Leasing '07 XC90

[mdrawson]

Someone posted a question about the leasing deal on an '07 XC90 with the new
3.2 ltr 6-cylinder engine. Nice car --- we've used it as a loaner from our
dealer, but we still like our V8 better (it gets better gas mileage).

Anyhow, the lease deal price on the car mentioned by the poster was $45K+,
and I would hasten to point out that this sounds like the dealer's lease
deal. You need to work your own lease deal, and the first part of that is
negotiating the purchase price just as though you were buying the car. $45K
for that model is right at the MSRP, which you never pay for a car.. You
then need to evaluate the specs of Volvo's and competitive (banks') leasing
deals which include the residual value (what the car is worth at the end of
the lease period, and consequently what you're paying on the lease, ie., the
agreed-upon price (minus a down payment) less the residual, which amounts to
the depreciation ), and the interest rate which is expressed as a "cost
factor" where the lower, the better. You also need to be sure that it is a
closed ended lease (no balloon balance or payoff at the end), and that you
have an option to buy the car at the end of the lease period for the
residual value. You also need to compare the cost per mile for any mileage
in access to the lease-specified mileage for the term of the lease.

We've leased from Volvo when they had a "cost factor" sale, and also from a
bank when they had a better deal. We've always leased for 36 months for 15K
mi/year (total 45K), and never paid a security deposit or processing fee
(everything is negotiable....).

You can't know if you have a good deal for you unless and until you've done
this homework and negotiations. In other words, the dealer's deal is
favorable to him, not to you, and you can always do better. After all, it's
your money. Good luck.

DRawson
[email protected]

 

[Roadie]

Have you also done the math as they say to compare the long term cost
of leasing a new car every 36 months vs buying and holding for the long
term? I have yet to find a lease that stands up under that scrutiny,
but maybe you have found the rare good deal.

 

[mdrawson]

My main reason for buying (which is what I've done on the last 2 Volvos) vs
leasing has to do with the miles I now put on a car --- way too much to
make leasing viable. An example of the purchase math: I bought an '05 XC90
V8 (MSRP $51K) for $45K, put down $10K and borrowed $35K for 5 yrs at 4.99%.
Monthly payment is $660, and since the car is mine I can pay off and/or cash
it out whenever. This mo payment is the same as the poster's estimated mo
payment with the lease he described.

 

[Roadie]

Well, the payments are only one small part of the math to determine
whether a lease makes financial sense. Total cost of leasing over and
over vs purchasing outright and maintaining the car are what really
count. Whenever i've run the numbers outright purchase is the
financial winner.

Leasing does allow the buyer to get into a car with minimal upfront
payment, and that feature is attractive to those with no down payments
I suppose.

 

[John Horner]

Have you also done the math as they say to compare the long term cost
of leasing a new car every 36 months vs buying and holding for the long
term? I have yet to find a lease that stands up under that scrutiny,
but maybe you have found the rare good deal.

If a person knows that they are going to want a new vehicle every three
years or so then leasing can be a smart way to go since you put the
residual value uncertainty factor on the other guy's back.

Financially it may make sense to keep a car longer than that or it may
not. It really all depends what a person wants and what they are able
to afford. Some people are simply bored with a vehicle after three
years and want something new and different. More power to them. These
folks put good used 3 year old cars onto the market for those who want
to minimize depreciation expenses to buy.

Different desires, different choices.

John

 

[Michael Pardee]

If a person knows that they are going to want a new vehicle every three
years or so then leasing can be a smart way to go since you put the
residual value uncertainty factor on the other guy's back.

Financially it may make sense to keep a car longer than that or it may
not. It really all depends what a person wants and what they are able to
afford. Some people are simply bored with a vehicle after three years
and want something new and different. More power to them. These folks
put good used 3 year old cars onto the market for those who want to
minimize depreciation expenses to buy.

Different desires, different choices.

John

I agree, although the terms of leases can be extremely rigid. Even if the
lessee loses his driver's license because of failing eyesight, or even if he
dies, typically the lease is still in force. It can be an unpleasant
surprise to heirs to have to make monthly payments on a car they didn't want
or need. At least a car that was bought on payments can be sold.

Mike

 

[Roadie]

If a person knows that they are going to want a new vehicle every three
years or so then leasing can be a smart way to go since you put the
residual value uncertainty factor on the other guy's back.

Financially it may make sense to keep a car longer than that or it may
not. It really all depends what a person wants and what they are able
to afford. Some people are simply bored with a vehicle after three
years and want something new and different. More power to them. These
folks put good used 3 year old cars onto the market for those who want
to minimize depreciation expenses to buy.

As long as the person leasing a car every three years realizes that
they are re-paying the first three years depreciation plus a return
many times over then yes that individual can then make an informed
decision. But unfortunately the advertising for leases tends to talk
in generalities about the financial benefits of leases and does not
mention what is really being repaid.

Indeed what I hear over and over is that the individual is preserving
his capital by leasing. In reality he doesn't have the money to make a
downpayment and repay a loan so he leases. In effect he is getting
into a car that is beyond his means.

 

[Roadie]

I agree, although the terms of leases can be extremely rigid. Even if the
lessee loses his driver's license because of failing eyesight, or even if he
dies, typically the lease is still in force.

Well, yes, that is true. But why should it be otherwise. The
individual could have lookied into a monthly rental if those issues
were of concern.

It can be an unpleasant
surprise to heirs to have to make monthly payments on a car they didn't want
or need.

The heirs don't have to and should not make lease payments for a leased
vehicle in a deceased persons estate. An attorney would give the best
advice there.


At least a car that was bought on payments can be sold.