Okay, so I thought I'd put together this example of how to do the analysis to determine if leasing vs financing is right for you. While it works on the Fit (or any car), I'm using Honda's current deal on the Civic as an example

$199 down, $1999 due at signing. The $199 is the important number here.

This deal is offered on a Civic with MSRP of $18,395. As a result of the $1999, you have a capitalized cost of $16,648.65. The capitalized cost number is very important.

The total monthly payments are $7164 ($199 x 36), and there's an option to purchase at the end for $11,588.85. The purchase option is also an important number.


Sooo...

By plugging these numbers into a financial calculator or spreadsheet, you can figure out if this is as good of a deal as financing via a loan.

You start with the capitalized cost, which is the present value of the amount being financed. You then have monthly payments of $199 for 36 months. Finally, you have a future value of $11,588.85.

Doing the math, you have a implied monthly rate of .41% - or 4.922% APR.

Thus, unless you can borrow money for less than 4.922%, you should lease.

In Excel, you can use the following formula:

=RATE(36,199,-16648.55,11588.85)*12

where the first item is the term, the second item is the lease payment, the third is the negative of the capitalized cost, and the forth item is the purchase option at the end. You multiply everything by 12 to convert to a monthly compounded annual rate.

 

So where does the $1999 due at signing go?

Oops NM missed a line....ignore me...

*these are not the droids we are looking for*

 

Good break down.
Leasing isnt a bad thing IMO. It can get you into a car you really cant afford to buy. A Fit i think you should buy, its cheap. Your payment cant be all that much. But say you want a BMW 335i loaded that costs 42k, payments even with some down will be high, put some down, lease and you can be driving your dream car and actually be able to afford it. I think its a great thing on higher priced cars(28k^).

Tyler

 

where's your sales tax?

 

That's decent bit of info but you have to look at other factors as well. I find it depends more on the specific vehicle your interested in and it's resale value above all things. Buying a Hyundai Accent or Chevy Cobalt is rediculous. A car with low resale is pointless to buy Much better off leasing.

A car with high resale value is a solid investment. It will cost more now but you'll generally do alot better in the long run. I bught a 2003 Mazda Tribute LX V6 FWD, it cost me $34k taxes included. After 138k kilometers (80k miles) It was barely worth $7k. So it cost me. $27k to own that POS for 3 1/2 years

At the time I was going to buy a Toyota Rav Limited. but was turned off from the fact that it only had a 4cyl engine. Had I made that purchase I could have gotten back approx $22k as a tade-in so it would have cost me $12k to use the vehicle for 3 1/2 years

Had I Leased the Tribute for 48 months is would have cost me $16k for the 4 years. Would have been MUCH better leasing it.

There's mose factors than just the Buyback. There's the real world value to be considered.

My fit I bough Brand new and I'm only keeping it for 3 years and I figure it'll cost me i payens roughly about $6k to use and it's one of the more fun vehicles I've ever owned.

My Beetle I bought used (2007 with 13k Km's) I would have leased it if the used one wasn't $7k off sticker price.

Sorry if I'm not too linear and rambling... bloody tired.

 

They don't include it in their lease offer, so I left it out.

If you covered the sales tax up front, then nothing in the analysis changes. If you finance the sales tax, then you would throw it into the the PV section of the calculation (the negative number) and your payment would go up as well. Obviously the FV number (the purchase amount at the end) doesn't change because that's the vehicle's value at the end.

 

I'm merely showing what the break-even point is between financing and leasing, interest rate wise.

If the value of the car at the end of the lease is GREATER than your discounted purchased amount, then you have just overpaid. Why? Because a lease is simply a loan against the depreciation of the vehicle. If the vehicle didn't depreciate as much as anticipated, then you ended up borrowing against the surplus value above the terminal purchase price.

If the value of the car at the end of the lease is LESS than your discounted purchase amount, then consider yourself lucky. That being said, think of who came up with the purchase price -- odds are they are MUCH better at forecasting the future resale value. Regadless, they'll turn that car into a certified pre-owned and still turn a nice profit.