New 2014 Silverado: Lease or Purchase?

[steveo2155]

I have never even considered leasing before until now, seems like that is all people are talking about is leasing. And I have heard a lot of people say that they like it because at the end you have a lot of options, including the one where you can buy it. I have always been told to never put a down payment for a lease. I was just trying to explore all of my options. I was just seeing if this sounded like a good leasing deal or if it sounds like the payments should be lower - with everybody talking about how great leasing is I thought it would be a little lower payment. And I always figured if leasing for 2 or 3 years and then purchasing was only going to cost a grand or two more in the long run vs financing a 72 month loan in the first place, I figured I'd at least check into it.

[pm26]

Years ago someone wrote a funny post about buying a new truck. It went something like "I can afford a $ 32,600 truck, but I cannot afford a $ 33,200 truck." It was obvious that he could not afford either.

[KARNUT]

My money makes me money, I use their money at 0 percent or 1.9. I never pay cash for a truck, their money is too cheap. I buy rent houses with my money, one rent house pays for my rides. I could write off a lease but too restricted for me. Buying a use truck never worked for me someone like me could have owned it, ran the tar out of it. Cars or SUV different story. Id never buy a Tahoe or Caddy new.

[supersierra14]

Im glad I leased mine..cause theres so much I learned and want for my next one and im sure the 2017s will be much better

^Werd! first new truck for me, didn't know what to expect. $385 lease payment. Looking forward to 2016'ish and all the stuff we are doing to the trucks now might be standard....

[Impatience II]

I leased mine. 359 per month. 2000 down. 39 months 12000 miles. 2014 GMC Sierra SLT Double Cab. Pretty much loaded. 20" wheels, nav, power fold mirrors, ect.

[MTB]

How much is your trade in worth? If you put your trade in down on the lease you loose the value of it at the end of the lease. Your options then are to finance the remainder or lease another truck, however now you are without down payment....

[Northside]

Just save $500 a month until you have what you need and you too can never finance a vehicle again. Being the banks bitch is very over rated.

It depends on your situation. I had plenty of cash to buy the truck, but the interest rate they offered me made it silly to spend my money, which makes a lot more interest. Kind of makes the bank my bitch!

[Hootbro]

It depends on your situation. I had plenty of cash to buy the truck, but the interest rate they offered me made it silly to spend my money, which makes a lot more interest. Kind of makes the bank my bitch!

 

I am trying to figure the math of your statement. How is paying a low or no interest monthly car loan note instead of paying in full and keeping that principal in the bank gaining interest money ahead?

 

No matter how you slice it, the truck is a depreciating asset out the gate. For the sake of argument, let's say you deposited $45K in an investment account. What kind of return would you have to get on that to make not only the monthly payment for 60-72 months but still come out ahead and make money or even break even after 60-72 months?

[Northside]

I guess I can't figure out how pay in full and keeping the principal in the bank gaining interest. Kind of like having your cake and eating it too. Simply put: Years back I could get a 2.9% loan for my new truck or pay cash using money I was drawing 4% on. I found it cheaper to pay 2.9% for the banks money (GMAC) than to pay 4% (the amount I was accruing on my money market) for my own money.

[Silverado Steve]

Unless you're putting your money into the Stock Market, you aren't going to gain more money in interest than what you will be paying a bank. I agree with Interest rate's as low as they are, if you can swing it investing, you are gambling with house money. There's obviously pro's and con's to each. I paid my truck off in cash...the reason I did that was I don't like paying interest, and the money I would of paid in monthly payments, is going into a CD to fund my next car purchase. I already have money set aside each month that I invest for retirement. Of course I could of invested the money I spent on my truck in stocks, but I didn't want to tie up my money if I neeeded when something arrived. The general rule is only invest money that you don't need or won't touch for at least 5 years. I agree with Hotbro, having a long term loan on something that depreciates is a quick way to become upside down. However, there are several members here who will strongly disagree, but I think when you consider a vehicle purchase or lease, you have to look deeper than quoted price as there are more factors that come in to play; especially when paying interest, depreciation, taxes, fuel costs, insurance...a $42K vehicle will become a $49K vehicle at 3% interest for 72 months....etc

[KARNUT]

Your truck going to devalue at o percent or cash the trick is to buy right. I trade every two years Im never upside down. Its crazy I know my only vice. I had to learn how to buy right to make it work. The cash I save buys rental houses that pays for my vice. The only thing I pay payments on are cars and trucks. That cycle may change now thou I cant see how these truck can get much better. I may last till the next major redo.

[wandern]

Going by your numbers, you'd be paying (39 months * $485/month) + $28856 = $47,771 (and where are you going to get the $28k after 3 years?) for leasing the vehicle, and (72 months * $550/mo.) = $39600 if you purchase with that long 6 year loan. Your interest rate would probably be lower with a 60 month (5 year loan). At any rate, the lease costs are extraordinarily high.

 

Have you considered saving $10k for a down payment and then purchasing the truck with a low interest 5 year loan? You'd come ahead in all respects other than instant gratification.

 

For the cash buyers out there: good for you- but when you're paying less than 1.5% interest on a loan, which is generally less than the rate of inflation, which allows you to invest the money in other investments, it does not make financial sense NOT to finance the vehicle, regardless of your ability to pay cash up front.

 

If we were paying 5% for auto loans, it would turn that math on its head. I say take advantage of nearly-free financing while it lasts...

[KARNUT]

My brother inlaw who is debt free owns 7 acres here in Texas saved his money to buy a new truck. He lived in a single wide trailer. He wanted to pay cash. I had him do this, he took his cash bought a double wide move the single wide to the front of his property and rented it out. The rent pays for whats left on the double wide and part of the truck note at 0 for 60. His girl was so impressed she move in they got married now they are both living large.

[Silverado Steve]

Your truck going to devalue at o percent or cash the trick is to buy right. I trade every two years Im never upside down. Its crazy I know my only vice. I had to learn how to buy right to make it work. The cash I save buys rental houses that pays for my vice. The only thing I pay payments on are cars and trucks. That cycle may change now thou I cant see how these truck can get much better. I may last till the next major redo.

 

Yes, true all vehicles depreciate. I'm going to use KBB's projected depreciation of the 2014 Silverado. Accoridng to them, the Silverado is projected to retain 52% of its initial value after 5 years. So lets say for discussion sakes that my truck....MSRP was $51K after 5 years my truck should have a value of $25K+ knowing that, and I paid off my truck from day 1. If after 5 years, I put $500 a month away into a savings account, not counting any interest, I would have $30K + the value of my truck to purchase a new car. So every 5 years, I have the money to buy.

 

You are right as I mentioned earlier, the current interest rates are low enough that you are gambling with the banks money. However keep in mind, with investing, unless you have the cash to buy your income properties, you are paying a higher interest rate for a mortgage (currently 4.5%) along with the interest rate of the car (1.9%). I do agree if you have enough cash to swing it, it's something to consider; however, you are tying a monthly payment into your budget, and locking the cash you have on hand down for a period of time as well for the investment you are making. Additionally, you have to have certainty that your finacial standing will remain intact for the period of the loan. You really have to look at the numbers to see if it works for you. Being a single income household such as myself, I like the certainty of not having debt. It's good that you can fund you car habit every 2 years, unfortunately many car buyers are upside down on their current car loans and a longer term loan obviously doesn't help their cause.

 

 

Going by your numbers, you'd be paying (39 months * $485/month) + $28856 = $47,771 (and where are you going to get the $28k after 3 years?) for leasing the vehicle, and (72 months * $550/mo.) = $39600 if you purchase with that long 6 year loan. Your interest rate would probably be lower with a 60 month (5 year loan). At any rate, the lease costs are extraordinarily high.

 

Have you considered saving $10k for a down payment and then purchasing the truck with a low interest 5 year loan? You'd come ahead in all respects other than instant gratification.

 

For the cash buyers out there: good for you- but when you're paying less than 1.5% interest on a loan, which is generally less than the rate of inflation, which allows you to invest the money in other investments, it does not make financial sense NOT to finance the vehicle, regardless of your ability to pay cash up front.

 

If we were paying 5% for auto loans, it would turn that math on its head. I say take advantage of nearly-free financing while it lasts...

 

Leasing really only makes sense for those who can write it off as a business expense. It's like the person who perpetually rents a house or apartment. When I rented, I had a 60 year old neighbor, who rented from Day 1...I could only imagine had she bought, she would of had her house or proeperty paid off 3 times over at most.

 

I've looked into the argument of paying cash vs, financing and investing....and you're right with historically low rates, it's a deal, but something lost, is you tie a monthly payment into your budget and your money is locked down in the investment. Sure you an liquidate your investment if something catastrophic happened to where you might need to pay your car off ASAP and you would lose your investment plus the money paid in interest. If you can swing it, it defintely makes sense...however I wonder how many people have the discipline to get a loan that's equally affordable and able to lock their money up into an investment for a period the length of the loan. Based on info out there, most buyers fall into the trap of taking out longer term loans with slightly higher interest rates to buy more car than they need and really can afford, leading them to be upside down on the value of the car. At that point, your investment would be for not. Again, you really have to look at the numbers, but I agree either make your money work for you, or live debt free. Having a long term loan and or lease with no return is a bad idea.

[KARNUT]

Belive it or not I looked up Kelly blue book they don't show 14s yet but with Texas package I got 12/31/13 I would only be 2000 up side down at the 13 value. I buy them right . My way works for me may not be good way to do it but I manage to save a lot this way. I don't think ill buy anymore rent houses can be pain to deal with. Paying cash for a truck I just cant do it unless rates go up. Even finance guru says pay cash, that's the one thing I don't listen to Dave Ramsey about.