Lease vs Purchase / Finance Wrangler discussions

[ThirtyOne]

I have a question about leasing for the Dealer Guy. In the past the Jeep dealers I have dealt with have been very reluctant to do lease deals and Jeep has jacked up the money factors really high to discourage lease deals on the Wrangler. I have always assumed that this was because with the extremely high residuals people would just buy wranglers for cheap monthly payments and then flood the used market.

But then Jeep recently did a lease deal on the '18 sport so I am wondering what the attitude on leasing is on the inside.

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[JLWF Dealer Guy]

I have a question about leasing for the Dealer Guy. In the past the Jeep dealers I have dealt with have been very reluctant to do lease deals and Jeep has jacked up the money factors really high to discourage lease deals on the Wrangler. I have always assumed that this was because with the extremely high residuals people would just buy wranglers for cheap monthly payments and then flood the used market.

But then Jeep recently did a lease deal on the '18 sport so I am wondering what the attitude on leasing is on the inside.

Love the lease. It’s a no brainer if you are the dealer. It still blows my mind that nationally the average car on the road is 11 years old. Leasing is a great way to get repeat business every 2-3 years, especially on Wrangler and some of our other products like some Grand Cherokee trims and some Challengers. They retain their value so well, the customer can lease, get out at the end of term, or in many cases, prior and actually potentially end up with equity. There are a few banks ( like 3 ) that we use. Sometimes the money factor is much higher than Chrysler’s but it is made up with much higher residuals. In the end a lease is about monthly payment so who cares if you are paying 10% instead of 2% if the payment is lower.

 

[ThirtyOne]

Love the lease. It’s a no brainer if you are the dealer. It still blows my mind that nationally the average car on the road is 11 years old. Leasing is a great way to get repeat business every 2-3 years, especially on Wrangler and some of our other products like some Grand Cherokee trims and some Challengers. They retain their value so well, the customer can lease, get out at the end of term, or in many cases, prior and actually potentially end up with equity. There are a few banks ( like 3 ) that we use. Sometimes the money factor is much higher than Chrysler’s but it is made up with much higher residuals. In the end a lease is about monthly payment so who cares if you are paying 10% instead of 2% if the payment is lower.

Thanks! When the time comes, you may get a PM from me...

 

[homerun]

Speaking as a banker, leasing is a horrible idea for the consumer. Great for the dealer. Its the equalvalnt of renting verse owning your home. Just giving money away and never anything to show for it. The other mistake people make is thinking that payments are the only thing that matters. That is very short term thinking. Its the cost of ownership that matters. Stretching the loan out as long as possible to get low payments means you are paying more over the life of the loan. In most vehicles it means you will be upside down next time, maybe not so for a wrangler but still not your best financial move.

 

[ThirtyOne]

Speaking as a banker, leasing is a horrible idea for the consumer. Great for the dealer. Its the equalvalnt of renting verse owning your home. Just giving money away and never anything to show for it. The other mistake people make is thinking that payments are the only thing that matters. That is very short term thinking. Its the cost of ownership that matters. Stretching the loan out as long as possible to get low payments means you are paying more over the life of the loan. In most vehicles it means you will be upside down next time, maybe not so for a wrangler but still not your best financial move.

Whole other topic...

 

[JLWF Dealer Guy]

Speaking as a banker, leasing is a horrible idea for the consumer. Great for the dealer. Its the equalvalnt of renting verse owning your home. Just giving money away and never anything to show for it. The other mistake people make is thinking that payments are the only thing that matters. That is very short term thinking. Its the cost of ownership that matters. Stretching the loan out as long as possible to get low payments means you are paying more over the life of the loan. In most vehicles it means you will be upside down next time, maybe not so for a wrangler but still not your best financial move.

Very few people truly ever own a vehicle outright. The vast majority are always making a payment. As a depreciating asset, a vehicle is the worst purchase in the history of the world. That being said, it is a necessity for most. It then boils down to, do you want to drive a new car that is under warranty for the 3 year period, if anything goes wrong, it is fixed at no charge, unless you cause the issue yourself, then in 3 years, re-lease for the same, possibly less amount on a new vehicle and start the process over again. We will call it $400 a month. Or, purchase this vehicle, and pay $200-$400 more a month, drive it into the ground, when the warranty is up, pay for all fixes out of pocket. On the low side here on a 5 year loan, that is almost $5000 more for the last 2 years. Then, + repair costs. Then if you hold onto it for 10 years, or 100k miles, the value plummets so your $40k car is worth $10k and that is on a Wrangler that retains something of value. So with interest, call it $45k out of pocket, $10k value, spent $35k if it never needs work. Most people are looking at a monthly budget. Same thing, 3 leases, same out of pocket but driving a new car with the newest upgrades 3 times over the same period and having a little more money each month to pay for my fat wife's Starbucks habit and getting her hair dyed every 2 weeks because, as a man, you just don't get it.

 

[BDJeep1]

Speaking as a banker, leasing is a horrible idea for the consumer. Great for the dealer. Its the equalvalnt of renting verse owning your home. Just giving money away and never anything to show for it. The other mistake people make is thinking that payments are the only thing that matters. That is very short term thinking. Its the cost of ownership that matters. Stretching the loan out as long as possible to get low payments means you are paying more over the life of the loan. In most vehicles it means you will be upside down next time, maybe not so for a wrangler but still not your best financial move.

As a banker you should understand the time value of money. If you are someone who likes a new vehicle every 3-4 years and drives 15,000 miles or less a year then leasing can be a much better use of your money. Vehicles are depreciating assets. In general finance terms it is better lease depreciating assets and buy appreciating assets.

For Jeeps and cars in general....If you are someone who buys and keeps a vehicle for 7 to 10+ years or drives 30,000 miles or more a year then buying is better. If you are someone who is between these 2 examples then buy vs a lease can be a wash depending on interest rates, any incentives to lease or buy from the manufacture, milelage charges, etc.

 

[ThirtyOne]

Like I said. Whole other topic. I would love for someone to start a thread on it so we can have this discussion. This thread is so valuable I would rather not get it off topic.

 

[homerun]

@ThityOne - I understand you don’t want to get into, but let me respond once and I’ll be done.

@JeepDealerGuy and @BDJeep1. You are both 100% correct in your statements. Most people never own a vehicle outright and if you are someone who likes a new car every 3-4 years there is value to what you are saying. All I am saying is getting a new car every 3-4 or never owning a vehilce outright is a poor financial choice. It may be a fun choice or want, but it is not a need and something will suffer, maybe long term savings or retirement. If you are truly worried about what is best from a financial stand point you need to set aside instant gratification (ie trading every 2-4 years). Now if you can afford it and enjoy and new vehicle that often, go for it, but don’t claim its the smartest financial move you can make. It provides instant gratification and short term happiness and there is something to be said about it.

@JeepDealerGuy you are correct to consider repairs, however I don’t believe any new vehicle should require major repairs before 100k. If it does than it was poorly made. Also the most expensive parts of the repairs is the labor. Learn a new skill, have some garage beers, buy a Chilton or Haynes and fix it yourself. Sure it will cause stress and take 3 times longer than an expert, but its fun, you will learn about your vehicle, saves money, and is very rewarding once you are done. Plus its a Jeep even with the new tech it is still an easier vehicle to work on and this knowledge could save you out on a trail. This yet another reason I am getting the 3.6. Easier to repair.

 

[ThirtyOne]

I'm actually dying to get into it I'm just resisting the urge.

 

[BDJeep1]

...but don’t claim its the smartest financial move you can make.

I didn't claim this....just provided an example when leasing is better than buying and a different example when buying is better than leasing.

 

[JAY]

New topic... have at it boys and girls (respectfully)

This is actually a great (and often asked) topic which can help future owners decide whether leasing or purchasing / financing fits their needs and situation better.

 

[BillyHW]

As a banker you should understand the time value of money. If you are someone who likes a new vehicle every 3-4 years and drives 15,000 miles or less a year then leasing can be a much better use of your money. Vehicles are depreciating assets. In general finance terms it is better lease depreciating assets and buy appreciating assets.

For Jeeps and cars in general....If you are someone who buys and keeps a vehicle for 7 to 10+ years or drives 30,000 miles or more a year then buying is better. If you are someone who is between these 2 examples then buy vs a lease can be a wash depending on interest rates, any incentives to lease or buy from the manufacture, milelage charges, etc.

I'm going to be buried in my JLUR.

 

[Cov]

As someone who knew nothing about leasing, this is what I have gathered.
Please correct me if I'm wrong.

Leasing:
-Even if you are ahead with equity every single lease and only end up spending 5k in lease payments every 3 years, you will never own the vehicle outright, because you have to sell your lease to even get the equity in the first place.
-BUT you get to drive a new vehicle every 3 years and not have to pay for extended warranty
-Must remove modifications before end of lease or find mod friendly dealer
-Trading in your vehicle for a new lease could be risky if vehicle is totaled/stolen since it's owned by the leasing company and you won't get your trade in's money back? (I'm not 100% sure and still learning)

Buying:
-You will eventually come out ahead (although after many years) vs someone leasing, because when everything is paid off, you will no longer have any payments.
-Unlimited miles extended warranties are 3-4k and only paid once vs 5k every 3 years to stay under warranty
-You won't be able to drive a new car every 3 years (if that even matters to you)
-Keep all your modifications and not have to deal with removing it

To me, it really comes down to personal preference. I modify all my vehicles too much to want to deal with returning everything to stock and that's if I even have the stock parts left, but at the same time every vehicle I purchase, I tell myself I'm keeping this one for the rest of my life, which never ends up being the case...

 

[ThirtyOne]

@Covfefe I would correct you on a point. You can own the vehicle outright by buying out the lease with cash or more likely taking out a loan to cover the residual. I have done this several times although the bankers of the world will tell you that I am an idiot for doing it and they are not all wrong. You can do it regardless of how you have driven, modded or damaged the vehicle. In the long run if you do it you will pay more interest for the vehicle than if you had chosen to take the equity out when it was still worth something.

As far as coming out ahead with a purchase, let me give you an example. I paid an extra $150/month on a $45,000 car over 5 years to pay it off with a loan. Then for another 7 years I had no car payment. So I came out ahead right? When I traded in that car I paid $45,000 on it was worth $3,000. And over the 5 years I paid an additional $9,000 in payments.

But that was the smart conservative financial move? I am going to post a more complete example of this once I work through all the math so people can understand it.

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