F450... Lease? Purchase?

[Paul_Lori]

Ok, now that you all have gotten up from the floor from laughing, let me put some context around this...


I know, "Fulltime rv'ing using a leased vehicle? Are you NUTS?". Our situation is that I am a nurse and will do the "traveling nurse' thing, which means we will have 13 week contracts, so for 3 months at a time, we are in one place, so "high mileage" isn't going to be that big of an issue. We figure if we do only 15,000 miles per year, that might be a big year.


So if someone could gut check my logic for me, I would appreciate it....


50,000 lease payment 3 year lease, 19000 miles: $450/month


50,000 purchase - $780/mo.


These are estimated numbers, obviously, but are fairly realistic we think.


Thoughts? (stop laughing now... )

[Mr_D]

Will they even lease a vehicle to you knowing you will be adding a hitch and towing with it? That usually involves cutting holes in the bed.

[laj]

i always figured they could make money by leasing, so i could save money by buying.

[tuffr2]

I think I would lease a brand new F-450 for $450 / $500 per month. I would think most F-450 will have the 5th wheel prep package which means the factory cut holes to mount a 5th wheel or gooseneck hitch/ball.

Also if you could stay in a certain region of the country you would not put that many miles on the truck. Like New York to Miami or Minn to Texas. Going north and south is 1/3 the miles as going east and west.

[SmokeyWren]

Originally Posted by Mr_D

Will they even lease a vehicle to you knowing you will be adding a hitch and towing with it? That usually involves cutting holes in the bed.

If you lease a new F-450 pickup that has the optional Fifth-Wheel/Gooseneck Prep Kit, you won't be cutting any holes in the bed. Reese, Pull-Rite, B&W and others make 5er hitches that will plug into the factory holes in the bed.

However, any decent financial adviser will tell you that leasing is not as cost effective as buying.

Your $450 vs. $780 per month is not full costing. For one thing, at the end of the lease you'll have zero equity with a lease, but with a purchase you'll have a used truck worth probably $25k to $30k.

[Paul_Lori]

Originally Posted by SmokeyWren

However, any decent financial adviser will tell you that leasing is not as cost effective as buying.

Your $450 vs. $780 per month is not full costing. For one thing, at the end of the lease you'll have zero equity with a lease, but with a purchase you'll have a used truck worth probably $25k to $30k.

Not always the case when dealing with a business expense, which is why I'm exploring it.... It's the miles I'm most concerned with, but I think 19k a year is a lot of miles... ??

[TXTiger]

A lease is just a form of creative financing. It works if you have a business and can deduct the payment. However if you buy out the lease at the end you are paying the down payment at the end rather than at the beginning and if you turn it in and have excessive mileage you will still be paying at the end. Even tho you may be parked for 3 months, do you have a daily driver or will you be driving the truck back and forth to work and the store? This will add miles too. I am not a CPA but I also believe that mileage back and forth to work is not deductible so you may not benefit entirely from leasing.

[Spoonsize]

Have you looked in to a trailer towing service? No fuel to buy, no registration nor insurance, no interest.....etc, etc.

[Itchytoe]

Originally Posted by Paul_Lori

So if someone could gut check my logic for me, I would appreciate it....

Okay, but I don't think your $50,000 price tag is quite realistic if you're talking about new vehicles.

50,000 lease payment 3 year lease, 19000 miles: $450/month

You're paying $16,200 for those three years, as long as you don't go over mileage. I really think you will, but you know yourself better than I know you. I've averaged well over 20,000 miles a year for the last decade, and I travel for work just like you're describing. The average Joe drives 13,500 miles a year (quick Google search results). One trip north to south is 2,000 miles. Do 3 trips a year and you're looking at 6,000 miles extra. Now you're up to 19,500 miles. Toss in an LA to New York trip and you're looking at another 5,000 miles round trip. Now you're at 24,500 miles which is 5,500 miles over your limit. Do that all 3 years and you're now you've got to foot the bill for an extra 16,500 miles, which can be

another $4,000. Now you've actually paid $20,000 for 3 years of use.

50,000 purchase - $780/mo.

$28,080 total. WHOA! That isn't right. This isn't the whole story. You're talking about a 2015ish F450 right? $30,000 isn't getting you a new one. Unless you're talking about just the first three years of a longer note, or a used truck, this number isn't realistic.

I just did some quick searching for new and used F450s on autotrader. You can get new ones that are decently equipped (Lariat package) for about $70,000 all day long. You can haggle that down to $65,000 easily. 3 year old used ones with 50,000ish miles are going for about $50,000. That means you would have paid $28,000 over 3 years and had a vehicle worth $50,000 at the end of that time. Sell it for that, well for $45,000 to make the sale easier, and you've got a 3 year cost of ownership of about $20,000. (Of course, your interest rate will impact pay off amounts and other factors etc., but let's try to keep things simple for now)

These are estimated numbers, obviously, but are fairly realistic we think.

Eh, yea okay I'll assume they are realistic numbers, but things change a bit when you start looking at the real world. Buying doesn't make sense if you treat it as a leased vehicle. Realistically, you'll keep that purchased vehicle a bit longer than a lease. Keep it another three years and you'll almost have it paid off, but you'll have a vehicle worth $40,000. (Yes, I did some quick autotrader searching again).

At the end of your second leased F450, you've paid $32,000 if you don't go over mileage, maybe $40,000 if you do. At the end of the second lease, if you purchased instead, you've paid $40,000, but you've got a $40,000 asset to sell. After it's all said and done, you've paid $65,000 for the truck, and sold it for $40,000 6 years later leaving you with a net difference of only $25,000. Now you've saved $7,000 if you don't go over mileage, and up to $15,000 if you do go over mileage. And you're looking for a new vehicle in either case. The average vehicle on the road in the US is 12 years old. Keep your truck for only 9 years and it will still be worth $30,000 (yea another quick search), so you'll have only paid $35,000 total after you sell it in 9 years if you buy, but 3 leases will cost you at least $45,000 and maybe $60,000 in that same time. And you paid off the purchased truck at the 6 year mark (or whenever the end of your term was) so you enjoyed several years of no payments at all. As someone who has a dually diesel 4x4 with no payments, I can assure you that it feels wonderful to not make a monthly payment.

Now if you're willing to buy a 3 year old truck to start with, then buying blows leasing way out of the water.

Thoughts? (stop laughing now... )

If you go over mileage, like I certainly would, then leasing and buying cost the same for 3 years. If you stay under your mileage, then leasing is a cheaper option for those three years.

I've always said leasing is great IF YOU GET A NEW VEHICLE EVERY THREE YEARS.

If you treat your purchased vehicles like leases, then buying obviously won't make sense. The benefits of buying aren't in the first three years, but the benefits of leasing are only in the first three years. Focus on a 3 year plan and leasing wins every time. Focus on the long haul, and buying wins every time.

I guess the real question is, how far down the road are you looking?

[jjackrash]

Originally Posted by Itchytoe

If you treat your purchased vehicles like leases, then buying obviously won't make sense.

Unless you are talking diesel trucks and buy them when the incentives are right as the new model years are hitting the lot. I flip my diesels every three years; they hold their value extremely well. The last three trucks I traded in for about for about $6-8k less than I paid for them new with around 35-45k miles on them. For example, I paid $58k-ish for my new 2016 and just traded it for $51k on a new 2019. I seriously doubt you could do better on a lease.

(I buy GM products; I don't know how the Fords and Dodge's hold resale, but I suspect they are close).

[Paul_Lori]

Originally Posted by Spoonsize

Have you looked in to a trailer towing service? No fuel to buy, no registration nor insurance, no interest.....etc, etc.

Hmmmm.... Now THAT'S something I hadn't thought of.... That's why I'm here!

[Itchytoe]

Originally Posted by jjackrash

Unless you are talking diesel trucks and buy them when the incentives are right as the new model years are hitting the lot. I flip my diesels every three years; they hold their value extremely well. The last three trucks I traded in for about for about $6-8k less than I paid for them new with around 35-45k miles on them. For example, I paid $58k-ish for my new 2016 and just traded it for $51k on a new 2019. I seriously doubt you could do better on a lease.

(I buy GM products; I don't know how the Fords and Dodge's hold resale, but I suspect they are close).

You're entirely correct. My calculations were based on quick search results. You can definitely get better deals if you can wait till the right time of year and get the best incentives, or spend more than 30 seconds searching for the right truck, or buy the previous model year, or just buying from the same dealership every time... All that stuff just makes buying more financially lucrative. Most people don't do that when looking for a new vehicle though. You gotta admit, the average Joe doesn't get a new F450 every few years.



Oh and yea the Ford diesels enjoy the same good resale values. That 6.7L is pretty darn good. I love mine.

[jjackrash]

Originally Posted by Itchytoe

Most people don't do that when looking for a new vehicle though. You gotta admit, the average Joe doesn't get a new F450 every few years.

Oh and yea the Ford diesels enjoy the same good resale values. That 6.7L is pretty darn good. I love mine.

Agreed. And good to know the Ford's hold their value as well.

(Note: I got nothing bad to say about any of the new diesel's including Ford and Ram; I am just comfortable with GM and will almost certainly stick with GM until it gives me a good reason not to. All the new trucks are pretty freaking awesome).

[Bamaman]

For many years, my job was teaching Retail Leasing to dealerships, sales managers and their salesmen. There are so many different angles to leasing. Remember that:
Leasing to individuals is commonly done at MSRP. They can always come down on the monthly payments and still make a very profitable deal.
Dealers sell the lease agreements to manufacturers' financing arms that are responsible for establishing the lease end values. The dealer has no further liabilities on the deal.
Lease payments will always be lower than a purchase on a retail contract.
Leasing will continue to be used on a large number of expensive vehicles because so many customers simply cannot afford to purchase them on 60 months--and leasing is required.
Have you considered sales taxes on a purchase of a $70,000 vehicle? In some states, sales taxes run $5K to $7K. On leases, only the payments are taxed which is a big savings.
Look for a dealer that's willing to be completely transparent on the deal. That means he is willing to tell you the Acquisition Cost (Selling price) and the Lease End Value--if you chose to purchase it at the end of the lease. I'll stop at that.