Reality check on Car Leasing

[virginiaann]

In the near future, I need a new car. (let's assume, for the sake of the argument, I actually need it). I have no perspective, since I've always bought cars with cash. I'm now reconsidering this for various reasons.

Those of you who do or did lease a car:

• How much do/did you spend per month and in total, for how long?
• How much was the MSRP and residual?
• How much is/was the monthly rate as a percentage of your net income?
• Anything you'd like to share, experience, good, bad, ugly

I'm looking at cars in the 65-85k range, residual ranges from 30-50%. They would cost anywhere between 600-1'200.- per month, for four years. With trading in my current car this is a total of 37-65k. We have a net income of 130k. I have no clue, is this considered "normal" or totally outlandish?

 

[mercy7able]

@virginiaann I would suggest to try and go for a second hand car below 50,000 km mileage and your monthly rates will be significantly lower vs new cars. I am currently on a 4 year lease on second hand BMW from a BMW dealer and pay about 380 CHF per month with a upfront paid 5000 CHF and with an option to buy the car back after 4 years at residual value i.e. sticker price minus paid amount on the lease. I know some would argue about lease vs buy costs but I felt comfortable with this monthly payment option as I wouldnt be able to rent a car at these prices anyways.

 

[mc1975]

@mercy7able If you can get a good enough fleet discount from an employer, it makes sense to go new. Id check that first. I leased new and after fleet discount found the price fair even compared to used cars. Also included was service and a guarantee for 4 years. Knowing that your biggest expense will be new tires, it gives a certain piece of mind than knowing from 50k km to lease end there will likely be some major maintenance or worse breakdown costs

 

[1godspace]

@mercy7able Can I ask the model? I would love to have the same conditions. Could you provide me the contact from that BMW Dealer?

 

[mercy7able]

@1godspace Already replied privately . Cheers

 

[jamesf123]

@mercy7able Why below 50k km? Does leasing more used ones somehow cost more?

What would the costs have been worth zero upfront?

 

[ggv]

@virginiaann I pay 390CHF on my lease, but it’s a 36k new almost new electric car and I initially gave them 6k. I plan to keep the car once the 4 years are over.

If you think those values are too high maybe consider a cheaper car?

 

[vanessaeb]

@ggv Looking for an electric car myself. What did you get and did you feel like the range was degraded at 36k or not?

 

[ggv]

@vanessaeb I went for the long range version of the Smart #1, so the Pro+ model.

So far I’m pretty happy with it, I do suffer from range anxiety as in my head I’m still not used to owning an EV, it’s not that the range has ever let me down, it’s more like I’m still not convinced that it won’t eventually so I obsess too much about it. ( might me a good thing though since I have gone below 10% battery)

Anyway, for my use the range is more than enough, the infrastructure so far is pretty good in Switzerland and for the few times I traveled outside the range was more than enough.

 

[ggv]

@vanessaeb I just remembered something, maybe think very well where you are going to charge and check the prices. I use mainly Swiss charge, Charge Price and Chargemap to check this.

It’s also cool if you can charge at home/work, for example I can’t charge at home but at work there’s a charger that costs 0.33CHF kW/h. So it’s a very good price and I make use of it.

ABRT (a better route planner) is super cool to study some trips and see how the range will work for you.

 

[mc1975]

@vanessaeb My car (BMW) was 69k list price, reduced to about 55k after rebates. I paid down 10k and pay 397 CHF per month. 20k km/annum are allowed. Add another 105 chf monthly for full insurance from bmw

I think important is leasing interest (1.9%) and depreciation allowance. In this case they estimate rest value at 38k if i remember correctly.

 

[missymckibben]

@virginiaann Not sure what you are looking for, if you are expecting an opinion on whether more than, probably, 15% of your disposable income in is too much when you already have a car worth 28k, I would say the answer is "definitely".

If you are looking for opinions on whether a lease makes sense or not, I would say it depends on what you are looking for and how much cash you have on hand. If you are looking for a car that will last 12-15 years well maintained and have the cash, I would go for the cash. If you are looking to change the car in 4 or 5 years and you find an offer with a good interest rate, then go for the leasing.

 

[beliall]

@virginiaann Financially leasing is probably not the best decision, but it all depends on how you look at your car, and what you do with the money you have left after leasing and not purchasing a car with cash.

Last year we were in somewhat similar position and decided to lease a new X3. Net price got discounted down to about 80k from catalogue price of about 95k. Best deal we were able to get and we had to travel around as dealers in Zurich were not eager to offer good discounts. Monthly costs at 1,9% rate for 4 years is 1150 CHF for leasing plus insurance, and we've put 5k as downpayment. Mileage per year is set to 30,000 km, and that alone increased our leasing rate. Residual value is about 30k CHF, and we haven't decided yet if we will keep it or not. Was it worth it? For us it absolutely was, as we drive a lot, car is bigger, more comfortable, has similar efficiency, and is reasonable % of our monthly budget.

Old one was a 3 Series that I still really miss, as it was an exceptional car with unique driving experience and sense of the road, but the maintenance cost were getting too high for what the car is worth. Cars just become expensive beyond 200k km mileage.

Before we ordered the car, we were also looking at following options:

- used car with remaining warranty. The used car prices are now declining and starting to make more sense, but unfortunately early last year they were quite high, and the leasing rates tend to be higher than those for new cars. Second hand X3s were starting from 60k and had worse equipment or unnecessarily bigger engines.

- an equivalent GLC was costing about 200-250 CHF more per month mainly due to the difference in leasing rate. At the time Mercedes was offering leasing rate of more than 4%, and that made it too expensive.

- a similar Kodiaq was about 200 CHF cheaper per month, mainly due to much higher leasing rate.

Bear in mind leasing rates change. BMW at one point had 0.9% leasing rate for stock cars, Mercedes now has 1.9%, some other brands even have 0% for EVs, etc. If you decide to lease, visit various dealerships, get offers, try to negotiate.

 

[virginiaann]

@beliall Thank you for your thorough response!

 

[tracytray02]

@virginiaann My simple rule for car purchase:

• if you can buy it cash, always buy it cash
• if you can't buy it cash, find a cheaper car

 

[virginiaann]

@tracytray02 Good rule of thumb, was mine as well - but now here's what I'm thinking: The cash earns much more when invested than I "waste" when leasing. There is also a good chance electric cars lose much more value than anticipated by leasing providers, given the rapid advancements in technology.

 

[tracytray02]

@virginiaann I think your thought process makes a lot of sense tbh

 

[remluf]

@virginiaann Exactly. A car isn't an investment. So I usually preferred to lease or get a loan. The total cost was actually lowest for leasing last time I got a new car, but that was in 2018 and BMW offered 0.0 leasing with a decent leasing factor. It's higher now though.

 

[christhomas2]

@virginiaann Just a small remark: select the vendor, probably avoid small vendors. A leasing contract is only a rent, the number for the "rest-value" you have to pay to keep the car is somehow to be interpreted as "minimum". If car prices go up the dealer may ask for more money, money that would be yours if you pay the rest value and sell the car yourself. Happened to a friend of mine and it seems to be legal. And it was a lot of money so at the end he left the car to the dealer... who made a big big profit... and lost a client of course.

Buying on credit may have some tax advances over leasing. And of course a bit more liberty, as you can pay back your credit and/or sell your car whenever you want and you have a better negotiation position, as for the perspective of the dealer you pay cash.

Financially I would say the best option is to pay cash, you probably get way better prices. But then I bought my car over 20 years old, so not much experience in buying lately. But I suppose some things never change, like horse traders.

 

[graymike91]

@virginiaann 65-85k car while your income is 130k, either :

• you love cars in which case this is just a hobby purchase and you shouldn't try to make sense of it, accept the fact that you're paying more to get enjoyment out of a tool
• it's probably too expensive and brings almost nothing to the table compared to another one half the price. Not to mention recent 2nd hand models that are still under warranty

EDIT : taking the lower brackets into account, it's about 35k over 4 years (10% of 65k upfront then 48x600, not even considering insurance) for owning nothing at the end and even giving back your current car. The same money could buy you a very decent 2nd hand car, only this one will be yours so you can still sell it after 4 years. and make like 10k (if not much more) on it.

Think long and hard about the benefits of the brand new 65k car over the 2nd hand 35k one. It probably won't make any sense outside of joy if you're into cars.

EDIT2 : I can't stress this enough : if you love cars and want to buy something interesting, sure (although i'm not sure there's much to be had on the brand new market for that kind of price). No harm in enjoying your life. But don't try to make any financial sense out of it. A car is mostly a liability.