alozzy wrote: ↑
Mon Nov 23, 2020 12:33 am
A 5 year (60 month) car loan on a $15000 purchase, with $3000 down, would cost $216 per month (assuming 3% rate). At the end of that 5 years, the car would likely still be worth $10000.
Are you saying 33% depreciation after 5 years ? That would be exceptional. 2/3 depreciation sounds closer to the mark to me.
For one contrary example, I bought my 30 month old LEAF for $8,300. My somewhat WAG is that it sold for ~ $30k when new, and then was eligible for a $7,500 federal tax credit. So even if you figure that the manufacturer took the entire tax credit, depreciation was
1 - 8300/22,500 = 63%
Leasing has a (relatively) good name in the LEAF world because Nissan has historically periodically dumped cars on the US market via lease deals to make sales quotas, and their loss has been a deal for consumers. That aberration (in the sense that manufacturers make product to profit) aside, leases are expected to be more expensive to the consumer than buying new for two basic reasons:
Depreciation is highest in the first 3 years of a car's life, exactly the period when leases run their course. People who take on leases are driving around in new-ish cars, and they pay for the privilege.
Second, insurance costs are higher, due to the higher value of the car. Once people are comfortable with the car value to self-insure then insurance costs drop dramatically. That never happens for people who lease, but it can happen for people who buy used or buy new and keep the car long term.
Once again using my LEAF as an example, we pay ~ $25 a month for good liability insurance but self-insure comp and collision.
Summing up, our LEAF has depreciated ~$2,000 - $3,000 during the 48 months we have owned it from age 2 1/2 years to 6 1/2 years, which works out to ~ $42 - $62 a month. After adding in insurance it has cost us somewhere in the range of $67 - $87 a month (not including O+M.)