Quote:
|
Originally Posted by Aloha Joe
Quote:
Originally Posted by desertfox73
Sort of. Single-pay lease rates are extremely low, close to a zero percent interest. I ran a calculation for my M3 comparing the lowest finance rate I could get from BMW (1.9%) against a lease-purchase scenario using a single-payment lease. The money factor for single-pay lease was so low it actually does wind up cheaper to lease for three years then buy the car, rather than to buy the car outright. And if I decide to return the car in 3 years, I'll have spent less over the three year lease than I would have over three years of a 5-year financing term.
In a lease transaction the company is guaranteeing the residual, true, but they are also still financing the risk that the lessee won't make payments. That doesn't go away with a lease, it just gets layered on top of the residual risk. Maybe that's what you meant, just clarifying.
|
On your single lease calculation, don't forget to calculate the opportunity cost of the lump sum money. It's definitely better to pay 1.9% interest on borrowed money and earn 5% interest on your invested money. |
If you took what would have been the lump sum payment and invested it, then used a separate bucket of funds to make payments on the car, it could work depending on the lump sum amount. But assuming you only have one chunk of change to invest AND/OR pay for a car, it's a different story.
In that case, you would be drawing down principle each month to cover the finance payment, in which case the investment wouldn't pay too much, even at 5%.