This just popped up on my Quora so if anyone want to read it : https://qr.ae/TxGs4O
I’ll give it to them in that it’s a nicely written example, but they goofed up the math, didn’t bother explaining the lease calculations and pulled numbers out of thin air.
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The residual value is based off MSRP, not net cap cost as they mention.
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In May 2019, the lowest residual value of any Accord model (touring) was 52%, not 50%. This also corresponded to a money factor of .00118, not .0021
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They blatantly ignore the fees portion of the financing, but call out specific fees for disposition and acquisition fee for the lease…
Dave Ramsey is a lurker for sure.
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Not sure why anybody would compare a 3 year buy and sell to a 3 year lease. Buying and selling a new car every 3 years is perhaps the most expensive way to drive a car (except maybe leasing, depending on variables). That’s not the way to justify a lease. If you want a new car every 3 years and can afford that luxury then leasing is probably the way to go.
Most people can’t afford a brand new car every 3 years
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Someone should stick that guy with a subprime lender for a 20k car with 25% apr, with no warranty. I bet he’ll be singing a different tune. Leasing or financing isn’t for everyone.
No, it’s not. Many people out there don’t have much of a choice. They need to finance or lease because they may not have liquid cash fro a 4k/5k beater.
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IMO Ramsey is conveniently ignoring one of the most basic fundamentals of investing. That is Cash is King. Spending a lump sum on a used car is a horrible way to leverage your liquidity. Why spend $10k on a used car when I can get into a brand new car with $0 out of pocket and a marginal monthly payment? Over the 3 year term, that $10k earns compound interest with market rates in the double-digits. Factor in maintenance, depreciation, and taxes of buying a used car every 10 years versus putting that money into an annuity every 10 years and leasing starts making a whole lot more sense.
Using this argument, financing and holding a used car for 10 years will have similar upfront costs and much less ongoing payments for which you can invest.
Leasing makes sense to people who can afford to buy new cars every 3 years, but a lease doesn’t hide the fact that many have no business buying a new car when they have a zero savings rate and no real savings.
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Right on time for the discussion
Autotrader - 2020 used cars under 10k
Not many to choose from and some are over 10 years old.
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Lease vs buy.
Lease a new car, find a great deal. Try to keep payments low.
Buy a used/slightly used car that can last more than 6+ years with low cost maintenance.
IMO
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Hey now. Old crap cars have their place too. Buy here pay here lots where they’re sold and repossessed multiple times and on occasion to the same customer again.
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Agree w/ Derek Ramstein leasing is for bums.
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Because at least then you’re comparing apples to apples rather than comparing leasing to both purchasing AND holding longer term which is adding multiple variables.
As far as I am concerned I say anyone who listens to Dave Ramsey’s advise gets what they get. To each their own. Don’t get me wrong if you’re interested in learning how to do it, I’ll teach you everything I know but I’m not going to waste my time arguing with every idiot on the internet. I’m too old to blow against the wind and quite frankly the fewer people that know “how” to get the unicorn deals the more there are for the rest of us.
that’s how Simeon Yetarian makes his living
Not really. It’s better to compare two lease cycles vs a 6 year purchase imo. It’s a bit more realistic and lets people try out the “buy cpo and own for 5-6 years” vs leasing.
Granted payments won’t be exactly the same, but if sticking with similar vehicle class then it’ll probably be +/- $50-75. But let’s you look at the long term tax, fees, depreciation (owning), new tires, etc.
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While I agree that comparing 2 lease cycles vs a 6 year purchase is probably a more accurate use case to what people do, that isn’t comparing buying vs leasing. That’s comparing getting a new vehicle every 3 years vs every 6 years. It conflates multiple issues.
As far as I am concerned I say anyone who listens to Dave Ramsey’s advise gets what they get. To each their own. Don’t get me wrong if you’re interested in learning how to do it, I’ll teach you everything I know but I’m not going to waste my time arguing with every idiot on the internet. I’m too old to blow against the wind and quite frankly the fewer people that know “how” to get the unicorn deals the more there are for the rest of us.
I’m going to ask this question without giving it much thought…
I don’t think the issue is fewer people getting unicorn deals means there’s more for the rest of us. Dave Ramsey preaches not leasing period. So my question is… If less people lease in general, does that bode well for us or does that hurt us who a) love to lease and b) are good at finding good deals?
It bodes well for all of us if dealers can keep milking money out of uninformed customers. The mode of purchase doesn’t matter, dealers can mark up the finance rate as easily as MF, give 2-3% discount and sell products on the FI side to bring in $$$. Some lenders also limit the amount of markup on MF for leases so with traditional financing the rates could be as high as 20-25% (yikes).
Someone who hasn’t done their research and is shopping monthly payments might be convinced by a good salesman to lease a Camry for $400 for 3 years vs paying $500 for 6 years. As long as such people exist, we will continue to have good deals for this community.
David Ramsey makes my blood boil. Guy is a clown 
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It bodes well for all of us if dealers can keep milking money out of uninformed customers. The mode of purchase doesn’t matter, dealers can mark up the finance rate as easily as MF, give 2-3% discount and sell products on the FI side to bring in $$$. Some lenders also limit the amount of markup on MF for leases so with traditional financing the rates could be as high as 20-25% (yikes).
Someone who hasn’t done their research and is shopping monthly payments might be convinced by a good salesman to lease a Camry for $400 for 3 years vs paying $500 for 6 years. As long as such people exist, we will continue to have good deals for this community.
Right, but what if people just stopped leasing altogether because that’s essentially what Dave Ramsey is preaching. What would that mean for those of us who do continue to lease? I have to assume the mode of purchase does matter because, for example, a manufacturer such as BMW provides different incentives based on if you lease or if you purchase (i.e. currently the finance incentive is higher than the lease incentive).
But taking it further, Dave Ramsey also preaches that unless you have a net worth of $1 million or above, you should only be looking at used cars. So my question would be, how do manufacturers/dealers respond to a movement like that (if it were to actually happen on a mass scale)? I’d like to think that means they further incentivise sales/leases of new cars, while simultaneously jacking up residual values (a function of supply & demand). In that case leasing would become incredibly attractive.
This is all hypothetical speak… but something to ponder…