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Discussion Starter #1
IS300 lease vs. buy comparison

To lease
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Sticker: $33,805
Downpayment: $3,000
Lease term: 48 mos.
Monthly payment: $399 (incl. 7% tax)
Total cost = $19,152 + $3,000 down = $22,152

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To buy:
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Sticker: $33,805
Tax: $2,366 (7%)
Total price: $36,171
Downpayment: $3,000
Financed amt: $33,171
Term: 48 mos.
Monthly payment: $809.80 (8% APR) for 48 mos.
Total cost: $38,870 + $3,000 downpayment = $41,870

AMOUNT SAVED BY LEASING: $19,718

So, someone tell me why leasing is a bad idea. I don't see an issue here.
 

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At the end of the To Buy scenario, you own the car. At the end of the To Lease scenario, you have nothing...

Hypothetically, at the end of four years, if you can sell the car you bought for $19,718, or buy the leased car for $19,718, then the scenarios are identical.



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Tony
'01 Spectra Blue
'94 Turbo Miata
 

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Tony, you have a point. It's just that some people like the feeling of owning the car. And then, it's sometimes difficult to get out of a lease. If you finance, you can usually sell the car and pay off your loan.
If you figure the time value of money, it's definitely better to lease (unless you plan on driving a lot).
To support your agreement, if the difference in the lease and loan payment (roughly $400) is invested in a good S&P 500 mutual fund for the next 4 years, you'll have at least $25K by the end of your lease term.
But I plan on keeping my IS300 for more than 5 years (even after I get another IS - hopefully a redesigned model in the next 4 years), so it's not such a bad idea to finance for me. Also, I got a great rate (5%) for the next 3 years, with $10K down, so I won't be paying as much in interest.

Thanks for the post.

black/ivory
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Tony's right. Figure in the sale of the car after the lease term. You end up saving a few thousand dollars by leasing, thats all though. The real savings comes on ease of liability and tax writeoffs. Leasing to by is just plain stupid, if you're going to lease, lease. If you're going to buy, then buy.

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Stephen Withrow
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98 Lexus LS400
97 Ford Explorer Limited
 

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Leasing is good IF you don't drive that many miles, you can write the car off as a business expense, and you don't mind making car payments forever, and you don't mind the fact that you're driving someone else's car. "Lease Logic" just didn't work for me. I guess that's why there are options...
 

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Actually I drive around 27,000 miles a year. You just have to pay for the extra mileage. Still saves me more on my tax return to make it worth it.

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Stephen Withrow
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98 Lexus LS400
97 Ford Explorer Limited
 

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Leasing is right for some people, not good for others. Here's more details:

The Advantages
Low Down Payments -- Even though a lot of the advertised lease deals assume a down payment, you can often get the dealer to limit it just by asking. Of course, the more cash you come up with initially, the lower your monthly payments.

Low Monthly Payments -- Since you are only paying off the depreciation on the car -- not its full value -- your monthly payments are much lower than if you opt to finance the purchase of the entire car over the same period of time.

Easy Turnover -- Assuming your car is in good shape, when your two or four years are up, just stroll into the dealer, hand over the keys, and drive out with a brand new car and a new lease arrangement. You don't have to bother with selling the car or haggling with a dealer over trade-in value. That was all taken care of beforehand.

Bigger Tax Write-Offs -- If you are deducting a portion of your car's depreciation from your taxes, you will be able to deduct substantially more if you lease.

The Disadvantages
No Equity -- Similar to paying rent on an apartment, your lease payments don't go towards owning anything. Unlike traditional financing, you can't look forward to the day when the payments will stop and you can drive your own car free and clear.

Lack of Flexibility -- You pay a big penalty if you want out of the lease before the full two or four-year term. Bailing out early may cost you as much as six extra months of payments, depending on your leasing company.

You May Pay Extra -- Most leases charge an extra 12 or 15 cents for each mile you drive over a certain limit. Typically the lease agreement grants 15,000 miles per year. Also, you'll have to pay up for any damage to the car beyond normal wear and tear when you turn it in. One way to avoid the mileage charge is to buy more miles at a reduced rate up front.

Insurance May Come Up Short -- If you total the car or it gets stolen, your insurance will only reimburse you for the car's market value, which might not cover what you still owe on your lease. You can buy extra "gap coverage" to protect against this, and some lease deals include it automatically.

Seven Questions You Should Ask Yourself
1. Do you need your cash?
If so, leasing makes sense, because usually you will put less money down than if you buy. In many cases, dealers will waive a down payment. You need only come up with $1,000 to $2,000 for fees, the first month's payment, and a refundable security deposit. Sales tax is usually paid monthly as part of the payment. Dealers often will allow you to roll many of the fees into the monthly payment as well by adding them to the price you pay for the car. If you buy a car and finance it, you could easily have to put 10% of the purchase price down as well as 6% to 8% sales tax -- perhaps $9,000 on a $50,000 car. You are building up equity, but current cash needs may be more pressing.


2. How often do you want a new car?
Leasing is attractive for people who want new wheels every three years or so. It saves you the hassle of selling your cars, and allows you to move from car to car with relatively steady low monthly outlays and low down payments. But don't lease if you like to buy a new car every year. Ditto if you like to buy one every seven or eight years. A purchase allows you to either buy a new car impulsively when you have a cash windfall or to forestall a purchase, nursing your old car along, if your income drops. With a lease, you lose a good deal of control over those decisions. If you foresee owning the same car for seven years or more, you'll save money by buying. That's because with a lease, you walk away from a car just when depreciation slows and -- under long-term financing -- equity begins to build.


3. How much do you drive?
Check your odometer. It's been keeping track of your driving habits for you. The ideal lease customer drives 15,000 miles a year and maintains a car in good condition.
 

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The good thing about leasing is that you have a better cash flow because your pay less $$ per month.

Well, that's how I look at it.
 

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i don't want to break down the whole calculation savings...but put it this way...if you plan on owning the car....and plann on keeping it for a long time...then buy it....
if you know for a fact..i mean fact..that you won't like the car and you'll end up trading it in after a couple years..then lease..you'll save way more money...

heres the stats...if your 20 - 31 years old..the prime age of lexus is300 car buyers...and other sports sedans...79% trade their car in after within 5 years...this means that leasing is your best option...
 

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Everybody here has good posts on this topic. The only problem in my opinion when buying a car is you really don't have the flexibility you may think. If you buy, when you drive the car off the lot, If you put down 5K, you're already probably breaking even on what you could get for it. Let's say you took out a 4 year loan and for some unknown reason, death to a spouse etc. you can't handle that payment anymore. What are you going to do trade it in when you're $4K upside down in the vehicle? Now that 4K goes onto the purchase price of your next vehicle. So if you were getting rid of the car in the first place because you couldn't handle the payment, what do you think you'd be able to afford after adding 4K to your next purchase? A rich man once said and I believe it was Rockefeller, "buy what appreciates in value and lease or rent what depreciates" That says it all to me.

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Discussion Starter #14
My salesman told me that I can put as many miles on my leased IS as I want and as long as I lease another Lexus at the end, the dealer will not charge me for the extra miles or excess wear & tear.

Is this true?
 
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Tony Mack
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