[Porsche-O-Phile]

Originally posted by kaisen
No surprise that there would be a couple uninformed comments.

First, Cash Cap Reduction (CCR) is just another name for 'down payment. You can lease with zero down, if you wish.... just like any loan. Will your payments be higher? Yes, again, just like a loan. The more money you put down, the lower your beginning balance, just like a loan.

Let's assume you are going to get a new Saturn VUE for $19425.

You could buy it for 60 months at 3.9% (GMAC supported rate) and get a $750 rebate as well. Assume $1000 cash from you and a 5.5% sales tax ($1027), and you would be financing $18702 for 60 months at 3.9% for a payment of $345 /mo x 60= $20615 plus the $1000 you put in is $21615.

Or you could lease it for 39 months at 1.3% (GMAC supported rate) and get the same $750 rebate. Assume the same $1000 cash from you. The only tax due up front is on CCR (Your $1000) so $55 in tax. You leave owing $17730 ($972 less). You have 39 payments of $268 (including $14/mo in tax) and a residual of $8741 (calculated with 15,000 miles per year). $268 x 39= $10452 plus $8741 residual plus $481 tax on residual plus $1000 you put in is $20674 (That's $941 less).

Even if you took out a 21 month loan to pay the residual balance ($9222 with tax) you could have as high as a 10.8% interest rate and still come out EVEN taking the same 60 months to pay for it. After five years of payments you have a paid-for VUE, just like five years of payments on a loan.

Of course, you may not want to keep it at the end of 39 months, for many that's the allure of leasing. At the end of the lease you owe nothing, you just turn in your VUE and walk away. There are no lease termination charges (drop off fees, etc.) with GMAC. 39 months into that 60 month loan, you only owe $6960 ($1781 less) but paid $3003 more in payments ($345-268= $77x39= $3003) so the lease came out $1222 ahead.

And that is only if the VUE is worth $8741 or more 39 months from now. If it is worth any less than $8741 (GMAC's guarantee) then the lease becomes a better deal. If it is only worth what you owe on your loan, WHAT DO YOU OWN? In this example, you own a $6900 VUE that you owe $6900 on, but paid $3000 more in payments to say you owned compared to the lease you COULD have signed up for. You CAN'T have inequity on a lease, but you CAN have equity (You have first right to buy your car for the residual).

AND, what would you have done with the $77 each month in cash flow????? You can assign your own values here, but it can only help the case for the lease.

There's one more thing. What happens if your VUE gets stolen when it is exactly 12 months old? In either case, you owe more than what the VUE is worth. With the lease, you walk away owing nothing.... just get a new one. It's called GAP and it's included in every major manufacturer's lease. If you OWN it and the insurance company writes you a check for market value and your loan is less, you still owe the bank the difference in the balance. And because of taxes, the balance WILL be higher ($972 less at start, plus higher interest in our example). Great thing you 'own' it, huh?

By the way Don, I wasn't talking about income tax benefits .... that is going to be individual. Some people and businesses benefit from leasing (expense/liability) versus owning (asset). Talk to your tax accountant.
I was talking about the way SALES TAX is calculated. In many states your tax obligation on a lease is determined on your 'USE' of that vehicle over time (usually determined by your payment), not your 'ownership' of an asset valued by the purchase price (due today). Some states do not.

I'd be happy to respond to any other questions, scenarios, or attacks. Just trying to clear up the misconceptions.

E

I think what he's trying to say is that whether you plop down a huge wad of cash up front or you finance, you still do the dealership's job of eating the depreciation. At the end, the dealership gets the car back in easily resellable condition (due to mileage & maintenance restrictions placed on you, on your dime of course) and they simply spray some "That New Car Smell" crap in it and mark it up $2,000 over market value for someone looking for a "certified pre-owned". The dealer wins - you lose.

Common sense: if the dealership is pushing these things as aggressively as they do, whom do you think it benefits? You? Hahahaha!!!