I think leasing is good for "flexibility" but there seems to be a correlation between those who avoid leasing and instead purchase a vehicle and keep it for a while than those who want the "newest" thing every two or three years. I think it financially is better to... well... finance... I'll use myself as an example.
Let's say my car was around $27k -
If I financed it for 60 months, like I did, with the interest I wound up paying around $30k -
If I chose to lease it for however long I would have paid maybe $6k total -
Now I can sell my car for anywhere between $16k-$18k if I get the right buyer -
I've had my car 4 years with over 45k+ miles on it -
I agree that I would have saved money in the short term but not in the long term, since I enjoy keeping cars for a while and really "using" the vehicles without restriction (lease = miles limited), it makes more sense to finance than lease -
I'm not putting anyone down who chooses to lease. I'm sure there is nothing wrong with it. I've yet to meet someone with a six-figure salary and a college-education though who chooses to lease over financing, especially if you plan to buy the vehicle out after the lease. That's just from my own experiences and my own limited opinion.
I make close to 6 figures and have a college education and I leased my 2018 WRX. My payments are 310/month. Residual Value is 54% of my sticker price, and buyout came out to be 16500. I think with 3 years and even over the 36,000 miles, with the ridiculous resale value of WRX, I can easily get more than that for the car. It all depends on residual value of the vehicle. Even if you put 40k mileage on the car, a 2018 in 3 years can likely still go for around 20k. That's me being realistic and not over inflating my price that many do on their 8 year old cars.
The only problem with the buyout option, is if you buyout and finance for >4-5 years, then you're in negative equity. But if you can afford to do a balloon payment, or can use the value of the car to trade in for a new car at another dealership, then you actually may be better off.
I have the lease/buy debate with my fiancée all the time. She's an economist by training. I can't convince her leasing is a reasonable idea. Sad.
Some of my colleagues in a medical practice used to have the practice (LLC) lease the vehicles, then they would pay quite a bit (~$1000 a month) pretax dollars, and at the end of the lease buy the vehicle for a pittance. Several of them drove higher-end Mercedes. (I think they also took deductions for gas mileage, which according to my accountant is double-dipping and not allowed.) She said leasing for work wasn't a great deal for me and deducting mileage would be a better deal.
I guess I am wrong. I legit didn't know. Now I feel foolish.
Honestly I like to blindly sometimes follow the advice of more successful people I've met in my life, at least when I was younger, since it has helped me. For example back when I was 18 I was told to put my money into the market through Vanguard and invest in the S&P 500 instead of buying lottery tickets. I was told to put a little bit away in your 401k and make sure your company can match it. I was also told that leasing a vehicle, especially if you are leaning towards buying it out at the end, is not financially the best idea.
Alas I was wrong about leasing. I guess it makes more sense, especially with the stronger incentives and more flexible financial options for it.
I apologize if my post came across ignorant or foolish.
Thank you for clearing it up everyone.
(btw: Hope everyone has an amazing Friday and a great weekend!)
Several reasons leasing can be bad:
1) You pay depreciation up front, which may not be such a big deal on a car like the WRX, since it retains a high resale value, anyway.
2) If you like to drive, there will be mileage penalties.
3) If you live in a city or poor climate, you will pay for any "deemed-excessive" unavoidable damages; TBD by the lessor. This will sometimes force the lessee to buyout, just to avoid the penalty.
I'm no finance expert, but I research. If you decide to lease, do the math and then low-ball negotiate the "sale" price and try to get more mileage. Leasing really is a crap-shoot.
Several reasons leasing can be bad:
1) You pay depreciation up front, which may not be such a big deal on a car like the WRX, since it retains a high resale value, anyway.
2) If you like to drive, there will be mileage penalties.
3) If you live in a city or poor climate, you will pay for any "deemed-excessive" unavoidable damages; TBD by the lessor. This will sometimes force the lessee to buyout, just to avoid the penalty.
I'm no finance expert, but I research. If you decide to lease, do the math and then low-ball negotiate the "sale" price and try to get more mileage. Leasing really is a crap-shoot.
Chris the WRX comes with a $1000 damage allowance, very few end up paying out of pocket for damage. Also consider this, If you purchase a wrx and have 1 or 2 fender benders that show up on the carfax, no matter how minor they were, your car is devalued by roughly 20%. If you leased it, Subaru eats that depreciation. Doesn't happen to everyone, but it certainly happens! Also the over mileage charge for wrx is only .15 per mile, so even if you go 2000 miles over your lease, you would owe 300 bucks. Considering there is pretty much guaranteed equity in the residual (ie the car is worth 20k and the buyout is 16500 typically) the overmileage seldom comes into play as any dealer with a brain will buy the car for the residual to resell even if you dont, so there would be no mileage to pay.
Hey Clayton, what is your take on key damage? If I end up getting my WRX from you in a couple years, I'll most likely be trading in my Jeep unless my wife wants it. The key scratch is on the rear quarter panel and rear door... down to the metal in some spots. Do you think it would take more of a hit on trade in with the damage fixed or not fixed? I've only talked to one body shop so far, but they estimate $1500-2000 for full fix and blending. At that price I'll be submitting it to my comprehensive, and I'm unsure if that would hit carfax or not.
Also, I never really looked into leasing so I'll definitely have to research the pros and cons next time after reading this thread.
I make close to 6 figures and have a college education and I leased my 2018 WRX. My payments are 310/month. Residual Value is 54% of my sticker price, and buyout came out to be 16500. I think with 3 years and even over the 36,000 miles, with the ridiculous resale value of WRX, I can easily get more than that for the car. It all depends on residual value of the vehicle. Even if you put 40k mileage on the car, a 2018 in 3 years can likely still go for around 20k. That's me being realistic and not over inflating my price that many do on their 8 year old cars.
The only problem with the buyout option, is if you buyout and finance for >4-5 years, then you're in negative equity. But if you can afford to do a balloon payment, or can use the value of the car to trade in for a new car at another dealership, then you actually may be better off.
If your residual is $16.5k, but the car's value is $20k, it only helps you if you buy it outright and sell private sale, correct? If you don't take the buyout, then you've paid more than the car is worth (ie. You paid 54% - so about $14k + interest when really it only devalued by $10k).
I would think dealer trade in value would be much lower than $20k, maybe as low as the $16.5k residual (ie. You break even) or lower, no?
If your residual is $16.5k, but the car's value is $20k, it only helps you if you buy it outright and sell private sale, correct? If you don't take the buyout, then you've paid more than the car is worth (ie. You paid 54% - so about $14k + interest when really it only devalued by $10k).
I would think dealer trade in value would be much lower than $20k, maybe as low as the $16.5k residual (ie. You break even) or lower, no?
My sticker price was less than 30,000 for a premium. So I could be wrong on the buyout price. Leases don't really have interest, and if they do, it will be negligible. The dealer is saying, that in 3 years, this car will depreciate to 54% of it's value. So let's take a Base model for example....
Base model- 28000
Residual value n ( lets just use 54%, but this can change depending on different factors)
Buyout is $15200 based on residual value. Subtract that from whatever money you put down, (if any) and divide by 36 ( 3 year lease) to get your monthly payments .
Now if at the end of 3 years, the car is worth more than 15200, then you made out. You can use your car as equity, to get a new car at another dealership. Yes, typically you will want to do a balloon payment to pay off the buyout, but some dealerships if you finance through them, offer 0% interest on the loan depending on credit. I used an arbitrary number like 20k for the value at 3 years.. But it could be more. Could be less.
If you do the finance through the dealer, sometimes you can get 0% interest loans depending on credit. So if you buyout and finance at 3 years, you won't be paying more in the long run.
Hey Clayton, what is your take on key damage? If I end up getting my WRX from you in a couple years, I'll most likely be trading in my Jeep unless my wife wants it. The key scratch is on the rear quarter panel and rear door... down to the metal in some spots. Do you think it would take more of a hit on trade in with the damage fixed or not fixed? I've only talked to one body shop so far, but they estimate $1500-2000 for full fix and blending. At that price I'll be submitting it to my comprehensive, and I'm unsure if that would hit carfax or not.
Also, I never really looked into leasing so I'll definitely have to research the pros and cons next time after reading this thread.
I mean if its gonna start rusting, then you should do it now. If you were trading it in next week I would say dont do it because I can get stuff like that done a lot cheaper than you could. If you do it through insurance it will most likely show up on the carfax as "damage reported" but not an accident at least. depending on what it looks like, and the overall age and condition of the car, it might be better to do a cheaper repair like touch up and wetsand so maybe look into that. BTW you're right in PA, you should join the Northeast Subaru Squad FB group too! gonna be doing some givaways in there real soon and there are a lot of ambassadors in there too so whenever you get around to the new wrx you can get a 500 coupon.
If your residual is $16.5k, but the car's value is $20k, it only helps you if you buy it outright and sell private sale, correct? If you don't take the buyout, then you've paid more than the car is worth (ie. You paid 54% - so about $14k + interest when really it only devalued by $10k).
I would think dealer trade in value would be much lower than $20k, maybe as low as the $16.5k residual (ie. You break even) or lower, no?
Not so, as long as you are aware of the equity in the car you can take advantage. Typically people just have no idea that thier lease has some equity in the residual and/or dont expect it to, so the dealer happily buys the car out and gloms all the profit. If you're working with a good dealer like me, or are knowledgable enough to force the bad dealers hand, even if they buy it for wholesale pricing, there should be equity. For instance, a typical scenario would be like this; lets say in 3 years you want a new wrx from me. I would buy your car with a residual of 16500 for a sum of 17500, and just use it like a trade in, so we apply $1000 of the lease equity to your next lease or purchase. Then I turn around and retail the car fror 19k. Its a win win. Of course you don't get tax credit though but that is because you only paid tax on the unresidualized portion, and the car isnt in your name but that is really the only difference between this way and trading in a car you own. Of course you can always buy the car yourself from Chase for cash and turn around and do a private sale too, but its a lot more work and you'd have to wait while the title flips and lay out all the cash.
Also, I am being very conservative here. Here is my actual vauto report for the market within 100 miles of Ramsey NJ. This reflects all the 2015 base wrxs listed retail:
So the average base WRX on dealers lots within 100 miles (10 cars in this case) has 34,282 miles, and is listed for an average price of 22,474!! No wonder so many guys go new through my deal lol.
I'm no dealer sales , but there shouldn't be any cash required at lease signing.
It all is just leverage to get your monthly payments down.
If your car is 40k, residual value at 50% and you put 3k down, then your car payments should be somewhere around 472 per month. That's only IF the $3000 is put towards sticker price of car.
I mean if its gonna start rusting, then you should do it now. If you were trading it in next week I would say dont do it because I can get stuff like that done a lot cheaper than you could. If you do it through insurance it will most likely show up on the carfax as "damage reported" but not an accident at least. depending on what it looks like, and the overall age and condition of the car, it might be better to do a cheaper repair like touch up and wetsand so maybe look into that. BTW you're right in PA, you should join the Northeast Subaru Squad FB group too! gonna be doing some givaways in there real soon and there are a lot of ambassadors in there too so whenever you get around to the new wrx you can get a 500 coupon.
Thanks for the info Clayton. I actually already joined the Facebook group. Since people seem to be posting their rides, maybe I'll throw up my Jeep and previous WRX and mention I'll be in the market for one again. It would be awesome to get an ambassador coupon... as long as they don't have expiration dates. Might be a couple years until the redesign.
Different banks handle it differently but usually the minimum required is just the first months payment and dmv. Some banks do sign and drive but not Chase typically.
Thanks for the info Clayton. I actually already joined the Facebook group. Since people seem to be posting their rides, maybe I'll throw up my Jeep and previous WRX and mention I'll be in the market for one again. It would be awesome to get an ambassador coupon... as long as they don't have expiration dates. Might be a couple years until the redesign.
The ambassadors issue the coupons at time of sale, but I started the group last Friday and already have over 100 members and 5 ambassadors in there at this point and am trying to connect with more and grow that group a lot bigger so chances are good whenever you get around to it I will be able to connect the right people in that group. Aaron Brown from Jalopnik is actually in there now too, super stoked on that!
The ambassadors issue the coupons at time of sale, but I started the group last Friday and already have over 100 members and 5 ambassadors in there at this point and am trying to connect with more and grow that group a lot bigger so chances are good whenever you get around to it I will be able to connect the right people in that group. Aaron Brown from Jalopnik is actually in there now too, super stoked on that!