Last post on May 19, 2013 at 7:14 AM
You are in the Prices Paid - Buying & Leasing Experiences
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Audi A4, Car Leasing, Sedan, Wagon
#1396 of 4282 Lease vs. Buy Conundrum
Jun 07, 2007 (10:25 am)
I worked out the math on a 2007 a4 Audi. Now my comparison is lease vs. buy numbers. On the buy side, I would be looking at a finance loan of 35k, 60 mos. at %5.89 with a payment of about 675/mo. Where as the 36 mos. lease is 379/month 10k mi/yr. Here is the kicker. The residual value on the car after the 36mo. lease is at $18,796.40 and the balance on loan after 36mos. on the 5yr loan situation is, $15,243.80. A difference of $3,553.00 less on the loan. But now factoring in $300/month MORE I pay on the loan for the 36mos., this is $10,800.00 total. So was it worth paying 10,800.00 over three years to buy down the value of the car by 3,553.00? My answer is NO! I can take the 300/month an put it in savings or investment, thus offsetting the cost of driving a newer car. I don’t care about the 10k mi. restriction b/c I will buy the car at the end of the lease. This is a great option because if you look up the same car with the “planned” amount of mileage after three years which would be a 2004 model right now, these cars are priced at 25k. This is a good argument to buy the car from the dealer after the lease end for 18,796.40, then sell it on the market and make a few grand or drive it some more. I think I am seeing all angles of the deal, please let me know if something is in my blind side. Basically I am avoiding loan interest for the first three years of ownership, which is a very large savings with the cost of borrowing money these days at a rate around 5.89%. That is how the savings is made in the lease rather than buy of this car, and maybe in taxes, but that is a gray area to me right now since I haven’t researched it yet. I know the purchase after lease situation of ownership has always been regarded as a way to pay the most for a car, but I think in this situation it works out better to lease.
#1397 of 4282 Re: Lease vs. Buy Conundrum [raudiaudi]
Jun 07, 2007 (11:26 am)
You won't be buying the car from the dealer, you will be buying it from VCI Account Services, LLC, who Audi assigns their lease rights to. You can buy it at the end of the lease and resell it, but you will be subject to double taxation depending on your state.
Also, 2004 A4's are not going for 25k. That might be the asking price, but not the selling price. I know that because I am currently selling a 2004 loaded A4 with 33,000 miles on it.
I am in a similar situation in an A4. I leased the car with a ridiculously low money rate of .0004 or something like that, and while the car is worth more on the open market then my residual, factoring in the tax consequences makes it a wash.
#1398 of 4282 Re: OK, how about this deal? good or bad? [cars0153]
Jun 07, 2007 (11:30 am)
Whether those advertising fees are "real" or not, they add to the cap cost of the vehicle. And informed posters here are simply not paying those fees. Sure, one can let the dealer add those fees on if he wants, then one should offer invoice. Actually, right now, people are getting well below $500 above invoice as it is the end of the model year. So I would start well below $500 above invoice (or start at well below invoice if the dealer is adding advertising fees.)
BTW, I have never seen a Southern California or Bay Area Audi dealers ad. I see them for Bimmers and Lexus all the time, but I never see them for Audi. The only thing they do is link some poor deal to the AudiUSA website.
#1399 of 4282 Re: Lease vs. Buy Conundrum [raudiaudi]
Jun 07, 2007 (7:09 pm)
lease period. Here are other fsactors to keep in mind. What happens if you don't want o-r like car after 3 years? With the lease your done and have options. With the purchase you still owe money. What happens if the car is not worth the residual(mine wasn't)?
with a lease Audi has the risk. On a purchase you do!
Jun 07, 2007 (8:26 pm)
how to tell what are good numbers and what bad numbers im sure when you go into a dealer it can be overwhelming
#1401 of 4282 Re: Lease vs. Buy Conundrum [cars0153]
Jun 08, 2007 (8:55 am)
I have owned a 2003 A4 before and liked the car, but it was when I could get a smokin' deal on the borrowed money, like 1.9% interest offer. I don't think that hitting a $18,500 residual will be too tough. There was a lawyer that posted something about leasing through Audi Finance as a bad idea because of not being able to sell the car to someone else without getting hit with taxes twice. I am not worried about that, plus it is not true...A lease needs to be thought of as a rental, not a purchase of an item, yes you are getting taxed on the lease payment throughout the course of the lease, but that is expected, as you would have to pay sales tax on the transaction to rent a car for example. What you are getting taxed on when you buy the car for the residual is the residual value of the car, in this case, $18,500.00 which is what you would pay if you bought the car outright anyway, but the taxable amount would be based on the market value of the car today. Audi isn't some special lease company that comes up with their own rules to screw a customer, it is simple business. Being a lawyer, I would hope that the Bumsville, Idaho Cosmotology, Tire, Community College and Law School Center he went to to get his Law Degree would have taught him the difference between a loan and a lease agreement, but I have overestimated lawyers before. Off the rant and back to what I was saying, so yes, if you buy the car from the dealer at that time, there will be taxes, i.e. transfering the car from the dealer to you, since it was a "rental" from the dealer to you, then there maybe another tax situation depending on who you sell the car to at the time depending on the party you sell it to and how straight edge you are with those types of transactions. Anywho, lease does look better in the numbers...
#1402 of 4282 Re: Lease vs. Buy Conundrum [raudiaudi]
Jun 08, 2007 (9:35 am)
That was a nasty reply to someone who was correct about Audi lease exclusionary pricing and explained it multiple times quite well.
Not necessary. Bad manners, too.
Audi will not sell the car on buy-out price defined in lease agreement (residual value + remaining payments less interest) to anyone BUT the lessee. That is the difference he finds in Audi from other auto cos. Audi will quote a higher price if a 3rd party wants to buy the car. Other auto cos. in his research have indicated that a 3rd party could buy a car from them off of a lease to you at that agreed price and this would enable you to escape tax burden by having to buy the car and re-sell it to 3rd party....
The tax occuring twice refers to something that is true on most leased cars in most states. If I buy my Audi today I pay remaining tax owed and then if I sell it tomorrow to another party they pay the tax on the amount they pay me, too. That is not exclusive to Audi, though. There are clever ways to get around this in some states. What is exclusive to Audi according to the poster and guarantees this tax situation is their refusal to sell to a 3rd party for the same (possibly attractive) price as they have agreed to sell it to you in their lease agreement. It is not as though they get the tax money so it is just a way to encourage you to stay in the leased car by making it financially unattractive to get out of the lease. Either you have to buy the car and re-sell and pay tax or a 3rd party (non Audi dealer or your next door neighbor for example) has to pay more unattractive price to buy out from Audi and then they pay tax once on their transaction (if it is private party - but if it is a dealer - then no tax will be paid until the car is sold to another private party by dealer.)
What part did you not understand?
#1403 of 4282 Re: Lease vs. Buy Conundrum [raudiaudi]
Jun 08, 2007 (1:58 pm)
I will take the high road here and simply agree with what Audihorse posted. Raudiaudi, you seem to have a complete lack of understanding of how the transaction is going to work, but in any case, go for it and see how it turns out for you. It seems no efforts to simplify will enlighten you.
Just don't call me in three years for help when you decide to buyout your lease from the "dealer" and finally figure out how the transaction will work.
#1404 of 4282 Re: Lease vs. Buy Conundrum [audihorse]
Jun 08, 2007 (2:06 pm)
For further clarification regarding tax liability on a lease buyout for anyone interested, in California there is an exemption to avoid tax liability on a lease buyout if you resell the car within ten days of taking ownership. The condensed timetable makes this a difficult but not impossible timeframe to comply with if you have a buyer you can trust lined up.
This will avoid tax liability on the lessee's part and allow the lessee to resell to a third party at the favorable lease buyout price (or higher to turn a profit).
Tax laws vary state to state however.
#1405 of 4282 Re: Lease vs. Buy Conundrum [audihorse]
Jun 08, 2007 (2:26 pm)
What RaudiAudi (and I) don't understand is why the lawyer, who contends he knows about contracts because he is a lawyer of some sort, signed a contract which he can't comply with. As previously pointed out, if the lawyer signed a contract he is bound by the conditions of that contract. If the lawyer chooses to sell the car in violation of the lease terms, the contract allows for Audi to penalize him in some manner - as all leasing companies do in one form or another. If you can give me a cite or a link to a leasing company that does NOT penalize one for selling a car out of a lease, please do.
Or, if the lease allows him to sell to a third party but at a higher buyout fee, he has to perform that contract term because ... he signed the contract. So if Audi wants to keep you in a lease for their business purposes (which I think we can assume they know better than the consumer), they can penalize him for breaching that lease by selling the car to a third party. Maybe some companies will let the lessee sell the car to some third schmoe for the remaining payments and residual, but the lessee will still owe them a fee. Otherwise, what is the incentive to stay in the lease?
If Audi has violated the terms of the lease by requiring a higher buyout than the lawyer contracted for, then the lawyer has a cause of action against Audi. But it appears that Audi is not violating the lease as the lawyer does not mention litigating the issue (and if a lawyer would not litigate, who would?) Again, if they penalize him beyond the terms of the contract, the lessee has legal redress. Indeed, he could get attorney fees under truth in lending laws.
I don't think Raudi was following the tax argument of the lawyer. The lawyer is indeed hosed by the tax circumstances he got himself into. The lawyer never did respond to my suggestion to trade or sell the lease itself. As I said, if one don't understand the risks inherent in a lease or have an uncertain income ... one should not enter a lease.