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Originally Posted by wireless
1. For example, leases usually do not explicitly state the interest/discount rate; purchase contracts do.
2.On the other hand, residual value (the amount the dealer is willing to accept for the vehicle at the end of the lease) typically is negotiable.
3.A lessee who returns the auto in good condition at the end of the lease will have no further obligations, except perhaps a small disposition fee.
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1. Wrong, lease rates are referred to as money factors, simple calculation turns money factor to lease rate. A lot of time lease rates are lower than finance rates for the same period of time, i.e. 3y/36 pay
2. Wrong, residual value is set by the manufacturer based on the term of the lease and the mileage of the lease. It is not negotiable, before you take the lease or after you take the lease. The only thing negotiable on a lease is the capitalized cost, i.e. sales price and the discount you can get on it, i.e. capitalized cost reduction.
3. Wrong, in most states, "wear and tear" covers up to $1500 in reconditioning costs on a typical lease, beyond that, the consumer is responsible for the difference, the dealership benefits by having you satisfied and either leasing again or purchasing from them, taking you over the coals for wear and tear wouldn't go too far towards this. There is also no 'disposition fee' at the end of a lease.
I used to sell Toyota's myself and before taking delivery of our newest vehicle I decided to do as much research as possible on leasing. A great website I ran across was leaseguide.com as well as reading multiple books about it.
Leasing isn't for everyone, if someone likes to keep a car and run it into the ground for 10-15 years, leasing is never a good option. For someone (the average consumer keeps a car for 3-4 years) that likes to trade out of cars, you will loose a lot less picking in appropriate lease than being upside down or even rightside up in your financing.
In our case, taking out 2, 3 year leases, broke even with the cost of purchasing/financing a car and keeping it for 6 years. It broke even without including the cost of maintenance necessary beyond the 3y/36m time period. That's why I went for it. I'm not going to tie up my money in a depreciating asset. To me a good example is this, if I were to come to you and ask you to invest $25,000 with me and in 3 years I'll give you $12,500 back, would you invest with me? That's what financing a car is.
People incorrectly use the term equity when referring to cars and call their cars assets. An asset is something you can afford to give up to gain liquidity, a car (at least the cars we all drive), is not an asset but necessity. Leasing is not right for everyone, but neither is buying. It's a choice. A lot of people are ignorant about leases and therefore assume there bad because they don't understand them. A lot of people are sold into leases, attracted by the low monthly payments, i.e. luxury cars, etc. These people are going to wind up disappointed in the lease process.
If you intend on buying out your car after the lease is over, leasing isn't right for you. It's not black and white, but truly gray and is dependent on what people are looking for exactly.
Sorry for the long response but buy vs. lease posts always get me going.
