Issue with leasing is they don't need to move cars so there's likely no mfg support from a money factor perspective. You'd probably being pay the equivalent of 10% interest.

 

Had planned to lease when I bought in June and the rates were so bad I bought (which I really didn't want to do). I had to use their rates and then replaced 24 hours later with a local credit union.

 

I worked 17 years for a finance company and for leasing money factors the rule of 2400 applies. It is NOT exact but will get you within 10-12 bps. For example a MF of .00309 would work out to .00309 X 2400= 7.416% or about 7.5% give or take.

 

Yup. And as I always understood it you are paying that interest rate on the price of the car plus the lease payments?

 

That is my understanding. I don't think it makes much sense to lease with a non incentivized money factor.

 

you are paying that interest on the price of the car minus the residual value. What do you mean price of the car plus lease payments?

 

if you’re buying a new car that you don’t plan on keeping for more than 3 years and you drive a predictable amount of miles under ~12,000 miles a year I think it gives you some flexibility. If the resale value plummets you can just give the car back and then you save a good deal of money. If the value is higher than expected you can buy and keep it or buy it and sell it and keep the difference. Not to mention the fact you don’t have to deal with the hassle of trying to sell your car if you had bought it.

 

Yes and sales tax factors in as well because you don't pay on the full amount, just for the term of the payments. The whole anti-leasing thing I haven't figured out. I do understand you will often pay a higher rate so yea that's not a good thing but a few pct is what $30? So it's not the rate that I pay attention to it's the residual and the way these cars are holding value the residual should be high, if it isn't, like you said you buyout and flip it.

 

Another variable is whether you live in a state that gives sales tax credit for your trade in.
When I lived in CA, I tended to lease since you don't get sales tax credit on the trade. With the lease, you pay sales tax on the payments- not the total cost of the car.

Example:
Buy for $100K, trade in something for $50K. In CA you pay sales tax on $100K. In CT, where I now live, you pay sales tax on $50K. HUGE difference.
If the lease payment on that $100K car was $1500 per month, you'd pay tax on that.....essentially you pay tax on the depreciation, not the residual.

 

Very true - but in CT they will charge you tax on that car every year you own it.