Hi Everyone,

This is a great forum here.

I need some advice on buying versus leasing. I just ordered a C4S for April delivery.

Financially, I have zero debt and a some savings. Buying the C4S, I'll still have zero debt but a lot less savings / cash.

What are your thoughts, experiences?


Thanks,

 

If you lease you have to put down a deposit.

If you buy you have to put down a deposit.

You buy you have value.

You lease you are paying down someone else's debt and you have no value.

In today's economy you can negotiate a very good car loan.

I'd prefer than over leasing.

 

Porsche's don't lease out very well (compared to other cars), so I'm going to buy mine when I decide to pull the trigger.

Don't take too much out of your savings, follow Gcalo's advice and try and get a good loan.

 

Also because business is bad some notes are 72 months. You don't have to keep it that long, but you'll lower the monthly nut.

Then you can overpay the principal with every payment and reduce the note to 36 months or some combination of that.

OPM (other people's money) can be very beneficial if you use it properly, and you are reliable about repaying it.

 

i am sure everyone will have a different "take" on this. i bought my p car because i do not know of a p car lease program that makes sense. for the purchase i calc'd the first year's depreciation and made that my down payment, and in this case, i financed the rest using porsche's money at 6%. i truly feel this is the most efficient use of money, why pay for it up front when you can make more than 6% with your investments? that said, i hate being upside down in cars, so getting rid of the 1st year's depreciation with the down payment means that whenever i want out, i can just sell it. now i am 18 months into a 60 month loan and the car is actually building equity so there will be a small check whenever i sell it to put toward the next one .

 

by financing at 6% you are in effect passing up a risk free return on your money of 6%. The Risk freerate avaialbe in the market today for a 5 year investment is 3.50%. Over the long term you can probably beat 6% by investing in risky assets. But thats over the long term..The return on risky assets could very easily be less than 6% or even negative over the next 5 years

I pay cash for my cars - why pass up a risk free return of 6% for 5 years? thats over a 30% risk free cumulative return - ill take that any day!

Now give me 2.9% financing or some special rate and i would finance the entire amount

 

good points by all, think mostly depends on your current situation/how often you change cars....

leasing: you can put minimal/zero down and have decent monthly payments (best to put little down b/c w/ leasing, you are essentially renting). use leasecompare.com, 3rd party bank. also, if you use it for business purposes - - can be partially tax deducted. but less hassle, just rent and dump.

buying: need pretty large down pymt to get decent monthly. sounds like you have some concern to dip into your savings (me too) like to have liquidity/flexibility, plus you can put that large down pymt on real estate/investments. if you have your purchase price, can help you crunch #s to compare. but if you keep your car a long time, might be good option for you. also, if you like to customize your ride... best option. on the negative, is trying to find a buyer for your unwanted car in 4-6 yrs.

summary: in your case... you have on order, but when buying -- - i think buying as a 2nd owner, low miles, hardly used is best b/c 1st yr/ depreciation was taken by 1st owner (usually get 10-20% off). IMO, i like leasing if not this option.

either way, sounds like great ride.. send us pics when you get it! any more Qs , happy to discuss!! thx

 

Thanks for all the great info.

You've helped me decide to buy instead of lease. I'll post pics as soon as I get the car.

Now I just have to decide whether to pay it all off right away.

 

If you lease you have to put down a deposit.

Not necessarily true. On the business vehicles I lease, I put zero down - registration, 1st month, and go.

You buy you have value. You lease you are paying down someone else's debt and you have no value.

Also not necessarily true. I've had lease deals that made more sense than buying with a loan or for cash. It all depends. If you buy, you might pay $90,000 up front and the moment you drive away from the dealer it's worth $80,000. Depreciating asset. I've had zero money leases where the money factor was so low and the residual advantageous that I've done much better financially than if I purchased.

Also, comparing a 6% loan with a 3.5% "risk free" investment isn't accurate. I've got some liquid CDs that are at 5.25% (risk free - insured to $100k by FDIC and I can pull from it if I want). I've also got AAA municipal bonds at 5 to 5.25% that are either double or triple tax free, so the equivalent "risk free" taxable return is well above what a car loan runs.

That all being said, the Porsche lease was terrible, and I didn't want debt on a "weekend car"...

 

I just did this twice in three months. My first 997 C2s was purchased through Porsche Credit at an outragious rate of over 8% because it was a three year note with a baloon. I put 20 grand down to keep the payments around 1100/mo. Crazy thing happened. The car was in a flood and needed to be totaled. Since the equity was with Porsche credit (because I had an option to purchase at end of 36 months or walk away) they talked State Farm into a total loss. I never thought I was that smart but with car facts today there would be very little value in a car that was 30" under water. I got plenty of insurance money to put me into a new deal. This time I chose to finance at 6% on a conventional purchase for 60 months. I put down 18 grand (kept some insurance $$$$ for rims and snow tires) and now I will own the car after 60 months for the same $1100/mo. payment. Just think of the lease as my first deal.
Now, if you keep the car mint, drive it less then 5k/yr you will be in equity. If you lease the equity will be realized by the lender. On the other hand, if you beat the **** out of the car, lease it. Pcar owners know a rat car when they see one and they are your only audience. Let the bank take the hit.
Besides, you may fall in lust with the car and never let it go. Why let the leasing company make an additional profit on your investment.

 

[quote=Gcalo;1540309]If you lease you have to put down a deposit.

Not true, I never put anything down on my leases except for the first month payment vs. buying where you make your first payment at the end of the first payment period.

You buy you have value.

Value? Do you mean equity? Of course you have no equity in a lease. You are renting. What equity do you have when purchasing? A vehicle is a depreciating asset.

You lease you are paying down someone else's debt and you have no value.

This makes no sense to me???

In today's economy you can negotiate a very good car loan.

You can do the same with a lease

You seem to know little about finance. I'm not advocating leasing but you should get your facts straight.

 

you may have some munis that have 5.25% coupons or cds at 5.25% - but those arent current rates...5yr AAA munis are trading at yields of approximately 3.15%...5yr cds are close to 3.5%..can you get a countrywide CD at 5.25%? - probably - certain financial instituitons take advantage of the FDIC insurance - if not for that countrywide would be paying >10%

AAA munis do not equal risk free rates...the only risk free investments (zero credit risk) are U.S. Treasury bonds. 5 year T notes yield 3.47%

yes - i am a bond expert - i manage $2bn in bonds

 

All I can tell you is what I've picked up over the past year. My Lord Abbett picked up several A rated munis including CT (triple tax free) for 5-5.25%. I also picked up a few liquid CDs from my local bank (special rate due to relationship) at 5 and 5.25% (the 5.25 was several months ago, now it's 5% on a published rate of 4.75%).

I consider FDIC CDs and A rated munis to be in the "risk free" category. If these A rated states (like CT) default, then that means the world has fallen apart... If you consider T bonds risk free, then I put the munis and CDs I've selected in the same category. I would think that for 10 A rated states to fail would mean the US has also failed.

Your point is well taken though - the street price may differ, and today's rates may be different than last month, 6 months ago, last year, etc. The point I was trying to make is that there are situations where your analysis needs to go deeper, to look at pre vs. after tax return and that you don't have to go into a high risk vehicle in order to obtain a return that is net comparable to an auto loan - the rates on car loans can also go down as returns on CDs and munis...

 

i dont disagree..but again, A rated muni are not risk free!...the ONLY risk free investment is U.S. Treasurys...if lord abbott bought 5.25% munis then they did it out 30yrs with imbedded call options....correct me if im wrong but car loans arent offered for 30yrs...if u decide to take a 5yr car loan and buy 30yr bonds with your cash you are taking HUGE interest rate risk....you could easily lose double digits by having to sell your bonds early to repay the loan...

 

AAA munis are quickly turning into CCC junk. I just sold my paid for Porsche and leased. Got a huge check back and parked that money in gold. Gold doesn't go to zero, where bonds are as we speak.

Never leased a car before but I feel this is the time. Resale value of cars will be rapidly depreciating. IMHO