JANUARY 2013 In This Issue... Toys 4 Tots Paso Robles Wine Tour ...

Show Me The Money
Story by Dave Humphreys
As you will recall from a previous
article, when you buy your Porsche, you
are essentially putting your money into
a declining value savings account - in
that you rarely get as much out as you
put in. When you come right down to
it, purchasing any automobile is a pretty
dismal investment by any measure.
You might say that leasing is
somewhat similar to buying, but without
the so-called equity “savings account.”
With leasing, you have the option of
putting your “savings“ (the difference
between the monthly costs of buying
vs. leasing; which can be substantial)
into more productive investments.
As a matter of fact, many financial
advisors and accountants are currently
encouraging exactly this practice as one
of the benefits of leasing.
But, let’s see how this can actually
work. We’ll compare a typical lease
(36-months) on an $85,000 Porsche at
say 6% interest, a 0% loan and a 6%
purchase loan. In an effort to keep things
as equal as possible, we have assumed
that a down payment is tendered in each
case. Even then, leasing will invariably
result in lower payments.
Lease - 6% Loan - 0% Loan - 6%
Porsche Price:
$85,000 $85,000 $85,000
Down Payment:
$5,000 $5,000 $5,000
Interest Rate:
6% 0% 6%
Residual:
$51,000 n/a n/a
Monthly Payment:
$1,289 $2,222 $2,656
Total Costs:
$51,404 $85,000 $100,616
*Note: The preceding chart was
compiled using Edmund’s Lease Calculator
(which is available free online), but does
not include acquisition fees, sales/use taxes,
registration/licensing fees, disposition fees,
purchase option fee, etc. nor incidental
fees charged by the leasing company for
conducting business. These fees vary
from state to state and from leasing company
to leasing company. So, do shop around for
the best deal. The chart is intended for simple
(though reasonably accurate) comparisons
only.
As you can see, the short-term
monthly cost of leasing (39-months or
less) will always be significantly less
than the cost of buying. For the same
model Porsche with the same price, lease
terms, and down payment, monthly lease
payments will invariably be 30%-60%
lower than purchase payments. In this
example, that amounts to about $1,367
per month; or, $49,212 overall. Now, I
don’t know about you, but that kind of
money is going to get my attention every
single time.
However, and this is also important,
with the long-term leasing (exceeding
42-months), the cost of leasing will
always be more than the cost of buying;
that is assuming the buyer keeps his
automobile after the loan is paid off.
So, be sure to keep this in mind when
you’re negotiating with the dealer - don’t
be talked into a longer-term lease just
to keep the monthly payments lower.
You’ll get burned it you do.
Does this mean leasing is always
better? Not necessarily. Payments are
not the only factors that should influence
your decision. There is much, much
more to take into account before making
any final decisions.
If a buyer prefers to keep his/her
Porsche after the loan has been repaid
and drives it for many years thereafter,
the overall costs will be spread over a
longer period of time. It doesn’t take a
theoretical scientist to figure out that
the cost of buying one (1) Porsche and
driving it for say ten (10) years is going to
be less expensive than leasing or buying
three (3) or four (4) Porsches over the
same period of time.
While we can’t put a dollar amount
on everything, to put this into proper
perspective, we need to look a little
deeper into how each program (leasing
vs. buying) differs one from the other.
First, the similarities:
• Both contracts contain a “finance
charge”; which represents the
interest paid for the money you have
borrowed. This is the money that
has been advanced to you or the
dealer to purchase the vehicle you
intend to either lease or purchase.
It also includes reimbursement for
any incidental business expenses
incurred by the financier.
• Both contracts set forth the amounts
of the monthly installments to be
paid over a specific period of time
(usually months); and to whom they
are to be paid.
• In both instances, you are responsible
to properly maintain the vehicle per
the manufacturer’s written
standards, repair any damage
incurred, pay all applicable taxes
and keep the license and registration
current.
Now, for the differences:
• Leasing contracts include a
“depreciation charge”; which
represents compensation to the
financier for the loss of the market
value of the vehicle during the lease
period.
• At the end of the lease period you
have the option of either buying the
vehicle for a predetermined price
(usually the “residual value”) or
merely returning the vehicle to the
leasing company with no further
obligation - your choice. How about
that?
• It is important to note that the leasing
company will maintain ownership
of the vehicle at all times - unless
you decide to buy it at lease-end.
(Continued on Page 30)
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