Cash Purchase vs. Finnance and how does Leasing come into play?

[kevman]

I'm looking at buying a new truck and I'm a little hung up on how to pay for it. For simplicity the truck I'm looking at is $40,000.

Option A: 0% Financing over 60 months
For Option A I've set up some NPV calculations using a discount of 3% and come up with a cost in today's dollars of ~$37,000.
Option B: $5,500 in Cash incentives
After subtracting the Incentives, putting down some cash and borrowing the rest from my LOC I end up with a cost in today's dollars of ~$35,000
Option C: 48month lease at 4.9%
I'm lost...

So my crude NPV calculations tell me taking the cash is the best way to go but then leasing comes in to play. Can someone better explain how leasing works and it's pros/cons. I know there is some information in the car salesman thread but I'm looking for a more direct comparison to some of the pretty aggressive incentives they have available today. Also could there be something I'm missing in my NPV calculations that may have skewed the results?

[jolinar of malkshor]

Personally I would do option A. 0% financing. But what do I know.

[Ace]

Chalk me up for 0% as well... then tell them you also want the 5500 in incentives

[Bertuzzied]

I would never lease a car unless you can write it off as a business expense.

I would however take over someone's lease if they initially put a big downpayment.
I have done that with my last 2 vehicles and saved myself the depreciation.

[Bring_Back_Shantz]

It all depends on how you want to do it.
I just went through the same process, and I determeined that leasing was the better option for me.
I got a better finace rate then buying it outiright so in the long run I'll actually save money by leasing it and buying it out at the end.

As for your situation, just remember that that 0% financing isn't real.
If there is a "Cash Incentive" then that just means they are building the finance cost into the cost of the vehicle.

Getting 0% financing ona $40000 truck, is probably the same as getting 5-6% financing on a $35000 truck.

[jolinar of malkshor]

Originally Posted by Bring_Back_Shantz

It all depends on how you want to do it.
I just went through the same process, and I determeined that leasing was the better option for me.
I got a better finace rate then buying it outiright so in the long run I'll actually save money by leasing it and buying it out at the end.

As for your situation, just remember that that 0% financing isn't real.
If there is a "Cash Incentive" then that just means they are building the finance cost into the cost of the vehicle.

Getting 0% financing ona $40000 truck, is probably the same as getting 5-6% financing on a $35000 truck.

Good point.