Lease vs car loan math

[Shaun @ Tru6]

My gf wants to buy her 2024 Lexus NX 350h when her lease ends in June. I just ran the math on it against if she had bought it back in 2023, and whether or not she should buy it now.

What did I do wrong in the math?

[Dantilla]

Years ago, when I was really stupid, I thought I needed a new truck.
Asked my accountant for an appointment to discuss leasing vs. Buying.

He just laughed.
"Always cheaper to buy".

[id10t]

But that assumes you plan on buying car when lease expires.

TBH the only time I can see a lease being worthwhile is if you MUST keep in a brand new car for business reasons, or if there is a way to leverage the cost on your business taxes/planning/etc - though I would imagine millage limits will screw you over if much distance is involved (real estate agent, uber guy, etc)

In your case Shaun what would a similar off-lease car be available to be purchased for if you were simply shopping instead of dealign with end of lease ? Depending on market, desireability, etc. you may be able to get the buy option price down ...

[DonDavis]

Very few customers can actually justify a Lease. But get ready to be told how wrong I am.

“Lease” sounds fancy so lots of people do it, regardless of the math.

“Don’t confuse me with the facts!”

[GH85Carrera]

I had a friend that was a cars salesman at a Mercedes dealership. I asked him point blank about the cost difference. He said the only way a lease really makes sense is if you have a company paying for it as a company car. Then of course, it is supposed to be for business use only. The tax write-off back then made it work. I have no idea what the tax difference would be today.

For an individual to lease a car it only makes seance if they really want a new car to drive, and are willing to pay the extra cost as they feel they really deserve it. Owning it is always better if you take care of the car. When the loan is paid off, you have a real asset if you bought the right car.

The insane depreciation of electric cars makes all of that different.

[Gogar]

If you can stick with this for a minute or two, it's pretty impressive!

[David Inc.]

I think, evaluating whether to buy now or not, you should completely ignore sunk cost and simply compare the offered lease buy-out price vs. buying used. That buy-out price actually looks pretty good, not knowing options on the car.

[mgatepi]

We usually lease my wifes car. Does it make Fiscal sense, no, but she likes a new car and I dont have to take care of it. Warranty and free oil changes = no worries. We know exactly what the car costs us each year. As for lease end, over the years we have actually built up some equity. In other wods the buy out cost of the lease is much lower than the value of the car. I then use this in my negotiating with the dealer on the new lease. For our last Lexus lease end this amount was $8,000 for which we put "down" on the new Lexus. I am sure we will do the same for the next.

[Crowbob]

I struggled with this question at my most recent new care purchase. If I ever get another new car, at whatever my age at that time will be, I’m probably gonna lease. The older I get, the more amenable I am to paying somebody else to make me comfortable.

[David Inc.]

Originally Posted by Crowbob

I struggled with this question at my most recent new care purchase. If I ever get another new car, at whatever my age at that time will be, I’m probably gonna lease. The older I get, the more amenable I am to paying somebody else to make me comfortable.

That idea does have some appeal, but then again I think I'm already turning luddite. I had a loaner while mine was in for warranty this week and it snowed while I had it. The whole time I drove the stupid thing it dinged and donged at me to let me know that the driver assist functions were turning off and on due to snow on the sensors or windshield.

I was so relieved to get my car back, what a pain in the ass.

[911 Rod]

There is a difference for warrantee and maintenance from lease to buy?
I think there is a slight difference in tax right off from lease to buy, but
I laugh when people say you get to right it off so it's basically free.
In this situation just compare the buyout to finding the same car used.
The train has passed a long time ago on anything else.

[Deschodt]

Generally speaking the accountant is right, but there are exceptions..
It's not ALWAYS cheaper to buy than lease. Some leases are heavily subsidized... Some cars residual value is grossly miscalculated... (EV)

2 opposite examples: I leased 2x E-golfs for 2y each for like $110 a month with peanuts down, there is no way buying was cheaper than that. These 2 cars were almost free...
Flip side: I leased my Polestar 2 (for way more per month) - thank goodness, as it's worth $13K less now at lease end than residual and that is NOT my problem, I can turn it in and they can eat that extra depreciation... EV leases makes more sense to me (also tech evolves too fast to want to hold onto one). Buying for everything else...

[Crowbob]

Good point, David.

But what is worse than that is, after a while, once you get back into the rudimentary second car you have to suddenly pay attention or else…

[Steve Carlton]

Originally Posted by David Inc.

I think, evaluating whether to buy now or not, you should completely ignore sunk cost and simply compare the offered lease buy-out price vs. buying used. That buy-out price actually looks pretty good, not knowing options on the car.

This is the key to deciding whether to purchase the car or not. There’s value in knowing where the car has been and if there are any problems with it. Was all the tax on the residual paid already in the lease, or will tax be due. States differ.

Is there a point in a forensic analysis if she made a good deal? If so, please post an image of the actual contract. That worksheet won’t be useful.

[greglepore]

To pile on, the banks are usually pretty smart. Unless the market significantly changes (ev's a good example) leases are engineered to have a significant profit. They make sense if there's a write off involved, or you're just the type that always wants a new car or car in warranty.

I would argue that none of this is relevant to the current decision. The residual is essentially wholesale. She has the added bonus of knowing the history and usage of the vehicle. Yeah, she's a pile of $$ underwater, but that's the case either way, unless she's going to go buy a 15k used car rather than buying out the Lexus. But I think you know that...it's certainly eye opening though.

[wilnj]

Also you need to include the real cost of maintenance/consumable, not just oil and filter changes.

Brake jobs that require the dealer computer to release the calipers mean you're paying dealer prices for the parts that go with it.

The M-Sport brakes on our G20 330i were a $2k maintenance bill. Deferred maintanance is why a 100k mile luxury car is so 'cheap'.

[Crowbob]

Originally Posted by wilnj

Also you need to include the real cost of maintenance/consumable, not just oil and filter changes.

Brake jobs that require the dealer computer to release the calipers mean you're paying dealer prices for the parts that go with it.

The M-Sport brakes on our G20 330i were a $2k maintenance bill. Deferred maintanance is why a 100k mile luxury car is so 'cheap'.

Stop. Just stop. ‘La la la la’ (with hands over ears).

[The Synergizer]

^ That made me laugh!

[pwd72s]

Monetarily, it's a no brainer...

That's why Jesse Waters surprised me yesterday at the end of his show, saying his car lease was about to expire, and was asking opinions on what his next car should be. Hell, I'd have thought he was more financially astute than to lease a car...

Maybe Fox is paying the lease as part of his contract?

[Crowbob]

Or maybe the most watched person on cable TV isn’t too concerned about costs.