From: carl@Cayman.COM (Carl Heinzl)
Newsgroups: rec.autos
Subject: Re: Responses on Buying vs Leasing
Date: 5 Nov 92 19:11:58 GMT
Distribution: usa
Organization: Cayman Systems Inc., Cambridge, MA
In-reply-to: acura@cbnewsi.cb.att.com's message of 5 Nov 92 13:57:30 GMT
bcc: carl


>Thanks to everyone who responded to my questions on buying vs leasing a car.
>The consensus seemed to be that is was better to buy a car. The reasons seemed
>to be that leasing puts restrictions on how much you can drive without being
>penalized at the end of the lease. Also at the end of the lease you usually

My lease has a penalty if I drive more than 15k miles per year *BUT* I
only have to pay this penalty if I walk away from the lease and turn
the car in.  If I buy it, no penalty.  I don't know about most people but
if

>have to pay higher than market value for the car to keep it (or walk away
>losing your equity). The major benefit seemed to be that you pay less up front

Nope, I *STRONGLY* disagree with this statement.  The buyout figure
calculated on my lease is done very straightforwardly (well it's
straightforward if you know what you're familiar with this type of
financial dealing).  I negotiated an initial price for the car (let's
call it the "purchase" price).  The residual price for the car is set
by the dealer (in my case to be 53% of the MSRP, which is a little
over 18k for my '92 Acura Legend LS) and the payments made are just
like I take out a loan for the full amount and have a balloon payment
at the end equal to the residual amount.  It is most definitely NOT an
inflated number.  If this number truly were inflated then the bank
(who will own this car at the end of the lease) would get stuck owning
this car without being able to get rid of it.  They just want to be
able to sell the car wholesale which is the amount less than cars will
go for in the retail (or even private sale) market.  If anything,
buying a car at the end of the lease is a GOOD deal (i.e.  if it's
your car and you're happy with it).

As far as walking away from your equity, we're not talking about money
in the bank here.  Automobile are depreciating assets, in fact, you
might even just call them liabilities!!!  If you walk away from a
lease you haven't lost your "equity" you've paid for the use of an
item.  If you had "bought" the car originally and try to sell it at
the end of the "lease" period you will find that your "equity" is
virtually non-existant (except for the fact that when you buy a car
you're making much bigger payments and may have payed more off of the
loan at that point).

>and generally less per month than with a loan. This tends to let you have a
>car from a higher price range than you would have been able to get through a
>loan. Or as one person said "leasing lets you get a car you really can't afford
>to have". I think I'll buy.

Well, it also has tax implications that we're not currently
discussing.  Just think what would happen to all those cars that have
turned out to be real lemons if, after the lease period or two or
three years, were turned back IN to the bank and THEY had to then get
rid of them...

I'm sorry that I hadn't been following this thread closer, but I just
had to inject some reality here.

-Carl-
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