On Financing or Leasing a Japanese Car

[alanbrenton]

Hi,

I would like to know what your take is on financing versus leasing a japanese car. I noticed that the japanese manufacturers have downplayed their vehicle's residual value making leasing more expensive.

I have two friends who leased domestic cars just recently and have been told that domestic manufacturers do the opposite, they exaggerate their vehicle's residual value.

Does it make sense to lease a domestic vehicle and finance a japanese one? When does the purchase offer at the end of the lease period make sense?

Thanks.

[Nyte]

I think that will depend on your level of income, and whether or not you plan to keep the car after the lease.

[Bullseye]

Buy the vehicle, buy something 1-2 years old, and pay cash for it. If you don't have the cash, then you can't afford it.

Just my opinion, though! :cheesygri

[HighFlyer]

buy something 1-2 years old, and pay cash for it.
If he's buying a civic/corolla, in most cases, he's better off buying it new since those cars don't depreciate much from the beginning.

[Bullseye]

If he's buying a civic/corolla, in most cases, he's better off buying it new since those cars don't depreciate much from the beginning.

Every car has the highest depreciation in the first couple years, it's still a considerable amount for a Civic or Corolla. Especially if you factor in the added costs of buying new, like freight/pdi, and the GST you have to pay if you buy from a dealer.

[Quick_lude]

Buy the vehicle, buy something 1-2 years old, and pay cash for it. If you don't have the cash, then you can't afford it.

Just my opinion, though! :cheesygri
Ummm... unless that car is a classic and will appreciate or hold its value, that's the worst financial advice, evah. :)

Never pay cash for a "regular" car.. Pay installments and invest the cash.

[Bullseye]

Ummm... unless that car is a classic and will appreciate or hold its value, that's the worst financial advice, evah. :)

Never pay cash for a "regular" car.. Pay installments and invest the cash.

No, you have it backwards. Never finance a depreciating asset! That's Personal Finance 101.

Do a side by side comparison of the two scenarios, you will see the error in judgement you've made. The only possible way your method would work is if you could get a guaranteed, after-tax return on the invested money that is at a higher rate than the financing on the vehicle. Fat chance of that. Don't even think of bringing up the 0% or low rate financing 'deals' to refute this, you're still paying more in that case, you are just paying a higher price for the vehicle instead! Big auto is not stupid, they are not going to loan you money at a lower rate than they could get investing the money themselves.

[phillbert]

quiet, let him lead the herd....
No, you have it backwards. Never finance a depreciating asset! That's Personal Finance 101.

Do a side by side comparison of the two scenarios, you will see the error in judgement you've made. The only possible way your method would work is if you could get a guaranteed, after-tax return on the invested money that is at a higher rate than the financing on the vehicle. Fat chance of that. Don't even think of bringing up the 0% or low rate financing 'deals' to refute this, you're still paying more in that case, you are just paying a higher price for the vehicle instead! Big auto is not stupid, they are not going to loan you money at a lower rate than they could get investing the money themselves.

[Quick_lude]

No, you have it backwards. Never finance a depreciating asset! That's Personal Finance 101.

Do a side by side comparison of the two scenarios, you will see the error in judgement you've made. The only possible way your method would work is if you could get a guaranteed, after-tax return on the invested money that is at a higher rate than the financing on the vehicle. Fat chance of that. Don't even think of bringing up the 0% or low rate financing 'deals' to refute this, you're still paying more in that case, you are just paying a higher price for the vehicle instead! Big auto is not stupid, they are not going to loan you money at a lower rate than they could get investing the money themselves.
Yes, the 0% deal is bogus. But you CAN get a low financing rate AND a good price to finance if you do your homework. Then you invest the cash or buy RSP's. So yes it is possible if you do some work and have a good portfolio. Cash for a car? Bwahahahaa..

[Bullseye]

Yes, the 0% deal is bogus. But you CAN get a low financing rate AND a good price to finance if you do your homework. Then you invest the cash or buy RSP's. So yes it is possible if you do some work and have a good portfolio. Cash for a car? Bwahahahaa..

Yes, what do I know, I'm just an accountant and financial advisor!