Okay here is my (new) thinking:

I have 150K sitting in an investment account earning ~9 percent. I had intended on just buying my car cash as I always do, however; my dealer says I should consider a lease instead.

His argument:

I can get the lease for roughly 8% & let my money work. Net net, it might cost a bit more but leaves me with more options.
I can have the option to buy or turn it in, good to have a choice if there were an accident etc.
If depreciation accelerates for any reason I have my residual for protection.

My situation:

High income, zero tax advantage
I feel good about a sustainable 9% return on my investments.
I'll drive this car maybe 4-8K miles a year
Take very good care of my cars
Will not mod the car
Would normally keep a car like this more than 5 years, so all things in my favor I would most likely opt to buy the car at lease end or for the right cost of money continue the lease.

If were talking a point or two of cost for the options I think I will go with the lease, but am I missing something or is there something that I need to further evaluate?

 

You might opt for a "one-pay" or "single-pay" lease. Basically you negotiate the lease to the terms you would like - 24, 36, 48, 60 months, mileage, and then at the end tell them you want to do a "one-pay" which is the entire lease cost up front but at a 1-2 pt rate discount. Yours is the typical situation for people to do this.

 

That's what I tell myself every time I purchased a car. Guess how many times I did not mod the car??

 

Mines leased and modded...told my accountant that the car's purpose was to help me respond quicker to emergency calls. (Section 179 tax law).

 

If you're not going to be able to write off part of the lease payment for business purposes usually a lease will cost you more than a purchase. I would run the numbers three ways - lease vs. financed purchase vs. cash purchase - to make the decision. Remember to compare your after-tax return on your investments with the after tax lease money factor and auto loan interest rate.

Enjoy the car!

 

Good point, I had not thought of the after tax numbers.

 

I dive the sea, sorry, can't agree with PorschePaul.
Leasing is the better way to go in this situation.

First off, selling a preowned car at "book value" is a near impossibility. So most people trade in a car at $2k short of "wholesale value".
I've seen people with cars listed on autotrader for six months without a single phone call, especially on a "high line car"..

Second, you may not get the tax advantage of a lease for taxes, but when you purchase the car, you pay 100% sales tax on the price of the vehicle. I think that's about $12k in taxes or so, depending on state.
- When you lease, you only pay taxes on the portion of the vehicle you borrow. So, if the car has a 50% residual, you only pay taxes on the 50% of the vehicle you use. Hence, 1/2 off taxes, for sales tax. Which can be, easily, a $6k difference.

Third, your not going to mod, you don't put up high mileage and you can turn the car in 3 years later, no hassle. You might pay a little more on money factor than you do on a direct finance charge, but it's usually not much and you also need not worry about having to let tom, dick and harry, test drive the car when you want to sell.

Most people trade in and get robbed.

THE ONLY WAY, financing makes more sense is:
If you put on a ton of mileage (over 15k miles/yr)
If you Mod
If you plan to keep the car for a long, long time.. And put on very little mileage (If you only put on 2k miles a year, you are paying for a lease, that assumes you are putting on 10k-12k, hence., your overpaying per mile..)

Here is the formula I use:
Lease your daily driver or anything that you put 8k-14k miles a year on. Trade it in after 3 years.
Finance your garage queen. As you put on low miles and will keep for a long time and can mod.

B

 

Another advantage of leasing (closed end leases) is that the bank assumes the responsibility if you car depreciates more than expected due to market/economic changes, or due to damage sustained to the car (even if repaired spotlessly, most dealerships can measure the paint thickness with an optical meter)

 

B-Line explains it the way I have been operating, except lately have been paying cash for everything to keep the wife happy (she hates payments of any sort!). In a perfect world I'd keep my money in investments and lease daily drivers, then own my fun car(s) and any other toys.

 

Your dealer also maybe making a little percent of the car lease as well. If you pay cash, he gets nothing more than the profit on the sale, other than service.

I think it also depends how much "more" cash you have invested, if it's only $200K, then lease, but if it's a substantial amount and the $150K won't be missed and you can replace it within the year or two.....then buy it out right, especially for long term ownership.

 

I'm still undecided, it will probably come down to my feelings when I get to transaction time. Maybe some sort of hybrid will be right for me.

If I do lease, does Porsche have a cost of money factor or some standard that they use as a reference? Sorry for the basic questions but I have never leased a car before.

 

why not consider a balloon finance? as I understand it, it's basically very similar to a lease but you can sell the car and opt to buy out at the end of the term.

 

idivethesea, you should check out www.leasecompare.com. I just used them and got a great rate (<5%) on my lease. PM me if you want details and some name & numbers.

 

Leasecompare is who I went through and saved 150 a month over porsche.US BANK was the actual bank. Talk to Jennifer.

 

Thanks for the tip, I'll check out lease compare next week and report what I come up with.