I'm leasing a Honda Civic right now that I think I'm going to keep. No down and $229 a month for 36 months. Residual ended up being 11k. I end up paying less than a grand over original purchase price if I decide to purchase it after the lease. That's why leasing an Evo seems tempting to me initially. Still looking into the cons and pros though. Thanks for all the personal experiences!

 

Honestly do what you feel is better for you. If you like the "new" factor which I would too because you have a warranty that comes along with it, then by all means buy the car. If you want a used one and want to get into modding quickly, then get the used. BUT which ever option you take, I would personally suggest going to a bank 1st, taking a loan out from them, buy the car with cash, so no payments from dealer, and just pay off the bank loan. This way it should be a cheaper interest rate and gives you some time also to enjoy the new car, and start saving/planning which mods you would like to add on.

 

Lolol that's one hell of a wack dealership you're working at. Here in Cali it's possible, especially with taxes imposed on businesses. Put it this way. If a dealer makes 35 grand off of a car in 3 years, out of that 35 grand he keeps 28. If I person walks in on the spot and pays 30k for that same car, the dealer can hide the earnings (which happens all the time) and put that extra 2k into his pocket.

 

Everything he said is basically true man. I don't know what you're thinking but it def. aint right. Either that or I just can't understand what your trying to say, which is very possible because it's really not clear the way you are wording things. This is about a new car purchase; you are using 2 different hypotheticals, yet interconnecting the numbers from both to determine the 2K profit. That makes no sense. It also looks like you think that a dealer would somehow make a profit of 28 grand on a car that was sold around 35 thousand dollars, and if that is so then you really don't understand the car buying process as well as you think you do. If a dealer makes ONE grand on a car purchase final price, that's a great day for them. The other place they make money is in financing (through their bank), just like the other dude said.

Sometimes dealers will give a good price on a car being paid in full because they will just go for the quick buck. That could be just a few hundred dollars but who cares. That's money locked down with no hassle, and on to the next person. How well that particular car is selling is also a huge factor in what price they will give on a cash purchase. If they are in a rush to move cars, yes paying in cash could work out very good for you. Otherwise, not so much.

 

If you don't mind, I'll educate you about out the car industry works because you seem to have a few misconceptions here.

First off, no dealer makes $35k off of a car! The average mark up on a car in today's market is between 4-6%. When it comes down to it, the average NET profit on a new car is like $700-1500.

When we get a car from the manufacturer, we take out a loan. That loan has interest (like any loan). We pay the manufacturer the invoice price. On an Evo its about $2000 less than the MSRP. We then discount the car from the MSRP. Say, a 34,999 MSRP + 795 for destination = 35,794. Say a dealer sells the car for $34,599. If the invoice price according to edmunds.com on a base GSR is 34,313 (including destination of $795).

So, the that dealer sold you the car for an up front profit of $286!!! Then you have to take in to account they pay the sales person, the detailer, and the mechanic who did the pre-delivery inspection. They sold that car to you at a net loss.

How the hell do dealers make money then?
1) We make money when you finance cars with us. So that idea that you get a better deal when you pay cash, is bull ****. We want you to finance with us. So we have a financial incentive to get you a good rate.
2) We make money when you buy accessories. Mark up on accessories is anywhere between 20-40%.
3) We make money when you bring your car back for service. Service departments way out gross sales departments in a dealership.
4) We make money when you trade in a car. Our "mark up" on a new car is some times a negative gross. Dealers aim to make about $1500-3000 up front gross profit on a used car. This is because you don't know what we paid for a used car. Whereas you know what we paid for a new one.
5) We make money when we meet sales goals. Right now '13 Outlander Sports have a $3500 rebate on them. We get a lot of that back when we meet a monthly sales objective!


Sooooo, no. You absolutely can not buy a new, 2014, Evo for $30k including TTL, OTD cash. You'd be asking the dealer to sell it to you at a gross loss of over $4000.

"But what about dealers here in Cali like South Coast Mitsubishi?" Sorry Sam, I'm calling you guys out! In states like California they're legally allowed to advertise prices that include discounts that not everyone is eligible for, and with out the $795 destination fee included in the price.

For example, the fine print on some cars read like this,
That's $1500 in rebates you may not qualify for. But they're allowed to advertise the price like that. They also don't have to advertise the $700 documentation fee, or that the price doesn't include $795 for destination charges. So lets assume you see a car priced at 17,499. And you're like "Holy crap that's $2500 less than anyone else." Lets add it all up. 17,499 + $500 if you're not military + $500 in you're not a recent graduate from a 4 year program and only specific schools + $500 if you don't already own a Mitsubishi + $795 for destination fee + $700 for documentation fee... Now you're at $20,494.

In MN we're not allowed to advertise like that because it's been deemed deceptive.

Bottom line is this: Dealers are a business, we're not unicef. We're not going to lose money on a new car deal. We make it up one way or another. Some are just more honest about how they make their money.

 

So someone mentioned that with 2 years, 24k miles, their residual is about 27k. Can someone tell me how much a used 2011 evox with about 24k is selling for right now? Is it selling for over 27k or under 27k?

I think we should also take in consideration how the car holds their value. For example, if you lease a BMW X5 for a 2 years and your residual is about 45k and people are selling similar vehiciles with about the same mileage for 40k or less, then it might not be a good idea to purchase the vehicle after the lease. But if the car is worth more than the residual value and you truly like the vehicle then you can pay for the residual.

Just my 2 cents. I understand that there are more factors involved in this conversation than just residuals alone but I just thought to bring it up as well.

 

I would buy it just in case you decide to mod it!

 

I just checked AutoTrader because I was curious...
The least expensive 2011 Evo GSR ( <30K miles) on there is listed at $27K.
There are a number of 2011 GSRs listed in the low 30K range.
So buying one for $27K seems like a decent deal. You can also count on the price going up a bit over the next two years.

 

Depends on the equipment. 27 would be good for a base with no other options. More equipment, more money obviously.

You're not understanding the point of this post, or not clear on how leases work. He is asking about buying the car at the end of the lease and whether or not it's a good idea to split the payments up.

Mods are irreverent since he's asking about buying the car at the end.

 

well time to put my2 cents in...I got my car on the 2year lease to own plan, first time buyer, little credit history..i gave 4k down and my payments are 360$..the residual value is like 27,200$ I believe..leasing is a good way to bring the price down and making the car affordable..after the lease the payments should be around 390-430 depending on if you give another down or the APR that the bank is willing to give to you....I believe leasing the 2 years is the way to go..and now about the mods, you can mod the car as long as when you take it back its completely stock

 

or buy it at the end. Then mods and miles don't matter either.

 

There is nothing wrong with leasing a vehicle - but know what you are getting into and run the real numbers for buy vs lease before you make a decision (as the guys above have pointed out). I would STRONGLY advise against leasing a vehicle to make it more financially viable (i.e. to allow you to purchase more vehicle that you can afford). Leases are great for people that want a new car every few years and don't care about never having equity in a vehicle. It also certainly works for people who don't know if they will like / want a given vehicle in 2 years or whatnot.

In my honest opinion, no one should ever purchase / lease a car that they couldn't afford to buy outright in cash at the time of purchase. However, I know that there are plenty of people who wouldn't agree with this. In the current economy, you are often better off financing a low (<2%) interest rates for 60 months and keeping the majority of your money in interest bearing accounts.
If you are trying to figure out where you'll get the $500/mo for a loan payment, but can "afford" $300/mo for a lease payment, you probably can't afford the car (and certainly can't afford to mod it).

 

TrogdorWBL is 100% correct. Go take a look at financial statements from any auto dealer... PAG, LAD, GPI, or AN... Margins on new cars are very low... LSD-MSD... F&I and parts and service is where margins are. I say to get best deal... Finance from dealer, tell them you know they r getting paid for originating the loan and then pay it off with a bank loan if you can get a better deal elsewhere, although dealers are pretty darn competitive with rates if your credit is good.

 

Your basing this on a pre-cash for clunkers car market.

C4C sent the used car market in to a huge cluster (Thanks Obama). Used car prices are at an all time high because of C4C. Because of this, manufacturers want you to lease so that in 2, 3 or 4 years they have a chance to buy back your car and resell it at an over inflated rate.

Leasing used to only be good for people who wanted new cars every few years. That's back when you leased from the full MSRP, and paid a normal interest rate. Now, because they want you to lease you actually get intensives. Especially on an Evo because there is no rebate. All of the money off an Evo (lease or buy) is just dealer discount, and you can get that on either.

So it used to be a terrible idea to buy a lease because you basically paid 100% of MSPR vs. buying say 90% of MSRP. Now a days, if can lease, or buy for roughly the same discount off MSRP. And, now lease interest rates are subsidized. Meaning if you qualify for a 2.49% interest rate for 60 months, you probably qualify for a sub 1.0% lease rate for 4 years (I've seen as low as 0.59% for a customer who had an 845 credit score). So If you can finance the exact same total of money for 60 months, as you can by leasing first, then buying, why not pay less interest?

I did the math on my lease. Based on my actual lease rate, and what I assume will be the rate on a 4 year old car with about 45,000 miles on it for my credit range I will save about $900 in interest over the course of 72 months.

 

I definitely agree with you that leasing isn't the same in today's market as compared to what it was in pre-recession times. If you can afford a given car, it certainly might make more financial sense to lease it first and then finance the rest later when you can buy the car out. My argument was simply against financing a car (be it via original purchase with financing or through a lease + buyout later) that you simply can't realistically afford to own. For what it's worth, I got 0% through Mitsu on my Evo GSR back in 2008. The decision of what to do was really a no brainier for me. I could have purchased the car in cash, but instead I put a minimal amount down and financed the rest. My invested money has made a great deal more $ since then.

While I don't necessarily agree with the cash for clunkers program, I think you are a bit short sighted if you think CfC has any major residual effects on the current state of the used car market (though I agree with your Obama comment on principle). It may still have small effect on the cost of very low priced vehicles; however, it's not propping the cost of my used Evo up. The current state of used car prices is simply a function of supply and demand. There were far fewer new cars purchased in the years immediately following the recession due to decreased spending power, buyer uncertainty, job loss, etc... There are simply fewer late model used cars available for sale. Furthermore, during that same time, there was a net increase in the demand for used cars for exactly the same reasons. As the economy recovers, and new car sales pick up (as they are), you will see a drop in used car prices (generally you can expect this over the next few years baring a double dip recession or whatnot).

One final point is that you don't know what your loan rate will be in 2 years from now (if you were to lease a 2014 Evo x today). The government has manipulated the interest rates to their current levels thanks to QE. There is no reason to expect that you'll be able to get a sub 2% auto loan in 2016 after QE stops. Furthermore, there is no reason to believe that the value of your 2014 Evo X in 2016 will be exactly what the dealer's estimated it will be. It might be significantly less. Granted that isn't a big deal if you are inside the mileage and didn't spend a boat load modding it. However, if you sunk a good deal of money into it Mod wise, and are way over the mileage, you might feel a bit trapped. If you didn't... you could easily walk away and buy a similar used vehicle at the new market rate. Buying outright now at a given rate locks in your finance rate, and it's unlikely that rates will drop to below what they are now (they almost can't). If you are planning to heavily modify a car, this might be your best bet. If you aren't, than the lease might be. That being said, there are plenty of variables to both plans.