Muray

I know, I know, the best thing to do is buying a 2 year old used car outright with cash, then keeping it until the wheels fall off. If you are like me you are an enthusiast and purchase of cars is often an emotional choice, not a practical choice. I present two situations:

Buy a new German car, keep it for 3 years, then sell it.

Or lease a new German car, lease it for three years, then return it.

One of the reason I bought my S4 before I sold it was that the lease from Audi, I thought, was ridiculously expensive. I thought if I paid it off in 4 years I would have gotten at least 20 to 25K when I sold the car after it was paid off. I did sell the car for what I thought was a fair price, but when you add in the finance fees and the sales tax, I took a huge hit. The bad thing about leasing is that I can't modify my own car.

I can always buy a 2 year old used car, but I like custom-ordering cars and getting exactly what I want. Unless I find a low mileage car I want for a price I want, I don't think I'd get a used car.

So how can I determine if leasing or buying the car is better? Any ideas?

Stereodude

Step 1: Polish Crystal Ball...

Seriously though... Basically you need to guess if the residual of the lease is realistic or not. If it's not realistic is it in your favor or Audi's?

Based on what I've seen I would conclude that the S4 residuals from Audi are not realistic, and they're heavily in Audi's favor. For example, I've seen a 3 year lease on a S4 with a residual of 51%. Roughly speaking that means you're paying 49% plus interest to drive the car for 3 years. At the end of the lease you turn in the car to Audi and they turn around and sell it for something more like 65% of MSRP (or more). That means you overpaid on the lease by 14% (or more) and Audi made 14% (or more) of pure profit. In this case you would be better buying the car and selling it after 3 years. However, you can mitigate the hit in this scenario by buying the car at the end of the lease and then selling it yourself for more than the buyout reducing your overpayment, but I would guess most people don't do this.

The inverse situation could be occur if a car company is discounting leases to move cars where the residual is artificially high. Say the residual is 63% so you pay 37% for 3 years for the car, but after 3 years the car is really only worth 50%. Here you save 13% by leasing.

So polish the crystal ball and peer into the future.

BaLLZDeePNYC

or you can do balloon payment finance

kasher_khan

I wondering the same thing. I have never leased a car before. Mostly follow what others have suggested; i.e buy a second hand low mileage car and let the first owner take the hit for depreciation.

However I can't afford a brand new 2013 S4 unless I either lease or get a balloon loan from Penfed (my union). I heard the residual on S4 with premium plus was like 59% and 57% on Prestige (which is what I want - drive select w stronic).

So I am also debating how this all works... Will be interested in finding out what previous Audi owners have to say about their lease experience with Audi Financial.

BTW: I heard 500-1000 over invoice is a good deal but how does the new facelift play into that. I guess the dealer still have base rate, residual and tradein to play with so they could potentially lower one of the factors only to raise the next...

sepangS4

I have always leased all my Audi's thru Audi Financial. They have been great to work with for me. One thing I do is Once I have my deal details and costs, I go to a bank or credit union website that has lease and buy calculators. Feed in the data and it tells you exactly the hard dollar costs if you buy or lease. Then with those hard dollar figures you factor in the plus and minuses of each process. My last transaction had the costs witin 1K of eachother. It is NOT as simple as doing residual % math because there are different costs along with different loan/lease rates. I simply analyze the numbers then factor in my situation, needs, benefits of each process, etc. and make an informed decision. I have to say I have been impressed with how Audi Financial has treated me before, during and after my leases.

DrGP

It really depends on what the actual value of the car will be at lease end. Since I don't use all of my mileage, I could have purchased all of my last 3 cars(04 S4, 07 335i and 08 Is 250) for less than the KBB trade in values. With the O4 S4, I bought the car from AFS, paid $2k in tax and transfers and then privately sold the car and put $3k in my pocket. Could have purchased the 335i for significantly less than market value, but decided I wanted a B8 S4 instead anmd didn't want to deal with a trade in that audi really didn't want. I can buy the 08 Lexus that my wife drives for much less than trade in value. So in May when the lease runs out, I will probably buy the car. Even if I sell it privately, or trade it in, I will be ahead of the game VS just giving it back. The nice thing about leasing is that it give you options. If you really don't like the car or just want something different, you can just give it back at lease end. Typically that is what most people do. Especially if the residual is less than the trade in or market value. But if the car is worth more than the residual OR you want to keep the car longer, you can buy the car.

sakimano

I wouldn't buy a new car...but if I was, and was borrowing, I'd base the decision on the best possible lending rate available, assuming the assumed depreciation on the B8 in the lease is fair/accurate looking. If there's a reasonable rate from Audi on a lease, just lease the car.

Leasing is the equivalent of buying a car with a free put option that allows you to ditch at the end of the lease term. The 'cost' is the same...you are still paying through the nose for depreciation of a new vehicle...and you are still borrowing the value of the car at the lease/buy interest rate.

With that said, I don't like leasing because it means you're 'buying' a new car and funding the vicious first and second year depreciation. I'd be inclined to find a 2011 with 14,000 miles on it for $10-12,000 less.

jdgamble

I just leased an S4 for the with the following #s...

15K miles/yr
0.0008 money factor (1.9% interest)
56% residual
$500 below invoice

So I drive for 45K miles and pay for about 38% of the MSRP (based on discount)... and only 38% of the tax on the car. And of course I get hit with the lease fees.

For me, I have a car problem... can't seem to keep one for more than 3 years. So for me it feels worth it. I also don't like to modify cars, so I don't have to worry about that.

Just my .02.

Muray

All great advices. It seems the decision is a complicated one, and you pay the most regardless because of the depreciation. I get double whammy because I like to modify cars and I like to drive new ones every three years. There's no way of doing this cheaply.

GiantEli

Well, I just went through this same math/dilemma.

I've got a '10 s4 (specs in sig), which was a ~$55k retail car. I sit not quite 2 years into the 3 year lease with ~14k miles on it, 2 sets of audi wheels, and not a ding/scratch to be found.

My lease was at 53% residual, 0.0008MF, sale price of $51.5k (SPP + BMW Takeout). The buyout on this car is roughly $28.5k.

Today on kbb, it's worth roughly $46k in a private sale. Figure on another $5-7k of depreciation and I'm still ~$10k in the black on this car.

Seeing as I really do like it and it would make a great companion car to a Q5, I'm inclined to buy it out at the end of the lease. I would ordinarily not buy out a leased car (my last 3 were BMWs), what with the typically inflated residuals, but the low rent charge here and the reasonable residual make it a relatively easy decision.