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Originally Posted by GreyWolf
In general, leasing is the more expensive alternative in the long run unless you don't plan to lease another after the first (i.e. it's a short-term/one-time thing). This is because, although with a lease you only pay for the part of the vehicle's value you used up, the leasing company assumes a fairly short life for the car. This means they think you're consuming the value of the car more quickly than you are. In addition, there is the leasing company administration/profit built in to the lease payment. That is actually on top of the imputed interest rate. With a bank loan, it's covered by the interest rate alone.
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Ok, I lease my wife's car and I own my car outright. Full disclosure.
Often times leasing can be the less expensive alternative. It was the last time that we swapped out her car. We ran those numbers at least a dozen ways at 3 different dealerships to get the right answer, and leasing was ALWAYS the cheaper option on a month-to-month basis. That's because the "nut" for the portion of the car that you're using is less than the whole car. Often the manufacturer will give you incentives to stay in their leasing program.
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Another higher lease cost is insurance. The leasing company may (will likely) require more insurance coverage than a bank does for a loan purchase (or what you would carry if you buy the car outright).
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This makes no sense at all to me. They're not going to charge you higher liability rates, so you have to mean the physical damage aspect. Assuming that you're fully insuring the vehicle, why would lease vs. own be an appreciable difference in rates. More importantly, how would an insurance company justify those rate differences to the state insurance departments who have to approve those rates? What am I missing?
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There are 2 reasons you can get a good deal on a just-out-of-lease car. The short life assumed in the lease means that the lessee has actually paid a bit more than the value they've used up. In addition, the leasing companies insure the sale price of the car after the lease. If they can't get that for it, the "loss" is somewhat mitigated by the insurance.
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This is the best advice that you can get in terms of buying. If you can find a gently used leased car - which is the norm based on the demographics of who leases - then you can save a lot and still get a car under warranty.