I agree with you and am typically a fan of leasing. However, with the money factor being so high and the likelihood that the Defender will hold its value well (not at the current levels, but still generally well), I suspect you will spend quite a bit more over the three years than if you bought and traded it. But, like you said, it is a gamble if resale plummets.

 

They should rebrand leasing as depreciation insurance haha.

But yea I am thinking the Defender should hold its value well unless reliability issues start to become more prevalent (still too early to really know I think). Traditional Land Rover depreciation + a pending plunge in used car prices does have me strongly considering getting the insurance though…

 

Pretty sure this isn't the way it works. You're paying interest on the cap cost plus the residual value. So if you buy a $100k defender with 50% residual you're paying that interest rate on 150k for your lease term, this is why the money factor impacts the lease payment so much.

 

You’re joking right?

 

You are only paying interest on the 'rent' charge, which is the price of the car minus the residual. So with a say 70% residual value you're paying interest (money factor) on that 30% value over the term.

If you buy the car at the end, then yes, you are paying interest on that residual value as well, and in the long run you will pay more in interest than if you got the loan to begin with. However if you're not keeping the car, you only paid interest on 30% of the vehicle. That's why also it's recommended to not put anything down on a lease as you're just pre-paying, though, i wonder with inflation like it might make sense to 'pre-pay'

Personally, I'm not sure I will keep the Defender long term, so the lease makes more sense. I average 10k miles a year on my vehicles but have only kept them at most for 3-4 years. I am however getting older and maybe a tiny bit wiser, but honestly the fact that the Defender is a gas engine and not an electric I probably won't keep it beyond my normal pattern.

 

No I'm not joking. That's how you calculate the finance charge on a lease. (Cap cost + residual) * money factor...

https://leasehackr.com/blog/2016/4/1...and?format=amp

Your POV doesn't make sense business wise. If the leasing company is buying the car from the manufacturer and leasing it to you and you're only paying the interest on the total lease payments, who's paying the interest on the delta between the total lease payments and actual cost of the car at the time of purchase? It's certainly not the leasing company.

 

The problem is you’re confusing money factor for interest rate

edit: no I think you might be right. Confusing because obviously you will pay interest on the depreciation. And I could even understand paying interest on the residual for the reason you stated above. But why would you have to pay interest on msrp plus residual?

 

you do not pay interest on both. You just pay it on the amount financed, which is MSRP, plus any upfront fee that you may roll into capitalized amount, less any down payment.

look at this example

- amount financed is roughly $66400 ($63000 MSRP plus $2000 of fees, $1400 of NY lease taxes)
- interest rate is 7.4%
- total interest over 2 years is $8850 : it is slightly less than $66400 x 7.4% x 2 because your monthly payment includes some principal payment and therefore your average principal over the 24 months is less than the upfront amount financed of $66400

hope it helps

 

you do not pay interest on both. You just pay it on the amount financed, which is MSRP, plus any upfront fee that you may roll into capitalized amount, less any down payment.

look at this example

- amount financed is roughly $66400 ($63000 MSRP plus $2000 of fees, $1400 of NY lease taxes)
- interest rate is 7.4%
- total interest over 2 years is $8850 : it is slightly less than $66400 x 7.4% x 2 because your monthly payment includes some principal payment and therefore your average principal over the 24 months is less than the upfront amount financed of $66400

hope it helps

https://leasehackr.com/calculator?ma...sult_mode=true

 

Yup makes sense, thanks. Interesting that you pay interest on the depreciation (the part you use) and the residual (the part you give back). Though you technically have possession of the residual, it isn’t yours (you can’t sell the residual without buying it from the leasing company). Doesn’t seem fair, no?