Financing into Leasing, a unique scenario, help!

[diecast]

Hey everyone. My wife and I went to and Infiniti dealership because they had an car exchange event with some hefty incentives. The goal of the exchange event is to allow us to upgrade the car with little to no difference in what we’re paying now. They’re basically offering us a deal to trade-in the 2010 G37x that we’re financing and lease a new 2015 Q50 sedan (demo model). We’re seeking some advice on what to do.

We’re currently financing a CPO 2010 Infiniti G37x, with about $19,000 and 3.5 years left at 2.9%.

The dealership trade-in value of the G37x is $16,800, and with the cash incentives they’re offering, the Q50 will work out to about $100 extra a month on a 4 year lease at 0.9%. Factoring in known maintenance costs on the G37x in the next 3 years, which will be spread over months, it makes the extra $100 a month we’ll be spending about the same.

The lease buyout on the Q50 at the end of the 4 years is about $20k. We’re planning to finance it if we want to keep it.

We’re both new to leasing, and have always been partial to owning. But don’t want to dismiss the idea of it. Any advice would be great. Basically, we’d be paying almost the same amount per month to get into a new car but going from financing a 2010 model to leasing a 2015.

[AZ89two4Tsx]

So you're looking at about $550/month for the Q50. Disregard the interest rate(s) because it doesn't really mean anything - dealers can lower rates and just jack up the lease price.

The thing that would be most concerning (to me) at least is that you are paying to own the G37 - it will be paid off in 3.5 years. When you lease the Q50, you'll be paying ~$26,400 (550*48) with nothing to show for it at the end of the term. Sure, you are paying to upgrade, but is that worth not having anything when that 4 years is up? Of course the BPO at the end of the term is going to seem like a decent deal, but you have to consider the fact that the car is a one-owner, low-mileage example (thanks to you). Not only have you eaten the cost of depreciation since it was new, but you've also paid off more than half of the car was worth new. There will probably be some sort of maintenance that needs to be done to the Q50 but I kind of disregarded that since it should only come out with ~50K miles I'm assuming.

If I was in your situation, I would definitely keep the G, but some people are just the type to want a newer car. Buying a car isn't typically a rational decision in itself (if it was everyone would drive a Prius, Civic, etc) so some see an expensive lease as totally justifiable. What it comes down to me is that at the end of leases you have to give the car back which leaves you with no asset. Remember, the dealer wouldn't have the incentive if it didn't make them money.

PS: Another option would be to sell the G (private party), pay off your loan, and BUY a Q50 that has low miles (but still used). That way, the previous owner eats the depreciation and you end up with a practically new car. It seems like that's kind of what you did with the G

[Bubba1]

Leasing is not for everyone, but it can work IF your circumstances are right. The devil is in the details. For example, you left out the annual lease mileage allowance. A typical lease is just 12,000 miles per year. That ain't much so you need to calculate how far you travel. If you exceed that total at the end, you'll be paying a per mile fee above that which can add up fast, unless you buy the car afterward. Also be very careful about return criteria. They differ. Some leases are more forgiving about dings and minor scratches than others. Gotta read the fine print. If the critera is tough, like one ding per side of the car that fits inside a credit card, and you drive the car daily into a city or park at malls, again, you could be staring at a huge bill unless you buy the car at the end. The other thing about leasing is unlike the financing, which hands you a clear title to a car worth many thousands of dollars at the end of the contract, at the end of a lease, you end up with zilch, zero, bupkiss, literally nothing. Well, except the choice of either paying those return condition fines (if any), or buying the car at a pre-set balloon payment which is commonly above market price (even more if you finance it). So it sounds like to me that the lessor and salesman fare better you do with this deal.

I'm not suggesting leasing is evil. There are good things about it, like having a brand new car every few years, less chance for repairs or bigger dollar maintenance items like tires/brakes, a car under warranty for the duration of the lease, and less of a down payment in some cases. But it's really more for people that want a new car every 1-3 years, who don't put on a lotta annual miles, who can keep it meticulous, who don't do mods/customizing, and don't park in areas susceptible to dings/dents/scratches. Again, leasing can be worthwhile but only under the right set of circumstances.

I've both leased and financed cars, (leasing a few American cars my wife used for biz, financing Japanese cars for personal use). But trading a car to which you don't have clear title (your situation) is never a wise idea, as that remaining debt doesn't simply disappear, it gets added to your new car (buy or lease), which negates a chunk of any negotiated price reductions you've made on the new deal. The salesman is painting a rosy picture for you, but in reality, it'll cost you more in the long run. If I were in your shoes, unless there was something seriously wrong with your current Infiniti, I recommend being patient, keeping it until it's paid off, get that "clear" title in your hands, then decide what to do with it. Good luck.

[diecast]

You both make a lot of sense, and after some discussion with my wife we've decided to just continue financing our G37x. It was really enticing to drive a new Q50, but like you both explained, we'd really have nothing to show for it at the end of the lease except to then finance the Q50 for another 4 years. Keeping the G just gives us more options. We had to be honest with ourselves and accepted that we just wanted something new, and that our G37 is completely fine. That new car smell is intoxicating!

Thanks for the advice guys, will definitely pass on this wisdom when I can.

[AZ89two4Tsx]

As I said, to some, upgrading to a new car can offset the opportunity cost of financing (in your casing leasing) something new. Some people really do like to have a "new car" every few years and that is just a part of the car buying process. The new interior, gadgets, and just the pleasure of cruising around in something newer is always nice.

But in the end, if you want something that you can sell and eventually upgrade, the numbers do not lie. Having an asset with value that can be sold for cash or leveraged for a new loan will always be better than just renting something.

Let me (and the NICO community) know if you have any more questions! My degree is in this kind of stuff so I can answer any nerdy questions. And there is plenty of other knowledgeable people that can give some great insight.

[diecast]

Oh that is great to know, super helpful. I'll definitely have more questions in the future.

I hear what you're saying. We actually asked ourselves what kind of car owners we are. We DO like driving new vehicles, and experiencing the best innovations and comforts a car can bring. We both agreed that although leasing and driving a new car every few years is something we'd like to do, with our current financial standing and lifestyle, it just benefits us more to leverage that value we put into a vehicle. Leasing might be for us down the road