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Why Lease a car?
- Thread starter airborne spoon
- Start date
Except you're basically paying interest to the bank on the "borrowed" portion of the car for as long as it's borrowed, including on the entire "unconsumed" portion of the vehicle for the entire lease term. CA taxes are around 9%, so it makes sense to lease only if you can get an effective interest rate on the unconsumed portion of < 3% APR. Otherwise, it's cheaper to buy the car, pay the sales taxes, and sell the car when you're done with it. Rates have been low enough that this is probably the case now (haven't looked into it), but leasing makes zero sense in states with low or no sales tax.
CapeOne
Active Member
Given how you came up with the "$180k positive investment" result in your example, I can see how you might think "it's just dumb to even suggest that rental a home is better than owning" but your calculations were wrong and so is your blanket conclusion. Garbage in, garbage out. Maybe it's you who didn't or doesn't want to "learn and study," It's like you've never purchased or sold a house before.
Anyone suggesting that buying/financing is always better than leasing/renting or vice versa is just ignorant and narrow minded.
I would never lease myself. But I get why people do it. Get a new car every few years, no out of pocket warranty issues, drive a car you normally wouldn't be able to afford.
However I have no idea how people drive with those small miles restrictions. Like 12k a year? I did that in a few months lol.
However I have no idea how people drive with those small miles restrictions. Like 12k a year? I did that in a few months lol.
Watts_Up
Well-Known Member
Does anyone have an idea how profitable, or risky, a car leasing company can be?
Basically, a car leasing company is a middle man making profit on your back.
So I was wondering if I could myself buy a car and lease it to someone, and make profit doing so?
Then after 3 years I get back the car I initaly bought and still own.
I can keep the car, which will have a low mileage, or decide to sell it.
I think it is very common to buy a house and to rent it, so someone paid for your home mortgage.
Would it be easy for an individual to lease a car using the same model?
Basically, a car leasing company is a middle man making profit on your back.
So I was wondering if I could myself buy a car and lease it to someone, and make profit doing so?
Then after 3 years I get back the car I initaly bought and still own.
I can keep the car, which will have a low mileage, or decide to sell it.
I think it is very common to buy a house and to rent it, so someone paid for your home mortgage.
Would it be easy for an individual to lease a car using the same model?
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CapeOne
Active Member
According to the USDOT, the average person drives around 13,500 miles/year and some people, especially owners of "luxury" cars (which are more often leased on average), have more than one car which means those miles may be spread over multiple vehicles. Leases typically offer annual mileage limits of 10k, 12k and 15k so would be sufficient for most people. Custom leases offering even lower or higher mileage options are sometimes available too.
Very high mileage drivers could still lease if they really wanted to. However, it would mean having to buy at lease end to avoid the extra mileage charges.
CapeOne
Active Member
Some of the risks to the leasing company can include the lessee defaulting on the lease, the lessee damaging the car and refusing to pay, the lessee going over the mileage limit and refusing to pay, the lessee not returning the car (stealing it), the market value of the car being worse than expected at lease end, etc. I imagine insurance would be available to help cover at least some of these things.
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TessP100D
Active Member
CapeOne
Active Member
I believe that, or very similar, was originally a quote from J. Paul Getty. It's probably a decent rule of thumb but there are exceptions and each situation needs to be analyzed on its own. It's too simplistic to say one thing or one way is always going to be better than another.
This is also a problem with many financial advice programs. The formats are often quick Q&A and aren't designed for in-depth analysis and therefore can result in very basic, simplistic and wrong or misleading answers. Because of that, they can potentially do more harm than good. At best, these programs should be for entertainment purposes or as a jumping off point for the viewer/listener to do further research and analysis on their own. Not enough people recognize that, unfortunately, and take or interpret too much of what is said as gospel.
mrbulk
Member
Lease vs buy arguments have raged, quite evenly for each side I might add, since the dawn of (car) time. Everyone has different situations from which either buying or leasing may help them benefit, so from my vantage point the argument is still 50/50 for either side depending upon one's specific circumstances.
We are leasing a Model Y AWD now. Right after we picked up the car, the announcement for the new chassis with "single front end casting with battery pack as frame member" came out. We wish we had that. So we can't have it now, and can't have it for at least 6 years (or longer) if we had financed. And at 6 years old with none of the latest improvements, how much could our car be worth? But since we are leasing, in another 3 years or less we can have that new chassis plus whatever else is improved by then.
A friend bought her 2020 Model Y AWD almost two years before ours, meaning she did not have the latest current improvements such as the dual-paned laminated front windows, new center console, the 7-seater option (which she actually needs now) and several other improvements. She wishes she had waited, or at least leased the car, so that she could now get the newest Model Y in about a year when her lease ended.
I leased my 2018 Model S75D (just the base cloth-seated model) which cost ~$84K at the time. But two years later you could get a new Model S100D Long Range for $5K Less than what I paid. At my end of lease turn-in time my residual of $62,000 was at least $10K more than what similar used versions of my car were selling for. Also my car was involved in an accident ($22,500 in damage repairs, other driver's fault) which would have significantly diminished my car's value even more. So I had the safety valve of simply returning the car to Tesla at the end of the lease. Had I bought, I would be upside down by a significant amount right now and stuck in a car I no longer would have wanted.
So there are safety outlets built into a lease that are more difficult to realize when buying outright. For me in the past it was always (or used to be always) leasing cars because I was still working, and it gave me a great tax write-off advantage as I required the car to be used directly during my employment.
But after retirement, when I discovered Teslas, I realized in the world of (still-new) EVs that there were a lot of technological improvements incoming, and yet I could not afford to wait several years because I needed a car now, nor did I want to buy an ICE car and "suffer" with all the indignations they came with, for those several years. Plus as a technology leading company, how do you even know when Tesla is "done" with improvements?
The cost to make a Model Y is getting cheaper and cheaper (Musks's own words to that effect), even cheaper than the Model 3 costs to make. And in the upcoming years when the Model Y is even More improved (4680 battteries, etc.), and likely to become yet even Cheaper than now if Tesla aims to stay ahead of any competition, what happens to one's (purchased, meaning the money is already spent and you are foolishly locked in) vehicle "asset"?
You would lose your ass(et), that's what.
Much like the FSD subscription program, leasing a continually-improving product is the way of the future. Instead of buying cars to be stuck in, we are paying monthly to access the latest models of computers on wheels every few years.
We are leasing a Model Y AWD now. Right after we picked up the car, the announcement for the new chassis with "single front end casting with battery pack as frame member" came out. We wish we had that. So we can't have it now, and can't have it for at least 6 years (or longer) if we had financed. And at 6 years old with none of the latest improvements, how much could our car be worth? But since we are leasing, in another 3 years or less we can have that new chassis plus whatever else is improved by then.
A friend bought her 2020 Model Y AWD almost two years before ours, meaning she did not have the latest current improvements such as the dual-paned laminated front windows, new center console, the 7-seater option (which she actually needs now) and several other improvements. She wishes she had waited, or at least leased the car, so that she could now get the newest Model Y in about a year when her lease ended.
I leased my 2018 Model S75D (just the base cloth-seated model) which cost ~$84K at the time. But two years later you could get a new Model S100D Long Range for $5K Less than what I paid. At my end of lease turn-in time my residual of $62,000 was at least $10K more than what similar used versions of my car were selling for. Also my car was involved in an accident ($22,500 in damage repairs, other driver's fault) which would have significantly diminished my car's value even more. So I had the safety valve of simply returning the car to Tesla at the end of the lease. Had I bought, I would be upside down by a significant amount right now and stuck in a car I no longer would have wanted.
So there are safety outlets built into a lease that are more difficult to realize when buying outright. For me in the past it was always (or used to be always) leasing cars because I was still working, and it gave me a great tax write-off advantage as I required the car to be used directly during my employment.
But after retirement, when I discovered Teslas, I realized in the world of (still-new) EVs that there were a lot of technological improvements incoming, and yet I could not afford to wait several years because I needed a car now, nor did I want to buy an ICE car and "suffer" with all the indignations they came with, for those several years. Plus as a technology leading company, how do you even know when Tesla is "done" with improvements?
The cost to make a Model Y is getting cheaper and cheaper (Musks's own words to that effect), even cheaper than the Model 3 costs to make. And in the upcoming years when the Model Y is even More improved (4680 battteries, etc.), and likely to become yet even Cheaper than now if Tesla aims to stay ahead of any competition, what happens to one's (purchased, meaning the money is already spent and you are foolishly locked in) vehicle "asset"?
You would lose your ass(et), that's what.
Much like the FSD subscription program, leasing a continually-improving product is the way of the future. Instead of buying cars to be stuck in, we are paying monthly to access the latest models of computers on wheels every few years.
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TessP100D
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Please do. As. A player. He was hard nosed and played to win. As a manager… ahh he messed up.
My point was that if you have enough money, you have the ability to leverage the business to finance aspects of your personal life.
Watts_Up
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