any reason not to do a lease?

[Daniel in SD]

Kelley Blue Book claims that the Model 3 has the best resale value. 69.3% after 3 years.
On the other hand they made that prediction when the Performance was $65k so they may not be all that great at what they do... lol
2019 Best Resale Value Awards | Category Winner | Kelley Blue Book
I'd be curious to see an apples to apples lease vs. loan (with equivalent downpayment and monthly payments) comparison with tax included. The "invest your money risk free at 6%" stuff just confuses things.
Anyway, I buy my cars cash and keep them 10+ years so it's an academic question to me.

 

[M3BlueGeorgia]

There's two other issues, one of which people have alluded to.

BMW and some other manufacturers hide big discounts in their lease prices. Therefore the leases can appear to be cheaper than a loan, but only because you aren't being allowed to compare apples with apples.

If you aren't the kind of person who babies their car and keeps down the mileage, leases can work out to be very expensive when you return it.
We put 23K on our car in the first 12 months, and at that rate leasing simply wouldn't work, as that's the equivalent of $2K to $3K per year in mileage overage charges building up, waiting for the end.

 

[SlimJim]

There's two other issues, one of which people have alluded to.

BMW and some other manufacturers hide big discounts in their lease prices. Therefore the leases can appear to be cheaper than a loan, but only because you aren't being allowed to compare apples with apples.

If you aren't the kind of person who babies their car and keeps down the mileage, leases can work out to be very expensive when you return it.
We put 23K on our car in the first 12 months, and at that rate leasing simply wouldn't work, as that's the equivalent of $2K to $3K per year in mileage overage charges building up, waiting for the end.

I have never paid any penalties and what people don't know is that you can actually trade in a lease car near the end of the lease at a different car brand dealership.
One car actually had a lot higher value than the residual on the contract so I had equity on it.
Of course, if you know you drive more than 15K per year you should not lease.
You cannot accidentally drive a car 23000 miles a year.

 

[daniel]

... if you took that $32,847 and put it in a modest investment earning 6% you'd have made another $4,500ish in those 3 years...

I think getting 6% on a safe investment is stretching it. If you look around you can probably get a lower-grade bond fund that pays 5%, with no guarantee on principal value, or you can get a pretty safe indexed bond fund paying around 3.5%.

I think your calculation would be more reasonable assuming 4% rather than 6%.

Three years is too short a time period to count on anything with stocks. Over a 3-year period the stock market could go way up or way down, though I would not expect it to go way up between now and three years from now.

 

[Dan203]

I think getting 6% on a safe investment is stretching it. If you look around you can probably get a lower-grade bond fund that pays 5%, with no guarantee on principal value, or you can get a pretty safe indexed bond fund paying around 3.5%.

I think your calculation would be more reasonable assuming 4% rather than 6%.

Three years is too short a time period to count on anything with stocks. Over a 3-year period the stock market could go way up or way down, though I would not expect it to go way up between now and three years from now.

My personal investment in the Vanguard S&P Index fund has a rate of return of 5.7% since April 2014. If I just look at the last 3 years it's 9.6%. So, barring a big crash, 6% seems pretty reasonable.

 

[bigroo42]

weighing in on the recent investment convo - yes a decently big crash is coming. my firm's forward-looking assumptions of the s+p are not as rosy as they were for the past 5 years by any means. So, 6 percent, un-emotional, return for the next 36 months is very aggressive.

with that being said i have vacillated between leasing and buying for a while now. however one key fact that was casually dropped by one of the Tesla guys was "oh, you can't buy it at the end of the lease". That was a dealbreaker for me.

in part, because, i would want to put a few, if not a lot of, modifications. i.e. tint, ceramic coating, ppf, chrome delete,, and whatever else. if i were to lease the vehicle and then HAVE to turn it in after 3 years then i wouldn't do any of those things. and i don't want to drive a car for 3 years without tint, etc....

someone mentioned it earlier, but definitely very smart of Tesla (on their end) to keep the inventories. They do (who wouldn't) want to be in the used car game as the margins are typically fantastic for the company.

all in all, i will be SUPER happy with my M3 and, unlike other ICE cars, the version of the car i purchase will be the 'least advanced' version of itself that it will ever be (to quote one of the tesla guys). i will just have to be content in the car - or worst case if something REALLY amazing (more amazing than the m3 - possible) come out i could always sell my M3 and upgrade.

easy call for me - buy.

 

[daniel]

My personal investment in the Vanguard S&P Index fund has a rate of return of 5.7% since April 2014. If I just look at the last 3 years it's 9.6%. So, barring a big crash, 6% seems pretty reasonable.

The past three years have been very good for the stock market. Whether it will continue this strong for the next three years is an extremely speculative matter. The stock market is a very good bet in the long term, but has always been a gamble in the short term. It's the reason why young people starting out in life are advised to put their savings in a whole-market index fund, while old folks in or nearing retirement are advised to move to bonds.

Assuming a 6% return on an S&P index fund is not reasonable. It could happen, but it is very much a gamble, as in the short term the market goes up and it goes down. The next three years could actually show a significant loss. I think this is actually one of the longest rising periods in the history of the U.S. stock market. Assuming the recent past will predict the near future is a classic mistake.

Which is not to say a person should not lease a car. There are good reasons to lease and good reasons to buy and the best choice will be different for different people.

 

[NikeWings]

Over a span of 20 years, I’ve stuck by my dads advice........buy assets that appreciate and rent (lease) assets that depreciate. It avoids the fine art of human rationalization, and has served my balance sheet exceedingly well.

 

[kunzjob]

Thought I'd bump this one up as a LOT of people are finalizing deals... I'm still waiting for my M3P and after nearly 6 weeks this decision still tears at me. This will be my first EV and Tesla. I have never leased but change cars often and have spent plenty of money doing so.

Here is why I'm thinking lease:
Although finance rates are great , to get to the same monthly payment, I'm looking at an additional $11k down (most of this is due to CA taxes)
Low down payment allows more $ in the bank/funds/markets
Selling a used Tesla scares me for some reason

PURE SPECULATION:
After 3 years time, I think a M3P will have nearly 400 mile range and be sub 3 seconds 0-60 (worthy of upgrade)

Here is why I'm thinking purchase:
1.99% APR for a 5yr loan
I might actually want to keep this car for longer than 3 years due to software updates and just being overall amazing
I plan on getting tint (about $1200)

Either way I'll be ok. Neither will hurt nor propel my finances in a big way.

@NikeWings and dad... thanks for simplifying, I like it and might start using it!