Lease vs. Purchase, Never leased before. HELP

[mllcb42]

because when my dad ran the numbers, leasing came out to be more expensive once you take into account resale value.

Did your dad assume that he was turning in the lease or that he was leasing through ccap and was also able to capture that high resale value?

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[Bowhunter23]

When I punched the numbers for my order, a 3-yr lease taking into account the 4XE instant $7500 on the lease then a 3yr buyout afterwards was slightly cheaper then just doing a 6yr loan now. Even with the additional 1% discount the dealership is offering if finance through them. I think the difference was about $500 over the 6 years. That's Residual and MF #s from Feb I believe so could be different now. Also, I wasn't trading in anything either, I sold my Sport outright so you could take into account that you don't pay tax on the value of a trade-in when you purchase. Can't do that with a lease.
But in my case, since I doubt I'd be buying it out after 3 years (3 years less life on the batteries and hoping they have improved the system by then) to me the lease makes most sense.
Just stinks that in Ohio we pay taxes on the depreciation for full lease term (3 years in this case) at time of register. So even if I terminate the lease early and have someone buy it out, I've already paid for tax for those 3 years.

 

[dalema]

This is the thread some folks referenced. Check here for dealers with below invoice (way below MSRP) pricing.

https://www.jlwranglerforums.com/fo...-invoice-on-2022-wranglers.80479/post-1752118

 

[The Last Cowboy]

I can tell you this, it’s very nice to own your vehicle outright once it’s paid off.

What I really don’t understand is having a high payment, then taking a credit card and doing a lift, wheels, tires and bumpers on day one. Especially on a leased Jeep.

 

[Chance_P]

I cant imagine tying up 60k on a depreciating asset. I wont waste my time getting angry at those that do though. ?‍

 

[thedonkeyslayer]

I'm leasing a 4xe because the battery/powertrain is unproven at this point.

Have never leased, always purchased. Besides the uncertainty with the 4xe, it is nice paying $16.5k out of pocket (pay lease in-full up front) to have a $68k (MSRP) JLUR for 3-years. At the end of the three years, I can buy it and keep it or trade it, or simply turn it in and get a new one (maybe a Gladiator 4xe).

Purchasing it on a 5-year loan would be around ~$1200 per month (0 down), or about what I'm paying for the entire lease in 14-months of payments. I get where some do not think it makes financial sense to do this, but I think in this case it makes the most sense for me (and yes I could afford to simply buy it if I wanted to).

 

[TheRaven]

It’s less about affordability of payments and more about making sure the loan is not underwater at crucial times. A 7 year loan can leave a hypothetical buyer underwater when the warranty runs out. Imagine being $5k under and having major issues not under warranty anymore.
Being underwater for 3-4 years on that long of a loan also means a buyer is stuck with that vehicle. If they have a kid or need to change jobs to a longer commute, they’d be stuck with a vehicle that doesn’t work for them anymore. That’s the real trouble.
All numbers are made up, a more knowledgeable person might correct them.

Agreed but the skyrocketing MSRPs of vehicles is changing this part of the equation too. When new vehicle MSRPs jump too fast, the used market heats up and depreciation slows. You can see this in the extreme right now...most used vehicles aren't depreciating at all, and the ones that are are seeing somewhere in the range of 20-30% of their depreciation rates from 5 years ago. Once the used market cools again, we are going to have new "rules of thumb" for vehicle depreciation.

Car loans are not insanely long because cars are expensive. Cars are insanely expensive because people are willing to mortgage their first, second, and even third child to buy a car. If people didn't buy these cars then the price would come down. These days though, it seems everyone has to keep up with the joneses. On top of that they want it now now now. Here's a novel idea, buy what you can truly afford. Pay cash. (But, i can make more investing. That's not how it works. It's called Risk management. Not enough time for that discission)

Getting a new vehicle every 3-4 years (including leasing) or never owning a vehicle outright is a poor financial choice.

More pieces of out-of-date advice. This just isn't relevant anymore, guys. Cars are worth far too much in relation to the average buyer's income (and that's not specific cars, I mean cars in general). If you are mom and dad in the average two-mainstream-car family that means you have $80-100k worth of car in your garage. Keeping that much money tied up in depreciating assets is a poor financial choice.

But on topic - with the Wrangler, leasing is a great choice...in fact in many cases it's the SMARTER choice. I've already illustrated in other threads how in most Wrangler leases, you spend less in total ownership cost than with buying. That's incredible considering that Wrangler leases have terrible rates. I didn't lease my Wrangler cause I needed to. I leased it because it was the cheaper option. The extra money I don't have tied up in the Wrangler is making money for me.

 

[dahacker]

More pieces of out-of-date advice. This just isn't relevant anymore, guys. Cars are worth far too much in relation to the average buyer's income (and that's not specific cars, I mean cars in general). If you are mom and dad in the average two-mainstream-car family that means you have $80-100k worth of car in your garage. Keeping that much money tied up in depreciating assets is a poor financial choice.

Heavily, Heavily, Heavily disagree. I'd love to see the total cost of ownership spanning six years for this mythical family. Four leases on one side (4 three year leases), and two loans paid off in five years on the other side.

While technically if you Invest at 10% any initial savings you have with the leases over buying, you MIGHT come out ahead. BUT, this mythical 10% investment is completely bogus. 75% of people don't have any real retirement savings, much less the ability to invest properly to get that extra value for their money. So those people after six years and four leases would have NADA, while the other family who bought, would have two functional vehicles and no monthly payments other than insurance, maintenance, and gas.

By miles and miles and miles and miles, the correct financial decisions for having an auto are as follows:

1. Get a cheap reliable vehicle.
2. Don't buy new. Get a 2-3 year old vehicle or the equivalent depreciated sweet spot for the model you are looking at.
3. BUY THE FREAKING AUTO. NO LEASES.

 

[JDub11]

Looks like I'm a little late to respond. I will add the fact that car prices would come down if the demand wasn't there is fact not out dated information. It is also fact that cheap long term loans are driving demand. Also, this imaginary family dosent need 80 to 100 k of cars in the garage. There are plenty of cars available for much less. It might not be the car they want or dream of, but it's a car they can afford. I hear the well it won't have warranty cry coming already. Fact is my wife drives a 2016 grandcherokee with 150000 miles and we have yet to pay for anything other then regular maintenance.

I also think the advice is not to BARROW MONEY to buy a depreciating asset. If you are leasing the bank bought the vehicle. You are paying the desperation so the bank dosent take the hit. The difference is the bank payed cash. 8s the bank making 10 percent on this investment? Maybe Maybe not depending on the deal they get from the mfg or dealer. It is part of their risk management though. If it wasn't why wouldn't they just buy stocks and bank the 10 percent.

 

[TheRaven]

By miles and miles and miles and miles, the correct financial decisions for having an auto are as follows:

1. Get a cheap reliable vehicle.
2. Don't buy new. Get a 2-3 year old vehicle or the equivalent depreciated sweet spot for the model you are looking at.
3. BUY THE FREAKING AUTO. NO LEASES.

As a universal statement, the above is incorrect. However, there are certainly scenarios where it can be correct.

This has already been discussed at length, please read starting at this post - https://www.jlwranglerforums.com/fo...-new-lease-contract.63928/page-7#post-1359947

I'd love to see the total cost of ownership spanning six years for this mythical family. Four leases on one side (4 three year leases), and two loans paid off in five years on the other side.

To save you some time here's another post of mine from that thread that gives you an example like what you're asking for:

https://www.jlwranglerforums.com/fo...-new-lease-contract.63928/page-9#post-1360571

 

[kj11]

Quick check on the scoreboard...

Random forum dudes - 1
Accountant dad - 0

 

[TheRaven]

Looks like I'm a little late to respond. I will add the fact that car prices would come down if the demand wasn't there is fact not out dated information. It is also fact that cheap long term loans are driving demand. Also, this imaginary family dosent need 80 to 100 k of cars in the garage. There are plenty of cars available for much less. It might not be the car they want or dream of, but it's a car they can afford. I hear the well it won't have warranty cry coming already. Fact is my wife drives a 2016 grandcherokee with 150000 miles and we have yet to pay for anything other then regular maintenance.

So your solution is - just buy cars you don't like. Sorry but if i'm looking at spending $35k on a vehicle I don't like, i'm going to be much happier spending $40k to get one I do like. I'm borrowing either way - i'm not tying up $40k that could be at work in my stock portfolio or even real estate.

Cheap long term loans exist so people can afford new cars. So saying that they are "driving demand" is very misleading. You are conflating cause and effect.

I also think the advice is not to BARROW MONEY to buy a depreciating asset. If you are leasing the bank bought the vehicle. You are paying the desperation so the bank dosent take the hit.

I agree, just lease. That way you don't own a depreciating asset. Having $50k tied up in this kind of thing is just not smart. There are far better things to do with that money. Successful corporations figured this out decades ago.

 

[JDub11]

I'm not talking about a 35000 dollar car to a 40000 dollar car. I'm talking about buying a 20000 dollar car instead of a 40000 on 84 payments.

Cheap money is absolutely driving inflated prices in everything. This includes car loans. They are raising car prices because people are willing to take loans out to buy them. This isn't to say input cost dont have an effect, but if demand wasn't there prices would come down or it would no longer be produced if there weren't sustainable margins. Look at the record profits. If it were input cost driving prices increases this would not be happening.

Those banks must be pretty stupid buying all those cars and leasing them out. Bet they aren't making a dime.

 

[JDub11]

I forgot to add corporations lease for tax advantages on certain assets. Not because it's cheaper.

 

[mllcb42]

Those banks must be pretty stupid buying all those cars and leasing them out. Bet they aren't making a dime

I've had plenty of leases where the bank lost thousands of dollars on the deal because the vehicle depreciated significantly more that was anticipated. I'm very glad they got stuck holding that bag and not me.

There are leases the banks make a killing on and their are some they lose their shirt on. They keep doing it because they win more than they lose, but that doesn't mean you can't ever come out ahead.

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