Buy -vs- Lease

Leasing appears to be significantly cheaper right now. I guess no one has done the math and is assuming purchase is cheaper.

The current lease deal of $999 down and $199 per month is attractive. In my state we pay excise on the full negotiated price of the car when leasing, just as we do on a purchase. In most states you pay on the amount you are leasing only, sometimes as a lump sum, sometimes on the monthly payment amount. A lease will be even cheaper for those states.

I haven't looked at the details yet at Toyota, but I was very close to leasing a Nissan Leaf before I decided it was just too expensive. $999 down $199 a month for a Prius HB 2 plus the usual dealer/brand junk like $199 documentation, ~$500 acquisition fee gives us a 36 month total of $8663 or $17326 for 6 years (as mentioned in a post above) which comes to ~$2887 per year.

In a purchase situation we have a MSRP of $24,200 for the same model. Even if you are able to get a true 0% APR, if you divide $24,200 by 6 you get a per year cost of $4033. In addition to this $4033 are any repairs that are necessary out of warranty that you would not pay for on a lease.

Now you will probably argue that nobody buys at MSRP, but a lease is negotiable as well. Say you can get $2000 off the purchase, and you would be doing well to get that. Your $24,200 now becomes $22,200 but is still $3700 per year. In order to drop down to our non-negotiated lease you would have to get a brand new $24,200 car for $17,326 or nearly $7,000 off, a price that no dealer will give you. On the lease side, it is typical to roll taxes and fees into the lease, so your actual payout will be more in the lease, but usually you can add that in, and while doing so, get them to drop the base cost of the lease resulting in a higher than initial $999 + 35 x $199, but less than $999 + 35 x $199 + taxes + fees.

Adding the fees and TTL into the lease, I would estimate being able to get it for $2000 down $199 x 35 = $8965 or $17,930 for 6 years or $2988 per year, still far far below $4033 per year + one time TTL of ~$900 (for my state).

You would have to keep the car for about 9 years just to break even compared to the lease and then you'd be driving a car that was 3-6 years older for 66% of the time compared to a 0-3 year old car 100% of the time. I know which I'd rather do.

 

So at the end of 6 years (using your numbers, to save time):
Lease: You have paid $17930, and you have no car.
Buy: You have paid $25100, but you have a car that you can sell for maybe $9800 (per Edmunds TMV). If you do sell the car then you are out only $15300.

Let's compare after only 3 years:
Lease: You have paid $8965
Buy: You have paid $25100, but your car is worth $16000. If you sell, it has cost you only 9100. And if you had actually bargained and got your car for $22200+$900TTL = $23100, and you sell after 3 years, your cost is $7100, which is less than your lease of $8965.

It is worth remembering that you do get to keep the car if you buy it, but not if you lease it. It makes a difference.

 

It you only drive 12-15k miles/yr, keep your car in fairly good condition, AND you always trade or get a new car every 3 years or so and will continue to do so forever, then leasing over the long run may save you money if you take advantage of lease deals or negotiate well. That being said, I got off the lease bandwagon with my current Prius v because I drive 20k miles/yr, and got tired of having to purchase/lease another vehicle every 2.5 to 3 yrs. I would actually start my new car search after only 18 months - what a waste of time!

 

unless you report it as an operating expense for a business, then uncle sam pays for a huge portion of that $17,930.. and you'd only have to pay.. less than half out of your pocket =P

 

Of course, that depends on how much you drive the car for your business vs. non-business. And be sure you keep good records of your business mileage! If you can't prove that you drive it for business, you could be in hot water.