With affordability on the minds of many consumers, does it currently make more sense to lease a vehicle or finance one? To help answer this question, online car lease marketplace Swapalease.com, conducted an apples to apples to apples comparison of three different car-shopping scenarios in the U.S. using the same vehicle in order to determine where the most savings would be found.
The three different scenarios included financing a $30,000 MSRP vehicle for 72 months, leasing the same vehicle from a dealer at two 36-month intervals, or assuming an 18-month existing lease four consecutive times. Each scenario contained the financial options over a 72-month time frame, with loans of this length now accounting for 31.8 per cent of all retail car sales and up from 30.2 per cent last year according to J.D. Power.
Standard variables on the vehicle in each of the three different scenarios:
Financing for 72 Months
After taxes, fees and a pre-purchased extended warranty at the time of vehicle sale, the net amount financed comes out to $33,413.75. Over the life of 72 months this monthly payment is $538.13, totaling $38,745.09 with the 5.00 per cent interest rate. Assuming additional post 36-month maintenance not covered under the extended warranty would total approximately $2,700 (tires, electronics, engine service, etc), the total cash outlay over 72 months comes out to $42,445.09 on a vehicle with an MSRP of $30,000.
*Savings compared to lease: -$2,774.39
*Savings compared to lease assumption: -$5,404.39
Two 36-month Leases from a Dealer
At a residual value of 52 per cent, the calculated net residual value on a $30,000 MSRP lease deal totals $15,600, and the depreciation charge totals $14,000. At 36-month terms, the monthly rent payment after interest and taxes totals $514.45. Including the cap cost reduction of $1,000 and other taxes and dealer doc fees, the total due at inception is $1,829.45. The total cash outlay for the 36-month lease term equals $19,835.35, and $39,670.70 over the 72-month period.
*Savings compared to finance: $2,774.39
*Savings compared to lease assumption: $-2,630.00
Four 18-Month Lease Assumptions (via Swapalease.com)
When a person takes over a similarly priced MSRP lease (valued at $30,000) with 18 months remaining, their monthly payment is $514.45 with $0 down payment. The interest rate of 5.00 per cent and sales tax rate of 6.50 per cent are already baked into that monthly payment at the time of lease assumption. The total cash outlay of $9,260.18 over an 18-month time frame translates to a total cash outlay of $37,040.70 for the 72-month period (four lease assumptions).
*Savings compared to loan: $5,404.39
*Savings compared to lease: $2,630.00
“The financial outcome might be different for customers who hold onto their vehicles for longer than the 72-month period, however, the latest data show that a smaller percentage of drivers are following this path,” stated Melinda Zabritski, Senior Director of Automotive Finance at Experian. In 2012, the average length of ownership for new vehicles stood at 66.2 months, down from 8.1 in 2011, according to Experian.
To view the full comparison chart, click here: http://www.swapalease.com/mediacenter/leasing/articles/comparison.aspx
