Leasing with Option to Buy?

[oskar27]

I was planning to place an order in January to purchase a 2013 Edge LMD in Kodiac brown metallic with light stone or white platinum metallic with Sienna seats but since my dealer does not have any vehicles in my colors, I'm thinking now to lease.

 

Never leased a vehicle before, preferred rather to purchase, and I don’t really know the pros / cons of leasing vs purchasing. The idea is since I can't see the vehicle before I purchase might as well lease it and at the end of the lease if I like it then I pay the buyback price and its mine but if I don’t like it then just return it or trade in for another color.

 

Do you think the above is a good financial idea or its going to cost me much more to own the car if I decide to keep it?

[akirby]

Theoretically buying a leased car will cost the same as buying it outright since your lease payments are based on the residual value. There could be a slight difference in interest rates and the incentives can be different which woud make one option slightly better than the other.

 

The only other potential downside is you might be making payments longer with a lease and buy than if you just financed it up front, but the payments will be lower.

 

I think it's a good idea if you're not sure you want to keep the car long term. I considered doing it myself.

[oskar27]

The lease quote I have is for 36 months at 0.00% interest and monthly payments of CAD$682.04 tax included (residual CAD$20,792)

 

The purchase quote is for 60 months at 0.00% interest rate and monthly payments of CAD$807.66

 

The above include a Ford credit of CAD$1,750

 

From the above it looks like that the lease is more attractive financially but at the end of the lease I must fork out $20K to own the vehicle which is ok with me assuming that I like the vehicle. If not then I lost my 36 months payments.

 

I was just asking to see if there is a disadvantage on leasing but since you are planning doing the same I will really now consider this option

[akirby]

You're not really losing any more with a lease than if you bought the car and sold it after 3 years. Either way you're paying the first 3 years' depreciation. And it's easier to just turn in a leased vehicle and get a new one after 3 years if you decide you don't want to keep it.

[RJG]

I also recently had to make the same decision. I'm a retiree. Mostly living off investments. I also usually just pay for vehicles when I get them. And I usually buy someone in our family a new vehicle every few years. Seems I'm always buying cars. So I deal with this decision a lot.

 

Being an X plan buyer, the pricing on our 2012 Limited was pretty straight forward. X plan price with Limited with Nav, was around $34,000 (US) plus taxes. Rather than just buy the vehicle outright, accepting their $8000 trade in on 8 year old Mercury Montego, and paying cash for the difference, I paid $5000 down on a 27 month lease (based on X plan buy price) with lease payments of $274 per month. Residual of $23,850 a lease end. Ford was subsidizing the 27 month lease at the time. Will probably buy the vehicle at lease end, either keeping it a while until original warranty is up, or sell immediately attempting to recover most of the $5000 I put down on lease.

 

So far....by my convoluted way of thinking, I have been driving this really nice car free for this year. Have made more on the money I kept invested than the lease payments added up to. Your results may vary.

 

However....without having the "opportunity cost" (lost investment return on money spent), and adding up all the extra costs built into leases, I think outright buying the vehicle would be about $1000 cheaper on a 3-5 year ownership period. Leasing has some advantages for some, but generally costs a little more. I only overcome this extra cost by doing something better with the money. Which, of course, doesn't always work. Leasing does make sense I think for a person who is always trading every couple years. Just paying for the part of the car you use up. But if you have little assets to work with, it's hard to ever build any equity this way. Leasing actually works better on low depreciating vehicles, not on mass produced vehicles sold to rental car fleets who dump them on market depressing their prices. Google for low depreciating vehicles if you lease. I'm a F shareholder, and like the cars, is only reason I lease a F product. JUst a loyal shareholder I guess.

 

Anyway....that's my opinion. And I pay attention to real costs of things.

Edited December 31, 2012 by RJG

[oskar27]

Hey RJG, thanks for the insight: I'm also a reiree and thinking about the same lines but I'm not a F shareholder LOL, dont trust the company and although they did much better in 2008 than the other BIG 2, I find the automotive industry too risky. I was looking the other day on the NBR on PBS and I think they were reporting the auto sales for October or November; the import sales were up 26-30% and the big 3 were up only 6%. Yes a good increase but a far cry from the imports. Its really upsetting to see these numbers and thinking that the big 3 started the automotive industry but now they are always behind the imports and will never understand why they cant change

 

Anyway the only reason I will look into leasing is because my dealer does not have an Edge Ltd in my color and so I find it easier to lease since at the end of the lease I can return the car if I dont like it.