Leasing Thoughts...

Everyone says lease; let the leasing company take the hit if the car depreciates. From my understanding, the leasing company makes money on the cost of funds. They do not want to loose money if the car is worth less in the end, correct? Are there tax consequences that I'm unaware of? If the leasing compay pegs the residual at, say, $60K in three years and the market at the time the lease is up puts the price in at $55K, doesn't the leasing company loose? I'm thinking leasing companies stay in business by getting these numbers correct. They can't really make it up because if the car is workth $65K, the owner will buy out the car for $60K and flip it. Thoughts?

Most of Ford, GM and Chrysler's finance arm losses (add to that Nissan/Infiniti, etc.) have been around missing residual values. That's why the lease deals on most cars are not nearly as good as they were 2-5 years ago. The leasing companies are betting they can get close to the residual...if they don't, it's good night irene...note that GE Capital, perhaps the largest leasing company period, closed their retai automotive lease arm about a year ago due to falling residuals. I just leased with US Bank and I'd be surprised if they can get $40 k for my C4 in 3 years...but that's their problem, not mine!

Sounds like you should do a lease vs. buy analysis tree. Wazoo is right. Several HUGE financial companies have lost $200+ million dollars in residual vs. market differences. Let them worry about that. Theoritically: The advantage of a lease is that it you can drive more car than you can afford and/or would want to buy outright. Your lease payments cover depreciation and mileage, allowing you to invest the principal (opportunity to invest with a return) elsewhere. My opinion: I would lease a new 996. 996's have been soft. We leased our 02' 996 C4 Cab. I could have bought an 01' set up the same way for $30K less than our $100k sticker 02'. The projected resale (my loss of dollars on a purchase) of the 01' didn't make sense. On the other hand, my 97'S was bought for $65K in 98' and sold for $59,5K in 2002. I may never see that deal again. <img src="graemlins/crying.gif" border="0" alt="[crying]" /> We sold it to help with the landscaping on the new house. Just my $.02 Tom 02C4 Cab 97S Sold for a palm tree

Tom, I seriously looked at leasing an '02 but the deal on the '00 was too good. Assume you were able to pick up the '02 at dealer wholesale?

I wish it was close to wholesale. I still have not heard of anyone getting wholesale. Maybe a 5% to 7% discount off of a 13%/14% mark-up. Unfortunately, we got it in Dec 01. They were too hot for the dealers to let go of. Got it just below sticker, with a money rate at their cost of funds. FWI- My close friend sold his 01 C4 Coupe,6spd, 3K, all options for 62K this past week. Regards, Tom

Actually the rediculous deals seem to be on 01's right now. I just picked up a 01 C4 with 3 full years left on warranty for about $670/month plus tax (three year lease). The residuals on 2001's seem to be higher than on 2002's (!) For instance, go to Leasecompare.com and run a 01 C4 and then a 02 C4S with the same mileage. The 01 C4 will be worth more in three years than the 02 C4S... (!!!) Something must be wrong with the residuals of the leases but hey, take advantage... :-)

Wow, $670 on an 01...heck of a deal. Congratulations. The lease deals are awfully good now. The residuals will likely fall after the first of the year. I also did the #s on leasecompare and agree, strange how some of the #s came back. There's a nice aol instant messenger feature on leasecompare...you can im the president (he answered my instant messages and answered questions...good guy).