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The gosh-honest truth? You really need to have a CPA look at it. Every lease has a different twist to it.

The idea of a lease is that it is actually a loan, with you borrowing only the money that corresponds to the difference between the sales price (for discussion's sake let's say the sticker price) and what they expect it to be worth at the end of the lease. The leasing company retains ownership the whole time. You are going to pay interest on the money loaned, and probably some part of the value (capitalized cost) of the vehicle while you have it.

Leases are really, really tricky because they are complicated and it's (way too) easy to hide charges in places you don't understand. They're also an easy tool for the dealer to pull the wool over your eyes both due to the complexity, and that your attention is diverted away from the real costs and towards the monthly payment alone.

There are tax advantages to leasing if you are writing any part of it off as part of a business. For a personal vehicle a lease is useful if you really want the vehicle but don't qualify for a full loan. However, be forewarned that nearly all leases leave you "upside down" (owing more than it's worth) for the entire lease period, so once you sign on the dotted line you need to plan on it being yours for the full lease duration.

That all said... I leased a personal vehicle once and will never do it again. I hated the car after about a year but was stuck with it for another three because it had dropped in value like a rock, and I was "upside down" on the cap value all the way through the day I turned it in.

:(
 

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We have leased one car, will never do it again, it wasn't too bad a deal, but the negatives outweigh the positives.
 

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The idea of a lease is that it is actually a loan, with you borrowing only the money that corresponds to the difference between the sales price (for discussion's sake let's say the sticker price) and what they expect it to be worth at the end of the lease. The leasing company retains ownership the whole time. You are going to pay interest on the money loaned, and probably some part of the value (capitalized cost) of the vehicle while you have it.
I bought my last truck through the bank on a "buy back" plan which is basically a lease. However there are no rules like a lease. At first I was upside down, but made extra monthly payments about a year into it because my money situation changed. After five years I would have been able to return it or pay out. I ended up paying it out 1.5 years early with out any extra fees. (Then bought my element with the trade as a large down payment, it is easier to deal when you don't owe.) Most banks in canada offer this service I would imagine the US banks do as well.
 

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I am seriously looking at an EX AWD Auto w/airbags and considering leasing for the following reason. Being a new vehicle, I am not totally comfortable with the potential resale in three years. If I am comfortable with the lease deal, I know that at the end of 3 yrs if the value is less than the residual I can walk, or buy the vehicle if it is worth more (also with a lease you only pay sales tax over the lease term on the difference between the sales price and residual).
My question for the dealers is what is the residual value for a 3yr/12,000 mpy Honda lease on the vehicle in which I am interested?
Thanks
 

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I compare leasing a car to sharing a cell in Attica with Bubba the 400lb rapist. You're gonna get screwed and it's going to really hurt in the end.
 

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I was dumb once. Don't get in a lease. Why spend almost the equivalent of the cost to end up with something you don't own? I will have spent $15000 on a car not even worth that to start because of a stupid lease. Stupid! Stupid! Stupid! Sorry, I get mad just typing it. But if I ever see that sales jerk again...
 

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>I am not totally comfortable with the potential resale in three years.

In the case of the E, this is very wise thinking. But I would hazard an educated guess that the professional actuarials at the leasing company are more pessimistic than you.

I used to advise strongly against leasing of personal vehicles for any reason. I was eventually slapped silly by a CPA and leasing agent who - correctly so - advised me that all leases are not always horrible deals. It was complicated (there's that word again), and it tied back into the cost of money and the inherent value of minimizing your personal cash flow. However, given the really lousy return that common folk like you and I can get on our cash these days, those arguments pretty much turn into vapor.

My advice is still if there are no tax advantages for you, don't lease. If you really think you have to, shop around - auto leases are available from most banks, too, and they will usually give you much better rates than signing-up for whatever package the dealer is pushing.
 

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You guys don't need to tell me I am stupid, I have a wife for that! I think where people get screwed is working from the payment amount. They think they got a good deal because the payments are lower. I work from the sales price. If you know the Capitalized cost (sales price), Residual value (percentage of MSRP) and the Money factor (interest rate) you can determine if you are getting a decent deal.
Here is what I have found out. For an EX AWD Auto w/side airbags leased for three years with 15,000 miles per year: I am in negotiations at no more than a 20,200 purchase price (Capitalized cost); Residual value 11,858 (21,560x.55); Interest rate 5.09% (.00210x2400). My payment (before sales tax) should be within a few dollars of $301 (payment over 36 mos. plus interest at 5.09% on 8,342 (20,200-11,858), plus interest on the 11,858 at 5.09%). This is essentially having a note at 5.09% with a balloon payment in three years of 11,858, only if the car is not worth that much at that time I walk. If it is worth more and I am happy with vehicle I buy. The above calculations get tweaked if lease is 4yr (lower residual) or 12,000 mpy(higher residual). Additionally, I would not initially pay sales tax on the 11,858, which in TN saves me $830. Admittedly many times leases do not work, primarily I think because residuals have become more realistic. Many lenders have been burned at the end of leases when the vehicles are not worth any where near the residual they counted on. I could ramble on more, but this is becoming a long post. I know this is confusing and yes, I am a CPA.
 

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>yes, I am a CPA

ROFL!!!! :mrgreen: :mrgreen: :mrgreen:

And you help make my point in spades! (I love it!) "Capitalized costs"... "money factor"... "residual"... no wonder most of us run out of the closing room holding our heads, screaming in agony. :D

You mention one of the biggest "gotchas" of all... one that I completely overlooked - annual mileage. If you ever expect to drive your car on long trips (like we do), you can just forget leasing. Our typical cross-country vacation can add 6-7K without thinking about it. The "stock" answer from the leasing advocates is to rent a car for the unusual stuff, but, gosh, that sure defeats the purpose of a personal activity vehicle, doesn't it? And most rental companies don't do the unlimited mileage thing any more - cross state lines and the meter starts ticking. :(

Bottom line? Leasing an E just seems to be at cross purposes. What good is a "get up and let's go someplace fun and interesting" vehicle when your wallet is watching the odometer?
 

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What most people do not realize about leasing is that you still have the option of selling the vehicle out right at (or even before) the term is up. I have leased several Hondas/Acuras through American Honda Finance, and have had excellent experiences with all of them.

My goal of leasing has always been to not wrap up equity in a depreciating asset. The key to leasing is choosing a vehicle that will hold its value. Because I am insane about the maintenance of my cars, I can say that I have always sold my leased vehicles privately for more money than the lease payoff.

Most (not all) people who attack the notion of leasing a vehicle do not fully understand the process, and therefore cannot make it work for them.
 

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I forgot to mention that when sold privately, the mileage limitations of the original lease do not apply. In other words, if you can sell your leased vehicle for more than your payoff amount it doesn't matter how many miles you have driven it. As an example, I recently sold my 01 Accord EX Sedan with 51K miles on it for $13K. My payoff near the end of my lease term was around $12K, while my original mileage limitation was 12,000 miles a year. When the buyer game me a check for $13K, I took $12K of it and paid of the lease, and kept the difference.
 

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I like to keep my cars for 10 years and I put 20k miles per year on them to boot...
I'm with Dan.....a lease is no good for me! My last car was 10 years old and my husband's car is 14 years old.....we drive 'um until they die!

I had a Chevy and it was about to die...that is why it got traded in for the E, but my husband's car is a Honda and will not die....so in all honesty I could be driving my E into my 40's! Sweet! A lease would just never do for me! Plus I put way too many miles on my car.
 

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Absolutely - if you keep your vehicles for that long, it definitely does not make sense to lease them! If you are in/out of new cars every 3 years or less, then you may want to consider it.
 

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There are advantages both ways, to leasing and to buying. The main thing to watch, as already pointed out, is the cap cost (or amount of money you will be financing). There are aquisition fees and other things that add up. You can negotiate the sale price, just like you would if you were purchasing. The money factor is just like an interest rate, only much harder to determine. It's much harder to shop "money factors" than interest rates.

Different states have different taxes and such for leases as well. In Texas, it even varies by county. Some countys charge personal property tax and some don't.

Another thing that we often get complaints on from customers who are leasing, is that insurance requirements are higher in many cases, thus insurance premiums are higher. You must maintain higher limits with Honda (as well as most leasing companies) and usually can expect to pay a higher monthly premium to your insurance company.

With regards to mileage and the limitations there:
1) You get penalized for excessive/high milegae no matter if you are buying or leasing. The mileage on your car effects the value of your car. The difference on a lease, is you pay for going over the mileage set forth, only if you turn the vehicle back in. Also pointed out earlier, you aren't charged for that mileage if you trade the vehicle in or sell it or keep it. Higher mileage will effect the trade - in amount though.

2)If you are in a lease and intend on keeping the vehicle at the end of the term, mileage again doesn't matter.

3)If you intend to keep the vehicle at the end of the lease, you will end up paying more for the vehicle than if you had originally purchased the vehicle. Unless you socked away that extra money (the difference between the payment on a lease versus a purchase) and use that money to pay extra on the vehicle.

Another thing to keep in mind when leasing, is that you will almost always be "upside down" in a lease. The values that the leasing companies set for the vehicle 3 to 4 years down the road, is often higher than what the vehicle will actually be worth. Because you are only financing the dollar amount between the sale price and the residual value, you aren't building equity and paying down principle in the same manner as a conventional loan. The good thing about Honda's in general, is they don't depreciate like a rock and it is very rare to see a Honda customer too far "upside" down to trade. Even those in leases.

Anyway, there are some other advantages and disadvantages that I'll try to cover later.
 

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I have been told by my accountant that I am better served to lease my vechile because I can depreciate it for my business more quickly as a lease rather than a purchase.
Am I better served to lease or purchase if I pay for the car thru my business and put 18k miles per year about 12k which is non-personal.
 

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One thing to remember, the buy out is not written in stone. My kid is coming to the end of a four year lease on a Passat. The contracted buyout was 12,900. He offered them 9,500, they countered with 10,000. We negotiated a good base price, the interest was reasonable and he ended up in a better, SAFER car than he could have ever afforede otherwise.
 
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