In the case of a lease should you have an accident that would otherwise drive the value of the vehicle down the lease company is assuming the risk, not you. When you buy you already know the outcome even if fixed correctly. You as the title holder get whacked with the depreciation. There is a place for leases. How could you argue a 159/mo payment in a Altima 2.5 or a 175 mo payment on an accord. They have their place for some buyers.

 

Everyone makes the choice they think best, I don't want a debate. I always buy and always have, often for cash and no loan. I am just trying to see what the risks are to leasing, especially since my daughter is ending one this month.

 

Also many of the lease companies will include GAP insurance in their leases.

 

you have it backwards.

with a lease you agree to pay $X to rent the car for X months and that's it.

at the end you can turn it in and owe nothing more.

you assume no risk for the car whatsoever.

the residual is part of what determines your payment.

the higher the residual, the lower your payment and the better deal it is for you.

it doesn't matter to you if the car isn't actually going to be worth near the residual value, you have the right to turn it in at the end of the lease and owe nothing more.

 

William- PFS doesn't look at Carfax on lease returns. They have a 3rd party inspection company that reviews the wear and tear vs the lease agreement. This type of process has been going on since the advent of leasing and is very normal. You can get into an accident, get it repaired and still easily pass the inspection. I had a friend who did a lease return with PFS and his windshield was pitted and tires were worn down a bit; they first tried to charge him but the dealer intervened and it was waived since it was part of regular wear and tear. You don't have to return the car to the condition it was when new. The biggest hits on a lease is miles over the allowance.

 

OK, that's good to know. What if the residual was real low and the car is worth more?

 

I have only seen this a few times, with Audi. It creates a higher monthly payment but with hard to get cars such as the RS5 when it came out people were able to make money by buying the car at end of lease and reselling.

 

OK, so then leasing has that as an upside unless you trash the car inside or something? Like staining the interior, smoking in the car, getting it nasty from a dog(s), stuff that really can't be easily remedied by a good detailing? Obviously I guess if you have dents and so on, you are responsible for making a claim on your own insurance prior to giving it back?

 

Then don't lease return it but instead sell it privately or trade it in to a dealer for a higher actual cash value as you only owe the residual after the payments are made. Oh lets say your car is completely trashed, you can just buyout the car sight unseen from an inspection for the monies owned without condition penalties since you are satisfying the lease agreement plus residual.

Leasing is no different than retailing when it comes to getting out early. There is a payoff of unearned depreciation minus unearned sales tax, unearned interest or money factor, plus the residual with no prepay.

 

Hmmm, how can you if you don't hold the title? Doesn't the leasing agent hold the title? In the case of a lease I would assume no title at all. In buying you have a title with a lien. People leasing homes can't sell them, same thing with land but O&G leases are always assignable, it's part of the agreement and the leases always include a provision that lessor's consent to assign the lease not be unreasonably withheld from lessee. Is this the case with car leases? I think I am getting myself confused here.

 

Lease is renting IF one chooses to return it at the end of the term (vehicle leasing) but lets say 10 payments into a 36 month term the lessee wants to buy the lease. They can buy obtaining the lease payoff from the bank (remaining depreciation minus unearned taxes and interest plus the residual). Its no different than a purchase where one pays it off early; either way the bank holds the title until the lien is satisfied. Paying off the lease (not just fulfilling the rent payments) is the same as paying off a retail loan.

These are close ended leases so the numbers are fixed. The bank sets the residual and payments and allows you to pay it off early if you want. If you make the term payments and the residual is way lower than value- you can trade it in for more or buy it for the residual and then sell it for more or sell it up front before lease return, take the monies and payoff the residual and pocket the difference.

 

You don't own the car but you have the right to purchase it at the end of the term for the residual value.

So you can trade it/sell it at the same time if you want.