O/T LEASING OR BUYING

After all these years, and these gazillion car aquisitions, I still don't understand the benefits of Leasing as upposed to buying, or vice-versa. My wife is OOT visiting family, and is about to get her dream car as a surprise birthday present (645i Conv). I'm trading in her '04 GX470. I was going to pay cash for the balance....one of the dealeship salesmen suggested a 1 pay lease, another suggested a conventional 36 month lease. She'll keep the car at least 3 years, and will drive about 15k per year. I'm writing off the PCar as my business car. Paying cash for the balance is not a problem. What would you guys suggest.

Pay cash. Leases are good for expense write offs and those who can't really afford the car, besides that 6 series may be a keeper

The term (3 years) and mileage (15K per year) put her in the sweet spot for a lease. I'm assuming the one pay lease deal would be separate from the trade/sale of the GX and would allow the dealership to write you a check for the fmv of the GX or you would sell it privately. However, IMO there is NO reason to trade in a car (and give up your equity) toward a lease in an effort to lower your monthly lease payment. In that situation, at the end of the lease, you would end up with nothing and would need to start the process all over again. I would consider trading the GX (if you don't want to bother selling it privately) and FINANCING the balance of the BMW over as short a term as you can live with. Rates are still quite low and the BMW is likely to hold its value through the term of the loan so you will have something of value at the end. You can also finance the BMW on a home line (assuming you are disciplined enough to make a payment every month against the line) and thereby take advantage of the tax deductbility of the loan interest.

Run that one by me again, please?

Richard - Check out the lease site below. Key in your ZIP, and since you already know what make and model you want click on the GO button on the left. Then choose the appropriate year, make and model from the drop down boxes and select the term in months and the mileage per year. You will get the monthly lease payment. Click on the payment and see the details of the lease, residual value, etc. Much lower payments than if you were buying and paying installment payments. Cap cost reduction is capital cost reduction (down payment to reduce the amount financed) and money factor is the cost of money. To determine interest rate take money factor times 24 (Example: money factor 0.00305 X 24 = 0.0732 = 7.32%). I hope this helps. http://www.leasecompare.com/

I've leased plenty of cars in the past and I used to write off the lease payments through my business. I also used to want a new car every 3 years, and my mileage was always low. A few years ago that changed and I started putting 15-20K miles a year on the car so I bought the 2004 Porsche. I like the idea of leasing when you are in and out of a car in 3 years, you only pay for what you use. Rob

Richard, if you have a home equity line of credit and have enough money to pull out you can withdraw the money from that equity credit line and then pay "cash" for the BMW. You then have an equity credit line balance that you are paying (with interest) every month and that is considered a "2nd mortgage" to which you can deduct the interest paid when you file your taxes. For me (and my wife) our next car we will just pay cash for so there is NO interest to pay. Our rationale for this thinking is that we could invest to $100K or pay cash for a $100K car. But, unless your investment is GOING to return at least what you would have paid in interest it doesn't make sense. Besides, we hate to owe anything in our house. Don't carry any balances around here! But to each his own. Question to ask yourself is do you think she will want to get rid of it in "36 months and 45K miles"???

If you own a home, you can sign up for a home equity credit line. As an example, let's say your home has a market (appraised) value of $500K and your mortgage is $250K. Banks will typically let you borrow 80-90% od your home appraised value or in this example, $400-$450K total. This would leave you with the ability to borrow, let's say, $150K on you equity credit line. These lines are used by folks to finance home improvements, educations, BMWs , etc. So you are borrowing against the equity in your house basically. These loans typically require a monthly "interest only" payment and this interest is tax deductible. Therefore, if you borrow at 5% and you are in the 40% tax bracket (fed and state combined), your after tax cost is really only 3%. But I think you would want to pay principal along with the interest every month so that when you sell the car you are not left with the original principal amount on your equity credit line. Does this help??

Wow! In the time I was typing my response, Rob and Tim beat me to a reply! NEWMAN! Also, we are thinking about leasing our next SUV since we can't imagine keeping it for more than 3 years and that way we can just give it back and only paid for what we used like Rob said.

Plus you can is to put $0 (zero) down. Your monthly payments will be a little higher but if you plan to walk away at the end of the lease then you don't have lump sum cash in the car. However, reduction in payment by putting money down versus higher payment and no money down is usually a wash when you factor interest payment avoided versus interest gained by keeping the cash.

I'm in agreement with all of the comments by Rob and Dell. If you are headed toward leasing, the one pay is worth looking at if you have the cash. You basically pay the entire lease up front but the dealer "shrinks" the interest out. In other words, the one pay amount should be a few grand less than the sum of the monthly lease payments. At this point, the money factor that Tim mentions comes into play. If you have the cash for the one pay but think you can invest it (as Dell suggests) at a higher rate than the money factor, then go with a monthly lease payment. Your interest income on the cash can be put toward your monthly lease payment and you will have your cash left at the end of the lease (of course you will pay tax on your investment earnings). I think we've beat this horse to death!

Richard - If you do decide to lease, then do your homework. Do not, I repeat, do NOT lease through the dealer! I am leasing my wife's 2005 MB CLK and the MB lease was going to be $120 higher that the lease I got through Lease Compare. Same car price, same term length, but MB money factor was much higher and the residual was much lower, so I would have ended up paying for more depreciation. I am also leasing the P-car. I was looking at a new Silver '04 996 at the local dealer (which I didn't buy) and the Porsche Lease was going to be $75 higher than the lease through Lease Compare. Also, negotiate the price of the car just as if you were buying the car, because you ARE buying the car. Then contact your leasing company. They will handle the rest after the normal paper work. If you use or have access to Microsoft Excel, PM me with your email address and I will send you a spreadsheet that calculates and explains all of the components of a lease.

Henry Ford once said;' Buy appreciating assets and rent depreciating ones'. Bis wise leasing makes alot of sense. In our practice we lease our cars, the practice pays in pretax dollars(up to 75% tax deductable), minimal down payment, usually 0 down/0 sec deposit to minimize upfront out of pocket money. Only pay for what you use, walk in three years to a new car with a full warranty. P cars f that up because they form an emotional attachment, then you can just buy it as a perk at lease end at residual value, while the practice/bis has actuually paid for half the car and you're the only one whose ever driven/farted in or anything else in that car. Kind of like getting a car at 1/2 price in a way. Only good for a car you really want to keep long term, ie a porsche for example. Leasing is not for everyone, works well in a medical practice, but NYS laws have f'd up leasing up here but good. I've leased my personal cars in the past as well, esp if they are disposable (family SUV, etc), use it/ drive it for three years, then get a nice new car and start over. Never stuck with a car you don't really want long term, no resale hassles, only pay for what you use when the car is fresh. Perfect for the wife that is hard on cars, like mine. Most women don't really form a meaningful relationship with a car anyway, they're ready for a new one every three years. they'll be some other car she likes more in three years when this one is ratted out, trust me Richard. Good luck.

I agree with all comments and would simply add that the 2 largest benefits to leasing are that if the car is for business purposes then most of the lease can be a tax deduction. But assuming you can buy through a homequity line that benefit may be realized with an interest deduction. I think there are limitations as to what you can deduct on homequity interest so check that one out. The other benefit is the option to purchase. If the resale on the car falls out of bed you don't buy at the end and if the value is there then you do buy. You are not playing the market as you would if you actually bought the car. That option may be worth something to you. I know a lot of people who leased and then found out the car was worth less than the residual at lease end. SO the leasing company took the hit in those cases when the cars were turned back in. Or the leasing company let the leasees buy for less than the residual, a win for the leasee again.

Porsche financial actually has a program called MVP, market value pricing as opposed to residual value pricing (higher). In an attempt to retain the customer, avoid auction (PAG despises auctions), they will offer the car back to the dealer or customer at market value, 100% of dealers know about this program, 75% participate. Not sure I would use a home equity line to buy a car, and still pay for it years after it is gone, leveraging your home against it.

Surgeon...do you really fart in your car? Damn. RL....I think you ought to sell the Porsche and the GX, and buy a couple of beat up old Hondas. Then send 'em to me so we can Pimp Yo' Ride.

You have a PM.

I own the Porsche, and I'm NOT selling.....as the Doc said, it's emotional!!!!! As to the GX, and my wifey's situation, I can't count the cars I've "taken" away from her, and if it were her choice, I PROMISE she'd keep a car 5 years ......let's see, it's been (this is gonna get embarrassing)....2 Escalades, 1 Range Rover (that was her fav), 1 X5, 1 S500, 1 S430.....we've been together since '97, so I think I'm going to quit the list before someone sends an ambulance!!!!

Save some cash, man just lease her the car, then she can get something else later. But, I know my wife never changes her mind.

I just leased a 2003 C4 Cab, My rationale is as follows 1) only want car for 3 yrs, will buy a new 997 S cab at the end 2) I like to know that I have at least one buyer, Porsche Financial, waiting for me in 36 mths, I can always buy it and resell if the value holds up or I can give it back to porsche 3) Financially, I am not paying interest or fronting my cash (i.e. personal equity) on the portion of the car I m not using. Meaning, I could have paid cash, but have that invested rather than sitting idle in a car earning negative %, or even if I financined it, I am not paying interest on the portion of the car I never intend to own 4) I do not take a tax deduction so I was not motivated by that 5) I am a believer in maintaining maximum personal liquidity, the less cash I have to give someone and the more cash I control, puts me in the driverseat if I hit a bump in the road or want to capitalize on an investment oppty. always use OPM (others peoples money) For instance, assume you had a $1 million house, would you rather have a $1 million mortage and $1 million of cash in the bank or no mortgage and thus no cash?

I would rather have the house and no mortgage...an appreciating asset, cash is a depreciating asset by itself, and at least around here you can earn more on real estate than any other conservative investment and you don't have to pay income tax on the return.

Just wondering, I have a HomeEquity Loan here in Australia and you are not permitted to claim interest as a Tax deduction. The rationale is is that your home is not an investment (you live in it as opposed to a true investment property) So, in light of this, how is it done overthere? or am I missing something? Thanks Jason

Lots of good info on this thread. The only caution I have is don't put down a large down payment just to get your lease payments down. I had a friend who put $10K down on his 997 lease and within three months his car was totalled. Bye bye $10K.

To me the biggest disadvantage of a lease is loss of flexibility. Despite leaseswap.com, it can be very hard to get out of a lease if you decide you don't like a car or like something else better. If you do decide to lease, as someone else suggested, you MUST do your homework. Time and time again I've had what seemed to be reputable dealers pad the lease with fees that were never disclosed up front. After I run the numbers independently and come up $50/month cheaper or whatever, they usually fess up that "oh yeah, we didn't tell you about the blah-blah fee?". I think that this is the reason dealers like leases so much. It's very easy to hoodwink the buyer into paying a little extra each month. Sort of the gift that keeps on giving--$50/month, $600/year, over the 3 years the dealer pockets an extra $1800. Very hard for dealers to resist.

Don't put ANY money down on a lease, I don't even put the taxes down, let them roll it into the lease payment. The reason for this is the example Fast1 gave... if anything happens to your car you will lose any money you put down. And besides the major advantage of leasing is not putting any money down. Rob

Previously, my negative with leasing was that the theory was good, but the implementation didn't work for me. They tell you that you'll not have your funds in a piece of depreciating hardware, and you can put it in some instrument to realize a gain.....my problem has been, and I don't think I'm alone here, I'd find myself with disposable cash, buy some crap I really didn't need, and wind up w/a payment. I think it requires investment discipline, or you might as well buy, and not have the payment. Still pondering...... Meanwhile, picture this scenario.....dinner at the Palm, in Nashville, for wife's birthday....arrive in the GX 470....while we're dining, the BMW dude arrives, gives the Valet a twenty....gives him a giant red bow to put on the '05 645i Convert...black w/cream interior.....we come out, give the valet our ticket, and out comes the birthday present......she'll freak, especially if there's a line waiting for their cars..... I can't wait!!!!!!!!

Great plan. Personally, the 6 doesn't do much for me, but I think your execution sounds awesome if you pull it off!

Richard - Neat plan. Did you read the "Diamond Package Option" thread on the 997 Forum? Some guy is getting a new '06 997 and is planning on having a pair of diamond earrings in the glove box (no, Dell, not for himself, for his WIFE!) to give to his wife when he brings the car home. Maybe you could switch that whole process around and put a certificate for multi P-car mods in the BMW glove box. You can lease her BMW and you'll have a lot of cash on hand. Then, instead of buying some crap you really don't need (remember those are your words, not mine), you can spend it on the P-car! BTW, when is your wife's birthday? Are you going to be pressed for time or do you have a few weeks to work everything out? (Dell, you really MUST try to focus more. Having to stop in mid-sentence to explain things to you really hurts the flow of the thread!) OK, Dell, I know I've got one or two coming my way soon!

You gotta get a cheaper wife

It doesn't have to do much for you.....it's HER fantasy car!!!!

Wednesday is the big day....the car is sitting at BMW of Nashville. If I'd had time, I'd have planned a European Delivery trip....you save 7k on that model. I did that trip once before (honeymoon '01), when we bought an M5, picked it up in Munich, and drove through Germany, France,Switzerland, and Italy.....great trip.... amazed at how polite the Germans were in the speed lane on the Autobahn....no honking, and hollering!!!!!

I recently had a 645i convertible keep up with my, or at least try on the NY State Thruway. The car is definitely not slow, I had to throw into 5th to pull away. Great idea Richard, and please post pics when you have the car. Rob

Damn!!!!! I leave for the day and come back to this? Richard, great idea on the car and surprise plan! Don't care what others say about the 6-series since this is for YOUR wife not for the critics. nice car nonetheless. Tim, yup, you're right, you got a few comin' to ya! FYI.......the wife and I picked up ANOTHER PORSCHE today! That's where we've been all day. (No Richard, not the GT3.....not till next spring we decided). It's bad enough we already have 4 cars! KEEP US POSTED ABOUT THE SURPRISE CAR SWAP AND DELIVER!!!

Whoa, Nellie.....a Cayenne? In addition to the MB ML 430? Go, man!!!!! I wish that had been my wife's fantasy car....what color, what specs???? I can see those 22" wheels in your future!!!!! By the way, Boston's loss softened the blow of the Yankee loss......our starting pitchers are supposed to be back within the next 10 days (Pavano, Wright), so it should be an interesting stretch run!!!!!

The only thing nice leasing with Porsche is that Gap insurance is included, does leasecompare offer that? just wondering, I may be ordering a new 997 soon and will prob lease again with Porsche,plus on my Cayenne S lease I have a Porsche financial letter that says I could take the vehicle off roading and recreational drives

I believe that Lease Compare does include the gap protection. In fact, I think most leases include that now.

Dell, what the hell? (hey, that rhymes!... sorry... got to stay focused! OK, let's start again!) Dell, what the hell? New Porsche and no pics? You know the rules! Pics... pics... we LOVE PICS... we NEED pics! Congrads on the new addition. Is it a Cayenne?

Oh crap, I knew I would get caught! Pics to come later this afternoon. My most sincere apologies

ok Guys....she's putting finishing touches to makeup, and we're off to the Palm.....wish me luck.....I saw the car today.....the key is giftwrapped.....big red bow......all is in order....the valets know to keep it up front!!!!! later

WAHOOOOOOO!!!!! Good luck Richard. Can't wait to see pics and hear how it went By the way, did you get the pics of the new 955 I emailed you?

Good luck man!

Dell - You mean you emailed pics to Richard and didn't post any of them HERE?!?!!! We are not feeling the love here! We WANT pics... we NEED pics... we LOVE pics! PICS... PICS... PICS... PICS!!!

Good luck Richard! I hope it goes as smoothly as planned!

Oh crap.....busted again. That's twice in 1 frickin thread. Needless to say I have aksed for it. standy for pics (have to race upstairs to the other computer)..................

Pics as promised on the new Pepper.

Dell � Nice pics! Thanks for sharing, finally! Since you included your 996 cab in one of the pics they can�t be considered O/T on the 996 Forum! OK, I�ll say it before you do� yes, the space between the wheel well and the tire on my 996 does resemble your 955! In other words, no, I have not yet lowered my car. See, I even �jab� myself on occasion!

Thanks! Like how I snuck in the 911? As for your 4X4 911, time to remove the "maybe" after RoWM030 in your sig. Unless of course you got your 911 with the air suspension and have it on the off-roading setting

Yeah, that's it, I have the air suspension optios and I just didn't know it! Now all I have to do is figure how to let some of the air out of the system!