190,000 miles. At 190,000 I replaced the starter.

I would have wasted $1,000 a something I would never use. I drove close to double the miles covered by the warranty before anything would be covered. Total savings $1,000.

This is all simple math.

 

Leasing

There are circumstances when leasing is a better path than a buy.

When lease rates are low, as they are now, and residuals are still pretty high (as they are now) .. it can make sense to lease first, for the first 3 years, and THEN buy your car out at the end. That also gives you both first right of refusal at your car to sell it (privately, or trade) if there's equity in it, trade it at the end to take equity out, or if there is no equity, or if there's negative equity, it's NOT your problem. It does leave you free to make a car change if you like in 3 years, which lots of folks like.

On the current SoCal leases, there's a lot of plus side to paying only about 50 cents a month in interest (lease rate .00001) and just paying the tax monthly on the car's payment amount. If you decide to keep the car, then you're only going to have to pay car financing interest on the residual value, a much smaller amount than what you buy the car for + tax and title initially. There are things to consider like your own driving habits, and your own mileage and needs. I'm very good at listening to all of this and figuring if someone should lease or if they really ought to buy.

And, don't wonder how Toyota gets by on 50 cents a month in interest. They do get the 650 Bank fee (it's theirs to keep) and they also have their antenna up for you for 3 more years, seeing how you make payments, offering you other deals and specials and end of lease payment waivers where it makes sense to them, and at lease end, they get a low mile car that's cared for well and serviced properly, and a car that they can sell to another dealer for payoff (or more) and then collect another $500 in 3 years from that dealership when they certify it... and then finance it as a used vehicle. In the case of these .00001 rates, they also (at least this month) don't have to hand the dealership a check for $750 back in dealer cash because that $$ isn't offered to use as a dealer when you use their low rates or their special financing.

Namely, they have a master plan in regard to these cars, and if you can lease a new Prius and like low payments while you determine what YOUR next move in 3 years is... it is a great time to lease. No way could I purchase a Prius and for only 3 years pay 50 cents a month in interest... heck, even when you calculate the 650 BANK FEE (about 18 bucks a month) into that, it's still less than 20 bucks a month interest for the first three years. That's hard to beat!

If you look at leasing realistically... as just another way to buy and make lower payments, and not some mysterious and hard equation, and do the math... it's really a blessing right now for those with good credit.

Dianne

 

There is something better than both leasing and financing the car. It is buying the car outright. That is what I did on my 2000 Toyota 4Runner and my 2010 Prius.

A lot of people cannot afford to purchase car outright. If you stay away from leasing and extended warranties you will have more money to pay cash for your next car.

 

Re: Leasing

Fleet sales director. Enough said.

It is like insurance agencies that sell annuities. They are trained from day one that they are a good thing. Any CPA or financial advocate will tell you they are the worse investment you can make. People buy them because their trusted insurance company employee’s feels passionate they are helping the customer, and the customer believe them.

 

hmm

Not everyone can afford to write a check for a car.

And, when you are comparing overall costs on a lease vs a purchase, use an apple to an apple.

I have no idea where or how those #'s were determined in the equation below but they are confusing and should be taken with a grain of salt.

You should compare YOUR vehicle on a lease and the same on a purchase, dolalr for dollar. Then decide.

I do this, sitting at my desk with my own clients a lot, trying to figure out their best plan. Logic, experience, and a sinple calculator will answer the question: should I lease? Buy? Or, pay cash.

Example: Prius APRs here are 2.9 for 60 months. But -- if you have your own financing at 3.9 (and some CU's do) and are financing under 20K, then you are better off using my CASH pricing and getting a $750 lower price to boot by NOT using Toyota's APRs. However, if you walk in here with a low FICO score or you haven't got a 3.9 apr from your own source to make sense of that path, and let's say you have a 657 fico score, then no one's got 3.9 apr for you. You'd be lucky to get someone to give you 9-10% so in that case, taking Toyota's 2.9 is way better than taking the $750 selling price reduction. Matter of fact, it makes that $750 look like a consolation price when compared to the difference in car payment between 2.9 and a 9.65% apr that a tier III buyer would normally qualify for.

One cannot just willy nilly decide that a car is more to lease, because there's way more to a lease than what happens after 3 years!

Dianne

Dianne

 

Re: Leasing

Yes, enough said.
I have a reputation of doing right by plenty of folks. Just being on this side of the desk doesn't make me a bad person or an irresponsible advisor. And, I am done with your broad brush.

 

Once again, this depends on all of the factors. Normally buying outright is better than financing. Normally financing is better than leasing. But with all of these, special circumstances can alter the math. Manufacturer incentives, tax advantages, and weird market conditions can skew normal financial advice.

On top of this we get into personal opinion. Not all decisions are made with only cold financial calculus. Humans are not the most rational of creatures.

Tom

 

Re: Leasing

The insurance agencies that sell annuities also have a great reputation of doing right by plenty of folks. They are trained that they are helping the customer. And they strongly belive they are.