I still don’t get it what is the value of one-pay lease. I know you save on MF, but there are risks and costs associated when you do that. What happens when you total that one-pay leased car? Bank gets pay off amount, but what happens to that huge lump-sum payment you have made? My understanding is that you can kiss good bye to that huge chunk of payment you have made. Besides, what if you find a better ride in the next year and two and want to get out of your lease? Will the car hold its value, enough to get you out of the lease by trading it to let’s say Carmax without losing a big part of what you have have prepaid above depreciation? I am not Honda fan, so I don’t know how this car holds value, but I hope someone doing one-pay transaction did the math and the numbers are in their favor. Still , I suppose, can’t get the money back if the car is totaled next day after leasing it.
One pays generally have different language than normal leases where you get a prorated return of your one pay if its totalled. Isnt always the case though.
Is he writing off the lease? Thats the only way this remotely makes some sense.
i think you are missing the point. none of the comments here were about the mark up over MSRP. all the oofs were about paying 10k a year to drive a 52k car! if this is indeed a rare specimen, and if he drives such low miles a year, its all the more reason to finance it rather than lease it. like somebody else said, remain his best buddy and buy it off at the residual value at the 3 year mark and flip it!
I love the Civic Type R. but I can’t bring myself to pay over MSRP. Congrats to your friend.
I still think it is a better deal then anyone buying a tesla back in December 2022. Everyone back then was paying a fat mark up and not even know it.
I just sent a note to my buddy seeing if he will finance it instead of leasing it. I gave him a huge paragraph breaking down the numbers and how it would cost $5k - $10k cheaper to finance it over 3 years and sell it vs just straight out leasing it. It’s something I was already thinking but not really pushing on - but with all of your comments I decided to double down on it.
He financed!
You doing to much your friend owes you - ask him to hook you up with a hottie or dinner or trip or drinks
Haha I like helping my friends where I can. He already mentioned he’s going to take me out to dinner next weekend. I offered my help without expecting much in return.
I helped another friend earlier this year sell his lease for a $7,000 check after payoff. He was about to turn it back into the dealership but convinced him to sell – especially since I helped him originally lease at such a good deal 3 years ago.
Maybe I should start charging huh 
The friend just needs to let gbright buy out the lease after 3 years at the residual and flip the car for $$$ hah.
Already had dibs sorry fam
Hi trusty community. Can you please help me understand why financing this Civic Type R is better than leasing it for 3 years and just selling it back to a different honda dealership? See calculator
Yes the MSRP is inflated, yes it’s not a ‘‘good’’ deal, but as you see from my previous forum, my friend doesn’t care. It’s a car he wants and I just helped him with the sale price negotiations cause he doesn’t enjoy the process (three places just recently tried to sell it to me for $25k over asking )
I know financing is better in this case, but I’ve never dealt with such a bad car (over MSRP) so I’m just super confused. It’s probably easy math that I’m not understanding and am over complicating it. He mentioned when you look at the totals over lifetime spend it doesn’t seem too far apart - but I know that’s wrong.
My friend was either going to 1. lease it and turn it back in/sell it back to a different honda dealership in 3 years or 2. finance it, and probably sell it in 3 years anyways
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The one pay lease at for $52k sale price ($45,375 car with 71% residual) is closer to $31k. One pay reduces the APR from 7.32% to 5.4%. I know this is bad.
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Financing it with the same $30k down payment means he needs a $27,665 loan for the remaining. The best rate he could get with excellent credit right now is 6.49% - so that’s $500 p/ mo over 66 months. He would only keep it for 36 months then sell it, though (give or take). Of course if we refinance over the term he will continue to save money.
I think the savings difference is around $2k - $3k, but I’m overwhelmed with the calculations.
For reference - the residual value puts the cars value in 3 years at $32,195. Here’s a link to an example of a car from 3 years ago and what it’s being listed for, to give a range on what it could sell for (IDK if this is what I should even be doing for comparison) - https://www.cars.com/vehicledetail/6d3daadb-c2f3-433c-a620-3e5b8f31ef41/
If he can stroke a 30k Juan pay
He can stroke the whole thing
You mentioned in your previous posts that he hardly drove
Last gen CTR selling for low 40s with low miles
Without getting into super-geeky math or debating the merits of the dealer markup…
There are basically 4 outcomes to obtain usage of the vehicle.
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Straight up cash purchase; there is an implied “opportunity cost” where the cash cannot be deployed to investing in an appreciating asset over the ownership term.
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Financing the vehicle; depending on the mix of cash-down and debt, the cost is a combination of the opportunity costs from #1 and the interest rate paid to finance the debt. Also, some borrowers will want GAP insurance if their down payment wasn’t sufficient.
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Leasing the vehicle - with no intention to buy the vehicle at the end of the lease term. In this scenario, the leasee is paying a large sum of money to affectively rent the vehicle for X years and then also the depreciation of the vehicle during the rental period. Should the market value of the vehicle after X years be greater than the lease-buy-out value, then this option could see the leasee lose value because they aren’t capturing the upside at the time of lease-turn-in.
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Leasing the vehicle - with the intention of buying the vehicle at the end of the lease term. In this scenario, the depreciation and residual value may not be an issue since the leasee will become the buyer at the end of the term. But, the financing charge to have rented the vehicle during the lease term may be higher than that of option #2 above. And, there are other lease origination fees and other one-time costs that may cause option #4 to cost more than option #2. And last, some states have weird sales/use taxes that may make this option cost more.
Option #3 isn’t always a bad option. In some cases, the residual value (edit: in the lease contract) is too high. For example, on some Electric Vehicle leases originated lately, the residual value in the lease structure is much higher than what the car will likely be worth at the end of the lease (thanks Government and Tesla!). This means buying out the vehicle at the end of the lease term would be really bad.
Oh, and please don’t buy GAP insurance on leases.
Wait a minute Honda Civic are $50K? People really pay that amount. I wouldn’t even get it just because of the name. I’m pretty sure there are better options out there for that price range. Leasing price I assume is most likely around the Germans or Lexus
Thanks for the write up - super helpful.
#1 - got it, that’s what I figured
#2 - makes sense, thank you
#3 - on 3 cars now I’ve benefited from making a few thousand profit on selling cars. Makes sense
#4 - great points. When you mention “the financing charge to have rented the vehicle during the lease term might be higher”. In this case it is. 6.49% finance vs 5.4% lease (due to one pay). Would a one pay of $30k with him then selling the car back to honda in 3 years be better than financing today as described above?
Why no gap insurance on leases if the car company already doesn’t offer it “free” for a lease? Or are you saying with finance its bad?
Thanks for the suggestion - good point. I brought it up to him and he still wants the new car, plus apparently the model is slightly different (IDK how)?
Agreed on paying 100% cash for it up front as a purchase would be the best case scenario.
You are obviously not their target market.
2nd post about an unenrolled third-party who DNGAF - have them make an account and post.
If you want to compare lease-vs-buy, look at acq. Fee + disposition/buyout fee, plus the spread between financing and buying. No incentives, residual and MF are not favorable, not a good lease.
On a Honda that you expect to hold its value, I’d be more concerned about being stuck in it for the duration of the lease. HFS restricts third-party buyouts, if it’s financed they can do whatever they want.
If your uninterested friend hates it, gets bored with it (c’est imposible!), unexpectedly finds themself expecting triplets before 36 months, they’re fire selling this to a Honda dealer, or trading it on an Odyssey irrespective of a preference for a Sienna/Carnival.
But ultimately you seem to care more than your friend, so let them spend their money and learn the lesson for themselves. If they cared, they’d make a LH account and post themselves.
The opportunity cost of cash is greater than the 150 bps MF buy-down is worth.
Honda Financial Services now gets all the one-pay cash up front. They basically giving your buddy 150 bps discount when the cost of funds from the fed discount rate is 550bps and the prime rate is as high as 900 bps.
Basically your friend can stagger the one pay cash into some laddered-maturity CDs and make more $ than what the MF buy-down is worth in this lease. A similar thing happens with MSDs… the financial services gets to offset their loss exposure and gets basically free $ by just dropping the MF a very small amount.
But, one reason people may like MSDs and one-pay is simply because they end up spending the cash on other stupid stuff instead of investing it anyway. So pragmatically for some people, getting the cash out of their bank account is better than watching them blow the money on dumb stuff like mods for their CTR.
Edit: Sorry for the joke about GAP insurance on leases. Most insurance companies won’t even let you buy GAP insurance on the lease since you don’t own the asset. To your point the GAP insurance is basically baked into the lease (one pay or normal lease).