GMAC to stop offering lease incentive deals in Canada

[Winsor_Pilates]

Originally Posted by DementedReality

my VW rate on an 08 Jetta is .9%.

cant beat that right? why not keep my money and give it up 1/48th at a time?

i am not advocating leasing at 8.8%, thats dumb too. you have to shop and shop and shop to find the right deal, but thats goes without saying doesnt it?

What model did you get? I was looking at VWs because their lease rates are great right now, but I don't think anything they have really interests me.

I prefer the older body style jetta's over the new ones, so I was considering a city jetta, but the engine is really weak, so I'm not sure I like it.

[DementedReality]

Originally Posted by Winsor_Pilates

What model did you get? I was looking at VWs because their lease rates are great right now, but I don't think anything they have really interests me.

I prefer the older body style jetta's over the new ones, so I was considering a city jetta, but the engine is really weak, so I'm not sure I like it.

first off ... i actually hate cars, which is another reason I lease.

i have a 2.5 base model... lease cost is 295 all in, 0 down for 48 months.

its an inline 5, gas is just ok, but better than the FJ i used to have.

not my favourite car, but the price was right. id really love an Audi TT, BUT a 2 seater might make it hard to transport a family around!

edit: i also have a 2001 Jetta ... this is the used car I referenced above ... trying to sell it now ... $10,400 ... anyone?

[Bill Bumface]

Originally Posted by Winsor_Pilates

How often is that the case thought? I've been looking at a lot of leases lately, and very few have rates even comparable to the finance rate. Unfortunately the ones that do are car's I'm not interested in.

I haven't looked at lease rates in about 3 years, but at the time there were several dealerships where the lease rate was the same or lower than the purchase rate for some cars. Totally depends on the manufacturer... they all operate in very different manners. Some prefer the "balloon payment" and give better rates on that, which is essentially a lease where you have to buy the car out, and therefore protect THEM from depreciation.

[Winsor_Pilates]

Originally Posted by DementedReality

first off ... i actually hate cars, which is another reason I lease.

i have a 2.5 base model... lease cost is 295 all in, 0 down for 48 months.

its an inline 5, gas is just ok, but better than the FJ i used to have.

not my favourite car, but the price was right. id really love an Audi TT, BUT a 2 seater might make it hard to transport a family around!

edit: i also have a 2001 Jetta ... this is the used car I referenced above ... trying to sell it now ... $10,400 ... anyone?

I am also considering a TT. But would have to go with an older one (2001-2002) for me to afford it. I don't have to worry about driving a family around yet.

[Dion]

Originally Posted by kevman

What I fail to understand is the fact that vehicles biggest depreciation occurs in day 1 followed by year 1, year 2, etc. Why continue to pay for year 1 depreciation? What was $40k new, is $25k after 4 years, $15k after 8 years, $7k after 12 years, $4k after 16 years, etc.

Excellent point! A person is better off buying a vehicle that is 2-4 years old. Let the original owner pay for the big part of the depreciation. It doesn't make economic sense to buy or lease new.

[Sylvanfan]

^^
It seriously doesn't make economic sense to even own a vehicle if you want to get technical, especially if you live in a City. But most people still do.

Realistically they are something that is always going to cost you money. Maintenance, repairs, insurance, fuel are all expenses you will never escape when owning a vehicle. Really owning anything costs you money....it's just that in things like stocks, bonds, or real estate you tend to have the asset appreciate in value. Outside of those things...there is a very select few things you can buy that won't cost you money. But hey...who wants to live in a empty house, and take the bus every day while sitting on millions in stocks? We're consumers...we spend money.

[MoneyGuy]

Originally Posted by DementedReality

i am surprised, given your profession.

it doesnt bother you to turn 25k into 18k within minutes of making the purchase?

i just figured you could make better use of the capital, especially given your knowledge.

i respect your background and i wouldnt bet that you havent done the math. so your feedback is interesting.

i wonder what slava's take on it would be?

Hey, if you buy the car you have two choices. You can buy a used car about three years old and let someone else eat all that depreciation. If you want to own a different car every 4-5 years, particularly if you don't have a lot of money and have mechanical skills, then that's the most cost effective way to go. Me, I'm older than most of you here, have limited mechanical skills, can afford to buy new cars without financing them, plus I want to know what I have, so I buy new. My cars rarely see the inside of a garage and that's worth money to me. I'll buy a Camry, Corolla or Civic, run it for 10 years, rinse and repeat. Is it the best financial decision for you? Perhaps not. Probably not. However, the money really doesn't matter as much to me as the other factors. To make it work, however, it's best to run that new car for eight to 10 years, or more. I would never lease, however. That makes no sense to me.

INteresting discussion. That's why I come here.

[Cowboy89]

When I was looking at cars a year ago there were tonnes of "leasebacks" that were only a year old and had only 20-30K on them for prices of $10,000 cheaper than brand new on a car that would cost $22,000-30,000 new. Why would anyone buy new when there are alternatives like this? Let the first owner take the depreciation hit and you end up with almost a new car.

[Claeren]

What happens when you return a leased vehicle and you have something like dings in the doors?

Not major damage but not necessarily negligible either?


What happens if you are in an accident?



Claeren.

[DementedReality]

Originally Posted by Claeren

What happens when you return a leased vehicle and you have something like dings in the doors?

Not major damage but not necessarily negligible either?


What happens if you are in an accident?



Claeren.

you are responsible to repair .. just as if you owned it. thats negates the issue, as it applies equally to either option.

[Claeren]

But what is the threshold then? Like, you don't need to get the car re-painted before return right? Yet all cars get nicks and scratches?



Claeren.

[automaton 3]

Originally Posted by Cowboy89

When I was looking at cars a year ago there were tonnes of "leasebacks" that were only a year old and had only 20-30K on them for prices of $10,000 cheaper than brand new on a car that would cost $22,000-30,000 new. Why would anyone buy new when there are alternatives like this? Let the first owner take the depreciation hit and you end up with almost a new car.

I 100% agree with your premise, it is far more advantageous to buy a 1-2 year old car than new and avoid the 1st couple of years of depreciation.

On the 1 year old "leasebacks" though, a bit of buyer beware as many of those are ex-rental cars. I used to work at a rental car company and most of the cars came out ok. There were a few though that missed regular maintenance (think first oil change at 25K) and other "unlucky" cars that seemed to get ridiculously abused by renters ...those might not be great values.

[automaton 3]

Originally Posted by Claeren

But what is the threshold then? Like, you don't need to get the car re-painted before return right? Yet all cars get nicks and scratches?



Claeren.

Yep, generally they allow you 3 hours of body work - or something like that. I've leased 3x and never been harrassed for any bodywork on return. Of course I've kept them in pretty good shape outside of the odd door-ding.

[automaton 3]

There was a thread just last week on this very same topic. Bottom line is that every lease vs. purchase decision has to weighed carefully on its own merits.

I think everyone agrees that buying a 1-2 year old car and driving it until it dies is generally the best overall strategy.

[Bill Bumface]

Originally Posted by DementedReality

you are responsible to repair .. just as if you owned it. thats negates the issue, as it applies equally to either option.

Not even close to true. I know at one point BMW's policy was that if you could cover the damage with a credit card it was acceptable. You could turn in a completely hail damaged vehicle if it was spaced out enough.

Some places are quite a bit pickier, but door dings and the odd scratch are perfectly acceptable. They don't expect to get a brand new car back.

[jtfrogger]

Originally Posted by DementedReality

i am not arguing about whether or not they make a profit, or how much of a profit. they are in business to make a profit, so its not a surprise

The thing is, a leasing company borrows money to buy the asset, leases it to you, and then sells it at the end of the lease. They'll sell it to you if you want it, or to someone else if you don't. Often, they will sell off the cash flow of your payments, which reduces the amount of money they have to borrow. The residual value they use is conservative, so that the chance of them taking a loss on the sale is quite slim.

You could do the exact same thing as them. Finance the vehicle, then sell it at the end. You would be ahead of the game nearly every time. You seem to be quite averse to selling a used vehicle on your own. I think you make it out to be more complex than it really is.

Originally Posted by kevman

Perhaps my math was wrong but my NPV calculations showed a SIGNIFICANT cost advantage to purchasing. However they were based on long term vehicle ownership.

How about factoring in insurance? Can you neglect the fact that if you're leasing you MUST cary full coverage where as if you're driving your own car you can dictate your insurance level.

Over the last 5 years (years 10-15 of my vehicles life) I've averaged about $1,000 a year in maintenance. My insurance premiums are about $700 a year. Perhaps my costs in years 1 through 5 were more but my low costs now easily make up for it.

What about the NPV comparisons if you sold the car after the same timeframe as a lease ending? As an estimate for what you could sell the car for after the end of the lease, use the buyout amount for the lease, since they are reasonably conservative. The finance yourself method should end up better.

[jtfrogger]

Originally Posted by Machiavelli

Buy a 2009 Mazda 3 for about $22K with taxes included (I've worked it out already with negotiating).

Sell in 3 years for about $15K, loss of 7K plus interest on my LOC (about 3K) works out to a loss of 10K.

Lease at the current rate of 8.5%, bringing monthly payments of $405 per month on a 36-month lease term, paying $14580 over this term. However, if Mazda continues not to have this vehicle on a lease program (8.5% is with a third-party company), they may continue to offer $3200 in lease cash (money paid to the customer to off-set the ridiculous lease rate), bringing total loss to $11,380.

So in this situation it seems like it would be a better deal to lease, as the difference in money lost is not substantial, and the lease would improve cash flow.

Am I thinking properly on this, DR, MoneyGuy, and others?

If a car dealer is willing to toss in $3200 to offset the cost of the lease through a third party, I would believe that you would be able to negotiate that into the purchase price if you buy it without leasing. Especially since you are not using their financing (you speak about your LOC).

[Machiavelli]

Originally Posted by jtfrogger

If a car dealer is willing to toss in $3200 to offset the cost of the lease through a third party, I would believe that you would be able to negotiate that into the purchase price if you buy it without leasing. Especially since you are not using their financing (you speak about your LOC).

Really? I'm sure they would say, "no, this incentive is only if you lease the vehicle."

[DementedReality]

Originally Posted by jtfrogger

....

You could do the exact same thing as them. Finance the vehicle, then sell it at the end. You would be ahead of the game nearly every time. You seem to be quite averse to selling a used vehicle on your own. I think you make it out to be more complex than it really is.
.

i have sold many used vehicles and its not only a pain, but i just dont like having equity in a car. id rather have it as liquid as i can make it.

secondly, dont yuo think a company who specializes in this business would have far more resources to properly market and turn over the end of lease units? id rather not.

[jtfrogger]

Originally Posted by Machiavelli

Really? I'm sure they would say, "no, this incentive is only if you lease the vehicle."

I figure you'd be able to get some of it. Maybe not all, but at least a portion. I would ask for all of it, especially if I was financing it myself. If the salesman said he couldn't, I'd ask for an full explanation as to why. They are probably getting a bit of a kickback from the leasing company, but I can't imagine it being the whole amount.