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Originally Posted by Paul
Leases can be cheaper in the long run if they are negotiated correctly (I've been leasing cars since 1978).
Cars are not an investment, they are an expense. One successful formula for acquiring wealth is to minimize expenses and maximize investments. In other words spend all extra money on investments not Porsches!! So if you want a Porsche, lease it, invest the difference. IMO, You will almost always increase your net worth following this plan.
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As with everything else in life, things are not that simple. Each individual financial situation needs to be considered separately and there is no universal optimal answer. Things to consider on a $60k car lease example (I use "you" below generically):
1. What returns can you reasonably expect make on a $60k investment at various levels of risk? What is your net worth? The higher your net worth, the riskier you can afford to invest the $60k, thus expecting higher returns over the long run, making leasing a better option. The ability to spread your bets and diversify is the main reason why it's easier to get richer when you are rich already.
2. What is the interest rate that you are charged on the lease?
3. Can you write-off the lease payment as an expense before your income is being taxed?
4. How much does the value of the car depreciate over the lease term?
5. How long do you plan to drive the car? The longer you plan to stick with it, the more it pays to own vs lease.
And finally, you can't look at things only from a financial point. It may not be optimal to only worry about maximizing wealth until your last day on Earth. At some point (usually called "mid-life crisis") we are all faced with our own mortality and with the fact that our bank account is worthless to us after we die. So if you really prefer to own that Porsche (despite being a depreciating asset and an expense), to love it, enjoy it, and take care of it, then so be it -- regardless of the fact that you could have saved couple of $k if you leased it instead.
Just my opinion, of course.
Z.