Originally Posted by pappy19
With a lease, you are basically paying the depreciation off for the lease period. On an outright purchase, you'll be paying the whole amount for the vehicle, plus sales tax on the entire amount, and then you lose about 20% as soon as you leave the dealership. Unless one is towing constantly or towing commercially, I don't see where it makes any difference in buying or leasing a vehicle from that stand point.
You are partially correct pappy but not quite in that with a lease you are paying the depreciation (purchase price - residual value) plus interest on the entire purchase price over the term.
You pay sales tax on the payment and any down payment(capitalized cost reduction).Further more if you purchase at the end you will pay tax on the buyout.
If you trade in a leased vehicle (in a state that gives you a trade credit) without buying it at the end you receive no tax credit against the new vehicle because you were not the owner you were the Lessee(renting with option to buy).
Leases become attractive when a Manufacturer sets a high residual (exceeding 60% at times for 36mos) and a subsidized low interest rate (lease factor)of say .5% APR or less.
BMW and Mercedes do this on a regular basis to gain market share.In this case you do not want to buy the vehicle at the end of term as the buy out is higher than the actual value,so its time exercise your walk away option.