It seems to me that I'm in an interesting situation even considering leasing a new '06. Normally, I would be completely against the notion of "leasing", but after some consideration, it's starting to sound more tempting.

Here's the situation:

1. I have a crappy old cavalier that I've been driving into the ground, and I don't know how much longer it's going to last
2. I'm really excited for the '07, but don't think I can wait until next march for a new car, and also I think i'd rather wait for an '08 or '09 (with extra options, kinks worked out, etc)
3. The Mini Cooper seems to have an exceptionally high resale value, potentially making the lease value very small????

So I'm curious what the trade-offs would be in this particular situation. Financialyl speaking, I don't have any problems putting a sizable downpayment and large monthly payments into a loan.

Any thoughts much appreciated!

Thanks!

p.s. I'm in Seattle, and the loans seem to be around 5-6% for my credit rating

 

Well the two things I would look out for if you are lease are:
1. Will you drive a lot and put more miles than allowed in the lease, costing more money in the end.
2. Do you have any intention of personalizing/modifying the car as this is not a wise decision on a lease.

We lease my wife's car because she only drives about 10,000 miles a year and it gives her the opportunity to get into a new car every 3 years or so.

I bought my MINI because I drive over 25K a year and I want to own the car so that I can do whatever I want to it in terms of modifications.

I think financially speaking with the resale value of the se cars being what they are you would stand to come out further ahead in the long run by buying it and then selling or trading in down the road.

If the monthly payments aren't an issue then owning may be a better way to go. If you are trying to get more bang for your buck then a lease is a good option to help lower the payments.

chris

 

Everything Chris said plus, if you tend to own your car for a long time, then buying is usually more attractive than leasing. Also with buying you get "pride of ownership".

 

thanks guys.

Like I said, I wouldn't even consider leasing except for considering the purchase of an '08 or '09. But, I was planning on a 36 month loan anyway, so by '09 I should have the car practically paid for... so i can decide to keep or upgrade. :-)

 

But a good question would be ... how many people actually keep their cars long enough to pay off the bank? You get a 4 or 5 year loan, 5 years can be a LONG time.

If thats true, the bank has "pride of ownership" and you have "the pride in being able to make your car payments"

Just a thought. If you turn the car over in 3 years, lease might be better.

 

then leasing has tax advantages...

One more thing to think about!

Matt

 

Even if you only plan to keep the car two years, buying and then selling will probably be cheaper than leasing. However, two things to consider when buying: 1) Your payments will typically be higher and 2) you'd need to sell it yourself after two years to maximize your return, which is a hassle. If you end up trading it in on a new car in two years, you're probably no better off than if you had leased.

The real benefit of a lease comes if you use the car for business. I.e., a portion of the payment -- perhaps all of it -- can be written off on your taxes in certain situations. If you can take advantage of that, a lease can be a good deal. If you're a regular 9-to-5 guy, however, the choice between the two is more difficult. Nobody can tell you which way is better without seeing your entire financial picture.

 

how would you do such a thing? I'm not self-employed.. but i do commute to work (about 9 miles)

 

Like I said, my original plan was a 36 month loan. So.. i should own the car by the end of '09. Or, in other words, have more equity than debt in early '08

 

Also...
I was hoping to do a 15%pully/CAI/Plugs/ECU upgrade sometime within a year

 

Personally if you can't write off the lease payments as part of a business I think it's a big chance that you won't be paying for things like...too much mileage, every small scratch and ding, etc.

As for basing any part of buying a car with it's resale value in mine, well that's a fools notion. A car, especially new, is a poor investment in anyones book. It's not like land, a work of art or even a good bottle of wine. Too much of a bad gamble.

 

I drive my cars into the ground and own them for 8 to 12 years usually. Even with a 5 year loan I end up with 3 to 7 years of no loans and let me tell you that is a real pleasure.

 

We are a two car family (one leased and one financed). When I checked out the MINI site for a lease, I could not believe how high the payment was. I bought an '05 MCS. I am almost sure you could buy and sell a MINI with much less out-of-pocket money spent, even if used MINI prices fall. I can see leasing for certain cars (I currently lease an '05 S2000).
If I were you, I would DEFINITELY buy your MINI

 

Thanks. good to know what the lease cost it like.

 

MINIs have some of the highest residual values of any car on the market. I'm not sure why you think it's such a bad deal, unless you were getting screwed on interest (money factor) by the dealer.

 

I configured 2 scenarios on MINIUSA website...

25200.00 MINI S

2500 down
12060 (335.00/mth X 36 mths)
1085 (9% taxes in Pa., since I live there...you're taxes may vary)

15645.00 total payed out over 3 years

You will be paying 62% of the vehicle in 3 years and giving it back.

________________________

28200.00 MINI S

2500 down
15408 (428.00/mth X 36 mths)
1386 tax

19294.00 total payed out over 3 years.

You will be paying 68% of the vehicle in 3 years and giving it back.

 

Why you would take a 36 month lease, with a residual somewhere in the high 50s when you could get a 24 month lease with a 72% residual?

 

A lease is worth it only when you are low miles, return to stock when done and short period of time owner. It cost me $10 a month more to own, and I have in 6 months doubled the lease mileage allotment so that little bit is worth it.
Plus I'm keeping the MINI for another 20 years min. ( if I need another car I'll get in addition to the MINI).

 

One important point to remember on leasing. You almost always have the option to buy on a closed-end lease. I plan on leasing for 3 years and then buying it outright at the end of the lease. Financially for me, it is the right thing to do since I will be using it for work more than 50% of the time. . . .and if you go over your alotted miles and buy it at the end of the lease they won't charge you for the additional miles!!.

Check leasecompare.com for some good rates. Better than BMW/MINI financial is even offering. . . .

I'll be ordering mine hopefully at the end of this month. . .I can barely contain myself!!!!

Make sure you look at all of the options and do what is best for you. YOU have to make the payment and YOU know how long you would usually keep a car for. . .

GOOD LUCK!!

 

I want to address something I am seeing every time I see this subject come up. Which is that there are tax advantages to leasing if you own a business. In my opinion, the tax advantage is minimal if any at all. With a purchase you are allowed deductions for interest and depreciation which may meet or exceed the lease deductions.

In each case only so much of the portion of mileage as is used for business purposes is deductible. Presuming that the MINI may be a second car in many cases, this may be little to none.

To the extent that there are any tax advantages in leasing, this can be offset by just being financially not as good a deal. It is harder to negotiate on a lease for most people and generally you will get a better deal on the price and financing terms in a purchase simply because those terms are easier to understand and negotiate.

 

If you lease as a business, the lease payments are deductable, as is everything else about the ownership of the car. Depreciation schdules allow you to deduct lost value in the car, but you're supposed to keep trip logs and the like to prove use. The actual accounting details have to be done to see which scenario works out best, but from a time invested point, leasing is easier to caluculate!

And O-ron, sorry, commuting isn't a deductable expense. But every trip you do for your work in personal cars is. There's an IRS guidebook or information pamplet that explains how it's all done. Comes down to deducting by the mile, vs deducting a % of depreciation (and insurance and the like) based on how much work use vs how much personal use. There's money there to be had, but it's a PITA to keep the records.

Matt

 

Leasing is a great deal - for the dealer. He gets to sell you a car based on payments, not on sale price. He gets to try to sell you the car at the end of the lease so he profits off of the same customer and the same car twice. He knows that you will be "in the market" for a car at the end of the lease. He can charge for excess mileage and damage. The state gets to collect taxes on the car each time it is re-titled. If you can take advantage of the tax credit for leasing a company car, then it may be beneficial and certainly easier than figuring depreciation etc. Accountants love for business owners to lease. But for the average person, leasing is the most expensive way to purchase a car. Look at it this way, you are actually renting the car for a long period of time. I would rather own the car. Then I can decide when I want to buy another one, or if I want to keep the one that I have.
No matter how you do it, a car is a lousy investment. Everyone has their own theory about the cheapest way to own. Some advise you to only buy cars that are one or two years old. Some say lease a car every three years so you are always covered by a warranty. My theory is buy a car you like, take excellent car of it, and drive it for a long time.
To each his own. You pays your money and you makes your choice.

 

I do not prepare tax returns and it has been a long time since I have read any tax codes, but it seems to me that whether you lease or buy, when using in business, you still have to segregate the business vs non-business use and thus have to track the mileage. And likewise the logs have to be done for lease or purchase for the mileage (operating costs) deductions. The only accounting difference is in deducting lease payment vs depreciation. Depreciation is not hard to calculate. The true difference is that sometimes when you sell the car you may have a gain if you have depreciated beyond the selling price. This of course won't be true of a lease.

Mostly my point being that the tracking and logging is not much different in a lease or purchase in a case of a vehicle that used for both personal and business use.

 

have you looked @ leasetrader.com ? sometimes taking over a lease will work for you--it did for me.

 

For me buying wasn't much of an option due to lack of funds. The first dealer I went to offered me a lease payment ($440/month) that was out of the question. So I did some research (like other have said, leasetrader is a good place to look) and went to a second dealer. Again, the offered me too much at just under $400/month, but after showing them the lease offered through other companies and some going back and forth between the salesman and the business manager I ended up with an owner's choice option at $353/month. So I ended up getting the owner's choice (which is nice in the states of Illinois and NY since apparently those are the only two states that will screw you on taxes a second time if you choose to buy the car out at the end and the owner's choice eliminates that) for $87 less then a lease would have been.

So the morale of the story would be to do some research before you go in. Your dealer may treat you a little better than the two I went to did, but I wouldn't count on it. I guess I should also say that in order for me to buy it, it would have been over $500/ month, so I've saving quite right now at least. I'm not sure how that will work out when I buy it out at the end, but I'm just kind of hoping I'll be in a better financial state than I am in now .

hopefully this helped a bit.