Last post on May 15, 2013 at 3:35 PM
You are in the Prices Paid - Buying & Leasing Experiences
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Subaru Forester, Car Leasing, SUV
#224 of 592 Re: Does gdtrfb's lease answer my question [pano1]
Feb 20, 2009 (12:02 am)
Hi Pete, there are a couple reasons that leasing appeals to me.
1. The car is under warranty for the majority of the lease so I know I will not have to make any repair costs for the next 3 years or so.
2. I like to have a new vehicle every couple years
3. This is the first year of a redesign of the forester, while Subaru has a great reliability record I am leery about the first year of a new redesign as I got burned on purchasing a 2001 X5 that turned out to be a hunk of crap. So if it does turn out to be unreliable I can just turn it in after 3 years instead of trying to sell it.
4. Sales tax is spread out monthly throughout the lease instead of lump sum when purchasing.
As I understand it, you never want to put down any more than you have to on a lease. The reason is, if the car is totaled, or stolen and not recovered you get zero money back from the insurance company since you donít actually own the vehicle. So for example if I had put down the total monthly costs for my lease ($12,696) and the car was totaled after the first month I am out the full $12,696. Since I put down only 1st month payment and registration fees, if the car is totaled next month I am only out 1st month payment and registration fees ($445).
Second thing to remember is car companies do not know exactly how much a vehicle will be worth after the end of a lease (neither do we). The best they can do is guess; their guess is called the residual value. A good example of this is the Jeep commander I leased before the Subaru. When I signed the lease 27 months ago Chrysler financial guessed the jeep would be worth $17,600 in 27 months, but in the mean time the economy tanked and gas prices shot up so now the jeep is only worth $12,000. So if I had purchased it and wanted to try and sell it after 27 months, I would have to put it up for sale at $5600 lower than the $17,600. Because I leased the jeep I was just able to turn it in and not have to worry about the accelerated depreciation.
So in the example above you might be able to sell the forester for 18,000 after 24 months, but what if it is worth 5600 less than 18k after 24 months like the jeep was. Then you could only sell it for 13000 and would end up spending 11,600 over 2 years. Also you would need to add the tax paid at time of purchase (~1300 depending on where you live) so you could end up spending 12,900 over 2 years which would be more than leasing for 3 years.
If you do decide to lease, then the money factor (MF) will become important. MF is simply the interest rate on the lease. MF x 2400 = interest rate %. So on my lease the MF is 0.0016 so the interest rate is (0.0016 x 2400) = 3.84%.
I hope this helps.
#225 of 592 Feb Lease Rates
Feb 20, 2009 (8:49 am)
Carman (or anyone who has this info): could you please provide the residual and money factor for a lease on a 2009 Subaru Forester 2.5 X with premium package (MSRP aprox $25,500).The lease would be for 10,000 mile/yr for 36 months. Also, I saw on the Subaru website there appears to be a lease special on the Forester thru 3/2/09. Does this impact the residual or money factor, or is there cash back to be used in the lease? Last, when negotiating with the dealer, should they be up front about the residual and money factor; it seems the salseman that I have spoken to either can not or will not discuss this with me.
Thank you for your help.
#226 of 592 Re: 2009 Forester Lease [jackson41]
Feb 25, 2009 (9:27 am)
Could you please explain how to calculate lease payments once we know residual and money factor?
#228 of 592 Re: Does gdtrfb's lease answer my question [gdtrfb]
Feb 25, 2009 (11:43 am)
Thanks for your reply and information. I'm not doing a very good job of explaining what I'm getting at with forum members. I'll try to do a better job this time. I've always paid cash for my purchases because I've never had a trade-in. I was able to negotiate a good price because I bought at year's end and when incentives were at or near their highest levels. People would line up at my door to ask when I was selling my last vehicle because I only drove them for a year, maintained them scrupulously and was willing to sell below similarly priced cars at a dealer's lot. It was great for me and great for the purchaser. I buy a new car every year and tire of them in a year so I'm always looking for a new one that appeals to me. I'm single, retired, and owe nobody anything. I have no wife or kids and thus have the wherewithal to buy every year, which I do. I could care less about financing, money factors, or residuals. I'm interested in getting the best possible deal available and once I find that, I pay cash. Over the last 27 years, I have paid an average of $2187 to buy a new car every year. Sometimes I do better than that and at other times worse.
I am constantly bombarded by my friends asking me why I just don't lease since I buy every year. My prejudice has always been that people who lease are people who don't have the good fortune of being in my financial situation or who are in business and can write off their leases. I may be wrong in my belief but no one as yet has been able to show me that I'm better off leasing than by purchasing outright. I have sought counsel here but obviously have not done a very good job at getting this point across. My contention is that I will do better purchasing a vehicle outright than by leasing, which has mileage limits, and many other negative factors for someone in my situation. You cited reasons why you like leasing and showing why you find it beneficial. I have no problem with any of the points and advantages that you cite, for you. But for me, those factors are irrelevant. I hope you see why in my rather long explanation of my situation. So what I need here from you or forum members is evidence that leasing is a better deal than buying outright.
Assuming you and other forum members are correct in leading me to leasing, I find that no one in the entire auto universe offers a one year lease. The best I can do is a 24 month lease. The purchase year for me is unlike any year in my buying history. First, since the economy sucks so badly, no one had knocked at my door so I decided to keep my car last year and actually held this vehicle for almost 2 years now and I am really bored with it. I just love the Forester and am planning to buy it when I get around to selling my vehicle. I can purchase a Premium for around $22.4K outright. ALG leasing, the "bible" or residual values says that the Forester has a 69% value retention after 3 years. I believe that I should buy the Forester outright, do the unthinkable and keep it for two years, then sell it after 2 years. My point here is that after two years, I should be able to recapture more than 75% of my initial investment (~$16.5K) and be further ahead than by leasing for 24 months at the best leasing rate I can find. If my assumption is correct, I would have spent ~$6000 over 2 years for the use of the Forester. That would be $3K per year.
Based on your recent leasing experience can you refute my example and logic so that you can convince me that your deal is better than my hypothetical?? I apologize for the length of this post, but if you can provide me with an opinion or better yet, facts, I would be deeply appreciative. Allow me to throw one more scenario that I just thought of. What if nobody knocks at my door or I am unable to sell my vehicle at the price I want.....would trading in and leasing be a good option?
What should I do at the dealership to ensure a good deal?
Thanks for your patience,
#229 of 592 Re: Does gdtrfb's lease answer my question [pano1]
Mar 01, 2009 (10:56 pm)
I can purchase a Premium for around $22.4K outright. ALG leasing, the "bible" or residual values says that the Forester has a 69% value retention after 3 years. I believe that I should buy the Forester outright, do the unthinkable and keep it for two years, then sell it after 2 years. My point here is that after two years, I should be able to recapture more than 75% of my initial investment (~$16.5K) and be further ahead than by leasing for 24 months at the best leasing rate I can find. If my assumption is correct, I would have spent ~$6000 over 2 years for the use of the Forester. That would be $3K per year.
If you are comparing a zero down lease you have to compare a zero down bank loan also. A $22,400 sale price including sales tax of 8% would make the financed amount $24,192. That was based on a 5 year loan at 6% with a monthly payment of $467.70. Your total of the 24 payments should be $11224.80. Now here is where it gets fun. You should easily be able to lease a Forester Premium for $345 including 8% tax with zero down. $345 times 24 payments is $8280. The bank loan costs you $2944.80 more than leasing.
According to my amoritization calculator you would still owe $14982.92 after 24 months. If the car is worth $16,500 (as you predict), you are only netting $1517.08 but since your out of pocket was $2944.80 more than leasing you actually LOST $1427.72. In this example leasing wins.
#230 of 592 Re: Does gdtrfb's lease answer my question [indianajohns]
Mar 01, 2009 (11:27 pm)
If you can lease a car for $350 vs buying it for $470 you are saving $120 a month because of the lower payments. Even putting that money in a regular savings account will yeild over $2,900 after 2 years.
If you negotiated a good lease and the numbers are good you will do better than purchasing. Even 7% Sales Tax on $22,500 is $1,575. So you are automatically in the hole $1,575 plus $2,880 in payment difference. That's $4,455. I don't see how you could make up that big of a difference when your loan payoff is $15,000. That would mean you'd have to sell the car for $19,456 to make a single dollar. I highly doubt a 2 year old Subaru with 24,000 miles would be worth that.
The point of leasing is to lower your monthly payment by at least $100 a month and to lessen your sales tax burden. In most states the leasee pays sales tax only on the monthly payment instead of the actual sale price of the car. So on a 24 month lease at $320 you are only paying $537.60 total at 7%. Leasing makes sense under ideal conditions. But you do have to have a great money factor and residual AND a great negotiated sale price. You can't expect to lease any car for cheaper than buying it. Some cars have horrible lease numbers.
#231 of 592 Re: Does gdtrfb's lease answer my question [indianajohns]
Mar 02, 2009 (10:29 pm)
indianajohns and stoopy
Thank you so very much for taking the time to try to enlighten this leasing? virgin. As I read your responses, both of you keep talking about getting a loan and the associated costs that go with it. Maybe I'm misreading you. I am paying cash for the car. I will pay the taxes and other fees. I know that indianajohns says that I must compare with taking a loan and stoopy talks about lowering the cost of my loan. My point is that I am paying cash not taking a loan. So I fail to see why I must compare taking a loan in order to get a straight forward answer, so I must assume that there are complex accounting mechanisms that I am overlooking.
What am I missing here? I'm paying, say $25K cash for this car, selling it at what ALG says is over 75% of MSRP in 24 months. That's $18750. Net difference is $6250 or $3125 per year. Are you fellas telling me that I can lease for 24 months for less than $6250 total cost??? If you can find me this kind of lease, I would do cartwheels and would agree that leasing is cheaper than buying outright. I don't think that any human on this planet could lease for 24 months at the cost that I cited.
Fellas, I am not the brightest bulb in the pack, but I fail to see the argument that you are making. I am showing you what I believe is very simple math. You guys are saying that it is much more complex than I am showing. I am deeply appreciative of the time that you are spending trying to help me see your point of view. I apologize for being so dense, so could you please make one last effort, showing me the folly of my math and logic??
#232 of 592 Re: Does gdtrfb's lease answer my question [pano1]
Mar 03, 2009 (7:26 am)
OK, based on your earlier post:
I can purchase a Premium for around $22.4K outright. ALG leasing, the "bible" or residual values says that the Forester has a 69% value retention after 3 years. I believe that I should buy the Forester outright, do the unthinkable and keep it for two years, then sell it after 2 years. My point here is that after two years, I should be able to recapture more than 75% of my initial investment (~$16.5K) and be further ahead than by leasing for 24 months at the best leasing rate I can find. If my assumption is correct, I would have spent ~$6000 over 2 years for the use of the Forester. That would be $3K per year
If we go by your ridiculous 75% residual, we get the following 24 month lease:
MSRP on your Premium w/All Weather: ~$24.7K
Cap cost (selling price): $22.4K with 0 reduction (down)
Money factor: .0016 (current best, but not the best in general)
Monthly payment: $170.45/month ($4,080 over 24 month) if your $22.4K includes acquisition fee and $198.26 ($4,758 over 24 month) if it does not (then you need to add it to the selling price).
#233 of 592 Re: Does gdtrfb's lease answer my question [ursus]
Mar 03, 2009 (10:19 am)
Thanks for your input ursus. I don't think you probably read my last post, #231, when you responded to an earlier post. I know that I didn't do a very good job of explaining my premise of the outright buy. I hope that post #231 does a better job of explaining my logic. If my assumption of you not reading post #231 is valid, could you respond to that one as well??
I don't know for sure what all your math means. I also have no knowledge of some of the terms that you are using since I am so ignorant of the leasing process and certainly make to pretense that I do. But, I do have some knowledge about resale values of vehicles. Why is it ridiculous to expect that I should be able to sell a vehicle with a $25K MSRP for ~$18+K after 24 months? IF ALG numbers can be believed, they say that after 36 months that same $25K car should be worth ~70% or $17.5K after 36 months??? So why is it ridiculous to believe that I couldn't get a thousand dollars more than that after only two years??
As mentioned above I have no clue about the numbers and logic you are using but am I correct in assuming that you are saying that IF my assumptions about ALG numbers are correct that the lease for 24 months would cost less than $5K for 24 months?? Please understand that what is easy for you leasing experts is a complete mystery to me and that I just don't get the logic of leasing. That's why I came here for help in getting me to see the logic of leasing. Problem is that the more you good folks try to help me, the dumber I get.
What really confuses me is all the jargon that you folks use. I just can't see why talking about money factors, cap costs, residuals, etc has any bearing on this discussion. I have cited at length that I can buy, then sell a new Forester for ~$6K at the end of two years. What I am asking is what would a 2 year lease cost me under the most common lease arrangement that you have heard of ?? I am betting that whatever that lease arrangement is would cost me much more than my $6K estimate.
Thanks for your patience,