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Old 18.08.2015, 17:59
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Buying a Car vs. Leasing It

Hi
I am looking at a car purchase.
My earlier plan was to buy one by taking an auto loan.
Then I looked at the Interest Rates for Auto Loan. It is day-light robbery.
I get less than 0.2% from my bank but I am expected to pay 8-14% for the loan.
Someone suggested that I could look at leasing. The leasing rates are cheaper at 4-6%.
I am thus wondering which is a better option.
To Take a Lease or Buy a Car.
Any thoughts/suggestions will be quite welcome.
Many Thanks.
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Old 18.08.2015, 18:04
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Re: Buying a Car vs. Leasing It

If you have lived here a year, look at the personal credit at the Migros bank, https://www.migrosbank.ch/de/privatp...vatkredit.html

Then you can always sell the car. You cannot change a leasing contract without heavy penalties.

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Old 18.08.2015, 18:09
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Re: Buying a Car vs. Leasing It

Neither. Best thing is to buy a car within what you can pay outright and avoid any kind of loan or lease. Cars are fast depreciating assets and expensive to maintain on top of that. If you are looking to save money buy cheap and avoid the compounding expenses.
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Old 18.08.2015, 18:14
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Re: Buying a Car vs. Leasing It

buy a good second hand vehicle, you don't have the loss of value when driven out of the show room. leasing agree with previous two comments
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Old 18.08.2015, 18:29
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Re: Buying a Car vs. Leasing It

Bear in mind that the interest on leasing is not tax deductible, but the one on loans is. E.g. if you take a loan to buy a car, you can actually deduct those 14-16% from your taxes, whereas you cannot deduct the 4-6% when leasing. Furthermore, leased cars must have fully comprehensive insurance, which may or may not make sense depending on the car value and circumstances.

Factoring all that in, it is usually quite a bit cheaper to take a loan than a lease. Now that we established this, let's look at buying outright or on credit.

Buying outright makes sense if you have the cash (obviously) but not a lot in excess. E.g. you are looking at a car for 30k, and you have less than 40k cash. If you have lots more cash, then actually the best thing to do is take out a loan, deduct the interest from your taxes and then invest your cash instead. This way, the cash that would otherwise be locked up from day one, will be actually earning you interest (in decreasing amounts as you use it to pay the monthly installments).

The big mistake many people make when considering upfront payment or installments is the lost opportunity of investing that cash. Quite often, an upfront payment attracts discounts, but these have to be weighed against the lost opportunity of investing that cash elsewhere.
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Old 18.08.2015, 18:39
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Re: Buying a Car vs. Leasing It

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E.g. if you take a loan to buy a car, you can actually deduct those 14-16% from your taxes, whereas you cannot deduct the 4-6% when leasing.

If you have lots more cash, then actually the best thing to do is take out a loan, deduct the interest from your taxes and then invest your cash instead.
Careful - interest isn't deducted from your taxes, it's deducted from your taxable income.

So you don't save all the interest - just the part that would have been taxed at your rate (ca. 25% probably).
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Old 18.08.2015, 19:35
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Re: Buying a Car vs. Leasing It

More opinions and advice here:

Buying car vs leasing?

Advice - Buying/Leasing/Renting? [a car]

Leasing or Buying a Car

Car Leasing v. buying
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Old 20.08.2015, 19:53
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Re: Buying a Car vs. Leasing It

Thank You.
Good advise here.
I would rather take a loan than go for a lease.
The only challenge is disposing off a car. Think it is easier with a lease than if you do it yourself.
I have never bought a second hand car earlier.
What is a good mileage? I read a couple of posts and opinions vary.
Any thoughts/guidance on that?
Thanks a ton for all the inputs.
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Old 20.08.2015, 20:29
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Re: Buying a Car vs. Leasing It

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Quite often, an upfront payment attracts discounts, but these have to be weighed against the lost opportunity of investing that cash elsewhere.
Where, for example, can one invest cash and obtain a reasonable return ?
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Old 20.08.2015, 20:39
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Re: Buying a Car vs. Leasing It

If you intend to give the car back DO NOT LEASE!!! They rape you when you hand it back, has to the be absolutely mint, otherwise you'll have to pay to get it upto mint standard. I speak from bitter experience
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Old 21.08.2015, 00:07
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Re: Buying a Car vs. Leasing It

I guess ultimately it depends on how long you plan to stay in Switzerland and how much cash you have and ready to invest. I personally went for leasing simply because I didn't have spare 40-50 grand to spend. The deposit could be quite reasonable, the interest rates are almost nothing, and over a few years the car is yours.
Loans seem to be much more expensive
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Old 21.08.2015, 00:43
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Re: Buying a Car vs. Leasing It

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I guess ultimately it depends on how long you plan to stay in Switzerland and how much cash you have and ready to invest. I personally went for leasing simply because I didn't have spare 40-50 grand to spend. The deposit could be quite reasonable, the interest rates are almost nothing, and over a few years the car is yours.
Loans seem to be much more expensive
Me too. I look at it as a rent-to-own option rather than "just" leasing. The monthly payments and low interest rates are very reasonable.

Credit or Leasing: Both with pro and cons. Just do your own research then decide what meets your needs or wants.
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Old 21.08.2015, 09:14
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Re: Buying a Car vs. Leasing It

With a leased car you may need to expect full list price. In most cases it's very quite to get a substantial rebate on a new car, for direct imports 25% is common(though these tend to have lower resale value). A lease car will require Vollkasko (full comprehensive insurance?), which for you as a newly-immigrated may be quite expensive (not sure, compare premiums on www.comparis.ch).
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Old 21.08.2015, 09:31
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Re: Buying a Car vs. Leasing It

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With a leased car you may need to expect full list price.
Where did you get that idea from?? Plenty of discounts available on new cars which are leased. When you add in then number of cars purchased (via a lease) using fleeting discounts I suspect very few people end up paying the list price.
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Old 21.08.2015, 09:59
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Re: Buying a Car vs. Leasing It

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Where did you get that idea from?? Plenty of discounts available on new cars which are leased. When you add in then number of cars purchased (via a lease) using fleeting discounts I suspect very few people end up paying the list price.
On top of that is it absolutely normal to put a lease on a used car... I once leased an imported German "Jahreswagen" with 10k km, which was about 50% of the new price. The amount of ignorance and misinformation when it comes to basic financial tools is staggering in Switzerland.

Simply put: a lease is a rather inflexible but therefore cheap financing tool. I only used it for "short" term options of 2-3 years with the intention to keep the car afterwards. My personal life situation is changing too often and too fast to plan longer than that. I would not recommend it to use some 8 year lease contract to finance that super car you really want but actually cannot afford...
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Old 21.08.2015, 13:10
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Re: Buying a Car vs. Leasing It

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Buying outright makes sense if you have the cash (obviously) but not a lot in excess. E.g. you are looking at a car for 30k, and you have less than 40k cash.
I agree with you that buying outright makes sense (for a 2+ year old car) but when you have just 40k in savings it is in my opinion financially idiotic to purchase a car for 30k. It doesn't matter if you pay cash, finance, or lease it. You would be spending 75% of your savings on a depreciating asset that, in just another 1-2 year costs you nearly 50% of your total savings.

If I had 40k in savings, I'd be purchasing a 2-4 year old car in the 7-12k price range. Of course this is only possible thanks to the many people who periodically purchase new cars that depreciate >50% within 2-4 years.
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Old 21.08.2015, 13:18
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Re: Buying a Car vs. Leasing It

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On top of that is it absolutely normal to put a lease on a used car... I once leased an imported German "Jahreswagen" with 10k km, which was about 50% of the new price. The amount of ignorance and misinformation when it comes to basic financial tools is staggering in Switzerland.

Simply put: a lease is a rather inflexible but therefore cheap financing tool. I only used it for "short" term options of 2-3 years with the intention to keep the car afterwards. My personal life situation is changing too often and too fast to plan longer than that. I would not recommend it to use some 8 year lease contract to finance that super car you really want but actually cannot afford...
Which is what I also did many years ago. I paid as much as I could for a deposit, and the rest was financed by a lease. I had no intention of returning the car (I have also read many horror stories about this) at the end of the lease, rather, I decided from the start to keep it until it falls apart (which it is successfully doing now).

Some garages have 0% offers from time to time (e.g. the Renault garage in Baden-Dättwil indicated to us that their September leasing offer will be 0%).

For our next car, we pay cash, however.
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Old 29.08.2015, 22:56
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Re: Buying a Car vs. Leasing It

I think the Migros Bank idea was outstanding.
They offer a loan at 5.9% and you can also take a tax break on it (partial relief).
Considering most leasing is at 5.9% or higher, this is a good option.
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Old 29.08.2015, 23:23
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Re: Buying a Car vs. Leasing It

How expensive is the car anyway, in terms of multiples of your salary?

I must admit I would hate to take out a loan for a car these days - but at the very beginning of my professional life, I did just that: paid 8k DM (Deutsche Mark, if you remember those) from my savings, 4k DM from my parents and the rest of the ~23k DM for a VW Lupo came from a loan from the Volkswagen bank, payable over three years.
Don't remember the interest rates, but they probably were less than 5% p.a.

I had thought I needed the car, but in fact rarely used it for getting to work.

Over the life of the car (fourteen and a half years, almost), I've probably paid as much for renting garages (difficult to assess, due to currency-fluctuations). Plus an increasing amount per year for repairs, maintenance...

When I had paid-off the three-year loan, I had also quite my job and stumbled a bit into a difficult financial situation.
So I was glad I had at least paid off my car.

Think about that.
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Old 29.08.2015, 23:29
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Re: Buying a Car vs. Leasing It

Its not a lot.
The key question for me is whether I want to put down the amount at one go or space the payments out. I intend to clear up the loan in the next 6-12 months so that is not an issue.
When I bought my 1st car, I took a brand new SUV at a Lease.
I had it for 08 months and then I left CH for work.
Between the downpayment and lease termination costs and monthly lease payments, I paid about CHF 40'000 and the asset remained with the Garage finally.
So I have decided against the lease this time around. Better to buy it than lease it.
I could make the payment from my savings but instead of taking a big hit at one go, I wanted to manage my cash flow.
Does that help?
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