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Why is it essentially burning money? Usually leases offer very competitive financial incentives, and are structured so you're paying off the depreciation of the
by timcederman 10y ago
Why is it essentially burning money? Usually leases offer very competitive financial incentives, and are structured so you're paying off the depreciation of the car at an extremely low interest rate. Another way to look at it is you're getting a well priced new car that has a guaranteed buy back price in 3 years, all without putting down any capital (or a small amount).
- Johnny555 10y agoBecause leasing companies make a profit... they know exactly how much a car depreciates and they make sure you pay for that depreciation plus profit for the leasing company. There are some tax advantages with leases that some people can take advantage of, but for most people, leasing is not going to save them money but it does provide a convenient way to always have a new car.
- Cookingboy 10y agoMany manufacturers operate their own lease. For BMW, you are likely to come out ahead than purchasing the car and selling it yourself after 3 years. Their residual value for lease is artificially high. For Maserati, some of their models actually carry a negative money factor, so you are being PAID to lease. You can lease an $80k Ghibli for $600/month for 3 years, that's way less depreciation than if you bought and sold the car after 3 years.
- nitrogen 10y agoDoes that depreciation estimate include the up-front payment of 5-7k?
- Cookingboy 10y agoYes, overall cost of course. BMW only usually only does about $3k downpayment anyway.
- timcederman 10y agoI've done the analysis, and while there are some bad leasing deals out there that represent what you are probably thinking of, the very best ones offer incredible value for money (e.g. https://news.ycombinator.com/item?id=12475939 https://news.ycombinator.com/item?id=12475939).
- vkou 10y agoLiving in a state that charges 6-10% sales tax on selling your car is an incredible reason to lease. (As you only end up paying tax on what you leased for, instead of the purchase price). Assuming you want to keep driving new cars, that is.
- prostoalex 10y agoThat assumes efficient marketplace for selling the car at the optimal residual value once you're ready to get rid of it. Between low-balling used-car dealers and Craigslist randos asking if you'd take personal checks, for many people selling a car is more stressful than buying a car.