I'm hearing people who leased in 2018 or 2019 are seeing some amazing opportunities to buyout and resell. But I'm curious why the deals aren't better right now.
I'm hearing people who leased in 2018 or 2019 are seeing some amazing opportunities to buyout and resell. But I'm curious why the deals aren't better right now.
Because they want to squeeze everything they can from all of us.
Maybe they think the residual values won't be as high 2-3 years from now. Hopefully car prices will return to pre-covid numbers eventually.
Am I missing something? Hard for me to see how large demand and short supply are going to encourage deals, whether it's purchase or just taking up a car for three years. That lease is still a car that's not available to Sell High right now, right?
Read the fine print on new leases. There have been changes on many leases that don't make consumer profit as easy. I don't have all the details without searching but the changes include not allowing 3rd party sales.
As an example, you lease a GM and when the lease is done you either have to buy it or give it back to GM. This means you can no longer trade it in to a Ford Dealership and you can't sell it to another individual (at a profit) without first really buying it which could mean you have to pay sales tax on that purchase before you sell it.
Edit: some in depth details
In reply to Jesse Ransom :
The lease is based on the estimated residual. If they figure that your $30k car will be worth $15k after four years, the lease is $15k. If they figure it will be worth more, the lease is less.
I remember a deal about 15 years ago where you could lease a new Nissan (Titan?) for $2200 down and $0/month, because they thought the residual would be high.
I am thinking that they know the current hiccup is temporary.
Worst case, if the real value ends up being a lot higher than the residual, people either buy out and resell for profit (and they get their money either way) or people turn in the lease (and they get their money, plus effectively make a ton more money on reselling the car).
BTW - Guy in my building got an offer for $37k for his 2018 Ram, lease was up and the residual was a lot lower than that. A lot lower. He used the profit to make a huge down payment on a '22 Maverick that had been ordered and the guy didn't want it because he didn't like the wheels. And he got it well below MSRP, too. He figures he could probably flip it for a profit after winter is over 
Could you imagine leases if the residual was upside down? "Here, we will give you $50/month for 36 months to drive this car"
In reply to Pete. (l33t FS) :
Got it, danke. If they price the residual based on current used prices then the lease should be cheap. I suspect you're absolutely correct about the lack of cheap leases being a good indicator that people paid to forecast such things are thinking that lease-distance into the future we'll see the pricing spike subside.
I should know this stuff. We actually leased the Leaf, IIRC, but I never thought about it beyond being a hedge against battery tech going nuts while we had it.
There may also be a psychological factor involved, too. The residual value assumes a well cared for vehicle gets returned. They will ding you for things like having the wrong quality tires on the car. (Have had people burned by that bring their new lease vehicle in, buy cheap crappy tires, and stash the OE tires to remount when returning the car. Boggles the mind)
Could you imagine what a Cherokee would look like after someone leased it at $75/month? If it costs a lot NOW instead of a far-off later that might not even happen if the vehicle got totaled during the lease period, that would keep people a little more mindful of what their vehicle is really worth. I notice that I have not seen another 100% down/$0/month lease offer after the Nissan situation.
I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
parker said:I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
It's like renting instead of buying a house. Some people don't want to buy a house, some people can't, and some people want to / have to move around a lot.
Leasing a vehicle makes sense under 1 of 2 conditions:
Under those circumstances leasing makes financial sense.
In reply to parker :
It's making a car payment with a pre negotiated trade in value. It makes a lot of sense for a lot of people. Not everyone, of course, but a lot.
Duke said:parker said:I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
It's like renting instead of buying a house.
Leasing a vehicle makes sense under 1 of 2 conditions:
- You're the kind of person who wants a new car every 2-3 years, no matter what.
- You can lease it through a business and write it off your taxes.
Under those circumstances leasing makes financial sense.
1. Is just dumb unless you just make so much money that it doesn't matter to you.
2. I don't get this either and I do own a business. An expense is still an expense. So you spend $20,000 to save $4,000 in taxes. That's still $16,000 less income than if you'd paid the taxes.
In reply to parker :
My mom pays $250/month to drive a new car every 3 years. That isn't dumb, she just wants a transportation pod and a known quantity for her monthly out-go.
Cars out of warranty can have wildly variable out-go.
parker said:Duke said:parker said:I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
It's like renting instead of buying a house.
Leasing a vehicle makes sense under 1 of 2 conditions:
- You're the kind of person who wants a new car every 2-3 years, no matter what.
- You can lease it through a business and write it off your taxes.
Under those circumstances leasing makes financial sense.
1. Is just dumb unless you just make so much money that it doesn't matter to you.
2. I don't get this either and I do own a business. An expense is still an expense. So you spend $20,000 to save $4,000 in taxes. That's still $16,000 less income than if you'd paid the taxes.
It's $16,000 less income than if you'd paid the taxes... except how much of that $16,000 would you have spent on a owning a vehicle over the same timeframe as the lease? You can't just ignore that cost.
parker said:I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
In theory, you wind up spending exactly the same amount of money as if you'd bought the car at the beginning, owned it for 3 years (or whatever the lease term is) and then sold it. Obviously there are a lot of bad deals out there and you need to work through the numbers (which have been made needlessly complicated, IMHO) to make sure you're not getting stuck with one. There's also a certain amount of gambling involved, because you and the leasing company are making a bet about how much the car will be worth at the end.
In some states there are also sales tax advantages -- for example California charges you sales tax on the entire thing at purchase time (with no discount for trade-in), whereas if you lease it then you pay sales tax on the principal portion of each lease payment when you make it.
I've never actually leased one because I tend to keep cars long enough that buying them makes more sense for me. OTOH I know people who lease them all the time because it fits better with their use pattern.
In reply to codrus (Forum Supporter) :
How does that work? Do they give you money at the end of the lease period?
Pete. (l33t FS) said:In reply to parker :
My mom pays $250/month to drive a new car every 3 years. That isn't dumb, she just wants a transportation pod and a known quantity for her monthly out-go.
Cars out of warranty can have wildly variable out-go.
If you have enough of a fixed income, this is a great reason to lease
Mazda leases were fantastic before the move to Toyota financial, now they're awful.
Honda leases are still good I believe, but I've not checked in a while.
Honda(may still) and Mazda used to include GAP insurance with a lease at no cost. If the car got totalled and you owed more than the value, finance company made up the difference and you walked away scott free. Mazda used to also include up to $1500 in damage waivers. so dings and dents didn't usually cause an issue at lease turn in time. Also, you could trade the car in anytime just like a normal financing. I traded in my 2013 Fit lease after 9 months when i had been at the mazda dealership for 5 months.
Leases also sometimes have PHENOMENAL money factors(daily interest rates). in 2016 I was buried $10k+ upside down in a 2016 MX-5 club that I bought because my boss at the dealership wanted to move it (because nobody wanted to pay for the BBS package) and after a few months i realized i was screwed because i couldn't afford to mod the car to autocross it.. and make payments.
Memorial day that year mazda had a bunch of 2016 Mazda 6's lying around on lots.. so they went full nuclear option to get them off the lots. They threw down $3000 in rebates to get cars off the lot, and wrote the money factor down to what was effectively 0%. Leveraging the rebates, plus additional money for being an employee and buying a old AF unit off the lot and a little bit of luck.. i managed to get myself out of the ND and into the mazda 6. Sure i was paying an ungoldly amount for a lease, BUT had the car been totalled at any time.. mazda finance was on the hook for the balance.. not me.. and I in trun got a nice lease, with a 36 month 0% loan on the negative equity debt. I paid that lease to the end and My parents and I got lots of great use out of the car over the 3 years we had it and on a $18k total lease payments.. we paid $14 in interest..
Leases also usually have a termination fee, but in my case the dealer we traded in to bought the car from mazda and as such no termination fee.
My residual ended up being almost exactly on the money for wholesale value of the car.. i wished we had been in the right spot to have kept it.
Under the right(NOT ALL LEASES) circumstances.. a lease can a great way to buy a new car with less money down and keep your payment lower, while also having the ability to walk away from a car after a few years without losing your ass on resale.
Back to the OP topic, Manufacturers know the bubble on values is going to burst, and they're certainly not going to be holding the bag when it does.
parker said:In reply to codrus (Forum Supporter) :
How does that work? Do they give you money at the end of the lease period?
it all depends on who you lease from, but yes, some MFR you can take the equity into your next vehicle purchase.
I have leased several cars including one that I just bought off lease and one that is on lease now.
the one that we just bought is a 2018 civic, 3 year 36k lease. Bought it for $12k and the "book value" is something like $18k now. The lease just gives you flexibility to spread out payments over a longer term or bail out after 2-4 years in an organized fashion. Wait 2-4 years what? In all that fine print and residual value conversation you figure out that you can give it back to the dealer early if you are using miles at the right rate and they are happy to take it. You can also extend the lease at the same rate and the same miles per year for up to a year (with Honda).
As people said earlier if you have a desire to drive a 0-3 year old car all the time it's a decent deal versus purchasing. It's also expensive AF to drive a 0-3 year old car all the time compared to my old truck. That said I believe it is cheaper to lease a 0-3 yo vehicle than buy it.
In reply to parker :
Leasing v buying is just doing the math and being honest with yourself. Especially with new car loans being +5 years now, factor in the overall interest rates, and the actual value of the car when you are done- leasing makes sense for a lot of people. Add in the older the car, the more it costs to keep in going- I've spend no money at all on any of the cars I've leased, other than the extra oil changes. No tires, everything that breaks is covered, etc (not that much breaks on a sub 3 year old vehicle).
And for people who suggest that people should always buy used cars- somebody has to get a new car to fill the pool.
Just watch out for the excess mile charge , they can kill the deal if you have a long drive to work.
parker said:In reply to codrus (Forum Supporter) :
How does that work? Do they give you money at the end of the lease period?
I've never actually done this, but my impression is that there's a pre-arranged "residual value" on the vehicle, based on what the leasing company thinks it'll be worth. Say you lease a $50K car for 3 years at 15K miles/year with a $20K residual -- basically you're paying for $30K of depreciation in those lease payments (plus financing). If the bottom drops out on the car and it's only worth $15K instead of $20K, well, you just walk away and the leasing company eats the $5K loss. If it's worth $25K instead then I think you usually have the option of buying it at the residual price, so in theory you can do that and immediately flip it.
True true. It has never been an issue for us but it sure can be. Worst case is you are stuck buying it at the end but that Civic I talked about last post has 15k miles on it now :-( that's a long story that isn't exactly my story so I'll leave it there.
In reply to codrus (Forum Supporter) :
Depends on if it is a closed end or open end lease. Closed end means they get the car back, open end gives you the option to buy at a prearranged price.
Duke said:parker said:Duke said:parker said:I can't wrap my mind around leasing, period. Pay hundreds of dollars a month for a few years and at the end you have............nothing.
It's like renting instead of buying a house.
Leasing a vehicle makes sense under 1 of 2 conditions:
- You're the kind of person who wants a new car every 2-3 years, no matter what.
- You can lease it through a business and write it off your taxes.
Under those circumstances leasing makes financial sense.
1. Is just dumb unless you just make so much money that it doesn't matter to you.
2. I don't get this either and I do own a business. An expense is still an expense. So you spend $20,000 to save $4,000 in taxes. That's still $16,000 less income than if you'd paid the taxes.
It's $16,000 less income than if you'd paid the taxes... except how much of that $16,000 would you have spent on a owning a vehicle over the same timeframe as the lease? You can't just ignore that cost.
Actually if you do it right you can make money on a business lease. Assume it's a $400 lease payment, 3 years, 45k miles. Each year you spend $4800 in payments but can deduct $8400 as a mileage expense.
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