Bargain Lease: Is Toyota Heading for Financial Disaster?

[Omaha Steve]

http://www.nitrobahn.com/news/bargain-lease-is-toyota-heading-for-financial-disaster/

Mallik G. | August 3, 2010 at 8:07 am


Many auto experts have started expressing the view that Toyota’s move of leasing ‘a well-equipped Toyota Corolla for just $189 a month for three years’ could be a financial disaster and might backfire.

In an unexpected business move, Toyota Motor Corp. has announced renting a brand new Toyota Corolla for $189 a month through its dealers. For customers, the offer is one of the best motoring options seen so far, says an excited auto dealer. If you are planning to purchase a new car, even if not a Toyota model, you may consider availing the great Toyota leasing offer, he adds.

The Toyota move is seen as an effort to regain its lost credit amid a series of recent recalls. “To keep customers coming to its showrooms amid a series of embarrassing recalls, Toyota has been offering some of its best leasing terms in years,” says a media report published in online dispatch.

According to financial pundits, the $189 rental offer is bound to haunt the Japanese auto major for the next three years. It’s very unlikely the market will turn on their projected line-of-business, they fear.

FULL short story at link.

[MilesColtrane]

1. I've never understood how leasing makes sense.

I suppose if you take the balance of what you would be paying to buy and put it into some kind of high yield investment you would come out ahead.

But, where are the high yield investments these days, and does anybody who leases a car actually do that?

[flvegan]

2. If you have to finance, leasing can be a good hedge against depreciation

especially if you plan to trade a car in every few years.

Example: a "well equipped" new Toyota Carolla LE is around $18k-19k, sticker here. A 3 year lease of $189 is under $7k total. I can pick up a 3 year old, low mileage Carolla LE (well equipped) for around $12k from a dealer, which means the trade in value is $8k. Far better than break even.

Even with the additional mandatory insurance, it can be beneficial for a certain % of folks. Even more so for folks buying cars that depreciate with utter madness, unlike Toyota, Honda, etc.

[SoCalDem]

3. and for people with a car allowance.. My husband gets $350 a month for his

but for us it's just "found money" since he drives our old Honda. For someone like a realtor, a lease may be a good bet since they can write off the cost and if they keep it under the lease-approved miles, they always have a "new-ish" car to take people around in..

[MilesColtrane]

5. OK, I guess that's a part of the business world thing.

Like a business wouldn't send someone to pick up a client in a 10 year old Geo...

The same world as expense accounts and company season box tickets to the local hot pro sports team...

If it's not necessary for business purposes, I still don't get why someone has to have a new car ever 2 or 3 years.

I guess I'll always be a lower class schlub who buys 'em used and runs 'em into the ground.

[ingac70]

4. How many thousands due at signing? n/t