It’s usually better to turn in your lease than buy it out

[RickFLM4]

Originally Posted by spdandpwr

This makes me hopeful for keeping my car past the 36k miles I have it leased for.

When you get to the end of the lease and look objectively at the economics, you will almost certainly find it makes more economic sense to turn it in and get a new one. High residuals work very well for lease payments, resulting in a buyout that isn't very attractive relative to market value.

[trey100]

Originally Posted by RickFLM4

When you get to the end of the lease and look objectively at the economics, you will almost certainly find it makes more economic sense to turn it in and get a new one. High residuals work very well for lease payments, resulting in a buyout that isn't very attractive relative to market value.

As high as my residual was (60% for 15k/yr), I am finding that equivalent cars and mileage are much more expensive than my buy out.

[RickFLM4]

Originally Posted by trey100

As high as my residual was (60% for 15k/yr), I am finding that equivalent cars and mileage are much more expensive than my buy out.

More expensive to lease another than buy out? Really?

[spdandpwr]

Originally Posted by RickFLM4

More expensive to lease another than buy out? Really?

The Mercedes c63 lease is ridiculously high, even a base model.

[RickFLM4]

Originally Posted by spdandpwr

The Mercedes c63 lease is ridiculously high, even a base model.

Apples and oranges. C63 is ridiculously expensive to lease - residuals are not even in the same league as an M. Same for Audi RS5. My comparison was buying out an M3/M4 to replacing it with a new M3/M4 lease.

Additionally, if you look at the buy out for an M and compare it to realistic market prices (be it trade in values or private market sales) it is not a compelling buy. Buy yeah, comparing a used M to a new C63 with bad lease economics is a different story.

[trey100]

Originally Posted by RickFLM4

More expensive to lease another than buy out? Really?

For my situation, the best deal I could work out on a 2018 M3 was $850/mo with taxes/fees/acquisition up front (a 78k MSRP Car). If I leased that car versus by my car, there would only be a $10k difference. Meaning, as long as I could get 10k for my car in 3 years, I'd come out ahead. Risk being a huge out of warranty issue.

[RickFLM4]

Originally Posted by trey100

For my situation, the best deal I could work out on a 2018 M3 was $850/mo with taxes/fees/acquisition up front (a 78k MSRP Car). If I leased that car versus by my car, there would only be a $10k difference. Meaning, as long as I could get 10k for my car in 3 years, I'd come out ahead. Risk being a huge out of warranty issue.

$850 x 36 = $30K so your residual is only $40K? My residual was over $50K + sales tax. Factor in an extended warranty and it really was difficult to justify vs. going to get a new one.

Aside from out of warranty issues, there is also higher routine maintenance cost on an older car - things like brakes and will need tires sooner, for example. If your residual is really $40K and current market value is in that range, maybe it works for you. It was a no brainer the other way for me, as my residual was much higher.

[trey100]

Originally Posted by RickFLM4

$850 x 36 = $30K so your residual is only $40K? My residual was over $50K + sales tax. Factor in an extended warranty and it really was difficult to justify vs. going to get a new one.

Aside from out of warranty issues, there is also higher routine maintenance cost on an older car - things like brakes and will need tires sooner, for example. If your residual is really $40K and current market value is in that range, maybe it works for you. It was a no brainer the other way for me, as my residual was much higher.

Don't forget fees/acquisition in a new lease. That's another $1.6k or so so about $32k over 3 years.

My car: 60% residual on a 2016 $72,xxx M3. That's 6 speed, metallic paint, executive, 19" wheels, adaptive, and the enhanced bluetooth. No "driver aids", carbon stuff, DCT, etc that inflates the price on some cars. Buyout is 43.3k and they will take off $1.5k if I buy, so 41.8k. I guess if your sticker is 83-84k at 60% then you'd be at 50k minus any buyout rebates they give you. Then again you probably will be close to $900 on an $84k car.

[RickFLM4]

Originally Posted by trey100

Don't forget fees/acquisition in a new lease. That's another $1.6k or so so about $32k over 3 years.

My car: 60% residual on a 2016 $72,xxx M3. That's 6 speed, metallic paint, executive, 19" wheels, adaptive, and the enhanced bluetooth. No "driver aids", carbon stuff, DCT, etc that inflates the price on some cars. Buyout is 43.3k and they will take off $1.5k if I buy, so 41.8k. I guess if your sticker is 83-84k at 60% then you'd be at 50k minus any buyout rebates they give you. Then again you probably will be close to $900 on an $84k car.

Fair point on fees, but you are also comparing lease cost of a slightly more expensive car to buyout of a less expensive one. You also seem to be comparing buying out with cash (no interest) vs. lease payments with money cost built in. If you are actually financing the buyout over 3 years there are interest costs to factor in to the buyout too. Also not sure if lease payments or buyout include sales taxes but that could be another difference if one figure includes and the other doesn’t. In any event, sounds like you made up your mind so glad it worked out for you. You may be able to find a good extended warranty to mitigate risk of repair costs and still have it work out.

[trey100]

Originally Posted by RickFLM4

Fair point on fees, but you are also comparing lease cost of a slightly more expensive car to buyout of a less expensive one. You also seem to be comparing buying out with cash (no interest) vs. lease payments with money cost built in. If you are actually financing the buyout over 3 years there are interest costs to factor in to the buyout too. Also not sure if lease payments or buyout include sales taxes but that could be another difference if one figure includes and the other doesn’t. In any event, sounds like you made up your mind so glad it worked out for you. You may be able to find a good extended warranty to mitigate risk of repair costs and still have it work out.

I thought about all that. Tax gets paid on both and the difference with financing is about $1k. You also used your 50k example to twist the numbers but your car would probably lease for another 3-4K over 3 years.

I'll simplify here:

41,800 buy out financed 100% over 48 months with NY tax = $48k in total payments

Lease at 850x3600 with tax/fees up front ($4k) is $34,600.

Total delta even if you literally had $0 to put down is $13,400. Not a big deal to recoup.

Your case May even get more money off since it's $50k and the payments would probably net out to $36-37k. Your total costs same as above is $57.5 so a $20k delta worst case (probably closer to $17k when you do something more realistic).

overall amount to recover isn't a lot.

Plus: Leasing a 2018 leftover means most likely compromising on what you want. Whatever color is left, options that you pay for that you never would, etc. so my 78k version was the closest I could get to my build. Still a compromise.

Any case, no need to argue about this. My point is that it isn't an automatic "it doesn't make sense to buy". I'm a lease guy, trust me, but when the residuals and money factors changed, the math changed with it.

[RickFLM4]

Definitely not arguing - just a friendly discussion.

Looks like we got our own thread...

[EvoFire]

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