Personal Finance

Leasing a Toyota Rav 4 to buy it at lease end.

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  • Jul 16th, 2018 12:33 am
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Jan 18, 2013
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Leasing a Toyota Rav 4 to buy it at lease end.

I'm thinking about leasing a Rav4 with the intent to buy it and buy it at the end of the lease. I've quickly run the numbers and it seems to come out slightly cheaper than financing it. I like the idea of having a smaller payment and we shouldn't have an issue saving up the cash to buy it before the end of the lease.

Am I crazy? Is this a terrible idea?
Last edited by lennyandcarl on Jul 16th, 2018 1:17 pm, edited 1 time in total.
20 replies
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Aug 23, 2017
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lennyandcarl wrote:
Jul 12th, 2018 5:20 pm
I'm thinking about leasing a Rav4 with the intent to buy it and buy it at the end of the lease. I've quickly run the numbers and it seems to come out slightly cheaper than financing it. I like the idea of having a smaller payment and we shouldn't have an issue saving up the cash to buy it before the end of the lease.

Am I crazy? Is this a terrible idea?
Not at all, if it's cheaper why not - and you can always give it back at the end of the lease if you end up hating it or it you crash it and it's repaired.
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lennyandcarl wrote:
Jul 12th, 2018 5:20 pm
I'm thinking about leasing a Rav4 with the intent to buy it and buy it at the end of the lease. I've quickly run the numbers and it seems to come out slightly cheaper than financing it. I like the idea of having a smaller payment and we shouldn't have an issue saving up the cash to buy it before the end of the lease.

Am I crazy? Is this a terrible idea?
I did that with my last lease. Well..kind of..I extended the lease for 2 more years, then paid it off. I leased because it's an easier write-off formula tax wise.

The nice thing about leasing, if you hate the car, give it back. If you like it, buy it. Sometimes you overpay on a lease if you don't buy out, sometimes the company takes a loss (if low resale) if you don't buy out.

Most respectable car companies aren't charging customers more if they lease and then buy-out. So, it's a Toyota, are you crazy? No. Bad idea? No.
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Jan 15, 2017
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Double check those numbers as right now the Toyota website is showing the APR for leasing higher than purchases. For instance, a 5 year lease has APR of 5.24% vs 3.02% for purchases. Also, make sure when calculating your total costs for the lease that you are including any fees to buy out the lease at lease end, any provincial fees like safety testing and sales tax on the total buyout price.
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Even if it were marginally more expensive I would still do it - you gain the benefit of being able to save/invest the excess money otherwise that would have gone towards paying the car; plus you never know if you'll want the car at lease-end, if it'll have non-stop problems that you want to just get rid of it, or if its involved in a collision which diminishes its value.
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Altera wrote:
Jul 12th, 2018 8:05 pm
Even if it were marginally more expensive I would still do it - you gain the benefit of being able to save/invest the excess money otherwise that would have gone towards paying the car; plus you never know if you'll want the car at lease-end, if it'll have non-stop problems that you want to just get rid of it, or if its involved in a collision which diminishes its value.
I’m usually not a fan of leasing or financing a vehicle. But I leased a Mazda CX-5 and in the last 10 months of the lease I got TBoned. 12k worth of damage that insurance paid for. But car wasn’t 100% the same in my eyes, but all I had to do was give it back st the lease term. Even though the value was probably much lower now because of the accident.

So I guess the manufacturer or dealer takes the hit on the depreciated car cost because of the accident? Because now that car won’t be worth the same as another used CX 5 with no accident.
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Oct 23, 2017
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lennyandcarl wrote:
Jul 12th, 2018 5:20 pm
I'm thinking about leasing a Rav4 with the intent to buy it and buy it at the end of the lease. I've quickly run the numbers and it seems to come out slightly cheaper than financing it. I like the idea of having a smaller payment and we shouldn't have an issue saving up the cash to buy it before the end of the lease.

Am I crazy? Is this a terrible idea?
Not at all. I have done this a couple of times and like the flexibility I have with the lease. I have the money to buy outright but get a higher rate on bank shares than I pay on the lease. I don't like my current car as much as I expected, so will turn it back or offer it to a relative at my buyout cost. But I bought my last car at end of lease.
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lennyandcarl wrote:
Jul 12th, 2018 5:20 pm
I'm thinking about leasing a Rav4 with the intent to buy it and buy it at the end of the lease. I've quickly run the numbers and it seems to come out slightly cheaper than financing it. I like the idea of having a smaller payment and we shouldn't have an issue saving up the cash to buy it before the end of the lease.

Am I crazy? Is this a terrible idea?
Yes by bottom-lining both the lease usually will come out cheaper but that is mainly because the residual is not calculated in the lease.
You will have to have all the cash on hand plus taxes to buy the residual out. If you don't then you will have to finance it via your own lender then you will have to add those interest costs to your bottom-line total
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abc123yyz wrote:
Jul 12th, 2018 9:58 pm
I’m usually not a fan of leasing or financing a vehicle. But I leased a Mazda CX-5 and in the last 10 months of the lease I got TBoned. 12k worth of damage that insurance paid for. But car wasn’t 100% the same in my eyes, but all I had to do was give it back st the lease term. Even though the value was probably much lower now because of the accident.

So I guess the manufacturer or dealer takes the hit on the depreciated car cost because of the accident? Because now that car won’t be worth the same as another used CX 5 with no accident.
Sorry to hear you were in a collision and hope you weren't (seriously) injured. The car never will be 100% the same of course - and that is the risk the lender takes when they lease the car out. So long as the vehicle was repaired to mfr. standards and it passed road safety inspections and lease-return inspections, they take the hit on it.
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lennyandcarl wrote:
Jul 12th, 2018 5:20 pm
I'm thinking about leasing a Rav4 with the intent to buy it and buy it at the end of the lease. I've quickly run the numbers and it seems to come out slightly cheaper than financing it. I like the idea of having a smaller payment and we shouldn't have an issue saving up the cash to buy it before the end of the lease.

Am I crazy? Is this a terrible idea?
you should post your numbers.

Usually leasing is more expensive than financing even if the lease rate is lower (unless it's 0%).
Reason is, the lease doesn't depreciate as fast as financing. Interest is basically charged on the residual for the entire term.
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Altera wrote:
Jul 13th, 2018 12:15 am
Sorry to hear you were in a collision and hope you weren't (seriously) injured. The car never will be 100% the same of course - and that is the risk the lender takes when they lease the car out. So long as the vehicle was repaired to mfr. standards and it passed road safety inspections and lease-return inspections, they take the hit on it.
Thanks for the concern. Fortunately no injuries all around. Yes it was fixed to Manufacturer standard. Just checked the invoice yesterday and it was $15.000 in damage. Surprisingly insurance didn’t write it off.
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Dec 4, 2016
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skeet50 wrote:
Jul 12th, 2018 6:28 pm
Double check those numbers as right now the Toyota website is showing the APR for leasing higher than purchases. For instance, a 5 year lease has APR of 5.24% vs 3.02% for purchases. Also, make sure when calculating your total costs for the lease that you are including any fees to buy out the lease at lease end, any provincial fees like safety testing and sales tax on the total buyout price.
Leasing has higher APR than finance for a good reason. Dealership takes on significant risk. Certain cars with terrible long term reliability records have to offer leasing, as no one wants to own their cars post warranty.
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abc123yyz wrote:
Jul 13th, 2018 1:16 pm
Thanks for the concern. Fortunately no injuries all around. Yes it was fixed to Manufacturer standard. Just checked the invoice yesterday and it was $15.000 in damage. Surprisingly insurance didn’t write it off.
CX-5s are worth a lot in the used market. They often sell at wholesale $1-2k ABOVE residual.
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BlueSolstice wrote:
Jul 13th, 2018 1:51 pm
Leasing has higher APR than finance for a good reason. Dealership takes on significant risk. Certain cars with terrible long term reliability records have to offer leasing, as no one wants to own their cars post warranty.
Amazing; everything you just wrote was wrong.

The dealership doesn’t take on risk with a lease. The lessor, usually a captive financing arm of the manufacturer, does. Leasing has long been popular with luxury brands, not because of poor long-term reliability (some luxury brands have that, some don’t), but because a)it reduces the monthly payment on otherwise expensive cars, and b) there can be tax advantages to operating leases for business owners or employees who mix business and personal use of company vehicles. Many brands with historically poor reliability or depreciation didn’t even offer leasing. It’s only recently that it’s become a universal offering.

GM and Chrysler dropped leasing for years, particularly in Canada, after their bankruptcies. If what you’re implying was true, they’d have been more likely to offer leasing at their most desperate times, not less.
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Mike15 wrote:
Jul 13th, 2018 9:06 pm
Amazing; everything you just wrote was wrong.

The dealership doesn’t take on risk with a lease. The lessor, usually a captive financing arm of the manufacturer, does. Leasing has long been popular with luxury brands, not because of poor long-term reliability (some luxury brands have that, some don’t), but because a)it reduces the monthly payment on otherwise expensive cars, and b) there can be tax advantages to operating leases for business owners or employees who mix business and personal use of company vehicles. Many brands with historically poor reliability or depreciation didn’t even offer leasing. It’s only recently that it’s become a universal offering.

GM and Chrysler dropped leasing for years, particularly in Canada, after their bankruptcies. If what you’re implying was true, they’d have been more likely to offer leasing at their most desperate times, not less.
GM dropped leasing because they got stuck with cars with terrible resale value at end of lease. That's the risk I talked about. Buyer pay extra upfront for the option of dumping undesirble cars on the dealership.

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