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Discussion Starter · #1 ·
I've never leased before, though relatives have. Of the closest, all have taken the buy-out and kept the car because they liked it and wanted to keep driving it (and the terms of handing it back weren't favourable). For the most part, those who didn't keep it, handed it back because they wanted a new vehicle not because it was financially smarter to keep it for a couple of years. I'm thinking of leasing this time, since there is no vehicle (from Genesis or otherwise) that ticks enough of our boxes to say it's a winner (my last 3 vehicles, while not perfect, all stood out as the preferred choice, and I owned them 13 years, 9 years, and now 7 years, respectively).

Going into this, I anticipated just buying another Subaru Outback (only decision: how much higher trim level for which specific features) but now the Outback has some things I don't like, and others have features I might like. Thus the search through almost all the possible choices and ending up with GV70 as one of top 3 (but none of those 3 is clearly #1, thus the quandry). We're thinking it might be worth getting a 2-year lease, then when it's up either buying it out or doing another wide search for something else. Will cost a little more than buying outright I think, but it's a form of paying for flexibility.

Genesis.ca site offers leasing costs (3.40% for 2-5 years; financing is 2.90% for 2-7 years). Is there a way to calculate the residual value (or buyout or whatever it would be)? I know the dealer will probably tell me that information, but I like to figure things out myself when possible. I've found many online lease calculators but all seem to want that residual value as an input. I feel like if I have agreed price (in this case I'd use MSRP), monthly lease payments, and interest rate, it should be possible to calculate how much is left owing after (in effect, by calculating how much the principal on this "loan" was). But I don't know if there are other factors, and the lack of a simple online calculator to do that makes me think it's not that easy.

Does anyone know a calculator (or spreadsheet formula) that will give me that info for a Canadian lease? Also welcome any comments on the strategy and what to expect.

Thanks.
 

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2021 Genesis GV80 3.5T AWD Advanced Plus
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In a nutshell, Biting is always cheaper than leasing--except if you are a business and can deduct it. That said, however, buying a car can be considered a depreciating asset also. If you are an individual, buy outright or finance.
FWIW, I am NOT a CPA or accountant!
 

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Discussion Starter · #3 ·
Thanks. My main concern is if we don't want to stick with the vehicle long term, is it more expensive to buy now (outright or finance at 2.90%) then sell after 2 years, or to lease for 2 years (at 3.40%) and walk away?

I assume if we keep for 7-8 years, cheapest is to pay cash (foregoing 2% taxable income, say). Lease rate is higher than finance rate, but as I understand it a lease only finances part of the price?

Obviously there's some guesswork on how well the GV70 will hold its value over 2 years (or 5 years). But I've never worried too much about that, knowing I've tended to keep vehicles for a long time.

Are there other factors I'm missing?
 

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2021 Genesis GV80 3.5T AWD Advanced Plus
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FWIW, the current rate on Genesis (good FICO) is 1.9%. OOPS---I now see that you're not in the US. Everything I said above MAY not even apply.😳
 

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Discussion Starter · #5 · (Edited)
Thank you, I was going to clarify that. I appreciate the info and I think your answers apply directly to Canada too, except the interest rates are higher here. I note on the US site, they don't seem to quote an effective rate on the leases (not GV70, but on other models under "special offers"). I assume it's on the order of 2.40%, based on finance being 1.90% in US and 2.90% in Canada, and lease being 3.40% in Canada. OTOH the lease info (for other models) does at least say how much will be owing when lease is finished. Can't find even as much info for GV70 as on Canada site, but so be it.

The dealer will probably tell me tomorrow (Wed) what the details are, but I like to know so as to check their math (and while I'm happy to admit I got something wrong, I like to see where). I can't find a lease calculator that works without inputting the residual cost. My simplified math is this: if they quote 24 monthly lease payments of $975.07+tax (at a lease rate of 3.40%), the principal amount of the loan is whatever results in $0 balance after 24 monthly payments?

Here's my logic, I assume there are other costs I'm missing. I cheated and stuck it in Excel, brute force (24 rows, 1 for each month). Then I just kept adjusting the principal of the loan (lease) until the balance was $0 after 24 payments. I assumed interest is applied on declining balance, and it looks like a principal of $22656.85 is about right. Total interest $744.83 and principal $23401.68. So then assuming purchase price is C$63130.70, $1000 down, lien registration paid up front, and a lease principal of $22656.85, the remaining owed on the car would be $39473.85, which is 63% of the $63130.70 (or 37% depreciation in 2 years).

At that point they'd be looking for the vehicle back (and possibly some cash to cover damage and extra fees), or $39473.85 (plus whatever fees) for me to keep it. If GV70s keep their value better than they expected when setting the residual value, that could be a bargain and I'd want to keep it (if I like the vehicle, or if it's worth way more, for example if today's used-car conditions are still in place in 2 years -- unlikely -- the market value could be $65K* not $39K). If they turn out to be a bust (e.g. heavily redesigned in 2 years), the market value could be only $30000 and I probably wouldn't want to pay them $39K. In effect, I'm paying $744.83 (the interest) for a call option to buy this exact GV70 for $39473.85 on a certain date in future, which I can exercise or not at my sole discretion. The upside is I can walk away after 2 years, just paying whatever fees and penalties (for damage) they decide to assess. The downside is if I keep it, I pay more in interest than if I bought for cash in the first place.

[*based on people reporting getting more for a used vehicle today than they paid new 2 years ago]

If you were able to wade through my logic, do I have it right?

[added: I tried a few lease calculators with this info and none of them return $975/mo so maybe I am doing something wrong. :( ]

Thanks.

2126
 

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Discussion Starter · #6 ·
I realize I put the $1000 DP as paying off principal, but I guess if I walk away after 2 years, it should be filed under interest? IOW $1744.83 for the option to buy after 2 years?

And if I wanted to keep the flexibility after 2 years, could I increase the "down payment" to cover the entire lease amount, and pay no interest?

Thanks.
 
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