Foreword: I sold my LandCruiser. Tears ensued. I'm selling my motorcycle. My legs feel weak. Since I drive less than 5k miles a year, I asked a friend for advice about the pros / cons of leasing a car. He responded with what I consider the definitive guide. You can read it below.

Pros:

Takes much less money up front to get going.

After the lease you just give that old tired 3 or 4 year old car back and go get another new one!! So fun!

Better to do financially if you are an indy contractor and the car would sell for over $30k (because of a luxury tax imposed by the gvmt that all but eliminates any savings from writing off a car bought for over $30k). You can write off the lease amount. This is why most realtors lease. I almost leased but the Honda we ended up with was only $25k so we didn't get hit with luxury tax. Also, there was a loophole that year (may still be around) that let me write off $10k of it the first year. That was nice.

For super-luxury or sport cars its all about how you set up the lease and how they calculate depreciation. It's a risk to both sides. You could end up paying more than you would have to buy it and resell yourself or the dealer could get a bit screwed. But, dealers don't like to get screwed, so look for it to favor the dealer's position rather than be closer to fair. You are basically paying for depreciation on the car during the years you have it.

Cons:

If you drive over 12k miles a year you are screwed. There are 15k/yr leases but if you are pushing that you might go over as well. They really make you pay for extra miles.

If you ding it up they will ding your wallet up.

You have to have the highest insurance levels to cover the cost of replacing the car. I believe the dealer or lessor requires this.

After the lease you are left with nothing to show, no car to trade in, sell or just keep driving. Dealer will offer it to you to buy at that point. You can figure what resale would be and do a quick flip to make a few bucks. Or if it's worth less than what the dealer wants you just give it back.

Summary:

I've never leased a vehicle. I drive between 15k-20k/yr so it just doesn't work for me. I did consider it thinking I would just never take it on SoCal trips. John Doe always leases his pimp-mobiles because at their price point he feels the dealer is taking a bigger risk on depreciation being more than what they figure up front (what your payment is based on).

The key is the depreciation. Some cars (BMW, Lexus, etc) depreciate so little that the cost to lease is actually lower than cheaper cars (Infinity, Jaguar, etc) because those cars drop in half almost in value over the 3 years so they make you pay for the price drop. So, in the case of when I was shopping 3 years ago, it was cheaper to lease a $35k BMW 3-series than to lease a $28k Infiniti G35 because the Bimmer held value so well.

*You aren't paying for the cars value in a lease (like John Doe's old M5 was prob worth $100k?) just the depreciation (how much it drops in the 3 or 4 years you agree to drive it, love it, race it.

Though, purchase price still needs to be negotiated hard just like a buy. Lots of leasees don't know this and they start behind the game when negotiating monthly payment. If everyone agrees the car is going to be worth $18k in 3 years but the dealer wants $26k list you will pay the $8k difference in depreciation. If you negotiate that sale price down to $24k you obviously pay less. Also, interest rate matters too. Junk US cars have 0% interest I think.

Here is a link that may work.. hopefully.. it is a comparo program between costs on leasing and buying..

http://partners.leadfusion.com/leadfusion/consumerreports/auto03/tool.fcs

from consumer reports but behind the password section I believe.

Last lastly, when we bought our last car that had a payment we used our credit union because of their super low interest rate. The dealer had all the contact info on their computer so we were able to do it all at the dealer, though through our credit union. So, check your bank's rates.

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