fredw1

Leases have no interest rate have money factors, so if an ad is talking about interest rate, it is a loan.

If the ad is incorrect and it is a lease, then you want to put down as little as possible. If something happens to the car before the lease is up, you never see any of your downpayment back. The insurance company pays the leasing company off for the value of the car, regardless of how much you have put down. It is better to take what you would have put down, and set it aside, using 1/24th of it to add to each month's payment. You may come up a few dollars short than by making the down payment, but because of the small amount over a short term, it won't be much.

I am wondering if the "balloon payment" (which again sets off loan and not lease connotations in my mind) is really a open-end lease. With an open-end lease, the lessee is obligated to buy the car at the end of the lease for the stipulated amount. That's usually not good, since the car may be worth less than that.

If you choose to lease (and this can be a good option), consider a closed-end lease, where you walk away at the end. If you want to buy it at the end, you can, and you can negotiate the price.

In deciding whether to buy or lease, look at the monthly payments either way. If you plan to buy, also consider the differences between a bigger up-front payment (loan) or an at-end payment (lease). I compared both, and decided to lease. It was a draw (monthly payment- and total-cost-wise) between $11,000 down and 60 monthly payments of $375 (total $33,499) for a purchase, versus 48 lease payments of $396 and a residual of $14, 625 (total $33,633, no money down). The difference was that I could own the car in four years with the lease compared to five with the loan. In addition, if the car is worth less than $14,625 at the end, I'll negotiate a lower price. If it's worth more, I still get to buy it for $14,625, and then could sell at a profit if I did not want to keep it. In either case, I could walk away and owe nothing more.

There are many things to consider, and there is no universal answer to whether it is better to lease or buy. Work up your own numbers and then decide. I have attached a spreadsheet I used which may be helpful.

MazdaRich

Fred, thanks a lot for your input. I'll try to sort through the numbers on your spreadsheet tomorrow. I am thinking of going for the 24-month lease with a residual around $16k (on a $29k car.) I would plan on buying at the end (unless a Mazdaspeed comes along or something.) It seems that Mazda giving you $2000 outweighs the advantage of owning the car outright.

fredw1

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This could likely be the case. When I was looking for an '04 (couldn't find what I wanted, so ended up with an '05), the numbers I had were even more in favor of leasing because of the $3000 rebate that was available for the lease, but not the purchase. My plan is also to buy at the end of the lease, but who knows what might happen in the next four years. In hindsight, I might have been better off with a shorter lease and, when it ended, I could have leased the car again, maybe with a lower cap cost and lower residual.

MazdaRich

$3000 rebate? Did you do this in the past couple of weeks? I thought it was $1000 from Mazda and $1000 from Mazda Credit.

I've also been trying to get Mazda to agree to give me a loyalty rebate but they don't want to do it if your coupon expires--I had one that expired April 30th. It seems stupid that they don't just have a standing loyalty rebate. I also have the Gerber e-mail rebate but no direct mailing....

Feras

iTrader: (1)

for posterity in a lease what you are paying for is the depreciation on the vehicle plus a small rental fee. for instance a 30000 car is worh 15000 after 3 years. Your payments after three years will equal the 15000 plus the money factor. Cars that hold their value end up being cheaper to lease. Say the depreciation only goes to 20000, then you only pay 10000 plus the money factor after three years.

fredw1

I was looking back in December. Even in January, I think there was a $4000 rebate on '04 leases.

Sigma

Yeah, but those rebates were available for purchases too, Fred. In December there was $3750 in rebates on '04 RX-8 purchases and in January there were $4500 in rebates on purchases.