Buying vs. Leasing

Check with your accountant for a tax effective way to to do it. In Australia it is working against me that the costs for fuel is low, I would be better off buying a V8 but my perosnal principles would not go for it, so a Prius is the way to go.

 

IMHO, I leased a Hylander 4 years back (5 year lease) and am kicking myself for not purchasing. I have not looked into what it will cost me to purchase it at the end of the lease, but what ever it is, it would have been a whole lot cheaper for me to purchase from the beginning. If you are the type that buys new at the end of 4 years, I guess it wouldn't matter. But I love this car so much and it is in such great shape, I will try to hold on to it for a few more years. We were told that the payments were a little cheaper to lease, but we really did not pull up real numbers to compare.
BTW, I was on the list to get a hybrid Hylander and refused the car because Toyota sold out to the oil companies and focused on power instead of gas mileage (IMHO). So we bought another Prius instead. Now my wife and I have our own. Funny world, isn't it.
We are in Miami, so I can't help on the dealer problem. Doesn't it make you scratch your head how a salesman can be so clueless? Such an easy sale!!
hope this helps,
hal
Ecstatic 2 Prius family

 

There are a lot of factors in making the buy v. lease decision that you may want to consider:

How many miles will you be driving over the lease period? Many (all?) leases have a mileage cap, the more miles you drive the higher the lease price, but there are often steep costs for exceeding the mileage allotment.

Resale price on the Prius may not hold to it's current levels as Toyota increases the production of Prii. This may be offset by an increasing consumer base for the Prius as more drivers become comfortable with hybrid technology and if gas prices continue to rise.

The cost of money - what is the interest rate you will be financing your purchase v. lease rates.

Depreciation - if this is for a business purchase then check with your accountant. You may be able to deduct more for a lease than a purchase.

Here is a link to MSN Carpoint with short articles on the buy v. lease decision -
http://autos.msn.com/leasing/default.aspx?src=LeftNav

Finally, here's a link the Bloomberg Lease/Buy calculator to help determine your exact costs.

http://www.bloomberg.com/analysis/calculat...s/leasebuy.html

Good luck!

Cheers,
Jeff

 

The absolute first questions to ask yourself prior to leasing are how many miles a year do you drive and how long do you plan on keeping your new car?
You can choose your mileage terms, 10k, 12k, 15k whatever per year, each resulting in a higher payment. But if you choose low for the smaller payments, and you start exceeding your mileage....it will cost you at the end of the lease termif you turn it in.
Some folks rationalize they'll just buy the car at the end of the lease, get a low mileage allotment and rack up the miles. That's fine, but what if you decide a few years down the road you don't want to buy it out after all---ie. (it gets wrecked and/or becomes troublesome or you just get tired of it, want something else, must have that next generation model, etc)....then your stuck with mileage overage expenses . At .25/mile that's $1000.00 a year for every year your exceed you mileage by 4000.
So, answer the mileage question first.

Next, On a lease you are basically paying the depreciation of the car. That is determined by Price(cap cost) - value at term end(residual). The residual is set and you can't change it. The price(cap cost) of any car is negotiable, including a leased car. So the object is to reduce the cap cost. Haggle yourself a good price and you just lowered your lease payment by reducing the capatalized cost.
Making a down payment will do the same thing..But that is money out of your pocket (cap cost reduction) and into theirs. Down payment on a lease is the worst thing one could do, you'll never get it back. (Especially if the the car is totaled in a wreck at some point..more on this later)
In a basic sense leasing is only good for the person who doesn't drive many miles per year, likes to swap cars often and favors those who choose a higher end car.

Also know that the interest rate on a lease is called money factor. There are different rates for different credit scores. These are hidden numbers and the dealer is not likely to offer you the best rate available even if your credit is the best. Money factor is a confusing decimal number that can be converted with a formula to a corresponding interest rate. Only then can you compare it to currently competetive bank rates. You can find out these numbers if you're resourceful.

Also, know how to calculate a payment yourself with the lease formula. The dealer will always tack on $20-$40/month to the payment your are presented, over 3-4 years that's $ 1000 + or more in his pocket and you didn't even realize because the payment "looked so good".
I got more if you want it. But get familiar here:
http://www.leaseguide.com

 

9G-man - most of what you say is true and quite accurate. The issue about not leasing if you put many miles on may be true or may be false - it depends. Remember is you buy the car and rack up the miles it will also be worth less money when you go to sell it than if it has low miles - so you should expect to pay more to put many miles on with a lease. BUT you don't have to do this by way of paying a penaly of 25 to 35 cents per mile on the back end. Many, if not all, dealers will let you buy extra miles up front at a much lower cost of from about 8 cents to 12 cents for miles above a base lease of 15,000 miles a year. If you don't use all those miles (in excess of the base 15K) they typically refund that money to you - so all you loose is the time value of money but protect yourself from paying a big premium for those miles on the back end.

 

Hey,
What you are saying is absolutely TRUE! The main point I wanted to make is that many folks will be enticed by the lower payment associated with a lower mileage allotment, intentionally knowing that they will infact excede those miles. Its a bad temptation that is like the human nature of procrastination. Some rationalize the choice saying they intend on buying out the car at the end anyway.
Yet,When the time comes most people don't really want to buy the car after all for many possible reasons, including, it got wrecked , it's unreliable and most of all they can just start over with a new car for the same price of paying for the old car. Yet now they are stuck with Thousands of dollars of mileage overage ----that could have been avoided to begin with, in the manner that you pointed out ( paying more) -- or --by simply not choosing to lease.

Also, as for the example of having bought a car and it being worth less because of higher than normal miles on it....at least one would still have a car that is worth something -v having no car at all and a bill for all those miles.

 

Having read my above post one might get the impression that I am against leasing. Guess what, that's not all the case. My current car is a lease. In fact I worked out such a good lease with no money down that I am half way though it and actualy have equity in the car if I were to sell private party and break even on trade in. This is very rarely the case in the middle of any car lease.

What I want to express is a car lease is a bit more complicated transaction than the ordinary car buy really understands. Thus, one is opening themselves up being taken advantage of if they don't truely understand it. For most people monthly payment is the bottom line and that is the first and worst mistake.

I commented that putting money down on a lease is not wise, and many folks may not agree. Although, it lowered the monthly lease payment, in the end that lump sum came out of your pocket and you will never recoupe it. Worse...If the car is totalled during the lease term, the insurance co. will only pay the currently remaining cap cost, and you just reduced it for them up front. They thank you very much. :lol:

 

Now consider this as it relates to the Prius specifically:

When you lease the object of a good deal is to reduce the cap cost. The Prius is an extemely popular car that folks are paying near, at and beyond MSRP. Thus, the opportunity to reduce the cap cost is not there like other cars, you'll be leasing at a premium.

Furthermore, it is widely accepted the premium one pays for hybrid cars is difficult to recoupe through fuel saving only. In order to do so you must drive it, build up miles and eventually (depending on gas prices) save money. The catch here is when it comes to leasing a Prius you wont have it long enough due to lease term, nor can you rack up the miles.

The only thing leasing a Prius will do is save the environment and impress the tree huggers. :lol: ---I'm being humorous here, --but consider my my point.

 

Agreed, it probably does not make economic sense to lease a Hybrid. A hybrid is most economical when you buy it and keep it.

I just bought a used 02 that only had 7200 miles on it. The lady that bought it paid a premium to get it new and almost gave it away as a trade-in. Fortunately for her she has lots of money to throw around. For me it was a great deal as I got an almost new Prius for only $16,000! That is the way to buy a Prius.

 

another point to consider- when you lease you're not eligible for the $2000 tax deduction...