klodnick@topaz.RUTGERS.EDU (John Klodnicki) (03/05/86)
I was always under the impression that the advantages of new car
leasing could only be enjoyed by a business, or someone owning his own
business, writing off the lease payments for a tax break. However,
some recent literature (Business Week's Guide to Careers) seems to
suggest that leasing might be a good idea for the recent college grad
(which I'm soon to become). They seem to think that eliminating the
necessity for a large down-payment is a great advantage for leasing
vs. buying. Also, lease payments can typically be less than montly
installments on a car loan, easing the financial burden of the
not-too-long-ago-starving-college-student. But is this a good idea??
Intuitively, it seems like a sure way to lose money.
The way I understand it (feel free to correct me) is that you can
compute your net cash outlay for use of the car for four years as
follows:
lease_price = monthly_lease_payment * 48.
buy_price = car_price + interest_paid - depreciated price of car after 4 years.
So it seems that if one can reasonably predict the depreciated value
of a car, it is possible to figure which deal is better. However, I
have NO experience in the new car market, and as the time approaches
for me to graduate and junk my '73 Chevy w/170,000 miles and almost as
many dents, I would greatly appreciate any advice from anyone wiser
out there. Thanks.
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John Klodnicki
{seismo,allegra}!topaz!klodnickheneghan@ihlpf.UUCP (Heneghan) (03/07/86)
> I was always under the impression that the advantages of new car > leasing could only be enjoyed by a business, or someone owning his own > business, writing off the lease payments for a tax break. However, > some recent literature (Business Week's Guide to Careers) seems to > suggest that leasing might be a good idea for the recent college grad > (which I'm soon to become). They seem to think that eliminating the > necessity for a large down-payment is a great advantage for leasing > vs. buying. Also, lease payments can typically be less than montly > installments on a car loan, easing the financial burden of the > not-too-long-ago-starving-college-student. But is this a good idea?? > Intuitively, it seems like a sure way to lose money. > > The way I understand it (feel free to correct me) is that you can > compute your net cash outlay for use of the car for four years as > follows: > > lease_price = monthly_lease_payment * 48. > buy_price = car_price + interest_paid - depreciated price of car after 4 years. You forgot two small details: you own the car when you buy it (you can still sell it) and both methods still require the owner to pay maintenance costs. > So it seems that if one can reasonably predict the depreciated value > of a car, it is possible to figure which deal is better. However, I > have NO experience in the new car market, and as the time approaches > for me to graduate and junk my '73 Chevy w/170,000 miles and almost as > many dents, I would greatly appreciate any advice from anyone wiser > out there. Thanks. Also, consider the initial sales tax write-off plus the monthly interest. If you need a car and can't afford a down payment and don't have enough other write-offs to file long, this maybe an alternative. Another thought is what if you want to unload the car before you finish your payments, is it easier to unload car payments or lease payments through the lending institution. Joe Heneghan