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Saab leases are NOT a level playing field.... Posted by Mike Lynch [Email]  (#81) [Profile/Gallery]
(more from Mike Lynch) on Tue, 1 Apr 2003 16:27:04
In Reply to: All you who have leased... why? advantages? [+], Bjorn, Mon, 31 Mar 2003 13:45:56 Members do not see ads below this line. - Help Keep This Site Online - Signup |
First let me conclude by saying, that whether you lease or whether you buy, you'll spend the same amount of money to own the car for the same period of time.
With leasing the payments are substantially lower. You have the option to purchase the car for the residual/buyout OR NOT at the end of the lease term. This is important as Saabs leased in 2000 have residual/buyouts their are generally agreed to be too high, which means the lease company eats the difference in the lower value at auction, not you. This is really important to Ford Explorer lessee's who were pre-Firestone rollover debacle. These folks avoided massive losses by leasing.
Should the opposite situation occur, the vehicle is worth more than the residual/buyout, than you can gain that equity BEFORE the lease ends by trading or selling the car. After the lease ends the car belongs to the lease company and you can lose out.
Even someone who intends to keep the vehicle after the lease can have the benefit of lower payments and the assurance of a fixed residual/buyout. If they buyout the car at the end of the lease term and finance that amount, the net effect is just a longer term.
The more expensive the car, the more leasing is done, as the people who have the money to afford expensive cars also have a better place to put that money than investing in a depreciating asset.
Saab leases don't quite fit the model as Saab has so many different programs. One incentive for financing, no incentive for low rate financing, and another incentive for leasing. Often the lease with a Saab can be the best overall deal because Saab combines a large incentive and a low rate with the lease. The purchase incentives can be larger, but they are never combined with low rates. It's really muddled now as Saab is offering 0% for 60 months OR the incentive. When it was 3.9% like last month it was a much easier decision, incentive or rate. Now the interesest savings at 60 months at 0% is almost always better than the incentive except with the convertibles and perhaps the 9-5 Linears.
So with Saab you have to look at the lease vs. financing on a model by model basis and what was smart last month may not be best this month as the programs change.
Another way to see the benefits of leasing is to add up the difference in payments and total payments. Take the Saab lease special $399 x 48 months with $3,500 down and a $15,635 buyout. Well if you purchase the same car with $3,500 down for 60 months at 0% payments are $650ish. So that's a $221ish savings (payment is actually $429 including tax) times 48 mos = $10,608 and another year at $650 x 12 = $7,800 for a total of $18,408. That compares with a lease buyout of $15,635 + tax and lic = $17,042. Add in the finance charge on the $17,402 and we're back to my original conclusion, leasing or purchasing cost the same for the same period of time. Some folks would feel that $1,500 over 5 years isn't that big of a deal and $221 month is negligible. Others can't afford or don't want to spend $600ish, but if they can do $400ish then they feel OK about it.
Leasing allows you to own more car for less payment. Leasing screws the government out of their sales tax as on a lease you pay only tax on the payment instead of with a purchase paying tax on the whole amount. Leasing protects you from downward resale trends, but allows you to take advantage of upward trends. Leasing can still work even if you don't get a new car every 3-4 years, but leasing is the only way if you do.
posted by 207.158.49...
, Tue, 1 Apr 2003 16:27:04 <-- Viewing This Message
, Tue, 1 Apr 2003 13:42:12
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