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Leasing Vs Buying A Car (Pros and Cons) | How to Calculate a Car Lease Payment

Leasing Vs Buying A Car (Pros and Cons) | How to Calculate a Car Lease Payment

Well, yet another week and yet another Finance
Friday video. So as I said last week the car is the most
expensive purchase most people make that goes down in value. Now with that in mind wouldn’t it make sense
that you wouldn’t want to make a big purchase on something that is almost guaranteed to
go down in value? What if you didn’t actually buy the car at
all? Would that be better for your financial Foundation? That’s what we’re going to be talking about
today as you can see by the title of the video today we’re going to be talking about leasing
versus buying a car. Hey everyone, Daniel here and welcome to Next
Level Life a channel where you can learn about Investing, debt, retirement, and many other
general financial education videos because the school’s aren’t going to do it for us. So if any of those topics sound interesting
to you or if you want to learn how to better handle your money and have more financial
freedom be sure to hit that subscribe button and the bell next to my name to be notified
every time I upload a video. So I thought talking about this would be a
good follow-up to last week’s video on the 20, 4, 10 rule. So today I’m going to be talking about what
leasing a car is and how it differs from buying a car, some of the benefits and downsides
of both Leasing and buying. I’ll show you how a car lease payment is
calculated and then doing a bit of a mathematical comparison between the two options where I
will also tell you how Dave Ramsey says that car leases charge you an effective interest
rate of about 14% or 15%. This is going to be a bit of a longer video,
so let’s get started. So first let’s define the difference between
Leasing and buying a car. The best way that I can explain it is to say
that leasing a car is basically just renting the car. Similar to how you might decide to rent an
apartment instead of buying a house. When you lease a car the lessor or the person
holding the lease rents the car to the lessee, or you, for a specified period of time in
return for periodic payments. Now that sounds in many ways very similar
to what happens when you sign a car loan right? You got the car in return for making regular
payments to the loaner. The difference, of course, is that once you
finish paying off the car loan you own it. However, when you lease a car and the lease
term ends you trade the car in and assuming you sign another lease you get a new one. This means that at no point in time do you
actually own the car. It is never an asset for you. Whereas if you were to sign a car loan and
make payments the car would be an asset to you after the final payment is made. Now, of course, you can decide to purchase
the car that you least out right at the end of the lease, that is an option, but not a
whole lot of people do that and we’ll get to why that is later in the video. But first, let’s talk about some of the benefits
of leasing a vehicle. The first benefit that people often point
to is that under most circumstances unless you make a really big down payment when you
buy a car the monthly payment on a lease is generally going to be lower than the monthly
payment on a car loan. And again I will show you exactly why that
is when I get to the comparative example but for now, let’s just go through the benefits. The second benefit that people often pointers
that there’s no need to worry about selling your car at the end of the lease term because
when the lease term ends as I said is simply drop the car off at the dealership and either
sign a new lease or move on to some other car buying strategy. The third benefit to leasing that many people
point to is that the car often times remains covered under a warranty because the lease
terms generally don’t last more than say 3 or 4 years and sometimes they’re even shorter. And since the warranty on most cars is roughly
the same as the lease length or at least the average lease length you often times have
a more predictable total cost of car ownership. And some leases may even include basic maintenance
so if that’s the case you’re only cost would be insurance and fuel. The fourth benefit that many people going
to is the small down payment that is required for a lease. And you could argue whether or not that’s
really a benefit but we’ll get to that later in the video. But for those consumers who don’t have a lot
of money saved up for a downpayment, it often seems like a good benefit. And obviously when you’re leasing cars every
few years you always have access to at least nearly the latest technology if not the latest
technology goes your car is new. And for many, this is a huge benefit. The last benefit that people often point to
when it comes to leasing versus buying a car is the potential tax savings that you may
experience. Although you’ll definitely want to check with
a tax professional to find out how leased vehicles are taxed in your area because it
does vary from place to place so that may be a benefit and may not be a benefit depending
on your situation. The downsides to leasing a car are of course
the rules and restrictions that seem to pop up all over the place. Depending on your lease you may have mileage
restrictions, excess wear-and-tear fees, ride-sharing restrictions, the need to have excellent credit,
and possibly even the need to purchase gap insurance. Typically you will have mileage restrictions
on leases between 9,000 and 15,000 miles per year and if you go over that you get charged
a pretty hefty excess mileage fee which can range from $0.20 a mile to a $0.25 a mile
or maybe, even more, depending on what it says in your lease. Now of course I’m told from people who have
leased cars that they don’t generally check the amount of Miles you’ve driven each year
but rather if it’s say a 3-year lease and you have 15,000 miles per year that you’re
allowed to drive they will check it at the end of the lease and see if you went over
45,000 miles and if you did they will charge you for the extra miles at that point. I have not ever released a car so I have to
go with what I’ve heard from people who have and that’s what they’ve said. As far as the excess wear-and-tear fees go
I’m told that some wear and tear is to be expected you won’t be charged for every minute
thing but you are expected to return the car in nearly its original condition and any customization
that you have put on the car needs to be easily removable. And in some places you’ll also have to be
able to show that all recommended Services were performed on the car at the proper times
so I imagine there is quite a bit more paperwork with this route as opposed to buying a car,
which may matter for some but for some others it may be worth it. I’ve also been told that with very few exceptions
you need to have top-notch credit scores to be able to lease a car and leasing companies
almost across the board require you to purchase gap insurance. And of course the last downsides to leasing
a car is that some leases will have early trade-in fees or penalties and you never hold
any equity in the vehicle when you return it at the end of the lease contract you will
have nothing to use as a down payment on your next vehicle unless you were diligent and
saved up during the time that you had the lease. And obviously, when you’re buying a car the
benefits and downsides are flipped. When you buy a car you don’t have any monthly
payments after the loan is paid off you don’t have mileage restrictions or any customization
or excess wear-and-tear fees and your credit does not have to be excellent although it
would certainly help when it comes to interest rates on a loan. However it is generally more expensive in
the short-term month-to-month then leasing is, some dealers will try and talk you into
a long-term loan since it makes the monthly payment look smaller but it usually carries
a higher interest rates and of course keeps you in debt longer which is generally not
a good thing, and you may need a pretty hefty down payment depending on your situation. So how do you calculate a monthly lease payment? This is one thing that I wasn’t going to do
initially in this video but decided that I should do it because I couldn’t find too much
information about this in other videos on YouTube. First, you’ll need a few things. You’ll need the MSRP of the vehicle also known
as the sticker price of the vehicle. Next, you’ll need the money factor which is
also sometimes called the lease factor or even a lease fee and you’ll usually need to
call the dealership that you’re looking to lease the car from in order to get this. They will likely ask you what brand make and
model you’re considering leasing so be sure to have that information ready when you call. Third, you’ll need the term or length of the
lease most sites that I researched recommend leasing for no more than 36 months but there
are some specials for 39 months. But the point is you need to know how long
your lease term is going to be. Once you have that you’ll want to find the
residual value of the car by asking the dealer what the residual percentage is for the specific
car that you’re considering while you’re on the phone with them. The residual percentage varies of course between
dealers in cars but it’s usually somewhere in the neighborhood of 45% to 60% for a 36-month
lease. You also need to find out if there are any
fees associated with the lease. Common fees include registration fees, acquisition
fees, and sometimes down payment tax but there may be others. And the last thing you’ll need is any rebates
that are available to you if you have any. Once you have all that information here’s
how you calculate your monthly lease payment. For this example let’s say that John is going
to lease a car with an MSRP of $25,000. To keep the math simple will say the residual
percentage is 50% and the money factor or the least Factor will be 0.00125. He’s Leasing and will not make any down payments
on the car and he does not have any rebates, but he does have $1,200 in various fees and
has a lease term of 36 months. Once you have all that information here’s
how you calculate your monthly lease payment. The first step is to take your vehicle’s MSRP
and multiply it by whatever the residual value is that you are given. In John’s case, that means he takes $25,000
* 50%. This gives him a residual value of $12,500
for his leased car. We’re going to assume for the sake of this
example that he did not negotiate the actual sale price on a car and instead just purchased
it for the sticker price or MSRP. Therefore Step 2 is to take the sale price
and add in any of the fees that you have to pay in order to get what the car manufacturers
called the gross capitalized cost. In this case, since he didn’t negotiate, he
paid the MSRP of $25,000 and had $1,200 in fees. Therefore his gross capitalized costs are
$26,200. Step 3 is to take any down payment, trade-in
equity, or rebates that you might have an add them together in order to get what they
call your capitalized cost reduction. In John’s example, he didn’t make any down
payments and he didn’t have any trade-in Equity or rebates so his capitalized cost reduction
is just going to be zero. Step four is to take the gross capitalized
cost that you figured out in Step 2 and subtract the capitalized cost reduction you just figured
out in step three in order to get your adjusted capitalized cost. again in John’s case, he didn’t have anything
in step three so is adjusted capitalized costs are the exact same as gross capitalized costs
cost of $26,200. Step 5 is to take the adjusted capitalized
cost you figure it out and step 4 and subtract the residual value that you figured out and
step one in order to get what they call you or depreciation amount. In John’s case, his adjusted capitalized costs
were $26,200 and his residual value was $12,500. So punching those into the calculator you
find that his depreciation amount for the car lease will be $13,700. This number is very important because it’s
what your base monthly lease payment is going to be calculated with. And that’s what we do in Step 6 you take the
depreciation amount you figured out and step five and divide it by however many months
you are leasing goes for. In John’s case, he had a 36-month lease so
he takes $13,700 and divides it by 36 which gives him a base monthly payment of about
$380 a month. But don’t get excited we’re not quite done
figuring out your actual monthly payment yet there still a few more steps. In Step 7 you take the adjusted capitalized
cost that you figured out and step for and add the residual value that you figured out
in Step 1 and then you multiply that number by the money factor. So in John’s case, he had an adjusted capitalized
cost of $26,200 and a residual value of $12,500. So we add those and that gives us $38,700.
we then take that $38,700 and multiply it by the money factor of 0.00125 which gives
us a little over $48 a month. This number is what the leasing companies
called the rent charge. Step eight is where you at that rent charge
to the base payment that you calculated in Step six to get your pre-tax lease payment. In John’s case, this means he takes the $380.56
that he calculated In Step 6 and adds the $48.38 from Step 7 to get a pre-tax monthly
lease payment of $428.94. Now if you’re lucky enough to live in a state
that doesn’t charge sales tax you’re done calculating your lease payment. However, if you’re like most of us that live
in a place that does charge sales tax then you need to multiply that pre-tax monthly
lease payment by the local sales tax rate where you live to get your total monthly lease
payment. Let’s say John lives in Santa Monica California
just for the sake of this example they have a sales tax of about nine and a half percent. Meaning that he would have to take that pre-tax
monthly lease payment of $428.94 and multiply it by 1.095 to get his monthly total monthly
lease payment of $469.69. So that’s how you calculate a lease payment. Now I know that many of my viewers also watch
Dave Ramsey and so you’ve probably heard him say that leasing a vehicle is the most
expensive way to own a car. He says that on average the effective interest
rate on car leases are about 14%-15% which is about as high as the average interest on
credit cards. So this is kind of a big deal. But one thing that I haven’t heard him talk
about before is how the people calculating that effective interest rate arrives at 14%
or 15% because you certainly don’t see anything on the lease contract that says you’re paying
15% interest on this lease. You see what the money factor is but that’s
about it. Well here’s how you calculate it. When John was paying for that lease on his
$25,000 MSRP car, the base monthly payments weren’t actually being calculated based
off of $25,000 like they would be on a normal car loan were they? No, they were being calculated based off of
the difference between the cost of buying the car (after things like registration fees
were taking into account) and what the residual value of the car will be at the end of the
lease term, which is obviously estimated by the leasing company prior to you signing the
lease. In the example with John, the difference between
those two numbers was $13,700. So let’s say that for example instead of
leasing a car, he decided to buy a car for the same $13,700 that his base monthly lease
payments were being calculated with. And let’s also say that the $13,700 car
loan that he signed when he bought the car was for 36 months and his monthly payments
were just under $470, just like they ended up being for his lease. If you punch those numbers into a loan calculator
and ask it to find you the interest rate on the loan, you’ll see that it comes out to
be about 14.2%. And just for grins and giggles do you want
to know how much you would be paying a month if you bought a $25,000 car instead of leasing
it? Well assuming we go with the averages, the
average interest rate on a new car loan according to Experian is a little under 4.5%, so I’ll
use that for the interest rate and I’ll say it’s a 60-month car loan. The monthly payment?… $466.08. So not all that much different than the lease,
except for the fact that you may have some resale value at the end of the car’s run
that you can then use for a downpayment on the next one. So as you can probably tell, I personally
am in favor of buying a car as opposed to leasing it, but that doesn’t mean that my
opinion is objectively and universally the correct one. For some people, it may be worth taking on
that higher effective interest rate in order to always be driving with the latest technology
and not having to go through the hassle of selling the car at the end of its run. And that’s perfectly fine, my goal with
this channel is not to tell you what to do with your money. My goal is just to make sure you are aware
of what options are out there and do my best to clear up any mysteries in the realm of
personal finance. But that’ll do it for me today once again
if you enjoyed this video be sure to subscribe and hit that Bell next to my name so that
you’ll be notified of all my future uploads. I generally upload every single Friday, and
if you have a friend that would be interested in this kind of content be sure to share it
with them and let’s really get this information out there and start our own Financial revolution.

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100 thoughts on “Leasing Vs Buying A Car (Pros and Cons) | How to Calculate a Car Lease Payment

  1. How is a car an "asset" when it depreciates in value – and has the said maintenance expenses? I'd rather be a 1099, lease an expensive car, and help bring myself down into a lower tax bracket because of the write-off amount. Compliment this video with the Stephan Graham Channel video on auto leasing.

  2. I typed on google… why is leasing a bad idea…. literally everything you’ve been saying. I mean, word by word, like you just took the article and made a video on it. -.-

  3. Great Comparison – We've leased and purchased cars and as shown, both financial instruments have pro's and con's. And yes, some dealerships offer better lease options based on credit score and down payment than shown in the example. It just depends on your financial situation and if the monthly payment is more important or necessary than owning/having residual value at the end of the contract. Remember if you go over mileage on a lease it can get very expensive and if you choose to purchase a car remember to factor in maintenance and repairs once the warranty expires. AND I'd like to offer a third transportation options which is to not own a car at all and use public transportation, Uber, Lift, ride-share etc., as a way to get out of credit card or other debt. If you add up automobile insurance, taxes, monthly payments and maintenance/repairs you could probably use alternative transportation for 18-24 months and pay off all of your credit card or other debt and still have money left over. Of course, the third option is more attractive to Millennials and those living in areas that offer alternative transportation. Food for thought!

  4. Love the information in these videos but the doodles are usually unnecessary and distracting. Plus you reuse the same doodles in EVERY video, which again adds nothing to the video and even makes me want to stop watching the videos some times because I'm so tired of seeing them. And they add nothing to the video. I think you could make these videos shorter and be a better use of your time and ours. At least get rid of the giant hand animation.

  5. When you buy a car with a loan it becomes YOUR asset the second you buy it, you just also take on a liability of a loan. The bank does not own your car until you make your last payment you always own it.

  6. He admits he's never leased a car. His figures are theoretically correct but way off in reality. Inaccurate advice. Don't give advice for a process you have no experience.

  7. I bought a ten year old van with 120,000 miles for 6000 dollars. I have had it four years now. Just did general maintenance. Put over 50,000 miles on it. Still going strong. Getting pretty rusty, any major repair it goes to the junk yard

  8. I prefer to lease the car since my car. I can run whores out of the back and deal drugs out of it. When I got busted, law enforcement could not siege the car. The leasing company did not,repossess the car despite the contract stated that I could not pimp or deal out of it. It’s all about the money. The cool fact was I beat the case and still kept the car. By that time the lease,was up.

  9. Only time leasing is good is when you build a relationship with the car brand, I have a Kia. I’ve been doing it since high school (started working at 14 years old at my local grocery store).
    When I was in college, I had a commute far. I was getting close to my miles, I called my guy and asked him if i May turn in early and have a deal. They supplied me with a deal, if I turned in my car and rebought with them. I saved myself miles, got a better car for the same price. Because the car I wanted was a better model, and the guy wanted to keep me as a costumer.
    Now I’m on my 4th car with Kia, still paying the same from high school for a 2019 haha

  10. I bought a used car by cash outright. I just prefer to own it rather than lease as then I can use it for a long time. Most cars last over 10 years now and 3 years seem really short.

  11. Your so full of shit I lease a car that was 34,000 for 36 months with no down payment my monthly payment was 280 a month

  12. i would disagree with this analysis, in layman’s term if you want a new car and change it regularly to another new one even after a period of 5 years considering your car is anreasonable one and not a small dinky, you’ll see there is not much difference and much less of a hassle with leasing, if your car price higer, leasing will by faar win on this (for preminum cars with low reslae value). Now if you buy a 5 year old car and want to keep it another 5-10 years, hands down buying is the winner here

  13. I kind of see Leasing as better. As an average American will want the next new thing. Most Americans won't keep their car for 10 years. As soon as you're finishing pay it off, you want another one. And guess what, the car depreciates every year by a large amount. Image if someone hits you, its now considered an salvage title which is worse. In essence, your car will never go up in value if you RENTED or FULLY PAID for it. Today you bought your car 25,000 dollars. Years later, it is now worth 10,000 and will continue to go down unless you sell it. However, since you paid monthly for it, you paid much MORE in the process.

    If your car value can NEVER go up in value, it is considered a liability for a life time. That's why i find leasing better, of course you have pay much less than paying monthly on a new car, but a car will ALWAYS become an liability regardless. It is a settlement by American Society that you will need a car. There's just no point of buying one or renting one if you always lose value in it. The difference you keep between leasing and renting/buying a new car can go into things that can gain greater assets for you.

    Just my view.

  14. Buy a reliable used car that you can afford with cash. This is the best way to get more car for less money. No leases, no debts, no new cars.

  15. Leasing outweighs buying all day in today’s society. Not all not all not all, but most believe they own their car after driving it off the lot when financing and expect titles or it being worth a lot more than it is… etc. Then after 3 years grow tired of it, or maybe the family grows or shrinks, our a lifestyle change etc…(customer) comes in wanting to trade for the new year model with $0 down and get the same payment ever without paying attention to their cars PAYOFF and current MARKET VALUE at that time (based on location).

    Leasing is the best route in many many cases. Especially unburying yourself from a car with tons of negative equity. Look OUT for huge rebates and work the sales managers. Best days to buy—->>end of the month (last day) and Monday’s. Always visit manufacturers websites to learn current rebates and walk in and get your best deal!! Good luck. I sell cars, and in my mind I’m not a car salesman but instead a cool dude who sells cars. I knows it’s annoying asf buying these days so I try to give a better experience and finally working for an honest dealer that doesn’t upsell and pull Shady shit. 🤘🏼

  16. I think it is better to does not mix price with taxes and without taxes. I did this exercise in my leasing in Montreal and I will pay 2.99% year only and end after 03 years I will decide if I buy back or just to take another leasing or buy a second hand car. It is depend of available offers at time when you take a decision.

  17. Cot dayum! Almost $470 a month and that's not yet calculating your insurance, especially since insurance is usually higher for leased cars, according to what I've read on auto insurance websites.

  18. Keep in the mind the disposition fee that some makers will charge you at the end of your lease IF you choose NOT to lease another vehicle-Be sure to read the fine print

  19. Now does that estimated residual value affect resale value if you own the car? I mean just buy a certified pre-owned vehicle that exceeds the estimated depreciation amount if that's the case.

  20. Another thing you need to take into consideration for the future when you want to resell your car is that diesel cars will be soon prohibited in many European countries, and petrol cars will not be sold by 2030s. This means your depreciation will be even higher! (Then comparing to 10 years soo, for example)

  21. As the tech upgrades so fast, the car depreciates much faster than old time. That is why I prefer lease. Less monthly payment and put the difference and down payment to invest.

  22. Thanks for this video. You pretty much explained why Leasing is more expensive as Leasers are always paying interest every month for the rest of their (car) lives while Owners that financed their cars their interest paying period ends after 60 months and only resumes once they replace that vehicle. Kind of like renting versus purchasing a house. Sure there are property taxes and maintenance fees in home ownership (like maintaining cars) but in the long term owning is better than renting. The talk of I want a new car every three years is irrelevant as the video is about absolute costs, not preference. Your video would have been better if you calculated the costs of going through three leases (9 years) versus costs of owning a car (that was financed for 60 months) up to the 9th year.

  23. Best way buy with the cash, all know this. If I can't – I'll go with the 2-3 years lease as technologies changes rapidly. Or I'll dive into loan if I really want to stuck for life with "THIS" car only… other way just doezens headaches for decade(s)

  24. I bought a 2008 Acura TL type S used in 2011/12 with 45k miles for $20k
    Car new was $39k
    Paid the car off in 2 years even though I had 4% interest.
    That car still drives like a champ and looks better then most new cars that all look the same IMO. With 220k miles with no issues. Regular maintenance will keep most cars running a long time.
    I could buy a brand new car but for me I’d rather have a reliable car to take me where I need to go and my money can make more money for me invested.
    Most people in new cars are playing keep up with the Jones.
    I said most not all before the barrage starts.

  25. This video is actually wrong as lease payments are always much less than finance payments. Leasing is much better in my opinion as the dealership is responsible for predicting the future value of the car rather than yourself. This was not covered in this video at all which is a major factor.

  26. I am 68 years old. I don’t want to purchase for a long time ownership. And, I do need to leave a car in my will. So, every 36 months I lease a new Ford F-150. And the warranty lasts 36 months.

  27. All these calculation are true, but the example is poor. I've been leasing 2 cars for about 8 years so far. I use 1 major calculation to determine what I should be paying. With a MSRP of roughly 45K, you should put 1.5K (out of pocket) don't use the word down payment or you will screw yourself, the monthly payment should be around 1% of the card value or less. 30K car = $300 a month or less, 45K car = $450 a month or less and so on.

  28. What’s your lease worth when the term is over? Zero

    What’s your car worth when the payments are over? Thousands.

    I’ll purchase instead of rent. Don’t call it leasing… call it renting because that’s all it is.

  29. You do get equity if you’re car is worth more than the residual value. (Usually when you’re under mileage), but that’s only if you get another lease or buy something from them. If you just return it, you do not get the equity.

  30. Lease all day long if you want a new car every two years. I'm 12 months in and pay £217 a month for a £27000 car, no brainer. Avoid pcp deals, you finance half the value of the car.

  31. 6:38 Wrong… If you buy a brand new vehicle and put 30k per year as apposed to the normal 12k and 3 years later go to sell that vehicle with 90k on it, you will incur excess mileage fees on the value. Mileage fees up to 40 cents per mile. Do the math….

  32. a .00125 money factor doesn't equal 14%.. not even 5%… so…..again dave ramsey is a complete idiot when it comes to leases.
    Using a money factor of .006 would equate to 14%…

    Nice try…..for offering misinformation.

  33. Don't ever lease a car in Missouri. They have a thing..Personal Property Tax, that is about $800 a YEAR for a new, $30K vehicle. Dealers absolutely will not pay it. So..You lease a Sonata, pay $199 a month, which is $2400 a year, and THEN have to fork up another $800 the 1st of January. Let's add another 25% to your lease costs!!!

  34. I didn't watch the video, don't need to. If he has covered a point I will make, then good. First…with a lease, all you are buying is the depreciation. Look at a Cadillac, and see what a new one sells for two years later. So..rule number one. If you HAVE to lease, lease a vehicle that holds its value well over time. Second…when the lease period ends, you have the option of purchasing the vehicle. If you're lucky, like I was, the purchase price will be less than the trade in value, and you can use it as a down payment on your next lease or purchase. Third….DON'T USE A LEASE VEHICLE WHEN THERE IS ANY CHANCE YOU WILL GO OVER THE MILEAGE. I had a co-worker that took a brand new leased car, and drove it 4500 miles on a long vacation. He was screwed…and at the end of the lease, instead of buying the car outright, he paid THOUSANDS of dollars to get into another car. He would have been smarter buying the car, then trading it.

  35. Personally, I have leased just one vehicle. In 2009, I leased a Hyundai Elantra. It was a nice car. 18 months later, I went into the dealership to help my daughter out with her purchase. Due to the financial troubles in 2007-2010, nice used cars were at a premium. As part of the lease, I had a written opportunity to purchase this vehicle at the end of the lease period for $10,800..which was then six months away. They were retailing at $14,500. They wanted my car, bad. I told them I would give it to them for $14,000, and apply $3200 to a trade in for a new Sonata. Worked like a champ! I received $3200, JUST to give my lease back to them early. At $150 a month for 18 months, this is $2700 total cost to me for the lease. Yes…my lease was essentially free, plus another $500. What did Hyundai get? A very nice Elantra, which they sold for a profit, and I bought a brand new Sonata Limited, which I kept for the next seven years. Still…I don't recommend leasing. Like renting a condo, it may be a little bit cheaper, but the feeling of driving your OWN car vs. a rental, for me at least, was huge. Yes…it's a rental, just like Avis or Hertz. Some dealerships will look at every little door ding, scratch, or worn spot throughout the vehicle, and charge you for them. Yes..the contract specifies "normal wear and tear", but you can't argue with the dealership, not realistically. It's another profit point for them on the lease.

  36. You can have equity at the end of the lease, it’s actually more common than you think depending on which car you lease. You can sell the car and payoff the lease if you have positive equity at the end of your lease

  37. Good video but bad example of lease, a $25k car wouldn’t be leased more than $250/month with at least 10k miles per year.

  38. Buy a newly-new second hand car (say 2-3 years old). The previous owner has taken the biggest hit with depreciation, your car 'should' not need big maintenance bills (if anything, they happen in the first 6 months), and at least you own the car after you've finished repayments (if you didn't buy it outright). Now you've got a car to trade-in for your next second hand car 2-3 years later (or sell it privately and use that as your deposit).

  39. I don´t understand step 7 of the calculation.
    Why is the interest calculated over the stickerprice (+extra fees) + the residual value?

  40. Conclusion : If you are a guy who does not mind driving the same car years after years ( as long as it can take you from A to B) then buying the car is your BEST choice. But if you are a guy who likes to drive/experience a new tech car every 2,3 years than leasing is your best bet.

  41. Hi,
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  42. Thanks for the advice. Gotta show you some love.
    I've used leasing calculators and am hung up on something.
    Wouldn't I want to negotiate down from MSRP in case I decide to buy at lease end? Isnt the capitalized cost we negotiated at inception going to play a role 3 yrs later if buying it? Or do they give me a new number based on cars actual value?
    Also why do we based the residual value off of MSRP then?
    If the car is $100K. And its 60% residual. That means the car is worth 60K after 3 yrs.
    But 100K was msrp and I got them down to 90K at lease inception. So assuming the original RV was accurate the car is still worth 60K.
    But my lease payments were based on the 90K cap cost right?
    Didnt I pay 40% of 90K over 3 years? I guess I'm saying I get confused here. Dont I want to get lowest cap cost so possible and lower my lease payments and then lower what I'd actually have to pay for the vehicle if keeping it?
    I'm thinking of 2018 Jeep wrangler unlimited Sahara or Rubicon.
    Esp since they should be wanting to get rid of 2018 JLs and esp JKs they have left.

  43. Leasing a car is so stupid i cant stress enough… your basically doing the manufacturer a favor so they can move cars and then the smart people come in and buy that 3yr old car that u just turned in still with factory warranty and njoy it for many many years without much issues and if ur the paranoid type of i feel my engine will blow up or tranny will go out then u can always buy a extended warranty

  44. I’ve never leased a car so I didn’t know bout the mileage restrictions. If that’s the case would it be better to buy a around town car and rent for travel?

  45. The latest tech is NOT a benefit. Car's shouldn't have all this crap in them. No one EVER "needs" the internet or to be able to watch vids on their dash. Tech in cars is bad.

  46. I’m curious, so why do dealers say it depends on your credit that determines your monthly payment?

  47. 15% interest .. nah i disagree

    15% and no doubt everyone would run away from it lol

    Most automakers offer 0 percent APR financing which 0 percent interest or as low as 2.9% ..this is very important to go with the lowest percentage as possible
    Companies like volkswagen even promoted things like no first month due + 0 money down
    Out of those goodies, the 0 percent interest is most important .. you would not want your principal interest to add up overtime which will make monthly payments more expensive and most importantly make sure that percentage is fixed not adjustable.. Fixed means the dealer cannot change it the figure in your contract compared to adjustable which the market constantly changes it

  48. Two things: running two commercials in a row is highly irritating: The graphic of the cartoon writing is equally distracting and irritating. I closed my eyes so I could concentrate on the verbal content. And YOU NEVER LEASED A CAR but you're going to tell us about it. No thanks.

  49. Yeah it's pretty obvious that they'd check mileage once at the end instead of one every year lol.. I've never had a lease either and I can make that assumption on my own.

  50. I’ve always felt buying was better. Even the term “Leasing” is just a FANCY MARKETING term someone cooked up to make the idea of renting more acceptable to middle class people. It sounds so sophisticated 😂 when in reality its just another way to never get out from under a revolving charge. All these numbers about the monthly cost of purchasing a car vrs leasing… yet no one addressed the fact that once my car was paid off I enjoyed many years of no payments. All That cash stayed in my pocket, except for a few repairs. Renting a car is a slick way to insure you will always and forever owe someone money. I guess that’s the new American Dream!!!

  51. There is a small issue in all of this reasoning. The problem is that this assume we are in an ideal world where you car never break, you never need service because you do it on your own; and that you can trade your car in for the effective value, when you decide to replace it.

    Well, speaking by experience, this never happen. My familiy bought 2 cars and leased 2; same "trim" and comparable market segment (a sport car and a sedan); so from what I have seen, the advantage of leasing is pretty much there.
    – Leasing take you off the hassle to sell the car; even in the best case, you get like 20% less than the actual value when you trade in; as such; that 14% value that you pay extra on the lease, does not look that bad.
    – owning a car means take care of it, because you know that you will keep it. This means either you are skilled at car repairs and services, or you have to pay for it. For a leased car you have to pay only for the scheduled maintenance; and you don't care much about how you drive it , because you are going to return it back. For some, that is a factor.
    – The longer you own a car, the more you pay to keep it in good shape; wear and tear is universal, so a 5-8 year old car, won't be as efficient and cost effective, compared to a new car; and not everyone can afford to buy a new car and trade in the old one, every 5-6 years.
    – If you plan to spend once for a new car, then replace it every few years; you loose in the trade in every time you swap car; add that loss on a period of multiple years; and you get pretty high numbers.

    So from what I experienced; leasing works if you do NOT plan to maintain your car yourself, you don't care much about owning, and you want to have peace of mind to drive a car that if is a lemon or has issues, it is taken care of.
    Instead buying a car works if you can get always the best trade in value when you sell it, if you are able to maintain the car on your own or pay cheap for repairs, and if you plan to keep it for long time.

    We have one family car that we keep until it fall apart, but for commuting and leisure; leasing makes most sense financially. Clearly this is not for everyone; but when you see your family spend thousands on repairs for "classic" cars, you develop a sort of mentality that make you favor the peace of mind of paying for something just to use it; avoiding the hassle to own it.

  52. What if you get discounts towards leasing?
    $1,000 down
    And $75 a month for a 2019 Chevy Cruz

    What I’m looking at right now.
    No catches since my last lease was that deal as well

  53. This is a really, really good video. One thing left out however is when you trade in the car, you often lose thousands of dollars so it all comes out in the wash.

  54. At least in the uk, leasing makes sense if you have no very specific car in mind but just a few parameters. Watch the specials every month and leasing always comes out cheap. You just have to be happy with not owning the depreciating asset.

  55. This video gave a more realistic view of the buying portion.. much appreciated most figure the buying portion with a 3 year loan and a 800+ credit score which a lot of average ppl can’t manage

  56. Just buy cars and stop leasing cars or fianaceing it's just annoying because then youngsters just go and buy new cars and show off like they worked hard for it. Also this way people are just getting these new cars and this way older cars are brining left to be rott away or scrapped which isn't good for environment I rather keep older cars also these new cars are just ugly and end of the day you don't own anything you just wasted all that money for something you never owned I know house is similer on rent but that's something big and expensive it's not something you can just buy with cash. Also if you can't afford a 15k car or 35k car then don't buy them or lease in other words just buy something you can afford such as a 3k to 5k car which could be a 10 year old and have more reliability then new cars.

  57. Seems like "double-dipping" in Step 7 where the residual value is added back in with the full purchase price of the car plus the fees to calculate a "rent" amount. What's up with that? Why not calculate it based on just $26,200? If this is the typical method of calculating lease payments, no wonder it's a total rip-off!

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