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Six Years of Leasing... 60k ??

When did it become smart to pay for something that you will never own? The idea of leasing is so mainstream that people actually equate leasing to owning . Its not the same. To spend 60k in 6 years and have absolutely nothing to show for it is interesting.

If the new rationale is technology changes so much that you don't wanna be tied down, and I even think that idea is debatable. And to make my point, Tesla cars have a future proof architecture built in, in which they are software upgradable. So if that is your thing maybe you're picking the wrong car, if its tech is outdated after 24 months.

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It became smart when every day it is worth less and less than it was the day before. I pay for electricity but I don't own any Con Ed power plants. Own appreciating assets. Lease depreciating assets.

However since leasing is set up with a myriad of different conditons (bet 10k-15k per year, take good car, good MF and residual required) YMMV.
 

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It became smart when every day it is worth less and less than it was the day before. I pay for electricity but I don't own any Con Ed power plants. Own appreciating assets. Lease depreciating assets.

However since leasing is set up with a myriad of different conditons (bet 10k-15k per year, take good car, good MF and residual required) YMMV.
IMO:

In 6 years you will have spent 60k and have nothing left, if you lease cars (but will always have a new car). If you buy, after spending 60k in 6 years you will have a car worth something (10k?) but will have an older somewhat less updated car for the last years. So you are essentially giving up the price of a 6 year old Volvo (about 10k or so) in order to always have the latest car. It may be worth it, if that's what you want, but you are paying for it.

Of course, the longer you keep it the more the savings. If you keep the car for 10 years, you'll lose most of the 10k you had at 6 years, but will save 4 years worth of lease payments (40k), in exchange for having a 10 year old rather than a new car.
 

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Leasing just provides optionality at the end of the term - turn it back in and not have to worry about trading or selling it privately or buying it outright. It probably does end up costing a bit more but it all comes down to the numbers and for that premium you are driving the latest and greatest with no repairs expense because it's always under warranty. Certain cars lease well, others due to poor residuals, MF, no manufacturer support, not so much. And folks never take into account the return you will be earning on that money you saved by leasing over a three year term.
 

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I’d love to lease, but I drive 25-30,000 miles a year.
 

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From a financial stand point, leasing is usually a less financially sound option, but we all make decisions based on our personal needs and to some people it is worth the added expense to never have to worry about maintenance, repairs, etc. and always have the latest technology and safety features. I certainly don't agree with perpetually leasing vehicles, but its not my money. Before my wife and I were dating she would lease a new car every 3 years. Her logic was she lived alone and drove around a fair amount and figured her car had a lower chance of breaking down if it was newer. Can't say I disagree with her logic and to her the added expense was worth it.
 

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I used to own my cars, but it was always a nightmare to try to sell them and dealing with idiots or dealerships that offered peanuts for my car.

Now I lease them. I don't pay anything upfront and only pay taxes on 50% of the car. So instead of paying $80k + $10k in taxes upfront, I pay several hundred per month and invest the rest in something that is acutally profitable (a car is the worst money decision you can make, depreciates at a massive rate).

Especially in this day and age, where the world is about to see a change with electric vehicles. When my lease is due in 2022 it won't matter if the car will be worth nothing because of the EV revolution. I will return it, get the next new and shiny car and carry on. Same 4 years later, when EV will be cheaper, have more range and recharge faster. NEXT CAR!
 

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I Thought of leasing my XC90, but after finding the CPO with all the options I wanted I ended up buying. Technology does play a factor these days but I’m pleased that Volvo has made software updates available so my 16’ model is not necessarily three years behind in tech. May cost a bit, but I have the option to upgrade Pilot Assist and safety features.

I agree it is much harder to sell a car now. Dealers have grabbed this market as it is a better money maker than new cars. Also, the last car I sold was a real PITA, as numerous buyers wouldn’t show up, show up late, or come with cash well below what I was offering.
 

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I believe leasing was a good concept for business owners that could expense and write off their taxes the entire lease. Something us pay ckeck to pay check guys cannot write off.

I guess for the rest of us, the idea seems to be that you could "afford" a car that you could not otherwise afford? Does not make sense to me. Seems like it is just a way to pay twice for something.

Me I like to modify my cars. Cannot do that on a lease. If the car is really reliable, I will gift them to one of my adult kids instead of trading them in.

Some of my wife's relatives leased their cars mostly because it was in fashion in their retirement community. Got to keep up with the Jones' after all. Now he is scared to drive it because if he exceeds his allotted mileage, and he gets hit for a lot of $ at the end of the lease. And I can hardly wait to see how much his lease company will charge him when he goes to turn it in and they see the body damage from his accidents and shopping cart dings.
 

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IMO:

In 6 years you will have spent 60k and have nothing left, if you lease cars (but will always have a new car). If you buy, after spending 60k in 6 years you will have a car worth something (10k?) but will have an older somewhat less updated car for the last years. So you are essentially giving up the price of a 6 year old Volvo (about 10k or so) in order to always have the latest car. It may be worth it, if that's what you want, but you are paying for it.

Of course, the longer you keep it the more the savings. If you keep the car for 10 years, you'll lose most of the 10k you had at 6 years, but will save 4 years worth of lease payments (40k), in exchange for having a 10 year old rather than a new car.
I spend 0.03% of my income on a new car. I use it for business so write off a bunch. Can't look at a car as an investment. Look at it as an expense. Like a cellphone. Like an electric bill.
 

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I think a good way to look at leasing is to think of it as paying rent versus buying. When you apply this to a home, most would say that buying is preferable over just paying rent and someone else's property tax. Homes while they often depreciate, the land they sit on often appreciates. So all in all buying your home is/has been a good investment. Unfortunately cars are pretty much a depreciating asset. At least the ones we are talking about. So why lease? Generally your monthly payment will be less than if you purchased the car and attempted to pay it off in the same time frame. It can be a significant difference. That often allows someone to lease a car they would normally not try and purchase. Most cars now are leased with a closed lease option which says at the end of the lease you will only be responsible for excessive mileage over and above what you contracted for as well as any damage. However, the value of the car will not impact you and therefore you are not responsible for its residual value. Another benefit is that as a business deduction a lease can more easily be written off. Your money is not tied up and there is little to know unknows associated with the lease. As has been pointed out having a new car keeps you up to date with technology. That is the good side. The bad side is you are renting and never acquire any equity. It takes a pretty good credit rating to get a good money factor (the cost of money). If you are a high mileage person then leasing will probably not work out well. Generally you can opt for 12,000 miles per year and up o 15,000 miles per year. However the lease goes up with the mileage increase. You also have to take care of the vehicle. If you abuse it then it will require that you pay for repairs before turning the car in. I have always purchased cars in the past. However starting with electric vehicles we leased as I knew that the battery technology was changing rapidly. We leased a 2011 Nissan Leaf for three years. The car was priced at $37,000 or so. Our lease at the time was around $400+ per month. When we turned in the car we had accumulated only around 12,000 miles. The car was worth on the open market maybe $6000. But had we purchased it, the price to us was around $15,000. So in that instance it was not a good investment. Better to have leased and walked away. That has been the story for the 2011 Leaf, 2014 Toyota Rav4EV, 2015 Kia Soul EV+ and most likely the 2017 Chevy Bolt EV. Our 2015 Toyota Highlander Hybrid was almost worth what my end of lease residual value was. I did actually try and sell it, but most people who called wanted to lowball me for the car. So I just turned it in during the purchase of my XC90 T8. The good news was that the dealership gave me what I still owed on the car at the end of my lease. So I was not our of pocket. I wanted to lease the T8 but found that leases were expensive in the $1000+ range. I tried to get them down to around $800 but just could never make it happen. I pretty much gave up until I found my particular car a 2017 that I purchased as new on May 26, 2018. It only had 1800 miles and I was the first registered owner. So I had to purchase. I was not happy purchasing as the car was expensive but that was my only option. As it turned out that was really a plus this time around. Last year 2018 because of medical issues, I did not work at all, and thus took distributions from retirement accounts. Unfortunately for those of you in the know that means that my traditional business deductions didn't work. I found that because I purchased my T8 that I could take a special depreciation on the car of approximately $38,000 for the first year. That along with my $5000 Federal Tax credit helped to reduce my tax liability for the year. So in this instance purchasing made a difference. The problem with cars as they become more expensive they also tend to depreciate significantly in dollar value. So as was pointed out in other posts if you keep a vehicle for many years 5-10 then generally you are better off purchasing rather then leasing. I prefer getting the newest technology and really don't want to keep a car for a long period of time. Cars today are so much more complex and generally expensive that I am not so interested in keeping it after the warranty goes out. People in the know will generally not purchase a high end Range Rover, or Jag, or Merc, or Audi as a used vehicle beyond its warranty. They are just too expensive to repair. AS cars get more expensive I have heard that a high percentage are leased, and of the ones that are purchased a lot are paid in cash and not financed.
 

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I will lease a car if don't plan to keep it after 3 years. I have another long term car of course. For example, for the Polestar 2 that I'd like to try, I will lease or subscribe to it. I will not buy two cars at this price level. Also BEV is not as interesting after the initial excitement. I will probably go back to old car after that.

If my car is my only car, I will buy it and keep longer years. I also don't mind old car as long as it is reliable.

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I'd love to lease, but I drive 25-30,000 miles a year.
You are a perfect candidate for leasing, provided your set it up with the high mileage. Think what your car would be worth after 4 years and 110,000+ miles on the clock...
 

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The bottom line is that the value of leasing vs buying is dependent on the person’s needs and priorities. i own 2 cars and lease one because that is what makes sense for me. there is no blanket “right” thing to do.

My daughter, who lives week to week, leases in spite of my advise. She should own IMO so she can get out from under a car payment every month.

As has been mentioned above, I’m not sure I want to own any of the new hi tech cars outside of a warranty period, either initial warranty or extended, anymore. I’ve read too many horror stories of otherwise great cars that need very expensive electronic repairs regularly.....its not like the old days when you can own a car and repair costs were, at least somewhat, predictable.

In my case i leased the new S60’s because:

A: the costs of keeping vs leasing over the next 3 years were basically equal.

B: I expect that in 3 years i will want a very cool new electric car of some sort. I love where that industry is going.....


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When did it become smart to pay for something that you will never own? The idea of leasing is so mainstream that people actually equate leasing to owning . Its not the same. To spend 60k in 6 years and have absolutely nothing to show for it is interesting.

If the new rationale is technology changes so much that you don't wanna be tied down, and I even think that idea is debatable. And to make my point, Tesla cars have a future proof architecture built in, in which they are software upgradable. So if that is your thing maybe you're picking the wrong car, if its tech is outdated after 24 months.

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PV = FV/(1+r)^n
Or, in other words:
60k over 6 years < 60k today
 

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In my case i leased the new S60's because:

A: the costs of keeping vs leasing over the next 3 years were basically equal.

B: I expect that in 3 years i will want a very cool new electric car of some sort. I love where that industry is going.....

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Correct thinking. And that is where the actual trend is showing us, industry-wide, especially with the subscription model taking deeper roots.
 

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I spend 0.03% of my income on a new car. I use it for business so write off a bunch. Can't look at a car as an investment. Look at it as an expense. Like a cellphone. Like an electric bill.
A nice car is much better than an electric bill!
 

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One factor that is often left out is SAFETY. If you listen to Dave Ramsey, he tells you to buy a beater. This does not factor in SAFETY. There are economic consequences of being seriously injured. My financial adviser has changed his advice on cars due to this
 

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I'd love to lease, but I drive 25-30,000 miles a year.
Same here. Doesn't make sense for me because of the mileage.

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While it is true that you can increase the mileage allowance per year it really increases the lease payment. Nothing is really for free in this world. We have been lucky because generally consumers have been slow to accept electric cars. Consequently manufacturers have often offered exceptional leases to mover product. Also California has some credits that manufacturers desire. So they will move vehicles to access the credits. Also leases are a way to get cars out on the road where others will see them and move to purchase. Back in the old days of the auto industry the Big Three all had interests in the Auto Rental industry. They used it as a means of insuring that metal was always moving. They would write off the car as having been sold then the Rental Car Agency would depreciate the hell out of the car and then it would hit the market. It was really kind of an Enron in my mind. All the Big Three stopped doing that as of the Great Recession. Those of you who travel for business know what I am talking about. Cars that were not selling ended up in the Rental Fleet. In a way leasing sometimes behaves in the same way. Manufacturers move the cars that either are not selling or help them in maintaining production efficiency. You can often find under $100 monthly leases on some interesting cars.
 
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