Feb 9, 2006 2:51:19 AM
- 911godspeed
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- Loc: IL, USA
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Board: Porsche - 911 - 997
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Feb 9, 2006 3:02:27 AM
- Silver Bullet
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- Reply to: 911godspeed
Re: Lease vs Buy
If you Google the topic, you'll get all the info you need.
You need to decide how long you plan on keeping the car and go from there.
Some here will undoubtedly chime in and tell you that you should invest your capital and earn more on it than you will be charged in interest on your lease. If you believe that, then please share with me what you are investing in.
It might be worthwhile to consider buying a previously owned 997 with low mileage, maybe even one with a certified warranty from a dealership. At least that way, you get to own the car (less cost than leasing in the long run) but you don't eat all the depreciation associated with buying brand new.
On the otherhand, if owning the car for the longterm is not important to you, then no matter what you do, buy or lease, it's going to cost you a lot of money.
You need to decide how long you plan on keeping the car and go from there.
Some here will undoubtedly chime in and tell you that you should invest your capital and earn more on it than you will be charged in interest on your lease. If you believe that, then please share with me what you are investing in.
It might be worthwhile to consider buying a previously owned 997 with low mileage, maybe even one with a certified warranty from a dealership. At least that way, you get to own the car (less cost than leasing in the long run) but you don't eat all the depreciation associated with buying brand new.
On the otherhand, if owning the car for the longterm is not important to you, then no matter what you do, buy or lease, it's going to cost you a lot of money.
Feb 9, 2006 3:15:27 AM
- JMShrink
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- Loc: California
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- Reply to: Silver Bullet
Re: Lease vs Buy
Hi there 911godspeed. It really depends what your goals are. Do you like to have a new vehicle every few years? How many miles per year do you drive? Do you have your own business and will this be a business vehicle? How long do you plan to keep the car?
If you lease the car, you will pay for the amount of depreciation and additional leasing fees. One thing to keep in mind, it'll be more expensive to lease a tiptronic 911 or 911 Carrera S, Porsche financial has lower residual values for such. A base 911 C2 will be the most reasonable lease. If you lease and there are problems with the car, depending on how long you lease and how many miles are on the car, it'll likely still be under warranty.
If you let me know some of your objectives, I may be able to help some more..
If you lease the car, you will pay for the amount of depreciation and additional leasing fees. One thing to keep in mind, it'll be more expensive to lease a tiptronic 911 or 911 Carrera S, Porsche financial has lower residual values for such. A base 911 C2 will be the most reasonable lease. If you lease and there are problems with the car, depending on how long you lease and how many miles are on the car, it'll likely still be under warranty.
If you let me know some of your objectives, I may be able to help some more..
Re: Lease vs Buy
Just to throw in another curve, but not hijack the thread, have you, or anyone, looked into the "Porsche Options" program? I'm not so familiar with it, sounds like a balloon loan...
As for investing your capital and beating your lease's "interest" charged, that shouldn't be too difficult for most investors...although, it does become a part-time job...
As for investing your capital and beating your lease's "interest" charged, that shouldn't be too difficult for most investors...although, it does become a part-time job...
Re: Lease vs Buy
BUY
If you plan to hold onto the car for a long time, purchase. If you plan to trade after a few years but put on very few miles (e.g. under 20k miles on a three year old car) a purchase is also good.
LEASE
If you put a lot of miles on the car to know exactly what your cost of ownership will be this is the way to go. I wouldn't go over 36 months on a lease. Also lease if you plan to turn the car back in after the term of the lease, or if you are doing it through a business.
OPTIONS (BALLOON)
Do this instead of a lease if you plan to purchase the car at the end of the term. In a balloon YOU are the primary owner on the paperwork rather than the leasing company, and depending what your local tax laws are, could eliminate the possibility of double taxation.
My $0.02.
If you plan to hold onto the car for a long time, purchase. If you plan to trade after a few years but put on very few miles (e.g. under 20k miles on a three year old car) a purchase is also good.
LEASE
If you put a lot of miles on the car to know exactly what your cost of ownership will be this is the way to go. I wouldn't go over 36 months on a lease. Also lease if you plan to turn the car back in after the term of the lease, or if you are doing it through a business.
OPTIONS (BALLOON)
Do this instead of a lease if you plan to purchase the car at the end of the term. In a balloon YOU are the primary owner on the paperwork rather than the leasing company, and depending what your local tax laws are, could eliminate the possibility of double taxation.
My $0.02.
Re: Lease vs Buy
I use the options program. I also plan to purchase the car at the end of the term - well my little brother is going to get it and hopefully he'll have the cash to pay via retail financing the buy out price.
For the options program, the buy out price at the end of the term also serves as a tax deduction on your NEXT purchase if you decide to return the car and not payout the remaining balloon. So if the buy out price is 30K, and you are looking to get a 100K car next, you'll be taxed as if it was a 70K car.
For the options program, the buy out price at the end of the term also serves as a tax deduction on your NEXT purchase if you decide to return the car and not payout the remaining balloon. So if the buy out price is 30K, and you are looking to get a 100K car next, you'll be taxed as if it was a 70K car.
Feb 9, 2006 2:35:06 PM
- 993Targa
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- Loc: ZH , Switzerland
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- Registered on: Sep 16, 2004
- Reply to: John SF 2005 997 S
Re: Why would you want $80,000 in your driveway instead of i
If you loaded your car with options but do not intend to keep the car for a very long time, don't buy.
Buying + Selling = you lose almost all of the options value (most private buyers don't care about non-essential extras)
Leasing/Balloon + turning in = you only lose half of it (the residual value is based on the purchasing price, hence includes options).
Of course, your mileage may vary.
Buying + Selling = you lose almost all of the options value (most private buyers don't care about non-essential extras)
Leasing/Balloon + turning in = you only lose half of it (the residual value is based on the purchasing price, hence includes options).
Of course, your mileage may vary.
Re: Why would you want $80,000 in your driveway instead of i
Things to consider with lease purchase as I have just found with extras is you need to find what the second hand values quoted in say Glass's guides includes. The values for the C2S for instance includes "sat Nav", so if you don't have it they will quote lower than book price.
Porsche in the UK generally quote a Residual value of 50% over 3 years and 45% over 4 years. If you push hard you will possibly get Porsche to agree to quote a 50% residual over 4 years.
Porsche in the UK generally quote a Residual value of 50% over 3 years and 45% over 4 years. If you push hard you will possibly get Porsche to agree to quote a 50% residual over 4 years.
Re: Why would you want $80,000 in your driveway instead of i
Quote:
The Groom said:
If you loaded your car with options but do not intend to keep the car for a very long time, don't buy.
Buying + Selling = you lose almost all of the options value (most private buyers don't care about non-essential extras)
Leasing/Balloon + turning in = you only lose half of it (the residual value is based on the purchasing price, hence includes options).
Of course, your mileage may vary.
There is also a maximum MSRP (MRM) that the residual is based off of. So, if the MSRP is above the MRM, you are totally paying that part off (e.g. MSRP of $105k, residual 60%, MRM $100k, the residual on the contract will be $60k, so you are paying the $45k depreciation).
As was intheloop mentioned, since you live in IL, if you have any intentions of possibly buying the car at the end of a lease, use a balloon note or retail financing--otherwise you will be taxed on the full price up front, and the residual value at the end (got to love the IL taxing...).
Re: Why would you want $80,000 in your driveway instead of i
Sorry Godspeed this is waaaaayy more than u asked for:
John SF, I know what you're saying, but besides a small lucky cache of Google my equities market returns are more like low single digit%/annum since 2000. He'd have to beat 6%+
just to break even/offset a leasing money factor or conventional financing interest.
Sorry for the long post but I ran some numbers when I got my 997S last summer, read further only if you are interested in the breakdown of the numbers.
I bought my 997S because it figures to be at least $10K to $20K LESS net outlay by buying as opposed to leasing, even if I sell in four years just as the warranty is expiring. Consider that lease payments at $1425/mo for 48 months would total $70K.
Assume the purchase price new is $90K.
If you exercise your lease buy-out option at $45K after four years (in other words, pay Porsche or a bank $45K at the end of your lease--assuming 50% residual on a $90K purchase price), add that to the $70K you will have made in lease payments and you end up paying
$115K for your $90K Porsche.
Even with opportunity cost of tying up $90K by purchasing now (you're still paying interest in the form of money factor on a lease) you're still better to buy imo....not to mention getting hammered by Illinois taxes on both ends if you exercise your purchase option at the end of the lease.
As far as the 'convenience' of having the ability to drop off the car at lease end and walk away, these are easy cars to sell as pre-owned if you're not asking outrageous money. I sold my last 911 after advertising on AutoTrader and Rennlist for four days....I should've asked more $$
.
You could well expect to command $40K resale on your four-year-old 997 even with 40K miles. So your out-of-pocket ends up at $50K, as opposed to $70K out-of-pocket turning it in after the lease. (consider what a model year 2002 996C2 pampered original owner with 40K miles sells for currently? probably $40K to $45K without much effort at all).
....just my $.02
John SF, I know what you're saying, but besides a small lucky cache of Google my equities market returns are more like low single digit%/annum since 2000. He'd have to beat 6%+
just to break even/offset a leasing money factor or conventional financing interest.
Sorry for the long post but I ran some numbers when I got my 997S last summer, read further only if you are interested in the breakdown of the numbers.
I bought my 997S because it figures to be at least $10K to $20K LESS net outlay by buying as opposed to leasing, even if I sell in four years just as the warranty is expiring. Consider that lease payments at $1425/mo for 48 months would total $70K.
Assume the purchase price new is $90K.
If you exercise your lease buy-out option at $45K after four years (in other words, pay Porsche or a bank $45K at the end of your lease--assuming 50% residual on a $90K purchase price), add that to the $70K you will have made in lease payments and you end up paying
$115K for your $90K Porsche.
Even with opportunity cost of tying up $90K by purchasing now (you're still paying interest in the form of money factor on a lease) you're still better to buy imo....not to mention getting hammered by Illinois taxes on both ends if you exercise your purchase option at the end of the lease.
As far as the 'convenience' of having the ability to drop off the car at lease end and walk away, these are easy cars to sell as pre-owned if you're not asking outrageous money. I sold my last 911 after advertising on AutoTrader and Rennlist for four days....I should've asked more $$
.
You could well expect to command $40K resale on your four-year-old 997 even with 40K miles. So your out-of-pocket ends up at $50K, as opposed to $70K out-of-pocket turning it in after the lease. (consider what a model year 2002 996C2 pampered original owner with 40K miles sells for currently? probably $40K to $45K without much effort at all).
....just my $.02
Feb 9, 2006 11:08:36 PM
- Silver Bullet
- Veteran
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- Loc: Canada
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- Registered on: Nov 24, 2004
- Reply to: Damian
Re: Why would you want $80,000 in your driveway instead of i
Damian - I think you're absolutely right. Either way, it's expensive to drive a 911. Those less able to afford one (like myself) rationalize leasing because its easier to budget, but over about 4 years or more, it just costs more than buying.
Re: Lease vs Buy
I agree with most of the comments made here. One more factor to consider is the total cost of financing when comparing leasing to financing. It is possible to get an extremely agressive money factor that is less than conventional financing. For example, I just leased my car with full intention of buying it after the lease expired. The residual on the car is 33% of MRSP and the money factor was 0.0018 (~4.5%). This equates to ~12000 in interest/taxes/aquition costs etc over 4 years which is much less that the interest charges on conventional financing for the 1st 4 out of 5 years (as with any amortization interest is payed 1st and capital is payed at the end). The added benefit is that I am planning to lease through my practice and then buy it personnally, so most of the lease payments should be a 'write off' adding the cost benefit.
Feb 10, 2006 6:46:49 AM
- U Boat Commander
- Veteran
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- Loc: Los Angeles, CA
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- Registered on: May 8, 2004
- Reply to: Blk987S
Re: Lease vs Buy
All you need to know is that a lease is exactly the same thing as buying because you get the purchase option at the end. If you do build up equity at the end of the lease, you can always buy the car and sell it yourself to capture that equity. Leasing companies will all cooperate with you in doing these "third party buyout" transactions.
The only negative for leasing is that you will pay a higher interest rate on the lease than a loan because there are less lease providers than loan providers (less copetition = higher cost to consumer) and the lessor has to be compensated for the risk that the car will be worth less than the buyout price at the end of the lease. Typically, the difference in interest rate is about 2% per annum for the best lease deal on a 911 (at the highest available residual - lower residuals have lower interest rates because there is virtually no risk to the lessor that the car will be worth less than the residual at the end of the lease). Plus, you have to pay an acquisition and disposition fee that together amount to about 1% of the cost of the car. If you think you can invest the differential between the lease payment and the loan payment and the 1% fees and make more than those amounts back, after taxes then you should lease. Of course, the potential tax benefits of leasing may outweigh the additional costs as well.
Not considering the tax benefits of leasing, it turns out that in order to break even, you need to earn about an 11.5% IRR on your money, after-tax, using the 2% differential and 1% fees. That's a pretty steep hurdle for most investors over the long-term. On the other hand, if you can realize the tax benefits of leasing then the hurdle is much lower and leasing may actually be preferable than owning from a financial point of view. That of couse depends on your individual tax situation.
I have an excel spreadsheet that shows how this works (at least in California under our sales tax system). If you send to me you email address in a private message, I will email the spreadsheet to you so you can see how it works.
The only negative for leasing is that you will pay a higher interest rate on the lease than a loan because there are less lease providers than loan providers (less copetition = higher cost to consumer) and the lessor has to be compensated for the risk that the car will be worth less than the buyout price at the end of the lease. Typically, the difference in interest rate is about 2% per annum for the best lease deal on a 911 (at the highest available residual - lower residuals have lower interest rates because there is virtually no risk to the lessor that the car will be worth less than the residual at the end of the lease). Plus, you have to pay an acquisition and disposition fee that together amount to about 1% of the cost of the car. If you think you can invest the differential between the lease payment and the loan payment and the 1% fees and make more than those amounts back, after taxes then you should lease. Of course, the potential tax benefits of leasing may outweigh the additional costs as well.
Not considering the tax benefits of leasing, it turns out that in order to break even, you need to earn about an 11.5% IRR on your money, after-tax, using the 2% differential and 1% fees. That's a pretty steep hurdle for most investors over the long-term. On the other hand, if you can realize the tax benefits of leasing then the hurdle is much lower and leasing may actually be preferable than owning from a financial point of view. That of couse depends on your individual tax situation.
I have an excel spreadsheet that shows how this works (at least in California under our sales tax system). If you send to me you email address in a private message, I will email the spreadsheet to you so you can see how it works.
Feb 10, 2006 3:36:21 PM
- Paul S in TX
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- Reply to: AJVIP
Re: Lease vs Buy
Quote:
ajcastaneda said:
I use the options program. I also plan to purchase the car at the end of the term - well my little brother is going to get it and hopefully he'll have the cash to pay via retail financing the buy out price.
For the options program, the buy out price at the end of the term also serves as a tax deduction on your NEXT purchase if you decide to return the car and not payout the remaining balloon. So if the buy out price is 30K, and you are looking to get a 100K car next, you'll be taxed as if it was a 70K car.
Not in Texas--I got NO sales tax credit on the purchase of my Club Coupe on account of turning in my 01 996 TT at the end of the Porsche Balloon option loan. Wish it were so--I would have paid only about 1/3 as much in sales taxes.
There would only be a trade in credit if the dealer was willing to take the Turbo in trade. The dealer wouldn't do it in my case since the balloon was way over market.
Mar 11, 2006 1:22:51 AM
- 911godspeed
- Junior
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- Loc: IL, USA
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- Reply to: Damian
Re: Why would you want $80,000 in your driveway instead of i
Damian,
This is the best explanation and lines up with my own calculation. Here are the details, feel free to comment.
-Model: base 911, cost before taxes is $72K approx
-I plan to put atleast 15K miles per year.
-With tax, it will cost me $76K approx if I paid cash
-The best lease quote I got is for 36 months. $1360/month which includes tax meaning I do not pay anything upfront.
-$1360 X 36 months = $49K
-Residual value = $38K
-Total leasing cost if bought the car = $87K
-If I purchase the car and sold it after 3 years at 45K miles = $76K purchase price - $40K reslae = $36K vs $49K leasing cost, a $13K difference.
-Cost of keeping the car for three years (lease option)= $49K
-Cost of keeping the car for three years (buy option) = $36K
-Cost of keeping the car forever (lease option) = $$87K
-Cost of keeping the car forever (buy option) = $76K
In all cases buying is cheaper from $11-$13k. So the questions is where can I invest:
-$75K - $1360, first month of lease
-$75K - $1360, second month of lease
The point is the investment amount will be decreasing as I will have to take the money out for payments. On the other hand, leasing company is charging me approx $300 worth of interest. Well, I want to know about a investment that pays me $300/month on a $75K investment.
All, feel free to comment. The good news is that my car is at the port now and I should be taking delivery next week. I need to make this decision by Monday.
This is the best explanation and lines up with my own calculation. Here are the details, feel free to comment.
-Model: base 911, cost before taxes is $72K approx
-I plan to put atleast 15K miles per year.
-With tax, it will cost me $76K approx if I paid cash
-The best lease quote I got is for 36 months. $1360/month which includes tax meaning I do not pay anything upfront.
-$1360 X 36 months = $49K
-Residual value = $38K
-Total leasing cost if bought the car = $87K
-If I purchase the car and sold it after 3 years at 45K miles = $76K purchase price - $40K reslae = $36K vs $49K leasing cost, a $13K difference.
-Cost of keeping the car for three years (lease option)= $49K
-Cost of keeping the car for three years (buy option) = $36K
-Cost of keeping the car forever (lease option) = $$87K
-Cost of keeping the car forever (buy option) = $76K
In all cases buying is cheaper from $11-$13k. So the questions is where can I invest:
-$75K - $1360, first month of lease
-$75K - $1360, second month of lease
The point is the investment amount will be decreasing as I will have to take the money out for payments. On the other hand, leasing company is charging me approx $300 worth of interest. Well, I want to know about a investment that pays me $300/month on a $75K investment.
All, feel free to comment. The good news is that my car is at the port now and I should be taking delivery next week. I need to make this decision by Monday.
Mar 11, 2006 3:43:52 AM
- jmorod
- Newbie
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- Loc: CA
- Posts: 13, Gallery
- Registered on: Feb 9, 2006
- Reply to: 911godspeed
Re: Why would you want $80,000 in your driveway instead of i
lease lease lease!!!!
*unless you plan to track it heavily...
perfect example- i leased a 996 in 2002 and as soon as i test drove the 997s 4 mos. ago, i was so glad my lease was ending! my S just came in and i'm happy as pig in shi* that i could just give swap the old one for the new. would hate to have 'paid cash' for the old one and have to take a major hit to get the new technolgy. to each his own...and remember except for a very few exceptions, ALL late model cars a DEPRECIATING asset. old chinese proverb 'if it fuc*s, floats, or flys...lease don't buy!
*unless you plan to track it heavily...
perfect example- i leased a 996 in 2002 and as soon as i test drove the 997s 4 mos. ago, i was so glad my lease was ending! my S just came in and i'm happy as pig in shi* that i could just give swap the old one for the new. would hate to have 'paid cash' for the old one and have to take a major hit to get the new technolgy. to each his own...and remember except for a very few exceptions, ALL late model cars a DEPRECIATING asset. old chinese proverb 'if it fuc*s, floats, or flys...lease don't buy!
Re: Why would you want $80,000 in your driveway instead of i
HAHAHAh, that's right!!!
If you plan on keeping the car for a long time then buy. If you like to drive a new car every 3 to 4 years then lease.
By the way, my car is due to arrive at the San Diego port on the 17th. Any one else waiting for their car on the west coast also???
If you plan on keeping the car for a long time then buy. If you like to drive a new car every 3 to 4 years then lease.
By the way, my car is due to arrive at the San Diego port on the 17th. Any one else waiting for their car on the west coast also???
Re:lease vs buy
If you run the lease through your business it is probably better to lease than buy. If you don't then it is better to buy. However, there is one caveat, if you get into a fender bender with a lease you simply fix it and give it back to the lessor at the end of the lease. If you bought then the value of a Porsche is killed in the resale market. By leasing you also transfer that risk to the lessor.
Re:lease vs buy
The main advantage to lease is to run it through your business. In that case compare pre-tax dollars. Also when comparing to buying, it is better to make the comparison when doing traditional financing (example 5 years). At 6% your 76000 car would cost 88140 over 5 years or 83232 over 3 years. So when you compare lease to buying the difference is not as much as you think (maybe 6K). I think the difference is even less when doing a 4 year lease (makes sense since the car has a 4 year warrentee). If you look at my note above, I had planned on keeping the car after the lease expires so I wanted to have the lowest residual possible. Factor in that I am leasing through my business, my 'out-of pocket' expenses for the Porsche is actually much less than the MRSP + finance charges (at the end of 4 years my out of pocket expense will be about 66% of MRSP+taxes). That means if I bought the car or financed it, vs leasing through business and then buying out car personally I will have payed 33% less for the car. (Think about it, a 100K car add taxes, financed charges etc, will cost me 80K or so 'out of pocket' at the end of 4 years, and I have a car that should be worth about 50K. That means if I sell the car privately, I had the privalege to drive a Porsche for about 600 dollars a month for 4 years for a 100K car).
Re:lease vs buy
Quote:
Deven said:
The main advantage to lease is to run it through your business. In that case compare pre-tax dollars. Also when comparing to buying, it is better to make the comparison when doing traditional financing (example 5 years). At 6% your 76000 car would cost 88140 over 5 years or 83232 over 3 years. So when you compare lease to buying the difference is not as much as you think (maybe 6K). I think the difference is even less when doing a 4 year lease (makes sense since the car has a 4 year warrentee). If you look at my note above, I had planned on keeping the car after the lease expires so I wanted to have the lowest residual possible. Factor in that I am leasing through my business, my 'out-of pocket' expenses for the Porsche is actually much less than the MRSP + finance charges (at the end of 4 years my out of pocket expense will be about 66% of MRSP+taxes). That means if I bought the car or financed it, vs leasing through business and then buying out car personally I will have payed 33% less for the car. (Think about it, a 100K car add taxes, financed charges etc, will cost me 80K or so 'out of pocket' at the end of 4 years, and I have a car that should be worth about 50K. That means if I sell the car privately, I had the privalege to drive a Porsche for about 600 dollars a month for 4 years for a 100K car).
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