Author Topic: Auto Lease vs. Auto Loan -- Do I need a slap in the face?  (Read 13803 times)

ccwishon

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Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« on: January 23, 2013, 10:29:30 AM »
Unfortunately I decided to lease a new car just a couple of weeks before I started reading MMM. I know MMM says a whole lot about the awfulness of auto loans, but I'm hoping to get some thoughts on whether or not I should keep my lease and whether a lease has more benefits than a loan. (Obviously I don't know a whole lot about this!)

I leased a plug-in electric car last October, and when I add up the amount I pay each month for the lease + the amount I spend on electricity - the amount I used to spend on gas and maintenance for my 14-year-old Corolla, I end up paying about $150/month. With this, I get the benefit of having a reliable car (I'm disabled, so this is a must for me for work), using the HOV lane (which really helps with the commute! Yes, I know I should move closer to work), and supporting my values (electricity vs. fossil fuels). I've also been told that a lease will significantly boost my credit for a couple of years down the line when I want to buy a house.

That being said, I'm still paying $150/month for a car. Am I in a financial emergency here or are the benefits of this car significant enough to out-weigh the monthly payments? I have no other debt and am currently saving 50% of my income every month.

I appreciate any advice you may have! Thank you!

NateDogg

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #1 on: January 23, 2013, 10:36:59 AM »
Sounds to me like you are not in an emergency, and the leased electric car is a great way to vote with your wallet. If financial independence is really important to you, sure, move closer to work and don't drive a car. I think it is a personal choice at this point in your life, since you are already saving a significant portion of your income.

smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #2 on: January 23, 2013, 10:59:36 AM »
MMM hates auto loans.  But a lease is technically not a loan, but a rental agreement.  So you're safe!

But seriously, the used car market has gotten so ridiculous, and new car manufactures are so desperate to move product, that the gap between buying new and buying used has closed dramatically in the past 4 years.  Even that sweet 5K spot MMM targets for used car purchases is pretty barren unless you're a great negotiator or know a reliable used car dealer.

A couple of months ago Nissan was advertising their Leaf electric car for only $250 a month plus taxes, $2000 down.  That's an amazing lease for  a car pushing 35-40K new off the lot (gov. kickback applied to cap cost).  One can easily work off that $250 in savings on gas alone (especially in a two car household) so it's like driving a new car for about $100 a month over 36 months (figuring in deposit, electric charger, electric bill, routine maintenance, etc). 

I think a small payment every month is justified by the environmental benefits of driving an electric car.  Perhaps find a way to chop $100 or so a month off your budget (give up an expensive vice, like cable, cell, or  drive even less) to smooth out the economic effects.  But I don't want to slap your face.  I want to shake your hand and say "smart move."

Freedom2016

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #3 on: January 23, 2013, 11:21:24 AM »
It sounds like you're saying you're paying $150 MORE a month than you were paying for upkeep of your previous vehicle - yes? What's the actual monthly nut you are paying for the electric car?

You haven't laid out what the rest of your financial situation is, so I don't think anyone can say whether you're in an emergency situation or not.

In terms of leasing, the car company is making money off of you. It's just embedded/disguised in the monthly lease rate. They calculate the lease amount by figuring out what the residual value of the vehicle will be at the end of the lease term, subtract that from the selling price (MSRP), then they calculate the upfront and monthly payments. Auto sellers LOVE leasing because they figure people are paying attention to the monthly payment, NOT the value of the car. They jack around the selling price and residual price to get their cut.

If you didn't negotiate the lease terms up front, you almost certainly are paying more than you should. How did the purchase go down?

ccwishon

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #4 on: January 23, 2013, 11:36:40 AM »
Thank you guys for the feedback! Especially the handshake instead of a slap in the face. To offset the cost, I've cut down my restaurant budget (once/month) and my entertainment budget (cut everything except Netflix streaming), so that helps with the price.

Course11: The purchase went down really well. I spent about 2 hours negotiating and feel pretty confident that I got the price down to just about the lowest the dealership would go  (knocked $140/month off of the original lease deal they offered).

As for my financial situation, I work at a middle school, so I'm not making the big bucks, but I save 50% of my paycheck each month and have no outstanding debt. I have about $24k in investments and savings right now, so it's not a lot, but it's growing pretty quickly (I was in debt and in grad school until last June).

The lease payment is $260/month + ~$30/month in electricity charges, so that's $290. Before the electric car, I was spending at least $130 on gas each month, if not more (depending on price fluctuations, one month it was $200!). My old Corolla was great, but missed an engine recall before I bought it used, so it was having all sorts of engine trouble. I added in about $10/month on maintenance, but really I was probably paying more than that with all the issues that came up here and there.

Thank you guys!

smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #5 on: January 23, 2013, 11:42:37 AM »
It sounds like you're saying you're paying $150 MORE a month than you were paying for upkeep of your previous vehicle - yes? What's the actual monthly nut you are paying for the electric car?

You haven't laid out what the rest of your financial situation is, so I don't think anyone can say whether you're in an emergency situation or not.

In terms of leasing, the car company is making money off of you. It's just embedded/disguised in the monthly lease rate. They calculate the lease amount by figuring out what the residual value of the vehicle will be at the end of the lease term, subtract that from the selling price (MSRP), then they calculate the upfront and monthly payments. Auto sellers LOVE leasing because they figure people are paying attention to the monthly payment, NOT the value of the car. They jack around the selling price and residual price to get their cut.

If you didn't negotiate the lease terms up front, you almost certainly are paying more than you should. How did the purchase go down?

They love financing new cars too, sometimes with double digit rates spread out over 72 months to "get that payment into your range."

They'll rob you one way or another if given the chance.  :)

As far as I'm concerned, the more electric cars, the more demand for electric car infrastructure, the less fossil fuel consumption, the better.  It's a virtuous circle which might require all of us to kick in a little every month to make it happen.   And with government kickbacks being applied to reduce cap cost + cheap interest for lease supplied by dealer, leasing electric cars has become a tantalizing option for many mustachians, IMO. 

Like I said, my cost analysis for the Nissan Leaf worked out to about $100 a month.  That insanely cheap, and I almost bought it even though I have no desire to trade in my 14 year old clunker.   

But overall leasing really does suck, don't get me wrong.

Matt K

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #6 on: January 23, 2013, 11:44:57 AM »
I agree that what you are talking about here is a value decision, and I support people choosing electric vehicles. I disagree with people who say "a lease is not a loan, so don't worry." In fact, saying it is a rental agreement is worse than a loan. With a loan you have equity when it is paid off, with a rental agreement you have nothing.

You say it costs you $150 a month to have this car. That number is meaningless. How *long* is that term for? What are you actually paying?

If Nissan is giving monthly terms of $200 for a Leaf - great, how long is the term, and how much do you owe at the end if you want to keep the car. A four year lease is pretty typical, so four years at $200 month has you paying $9600. That means you've paid ten grand to rent a car for four years, and once those four years are up, you can either give the car back and have *nothing* to show for your $10k, or you can buy out the lease for the remainder of what the car cost ($35k after government kick backs), which puts you on the block for $25000. Only this time, you don't qualify for new car 0% rates, and instead have to pay 7% 'used car loan' rates. At $200/month it'll take you another 20 years to pay off that car. Thankfully, no one will give you a 20 auto loan.

Here's a personal example, I currently leasie a subaru wrx - not MMM approved. I have it on lease, not because I couldn't afford to buy it on loan but because the math was smarter than financing. To understand this you need to understand how leases work. In a lease I buy the right to drive the car for four years, after those four years, the car belongs to the dealership. Upon completion of the lease, I can either return the car to the dealership and have nothing, or I can buy it from them. How much do I buy it from them for? However much the original sale price of the car was, minus what I've paid to them (minus loan costs).

So, how does the dealership figure out what my monthly lease rate will be? After all, if I only pay $5/month over my four years I'll have only paid $240, and there is no way they'll be able to sell that 4 year old car for $240 less than it was worth when brand new. The dealerships have a very good idea of what a car will be worth used in four years. So, they set your lease-rate such that when the lease is up, you owe 'wholesale' on that car.

Here's the real life example. I purchased my WRX for $35k. Subaru knows that the wholesale value of a 4 year old WRX is approximately $17k. Thus, over the course of four years, I have to pay off $18k (plus taxes, admin fees, loan interest, stuff like that). So, the dealership cuts me a four year loan for $22k ($18k car value + taxes other stuff Ė down payment). Interest rates at the time when I got the car were 4% (anything below 3% today is subsidized by the manufacturer, and they donít bother subsidizing cars that sell well without the extra incentive). So I am paying 4% annual interest on my $22k loan.
If I had financed the car, I would be paying 4% interest on the full $39k loan. So Iím saving 4% on $17k over four years. Thatís $2700 Iím saving by leasing instead of financing. I am also saving the difference, so when that $17k is due, I will have it ready in cash to buy out the car.

If I had purchased a loaded Mazda 6 instead of the WRX (same price new), its four year wholesale value would have been $12k, so my monthly payments would have been higher, and the amount I saved in interest by leasing it would have been less (only $1900).

Would buying used have been better? Absolutely. And I tried. But the car I wanted tends to live a rough life in the hands of young drivers, and very few really clean examples show up used in Ontario. The dealership (largest Subaru dealer in Ontario) sees less than five examples good enough for them to sell every year. Thus, it made more sense to buy new, take care of it, and keep it for as long as I possibly can. (More sense still would have been to buy a used Honda Fit, but like I said, this was pre MMM).

So, now that Iíve gone on this long winded explanation of leases, should you be leasing your plug-in electric? That depends entirely on how long you are leasing it for, how much you will owe when the lease is done, and what your plan for the vehicle at the end of the lease is. If you are content to rent the car for $150/month for the rest of eternity Ė go for it. If you want to eventually stop having to pay $150 month in car payments, you are going to have to buy it or something else at some point. If you buy something else, the money you are paying right now is money thrown away. If you want to buy this one, you have to look closely at the total cost of the car and see just what that total amount of money could also buy you.

NateDogg

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #7 on: January 23, 2013, 11:45:21 AM »
Hmm, I had troubles posting this the first time...

Seems to me that someone who has no debt besides a car & is saving 50% of their income is not in an emergency. Sure, ccwishon could save more money, but so could I, and that's his choice to make. It's now not an emergency, but a choice of lifestyle, and time to financial independence. Being disabled, the headache of repairs might be a cost significantly more than financial, so a new car may be appropriate. Given that, an electric car that satisfies your needs sounds like a great thing to me! I'd suggest purchasing it, except I think the rate of improvement in electric vehicles is so fast right now that by the time the lease ends something better & cheaper will probably be available!

I agree, leases tend to be a good way to funnel money from people to dealers. I don't lease cars.

gecko10x

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #8 on: January 23, 2013, 11:47:17 AM »
WRT if you got a good deal: The leasing company is probably making money off you. How much depends on how desperate they were, how close they estimated the residual value, and what you do at the end of the lease (buy or walk). If the effective rate is super low, and they over-estimated the residual, then you get a great deal on the lease term- but you'd get a crap deal if you bought at the end. If they under-estimate the residual, then you don't get such a great deal on the lease, but you would get a good deal buying it out. Either way, if you have the cash and plan to keep the car, you'd most likely be better off just buying it.

You're saving a good portion of your income, so I don't see anything wrong with spending your money on that car.

Edit: <$300/mo sounds like quite a good deal, and I agree with smedleyb.

Matt K

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #9 on: January 23, 2013, 11:53:52 AM »
In the long time it took me to type my answer, an number of other people have chimed in - I want to reiterate - ignroe your monthly payment on the car. Focus only on how much the car is costing you total. as others have said, focusing on the monthly payment is how dealerships get you (it's only $99 bi-weekly! *cough* 10 year term *cough*).

Step away from the monthly payment, look at the total cost.

Also, I figure if you are putting away 50% of your income, you're in a pretty safe position to spend money on something you value, like an electric car.

ghatko

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #10 on: January 23, 2013, 11:56:31 AM »
With this, I get the benefit of having a reliable car (I'm disabled, so this is a must for me for work), using the HOV lane (which really helps with the commute! Yes, I know I should move closer to work), and supporting my values (electricity vs. fossil fuels).

As far as I'm concerned, the more electric cars, the more demand for electric car infrastructure, the less fossil fuel consumption, the better.  It's a virtuous circle which might require all of us to kick in a little every month to make it happen.   

This is a bit of an aside, but did you know that for the US, that 72.7% of the electricity generated by electric utilities in 2010 came from fossil fuels? Of course this might vary depending on your location, but not everyone realizes that the electricity itself might still come from fossil fuels.

Source: http://www.eia.gov/electricity/annual/html/table2.1a.cfm
Section: Electricity Generators, Electric Utilities

smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #11 on: January 23, 2013, 12:11:05 PM »
This is a bit of an aside, but did you know that for the US, that 72.7% of the electricity generated by electric utilities in 2010 came from fossil fuels? Of course this might vary depending on your location, but not everyone realizes that the electricity itself might still come from fossil fuels.

It's a valuable aside.

But I figure if you pay $30 a month to the electric company to offset $300 in gas costs, the efficiencies must be great, right?  But I'm presuming here without hard data (other than my own cost analysis).

Paul der Krake

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #12 on: January 23, 2013, 12:17:32 PM »
If you spend $300 a month on gas, you have bigger problems. At a very conservative 20 MPG, that's over 6,000 miles every month.

smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #13 on: January 23, 2013, 12:20:10 PM »
In the long time it took me to type my answer, an number of other people have chimed in - I want to reiterate - ignroe your monthly payment on the car. Focus only on how much the car is costing you total. as others have said, focusing on the monthly payment is how dealerships get you (it's only $99 bi-weekly! *cough* 10 year term *cough*).

Step away from the monthly payment, look at the total cost.

Also, I figure if you are putting away 50% of your income, you're in a pretty safe position to spend money on something you value, like an electric car.

You do realize that the difference between leasing a Leaf and leasing a fancy new and equivalently priced WRX is about $7500 in U.S. government kickbacks applied to the cap cost of the vehicle?  Which in turn makes a Leaf roughly 40% cheaper to lease than a WRX, and that's before you figure in the amazing fuel savings?

In other words, your real life example sheds no light on the process of leasing an electric vehicle that's massively subsidized by the government.   She's paying $150 out of pocket and you're paying more than 4x that!

So who needs to step back and look at total cost again?   




smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #14 on: January 23, 2013, 12:30:43 PM »
If you spend $300 a month on gas, you have bigger problems. At a very conservative 20 MPG, that's over 6,000 miles every month.

That's for two cars, daily city driving, 4 wheel drive, snow belt w/ hills, NY state and $4.00 gas, etc.  Presumably the Leaf replaces the 14 year old clunker (12 mpg) and shoulders 85% of all our driving needs. 

Matt K

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #15 on: January 23, 2013, 12:38:00 PM »
You do realize that the difference between leasing a Leaf and leasing a fancy new and equivalently priced WRX is about $7500 in U.S. government kickbacks applied to the cap cost of the vehicle?  Which in turn makes a Leaf roughly 40% cheaper to lease than a WRX, and that's before you figure in the amazing fuel savings?

In other words, your real life example sheds no light on the process of leasing an electric vehicle that's massively subsidized by the government.   She's paying $150 out of pocket and you're paying more than 4x that!

So who needs to step back and look at total cost again?

Thank you for the lovely personal attack.

My comment was not that (s)he should not be leasing an electric vehicle. Actually, in both my posts I supported the idea. My comment was, as others have said, by focusing on the monthly payment, you are forgetting the over all cost, and could end up paying far more than if you focused on the total cost.

I openly admit my car, my choice, is not the MMM approved one. I use it because it is an easy source of real world numbers. When you read my post, you'll notice I openly say the better choice would have been a used Honda Fit.

What I'm failing to see, is how focusing on the fact that the OP is paying $150 above and beyond what they paid per month for their 14 year old corolla is superior to looking at what the full cost of the new car is above the corolla (or any other replacement). It is very possible that after the $7500 US government discount, and the decreased per-mile-cost of using electricity from the grid instead of gasoline, that the Leaf (or Mitsubishi, Mini, or Toyota, or whever other electric car the OP is leasing) is the better choice. But by focusing on the monthly payments only you run the risk of ending up in a situation where a very long set of payments substantially increases the amount paid to both the seller and the lender.

Edited to clean up typos, and remove a point where I misread something smedleyb wrote
« Last Edit: January 23, 2013, 12:43:11 PM by Matt K »

Paul der Krake

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #16 on: January 23, 2013, 02:03:53 PM »
If you spend $300 a month on gas, you have bigger problems. At a very conservative 20 MPG, that's over 6,000 miles every month.

That's for two cars, daily city driving, 4 wheel drive, snow belt w/ hills, NY state and $4.00 gas, etc.  Presumably the Leaf replaces the 14 year old clunker (12 mpg) and shoulders 85% of all our driving needs.
My apologies, my math is incorrect, that'd actually be 1,500 miles or 750 for each car which is a lot more reasonable. Brainfart.

ccwishon

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #17 on: January 23, 2013, 02:20:09 PM »
Thank you for all the feedback!

To answer a few questions:

It's a 3 year lease, so I won't be paying into the eternities, thankfully.
The total cost of buying the car is ~$30k
In my area of California, a large percentage of our electricity comes from wind power and other "green" methods
And yes, I am a she.

smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #18 on: January 23, 2013, 02:29:41 PM »
Thank you for all the feedback!

To answer a few questions:

It's a 3 year lease, so I won't be paying into the eternities, thankfully.
The total cost of buying the car is ~$30k
In my area of California, a large percentage of our electricity comes from wind power and other "green" methods
And yes, I am a she.

I thought that was obvious.

What kind of car is it again?

StarswirlTheMustached

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #19 on: January 23, 2013, 05:16:48 PM »
And yes, I am a she.

I thought that was obvious.


Obvious? How? I wasn't even forming a guess on OP's gender from this thread... and really don't know how it's relevant to the discussion about her car. Though, in hindsight, the job at an elementary school makes it statistically very likely she's a she-- but even if I'd noticed that I still wouldn't have thought "obviously no Y chromosome here". What am I missing?

ccwishon,
When you say the total cost of buying the car is 30k, is that the cost of ownership over the three year lease, or the cost of buying the car at the end of it? Surely it cannot be both.
In any case, yes, you probably could have saved money on a used, gasoline powered vehicle-- but if you're saving 50% already, that means you get to make some decisions based on principle. You also would not have had the piece of mind knowing you've got a very low-maintenance vehicle under warranty, and you did say reliability was important to you.
But here's the deal-- you've signed the lease. You've got the car. You're stuck with it now, so you need to find a way to be happy with it.


smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #21 on: January 23, 2013, 06:22:12 PM »
You do realize that the difference between leasing a Leaf and leasing a fancy new and equivalently priced WRX is about $7500 in U.S. government kickbacks applied to the cap cost of the vehicle?  Which in turn makes a Leaf roughly 40% cheaper to lease than a WRX, and that's before you figure in the amazing fuel savings?

In other words, your real life example sheds no light on the process of leasing an electric vehicle that's massively subsidized by the government.   She's paying $150 out of pocket and you're paying more than 4x that!

So who needs to step back and look at total cost again?

Thank you for the lovely personal attack.

My comment was not that (s)he should not be leasing an electric vehicle. Actually, in both my posts I supported the idea. My comment was, as others have said, by focusing on the monthly payment, you are forgetting the over all cost, and could end up paying far more than if you focused on the total cost.

I openly admit my car, my choice, is not the MMM approved one. I use it because it is an easy source of real world numbers. When you read my post, you'll notice I openly say the better choice would have been a used Honda Fit.

What I'm failing to see, is how focusing on the fact that the OP is paying $150 above and beyond what they paid per month for their 14 year old corolla is superior to looking at what the full cost of the new car is above the corolla (or any other replacement). It is very possible that after the $7500 US government discount, and the decreased per-mile-cost of using electricity from the grid instead of gasoline, that the Leaf (or Mitsubishi, Mini, or Toyota, or whever other electric car the OP is leasing) is the better choice. But by focusing on the monthly payments only you run the risk of ending up in a situation where a very long set of payments substantially increases the amount paid to both the seller and the lender.

Edited to clean up typos, and remove a point where I misread something smedleyb wrote

Sorry for appearing to attack you.

What I'm driving at is that over the next 4 years (U.S. leases run 2-3 years, nevertheless), you're paying 22K for the WRX (the value of the car you "use" + taxes, fees) which works to $22K, plus lets say $10k in gas over than time span.  That's $32K over 4 years in car costs, or roughly $650 a month. 

CC the OP, meanwhile, pays $150 a month out of pocket total for 4 years, which works to around $7200.  CC ends up with $24K more in cash over that time (with no equity in the car, like you),  even though both of your cars cost roughly the same new.

My basic point is this:  leasing a car is the most unmustachian way to get into a car, without a doubt.  But in the case of leasing an electric car whose cost has been subsidized by Uncle Sam and where the monthly operating costs/payments stand are around $150, one can make a very mustachinan case for "renting" an environmentally friendly electric car for what most households spend every month on basic cable programming.

I've never in my life advocated leasing, but the math actually works (i.e., is consistent with mustachian principles) in this case.

BTW, the WRX is an amazing car.  Sounds like a blast drive, really.  Your choice is your choice, and I'm not judging you in the least.   


jba302

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #22 on: January 24, 2013, 11:40:13 AM »
With this, I get the benefit of having a reliable car (I'm disabled, so this is a must for me for work), using the HOV lane (which really helps with the commute! Yes, I know I should move closer to work), and supporting my values (electricity vs. fossil fuels).

As far as I'm concerned, the more electric cars, the more demand for electric car infrastructure, the less fossil fuel consumption, the better.  It's a virtuous circle which might require all of us to kick in a little every month to make it happen.   

This is a bit of an aside, but did you know that for the US, that 72.7% of the electricity generated by electric utilities in 2010 came from fossil fuels? Of course this might vary depending on your location, but not everyone realizes that the electricity itself might still come from fossil fuels.

Source: http://www.eia.gov/electricity/annual/html/table2.1a.cfm
Section: Electricity Generators, Electric Utilities

But consider that the efficiency of a gas engine is really shitty, especially when compared to a gas burning power plant and even including loss of power during transport. I've read that the carbon output of an EV powered by a coal plant is the equivalent of a 45-50 mpg gas vehicle all things considered (so actual energy efficiency when considering the creation of energy at a power plant vs in the car).

Additionally, the plant has more opportunity for power generation sources, and even a micro-bump in the efficiency of a source would result in a major supply to the grid. At that point, it only makes sense to make the trainsition, except for the fact that the batteries are hella toxic to produce which should probably get worked on.

skyrefuge

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #23 on: January 24, 2013, 01:12:48 PM »
CC the OP, meanwhile, pays $150 a month out of pocket total for 4 years

No, her lease payment is $260/month. The original $150 figure appears to be the differential between the total monthly cost to own and operate her current car vs. her previous car, which is a meaningless figure in this discussion. Any comparisons in that domain should be between leasing-vs.-loan costs of the same car, not between two different cars.

smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #24 on: January 24, 2013, 01:47:19 PM »
CC the OP, meanwhile, pays $150 a month out of pocket total for 4 years

No, her lease payment is $260/month. The original $150 figure appears to be the differential between the total monthly cost to own and operate her current car vs. her previous car, which is a meaningless figure in this discussion. Any comparisons in that domain should be between leasing-vs.-loan costs of the same car, not between two different cars.

Yes, like I said, her monthly out of pocket expense for her car is $150.

edit: got it. 

If the dealer applied the electric car credit to the cap cost, the lease is much, much cheaper on a monthly basis (basing this on my research into the Leaf, which was $270 a month to lease vs over $550 for a traditional loan). 
« Last Edit: January 24, 2013, 01:56:07 PM by smedleyb »

dahlink

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #25 on: January 26, 2013, 05:10:37 PM »
I don't think you need a slap in the face at all.  You have no debt and save %50 of your income.  Sounds like its not too bad.   The only trouble maybe is what to do once that lease is up and how many miles allowed, etc.  It's my understanding that leasing is generally a bad idea because you are paying for the cost of the first 3 years of the life of the car.  These 3 years usually are the heaviest years of depreciation and you will be paying for that.  Buying a used car after that period (buying not taking a loan) from a private party is my understanding of what MMM would do.  Fortunately, a big chunk of the depreciation is taken out due to the subsidy in this case.

Skyn_Flynt

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #26 on: January 26, 2013, 05:53:25 PM »
Don't beat yourself up over decisions already made. $150/mo is not that much for a reliable automobile, and it's easy to spend that much on repairs for an older paid-off vehicle (if you cannot do them yourself).

Keep studying the forum and look for fresh ways to save.

jnik

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #27 on: January 27, 2013, 07:22:37 AM »
This is a bit of an aside, but did you know that for the US, that 72.7% of the electricity generated by electric utilities in 2010 came from fossil fuels? Of course this might vary depending on your location, but not everyone realizes that the electricity itself might still come from fossil fuels.
Sure, but electricity can be generated from other sources and used to run your car. Hard to shove a windmill in the gas tank of a gasoline-only car. The electric car isn't the whole solution, but it's one step.

ccwishon: depending on the nature of your disability, "moving closer" may not be as advantageous. It's nice to spend less time in the car, but the Big Win is when you can start getting to work without the car. A moderate driving commute if the route has low congestion, on electric, able to use the HOV lane may be "good enough"--of course, all those aspects may change over the years. Given that you're presumably contractually tied into the lease, I'd continue on until there's about a year left, then start looking at your options. Just as an example, Sheldon spent the last year of his life riding a tricycle when the MS got too bad for him to balance a bicycle.

grantmeaname

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #28 on: January 27, 2013, 08:38:11 AM »
This is a bit of an aside, but did you know that for the US, that 72.7% of the electricity generated by electric utilities in 2010 came from fossil fuels? Of course this might vary depending on your location, but not everyone realizes that the electricity itself might still come from fossil fuels.

It's a valuable aside.
It's worth pointing out that coal, natural gas, nuclear, the renewables, and some of the petroleum are domestically produced, so you're looking at something like half of the .9% of electricity generated from petroleum as an imported fuel source. That compares pretty favorably to the ~50% of your car's gasoline that gets imported. There's ecological as well as geopolitical costs to fossil fuels, of course, and the ecological costs of coal are not trivial, but the 98% reduction in fuel importation for your driving convenience is worth mentioning.

And yes, I am a she.
I thought that was obvious.
Obvious? How?
It's obvious from where it was explicitly stated in another thread. I don't think it was so clear from this one alone.

smedleyb

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #29 on: January 27, 2013, 12:55:09 PM »
And yes, I am a she.
I thought that was obvious.
Obvious? How?
It's obvious from where it was explicitly stated in another thread. I don't think it was so clear from this one alone.

My innocent attempt at a compliment to an articulate poster has spawned a life of it's own.   Did not mean to offend!  My apologies to the OP if my remarks are construed any other way but complimentary. 

Now where were we?

Oh yes, electric cars!  Leave it to Grant to bring the hard data to the table.  Cutting petrol imports by 98%?  The geo-eco-enviro-political benefits are too numerous to describe. 

Did a little digging last night and see that Nissan is now offering a 3 year lease on a Leaf for $219 a month plus taxes, which in my case would be 8%.   So that's about $235 a month in payments for a car that stickers for $35,000.  Plus $2000 up front and an additional $1000 for decent battery charger.  In most scenarios (figuring in gas savings) that works to about $150 a month over 36 months in cash out of pocket for a fancy new electric car.  I'm sorry but this quality of this lease deal is orders of magnitudes greater than any other lease I've seen. 

Obviously this car is not perfect for everyone's needs (range is sketchy), and the economics of buying a quality 5K car are far superior to any other method of auto purchase, but I'm of the opinion that if a Mustachian want's to indulge on forbidden fruit (buying new), this is the only deal (and perhaps other equivalent deals) that makes sense financially, and that's before we get into the positive ripple effects the purchase has on the world around us.   




ccwishon

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Re: Auto Lease vs. Auto Loan -- Do I need a slap in the face?
« Reply #30 on: January 28, 2013, 12:24:49 PM »
Thank you all for your feedback and advice!

And no problem, no offense taken!