Interesting topic. I have also often heard the alleged urban legend that you can get a better price on the vehicle from the dealer if you pay cash versus lease/finance.

Intuitively, this doesn't make sense since it takes away the opportunity for the captive finance company to make money off of you.

 

The answer to the OP's question is a simple one - No. With a relatively simple spreadsheet, a breakeven point can be calculated for any buy vs lease scenario, and therefore the opportunity cost factor - in some cases, will produce a better outcome for leasing, or at least a smaller delta between the cost of leasing vs buying.

A far more important calculation, I believe, is cost per mile, as depreciation is a huge financial factor with most Porsche models in the first 4 years of ownership, and an all cash purchase of a $100k plus car, driven less than 5k miles per year, for example, is an expensive proposition by any financial measure. ... and don't get me going about the cost of flat tires on these cars.

 

Believe me, if you lease a car one thing you can be sure of is that you are definitely paying for the depreciation for the 4 year period.

 

If you own a car at the end of a loan you have increased your net worth. I you keep the car and no longer make payments you have the opportunity to increase your net worth by saving or investing what you were previously putting into car payments..... very simple. Leasing is simply money blown away. this sounds similar to "it is good to have a mortgage because you can deduct the interstest". I would rather own the house outright.

 

Interesting thread. Much different comments here than I would find on a BMW forum where people are only wondering if they got the cheapest payment. Obviously far fewer get it.
While I completely feel that the lease is like throwing money away renting a car, there are a few cases that can be valid:
I just leased an X3 as a family car. The family car is so dinged, dirty on the inside and beat that it will be great to simply return it. The "owned" value is one of care and maintenance. If you simply can't take care of it well enough, perhaps better to lease. I've owned several and decided to lease this time. I realize my overall cost (with free mainenance) is about $7000/yr. I've done better, but the premium is not that high.
In the case of "subvened" leases. Someone cited the G37 lease. A friend of mine almost got one. He got a Z4, which is also subvened. Very simply, the residuals are artificially high and the money factor is artificially low. These aren't mistakes in judgement from the manufacturers! They are simply subsidizing the financing. They want to move the cars at a loss. As otherwise mentioned, leases get you "hooked". They hope to make money on the next one and get rid of a car with slow sales. A car that is selling well, you won't find a "good buy" on a lease. That G37, heck, it's like $350/mo with nothing down. Hard to drive anything that nice for $4k/year.

If you're going to beat the crap out of it. Friend leased a Cayman and tracked the crap out of it for 3 years. At the end, it looked ok, but I don't think the dealer noticed the noises it was making at the end of the lease. As with my family car situation, how many people are going to knock on your door to buy your 911 if you list in the add, "well maintained, only about 20 DE's per year!" Good luck.

Leases are only working if you take advantage of them, versus letting the mfg take advantage of you.

 

Paying cash and holding that title in your name is a nice feeling, I understand. I chose to finance my last two cars @ 2.99% even I had cash to pay for them. This was right after the market crashed. I felt the market would rebound eventually so I invested my cash in relatively low-risk stocks. For example, Apple stock that was less than $100/share in late '08/early '09 now sits comfortably at over $300/share today. Yes, there was risk involved with my decision, but I certainly felt that I had a much better chance than trying to beat the house playing blackjack.
It may not work every time, but in some situations, paying small interest to the bank isn't such a bad idea. I think it's ignorant to quickly dismiss leasing in general as a bad idea because it depends on that person's financial situation, risk tolerance, interest rates, etc.

 

Two things --

1) Leasing is great for some circumstances . Leasing a Porsche 911 as an individual owner however is not .

I mentioned corprate fleet leasing as positive.
I even said subvented keases like BMW narrow the gap .
I even went as far to say that a low income person with good credit might benefit with leasing an economy car for reliability to get to his job . (Many low income folks will insead buy an old car and when they face a 3K transmission repair or the car breaks down and they are excessively late to work .. they face problems ).

These are NOT the same circumstances as the person who leases a new Porsche 911 which he can not afford to buy.

2) Investing -- Buying a car based on a speculated future outcome of an investment is playing with money that he does not have . Every day there are winners and losers with a stock trade but the money one owes for a car will not change .

In your example with Apple .. you did well .. but what if Apple had gone down to 50 dollars ? What if you had shorted Apple ?

Buying cars on credit based on the wishful thinking of a stock outcome presents no hedge strategy. The risk exposure is high enough that some might consider this gambling .... instead of investing.

 

I didn't buy Apple. I just used it as an example since it's a well known company that many would consider as a good investment.
I bought other stocks with my money. Some did better than Apple, some did worse, and some even lost money.

I have a hard time accepting that my decision was based on "wishful thinking" because it certainly wasn't. I was fully aware of the market possibly crashing even more and was prepared to take some loss if the market didn't turn out the way it did. You can always play it safe or take some risks for greater reward. I chose the latter, but I wouldn't necessarily call it gambling. I'm not advocating everyone to do the same as I did, but I'm just providing a different point of view based on experience.

Just out of curiosity, what do you consider a good investment? I wish I knew a way to build wealth without "gambling" so much

 

You are pay the depreciation no matter how you choose to finance your ownership, temporary or perminent, of the car.

 

you are mistaken. there are plenty of PR companies who lease anything.
i also know some local folks in real estate who lease p-cars. i do not know how IRS will react to that in case of actual audit but 'i need it to impress clients' works fine as a business reasoning.

 

You are correct. My point was that leasing does not enable one to avoid depreciation costs.

 

Here is another easy way to decide what is better (buying or leasing). Just see what your dealer wants you to do, then do the opposite. The dealer almost always wants you to lease to you for many reasons:

1. They can make money on you both on setting up the lease and returning the car after lease. A few people have said they can abuse the car, leave it dinged up, etc., but that is what the dealer loves to see as you can be sure you will be charged/penalized for it.

The dealer also dictates to you what you can do with the car. They tell you how many miles you can drive, when you must return it, what modifications are allowed, what condition the car must be in, etc.

2. The dealer guarantees you will visit him/her in 2 or 3 years. No matter what happens, you have to return to the dealer after your term is up. From there you can return the car or buy it outright. Of course they will try to upsell you on a new lease again.

3. Finally, what really gets me about is leasing is that leasing = eternal car payments. Yes, owning a car longer than a few years does increase the risk for repairs down the road but it is still cheaper than leasing a new car.

Basically with leasing you're paying a convenience premium in that you never have to worry about the hassles of selling a used car. It is a costly premium that some may not mind paying.

Just remember, like Vegas, the dealer almost always wins in the end. The more you can avoid interacting with them, the better off you'll be.

 

guys.. it's simple.. just do the math.

numbers don't lie.. people do.


if u add the numbers and it fits ur situation.. lease.

If it doesn't, finance to fit ur situation.

If u don't want to finance, pay cash.


Consult ur CPA about tax advantages for u...


BTW, most cars are depreciating assets.. and the cheapest (best?) way is to buy a certified car that is 2-3 years old.. pay cash (or finance at low APR; less than 2.9%).. than drive it til the repair cost becomes too high to maintain the car. Then sell the car.

now if u like to drive nice cars all the time, it's hard to beat the BMW lease program and their fleet of sporty cars.

my 2 cents

 

Correct. Pay more to mitigate risk. I've had too many problems with minor fender benders or worse killing resale value. I like new cars, I don't like selling used cars and time is money to me. As long as you know what you're getting into, and don't get tied up in the "how much do you want to pay a month" game. It's my money, if I want to pay more to have a new car every three years and not have to deal with the used one, who cares what other people think.

 

My 911 is a keeper. I paid cash and got a $22K discount. My 535 was leased by my company for me. I will never get another BMW! way too many problems.