• Protip: Profile posts are public! Use Conversations to message other members privately. Everyone can see the content of a profile post.

lease or buy and make payments

27 January 2002
this might not be the place to ask but i was wondering if i should buy the car and make payments or just lease it.

i think that if i do not intend to keep it long leasing is better correct? i hear about an 18 month period is better if you are going to gte rid of it by then then you shold lease...
the only reason i'm afriad to lease is if i fall in love with the car and want to keep it.. becaus after 18 months i'll eb losing money, however can id ecide to buy it ont he spot there? lets say at 18 months id ecide to buy it and then get it refinanced or somethign? can someone clarify for me my options? thanks
One thing to keep in mind is that you don't build equity on a lease and you lose money in fees...

A lease is sort of like a very long term rental. With an 18 month, the residual of the car will be very high.

If you want to sort of "trial" the car, a lease could be a good idea. You can think of the money you'll put in over the 18 months as the cost of testing it.

If there is even the slightest feeling that you will want to keep a car beyond the typical lease time-frame, I would definitely recommend financing.
Originally posted by spookyp:
One thing to keep in mind is that you don't build equity on a lease and you lose money in fees...

Do you build equity when you purchase? No.

If there is even the slightest feeling that you will want to keep a car beyond the typical lease time-frame, I would definitely recommend financing.

Actually, due to American Hondas lame residual values in their NSX lease, it is one of the few leases on the planet whereby at lease end, your purchase price (residual) is actually a bargain. It's a perfect car to lease because, unlike most leases, you can sell the car at any time during the lease and still break out of it without the normal obscene negative equity and you can buy it at the end and the total paid including the lease payments and buyout is the same as if you bought it to begin with.... Go ahead and lease a new one and keep your payments low for now and then buy it out later if you like it. It will calculate the same as if you did a long term finance from the start.
I guess what I meant by building equity was more perception, really.

For me, it always feels more clear cut financing. I can secure a loan at a rate that I like and have a clear picture of the payment schedule. At the end, I own the car and the current value of the car, less interest, is what I am left with.

Most leases I have come across seem to have pretty high interest rates and a residual that seems higher than what the car will be worth at lease end. I always lease my daily driver and have always bought my "keeper".

I know what you mean though... It really is the same thing given equal terms and numbers...
I can help you decide.
I am a Finance/Sales Manager for the Hiley Autogroup. The choice to buy or lease is one that you have to make based on what is most important to you.You have 3 options:
1.The best option for the smallest monthly payment is the lease.
2.The best option if you think you might want to own it after 2 or 3 years of payments is called a "premier purchase" (for example is what Audi calls it) Every manufacturer calls it something else, but basically what it is is residualized financing. The bank will guarentee the future value of the car(residual). So if the book value of the car is lower than your remaining payoff, just turn it in. If it is higher then you can decide to continue to make payments until it is paid off or what ever you want to do. What it allows you to do is decide later about keeping the car for its entire "life".
This payment option is a tad higher than a lease, but substantially lower than a traditional 60 month finance. Its basically a balloon, but it keeps you safe, considering the state of the economy.
3.And finailly, the traditional finance is the best option if you want to own it in 5 years.
Hope this helps, if you wnat more detailed info on what the residual is for a NSX, I have a book of current residual values in my desk which tells me what banks think of the future values of all cars. Its obviously different if it is a 2002 your are looking at compared to a 99.
Here in Pennsylvania you have to pay an extra "lease" tax in addition to the sales tax too.


1992 NSX Red/Blk 5 spd #0330
1991 NSX Blk/Blk Auto #3070 (Sold)
1974 Vette 454 4 spd Wht/Blk
Looking for 76-79 Honda Accords
It's only higher because you have to carry your state's max which is probably 100/300 coverage. So, it's not 'higher' if you would carry this coverage otherwise. Balloon options are ok but very greatly per lender, whereas leases by different lenders typically have very similar residuals as they all consult each other. Usually the only variances are the terms and mileage adds available and how many points to add for each term and mileage. Balloons use and interest rate to calculate whereas leases use a money factor because there is NO interest in a lease by definition. Some lenders do call it an interest rate like GMAC but it is a converted money factor. Do the math and you'll see that you'll pay roughly the same total for an 80k car no matter which way you go.
The decision really boils down to the terms of the lease compared to regular financing.

I leased my 98-T because at the time, American Honda Fiancning was offering lease terms equivalent to 2% interest rates, with only $7000 total payment out the door. No brainer. Keep your money in the bank/markets and earn a higher return .......

And my residual is lower than the current market value ......
wow, thanks guys good feedback
comptechnsx : i'll be looking for a 94 nsx, paying roughly 30k for about 60k miles or maybe 2k more on the car and 20k less in the car
how would that look lease/financing wise?
there is a large possibility that i will not keept he car for long i might turn it in and purchase a new one but hey i might fall in love with it.. =)

If you are going after a 94, residualized/ballon financing is out the window. The residual would be so low that it wouldn't pay off at all for you to do it that way. You will find it extremely difficult to find any bank that will lease a 94 as well. If a dealership is willing to lease it to you, them more than likely they will hold your note and not report it to any credit bureaus. These dealerships are few and far between. Really, to be honest the only appealing option you have is to just do a traditional financing plan. Finance it for 60 months or if you can afford it 48. Not all banks will do 60 on a car of that age. Since its an NSX some will make an exception.
If you get a decent deal on the car's price and a somewhat good interest rate (don't look to get under 9.9%) then chances are good that if you want out to get out of it in 3 years the cars market value should be in line with your payoff. This all depends on how much to put down and a few other factors. Good luck, and let me know if you have any other questions. Hope you join the club soon!!
Don't pay cash for cars! They depreciate. If you were able to buy 45k of stock that was going to be worth 42k in a year or 38k in 2-3- yrs, would you buy it? No. Finance the car at a good rate (yes, you can get 6-8% for up to 72 months on 91-94 NSXs) and invest your 40-45k. The reasons are endless not to pay cash and I won't go into them all again. As a Finance Director I definitely had my share of cash conversions. Some of the reasons that I heard why people want to pay cash were quite entertaining.
That is assuming you don't buy Eron or a similar investent stock!!! Getting a 6 to 8 percent return is not a give me. I look at a car as a depreciating asset.

The arument could be made, should one pay interest on a depricating asset, when they can buy it without impacting their lifstyle or financial stability.

Their are no 100% s in investing.
I think you're messing with the wrong guy, comptech, when it comes to financing..... However, I said that rates range from 6-8 for up to 72 months for 91-94 cars.... But, for your information, I can have 6.25 on a 91 for 60 months and 7.25 for 72...... (6.75 for 66 in case you were playing along). Of course, my situation is a little unique to most when it comes to auto financing. But even you, can have 6.99 for 60 and 7.99 for 72 on a 91 if you're nice to me.
Don't mess with me about financing with your wise ass comments.

P.S. Do you want a job? It sounds like you would be a good closer when it comes to holding rate....
Remember, make rate but don't sacrifice your product penetrations to do so. If your pay plan is written correctly, you'll lose money that way. I'll show you how to go from 10k/ mo. to 14k+. I'm messing around with you a little bit but, seriously, you don't need to question what I write here to help people when it comes to the car business and or financing.

[This message has been edited by Nsxotic (edited 19 February 2002).]
never seen nsxotic get so.. avid about something
... be nicer to him man
anyway i would lilke to say
you speak of this connection you have
want to share? =) or atleast let us know about it, i need all the help i can get... mananging to pay for half my tuition, an apartment and lookin for the NSXYCAR help me out guys
I believe Nsxotic is in the car dealership business but I could be wrong.

So I have a question for Nsxotic,

If you were to buy a 94 NSX for say 38k
How much would you put down? What would you do with the rest? Say you had the entire 38k.
No wise remarks here, just interested in getting some info from someone that probaly knows more about this than me.
If you were to buy a 94 NSX for say 38k
How much would you put down? What would you do with the rest? Say you had the entire 38k.
No wise remarks here, just interested in getting some info from someone that probaly knows more about this than me.


Hate to break the news for you, the parameters you are setting will lead to yet another round of endless commenatry, some of them valid and some not based on your specific financial needs. This also applies whether you lease or buy irrespective of what the return rates are ......

Those are best discussed with a loan officer ....

For example, if you deduct the payments on your NSX as a vehicle used in business, then you may want to put as little down and absorb as much monthly payment as possible, this assuming that the loan officer will allow those payments (percentage) based on your total debt payments to income ..... if monthly payments are an issue with the loan officer, then you have to increase your downpayment ..... this goes on and on and on .......
Money down would depend on what rate I qualified for and what rate of return I was expecting to make over the term I chose. Notice that I didn't base it on what rate I was getting at the time of purchase........ Roughly, though, I'd say on 38k, I'd put down 4-5k and finance it for 36 months. Especially if you had enough cash to pay cash, then you could handle the large payment. Here's a rough example based on $0 down.

Pay cash:
Out of pocket one time.
Yield on investments you don't invest in.
6% (going low)
Annual income you missed out on
$2,400 x 3 =7,200
Divide by 12 months
Total out of pocket
$47,200 (money you spent + money you couldn't earn)

What you will have in 3 yrs.
$32,000 (approx. value)
+ savings = $0
+ interest on savings = $0
$32,000 total

If you finance:

$1275/mo. (based on 9% x 36 w/ 0 down)
$200 (offset against vehicle mo. cost; interest you are now earning from above)
$1075/mo. Net out of pocket
x 36 months
= 38,700

What you will have in 3 yrs.

$32,000 value
+ savings $40,000
+ interest on savings $7,200
-38,700 (total of payments made)
Difference: + $8,500
AND you kept you money liquid for the 3 years.... much better than putting it into a depreciating piece of metal... This is very important when buying most cars as they depreciate heavily. Guaranteed to lose big $$$ by paying cash. Good thing we all drive NSXs and don't get killed so badly... Given that, if it weren't for depreciation, I'd probably pay cash for a car. Because the only reason to do the above is to try and offset your depreciation by investing the cash while using someone else's money. If you can make as much with the free cash to offset the depreciation, you are doing great!.. just my .02.

[This message has been edited by Nsxotic (edited 20 February 2002).]

Your analysis is off by $7,200 because you're counting this amount twice. You shouldn't deduct the "opportunity cost" of the money in the first example AND add it as interest earnings in the second example. (There is no "out of pocket" $7,200 cost in paying cash.) The real difference between your two examples is $1,300 not $8,500.