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Lease to buy
Hi guys
I am planning to lease my new E90 with the intent to buy. My thought was that instead of locking in substantially more money in my car I can use that money to invest in ESPP (Employee Stock Purchase Plan). ESPP will give me around 20% (guaranteed) profit. Since I am planning to buy anyway I am thinking of going with 10k per year, eventhough I know I will drive more.
Since I am doing ED (w. $5000 off MSRP) my lease payment will be really low compared to buying the car.
Does this make sense or is it risky?
What are you opinions? Anyone else doing the same?
Thanks,
David
| | Reply » Lease to buy |
You should consider getting a loan if you are definite about buying the car in 3 years. Leasing a vehicle includes certain fees you don't need to pay when paying with a loan. Also, you can get a better price and rate normally if you buy instead of lease.
The game is different if your may switch your mind not buying.
| | Reply » Lease to buy |
Every study I've read show that lease-buy is a sure way to lose money.
Typically, a 5 year loan and a 3 year lease cost about the same in terms of monthly payment.
With about a 60% residual value on the car, you'll probably end up with a considerably higher payment for the remaining two years.
If you want a new car every three years and don't put a ton of miles on the car each year, you'll do OK leasing. You won't tie up a ton of your money, and your costs are defined up front. Leasing is an excellent choice for brands with strong residual values, like BMW or Honda.
If you want a car to drive 'til the doors fall off, buy the car. Residual value is less of an issue here, since doorless cars are often difficult to move in the used market, regardless of brand.
| | Reply » Lease to buy |
Good points. However, that a 5 year loan and a 3 year lease have similar payments might be true if you are not doing ED. But since I am reducing the 40% I need to pay off (if res is 60%), which in my case is $16400 with $5000, I only have to pay $11400 during three years, which lowers my payment with around 40%.
| | Reply » Lease to buy |
Lease to buy, can work out if you get a really low money factor or or large discount off of MSRP, like ED.
It all depends on your own personal needs. If you don't think you will keep the car, a lease can save you the headache of selling it privately or getting ripped on a trade in.
I would do the buy out in cash, to avoid paying further interest charges.
Yes, lease to buy is more expensive, it is up to you to decide if its worth it.
| | Reply » Lease to buy |
Quote: | Good points. However, that a 5 year loan and a 3 year lease have similar payments might be true if you are not doing ED. But since I am reducing the 40% I need to pay off (if res is 60%), which in my case is $16400 with $5000, I only have to pay $11400 during three years, which lowers my payment with around 40%. | It sound's like you've may have done your homework. It might work out to something like a balloon mortgage, with the perk of being able to turn the car in and avoid the balloon payment if you want.
I'd spend a little time with the time value of money functions in Excel to be sure you're comfortable with the decision, and your not kidding yourself about the economics.
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Lease to buy