Grid-Tie without netmetering

[rsilvers]

We only buy new cars, but are keeping them for 10 years or so. My mother still has my 99 Mercedes SLK that I bought new and it still is in great condition somehow. That car ended up being a great value. Close to no money on repairs.

[progro]

Amazing, I asked about net metering and we turned this into a debate on leasing cars

[azdave]

Either way, I'm just happy some well-to-do folks are taking the hit for me and buying or leasing all those expensive new cars.

I've never bought or leased a new car and doubt I ever will. I'll happily buy used and pay cash at 1/3 of what someone else paid to breathe in those new car plasticizers. My family and friends come by our place with brand new cars including upside down loans and bad lease deals (not to mention ridiculous insurance rates and registration fees). After dinner they tell me how poor they are and have no savings.

It took me awhile, but a few years back, I had saved up $12,000 in cash and considered buying a nicer used car to replace my worn-down 91 Aerostar van. Instead, I bought an $11,000 grid-tie PV system that saves me roughly $1600 a year in utility bills and will continue to do that for 20-25 more years with very little maintenance. Other investments I could have made might perform better but not with this low risk. With the $1000 cash I had left over I bought a 2001 Lumina for $600 (from a co-worker who was buying a brand new Prius) and I have been driving it since then with only a set of tires required. 25 MPG city, 33 highway.

Lease? Buy? Okay with me. Just don't tell me how broke you are.

[rsilvers]

Yeah, that is all fine. Nothing wrong with it.

There is something to be said with knowing the deal up front rather than having to deal with selling a used car. Especially if you don't have a lot of time to deal with it.

[rsilvers]

As i said, you didn't pay more than someone who bought it and traded in their car. So if you are someone who trades in cars, and you are ok with the lease term of X years, then leasing is just as good. Plus as you said, you save on sales tax. And for business owners, it is a better deal still.

[rsilvers]

The worse job one does negotiating on the new purchase price, the more room they have to give you more for the trade.

[NYHeel]

Exactly. But if he had bought and then traded in the car, he would also lose $2600 vs a private party sale. So leasing is like buying and then trading in the car. When I ran the numbers, that is exactly what I found out.

BTW, a 2016 Pilot EX-L AWD can be bought right now for $35,000 if you negotiate correctly.

Plus tax, which gets you to over $37k in my state (NJ with a 7% tax rate). I agree exactly with your premise except nothing stops the lessee from selling it private party. Except I got the value of the guaranteed trade in price.

Oh, also, the only down payment (or cap cost reduction) I made was a $700 bank fee. I also had to pay registration and MV fees plus first month's payment but that doesn't count.

[NYHeel]

I think I am seeing what the disconnect is between my logic and yours. It is the difference in thinking in terms of payments per month vs just money over the life cycle of the purchase. I always shop for the best deal, and don't care at all what the payments are per month. If I can't pay with cash, or can't make the payments, then I decide I can't afford it, and make do with less.

If you bought a $35,000 car with a 5-year loan, the payments would have been over $600 a month. And you didn't want to come up with that in any given month to optimize cash flow, and you didn't want a less nice car. So leasing allows you to drive a nicer car than you otherwise could if you bought. But you are actually paying more than someone who bought it (though less in any given month). And always have a payment.

As I explained, a lease is just a purchase financing tool where you get a guaranteed resale price after 3 years and you only pay sales tax on the portion of the car you use. That's it. I can't see any reason why I paid more than someone who bought it. In fact in many cases I paid less because they often mark up the residual to make the lease more attractive.

The other nice thing about a lease is that they let me just amortize the first 3 years. So I don't have to front the full money of the car or pay a larger loan payment during the 3 years. It's like taking an interest free loan on the tax credit for solar. Say you have a $30k solar system. You could take out a home equity loan for $30k and then payoff the 9k tax credit after one year. But then your monthly payments are higher and they won't let you re-amortize after a year unless you refinance. So you can get a solar loan that will give you no interest on the tax credit piece and you only have to amortize $21k. Of course you can also front the 9k and just wait for a year to get it.

[NYHeel]

So your decision was between $36K and $390/month for a 2013 Honda Pilot.
I'll assume 30k miles during that time.
KBB says a 2013 Pilot EX-L with 30k miles can be sold private-party for ~$28k (maybe more maybe less depending on options, milage, what shape it's in, etc.)
A lease after 3 years you're left with $0 value.
So time value of the $28k tied up in a car and $8k of depreciation vs. $390/month.
Lets say $3360 for a 4% return on the 28k (times 3 years)
So $11360 vs. $14040 ($390 * 12 * 3)

So it looks like you paid around $2680 for the benefit of not having the hassle of selling the car after 3 years.
Maybe less when including sales tax and property taxes.
Maybe more because you can potentially get a lower price point on the initial purchase ($36K looks like was the MSRP - probably could get it for $1k to $2k less if purchasing; It looks like 2016's are averaging $1k to $1400 less depending on your location.)

Looking at payments on a car loan vs. payments of a lease is a bad comparison because the lease doesn't leave you any value at the end, but the loan does (you own the car).
It's a good way for a salesman to convince you to go with the lease even when the car dealership is going to get more money from you.

It looks like this lease was probably not too bad of a deal for you - but many leases will be much worse. ex. $500/month for the 2016 Pilot - with similar values after 3 years would mean purchase would be a more attractive choice financially by $6.6k.

Personally, I don't have $2k, much less $6k to spend like that every 3 years.
But then I don't find much utility to driving a new car every 3 years. So I'm not really the target market for leases.

I have a real life case and not a hypothetical case like you have above. KBB's numbers are garbage and not practical. You could have bought a 2013 Honda Pilot EX-L retail from a dealers for advertised price of $25-26,000, with warranties in some cases. I know because I looked. Real life private party sale would have been about $24,000. But even if your $28k is right, nothing stops me, the lessee, from getting that price, as I'll explain below.

Your premise regarding a lease being worth $0 is completely wrong. It's worth just as much as a purchased car. A lease is just a financing tool, that's all. My car was worth about $24,000 private party sale and about $22,000 trade-in. However, I owed $20,500 on it, which was the residual value on the car. There was nothing stopping me from just buying for that amount (plus tax) or selling it to someone else and paying off the remaining $20,500. So, my car was actually worth more than the residual on it and I sold it just like you said I should. The key is that nothing stops a lease holder from selling or trading in the car at the end of the lease. I did the same with my lease. I traded it in and made $1500 on it. The trade in value would have been a bit more except it had an accident on record because someone clipped the car when it was parked.

I could have sold it private party for somewhere in the $24,000 range but I didn't want to deal with the time and effort to sell it. Thinking back on it, I probably should have sold it privately, though my profit would have been offset by the sales tax that I would have had to pay. Remember you don't pay sales tax on the full price of the car when you lease it so you owe it when you buy out the lease. However, you don't owe sales tax if you sell the car to a dealer.

Remember, a lease is just a financing tool. It can be bad when the dealer charges you a ludicrous amount. It can often be really good when you get a great deal because the residual values are inflated to make the lease price better. If you want to sell the car privately, go right ahead. But if you don't want to deal with that and just want to trade it in, now you get a guaranteed resale/residual price that's often much more than the real life trade in price. Also, say you had an accident your car isn't worth anywhere near what a clean car is (even if it's 100% fixed), you still get the guaranteed residual price. And if the residual is not more than the real life trade in price, then just tell the dealer to give you the real life trade in price and you get that extra money in your pocket.

[rsilvers]

Problem with solar leases is they are taking the SRECs and tax credit giving very little credit for them.

Really they are using your roof for their own benefit as if Verizon needed it to put up a cell tower.

[ButchDeal]

If you negotiate well you can get better on the trade in as well. Leases also often have a milage limit for more added costs.
If you keep the car for 4 years or more you start seeing drastic improvements in the savings with purchase.

In there analogy of car to Solar, you would think of solar in the LONG term so you should be thinking of the car in the long term. Also in the solar model there is the very real issue of selling the home with leased modules. Leased equipment does not convey so has to be negotiated outside of the home negotiation (or in addition to it), complicating the sale.

[rsilvers]

Exactly. But if he had bought and then traded in the car, he would also lose $2600 vs a private party sale. So leasing is like buying and then trading in the car. When I ran the numbers, that is exactly what I found out.

BTW, a 2016 Pilot EX-L AWD can be bought right now for $35,000 if you negotiate correctly.

[foo1bar]

I'll bite. I leased a Honda Pilot EX-L for $390 a month, including tax 3 years ago. The car would have cost me about $36,000-37,000 to buy without tax. Same goes for a Nissan Pathfinder SL I just leased. At that price, it would have taken me almost 10 years to pay off the car at 4% interest.

So your decision was between $36K and $390/month for a 2013 Honda Pilot.
I'll assume 30k miles during that time.
KBB says a 2013 Pilot EX-L with 30k miles can be sold private-party for ~$28k (maybe more maybe less depending on options, milage, what shape it's in, etc.)
A lease after 3 years you're left with $0 value.
So time value of the $28k tied up in a car and $8k of depreciation vs. $390/month.
Lets say $3360 for a 4% return on the 28k (times 3 years)
So $11360 vs. $14040 ($390 * 12 * 3)

So it looks like you paid around $2680 for the benefit of not having the hassle of selling the car after 3 years.
Maybe less when including sales tax and property taxes.
Maybe more because you can potentially get a lower price point on the initial purchase ($36K looks like was the MSRP - probably could get it for $1k to $2k less if purchasing; It looks like 2016's are averaging $1k to $1400 less depending on your location.)

Looking at payments on a car loan vs. payments of a lease is a bad comparison because the lease doesn't leave you any value at the end, but the loan does (you own the car).
It's a good way for a salesman to convince you to go with the lease even when the car dealership is going to get more money from you.

It looks like this lease was probably not too bad of a deal for you - but many leases will be much worse. ex. $500/month for the 2016 Pilot - with similar values after 3 years would mean purchase would be a more attractive choice financially by $6.6k.

Personally, I don't have $2k, much less $6k to spend like that every 3 years.
But then I don't find much utility to driving a new car every 3 years. So I'm not really the target market for leases.

[rsilvers]

I think I am seeing what the disconnect is between my logic and yours. It is the difference in thinking in terms of payments per month vs just money over the life cycle of the purchase. I always shop for the best deal, and don't care at all what the payments are per month. If I can't pay with cash, or can't make the payments, then I decide I can't afford it, and make do with less.

If you bought a $35,000 car with a 5-year loan, the payments would have been over $600 a month. And you didn't want to come up with that in any given month to optimize cash flow, and you didn't want a less nice car. So leasing allows you to drive a nicer car than you otherwise could if you bought. But you are actually paying more than someone who bought it (though less in any given month). And always have a payment.

[rsilvers]

How long it takes to pay off the car does not matter. You were only leasing it for X years (3?). So you only have to pay for the new car for the same X years, and then sell it. Then you look at how much each cost you over those X years figuring in the best incentives for each.

The way to not get ripped off on a lease is to negotiate the principle down before the lease calculation. Lease calculators are all over the place online, so you can verify the numbers that the dealer offers at your leisure and see that they have nothing out of the ordinary in them. I would have to do this whether the numbers were offered to me by a dealer or a broker.

How much was the capitol cost reduction (down payment) on the lease?