Let's Talk Car Leases

[Hawk_4shur]

So, my 2024 Toyota Highlander Ltd Hybrid is being built today in Princeton, IN. I should have it in 10 days or so.

So, talking to my salesguy about lease v purchase strategy. Leasing has worked well for me in the past. Inexpensive financing cost and still have equity in my car after 3 years and I could get a new one. I also expected financing cost to be way up 'cause, ya know, interest rates. But this one surprised me.

The implied interest rate in a Toyota lease is 9%. Kinda steep. The monthly lease payments over 3 years plus $5,000 down would be $31,100, including a lot of financing cost.

The difference between the total cost and the residual is about $21,000. So, I thought a single-pay lease would be in that general neighborhood.

The single pay lease amount is $27,250. So, I would be paying $27,250 for about $21,000 "worth of car" and paying it all in advance. Nope.

They get the money up front, no risk, in a high interest rate environment. Isn't that absurdly high?

I'm an accountant, so I thought I understood this stuff. What am I missing?

 

[TJ8869]

Do you live in a state that charges sales tax on the full value of the car upfront?

 

[Hawk_4shur]

Do you live in a state that charges sales tax on the full value of the car upfront?

The taxes included in the lease are the taxes on the lease payments only.

 

[Hawk_4shur]

Bump

Looking for some help here!

 

[bagdropper]

The dealer markups and add one on Toyotas recently for some models have been astronomical. Are they padding in some extras that at the moment you don't know about?

 

[beanerhawk]

So, my 2024 Toyota Highlander Ltd Hybrid is being built today in Princeton, IN. I should have it in 10 days or so.

So, talking to my salesguy about lease v purchase strategy. Leasing has worked well for me in the past. Inexpensive financing cost and still have equity in my car after 3 years and I could get a new one. I also expected financing cost to be way up 'cause, ya know, interest rates. But this one surprised me.

The implied interest rate in a Toyota lease is 9%. Kinda steep. The monthly lease payments over 3 years plus $5,000 down would be $31,100, including a lot of financing cost.

The difference between the total cost and the residual is about $21,000. So, I thought a single-pay lease would be in that general neighborhood.

The single pay lease amount is $27,250. So, I would be paying $27,250 for about $21,000 "worth of car" and paying it all in advance. Nope.

They get the money up front, no risk, in a high interest rate environment. Isn't that absurdly high?

I'm an accountant, so I thought I understood this stuff. What am I missing?

We're leasing again after my car was getting to old.

My wife used do have highlanders but since the pandemic they have been very difficult to deal with. Pretty much no negotiating at all. My wife got a Mercedes 250 on a lease and her payment is only $560 a month, we put nothing down on this one.

I got Jeep Grand Cherokee Limited Long addition and mine is $590 er month on a lease and I traded in my 2008 BMW 320i. It needed all new struts and due for the expensive service at 150,00. They put down that there were giving me $3,000 for it.

I would say you're not getting a deal at $5000 down and quick math says around $725 per month.

 

[alaskanseminole]

Personally, I don't see much appeal in leasing, except for the allure of driving a new car every few years. It's common knowledge that cars lose value as soon as you leave the dealership, so the concept doesn't make sense to me from a financial standpoint. However, we all need a car, right?

What I do is buy a car that's about two years old after a ton of research. I usually pay off the vehicle within 12-18 months and keep it for about a decade. As I've mentioned before, I drove my Mazda for 12 years (though I'll admit it was the only new car I've ever bought). I purchased my wife's vehicle in 2016 (it's a 2014). We financed it at around 3% and have owned it since 2018. It's great not having a car payment. I strongly dislike being in debt.

Leasing just seems like voluntarily succumbing to a never ending cycle of debt--like renting an apartment. I'll admit, though, maybe I'm missing something. This is just how I do it (handle car ownership).

 

[TJ8869]

The additional $6250 is interest on the residual value of the vehicle.

 

[Rifler]

So, my 2024 Toyota Highlander Ltd Hybrid is being built today in Princeton, IN. I should have it in 10 days or so.

So, talking to my salesguy about lease v purchase strategy. Leasing has worked well for me in the past. Inexpensive financing cost and still have equity in my car after 3 years and I could get a new one. I also expected financing cost to be way up 'cause, ya know, interest rates. But this one surprised me.

The implied interest rate in a Toyota lease is 9%. Kinda steep. The monthly lease payments over 3 years plus $5,000 down would be $31,100, including a lot of financing cost.

The difference between the total cost and the residual is about $21,000. So, I thought a single-pay lease would be in that general neighborhood.

The single pay lease amount is $27,250. So, I would be paying $27,250 for about $21,000 "worth of car" and paying it all in advance. Nope.

They get the money up front, no risk, in a high interest rate environment. Isn't that absurdly high?

I'm an accountant, so I thought I understood this stuff. What am I missing?

Here's the part you're missing,.. Buy it outright, pay cash, drive it and maintain it for the next 12 years minimum.... Done.

 

[ironside1]

Personally, I don't see much appeal in leasing, except for the allure of driving a new car every few years. It's common knowledge that cars lose value as soon as you leave the dealership, so the concept doesn't make sense to me from a financial standpoint. However, we all need a car, right?

What I do is buy a car that's about two years old after a ton of research. I usually pay off the vehicle within 12-18 months and keep it for about a decade. As I've mentioned before, I drove my Mazda for 12 years (though I'll admit it was the only new car I've ever bought). I purchased my wife's vehicle in 2016 (it's a 2014). We financed it at around 3% and have owned it since 2018. It's great not having a car payment. I strongly dislike being in debt.

Leasing just seems like voluntarily succumbing to a never ending cycle of debt--like renting an apartment. I'll admit, though, maybe I'm missing something. This is just how I do it (handle car ownership).

Leasing wouldn’t be for you. But for those that buy a vehicle and then pay it off through payments to just go out and purchase another new vehicle then leasing is for them.

 

[Hawk_4shur]

The dealer markups and add one on Toyotas recently for some models have been astronomical. Are they padding in some extras that at the moment you don't know about?

I don't think so - I have a complete accounting of the cost.

 

[Hawk_4shur]

We're leasing again after my car was getting to old.

My wife used do have highlanders but since the pandemic they have been very difficult to deal with. Pretty much no negotiating at all. My wife got a Mercedes 250 on a lease and her payment is only $560 a month, we put nothing down on this one.

I got Jeep Grand Cherokee Limited Long addition and mine is $590 er month on a lease and I traded in my 2008 BMW 320i. It needed all new struts and due for the expensive service at 150,00. They put down that there were giving me $3,000 for it.

I would say you're not getting a deal at $5000 down and quick math says around $725 per month.

Agree. It's not a "deal" - pretty much just paying sticker.

And, no deal on the lease either.

 

[Hawk_4shur]

Personally, I don't see much appeal in leasing, except for the allure of driving a new car every few years. It's common knowledge that cars lose value as soon as you leave the dealership, so the concept doesn't make sense to me from a financial standpoint. However, we all need a car, right?

What I do is buy a car that's about two years old after a ton of research. I usually pay off the vehicle within 12-18 months and keep it for about a decade. As I've mentioned before, I drove my Mazda for 12 years (though I'll admit it was the only new car I've ever bought). I purchased my wife's vehicle in 2016 (it's a 2014). We financed it at around 3% and have owned it since 2018. It's great not having a car payment. I strongly dislike being in debt.

Leasing just seems like voluntarily succumbing to a never ending cycle of debt--like renting an apartment. I'll admit, though, maybe I'm missing something. This is just how I do it (handle car ownership).

You are spot on. I admit, I'm a sucker. I like driving new cars that have the latest toys. Not smart.

When I advise others, it's to do exactly what you are doing.

 

[Hawk_4shur]

The additional $6250 is interest on the residual value of the vehicle.

You are exactly right. I even crunched the numbers to prove it.

Thanks.

 

[Hawk_4shur]

Here's the part you're missing,.. Buy it outright, pay cash, drive it and maintain it for the next 12 years minimum.... Done.

I'm not missing it, I'm just to stupid to do that.

 

[Hawk_4shur]

Personally, I don't see much appeal in leasing, except for the allure of driving a new car every few years. It's common knowledge that cars lose value as soon as you leave the dealership, so the concept doesn't make sense to me from a financial standpoint. However, we all need a car, right?

What I do is buy a car that's about two years old after a ton of research. I usually pay off the vehicle within 12-18 months and keep it for about a decade. As I've mentioned before, I drove my Mazda for 12 years (though I'll admit it was the only new car I've ever bought). I purchased my wife's vehicle in 2016 (it's a 2014). We financed it at around 3% and have owned it since 2018. It's great not having a car payment. I strongly dislike being in debt.

Leasing just seems like voluntarily succumbing to a never ending cycle of debt--like renting an apartment. I'll admit, though, maybe I'm missing something. This is just how I do it (handle car ownership).

Leasing is also a decent way to finance the first 3 years of the car. You can buy it at the residual.

But your way is better.

 

[Rifler]

I'm not missing it, I'm just to stupid to do that.

Okay then, proceed...

 

[alaskanseminole]

You are spot on. I admit, I'm a sucker. I like driving new cars that have the latest toys. Not smart.

When I advise others, it's to do exactly what you are doing.

I hear ya, I'm a tech person and love bells and whistles. When you look at a 2014 and 2020 Jeep Grand Cherokee, the only real differences are the U-Connect System and the LED headlights. I swapped out all 6 bulbs for LED on mine and I'm highly considering replacing the head-unit so my wife can have Apple Car Play. Then she really won't be missing out--unless you compare it to a 2022-23.

 

[Tenacious E]

Leasing is also a decent way to finance the first 3 years of the car. You can buy it at the residual.

But your way is better.

That's what I did on my last auto. Had a lease on it, and the lease expired in mid 2022. The residual value I bought it for was about $10K less than what I would have paid for the same used vehicle on the dealer's lot. I am out of the leasing game probably forever, but when interest rates are low the math can work in your favor.

 

[Hawk_4shur]

I hear ya, I'm a tech person and love bells and whistles. When you look at a 2014 and 2020 Jeep Grand Cherokee, the only real differences are the U-Connect System and the LED headlights. I swapped out all 6 bulbs for LED on mine and I'm highly considering replacing the head-unit so my wife can have Apple Car Play. Then she really won't be missing out--unless you compare it to a 2022-23.

Those are the only differences??

What about the advanced safety tech? No improvement in the engine?

 

[alaskanseminole]

Those are the only differences??

What about the advanced safety tech? No improvement in the engine?

Don't know about the safety tech, but it is the same Pentastar 3.6L v6. Of course there's the v8 option, but that's an upgrade. I was primarily talking about things you'd notice with the eye when looking at it. Sure there's some differences in the front end, but they are minor.

2014

2020

FFS, I've attached a 2014 pic from 10 different sources and it keeps giving me a RED X middle finger.

 

[HawkMachine]

I drive an older truck with low miles.

I'm a saver.

 

[HawkMachine]

My wife got a Mercedes 250 on a lease and her payment is only $560 a month

I got Jeep Grand Cherokee Limited Long addition and mine is $590 er month

I can't imagine forking out $1,150 a month for vehicles.

$13,800 per year.

And it never stops.

 

[beanerhawk]

I can't imagine forking out $1,150 a month for vehicles.

$13,800 per year.

And it never stops.

There are a lot of people that pay that for one car, never the less 2.

It's cyclical though. I had my last car for 10 years and paid it off in 3. But it needed replaced. Wife on the other hand likes a new car every three years. At some point when I hit 40 I was like screw it, I'm living it up 2nd half of the movie. And we do..

But also we wouldn't do anything out side of our budget. If we couldn't afford this we wouldn't have it.

 

[jawatkins]

I don’t understand leasing. But I also don’t care about cars as long as it’s comfortable and reliable I’m happy. I like my gas mileage too. I might get something fancy some day.