I agree with you that 7.9% is a borderline extortionate rate. At 6%, the upper end of what I might consider reasonable, would your monthly payment be about $75 less? For three years that's a $2,700 difference. That's where you become the judge of what's the risk of loss insurance/risk of lower residual/hassle of disposition worth.

What's the interest rate on a purchase loan? It's probably considerably lower, but a lower interest rate, if followed by a screwing at trade-in time,
is of questionable value.

 

I think your numbers are in the right ballpark. I can finance a purchase on line of credit for around 2percent, but not sure why I'd do that if I can pay cash. Leasing is different because of all the other benefits discussed, but at such a high rate, not sure it makes sense. Also,on trade in, I think I'd just sell privately as dealers offer way to little, and screw you over things like cosmetic damage. A knowledgeable private buyer will give you better price almost every time, especially for a vehicle that is high demand.

 

At 2% I'm a buyer, and put your cash to work at a much higher return.

 

Sorry meant 1997 993.

 

The money factor is .0016 for a 36 month prepaid lease in the US with no dealer mark-up or 3.84%. Not great but not terrible either. Given you are pre-paying the lease the interest charge is on a much lower base. In NY where I am based there is a tax savings since you only pay sales tax on the lease payments and not on the whole car.

 

Prepaid leasing raises other issues, such as serious potential losses from inadequate gap coverage, particularly in the earlier months. In addition, the real benefit to the leasing company of no financing costs on the depreciation is not generally passed on to the consumer dollar-for-dollar.

Your other point about the sales tax savings can be significant. Some states tax only the monthly lease payments less the financing charge, some tax only the monthly lease payments, and some charge the full sales tax as if purchased.

 

You have made good points about leasing but you are overreaching with the 99% figure here. If that were the case, then 99% of the new cars on the street would be leased vehicles which is not the case.
If the vehicle is leased by your company/corporation, then the company would be able to write-off the lease (as opposed to depreciating it over many years when buying). So in that case a lease might be preferable.
But if a person is going to keep the vehicle for a long time or plan to put 20k miles per year on the car, then buying might be a better option.

 

Your excitement about pre-paid leases led me to do some research. There is a lot of good info about pre-paid leases at this website (the pros and cons):

http://www.leaseguide.com/sn/prepaid-lease.htm

From that site, here is something to consider:

 

You can't get gap insurance for a prepaid lease?

 

Similar to the 2017 997 for those that like it better than the 991.

ChuckJ

 

Yup been hit twice (non fault) and big damage on the car that would have killed its value far more then the lease interest costs. Maybe prepaying will help but I would not have leased if I didn't get a decent interest rate and residual - Porsche leases are some of the worst in the industry!

 

Spoke to my insurance agent. insurance pays on agreed not depreciated value so I don't have an issue if I prepay lease.

 

So if I understand this thread correctly, all of a sudden anyone who doesn't lease a 991 is financially crazy because with just one accident they'll lose more on the value of their car then they would have paid in interest charges on the lease?

What if someone wants to keep a car for 5, 6 or 7 years? A lease that long would be nuts.

I aslo disagree that leasing a new car is the only smart way to go. If so, I guess there are a lot of dummies on this site who purchased or financed their cars.

Personally I'll be buying mine with 70% of the cash up front and the remaining 30% paid off in one year at 3% interest on a line of credit.

I leased my last 4 cars. Won't be doing that again.

If I were really smart I'd buy 1 or 2 years used, but I can't wait that long for the car I want.

 

lease for 3 years if you like it then buy it.
If its a lemon hand over the keys and get a new one.

 

Do prepaid lease at 3.84%. Buy it at end if you want to keep it assuming value is greater than the residual. If it isn't either negotiate residual or give it back.