Well, that is a decision up to you . . . just run the numbers as I did. However, the key point of this episode was not about numbers - it was about behavior. Do you want to be in debt for a car or do you want to make some decisions about your priorities and make a plan. Really dream. What do you want out of life? As with the roofer example, he knew he wanted to fly and buy cool old cars. As such, he bought used cars along the way - nothing boring, Italian, German, muscle cars - but all used. Fast forward to today - he still dailies used cars but now they are AMG GTs, Rolls Royce Wraiths and Bentleys for pennies on the dollar all the while having built the wherewithal to a life of so many more options because he is not fooling with money factors, down payments, cap costs and fees.
@@MotoManTV "roofer" ... he sounds like an investor, a business owner, a finance guy, an entrepreneur, a real estate "magnate", a property owner, which ALL more accurately describe your acquaintance than roofer.
Leasing and car payments are stupid, no matter what the cost. Made my very last car payment in 2005. Since 2007, I’ve spent $4,700 on my last 3 cars (96 Jeep Cherokee $1,800, 92 Honda Accord FREE, 02 Jeep Grand Cherokee $2,900) and about $3,000 on repairs on these cars. That comes up to $7,700 over the last 12 years, or about $53.47 a month. Plus, the best part, liability only car insurance at only $40 a month! Save your money, buy a beater car with cash and put $300 a month into a mutual fund instead. If your young, you’ll be a multi millionaire by the time you retire and can buy any car you want. Don’t waste your money on a boring Civic in exchange for retiring rich.
@@dragasoni save all that money to retire rich just to find out you have cancer? Yep that sucks because now everyone one in your family doesnt wanna spen too much of your money on your funeral. So yeah go ahead and be cheap. Enjoy your life responsibly but not cheaply. Life is really short, i mean reallly really short. It happen to my uncle last year. Always doing what you did. Buy a nice house, almost paid off, mutual funds you name it. I bought a 2016 ctsv and he was upset saying its just a car. Im like sir im 26 and i already have a house i dont want be just saving for my future. I dont wanna be 65 with a ctsv. He found out he had cancer in his bones and have a year to live. He said he always wanted a shelby. Anyways we order it. He went in the hospital sunday. Car came tuesday. He died friday. So much for a year to live. Now his wife driving shelby n everyone spending like crazy. Ps. He died in the hospital
Just started watching this, but you can’t make a blanket statement. If you get a lower interest rate on your lease than what you can get from other sources of debt, it can make sense. ULTIMATELY IT IS ALL ABOUT COST PER MILE. This is the best - and only - way to evaluate different car and financing options.
I would love to see these numbers if you kept the car for 10 years. The whole point of buying a reliable car like a Honda is that you’re able to keep the car for a long time. At that point I’m sure buying a car is way cheaper.
Even this is barely true nowadays if buying a new car. Assume you pay $25k drive out a brand new Honda Accord, within the span of 10 years, you will need 3 sets of tires, regular maintenance and some minor repair works. Let's just call it $4k. By the end of the ten years with 120k miles on it, let's call it worth $6k. Your total cost of ownership $23k, that's $192/month. If you were hunting for deals on tires or DIY, it may save you 2 grand but you get the idea. I've seen Accord leases average slightly over $200 each month with all fees and taxes factored in. Granted you saved money, but if value the latest safety features and technology, probably leasing is the way to go. Remember for a very small extra, you got to drive 3 brand new vehicles within the span of 10 years, not long ago Accord was failing small overlap crash tests and had none of the active safety feature. The real problem is people don't do homework and become the dream lease client for dealers.
With the substantial reduced cost of a lease and zero repair costs (other than maintenance), you would have to own your car at least 3 years _after_ you’ve paid it all off to start seeing a significant monetary savings in buying a car. Assuming you finance for the typical 5-6 years, you would have to own that car for minimal 8-9 years before the cost of the extra finance costs catches up the the reduce lease payments all those years. Do the math yourselves.
Ole boy .... I'm reading comments below ... Bottom line ... Buying the car is cheaper than leasing unless buying a unreliable car !! It's simple ... Buy it, pay it off,own it!! It's that simple . The man makes all the sense ... But as I live my life ,I've learned that common sense ain't common 🤔😐
I feel like car buying is like anything else. But what you want. It’s your money and you c am do what you please with it. I love guitars and buy tons of equipment that is worth almost nothing in about 3 years. It’s not an investment because I play for fun but I love every second of it. Buying a car for A-B transportation I completely understand the whole “buying what makes the most sense” argument. However, buying anything that you like it 100% emotional and nothing else. If you have the money to do it, cool. Most of us think with a low-middle class mindset. Remember that there are people out there who do really well for themselves and when they get scolded for buying new it’s not fair to assume everyone takes a massive financial hit when buying a car. I’ve know multiple people that have bought brand new vehicles that’s made as much of a dent in their finances as a nice dinner. It’s all about perspective and positioning.
so true, when you have a monthly passive income of 4,000 Canadian a month on top of your own job, who can blame me when I choose to spend 1000 of that 4000 for a lease for my own enjoyment?
Hey Forrest! This episode was all about 'behavior' and the cost of that behavior of convenience. As you may know, I am huge Dave Ramsey fan so well understand the concept of 'percentages' in life. However, as more and more folks pile on car debt - leasing is now somewhere between 50 and 90% of volume depending on the brand, I felt it important to spell out the real costs, the opportunity costs and the risks . . . with the hope of getting across the concept of 'You don't drive a payment or a price, you drive a car'. Once you boil it down to that and put it within the grand scheme of your priorities in life, then the decisions become easier. More here: ruclips.net/video/VKfNA_jA4HE/видео.html Happy to discuss more over a beer at the next program . . .
Exactly! The argument of "you should buy instead of lease" is irrelevant and dependent on preferences. The lease game has helped a lot of people out there drive new cars without having to shell out a huge monthly payment. There are a lot of factors to consider: emotions, hobbies, interests, industry someone is working in, income, family situation, accommodation, financial responsibilities...etc
Why would you compare 3 year lease to 5 year purchase? That skewed all the numbers. 7 leased cars vs 5 purchased. Obviously it’s going to be cheaper. Assuming that the interest rates are the same for financing vs leasing, it’s the exact same if you get the car for the same length of time. You also have to consider the business write offs.
Especially outside of the US it has huge advantages with the French and European tax system for wealthy people they almost never buy always lease even supercars barely cost them the price of an employee and this way the state can not take away the car for a random pretext since it first belongs to the dealership then to your company then to you. Plus this way they can close the files whenever they're bored with the car or the new one releases then lease another one or the new one (of course closing the files cost them money and reopening files for another car cost them money too but they're rich enough to not care of a few thousand bucks).
@@loupbleu3177 In the USA, if a personal vehicle is used for legitimate work purposes (and to an extent personal for that matter), one can write off (2019 figures) 58 cents/mile, up from 54.5/mile in 2018. End of story. So, if one uses a personal vehicle and drives, say, 10,000 [miles] for work, you get a tax credit of $5800 (simplifying, but while I am a business owner, I am not an accountant. I have a wonderful accountant who explained this thoroughly to me.). More than likely that you are spending more than that on a new vehicle. Now, if one leases a vehicle for the business, the car payment, insurance, fuel, parking, etc. come right from the business checkbook, not the owner's, with very few exceptions. It can get a little tricky depending on the business' tax status. If the business is an S-Corp (as mine is) all the profits of the business pass through to the owner, which means for me, it's a no-brainer. I want to maximize business expenses as opposed to personal expenses. For other filing statuses, do your research and talk to an accountant. The point of this post is that it's not always an "atomic bomb" to your financial future, especially if you are a small business owner. I've saved thousands of dollars per year out of my own wallet by leasing for my business. I wish you all the best.
@Mario Lopez See, that's the problem. You make it sound like there's something exclusive about that. All people should take control, make money work them and use the tax system to their advantage. If you the path to wealth is buying junk cars off Craig's List and flipping hamburgers at minimum wage, you're wrong. You have a backwards view becoming successful.
We leased a Honda Accord for 3 years at .9%. Then we bought it. Great way to lower your payment and end up with a car that lasts a long time. Note: 12-20 cents a mile is cheap, the actual COST of driving a car is 60 Cents to $1 per mile. 😉
Dear Motoman, I love your channel and I am an avid fan. However, I think this analysis is incomplete. You’ve essentially proved your argument correct by choosing the assumptions that would make it so, when in reality there is a wide range of possibilities in those assumptions that could change the outcome. Are you a Ramsey fan? I am. I’ve read his books and follow his program. But, even he admits that his methods are oversimplified to be effective for the masses, and not always mathematically or financially sound (i.e., organize debts smallest to latest and pay off in that order vs. paying those with the highest interest first). At the end of the day, all things equal (e.g., taxes, length of ownership, car MSRP), the difference between buying vs. leasing is that, in many ways, a lease is a derivative - a call option (the right but not the obligation to purchase something). The price of that call option, assuming you have excellent credit and deal with a manufacturer that has comparable financing charges for leasing and buying (i.e., MFs, APRs, origination charges), is quite simply that you’re paying interest on cap cost + residual (i.e., the whole car and not just the part that you're using), which most people don’t know (taxation, as you point out, varies from state to state). In some cases, the cost of that option will be more than what it would have cost to own the car (e.g., the residual turned out to be better than expected, high wear and tear charges, excess miles). In other cases, that option will be in the money (e.g., you were able to turn in the car versus being stuck with something that’s underwater and/or expensive to maintain). One needs to consider total costs and benefits when making the decision to own or lease, including what one could sell the car for in the future, and the flexibility of being able to return it at the end of the lease. So, it comes down to the math, and the assumptions. I’ve personally done both and, in some cases, leasing was a great option, in others it wasn’t. Buying a car, cash, and running it into the ground, is always going to be more financially advantageous long-term than leasing or buying a new car every 3-5 years - the same way that eating a peanut butter sandwich for dinner every day and putting the money one saves into a mutual fund would be - but if that’s not what most people are going to do, or if that's not what they value, they should at least be equipped with the right info to weigh the pros/cons. Finally, but importantly, a few items your analysis didn’t seem to address that I believe are becoming increasingly important: (1) cars are changing faster than ever and (2) people’s habits (at least in the U.S.) are also changing faster than ever. On the first point, as new safety systems (e.g., warnings, sensors, autonomous) and electrification hit mainstream, I believe the predictability of residuals will decrease (causing financial risk for owners), while safety of vehicles will increase (which few people ever quantify). Both of these tip the hat to leasing. On the second point, as people use alternative forms of mobility (e.g., ride-sharing, subscription-based models, e-bikes), the ownership numbers for cars might also drop, flooding the market with cars nobody wants to buy, and causing residuals to drop (again hurting owners and favoring lessees). Thoughts?
People need to get a life. This is just one person's opinion. At the end, who gives a crap if you spent or saved a few bucks. What's truly tragic is when people trade in a vehicle with negative equity and add it to the cost of a new vehicle. One that will heavily depreciate when you drive it off the lot.
Yup, leasing makes sense in general, over buying new cars, because of the ride-sharing cars and their effect on residuals. Motoman misses that. Buying a Tesla still makes more sense, because of the FSD and no buy option at lease-end. As a whole, buying used makes the most sense.
Hi Juan! As you may have seen, YES, I am HUGE Dave Ramsey fan (ruclips.net/video/VKfNA_jA4HE/видео.html) and would go so far as to saying that there would be no MotoMan without Dave Ramsey. Additionally, I lead a Financial Peace University class at my church. And as you are well aware, a huge car guy so even though I am financially prudent and have not financed a car is decades, I have never owned a boring, point A to point B car because yes, it is absolutely possible to drive an exciting car and still be economically responsible. That said, yes, Dave does indeed state his 'Baby Steps' and approach is simple, and that is the entire point. I have read all of his books and have met the man in person and he has not once said it is too oversimplified to be effective for the masses. Where you and I respectfully disagree is that leasing is not about 'math and assumptions'. It's about behavior. It's about priorities in life. I'll admit, I expected A LOT of comments in response to this episode but not nearly this amount. And the two things that make me scratch my head are: 1.) The amazing amount of people that still seem to believe you can only write off the cost of a car through leasing even though, as a long time business owner in multiple states, I addressed that to be a fallacy in this very episode. And more importantly: 2.) The amount of folks wanting to fool with cap cost negotiations, money factors, argue over which brands should be leased and more. If we're here, we're all car guys and car gals. And I do this because I want ALL of you to drive and own the car you *really* want. Not get caught up in the hamster wheel of debt, payments and most importantly RISK. That is what leasing costs you. I have said many times on this show: 'You don't drive a payment or a price, you drive a car'. But going back to Dave, that behavior is all about percentages - if your car payment is a huge percentage of your income - no matter how good a deal it is, whether or not it some sort of new fangled safety tech or often you get to change it, it still 'owns you' and thus limits your future options. On the flip side, if you have a real net worth of over US$1,000,000, then have at that convenience because it does not change your lifestyle. Bottomline, I've been broke making car payments. I've also been a good earner making car payments. It sucked. It robbed me of options. Then I changed my priorities and started hanging out with the folks that were doing the things I always wanted to do. Own and fly their own airplanes. Run their own successful businesses. Without exception - people that are doing all of these things and more avoid leasing like the plague. Why? Because they live life on their own terms. Good discussion. P.S. - Stay tuned for an upcoming episode with the one and only Bob Lutz where we go in detail about the future of transportation and how it impacts this discussion and the car industry as a whole.
As a perpetual leaser I was interested in watching this. You actually convinced me to keep leasing. Aside from the fact you had some fallacies, the savings are just not there when you lease vs. finance. There's no reasonable way anyone should pay cash when you consider the time value of money (and over 20 years, 5 years for each purchase, you're losing thousands on interest income). Thanks for putting the work in on this, my current lease is expiring in 3 months and was debating buying, but no reason to do that.
Buying makes even more sense if you keep the car. We've had our V70 for almost 19 years and maintenance has, until recently, been consumables. We're looking at an XC60 and plan to drive it for years to come. May not work out, It could become a maintenance nightmare, but most likely will be fine.
I own 2 vehicles but I lease a fun 3rd vehicle because I can flip it for something completely different every three years. I have a new Audi A5 sport back with 18 months left on a 36 month lease... By leasing this vehicle I can (and will) drop it off at the Audi dealership in a year and a half, walk away and lease something brand new. Probably a C-8. Leasing allows me to have totally something different and new every 3 years. For me, the cost of leasing is the price I gladly pay for liking shiny new toys. You’re videos are great and they are a main source of fuel for wanting that shiny new toy. 😁
Leon Smitherman Same situation! I have 2 cars that I own, but a third that I lease (2018 Jeep Compass right now). My plan is to flip it for something new every few years and keep the other 2 forever basically, so if I ever fall on hard times or just get tired of car payments or whatever, I’ve got cars to drive still. My other two are a 2004 Oldsmobile Bravada and a 2008 Saturn Aura 3.5L V6. My next lease will be an Alfa or something else a little more “fun”.
People are so wasteful with cars. People should get a high end car so that they can keep it for a long time and it should have impeccable reliability for the cost. In the world of computers, when people buy an HP Spectre or a Mac, the reason they pay that much for a laptop is because they know it's gonna last much longer than some $300 Dell from Walmart. That's how people should behave when shopping for a car too.
It’s all come to the personality, some people want to keep their cars forever but others don’t. Buying the whole car is for sure better for the long runs but it’s hurting the pocket. Leasing will be easy on the monthly payment and trouble free but you lost everything you put in when you return your lease. As a business owner I always leas my ride.
I keep an open mind: in some cases I’ve paid cash and kept a car for 10 years. I’m other cases I’ve leased. Most recently I leased than bought out the car (in cash)’due to the high resale values. Important thing is to do your homework, understand what you’re getting into and why. I would definitely never own a car that I couldn’t pay cash for if I chose to.
I'm currently leasing for the first time and I was already not planning on continuing after this but this video is just the nail on the coffin for any future of leasing for me lol
This argument falls apart when you shop for high end cars with heavily subsidized leases like BMW. If you want to lease a BMW (unless it’s an M model with terrible deals) you can pay much less leasing. Also, to compare fairly you have to run at 4 years, not 5 for the purchase since warranty expires at 4. Otherwise you have repair costs (Honda’s are reliable but also I’ve problem areas like brake rotors). So, your blanket statement that purchase is always better isn’t right for every car. Probably most, definitely not all.
Great advice. Makes total sense. But, in truth, all bets are off when life happens. Death in the family. Divorce. Job loss. etc. I was also one of those regular Joe's you talk about, who started with optimism in my heart and finances in the bank. Then crap happened, all of it, and that is the one thing that changes your perspective on life and your plans for your future self, especially when more than half of your built up coin disappears. I still don't lease, with that I agree. But my dreams would be dashed if I didn't take advantage of financing. And real estate in California huh? I'm sure that dude didn't buy every property in cash did he? Everyone who who claims to be a "regular joe" and owns stuff like a car collection or planes, I guarantee you, they have a cash cow somewhere that they either inherited or needed financing to make work. Very few people have lives perfect enough to take the perfect financial approach for their whole lives.
@@colins5142 some people dont want a car thats been abused and impiroperly cared for. I drive a turbo in florida, and i doubt most people idle the turbo when its 100F and theyve been driving fast
@@blackdoveyt theres a big enough enthusiast following for used cars to have been owned and well-taken care of, like myself. At least, if youre in the enthusiast market. If you're looking for a mint condition 20 year old Camry, well, you're in a game that I wouldnt wanna play.
@@colins5142 you never know how people cared for their car or drove it. Id argue that a lot of performance cars are probably treated worse than normal cars like some old lady's camry.
Ulta when you buy a car and the payments are done you do still have something that's worth some money although not as much as when you paid obviously but you can still sell it for something so you get some money back at the end
I would say buy something you can drive for at least 10 years and buy it used with half down, not really old too. For instance buy 25k used Japanese car so it will last u and won’t brake down so often and be able to put down at least 10k and pay off the other 15 then keep it for 10 years. This way if u sell it for 7.5k every 10 years in 20 years you will spend 35k plus little bit of interest.
I like leases because here in canada if you have an accident the lease company eats the depreciation caused by the accident where if i was buying it the accident would drastically effect my trade in value.
@Mario Lopez As long as the car is repaired (as opposed to a write-off) as per your insurance company policy, you can turn in the repaired car at the end of the lease with no penalty. In that case, the lease company absorbs the loss in resale from the accident.
@Mario Lopez Hi Mario. Very interesting discussion. I'm sure every lease is slightly different. Here in British Columbia, the lease value at the end of the lease is normally predetermined up-front. As long as the car is fully repaired from an accident, the car can be returned (with under the allowable mileage) without penalty. I experienced this first-hand recently, as I returned a leased car recently that had suffered damage (but was fully repaired) from an accident. No penalty was charged at the lease return (Volkswagen Canada lease). I can't actually remember if I purchased extra insurance to cover this particular outcome (to your point). Every lease is probably different though and I appreciate your reply! Cheers, Grant
@Mario Lopez Thanks Mario! Great information here. Now you've got me questioning my insurance coverage during car rentals (I rent very often). Good stuff. Cheers Grant
Company I work for uses about 100 18 wheeler trucks. Never buy new. Repairs tax deductible. Now formed their OWN leasing company and lease from it. Must be ways leasing works.
I feel leasing is for folks like you. No offense intended. There's people who don't really love one car and just like whatever the next new shiny flashing toy is. Then there's people that in one stage of their lives saw a new flashing toy and fell in love with it and some would even buy it when it becomes 6+ years older model because they fell in love with only that model and don't care about anything else or new from that make. I'm the latter. Nothing wrong with either type as long as it's your money and you spend it how you want it, whilst understanding the financial risks associated with your choices.
You forgot that a three year warranty, which is the one people use for all the cameras, sensors, magnetic ride control, air suspension, infotainment system, power windows, moon roof, heated and cooled everything, are covered for 3 years in the family truckster grade of cars. The repair bills on these high tech systems will be extreme. Assuming someone will know how to fix them. Secondly, if you don’t know how to negotiate the purchase price of a leased car, chances are you will overpay when buying. My 2019 Wrangler JLUS stickered at $55,335. My adjusted cap cost was $49,250. With a 72% residual value after 3 years and 12k miles per year. My payment is $649. At zero percent interest for 60 months my cost would have been $820/ month, with 2 years of repair exposure on top of brakes, tires, etc. I realize not all cars lease this well but with a bit of research and shopping leasing works way better for me. I am also curious to see what happens to all the new safety and self driving technology holds up in 5 years. Buy used, lease new!
Speaking as an economist. First it’s not like for like comparing different time periods and also there is lease purchase where leasing can be a spring board to buying where you get something to your specification and a history you know. However I do get that the buzz of having the latest and greatest is addicting. Delaying gratification will nearly always provide greater security and future wealth. However the principle of positive time preference holds where people nearly always prefer gratification now than later and are prepared to pay for that. There is the logical argument that it’s good to save for tomorrow but for all of us there inevitably will be a tomorrow that doesn’t come. We all die at and usually not a time of our choosing. Then also new cars are nice. There is utility in the latest model that is worth something. Your scenarios show there are some instances where there is little monetary cost to leasing over buying so be sure to only go for the better deals and you will be trading future security for instant gratifications you would in any credit arrangement of any kind, there is the opposite extreme where a person dies at home in the flat (apartment, condominium) , been living off bananas, hasn’t got out much, hasn’t traveled, few things ticked off the bucket list but has a stack of cash under the mattress!
It's dependent on the lease, and user of the lease. Leasing to own is never beneficial but leasing to eliminate depreciation can be less costly, as well as, the tax benefits for business use. All high end cars that depreciate quickly, can be hedged with leasing.
I still have my 1994 Nissan Pathfinder and 2000 Mercury Sable. They both still run great. I recently bought a 2016 Kia Sorento and loving the latest technology in it!!
I always buy a demo executive car that’s less than a year old with few thousand miles that still is under warranty and maintenance. Keep it for at least 5 yrs. works for me.
I own 2 cars and a motorcycle, titles in hand for all. I lease 1 family/wife suv cuz there’s always lease specials. I don’t want to worry about her car, rather worry about my toys lol. Plus most suvs suck to drive so I might as well have the newest sucky suv to drive. I don’t go over miles and take pretty good care of my cars so it works out for me.
Great evaluation!!! Some people really failed at basic math and compound interest. I worked for stealerships in the past and leasing was the most profitable deal you can make! So please keep leasing😁
I paid cash for a focus ST. Two years later I decided to sell it and lease a BMW I3 for 320/mo. I was spending more in gas for the paid and owned ST than my lease. It was a free car to me. Plus i stopped the depreciation on my money in the owner car.
The major weakness of this video is the car selected as a leasing example. I lease in New York loaded 2017 Mercedes C 300 ex loaner for $477 a month with zero down, maintenance service and roadside assistance included . Let’s do the math on buying this car. There are very good deals on luxury leases. Surprised to see MotorMan overlooking this angle of the situation.
I was just going through your library. Apparently I missed this one. I've got a Doosie for ya. Minding my own business going about my day and I overheard this: "Oh I took out an equity line to lease the Escalade." Tell me I'm in Texas without knowing I'm in Texas 🤣🤣🤣
@@MotoManTV Absolutely. Saw it quite a bit in my 40 years in NY/NJ. See it here. Certainly will see it moving to AZ in a few months. Rented Lexus and Land Rover in the driveway. High balance cards. Wants/needs an equity line and expects/demands their payments stay the same. Can't produce $200 cash at the end of the month.
I can summarize this whole video in a few words. If you value hard-earned money and don't want to be beholden to the banks, go buy a used car for $1000 like that Accord in the background and invest the rest. There is a universal truth in this passion we all share and its that we put themselves in debt to drive the car we want today rather than saving and driving one when we can truly afford one. It's a want vs need and that will always be the dilemma you have to face throughout life; not just with cars so make sure you make the right decision. Whether it's buying or leasing, always spend within your means.
I think the argument gets lost on people because there’s a lot of assumptions made around “buying” a cars in these comparisons. What’s the finance charges, rate of depreciation, and how well does said car hold value after an accident? Many of these factors make it hard to make the case exclusively for one or the other. I’ve done both and can say it’s a case by case. The only option that will always cost less is buying the car outright, used or new. VERY few people are going to pay for a “nice” car in full.
You need to compare 3 year leasing and 3 year buying. Who in their right mind is going to purchase or lease a front wheel drive Pilot? You will get killed on resale value. It’s actually cheaper to get AWD and you can go up hills in the rain.
Did your examples take the residual value of he car at the end of 20 years where you purchase the car? In the lease scenario after 20 years you hand the keys over and walk away. In the purchase scenario you sell the car and pocket cash and walk away without a car.
Sorry, sir: there is no tax deduction on Schedule A (itemized deductions) for a leased or purchase car. All miscellaneous deductions were eliminated in the 2017 tax changes. Yes, a car might offer tax write offs if you are self-employed (which Uncle Sam will definitely look at if audited), but a w-2 employee has no writeoffs (or tax benefit at all when buying or leasing except possibly the sales tax which might be taken if you could itemize (depending on the situation). Otherwise - great video!!!
This is all crazy talk if applied to luxury vehicles. I have done many comparisons on 3 year leases vs 5 year finances and sales of new (admittedly) German vehicles, i.e. Audi/BMW/Mercedes (and even Volvo) falls into that. There are ALWAYS discounts on lease as long as you don't try to get a new model that just comes out. I even leased back in 2009 actually since my 2006 lease was up. If you are close to end of the quarter, end of the year, etc.. usually you get really good lease deals. You may get a good purchase deal too, but once you start comparing 3 year leases vs 5 year purchases and you are alright. However, this mainly applies to luxury vehicles. Honda has a notoriously terrible lease deals usually (including Acura usually) while German cars are mainly leased and designed for leasing. Now, if you don't drive new cars and buy used and hold them over 5 years (say buying 3 year old vehicle and holding for 6 to 7 year old cars), then yeah, it does pay out. Overall cars are not an investment and they depreciate incredibly quick in general so buying (or even leasing) a new car is certainly a losing proposition.
Should do this again but buying a 2 or 3 year old CPO car AND purchasing an extended warranty. Peace of mind and huge savings. I've now purchased 3 CPO vehicles, have even gone as far as paying for maintenance ahead of time at a pretty big discount. Wish I had done that on my wife's Lexus.
Yes absolutely ! Any monthly car payment is.........because once the lease is over or you make your last payment, what does everyone do? Start all over again, so you have a car payment your entire working career. If you saved enough to buy a decent used car and took the car payment you would have payed and invested it over all those years, you would be multi millionaire. But you can’t do that because you have to keep up with the neighbors and the people at the red light that you don’t know. Those cars aren’t paid for either 😃
Buy ex-demo or nearly new cars 25%+ off the list price manufactures warranty. Compare the price of the lease payments to the cost of a 2/3 year old version of the car usually it’s the same amount. Except you give the car back.
I feel like the vast majority of cars being leased are luxury cars which most people do because 1: they don’t want to deal with the maintenance. And 2: they don’t want to come to terms with that depreciation when they come to sell it however many years later
I see both sides of the argument. Why would you buy something that is going to continue to depreciate? Leasing, for me, makes sense. Automotive technology is getting significantly better by the year. Safety enhancements, LED headlights etc.
With the substantial reduced cost of a lease and zero repair costs (other than maintenance), you would have to own your car at least 3 years _after_ you’ve paid it all off to start seeing a significant monetary savings in buying a car. Assuming you finance for the typical 5-6 years, you would have to own that car for minimal 8-9 years before the cost of the extra finance costs catches up the the reduce lease payments all those years. Do the math yourselves. Also added benefits is the tax write-offs on leases if you own a business.
I'm not a fan of leasing but there are a lot of assumptions in this video I don't agree with. There's no reason to lease a quality vehicle like a Honda or Toyota. Just finance it if you need to buy new, otherwise, buy a 2 to 4 year old car private sale. If you're in sales and need a nice car when you're with clients leasing a nice German luxury car might make more sense. I'd rather blow 20k on a 3 year lease than lose 40k in depreciation and be stuck with an outdated, unreliable and expensive to maintain car. I also don't think you should finance or lease a car that you can't afford to buy outright especially if you don't plan on investing the difference. All that being said I own two 1980s Toyota pickup trucks that I paid cash for.
Honestly, leasing only works for short periods of time. I currently lease a 2017 Honda Accord for $269 a month only because it happened to fit my financial situation at this time. When the lease is over, I am probably just going to search for a different used car (maybe a more efficient one) that still has all the tech features I want. I still have two other cars that I own that are still going strong and are more kind of beater cars. I consider the Honda a temporary investment and I’d only ever lease again if I found a deal that might be low risk, like $249 a month for 24 months on an Alfa Romeo Giulia
As long as you're not using leasing as a mechanism to live beyond your means, personally I am ok setting aside $/month to lease my daily driver and have a new car with predictable cash flow exiting every month - no car is free to run. You're still paying down principal value in a lease towards your buyout price at lease end, and not owning the car can actually de-risk a depreciation spike (think GM, 2008 - market crashed, cars worth 40% less, closed-end leased cars were handed back and became GM's problem almost sinking them). Never look at cars as an investment, If you enjoy them, you're going to put more value into your choice but regardless, don't buy something you couldn't afford to buy twice in pinch and buy something with known slower depreciation (NOT the luxury market). I would suggest a MUCH POORER and more common financial decision is financing an out-of-warranty European import because it's now "affordable" - committing yourself to having fixed and potentially skyrocketing variable monthly costs together, potentially leading to making monthly payments on a broken car you can't afford to fix. Aka what nightmares are made of! Educate yourself and be smart.
Great video Motoman, sadly common sense isn’t very common. In many ways leasing is truly meant to be more of a luxury since it allows you to always have a brand new car without any maintenance headaches but that convenience has a high price tag. For those that disagree just think, when has something that is a luxury purchase ever made the most financial sense.
Thank you, Greg! Sadly, you are 100% spot on . . . and not just in cars:) The entire point of this episode was not about numbers . . . It was about behavior and the very real costs of that behavior of convenience (or I gotta have a new car with the newest tech, safety, whatever) every three years.
I drive 40,000 km a year and I lease my car. I pay for the extra km up front so I’m paying 8 cents for the extra km above a standard 24000 km lease not 12 cents in the back end. I get to write off my car for business purposes hence the high mileage. In terms of business write offs ... In Canada you can only write off a purchase of a car up to $30,000 pre-tax regardless how much higher it is. In Canada you can write off up to $800 (before tax) lease payment. A lease payment over 4 years was $50 a month higher than a monthly finance payment over 6 years BUT the tax savings equated to a savings of $100 a month. So the net cost was it was $50 a month cheaper to lease. My choice ... lease for 4 years and have approximately 160,000 km ... OR ... for $50 more a month finance over 6 years and hope I have no issues over 240,000 km. For HIGH MILEAGE drivers leasing is a better solution. It has lower risk, lower cost, and more piece of mind.
Amen! I leased 1 car in my life with an open ended buyout for wholesale plus 5%. It was a 1993 Alfa Romeo 164L. Guess what Alfa did in 1995? Guess what it was worth in 1997? Winner winner chicken dinner. Could 't afford NOT to buy out the lease. Kept till 2002!! Leases are for those swinging above their financial abilities. PERIOD. Own 5 cars. All purchased. My future with them is MY decision.
I disagree. I like leasing since you get a new car every few years. Plus, if you are a FCA fan... you don't have to worry about repairs. 2019 RAM Laramie... 4k miles, already in the shop... TRANSMISSION FAILURE. Estimated repair cost: $8k. I have to pay $1500 out of pocket.
matty1053 2018 Compass lease driver here, and I agree. I like my Jeep, no major issues so far almost 18,000 miles in (I do need a new rear wheel bearing due to Michigan roads, however). Sorry to hear about the Ram. My next lease I want an Alfa. No way I’m buying that... I prefer FCA cars over Ford and GM, however. Leasing is a safer option for reliability.
If you are a long time viewer of the show, you know I am a big fan of Challengers however, this is something I genuinely don't understand: Why buy a car when you know the reliability is in serious question? One would believe that well known reliability problems would keep most buyers aware but in the case of FCA it doesn't. Seriously considering doing a follow up episode on this very topic.
MotoManTV I would DEFINITELY watch this episode (as I would any others being a long-time viewer), I think it’s a good topic. Please do explore that topic! As for me with my Jeep, the Compass Latitude with a couple option packages on lease made more sense than some competitors. I was also cross shopping the GMC Terrain mainly with it, and I don’t like the “push-button shifters” as much as a normal gear shifter. It was hard to find any similar vehicle besides the Kia Sportage for about $30,000 with AWD and all of the key features I have/wanted on my Jeep on a deal I could afford just getting out of school a few years back (heated seats, heated steering wheel, good sound system, AWD/4WD for Michigan snow, and decent styling). The Sportage had a bad lease deal at the time and quite frankly... is very ugly. The fact that this has been reliable, efficient (getting 27.5 MPG right now), and checks all of my boxes without breaking the bank and coming from a “cooler” brand (depending on who you ask I’m sure) are all pluses. If a different, non-FCA vehicle checks my outlines boxes the next go round, I will give it a look as well. There’s definitely areas where the Compass can improve, like power delivery with the 2.4L and 9-speed. On why others still flock to FCA regardless of reliability: I think it has to do with their product mix. They have far more interesting brands (Alfa, Maserati, Dodge, Jeep etc.) than the other two of the Big 3 automakers (in my opinion). They also make unique cars in those brands. Hellcats with 700+ HP, Jeeps with 700+ HP or that can handle almost any weather situation within reason, Italian sports cars, pickup trucks, luxury cars, etc. I’d argue FCA doesn’t really even make an “entry level” vehicle (with the demise of the 200/Dart some years back) and are exclusively targeting people that “know what they want/want something that stands out”. The Renegade and Compass and Fiats are about the cheapest cars they make now, and with options, those too can climb to the high $30,000 to low $40,000 range. There’s also not many options for 700+ HP anything out there or Jeep capability without going to something like Range Rover - but that’s also a big reliability dice roll and FAR more expensive to buy and maintain in many cases... Some of these buyers may also have other cars to fall back on in their portfolios if their new FCA car turns out to be a pile of garbage (myself, I also have a 2004 Oldsmobile Bravada AWD and a 2008 Saturn Aura XE V6 I enjoy driving). Bottom line - their product portfolio is unique and flashy, despite being hit-or-miss with reliability. GM basically offers 3 luxury brands and Chevy and Ford has Ford and Lincoln. FCA has a little of everything except for electrification. For buyers that prioritize “cool”, “capable”, “unique”, “sporty”, “fast”, “rare”, and other similar acronyms over “reliable”, “practical”, “cost effective”, “long-term ownership” etc., FCA probably makes a lot sense with the brands and lease deals they offer (as would a manufacturer like BMW or Audi too, perhaps).
Another downside of leasing: Companies will cater to what sells. The more people that lease, the more they will build cars that are suited to lease. Namely, engineer cars that are only designed to not have major problems for five years. Therefore nobody will have the incentive to make cars that last long time. I’m looking at you, European vehicles.
Leased an 2001 Audi and will never lease again. If you can get a 0% deal on buying a car it is 100% worth it..... but you have to have a 720 credit ratings which we did.
Yeah $1400 for a transmission fix. Try $4000 and you're about close. $1400 will just about cover the cost of replacing the catalytic converter from a Honda dealership. lol...
Great advice! I like to buy used and keep my cars a long time. As for financial advice, I've been recommending Quit Like a Millionaire, by Kristy Shen and Bryce Leung. It's east to read, and has some great advice for people who'd rather have money than look like they have money.
Eh, some good points but I still want a new car every 3 years. Heck I get bored with me lease before 3 years and is the car I wanted. So I’m good. I’ll stay leasing but thanks for the good info.
I think this needs a giant caveat emptor. I get a car allowance from work with various stipulations. The car has to be 3 years old or less. It's cheaper in this scenario to lease. Also, leasing insulates you from depreciated value in jurisdictions where you cannot sue for lost value in an accident.
What amazes me is that the people who are most against leasing and propose financing instead are always using these pathetically small and impractical Japanese econoboxes rather than using real cars that people actually want that cost upwards of $40,000. I’m not trying to buy one of these small pathetic econoboxes. I would rather die than drive a Honda or Toyota or Nissan. I have leased Hyundai before and I’ve been very happy. I had an Azera, followed by a Genesis and then I moved onto a Cadillac because the Palisade wasn't available. I never got stuck with a car I didn’t want. But my main car is usually an SRT vehicle. Jeep SRT and a dodge charger hellcat. When you’re talking about buying a $75,000 gas guzzler that needs a finance of $1000 per month minimum or a lease of around $700 per month. When those things get old and you need to start replacing parts, the costs are astronomical. Leasing makes more sense when you’re buying a high price, high maintenance vehicle. Financing makes more sense for a lower priced, lower maintenance econobox that you don't mind keeping for 10-15 years or more.
Leasing is sort of a long term rental agreement: Typically for 36 months or 39 months. You have a set number of free miles you can put on the car during the lease--as in 36,000 miles over 36 months or 39,00 miles over 39 months. In the US leasing only applies to a new car from a dealer. Check for factory supported leases through the dealers. With a good credit score you can lease a car with only the first payment down, plus tax title and license fees--and even that can be rolled into the lease payments. At the end of the lease you just turn the care back in. (Some leases may charge you a few hundred dollars to turn the vehicle in--but this is negotiable at the time of leasing.) Leases are not good for drivers who will put more miles on the vehicle that the free miles allowance permits because of extra charges. Get the dealer to give you a zero down payment quote for the payment amounts, so that you get a good reference for the kind of deal you are being offered. With leasing you are locked into those number of payment for 36 payments or whatever the case may be. When buying the payments are usually more than leasing payments, but you can sell the vehicle at any time but you still have pay off the remaining loan
The Boston accent part was a nice touch, M. Leasing never made sense to me, all these payments and you get nothing to show for in the end. Excellent work, M. You went above and beyond with this one.
@@MotoManTV my pleasure. Yessir I can tell. Crunching numbers is a pain in the ass, especially when Uncle Sam is involved. A mere comma placement could be the difference between a tax refund & a few years ... "Away".
Do you have to pay for the depreciation cost of the vehicle if you are leasing? I recently got into an accident(not at fault) and had 20K damage done to the car. I'm not planning to sell the car so haven't check how much the car depreciates after the accident, but if I were leasing that car, do I have to pay the dealership for the delta between non-accident car and accident car when i return it after the leasing ends? If you don't, that may add some incentives to leasing vs. buying
You are right on! A couple of more points against lease. They will charge you for every nick, ding, scratch and blemish on the car when you turn it in. If you decide after 18 months in you want something else, its MUCH more difficult to get out of a lease early than a traditional purchase. Best way to buy a car. Pick one 2-3 years old in good condition, save up and pay CASH. Drive it for 15 years, and take care of it. You dont need to impress anyone but yourself, and in 15 years you will be self impressed on your bank account. D
I have problems with this 'advice' on so many levels. 1. The 'opportunity cost' of leasing a car also applies to purchasing a car. The example cited here of opportunity cost is that, if I invested the $700 per month lease cost, instead of actually leasing the car, I'd generate $316,000 in wealth over 20 years. However, exactly the same math applies if I invested the $700 per month spent purchasing a vehicle. In actuality, it is worse for the car purchaser as a 60 month finance payment is actually $850 per month, which equals a greater opportunity cost. Fact is, when we spend money on anything, rather than investing the money, there is an opportunity cost. New set of golf clubs? Less wealth. Medical insurance premiums? Less wealth. Buy a burger? Less wealth. The argument here is that, because you lease a car, instead of buying one, you don't create wealth. My argument is that if you buy, or lease, a car you forgo future wealth. 2. I've not bought a car since 1994. I only lease them. I only negotiate great lease deals (which is claimed to be unrealistic here). My latest lease is a $75,000 BMW X5 hybrid and I pay $700 per month. Prior to this lease, I leased a $42,000 Honda Pilot EX-L with nav for $475 per month. In the past, I've negotiated 0% leases. 3. When leasing, one attraction to many people is that, because the monthly payments are lower, you can afford to drive the Pilot Elite AWD Black Edition and not the EX FWD. That is down to personal choice; cheap and cheerful or more luxurious? With my BMW X5, I lease for $700 but, purchasing over 60 month would have cost $1,200 per month. 4. I never have to concern myself with repair costs. Buying a $10,000 used car, probably with 90,000+ miles, over 36 months will cost $350 per month. Then, the transmission goes, or you need new brakes and rotors. You can easily find yourself $2-3,000 out of pocket, have to pay that as a lump sum and, you don't have use of the car while it is being repaired. I can lease a reasonably good vehicle for $199 and I get no surprise repair bills. For people on a fixed or limited income, leasing makes more sense as you know exactly how much that car will cost each month and you can budget for that. Not many people can keep $3,000 in a saving account to meet sudden repair costs.
Okay.. I get your argument. One question though. Say you lease a BMW X5 for $800 a month and then finance your balance of that lease after your 39 month term is up. And say that lease interest / tier rate was real low. Your thoughts sir?
Me? I would buy a 2 year old BMW, Mercedes, or Porsche, pay cash, drive it for a year or two and then sell it for close to what I paid. I have done this with everything from a BMW to a Lotus. More here: ruclips.net/video/VKfNA_jA4HE/видео.html
You’re comparing apples and oranges. You did not add repair and maintenance costs on the purchased vehicles in year 4 and 5. Tires brakes breakdowns etc. you have none of that with a lease. To be a fair comparison both cars would have to be replaced at same time. Purchase would be much more. Dealers discount the hell out of leases because they get to sell you again in three years and resell your leased vehicle at a premium price because it’s still under warranty and they can call it “certified’.
Let me sum up a lease for you. You pay $400 a month for 3 years to drive a new car and after the end of 3 years you give it back. At the end of the day you lost $15k and have nothing to show for it.
That can be true for purchasing as well. Many people have no equity to show for it after 3 years of financing. Some people have nothing to show for it even after paying cash because they bought junk that has no value. At least with lease, you know what you're getting.
Motorman love you but I’m a finance person and I disagree. If you’ve ever had a financed car stolen or totaled, you risk losing the entire value of the car. Especially now a days with carfax. With a lease this is a max out of pocket that is easily calculated. Leases make sense for people that are going to replace their car every 3-4 years. Financing makes sense if you’re planning on keeping a car long term.
I think there are a lot of areas where people can use this kind of frugal financial advice, but for car guys... this isn’t one of them. You gave advice as a car person for people who are casual car buyers. I eat, sleep, and dream about cars. I want to own a plethora of cars in my lifetime, and not when I’m an old man either. this is why I’m working to incorporate the high cost of this lifestyle. It’s like that Suzy Orman advice where she tells people to stop going out for dinner and save like some this alleged old couple who saved thousands by not going out for dinner. But on the other side it’s like, “dude you haven’t taken your wife out in 20 years”. You both enjoy going out and now you’re in your twilight years getting ready to die. That’s dumb! Live a balanced life! Enjoy life!
It would be more interesting to see the numbers for buying a car every 3 yrs vs leasing every 3 years which is a fair comparison to the behavior of what’s occurring. Not 5 vs 3. Of course buying would come out on top. A second interesting scenario would be to consider an EV purchase vs lease. Battery technology has and will change a lot in 20 years.
Any scenario where it might make sense? Such as a $78/ month civic? Though... down is like 3.6k. Still, about 180 a month or so? For ex model?
Well, that is a decision up to you . . . just run the numbers as I did. However, the key point of this episode was not about numbers - it was about behavior. Do you want to be in debt for a car or do you want to make some decisions about your priorities and make a plan. Really dream. What do you want out of life? As with the roofer example, he knew he wanted to fly and buy cool old cars. As such, he bought used cars along the way - nothing boring, Italian, German, muscle cars - but all used. Fast forward to today - he still dailies used cars but now they are AMG GTs, Rolls Royce Wraiths and Bentleys for pennies on the dollar all the while having built the wherewithal to a life of so many more options because he is not fooling with money factors, down payments, cap costs and fees.
@@MotoManTV "roofer" ... he sounds like an investor, a business owner, a finance guy, an entrepreneur, a real estate "magnate", a property owner, which ALL more accurately describe your acquaintance than roofer.
You shouldn't be putting money down on a lease.
Leasing and car payments are stupid, no matter what the cost. Made my very last car payment in 2005. Since 2007, I’ve spent $4,700 on my last 3 cars (96 Jeep Cherokee $1,800, 92 Honda Accord FREE, 02 Jeep Grand Cherokee $2,900) and about $3,000 on repairs on these cars. That comes up to $7,700 over the last 12 years, or about $53.47 a month. Plus, the best part, liability only car insurance at only $40 a month!
Save your money, buy a beater car with cash and put $300 a month into a mutual fund instead. If your young, you’ll be a multi millionaire by the time you retire and can buy any car you want. Don’t waste your money on a boring Civic in exchange for retiring rich.
@@dragasoni save all that money to retire rich just to find out you have cancer? Yep that sucks because now everyone one in your family doesnt wanna spen too much of your money on your funeral. So yeah go ahead and be cheap. Enjoy your life responsibly but not cheaply. Life is really short, i mean reallly really short. It happen to my uncle last year. Always doing what you did. Buy a nice house, almost paid off, mutual funds you name it. I bought a 2016 ctsv and he was upset saying its just a car. Im like sir im 26 and i already have a house i dont want be just saving for my future. I dont wanna be 65 with a ctsv. He found out he had cancer in his bones and have a year to live. He said he always wanted a shelby. Anyways we order it. He went in the hospital sunday. Car came tuesday. He died friday. So much for a year to live. Now his wife driving shelby n everyone spending like crazy.
Ps. He died in the hospital
Just started watching this, but you can’t make a blanket statement. If you get a lower interest rate on your lease than what you can get from other sources of debt, it can make sense.
ULTIMATELY IT IS ALL ABOUT COST PER MILE. This is the best - and only - way to evaluate different car and financing options.
I would love to see these numbers if you kept the car for 10 years. The whole point of buying a reliable car like a Honda is that you’re able to keep the car for a long time. At that point I’m sure buying a car is way cheaper.
Exactly
Even this is barely true nowadays if buying a new car. Assume you pay $25k drive out a brand new Honda Accord, within the span of 10 years, you will need 3 sets of tires, regular maintenance and some minor repair works. Let's just call it $4k. By the end of the ten years with 120k miles on it, let's call it worth $6k. Your total cost of ownership $23k, that's $192/month. If you were hunting for deals on tires or DIY, it may save you 2 grand but you get the idea.
I've seen Accord leases average slightly over $200 each month with all fees and taxes factored in. Granted you saved money, but if value the latest safety features and technology, probably leasing is the way to go. Remember for a very small extra, you got to drive 3 brand new vehicles within the span of 10 years, not long ago Accord was failing small overlap crash tests and had none of the active safety feature.
The real problem is people don't do homework and become the dream lease client for dealers.
With the substantial reduced cost of a lease and zero repair costs (other than maintenance), you would have to own your car at least 3 years _after_ you’ve paid it all off to start seeing a significant monetary savings in buying a car. Assuming you finance for the typical 5-6 years, you would have to own that car for minimal 8-9 years before the cost of the extra finance costs catches up the the reduce lease payments all those years. Do the math yourselves.
100%
Do whats best for you, without hurting anyone. Remember you cant take any of it with you.
Exactly
Ole boy .... I'm reading comments below ...
Bottom line ... Buying the car is cheaper than leasing unless buying a unreliable car !! It's simple ... Buy it, pay it off,own it!! It's that simple .
The man makes all the sense ... But as I live my life ,I've learned that common sense ain't common 🤔😐
I feel like car buying is like anything else. But what you want. It’s your money and you c am do what you please with it. I love guitars and buy tons of equipment that is worth almost nothing in about 3 years. It’s not an investment because I play for fun but I love every second of it. Buying a car for A-B transportation I completely understand the whole “buying what makes the most sense” argument. However, buying anything that you like it 100% emotional and nothing else. If you have the money to do it, cool. Most of us think with a low-middle class mindset. Remember that there are people out there who do really well for themselves and when they get scolded for buying new it’s not fair to assume everyone takes a massive financial hit when buying a car. I’ve know multiple people that have bought brand new vehicles that’s made as much of a dent in their finances as a nice dinner. It’s all about perspective and positioning.
so true, when you have a monthly passive income of 4,000 Canadian a month on top of your own job, who can blame me when I choose to spend 1000 of that 4000 for a lease for my own enjoyment?
Hey Forrest! This episode was all about 'behavior' and the cost of that behavior of convenience. As you may know, I am huge Dave Ramsey fan so well understand the concept of 'percentages' in life. However, as more and more folks pile on car debt - leasing is now somewhere between 50 and 90% of volume depending on the brand, I felt it important to spell out the real costs, the opportunity costs and the risks . . . with the hope of getting across the concept of 'You don't drive a payment or a price, you drive a car'. Once you boil it down to that and put it within the grand scheme of your priorities in life, then the decisions become easier. More here: ruclips.net/video/VKfNA_jA4HE/видео.html
Happy to discuss more over a beer at the next program . . .
Agreed friend
Exactly! The argument of "you should buy instead of lease" is irrelevant and dependent on preferences. The lease game has helped a lot of people out there drive new cars without having to shell out a huge monthly payment. There are a lot of factors to consider: emotions, hobbies, interests, industry someone is working in, income, family situation, accommodation, financial responsibilities...etc
watch: Dave Ramsey Videos. I don't wanna comment too long
Why would you compare 3 year lease to 5 year purchase? That skewed all the numbers. 7 leased cars vs 5 purchased. Obviously it’s going to be cheaper. Assuming that the interest rates are the same for financing vs leasing, it’s the exact same if you get the car for the same length of time. You also have to consider the business write offs.
Not if it's a business lease, then it's a substantial advantage, kind sir.
Especially outside of the US it has huge advantages with the French and European tax system for wealthy people they almost never buy always lease even supercars barely cost them the price of an employee and this way the state can not take away the car for a random pretext since it first belongs to the dealership then to your company then to you. Plus this way they can close the files whenever they're bored with the car or the new one releases then lease another one or the new one (of course closing the files cost them money and reopening files for another car cost them money too but they're rich enough to not care of a few thousand bucks).
Correct, without question business tax advantage.
@@loupbleu3177 In the USA, if a personal vehicle is used for legitimate work purposes (and to an extent personal for that matter), one can write off (2019 figures) 58 cents/mile, up from 54.5/mile in 2018. End of story. So, if one uses a personal vehicle and drives, say, 10,000 [miles] for work, you get a tax credit of $5800 (simplifying, but while I am a business owner, I am not an accountant. I have a wonderful accountant who explained this thoroughly to me.). More than likely that you are spending more than that on a new vehicle. Now, if one leases a vehicle for the business, the car payment, insurance, fuel, parking, etc. come right from the business checkbook, not the owner's, with very few exceptions. It can get a little tricky depending on the business' tax status. If the business is an S-Corp (as mine is) all the profits of the business pass through to the owner, which means for me, it's a no-brainer. I want to maximize business expenses as opposed to personal expenses. For other filing statuses, do your research and talk to an accountant. The point of this post is that it's not always an "atomic bomb" to your financial future, especially if you are a small business owner. I've saved thousands of dollars per year out of my own wallet by leasing for my business. I wish you all the best.
@Mario Lopez See, that's the problem. You make it sound like there's something exclusive about that. All people should take control, make money work them and use the tax system to their advantage. If you the path to wealth is buying junk cars off Craig's List and flipping hamburgers at minimum wage, you're wrong. You have a backwards view becoming successful.
@Mario Lopez One more reason to start a business.
We leased a Honda Accord for 3 years at .9%. Then we bought it. Great way to lower your payment and end up with a car that lasts a long time. Note: 12-20 cents a mile is cheap, the actual COST of driving a car is 60 Cents to $1 per mile. 😉
Dear Motoman, I love your channel and I am an avid fan. However, I think this analysis is incomplete. You’ve essentially proved your argument correct by choosing the assumptions that would make it so, when in reality there is a wide range of possibilities in those assumptions that could change the outcome.
Are you a Ramsey fan? I am. I’ve read his books and follow his program. But, even he admits that his methods are oversimplified to be effective for the masses, and not always mathematically or financially sound (i.e., organize debts smallest to latest and pay off in that order vs. paying those with the highest interest first).
At the end of the day, all things equal (e.g., taxes, length of ownership, car MSRP), the difference between buying vs. leasing is that, in many ways, a lease is a derivative - a call option (the right but not the obligation to purchase something). The price of that call option, assuming you have excellent credit and deal with a manufacturer that has comparable financing charges for leasing and buying (i.e., MFs, APRs, origination charges), is quite simply that you’re paying interest on cap cost + residual (i.e., the whole car and not just the part that you're using), which most people don’t know (taxation, as you point out, varies from state to state).
In some cases, the cost of that option will be more than what it would have cost to own the car (e.g., the residual turned out to be better than expected, high wear and tear charges, excess miles). In other cases, that option will be in the money (e.g., you were able to turn in the car versus being stuck with something that’s underwater and/or expensive to maintain). One needs to consider total costs and benefits when making the decision to own or lease, including what one could sell the car for in the future, and the flexibility of being able to return it at the end of the lease.
So, it comes down to the math, and the assumptions. I’ve personally done both and, in some cases, leasing was a great option, in others it wasn’t. Buying a car, cash, and running it into the ground, is always going to be more financially advantageous long-term than leasing or buying a new car every 3-5 years - the same way that eating a peanut butter sandwich for dinner every day and putting the money one saves into a mutual fund would be - but if that’s not what most people are going to do, or if that's not what they value, they should at least be equipped with the right info to weigh the pros/cons.
Finally, but importantly, a few items your analysis didn’t seem to address that I believe are becoming increasingly important: (1) cars are changing faster than ever and (2) people’s habits (at least in the U.S.) are also changing faster than ever. On the first point, as new safety systems (e.g., warnings, sensors, autonomous) and electrification hit mainstream, I believe the predictability of residuals will decrease (causing financial risk for owners), while safety of vehicles will increase (which few people ever quantify). Both of these tip the hat to leasing. On the second point, as people use alternative forms of mobility (e.g., ride-sharing, subscription-based models, e-bikes), the ownership numbers for cars might also drop, flooding the market with cars nobody wants to buy, and causing residuals to drop (again hurting owners and favoring lessees). Thoughts?
Juan Danzilo Excellent breakdown, after reading it, there’s no way he is going to respond
People need to get a life. This is just one person's opinion. At the end, who gives a crap if you spent or saved a few bucks. What's truly tragic is when people trade in a vehicle with negative equity and add it to the cost of a new vehicle. One that will heavily depreciate when you drive it off the lot.
Yup, leasing makes sense in general, over buying new cars, because of the ride-sharing cars and their effect on residuals. Motoman misses that. Buying a Tesla still makes more sense, because of the FSD and no buy option at lease-end. As a whole, buying used makes the most sense.
Michael Ball agree, especially sports cars. CPO with PPI is the sweet spot
Hi Juan! As you may have seen, YES, I am HUGE Dave Ramsey fan (ruclips.net/video/VKfNA_jA4HE/видео.html) and would go so far as to saying that there would be no MotoMan without Dave Ramsey. Additionally, I lead a Financial Peace University class at my church. And as you are well aware, a huge car guy so even though I am financially prudent and have not financed a car is decades, I have never owned a boring, point A to point B car because yes, it is absolutely possible to drive an exciting car and still be economically responsible.
That said, yes, Dave does indeed state his 'Baby Steps' and approach is simple, and that is the entire point. I have read all of his books and have met the man in person and he has not once said it is too oversimplified to be effective for the masses.
Where you and I respectfully disagree is that leasing is not about 'math and assumptions'. It's about behavior. It's about priorities in life. I'll admit, I expected A LOT of comments in response to this episode but not nearly this amount. And the two things that make me scratch my head are:
1.) The amazing amount of people that still seem to believe you can only write off the cost of a car through leasing even though, as a long time business owner in multiple states, I addressed that to be a fallacy in this very episode.
And more importantly:
2.) The amount of folks wanting to fool with cap cost negotiations, money factors, argue over which brands should be leased and more.
If we're here, we're all car guys and car gals. And I do this because I want ALL of you to drive and own the car you *really* want. Not get caught up in the hamster wheel of debt, payments and most importantly RISK. That is what leasing costs you.
I have said many times on this show: 'You don't drive a payment or a price, you drive a car'.
But going back to Dave, that behavior is all about percentages - if your car payment is a huge percentage of your income - no matter how good a deal it is, whether or not it some sort of new fangled safety tech or often you get to change it, it still 'owns you' and thus limits your future options. On the flip side, if you have a real net worth of over US$1,000,000, then have at that convenience because it does not change your lifestyle.
Bottomline, I've been broke making car payments. I've also been a good earner making car payments. It sucked. It robbed me of options. Then I changed my priorities and started hanging out with the folks that were doing the things I always wanted to do. Own and fly their own airplanes. Run their own successful businesses. Without exception - people that are doing all of these things and more avoid leasing like the plague. Why? Because they live life on their own terms. Good discussion.
P.S. - Stay tuned for an upcoming episode with the one and only Bob Lutz where we go in detail about the future of transportation and how it impacts this discussion and the car industry as a whole.
As a perpetual leaser I was interested in watching this. You actually convinced me to keep leasing. Aside from the fact you had some fallacies, the savings are just not there when you lease vs. finance. There's no reasonable way anyone should pay cash when you consider the time value of money (and over 20 years, 5 years for each purchase, you're losing thousands on interest income). Thanks for putting the work in on this, my current lease is expiring in 3 months and was debating buying, but no reason to do that.
Buying makes even more sense if you keep the car. We've had our V70 for almost 19 years and maintenance has, until recently, been consumables. We're looking at an XC60 and plan to drive it for years to come. May not work out, It could become a maintenance nightmare, but most likely will be fine.
The only argument for leasing is:
I'm rich and want to spend money on the convenience.
I own 2 vehicles but I lease a fun 3rd vehicle because I can flip it for something completely different every three years. I have a new Audi A5 sport back with 18 months left on a 36 month lease... By leasing this vehicle I can (and will) drop it off at the Audi dealership in a year and a half, walk away and lease something brand new. Probably a C-8. Leasing allows me to have totally something different and new every 3 years. For me, the cost of leasing is the price I gladly pay for liking shiny new toys. You’re videos are great and they are a main source of fuel for wanting that shiny new toy. 😁
Leon Smitherman Same situation! I have 2 cars that I own, but a third that I lease (2018 Jeep Compass right now). My plan is to flip it for something new every few years and keep the other 2 forever basically, so if I ever fall on hard times or just get tired of car payments or whatever, I’ve got cars to drive still. My other two are a 2004 Oldsmobile Bravada and a 2008 Saturn Aura 3.5L V6. My next lease will be an Alfa or something else a little more “fun”.
When you get into high end luxury cars, it makes sense to lease
Think about what you just said. Really think about it.
Charles צ'ארלס lmao 😆
Charles צ'ארלס why do you say ?
People are so wasteful with cars. People should get a high end car so that they can keep it for a long time and it should have impeccable reliability for the cost. In the world of computers, when people buy an HP Spectre or a Mac, the reason they pay that much for a laptop is because they know it's gonna last much longer than some $300 Dell from Walmart. That's how people should behave when shopping for a car too.
You should lease German or high depreciation cars and buy Honda
That’s what I do, except I stick to VW instead of a Honda.
Buy what you can afford and run it until it's no longer financially viable to fix.
It’s all come to the personality, some people want to keep their cars forever but others don’t. Buying the whole car is for sure better for the long runs but it’s hurting the pocket. Leasing will be easy on the monthly payment and trouble free but you lost everything you put in when you return your lease. As a business owner I always leas my ride.
Why buy a new car
every five years? When choosing to buy, you should consider spending at least 8-10 years in it
I keep an open mind: in some cases I’ve paid cash and kept a car for 10 years. I’m other cases I’ve leased. Most recently I leased than bought out the car (in cash)’due to the high resale values. Important thing is to do your homework, understand what you’re getting into and why. I would definitely never own a car that I couldn’t pay cash for if I chose to.
I'm currently leasing for the first time and I was already not planning on continuing after this but this video is just the nail on the coffin for any future of leasing for me lol
Just buy a 4000.00 used vehicle and drive it till it drops and get another one much cheaper .
This argument falls apart when you shop for high end cars with heavily subsidized leases like BMW. If you want to lease a BMW (unless it’s an M model with terrible deals) you can pay much less leasing.
Also, to compare fairly you have to run at 4 years, not 5 for the purchase since warranty expires at 4. Otherwise you have repair costs (Honda’s are reliable but also I’ve problem areas like brake rotors). So, your blanket statement that purchase is always better isn’t right for every car. Probably most, definitely not all.
ryan lieberman Exactly. I’m on my 5th luxury car lease. MotorMan needs to address this. A little incompetent moment here, ho ho ho.
Great advice. Makes total sense. But, in truth, all bets are off when life happens. Death in the family. Divorce. Job loss. etc. I was also one of those regular Joe's you talk about, who started with optimism in my heart and finances in the bank. Then crap happened, all of it, and that is the one thing that changes your perspective on life and your plans for your future self, especially when more than half of your built up coin disappears. I still don't lease, with that I agree. But my dreams would be dashed if I didn't take advantage of financing. And real estate in California huh? I'm sure that dude didn't buy every property in cash did he? Everyone who who claims to be a "regular joe" and owns stuff like a car collection or planes, I guarantee you, they have a cash cow somewhere that they either inherited or needed financing to make work. Very few people have lives perfect enough to take the perfect financial approach for their whole lives.
I think leasing is definitely a better alternative when you take as an example a luxury vehicle because of the propostrous depreciation.
here's an idea: buy a 3-year-old luxury vehicle. wow, I'll take my gold star now
@@colins5142 some people dont want a car thats been abused and impiroperly cared for. I drive a turbo in florida, and i doubt most people idle the turbo when its 100F and theyve been driving fast
@@blackdoveyt theres a big enough enthusiast following for used cars to have been owned and well-taken care of, like myself. At least, if youre in the enthusiast market. If you're looking for a mint condition 20 year old Camry, well, you're in a game that I wouldnt wanna play.
@@colins5142 you never know how people cared for their car or drove it. Id argue that a lot of performance cars are probably treated worse than normal cars like some old lady's camry.
Trump2024 ever heard of cpo? Plus, leased vehicles have so much restrictions u cant really abuse em anyway
Ulta when you buy a car and the payments are done you do still have something that's worth some money although not as much as when you paid obviously but you can still sell it for something so you get some money back at the end
Leasing is convenient if you have 2 or more cars, but if it is only for one car that you will drive all the time, it is not convenient at all.
I would say buy something you can drive for at least 10 years and buy it used with half down, not really old too. For instance buy 25k used Japanese car so it will last u and won’t brake down so often and be able to put down at least 10k and pay off the other 15 then keep it for 10 years. This way if u sell it for 7.5k every 10 years in 20 years you will spend 35k plus little bit of interest.
I like leases because here in canada if you have an accident the lease company eats the depreciation caused by the accident where if i was buying it the accident would drastically effect my trade in value.
@Mario Lopez As long as the car is repaired (as opposed to a write-off) as per your insurance company policy, you can turn in the repaired car at the end of the lease with no penalty. In that case, the lease company absorbs the loss in resale from the accident.
@Mario Lopez Hi Mario. Very interesting discussion. I'm sure every lease is slightly different. Here in British Columbia, the lease value at the end of the lease is normally predetermined up-front. As long as the car is fully repaired from an accident, the car can be returned (with under the allowable mileage) without penalty. I experienced this first-hand recently, as I returned a leased car recently that had suffered damage (but was fully repaired) from an accident. No penalty was charged at the lease return (Volkswagen Canada lease). I can't actually remember if I purchased extra insurance to cover this particular outcome (to your point). Every lease is probably different though and I appreciate your reply! Cheers, Grant
@Mario Lopez Thanks Mario! Great information here. Now you've got me questioning my insurance coverage during car rentals (I rent very often). Good stuff. Cheers Grant
Company I work for uses about 100 18 wheeler trucks. Never buy new. Repairs tax deductible. Now formed their OWN leasing company and lease from it. Must be ways leasing works.
Leasing a different car every few yrs would be nice. I get bored easy and always eat it on trade ins :(
I feel leasing is for folks like you. No offense intended. There's people who don't really love one car and just like whatever the next new shiny flashing toy is. Then there's people that in one stage of their lives saw a new flashing toy and fell in love with it and some would even buy it when it becomes 6+ years older model because they fell in love with only that model and don't care about anything else or new from that make. I'm the latter. Nothing wrong with either type as long as it's your money and you spend it how you want it, whilst understanding the financial risks associated with your choices.
You forgot that a three year warranty, which is the one people use for all the cameras, sensors, magnetic ride control, air suspension, infotainment system, power windows, moon roof, heated and cooled everything, are covered for 3 years in the family truckster grade of cars. The repair bills on these high tech systems will be extreme. Assuming someone will know how to fix them. Secondly, if you don’t know how to negotiate the purchase price of a leased car, chances are you will overpay when buying. My 2019 Wrangler JLUS stickered at $55,335. My adjusted cap cost was $49,250. With a 72% residual value after 3 years and 12k miles per year. My payment is $649. At zero percent interest for 60 months my cost would have been $820/ month, with 2 years of repair exposure on top of brakes, tires, etc.
I realize not all cars lease this well but with a bit of research and shopping leasing works way better for me. I am also curious to see what happens to all the new safety and self driving technology holds up in 5 years.
Buy used, lease new!
Speaking as an economist. First it’s not like for like comparing different time periods and also there is lease purchase where leasing can be a spring board to buying where you get something to your specification and a history you know. However I do get that the buzz of having the latest and greatest is addicting. Delaying gratification will nearly always provide greater security and future wealth. However the principle of positive time preference holds where people nearly always prefer gratification now than later and are prepared to pay for that. There is the logical argument that it’s good to save for tomorrow but for all of us there inevitably will be a tomorrow that doesn’t come. We all die at and usually not a time of our choosing. Then also new cars are nice. There is utility in the latest model that is worth something. Your scenarios show there are some instances where there is little monetary cost to leasing over buying so be sure to only go for the better deals and you will be trading future security for instant gratifications you would in any credit arrangement of any kind, there is the opposite extreme where a person dies at home in the flat (apartment, condominium) , been living off bananas, hasn’t got out much, hasn’t traveled, few things ticked off the bucket list but has a stack of cash under the mattress!
And unfortunately my friend went through this and it tore him up. You are right at least, in his experience.
It's dependent on the lease, and user of the lease. Leasing to own is never beneficial but leasing to eliminate depreciation can be less costly, as well as, the tax benefits for business use. All high end cars that depreciate quickly, can be hedged with leasing.
Good thing I only have 1 motorcycle worth $5k.
I still have my 1994 Nissan Pathfinder and 2000 Mercury Sable. They both still run great. I recently bought a 2016 Kia Sorento and loving the latest technology in it!!
I always buy a demo executive car that’s less than a year old with few thousand miles that still is under warranty and maintenance. Keep it for at least 5 yrs. works for me.
I own 2 cars and a motorcycle, titles in hand for all. I lease 1 family/wife suv cuz there’s always lease specials. I don’t want to worry about her car, rather worry about my toys lol. Plus most suvs suck to drive so I might as well have the newest sucky suv to drive. I don’t go over miles and take pretty good care of my cars so it works out for me.
Great evaluation!!! Some people really failed at basic math and compound interest. I worked for stealerships in the past and leasing was the most profitable deal you can make! So please keep leasing😁
I paid cash for a focus ST. Two years later I decided to sell it and lease a BMW I3 for 320/mo. I was spending more in gas for the paid and owned ST than my lease. It was a free car to me. Plus i stopped the depreciation on my money in the owner car.
Best car channel on RUclips. I never lease, used-cars for me, all the way! ha ha.
Smart. The fewer cars that you purchase over the course of your lifetime, the earlier you’ll be able to retire.
The major weakness of this video is the car selected as a leasing example. I lease in New York loaded 2017 Mercedes C 300 ex loaner for $477 a month with zero down, maintenance service and roadside assistance included . Let’s do the math on buying this car. There are very good deals on luxury leases. Surprised to see MotorMan overlooking this angle of the situation.
I was just going through your library. Apparently I missed this one. I've got a Doosie for ya. Minding my own business going about my day and I overheard this: "Oh I took out an equity line to lease the Escalade."
Tell me I'm in Texas without knowing I'm in Texas 🤣🤣🤣
HA! Sadly, that sentiment would not be limited to just Texas . . .
@@MotoManTV
Absolutely. Saw it quite a bit in my 40 years in NY/NJ. See it here. Certainly will see it moving to AZ in a few months. Rented Lexus and Land Rover in the driveway. High balance cards. Wants/needs an equity line and expects/demands their payments stay the same. Can't produce $200 cash at the end of the month.
I can summarize this whole video in a few words. If you value hard-earned money and don't want to be beholden to the banks, go buy a used car for $1000 like that Accord in the background and invest the rest. There is a universal truth in this passion we all share and its that we put themselves in debt to drive the car we want today rather than saving and driving one when we can truly afford one. It's a want vs need and that will always be the dilemma you have to face throughout life; not just with cars so make sure you make the right decision. Whether it's buying or leasing, always spend within your means.
Thanks for finally putting all this together. Very well done.
Thank you, sir!
I think the argument gets lost on people because there’s a lot of assumptions made around “buying” a cars in these comparisons. What’s the finance charges, rate of depreciation, and how well does said car hold value after an accident? Many of these factors make it hard to make the case exclusively for one or the other. I’ve done both and can say it’s a case by case.
The only option that will always cost less is buying the car outright, used or new. VERY few people are going to pay for a “nice” car in full.
cars arent built to last anymore so if you own it, the crap under the hood breaking will hurt but still less than leasing i suppose
You need to compare 3 year leasing and 3 year buying. Who in their right mind is going to purchase or lease a front wheel drive Pilot? You will get killed on resale value. It’s actually cheaper to get AWD and you can go up hills in the rain.
Did your examples take the residual value of he car at the end of 20 years where you purchase the car? In the lease scenario after 20 years you hand the keys over and walk away. In the purchase scenario you sell the car and pocket cash and walk away without a car.
Sorry, sir: there is no tax deduction on Schedule A (itemized deductions) for a leased or purchase car. All miscellaneous deductions were eliminated in the 2017 tax changes. Yes, a car might offer tax write offs if you are self-employed (which Uncle Sam will definitely look at if audited), but a w-2 employee has no writeoffs (or tax benefit at all when buying or leasing except possibly the sales tax which might be taken if you could itemize (depending on the situation). Otherwise - great video!!!
This is all crazy talk if applied to luxury vehicles. I have done many comparisons on 3 year leases vs 5 year finances and sales of new (admittedly) German vehicles, i.e. Audi/BMW/Mercedes (and even Volvo) falls into that. There are ALWAYS discounts on lease as long as you don't try to get a new model that just comes out. I even leased back in 2009 actually since my 2006 lease was up.
If you are close to end of the quarter, end of the year, etc.. usually you get really good lease deals. You may get a good purchase deal too, but once you start comparing 3 year leases vs 5 year purchases and you are alright. However, this mainly applies to luxury vehicles. Honda has a notoriously terrible lease deals usually (including Acura usually) while German cars are mainly leased and designed for leasing.
Now, if you don't drive new cars and buy used and hold them over 5 years (say buying 3 year old vehicle and holding for 6 to 7 year old cars), then yeah, it does pay out. Overall cars are not an investment and they depreciate incredibly quick in general so buying (or even leasing) a new car is certainly a losing proposition.
Should do this again but buying a 2 or 3 year old CPO car AND purchasing an extended warranty. Peace of mind and huge savings. I've now purchased 3 CPO vehicles, have even gone as far as paying for maintenance ahead of time at a pretty big discount. Wish I had done that on my wife's Lexus.
Yes absolutely ! Any monthly car payment is.........because once the lease is over or you make your last payment, what does everyone do? Start all over again, so you have a car payment your entire working career.
If you saved enough to buy a decent used car and took the car payment you would have payed and invested it over all those years, you would be multi millionaire.
But you can’t do that because you have to keep up with the neighbors and the people at the red light that you don’t know.
Those cars aren’t paid for either 😃
And it’s not a lease.......you’re renting a car........it’s not yours. Car dealerships are smarter than you.......just like credit card companies.
Buy ex-demo or nearly new cars 25%+ off the list price manufactures warranty.
Compare the price of the lease payments to the cost of a 2/3 year old version of the car usually it’s the same amount. Except you give the car back.
I feel like the vast majority of cars being leased are luxury cars which most people do because 1: they don’t want to deal with the maintenance. And 2: they don’t want to come to terms with that depreciation when they come to sell it however many years later
Thank you very much for this video. Leasing has never made sense to me for a car, but your explanation solidified my doubts.
You are quite welcome.
I see both sides of the argument. Why would you buy something that is going to continue to depreciate? Leasing, for me, makes sense. Automotive technology is getting significantly better by the year. Safety enhancements, LED headlights etc.
With the substantial reduced cost of a lease and zero repair costs (other than maintenance), you would have to own your car at least 3 years _after_ you’ve paid it all off to start seeing a significant monetary savings in buying a car. Assuming you finance for the typical 5-6 years, you would have to own that car for minimal 8-9 years before the cost of the extra finance costs catches up the the reduce lease payments all those years. Do the math yourselves.
Also added benefits is the tax write-offs on leases if you own a business.
I'm not a fan of leasing but there are a lot of assumptions in this video I don't agree with. There's no reason to lease a quality vehicle like a Honda or Toyota. Just finance it if you need to buy new, otherwise, buy a 2 to 4 year old car private sale. If you're in sales and need a nice car when you're with clients leasing a nice German luxury car might make more sense. I'd rather blow 20k on a 3 year lease than lose 40k in depreciation and be stuck with an outdated, unreliable and expensive to maintain car. I also don't think you should finance or lease a car that you can't afford to buy outright especially if you don't plan on investing the difference. All that being said I own two 1980s Toyota pickup trucks that I paid cash for.
"Quality" lollollol
I wold not buy a Toyota just because it has quality thief’s other cheaper options out there that can last longer as well
@@stefanfreestylez Not giving me anything to work with here, nice bm.
@@Yondaily What's a quality thief? What other manufacturers produce cheaper more reliable cars?
Extended warranties. Would not sell them if they did not make money on them.
Honestly, leasing only works for short periods of time. I currently lease a 2017 Honda Accord for $269 a month only because it happened to fit my financial situation at this time. When the lease is over, I am probably just going to search for a different used car (maybe a more efficient one) that still has all the tech features I want. I still have two other cars that I own that are still going strong and are more kind of beater cars. I consider the Honda a temporary investment and I’d only ever lease again if I found a deal that might be low risk, like $249 a month for 24 months on an Alfa Romeo Giulia
As long as you're not using leasing as a mechanism to live beyond your means, personally I am ok setting aside $/month to lease my daily driver and have a new car with predictable cash flow exiting every month - no car is free to run. You're still paying down principal value in a lease towards your buyout price at lease end, and not owning the car can actually de-risk a depreciation spike (think GM, 2008 - market crashed, cars worth 40% less, closed-end leased cars were handed back and became GM's problem almost sinking them). Never look at cars as an investment, If you enjoy them, you're going to put more value into your choice but regardless, don't buy something you couldn't afford to buy twice in pinch and buy something with known slower depreciation (NOT the luxury market). I would suggest a MUCH POORER and more common financial decision is financing an out-of-warranty European import because it's now "affordable" - committing yourself to having fixed and potentially skyrocketing variable monthly costs together, potentially leading to making monthly payments on a broken car you can't afford to fix. Aka what nightmares are made of! Educate yourself and be smart.
Great video Motoman, sadly common sense isn’t very common. In many ways leasing is truly meant to be more of a luxury since it allows you to always have a brand new car without any maintenance headaches but that convenience has a high price tag. For those that disagree just think, when has something that is a luxury purchase ever made the most financial sense.
Thank you, Greg! Sadly, you are 100% spot on . . . and not just in cars:) The entire point of this episode was not about numbers . . . It was about behavior and the very real costs of that behavior of convenience (or I gotta have a new car with the newest tech, safety, whatever) every three years.
I drive 40,000 km a year and I lease my car.
I pay for the extra km up front so I’m paying 8 cents for the extra km above a standard 24000 km lease not 12 cents in the back end.
I get to write off my car for business purposes hence the high mileage.
In terms of business write offs ... In Canada you can only write off a purchase of a car up to $30,000 pre-tax regardless how much higher it is. In Canada you can write off up to $800 (before tax) lease payment.
A lease payment over 4 years was $50 a month higher than a monthly finance payment over 6 years BUT the tax savings equated to a savings of $100 a month. So the net cost was it was $50 a month cheaper to lease.
My choice ... lease for 4 years and have approximately 160,000 km ... OR ... for $50 more a month finance over 6 years and hope I have no issues over 240,000 km.
For HIGH MILEAGE drivers leasing is a better solution. It has lower risk, lower cost, and more piece of mind.
Amen! I leased 1 car in my life with an open ended buyout for wholesale plus 5%. It was a 1993 Alfa Romeo 164L. Guess what Alfa did in 1995? Guess what it was worth in 1997? Winner winner chicken dinner. Could 't afford NOT to buy out the lease. Kept till 2002!!
Leases are for those swinging above their financial abilities. PERIOD. Own 5 cars. All purchased. My future with them is MY decision.
Great video! Very informative and wildly entertaining
I disagree. I like leasing since you get a new car every few years. Plus, if you are a FCA fan... you don't have to worry about repairs.
2019 RAM Laramie... 4k miles, already in the shop... TRANSMISSION FAILURE. Estimated repair cost: $8k. I have to pay $1500 out of pocket.
matty1053 2018 Compass lease driver here, and I agree. I like my Jeep, no major issues so far almost 18,000 miles in (I do need a new rear wheel bearing due to Michigan roads, however). Sorry to hear about the Ram. My next lease I want an Alfa. No way I’m buying that... I prefer FCA cars over Ford and GM, however. Leasing is a safer option for reliability.
If you are a long time viewer of the show, you know I am a big fan of Challengers however, this is something I genuinely don't understand: Why buy a car when you know the reliability is in serious question? One would believe that well known reliability problems would keep most buyers aware but in the case of FCA it doesn't. Seriously considering doing a follow up episode on this very topic.
MotoManTV I would DEFINITELY watch this episode (as I would any others being a long-time viewer), I think it’s a good topic. Please do explore that topic!
As for me with my Jeep, the Compass Latitude with a couple option packages on lease made more sense than some competitors. I was also cross shopping the GMC Terrain mainly with it, and I don’t like the “push-button shifters” as much as a normal gear shifter. It was hard to find any similar vehicle besides the Kia Sportage for about $30,000 with AWD and all of the key features I have/wanted on my Jeep on a deal I could afford just getting out of school a few years back (heated seats, heated steering wheel, good sound system, AWD/4WD for Michigan snow, and decent styling). The Sportage had a bad lease deal at the time and quite frankly... is very ugly. The fact that this has been reliable, efficient (getting 27.5 MPG right now), and checks all of my boxes without breaking the bank and coming from a “cooler” brand (depending on who you ask I’m sure) are all pluses. If a different, non-FCA vehicle checks my outlines boxes the next go round, I will give it a look as well. There’s definitely areas where the Compass can improve, like power delivery with the 2.4L and 9-speed.
On why others still flock to FCA regardless of reliability: I think it has to do with their product mix. They have far more interesting brands (Alfa, Maserati, Dodge, Jeep etc.) than the other two of the Big 3 automakers (in my opinion). They also make unique cars in those brands. Hellcats with 700+ HP, Jeeps with 700+ HP or that can handle almost any weather situation within reason, Italian sports cars, pickup trucks, luxury cars, etc. I’d argue FCA doesn’t really even make an “entry level” vehicle (with the demise of the 200/Dart some years back) and are exclusively targeting people that “know what they want/want something that stands out”. The Renegade and Compass and Fiats are about the cheapest cars they make now, and with options, those too can climb to the high $30,000 to low $40,000 range. There’s also not many options for 700+ HP anything out there or Jeep capability without going to something like Range Rover - but that’s also a big reliability dice roll and FAR more expensive to buy and maintain in many cases... Some of these buyers may also have other cars to fall back on in their portfolios if their new FCA car turns out to be a pile of garbage (myself, I also have a 2004 Oldsmobile Bravada AWD and a 2008 Saturn Aura XE V6 I enjoy driving).
Bottom line - their product portfolio is unique and flashy, despite being hit-or-miss with reliability. GM basically offers 3 luxury brands and Chevy and Ford has Ford and Lincoln. FCA has a little of everything except for electrification. For buyers that prioritize “cool”, “capable”, “unique”, “sporty”, “fast”, “rare”, and other similar acronyms over “reliable”, “practical”, “cost effective”, “long-term ownership” etc., FCA probably makes a lot sense with the brands and lease deals they offer (as would a manufacturer like BMW or Audi too, perhaps).
You’re giving an example off of the advertised lease price, anyone with a right mind will know that’s jacked up an insane amount
Uh uh uh Mike, you've got that completely backwards.
Another downside of leasing: Companies will cater to what sells. The more people that lease, the more they will build cars that are suited to lease. Namely, engineer cars that are only designed to not have major problems for five years. Therefore nobody will have the incentive to make cars that last long time. I’m looking at you, European vehicles.
Never lie to a car dealership it’s illegal.
purchase is always cheaper than lease or debt ecept if you are able to invest the amount of money in secutyties that give better return (leverage)
Leased an 2001 Audi and will never lease again. If you can get a 0% deal on buying a car it is 100% worth it..... but you have to have a 720 credit ratings which we did.
This was very helpful and I will share with my family. Thank you!!
Yeah $1400 for a transmission fix. Try $4000 and you're about close. $1400 will just about cover the cost of replacing the catalytic converter from a Honda dealership. lol...
you don't go to a dealership for fixes. You get an independent mech because dealerships are also called dealerships.
Great advice! I like to buy used and keep my cars a long time. As for financial advice, I've been recommending Quit Like a Millionaire, by Kristy Shen and Bryce Leung. It's east to read, and has some great advice for people who'd rather have money than look like they have money.
Why not just buy a car. Who wants to make payments for the rest of their lives?
justen ramirez Lackey There’s still a cost to own a car regardless of it’s paid off, financed or leased.
Eh, some good points but I still want a new car every 3 years. Heck I get bored with me lease before 3 years and is the car I wanted. So I’m good. I’ll stay leasing but thanks for the good info.
It isn't 42 States and 8 States. There are a couple of States without a Sales Tax, which changes the calculations a bit.
I think this needs a giant caveat emptor. I get a car allowance from work with various stipulations. The car has to be 3 years old or less. It's cheaper in this scenario to lease. Also, leasing insulates you from depreciated value in jurisdictions where you cannot sue for lost value in an accident.
Texas has property tax on leases. Can deduct entire lease on federal income tax if business vehicle.
What amazes me is that the people who are most against leasing and propose financing instead are always using these pathetically small and impractical Japanese econoboxes rather than using real cars that people actually want that cost upwards of $40,000.
I’m not trying to buy one of these small pathetic econoboxes. I would rather die than drive a Honda or Toyota or Nissan.
I have leased Hyundai before and I’ve been very happy. I had an Azera, followed by a Genesis and then I moved onto a Cadillac because the Palisade wasn't available.
I never got stuck with a car I didn’t want.
But my main car is usually an SRT vehicle. Jeep SRT and a dodge charger hellcat. When you’re talking about buying a $75,000 gas guzzler that needs a finance of $1000 per month minimum or a lease of around $700 per month.
When those things get old and you need to start replacing parts, the costs are astronomical. Leasing makes more sense when you’re buying a high price, high maintenance vehicle.
Financing makes more sense for a lower priced, lower maintenance econobox that you don't mind keeping for 10-15 years or more.
Stupid is as stupid does.
hello ,
can some one explain what is leasing car in simple meaning ?
thank you .
Leasing is sort of a long term rental agreement: Typically for 36 months or 39 months. You have a set number of free miles you can put on the car during the lease--as in 36,000 miles over 36 months or 39,00 miles over 39 months. In the US leasing only applies to a new car from a dealer. Check for factory supported leases through the dealers. With a good credit score you can lease a car with only the first payment down, plus tax title and license fees--and even that can be rolled into the lease payments. At the end of the lease you just turn the care back in. (Some leases may charge you a few hundred dollars to turn the vehicle in--but this is negotiable at the time of leasing.) Leases are not good for drivers who will put more miles on the vehicle that the free miles allowance permits because of extra charges. Get the dealer to give you a zero down payment quote for the payment amounts, so that you get a good reference for the kind of deal you are being offered. With leasing you are locked into those number of payment for 36 payments or whatever the case may be. When buying the payments are usually more than leasing payments, but you can sell the vehicle at any time but you still have pay off the remaining loan
renting
The Boston accent part was a nice touch, M.
Leasing never made sense to me, all these payments and you get nothing to show for in the end.
Excellent work, M. You went above and beyond with this one.
Thank you, Amro! Took a while to put this one together.
@@MotoManTV my pleasure.
Yessir I can tell. Crunching numbers is a pain in the ass, especially when Uncle Sam is involved. A mere comma placement could be the difference between a tax refund & a few years ... "Away".
Do you have to pay for the depreciation cost of the vehicle if you are leasing? I recently got into an accident(not at fault) and had 20K damage done to the car. I'm not planning to sell the car so haven't check how much the car depreciates after the accident, but if I were leasing that car, do I have to pay the dealership for the delta between non-accident car and accident car when i return it after the leasing ends? If you don't, that may add some incentives to leasing vs. buying
I buy a car and drive it till it explodes
You are right on! A couple of more points against lease. They will charge you for every nick, ding, scratch and blemish on the car when you turn it in. If you decide after 18 months in you want something else, its MUCH more difficult to get out of a lease early than a traditional purchase. Best way to buy a car. Pick one 2-3 years old in good condition, save up and pay CASH. Drive it for 15 years, and take care of it. You dont need to impress anyone but yourself, and in 15 years you will be self impressed on your bank account.
D
If you're a car guy or gal then driving one car for 15 years is near impossible.
I have problems with this 'advice' on so many levels. 1. The 'opportunity cost' of leasing a car also applies to purchasing a car. The example cited here of opportunity cost is that, if I invested the $700 per month lease cost, instead of actually leasing the car, I'd generate $316,000 in wealth over 20 years. However, exactly the same math applies if I invested the $700 per month spent purchasing a vehicle. In actuality, it is worse for the car purchaser as a 60 month finance payment is actually $850 per month, which equals a greater opportunity cost. Fact is, when we spend money on anything, rather than investing the money, there is an opportunity cost. New set of golf clubs? Less wealth. Medical insurance premiums? Less wealth. Buy a burger? Less wealth. The argument here is that, because you lease a car, instead of buying one, you don't create wealth. My argument is that if you buy, or lease, a car you forgo future wealth. 2. I've not bought a car since 1994. I only lease them. I only negotiate great lease deals (which is claimed to be unrealistic here). My latest lease is a $75,000 BMW X5 hybrid and I pay $700 per month. Prior to this lease, I leased a $42,000 Honda Pilot EX-L with nav for $475 per month. In the past, I've negotiated 0% leases. 3. When leasing, one attraction to many people is that, because the monthly payments are lower, you can afford to drive the Pilot Elite AWD Black Edition and not the EX FWD. That is down to personal choice; cheap and cheerful or more luxurious? With my BMW X5, I lease for $700 but, purchasing over 60 month would have cost $1,200 per month. 4. I never have to concern myself with repair costs. Buying a $10,000 used car, probably with 90,000+ miles, over 36 months will cost $350 per month. Then, the transmission goes, or you need new brakes and rotors. You can easily find yourself $2-3,000 out of pocket, have to pay that as a lump sum and, you don't have use of the car while it is being repaired. I can lease a reasonably good vehicle for $199 and I get no surprise repair bills. For people on a fixed or limited income, leasing makes more sense as you know exactly how much that car will cost each month and you can budget for that. Not many people can keep $3,000 in a saving account to meet sudden repair costs.
Okay.. I get your argument. One question though. Say you lease a BMW X5 for $800 a month and then finance your balance of that lease after your 39 month term is up. And say that lease interest / tier rate was real low. Your thoughts sir?
Me? I would buy a 2 year old BMW, Mercedes, or Porsche, pay cash, drive it for a year or two and then sell it for close to what I paid. I have done this with everything from a BMW to a Lotus. More here: ruclips.net/video/VKfNA_jA4HE/видео.html
what do you do?? how much do you spend on cars or SUV's
I have a $145 on a Kia Soul EV. Can’t beat that. Leasing
Drew Yager how much $ down ??
$2999
Yep, I can: ruclips.net/video/HznLHnCui9k/видео.html
does not make much sense to compare changing car every 3 years versus changing every 5 years. Why not comparing 5 year leases to 5 year purchases?
You’re comparing apples and oranges. You did not add repair and maintenance costs on the purchased vehicles in year 4 and 5. Tires brakes breakdowns etc. you have none of that with a lease. To be a fair comparison both cars would have to be replaced at same time. Purchase would be much more. Dealers discount the hell out of leases because they get to sell you again in three years and resell your leased vehicle at a premium price because it’s still under warranty and they can call it “certified’.
All of this applies..except to Porsche's 🤯
Alex garcia Porsche’s only go up in value as they age, it’s true..
When motto man turn in to Dave Ramsey 😂👏
Let me sum up a lease for you. You pay $400 a month for 3 years to drive a new car and after the end of 3 years you give it back. At the end of the day you lost $15k and have nothing to show for it.
That can be true for purchasing as well. Many people have no equity to show for it after 3 years of financing. Some people have nothing to show for it even after paying cash because they bought junk that has no value. At least with lease, you know what you're getting.
"nothing to show for it" except 36 months of trouble free driving.
Motorman love you but I’m a finance person and I disagree. If you’ve ever had a financed car stolen or totaled, you risk losing the entire value of the car. Especially now a days with carfax. With a lease this is a max out of pocket that is easily calculated. Leases make sense for people that are going to replace their car every 3-4 years. Financing makes sense if you’re planning on keeping a car long term.
I think there are a lot of areas where people can use this kind of frugal financial advice, but for car guys... this isn’t one of them.
You gave advice as a car person for people who are casual car buyers. I eat, sleep, and dream about cars. I want to own a plethora of cars in my lifetime, and not when I’m an old man either. this is why I’m working to incorporate the high cost of this lifestyle.
It’s like that Suzy Orman advice where she tells people to stop going out for dinner and save like some this alleged old couple who saved thousands by not going out for dinner. But on the other side it’s like, “dude you haven’t taken your wife out in 20 years”. You both enjoy going out and now you’re in your twilight years getting ready to die. That’s dumb! Live a balanced life! Enjoy life!
Exactly, the people who are talking this BS is living the opposite of what they preach.
Well whatever you do, you'll be losing a lot of money :/
Just find the way you'll lose the least :) *3-5yr old used car paid In cash*
It would be more interesting to see the numbers for buying a car every 3 yrs vs leasing every 3 years which is a fair comparison to the behavior of what’s occurring. Not 5 vs 3. Of course buying would come out on top.
A second interesting scenario would be to consider an EV purchase vs lease. Battery technology has and will change a lot in 20 years.