So I’m trying to make a final decision as to leasing vs. financing. I’ve been doing a lot of reading and calculating when it comes to leasing scenarios, so I think I have a good grasp of everything with a good lease calculator handy.
What I’m trying to do is determine how much total interest I would spend on leasing + buying out, vs. financing a car. (I know that leasing will cost more in the end, I just want to figure out how MUCH more, and sometimes my approaches to math are not that great)
So according to my lease calculator, I have:
MSRP of $52,845
Purchase price of $48,000
$4,000 in incentives off the top
Net cap cost of $44,000
Effective MF of .00071 after incentives and MSD’s
36m lease term, 61% residual
Monthly tax (CT) @6.25% of $24.19
Depreciation of $326.79
Finance charge of $54.13
Monthly lease payment of $405.11
So for interest, here is what I have:
total interest charge for lease is $1,949.
refinance the car at lease-end for $28,000 for 6 years @1.9% for a total interest charge of $1,648
Assuming I don’t pay the car off earlier (which I intend to) my total interest would be $3,597
And to finance the same car with a $44k purchase price for 6 years at 1.9% I get a total interest of $2,590.
So am I right in calculating that the lease would be ~$1,000 more expensive in interest doing it this way?
tl;dr, but you generally lease when you like to have new car every 2-3 years, don’t want to deal with repairs/warranty and/or want to drive a car that you cannot afford/don’t want to buy.
If your only criteria to make this decision is “total interest cost”, then you are correct. There are other pros/cons to leasing vs financing that should factor in to your decision like service (out of warranty vs in warranty), who is holding the bag for depreciation (you or the leasing company), the crazy deals you can get with leases vs financing, etc.
On this forum, you will find cars that lease well and don’t lease well so it really depends on the car you like.
I think your numbers are alittle off. For the purchase, if you roll the taxes of $44k into the loan, you would need to pay interest on that amount as well.
For the lease, you would tax on the monthly, which you already calculate. At lease end, you would then pay taxes on the RV and calculate interest in that point on.
I think it’s better to just compare total cost instead of interest.
If you intend to buy the car, buy it. Leasing followed by buying is usually more expensive, not just due to higher finance charges on a lease, but also because you are wasting money on:
Acq fee ($900-1000 on a typical 52K car like a BMW, M-B, etc)
Re-register and title it when you buy it
For your comparison to be relevant you should finance the RV for 3 years not 6 years so that in both cases you end up paying off the car after 6 years.
Then lease + finance interest will be about $2777 which is only $187 more than financing from begining.
