Evo X - Lease vs Purchase
Evolving Member
Joined: Feb 2012
Posts: 444
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From: Minnesota
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.
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.
As far as residuals however, that last bit I'm not so sure you're right about. They pay actuaries a **** load of money to do exactly what you described. Sure, I'll never know if my car will be in an accident 2 years from now, or the market collapses... I don't have a crystal ball. But on the assumption that things stay somewhat steady for the next 2 years, I can be fairly confident in saying my car is going to be worth more than its ~$14000 buy out. We sold a 2008 with 98,XXX miles on it for $19,999 at our dealer, paid 17k for it on trade. So, even with anecdotal evidence like that I'm fairly confident in saying that.
You're right, I can't be sure what the interest rates will be 2 years from now (I leased at '12). But I'm just estimating, and generally the rate on a 24 month loan for a 4 year old car with less than 80,000 miles is going to the lowest possible rate you can get on a used car.
As far as residuals however, that last bit I'm not so sure you're right about. They pay actuaries a **** load of money to do exactly what you described. Sure, I'll never know if my car will be in an accident 2 years from now, or the market collapses... I don't have a crystal ball. But on the assumption that things stay somewhat steady for the next 2 years, I can be fairly confident in saying my car is going to be worth more than its ~$14000 buy out. We sold a 2008 with 98,XXX miles on it for $19,999 at our dealer, paid 17k for it on trade. So, even with anecdotal evidence like that I'm fairly confident in saying that.
As far as residuals however, that last bit I'm not so sure you're right about. They pay actuaries a **** load of money to do exactly what you described. Sure, I'll never know if my car will be in an accident 2 years from now, or the market collapses... I don't have a crystal ball. But on the assumption that things stay somewhat steady for the next 2 years, I can be fairly confident in saying my car is going to be worth more than its ~$14000 buy out. We sold a 2008 with 98,XXX miles on it for $19,999 at our dealer, paid 17k for it on trade. So, even with anecdotal evidence like that I'm fairly confident in saying that.
I would assume that most people who can "afford" to own an Evo X and mod it should also be able to pay cash after a 4 year lease if the interest rates are crazy. If you were to lease one now (a 2014 today), you can almost guarantee that the interest rates will be higher than they are now in 4 years when you would be able to buy it out.
Also one other point - Unless there is a major problem with the first year of a given car, that first MY generally will hold it's value over time better than later versions of the same generation / body style. When a new generation of the vehicle comes out, they will all generally take a bit of a hit. That being said, there is no reason to believe that a 2014 purchased today will hold the same value as the 2008 that you recently sold did (assuming that Mitsu does produce an updated Evo XI for 2015 or 2016). This obviously depends on how similar the X is to the XI in price, performance, customer desirability, etc...
In the end, I don't really disagree with anything that you are saying. I'm just pointing out that there are many assumptions to this model that may not be favorable to someone who is at the edge of their budget. You take calculated risks - that's all you can do. Heck, the REVERSE could happen too!
Newbie
Joined: Jul 2010
Posts: 3
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From: NYC
If you're self employed, then leasing the vehicle might be beneficial to you as you're able to write off the cost.
If you are not self employed and are not interested in the write-off then the only reason you lease it is to get into another new car after the lease is up.
If your intention is to keep it and there are no benefits of taking out a least (tax, write off, business etc) then you might as well just finance it.
The only reason why you would least a vehicle with no business incentive is to just get yourself into a really nice vehicle without having to pay a ridiculous amount to down right own it. For example, a 60mo finance loan on an evo x with sss is most likely around 600 dollars a month. If your car budget is 600-/+ a month, for a car, and you lease, you can get yourself into an m3, a nicely equipped S4/s5 or an C63, all depends on your credit.
If you are not self employed and are not interested in the write-off then the only reason you lease it is to get into another new car after the lease is up.
If your intention is to keep it and there are no benefits of taking out a least (tax, write off, business etc) then you might as well just finance it.
The only reason why you would least a vehicle with no business incentive is to just get yourself into a really nice vehicle without having to pay a ridiculous amount to down right own it. For example, a 60mo finance loan on an evo x with sss is most likely around 600 dollars a month. If your car budget is 600-/+ a month, for a car, and you lease, you can get yourself into an m3, a nicely equipped S4/s5 or an C63, all depends on your credit.
Evolving Member
Joined: Feb 2012
Posts: 444
Likes: 0
From: Minnesota
If you're self employed, then leasing the vehicle might be beneficial to you as you're able to write off the cost.
If you are not self employed and are not interested in the write-off then the only reason you lease it is to get into another new car after the lease is up.
If your intention is to keep it and there are no benefits of taking out a least (tax, write off, business etc) then you might as well just finance it.
If you are not self employed and are not interested in the write-off then the only reason you lease it is to get into another new car after the lease is up.
If your intention is to keep it and there are no benefits of taking out a least (tax, write off, business etc) then you might as well just finance it.
Newbie
Joined: Jul 2010
Posts: 3
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From: NYC
All Manufacturers offer special discounted rates both for leased and financed vehicles If you go through their financing. Mitsubishi offered 0% financing on EVO's if I am not mistaken. As a business owner, and from experience, I am simply highlighting the common pros and cons.
Evolving Member
Joined: Feb 2012
Posts: 444
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From: Minnesota
All Manufacturers offer special discounted rates both for leased and financed vehicles If you go through their financing. Mitsubishi offered 0% financing on EVO's if I am not mistaken. As a business owner, and from experience, I am simply highlighting the common pros and cons.
However, for those looking for keep a car in a tighter budget, lease rates are going to be lower than than if you finance. Say you qualify for a 2.99% interest rate on a 60 month loan. You would likely qualify for a 1% interest rate (or lower) on a lease.
If I can finance 60% of my car at a 1.49%, then finance the other 40% at 3.99%, I save more money that way than financing the whole thing at 3.49%.
Newbie
Joined: Jul 2010
Posts: 3
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From: NYC
Mitsu does offer 0% for 36 months if you're typically a cash buyer, who doesn't care about monthly payments. This allows you to keep your liquid assets where they are and continue to earn you more money.
However, for those looking for keep a car in a tighter budget, lease rates are going to be lower than than if you finance. Say you qualify for a 2.99% interest rate on a 60 month loan. You would likely qualify for a 1% interest rate (or lower) on a lease.
If I can finance 60% of my car at a 1.49%, then finance the other 40% at 3.99%, I save more money that way than financing the whole thing at 3.49%.
However, for those looking for keep a car in a tighter budget, lease rates are going to be lower than than if you finance. Say you qualify for a 2.99% interest rate on a 60 month loan. You would likely qualify for a 1% interest rate (or lower) on a lease.
If I can finance 60% of my car at a 1.49%, then finance the other 40% at 3.99%, I save more money that way than financing the whole thing at 3.49%.
Personally, I would not recommend that path. You need to be financially disciplined to say, pay a $350/lease and save the other $300 for the next 3 years. Chances are, if you're able to be this disciplined then your finances should be at a level that you should jump at the idea of getting getting 0.X% financing at that 36mo. Also, I may be wrong, but aren't interests rates higher on used cars as oppose to new?
Newbie
Joined: Aug 2013
Posts: 55
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From: Florida
I see what you're saying, pay less to save more and it makes sense.
Personally, I would not recommend that path. You need to be financially disciplined to say, pay a $350/lease and save the other $300 for the next 3 years. Chances are, if you're able to be this disciplined then your finances should be at a level that you should jump at the idea of getting getting 0.X% financing at that 36mo. Also, I may be wrong, but aren't interests rates higher on used cars as oppose to new?
Personally, I would not recommend that path. You need to be financially disciplined to say, pay a $350/lease and save the other $300 for the next 3 years. Chances are, if you're able to be this disciplined then your finances should be at a level that you should jump at the idea of getting getting 0.X% financing at that 36mo. Also, I may be wrong, but aren't interests rates higher on used cars as oppose to new?
Evolving Member
Joined: Feb 2012
Posts: 444
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From: Minnesota
They are. Here's how the banks look at car loans. Banks assume you're going to default on a loan no matter your score. And they would rather have a newer, nicer car, low mileage car to try to sell back on the auction. They also feel like someone is more likely to walk away from a $3000 POS than a $35,000 Evo. Typically, as a car gets older with more miles, they are seen as higher risk, thus they get higher interest rates.
Cars that are 4 years old or newer, and have less than 60,000 miles are typically get the best rates.
Also keep in mind that shorter term loans get better rates too. That's fewer payments you may default on. So when you lease a car for say 3 years. When you refinance, you're only asking for a 2 or 3 year loan, unlike if you financed a used car for 60 or 72 months. The rate will be lower. So, assuming your credit doesn't change dramatically, and interest rates remain some-what steady you can save yourself some money by paying less interest in the long run.
Cars that are 4 years old or newer, and have less than 60,000 miles are typically get the best rates.
Also keep in mind that shorter term loans get better rates too. That's fewer payments you may default on. So when you lease a car for say 3 years. When you refinance, you're only asking for a 2 or 3 year loan, unlike if you financed a used car for 60 or 72 months. The rate will be lower. So, assuming your credit doesn't change dramatically, and interest rates remain some-what steady you can save yourself some money by paying less interest in the long run.
Thread Starter
Newbie
Joined: Aug 2013
Posts: 16
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From: Minnesota
Thanks for all the replies. Very good view points and this helped me see both cons and negatives. I've been cosidering a BRZ/FRS recently as well since that seems to be more within my financials means. I'd love an Evo X though. I will just have to keep my eyes peeled to see if a good deal comes up that I can snag. It's a close choice.
Evolving Member
Joined: Feb 2012
Posts: 444
Likes: 0
From: Minnesota
Thanks for all the replies. Very good view points and this helped me see both cons and negatives. I've been cosidering a BRZ/FRS recently as well since that seems to be more within my financials means. I'd love an Evo X though. I will just have to keep my eyes peeled to see if a good deal comes up that I can snag. It's a close choice.
I see this **** all the time at the dealer. For some reason Sion TCs, Civic SIs, and BRZs seem to the 3 biggest offenders.
They were looking at an Evo and STi, thought they couldn't afford it so they bought something in the low 20's/high teens. 6 months to a year later they come in with this car that isn't what they wanted. They're burred in their car, like 5 grand upside down, and now they want an Evo.
Just lease the car you want, and buy it at the end of your lease. You'll probably always think to yourself "I should have just gotten an Evo," every time you see one or drive by a Mitsu dealer in your less than equivalent car. You'll never once say "Why am I paying so much for this car?"once you get in to one.
Newbie
Joined: Sep 2012
Posts: 36
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From: Westchester NY
Dude, you can lease an Evo for the same price you can buy an FRS/BRZ.
Just lease the car you want, and buy it at the end of your lease. You'll probably always think to yourself "I should have just gotten an Evo," every time you see one or drive by a Mitsu dealer in your less than equivalent car. You'll never once say "Why am I paying so much for this car?"once you get in to one.
Just lease the car you want, and buy it at the end of your lease. You'll probably always think to yourself "I should have just gotten an Evo," every time you see one or drive by a Mitsu dealer in your less than equivalent car. You'll never once say "Why am I paying so much for this car?"once you get in to one.
I always say "why am I paying so much for this evo"!
but that is because its a 5 year old car with 38k miles on it and have sunk 70k+ into it, but that isn't the point, people say that
Bobby, you are a salesman, that is for sure haha. I agree with a lot of what you say, but a lease isn't always the answer, some people lease things outside their means, others do it because it makes financial sense.
It makes sense sometimes, totally dependent on situation and I don't think you should necessarily say "just buy the car you want" because if we all did that we would all have cars we can't afford and make us go broke.
but that is because its a 5 year old car with 38k miles on it and have sunk 70k+ into it, but that isn't the point, people say that
Bobby, you are a salesman, that is for sure haha. I agree with a lot of what you say, but a lease isn't always the answer, some people lease things outside their means, others do it because it makes financial sense.
It makes sense sometimes, totally dependent on situation and I don't think you should necessarily say "just buy the car you want" because if we all did that we would all have cars we can't afford and make us go broke.
Evolving Member
Joined: Feb 2012
Posts: 444
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From: Minnesota
I agree, I'm not saying "Well, if you can't afford $700/m then lease for $400/m." If $400/m is also out of someones means. But he did say he was looking at a BRZ/FRS. In which case you really can lease an Evo for roughly the same price you can buy a BRZ for. Sooo if the payment on a BRZ is with in someones means, but it's not their ideal car, then he should just lease the car he wants.