It's kind of like that, but I would also argue that a home is an appreciating asset (over the long-term) and a vehicle is a rapidly depreciating asset. So, I think buying vs renting a home is an easier decision, albeit more expensive than the lease vs buying of a vehicle. If you buy a $50,000 vehicle it's worth $25,000 the moment you drive it off the lot. And, from there on out you are trying to get out from underwater. If you are like most people that keep their vehicles for 3-5 years, then you really don't ever have any equity in the vehicle and for the most part have negative equity. Obviously, the shorter the loan term or the more you put down, the quicker you will be above water. If you are a person that keeps their vehicles until just before the wheels fall off, then buying is decision for you, but along with that decision anything that happens after the initial warranty period, is your problem. If the engine blows or transmission craps the bed, or it needs new brakes and rotors, that's your expense.
The cost of a lease is determined by the difference between the sales price and the residual (usually set by the finance company and not really negotiable) with a small percentage going to the finance company (1% or so). So, if you buy a $45,000 truck with the residual set at $27,000 and a 36 month term, your payment will be right around $500 per month before taxes. Basically, you are paying the depreciation on the vehicle over that term.
Now, at the end of that 36 month term, if the market value of the truck is $30,000 and the residual is $27,000, you could theoretically (taxes and fees not included) buy the truck and pocket $3,000 on a sale to a private party. If the market value is $25,000 after 3 years, you can walk away from it by turning it back into the dealer and do whatever you want, as long as you stayed under the agreed upon mileage and don't have significant cosmetic damage to the vehicle. Or, if you beat the crap out of the truck by towing at its max capacity for the last 3 years, you can turn it in and negotiate for a new one.
When you purchase a vehicle you pay tax on the purchase price. So, in New Jersey, I'd pay 7% of $50,000 or $3,500 to the state. If I lease a vehicle, I only pay tax on the portion I use so 7% or $1,260.00 ($45k - $27k)
It's definitely a shift in mindset. With the cost of new vehicles today, in order to ever have any kind of equity in them, you have to keep them for a very long time. With that comes risks. Vehicles aren't getting easier or less expensive to maintain. For me, I look at a vehicle as a necessary expense. It's like the electric bill or cable tv / internet bill. Sure, I could finance a vehicle over 5 or 6 years and be done with payments after 6 years and have a few thousand in equity. But, realistically, am I really going to keep it the 10+ years and risk being saddled with a huge expense if the engine were to go or transmission were to fail?
For complete transparency, I currently lease 2 vehicles. I lease a 2015 Chevrolet Silverado LT Z71 with a sales price of $44,000 and $27,000 residual and a 2015 Chevrolet Cruz LT for the misses with a $19,000 sales price and $13,000 residual. Both have 12k mile caps. Before leasing a had a 1999 Jeep Wrangler that I put 165k miles on that was bought new and I sold for $1k to a family member that has to now replace the rear at a cost of $2500. When I got rid of the Jeep, I purchased a 2004 Jaguar xj8 used with 54k miles on it and drove it for 45k miles and 3 years until the extended warranty was up. I traded that in on the Silverado that I'm now leasing.
This has been an interesting discussion of the pros and cons of leasing versus buying vehicles. Isn't it a bit similar to renting an apartment versus buying a house? Renters build no equity, can't deduct interest on their income tax return, etc. but they also have no repairs and maintenance costs. Obviously, most of our members here, including me, believe that owning a home is better than renting, but when I see all these huge new apartment buildings being built, and filled up as soon as they're built. there has to be a lot of people who prefer renting.
To each his own, I reckon.
