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- Feb 3, 2020
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- Mach-E FE reserved, Nissan Leaf, Toyota Tacoma
Yes. We've heard your two rules over and over.When you buy a car and finance it, you are spreading 100% of the purchase price over a set number of months.
When you lease you are spreading a portion of the depreciation, usually between 40% and 45%, over a set number of months.
Most of the time the difference between the interest rates when you buy vs. when you lease are not significant.
Bottom line: the monthly payments over the same period of time, the lease must be substantially less than the monthly payment when you finance.
If the residual is 60% over a 3 year lease, (you are paying 40% of the purchase price of the car) to get similar monthly payments when you finance the finance term would have to be 2 1/2 times as long or 7 1/2 years.
An absolute rule of leasing that may apply: If your budget only allows a monthly finance payment of $500 a month, never lease a more expensive car where the payments are also $500 a month. Always lease the same car and pocket and save the difference between the finance monthly payment and the monthly lease payment.
Two other rules of leasing: leasing 101:
- Never, I repeat never put any money down to reduce the monthly lease payment. Everything including sales tax and acquisition fee should be rolled into the lease.
- Never lease beyond the manufacturer's warranty period-
Your rules just don't have the same weight as Gibbs' rules.