The buying vs Leasing opinion thread

I am so glad that there are still people around that prefer leasing and renting to buying.

It never occurs to them that they are buying "property" for other people.

Without them landlords and leasing companies would go out of business.
 
silver6933 said:
PV of a lease vs PV of a installment agreement

PV of Lease is always higher. Else there is no profit in the company doing the lease.

In SA they obfuscate the matter with words.

You are paying to use an ITEM.

Why would you CHOOSE to pay more to use an ITEM?

Leasing or an installment sale is merely a financial vehicle to enable you to use an item.
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PV?

Why use an acronym on such a long post. Obviously you had enough keyboard and time to write the rest of it.
 
SauRoNZA said:
Therefore the need to replace every three years and to use leasing to accomplish this does sort of come to the conclusion that you can't really afford the specific car and/or lifestyle in the first place.
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Disagree with you here completely. A lot of people don't just view cars as their mode of transport, a lot of people drives cars for enjoyment as well. The whole point of this thread is if he were to buy a car every three years, what is the most affordable way to do it.

Here is some math, its not exact as I haven't done any Present value calculations, but illustrates a point.

Go to bmw's site and spec a plain jane 320i mSport. Monthly cost over 72 months = 8917.35pm. For a 36 month GFV deal you pay 5899pm for the same car. Lets assume you take two 320i's one after each other in the same deal (and this is where the present value and future value calculations on a new car hasn't been done), you get the following total costs:

Financed over 72 months, total payments = R642 049 - you now own a 6 year old 3 series

Two GFV deals over 72 months, total payments = 424 728 - you don't anything.

Split the difference you get = R217*321. If you think a 6 year old BMW is worth that, finance it. If not you're better off leasing. Best price i can find for a similar spec with about 100k kms on autotrader is 150k. Trade would be much less, probably 120.

In my mind a leased deal in this scenario is way more attractive. You could do 1 more 3 year deal before you hit the same spend mark, and a 9 year old 3 series would start hurting on the maintenance.
 
phiber said:
Disagree with you here completely. A lot of people don't just view cars as their mode of transport, a lot of people drives cars for enjoyment as well. The whole point of this thread is if he were to buy a car every three years, what is the most affordable way to do it.

Here is some math, its not exact as I haven't done any Present value calculations, but illustrates a point.

Go to bmw's site and spec a plain jane 320i mSport. Monthly cost over 72 months = 8917.35pm. For a 36 month GFV deal you pay 5899pm for the same car. Lets assume you take two 320i's one after each other in the same deal (and this is where the present value and future value calculations on a new car hasn't been done), you get the following total costs:

Financed over 72 months, total payments = R642 049 - you now own a 6 year old 3 series

Two GFV deals over 72 months, total payments = 424 728 - you don't anything.

Split the difference you get = R217*321. If you think a 6 year old BMW is worth that, finance it. If not you're better off leasing. Best price i can find for a similar spec with about 100k kms on autotrader is 150k. Trade would be much less, probably 120.

In my mind a leased deal in this scenario is way more attractive. You could do 1 more 3 year deal before you hit the same spend mark, and a 9 year old 3 series would start hurting on the maintenance.
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The only problem I have with that is that going from one 320 to another to another is...

1. Either never going to happen, because you'll succumb to upgrading.

Or

2. So boring that the whole logic of swopping every three years is utterly pointless.

If I were to swop every three years it would be because I'm a petrol head and want a different experience every time.

One 320 to another is no difference at all.

You also left any and all deposits out of your calculation which you would have had if you owned your previous car.

Also the point isn't really so deeply ingrained with the future value of the owned car but rather that you wouldn't have been paying for it.

Like I said the biggest worry with leasing is that when you get retrenched or some such event happens you sit with nothing.

I'm not trying to convince you either way, just giving a flip side to the coin. In my mind swopping cars every three years is crazy and only makes sense if you were paying cash and then I would do it every two years anyway.
 
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I read an article a while ago - basically leasing is for the wealthy who want a new car every three years or so, and don't need to spend time accumulating a deposit in order to upgrade or worry about interest charges.
 
phiber said:
Disagree with you here completely. A lot of people don't just view cars as their mode of transport, a lot of people drives cars for enjoyment as well. The whole point of this thread is if he were to buy a car every three years, what is the most affordable way to do it.

Here is some math, its not exact as I haven't done any Present value calculations, but illustrates a point.

Go to bmw's site and spec a plain jane 320i mSport. Monthly cost over 72 months = 8917.35pm. For a 36 month GFV deal you pay 5899pm for the same car. Lets assume you take two 320i's one after each other in the same deal (and this is where the present value and future value calculations on a new car hasn't been done), you get the following total costs:

Financed over 72 months, total payments = R642 049 - you now own a 6 year old 3 series

Two GFV deals over 72 months, total payments = 424 728 - you don't anything.

Split the difference you get = R217*321. If you think a 6 year old BMW is worth that, finance it. If not you're better off leasing. Best price i can find for a similar spec with about 100k kms on autotrader is 150k. Trade would be much less, probably 120.

In my mind a leased deal in this scenario is way more attractive. You could do 1 more 3 year deal before you hit the same spend mark, and a 9 year old 3 series would start hurting on the maintenance.
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Besides ignoring the point of paying in a decent deposit and increasing repayments to nuke the interest burden (and who buys a car on72 months? - eek!), you are being somewhat biased in your example in assuming the same cost when taking the second lease deal.

I have to ask - what is your real-world experience in purchasing cars?
 
IguBu said:
And as with cars - people should TRY and not pay off a bond over 20 years - you should essentially start with what you can "just about" afford - and as things improve start putting more money into the bonds..The savings over 10 years are frighting...

Same with cars - 3 years seem to be the sweet spot on depreciation - vs interest - so after 3 years you still get something back for it - of course brand, model etc plays a big role - or decide to keep it 5 years + - and if low mileage is the order of the day - then it makes a lot of sense as you shouldn't have issues with maintenance on low mileage.

The magic word is "interest" - that in my opinion is the cost.
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Yep - the debt burden. Spend a few years hunkering down so you can buy things and pay off more quickly without paying all that interest and the rewards keep growing. Just like the interest you might have been paying. Hence my phrase of getting over the debt curve.
 
SauRoNZA said:
Like I said the biggest worry with leasing is that when you get retrenched or some such event happens you sit with nothing.
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I disagree with this because this happens when you buy as well. I have been paying of my car for 3 years now. If I get retrenched today I would only get for it what I owe the bank and still sit with nothing or sit with paying an installment on a loan which I would not be able to afford if I was retrenched. I have been through trying to sell it for more. Not happening since I only paid off the interest now and the value of the car is about the same as what I owe the bank.

Splinter said:
This is the thing - you are simply consuming, but not accumulating (wealth). Based on what you said in your OP, it does not sound like you are investing or saving for retirement much (or at all).
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Except for the normal pension fund I do actually invest in Equity. I have no idea how you got to your assumption based on what I wrote? "assumption is the mother of all ...."
 
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terencej said:
I disagree with this because this happens when you buy as well. I have been paying of my car for 3 years now. If I get retrenched today I would only get for it what I owe the bank and still sit with nothing or sit with paying an installment on a loan which I would not be able to afford if I was retrenched. I have been through trying to sell it for more. Not happening since I only paid off the interest now and the value of the car is about the same as what I owe the bank.


"
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Then you overextended yourself.

Usually you would be able to sell the car and sit with cash in hand or sell it to buy another lesser vehicle and still have transport. You shouldn't end up with nothing.

If you leased you will ALWAYS have nothing if you default on payment and then have no recourse for transport otherwise.

Also the logic still stands NOT to have a car loan at all unnecessarily by not "needing" a new one so often.
 
SauRoNZA said:
Then you overextended yourself.

Usually you would be able to sell the car and sit with cash in hand or sell it to buy another lesser vehicle and still have transport. You shouldn't end up with nothing.
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Dude this makes no sense at all. Ever heard of the "upside-down situation"? Please google it. This happens to all normal car loans. http://www.investopedia.com/articles/pf/05/042105.asp
 
terencej said:
Dude this makes no sense at all. Ever heard of the "upside-down situation"? Please google it. This happens to all normal car loans. http://www.investopedia.com/articles/pf/05/042105.asp
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Yes obviously there are outliers.

Such as when no deposit is paid or very early in the loan when the interest outweighs the cost of purchase and you actually need to pay in even if you sell it.

But the point is that the odds of walking about better off are still in your favour whereas with a lease there are no odds at all.

More so if you buy demo or second hand in the first place and then depreciation doesn't play such a major roll in those odds.

At the end of the day like most things it can be very circumstantial.

Simple solution...don't have any loan at all if you can help it.
 
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terencej said:
This is the simplest yes
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I have a friend who is a commercial diver so he makes a fortune tax-free and works offshore for six months at a time.

When he comes back he buys the latest and greatest motorcycle and then rides it for six months and sells it again before he leaves and before he needs to change tyres or do the first real service.

It costs him virtually nothing as he's effectively "renting" it for that period.

Now six months is quite extreme but I would imagine if you started out by buying your vehicles cash in the first place you would get away with a similar setup by simply losing the little bit of cash for the period you drove it which would probably be similar to interest paid.
 
terencej said:
I am 29 and are on my 4th car since I bought my first one at age 20. I have basically been buying second hand cars and got either bored of them within 2-3 years or they gave me so much problems that I had to get rid of it.
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Just out of interest, what cars have you had so far and for how long/mileage covered was that?
 
Once you have a paid off car there's no going back. It's great not paying installments as the savings are huge. My history:

- Started working after Uni in 2006. Bought first car brand new for R145k. Mainly because parents always advocated buying new because you never know what you get 2nd hand. Took it at 35% residual because I was just starting out and wanted to have some spare cash at month end.

- Sold the first car after 4 years in 2010 for R105k. Good value because low mileage (40k) and RunX. I still owed R65k after 4 years because of the residual and it was a 5 year term.

- Bought upgrade for R200k when I sold my first car. A used car (5 year old) but something I really wanted. Paid it off in 2 years and haven't paid a car installment since middle of 2012. I can't imagine paying for a car again. If/when I have to buy a car again it will also definitely be used because the savings are great.

The most important thing is not rushing into a purchase and doing your research. I searched for 3 months before I found exactly what I wanted. Only then did I sell my current car and go for the upgrade. Many people rush into buying used cars and have a bad experience with car maintenance and ad hoc expenses because they normally purchase a car in an emergency and just take whatever deal.
 
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