Quote:
Originally Posted by vivekiny2k depends. usually leases are designed to recover upto one third of the price at the end of 3 years. Not all cars depreciate that fast. you can buy it out and sell it and recover some of your money. Here are lease terms for a civic. I am convinced that at the end of that period, a well maintained civic HF can fetch more than 12539 (money one will need to pay to buy it out).
Factor in time value of money and you will see you are getting it at a very low interest rate. |
Here are some things that is not considered in above quote.
The terms of early termination could be very high. Example, what if the car gets stolen or totaled? In such cases, insurance pay-outs often fall far short of the balance due on the lease leaving you holding the bag.
Mostly monthly payment consists of depreciation and interest. The depreciation part of the payment is calculated by taking the difference between the cap cost and the residual (the total depreciation over the lease) and dividing it by the number of months. In effect, you are paying off the depreciation with equal payments each month.
We know that a car depreciates much more rapidly in the earlier years with the biggest hit occurring the day you drive the car off the lot. So when you terminate the lease before you have paid all of the depreciation, you will likely be required to pay the difference between what the car is worth and how much you have paid on the depreciation.
Again, all this make sense if one does 12k miles a year or less. If one exceeds, all this economics go out of window. For me its a big deal because i do more than 15k miles a year. One will have to be so conscious while doing any trip or something.
As for civic retaining its value, indeed it will, but then same cannot be said about other cars like BMW 328i or Focus or Malibu when bought on lease. Its like picking up the most reliable one, take it on lease and buy it out later.
Also some brand new cars like mini cooper, civic, focus and many other cars have interest rate of 0.99%. I don't think it can be beaten by leasing. My friend who got Genesis sedan had option of leasing. He decide to buy it on loan as he was getting it at 1.99%. Also chances of ending up paying more at 3 yrs was more even though Hyundai has assurance program that your cars are protected for value till 3 years.
We have to consider the Insurance also. Leasing companies tend to require higher amounts of insurance coverage than you may normally carry. This could impact your insurance cost considerably.
Also, you require higher than normal credit history to be eligible for lease. Otherwise you end up paying higher. The civic quote you gave is only if you are qualified. If not, you will end up paying more. And atleast from Nissan's dealership, i know that they require more than 730 of credit score to get a decent lease for a good car (Altima). A new buyer especially from outside USA won't have that credit score and so will end up paying more.
And finally i will say this, when you lease a car, you are renting it. The lease company retains ownership of the car and you pay for the privilege of driving (and maintaining) it. For many who have "owned" cars all their lives, this may be a psychological barrier. I am one of them.
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