Thanks for this detailed information. It makes sense to me now how lease works. Yeah, I try to stay around 7500 to 10000 miles a year but never know so I better stay with purchasing the vehicle.

 

Here's the thing about leases: Everybody assumes it's just a set program and here's your monthly amount...

First, ALWAYS negotiate the sale price of the vehicle. Somehow people think you don't on leases. Everything is calculated based on it; taxes, residual, etc. All of that affects your monthly payment. Also, the money factor (lease equiv. of how APR is calculated) and/or the Residual amount are often negotiable and definitely so is the mileage allowance AND the fees paid if you decide to turn the car in and are over the allotment. Negotiate all that in your favor up front and NEVER let a dealer tell you the sale price is somehow relevant to how your are going to finance the vehicle.

Second, NEVER "capitally reduce" a lease. You are not financing a purchase of the car so why would you give them a down payment? You are essentially renting it with an option to purchase at the end of your stated time. Would you put a down payment on an apartment you wanted to rent?!? First payment (whatever that is after you negotiate purchase price), last payment, security deposit, acquisition fee and title/registration fees are really all that you should pay to drive it away. Anything else is simply to lower your monthly payment or "buy-down" the lease. I appreciate the psychology of lower monthly payments, but it doesn't make a lot of sense otherwise.

Taxes are one variable that's hard to speak to. Every state is different. Most tax you on the monthly payment as you go. Some (New York I think for example) tax you on the entire purchase price of the vehicle, and that tax is due as part of your drive-off fees. Read up on your own locality before you go to the dealer so none of that will surprise you either way.

To the question of whether it's a good idea to lease and then purchase it out afterwards the best answer is a solid maybe. I've done it; and been happy about it. It certainly depends on a number of factors. If you lease at a low enough rate, and then purchase the car - even finance it on a 3/4 year used car loan. It CAN be the math equivalent of financing a purchase for 6 or 7 years, which A LOT of buyers are doing these days anyway. The difference is your payment is lower initially and you get to decide if you really want to keep the car after 3 years. If you finance for purchase and then get the itch to turn it in after 3 years, you just took the hit on the depreciation AND paid a higher monthly along the way. If you lease like you absolutely will buy it out, then can't or don't want to, you just made 36 (presumably) or so payments and got nowhere. THAT'S the bottom line reason to never cap-reduce a lease by the way. Burning money in your fireplace would be more rewarding.

So it really comes down to depreciation as others have said. The very best way to buy a car is to get one that's about 2 or 3 years old, meticulously maintained with reasonable mileage, and pay cash for it at a fair market price. Most of us can't pay cash for these things, and in the case of a 2014 it's not an option to get them used yet of course. Tough question to ponder, but "a first world problem" to be sure. I'm in a similar boat right now. Been looking for 2011/2012 Durango coming in off a lease or trade, but there's just not much inventory yet. Could be a good sign that people are keeping them because they like them, or we just haven't hit the 3 year mark on when most stuff was sold - certainly not with the 12 yet. Maybe this Fall though... The 2014 is really different though with much better mileage off the new tranny, and I think the uConnect is a better iteration so I'm really thinking about pulling the trigger on a lease as I can't stomach the idea of financing 45k right now and I unfortunately can't just write a check for one.