GG Allin
New member
From the get go with the 4Runner I had every intention of buying the car at some point during or at the end of the lease. The high resale actually helps support that.
Am I nuts, '16 Trail Premium Value Question?
- Thread starter GG Allin
- Start date
From the get go with the 4Runner I had every intention of buying the car at some point during or at the end of the lease. The high resale actually helps support that.
One very good reason to lease is if you "know" or "think you know" that you will buy that vehicle outright sometimes you can come out a little ahead and weed out some interest by leasing. For example, my in-laws are loaded and they leased a new Alpina B7 and the dealer was running a special on 0% interest lease specials so basically he got 3 years of interest free financing before he turned around and then just bought it once the lease was up. Did the same with the Denali when GMC was running the same special. I think overall on the B7 he probably saved about $4k in interest alone.
Jetboy
New member
I have never calculated this to be the case on a car I was interested in. The average cost to own over a 5 year period is usually around half as expensive to buy as to lease for higher resale value vehicles.
A lease may work out on very high depreciation vehicles - like luxury brands that don't start with an "L". It's very hard for BMW to competitively lease a car against Lexus for example because the BMW will depreciate far more in 3 years than a competing Lexus model. In that case if you wanted the BMW it might make sense simply because BMW by giving similar lease terms is effectively giving a huge discount on the value of the vehicle, but only if you lease it. They know it will depreciate 10k more than the Lexus in the same period, but they want to have a competitive lease payment. The result is effectively a $10k discount.
It doesn't work that way, a lease is just a form of financing where the Future Value is higher than 0. Think of it as a balloon payment at the end. Take out the car and just think of it as an account with $$ in it.
Your capitalized cost is identical buy vs lease. You will pay a bit more interest on a lease because you are not paying down the principle as fast (3 yr lease vs 3 yr note) but a 0.9% (what I see on a lot of leases as the money factor as well) it's negligible, and IMO a worthwhile cost for the downside protection on the value. Even at 2.9%, it really is not that much of a difference.
Even for higher resale vehicles, you either benefit from the much lower lease payment over purchase, or you end up with value over the residual, which is only sunk if you turn the car in. Buy it at the end, roll into another 60 mo loan at 2.9% and keep stretching the payment out. I'll let the bank own my car at 3% and use the money on other more profitable endeavors. Yes, that would mean financing for 8 years, but you are only paying for what you are using, it's an expense (I don't recommend this unless you have full control of your finances... this is not a way to afford a car you otherwise couldn't, use the savings to grow your money in other areas).
I have crunched the numbers 6 ways from Sunday, and it really doesn't matter IF you are buying new. Disclosure... I own my 4R, leasing a VW Jetta. Reason? I don't trust the Jetta to be worth what the residual the dealer gave me, and won't keep it because I don't trust it to not give me trouble past the warranty. The cost to own I believe to be lower to lease in this case, plus you don't get as good of an interest rate when you finance less than 15k.
A little back on topic, to the OP, Leasing a Civic isn't the cheapest way out, but if it is what you want and can afford it, go for it and negotiate it just like you were purchasing the car (push for cost, even though the dealer is going to be talking in monthly payment terms, understand how it's calculated and get where you want to be). Just admit to yourself that you want it, and that is why you are going new Civic vs a 10 yr old used vehicle. The financials between those two do not work out in favor of the lease.
chillfancy
New member
Just bought a 2014 Trail Premium with 40k miles for $31,125. I would expect that you could sell a 16' Trail Premium with <20k miles for 33-35 privately.
Jetboy
New member
The key difference is that the manufacturer is taking on the risk of valuation at the end of the lease, and the result is that you don't own it. You have less rights than you would as a full owner. Risk is never free.
The only way it pencils in favor of a lease is if the manufacturer either misjudges the residual value, or intentionally sets an artificially high residual value. Setting an artificially high residual value for purposes of lease calculation is the same thing as discounting the purchase price. If you're a manufacturer who can't sell a product, but don't want to devalue the brand by dropping the price by $10k, you can offer a low lease payment and do the same thing.
My personal philosophy is that all depreciating personal items should be cash purchases - cars, phones, toys, etc. If I can't afford to pay cash - I can't afford it. Take the bus. I do have a loan on my 4runner, which was a mistake. I bought an RX350 the same day that was an unexpected purchase and couldn't afford to pay cash for both, so I have a loan on the 4runner. It's a low rate loan, but it's still a loan. I don't like having monthly payments. I won't do it again. I should have followed my own advice and bought a 10yr old Honda... or just kept my 3rd gen a year or two more.
Last edited:
[MENTION=118321]Jetboy[/MENTION],
I'm not disagreeing with you, just pointing out that it is another method of paying for a car. As someone who likes to purchase right out, of course you are going to dislike leases because that is even farther on the other end of the spectrum than financing. It's just another tool. You really don't have less rights, only restrictions on what you can do IF you want to turn it in at the end. It's a contract, but you can always buy it out, and the terms are spelled out in the contract.
I tend to agree with you though on depreciating goods, only with rates as low as they are it does change the calculation a bit. Financing isn't the worst idea if you have good credit and can use the bank's money instead of your own.
Plus, even with no payment, you still need to put money away so you can buy the next car. Psychologically, no car payment does indeed rock though.
I'm not disagreeing with you, just pointing out that it is another method of paying for a car. As someone who likes to purchase right out, of course you are going to dislike leases because that is even farther on the other end of the spectrum than financing. It's just another tool. You really don't have less rights, only restrictions on what you can do IF you want to turn it in at the end. It's a contract, but you can always buy it out, and the terms are spelled out in the contract.
I tend to agree with you though on depreciating goods, only with rates as low as they are it does change the calculation a bit. Financing isn't the worst idea if you have good credit and can use the bank's money instead of your own.
Plus, even with no payment, you still need to put money away so you can buy the next car. Psychologically, no car payment does indeed rock though.
Throwback
New member
If you just want to trade the 4runner for an economy sedan do it.
From a financial standpoint I would either figure out a way to keep moving forward knocking out the debt you already owe, or go buy something older for cash. No to be judgemental, but if a couple hundred bucks saved each month is a huge deal for you, it would probably be best to go the route of buying an older car outright instead of taking on another couple hundred bucks in monthly debt.
In 10 years which vehicle will you rather own, the Honda or the 4runner?
From a financial standpoint I would either figure out a way to keep moving forward knocking out the debt you already owe, or go buy something older for cash. No to be judgemental, but if a couple hundred bucks saved each month is a huge deal for you, it would probably be best to go the route of buying an older car outright instead of taking on another couple hundred bucks in monthly debt.
In 10 years which vehicle will you rather own, the Honda or the 4runner?
