Lease or buy 2022 CT4S?

[nafzal80]

My 2022 CT4S (gentian blue with chalk interior) is arriving the 3rd week of Dec. MSRP is $134k (so I did not over do the config), I configured the vehicle in a way that the car should sell in the used market.

I am fortunate to have put my order demand in 6 months ago when the market was different. Because of this, I have a deal worked out at 6% off of MSRP with no markup on lease financing. Of course being US based, I will be getting the $7.5K EV credit.

I don’t own a biz and will not be exceeding the 10k - 12k per year of driving (staying within reasonable lease diving limits). So lease biz benefits and driving mile issues don’t apply to me.

I can afford monthly payment of either the lease or buy options.

knowing where the market is and predicting where it could be, does it make more sense to lease the car for 3 years or finance purchase it and then sell it?

appreciate any opinions.

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[ericj320]

I’m very much in the same boat as you, no business benefit to lease, can afford either, with a dec delivery of a 4S at $134k. While I was initially leaning lease I’m more likely to buy. I built a rough comparison Excel spreadsheet and given all the same variables, when buying, on a 72 month loan for similar payments to lease, at the end of 39 months, the 10k mile lease I would do, my remaining balance would be $8k-$10k less than the residual I’d have at the end of the lease. Given those terms, in a loan you’d have more equity assuming you’d turn in the lease and get another or trade in the purchased car for a new one. Given we built this exactly like we wanted it, I’m not sure we will have that need or desire to trade it in at 39 months, if we do great, but having the option to keep it without having to buy it off lease is a plus for us as well.

Given the Porsche Financial lease terms are no where near ideal, almost to the point where it seems they don’t really want to hold the lease on these cars, in my opinion, unless you have business tax incentives for a lease, buying far outweighs a lease for private individuals.

 

[madeyong]

What is the residual value at the end of three years in the lease option as a percentage of MSRP based on 10/12K miles per year? I find that if the residual value is less than 53%/54%, it’s not worth it to lease because so much is put into the capitalized cost that gets applied to the high Porsche money factor and results in no ownership.

In my view it only pays to lease vehicles with very high residual values or when you get a business tax benefit from it. Of course, it’s somewhat of a gamble, but you will probably be able to sell a low mileage Taycan after 3 years for more than the lease residual value anyway. I think it’s doubtful you’ll be worse off in a purchase vs. a lease scenario, particularly given how low purchase interest rates are now vs. a Porsche lease money factor (even without markup). This assumes the discount you negotiated on a lease carries over to the purchase. Good luck!

 

[Silveral]

I had the same doubts. I went with a 42 months lease. My biggest concerns are on how technology will improve over the next 24-30 months. I did not want to own it, because I am afraid if the leap is too significant, depreciation of older models can happen. Also, I normally use the Carry Forward option to get out of a lease 6 months in advance and get in a newer model. Just my $0.02. Not saying who buys is wrong or anything....

 

[Bella]

My 2022 CT4S (gentian blue with chalk interior) is arriving the 3rd week of Dec. MSRP is $134k (so I did not over do the config), I configured the vehicle in a way that the car should sell in the used market.

I am fortunate to have put my order demand in 6 months ago when the market was different. Because of this, I have a deal worked out at 6% off of MSRP with no markup on lease financing. Of course being US based, I will be getting the $7.5K EV credit.

I don’t own a biz and will not be exceeding the 10k - 12k per year of driving (staying within reasonable lease diving limits). So lease biz benefits and driving mile issues don’t apply to me.

I can afford monthly payment of either the lease or buy options.

knowing where the market is and predicting where it could be, does it make more sense to lease the car for 3 years or finance purchase it and then sell it?

appreciate any opinions.

I have run three scenarios for myself:
1. The first is buying the car upfront for cash.
2. Buying the car and borrowing the money 100% from either my Margin account or from a Credit Union etc etc
3. Lease for 36 months.

If you are a very conservative investor Option 1 is the best. If you keep a lot of cash around then taking $120k from your reserve makes no difference.

If you assume that in Option 2 you can earn at least 5-6% in the market for 3 years then this option beats the other two by not using your cash to purchase the Vehicle. The risk is your car is not worth what you think in 36 months. I assume $1200 a month in Depreciation on a $120k car.

Option 3 is good if you don’t want to worry about investing your money or if you had an accident with the car (unfortunately you cannot predict what the condition of your car will be in 36 months).

Bottom line all three options are good for different people. You stated that you don’t have a business deduction which changes things for a lot of people. While the market is great for used cars in 3 years it could be the opposite. Obviously if you tend to keep cars for more than five years Leasing doesn’t make much sense.
Just my thoughts. If you read thru previous posting you will get different ideas.

 

[madeyong]

Also, you probably know this already, but you also cannot really compare monthly payments. That is not an apples to apples comparison since the $7.5K Federal tax credit is applied against the purchase price in the lease scenario vs. you claiming the full amount on your tax return in the purchase scenario.

 

[Silveral]

I have run three scenarios for myself:
1. The first is buying the car upfront for cash.
2. Buying the car and borrowing the money 100% from either my Margin account or from a Credit Union etc etc
3. Lease for 36 months.

If you are a very conservative investor Option 1 is the best. If you keep a lot of cash around then taking $120k from your reserve makes no difference.

If you assume that in Option 2 you can earn at least 5-6% in the market for 3 years then this option beats the other two by not using your cash to purchase the Vehicle. The risk is your car is not worth what you think in 36 months. I assume $1200 a month in Depreciation on a $120k car.

Option 3 is good if you don’t want to worry about investing your money or if you had an accident with the car (unfortunately you cannot predict what the condition of your car will be in 36 months).

Bottom line all three options are good for different people. You stated that you don’t have a business deduction which changes things for a lot of people. While the market is great for used cars in 3 years it could be the opposite. Obviously if you tend to keep cars for more than five years Leasing doesn’t make much sense.
Just my thoughts. If you read thru previous posting you will get different ideas.

also all very good points. I had to leave one of my favorite cars at the local train station two years ago overnight (one of my kids got sick and couldn’t pick it up) and in the morning found out some nice individual backed up inside of my side panel. Value dropped significantly and ended up not buying at lease end.

 

[nafzal80]

Is the ideal option to:

Lease for the entirety of the lease term, exercise the purchase option at the end of the lease term
and then sell it privately or to a dealership?

Porsche is very conservative with residuals. A nicely / well kept / PPF'd leased Porsche should sell for $10k above the price at which one would have paid to buy through exercising the purchase option at lease end.

Residual for a 39 month lease of a 2022 CT4S is 49%, meaning a $134k CT4S can be purchased by the leasor for $65.66k at lease end. Is it reasonable to assume one can sell that vehicle for $75.66k and net $10k ($75.66k - $65.66k)?

Does that assumed $10k recover most of the equity "lost" for deciding to lease for 39 months instead of financing for 72 months, while assuming one keeps the car for only 3 years?

This allows one to keep the car, sell it at lease end, or turn it in (if there was an accident during the lease period), or turn the lease in sooner and get the next Porsche.

This discussion is helpful, wondering if my scenario above is reasonable. Thoughts?

 

[nafzal80]

Any thoughts?

Is the ideal option to:

Lease for the entirety of the lease term, exercise the purchase option at the end of the lease term
and then sell it privately or to a dealership?

Porsche is very conservative with residuals. A nicely / well kept / PPF'd leased Porsche should sell for $10k above the price at which one would have paid to buy through exercising the purchase option at lease end.

Residual for a 39 month lease of a 2022 CT4S is 49%, meaning a $134k CT4S can be purchased by the leasor for $65.66k at lease end. Is it reasonable to assume one can sell that vehicle for $75.66k and net $10k ($75.66k - $65.66k)?

Does that assumed $10k recover most of the equity "lost" for deciding to lease for 39 months instead of financing for 72 months, while assuming one keeps the car for only 3 years?

This allows one to keep the car, sell it at lease end, or turn it in (if there was an accident during the lease period), or turn the lease in sooner and get the next Porsche.

This discussion is helpful, wondering if my scenario above is reasonable. Thoughts?

 

[ericj320]

There’s no question purchasing, even via a loan is a cheaper way to go, unless you have a business/tax reason to lease. If you want to use a lease to hedge losses just in case something bad happens so that you can walk away from an exceptionally depreciated car, than only you can decide what that is worth to you. It’s worth noting, in that scenario, you also walk away from any down payment (pre paid depreciation) you may have paid at the initiation of the lease if the car were to be totaled or stolen. In other words, they both have risks, a lease doesn’t fully eliminate that.

The idea that you can use a lease as a less expensive way to trade up on a 3 year cycle to the latest and greatest car doesn’t really apply here, given the fairly lousy lease terms PFC is offering. If interest rates on loans were rather high, that would change the equation, but for now the math just doesn’t support that. Given the same term a loan will have a far less remaining balance, giving you more trade equity than PFC’s residual. And the cost of the two over the same term would be similar or better with a loan. It’s just too cheap to borrow right now vs PFC lease terms.

 

[madeyong]

Any thoughts?

I think what you are describing is reasonable in today’s used car market. Usually the banks know better than you and you cannot reliably make money at lease end but this market is crazy right now.

My wife had a 3 year old Navigator and I had a 2.5 year old MB E350 Cabriolet. Both on lease and we sold them this year. With my wife’s car at lease end we had about $8.5K in equity after the lease buyout. With my E350 (which had 8 payments left) I returned the car and they cut me a check for $8K. Used the equity in the Navigator for my wife’s new X7 lease and mine went to the down payment for my financed Taycan. Remember that there will be dealer fees added to the residual value at lease end to purchase the vehicle and, depending on where you live, most likely sales tax too since at that point you had only paid sales tax on the capitalized cost during the lease term (however NJ has no sales tax on purchases of zero emission vehicles).

I come back to the crazy money factor Porsche charges on leases. Even without any markup you are looking at 0.002. That is a 4.8% interest rate. That is crazy given how low interest rates are currently. If you have good credit you can finance in the low 2.XX%. Basically my monthly payment is the same on 72 month financing vs. a 3 year lease. So that is what I think you should look at. After 3 years I don’t need to worry about buying out a lease. I either keep the car if I’m still loving it at the same monthly payment or I sell/trade it in.

 

[madeyong]

The idea that you can use a lease as a less expensive way to trade up on a 3 year cycle to the latest and greatest car doesn’t really apply here, given the fairly lousy lease terms PFC is offering. If interest rates on loans were rather high, that would change the equation, but for now the math just doesn’t support that. Given the same term a loan will have a far less remaining balance, giving you more trade equity than PFC’s residual. And the cost of the two over the same term would be similar or better with a loan. It’s just too cheap to borrow right now vs PFC lease terms.

Agreed. Said better than me.

 

[nafzal80]

I think your advice makes sense. What rates are you seeing out there for 60 or 72 month financing? Any suggestions on which banks to work with?

 

[madeyong]

I think your advice makes sense. What rates are you seeing out there for 60 or 72 month financing? Any suggestions on which banks to work with?

I got 2.23% last month on 72 months through Chase Auto.

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