Should You Lease or Buy Your Next 2011 Toyota Camry?

Look at any advice on whether to lease or buy your next car and you will get just that- plenty of advice with very little, if any, breakdown of the real figures. As a result, I thought it would be helpful to really explore whether a lease or a buy is truly better for a customer selecting a new 2011 Toyota Camry LE over both a 3 year and 7 year time period.

For a 3 year time period:

Thanks to Acton Toyota’s real $0 down lease you can lease a brand new 2011 Toyota Camry LE for just $229 per month for 36 months with qualifying credit. After 3 years, the lease will have cost you $8,244 (36 x $229) and you can simply turn the vehicle in with no cost to you unless you’ve exceeded the 45,000 miles (15k per year) in the lease agreement.

Should you purchase the vehicle you’ll be able, with qualifying credit, to take advantage of 0% financing for 60 months and receive $800 in rebates. With $0 down, just like the above lease, you’ll see a payment of $359.40. (Please note this payment includes sales tax and all fees associate with purchase similar to our $0 down lease). After 36 months, you would have spent $12,938.40 (36 x $359.40) with a remaining principal balance of $8,625.60. Toyota projects the vehicle to be worth $13,238 (this is the exact residual value used in the above lease) after 36 months and 45,000 miles. Assuming (and that is a big assumption) this value holds, you would have $4,612.40 in trade equity. When subtracting this trade equity from the $12,938.40 you’ve made in payments, you would have spent a total of $8,326.

So, if you intend to keep your 2011 Toyota Camry for 3 years, you will save yourself $82 over that time period if lease the vehicle. However, this difference is predicated significantly on Toyota’s projected residual value/residual value. If Toyota is wrong in their estimate by just 5% the lease savings quickly jumps to $743.90. If Toyota overestimates the mark by 10%, lease savings shifts to $1,405.58.

For a 7 year time period:

With the same purchase as above you will have spent a total of $21,567 (60 x $359.40) when your 5 year loan reaches maturity. You then get to enjoy 2 years of no payments.

When the 3 year lease ends you will have spent $8,244 and then must seek to finance the buyout price of $13,238 for 24 months. (We want to finance both vehicles for the same length of time, 5 years). Should you be able to secure an interest rate of 4.9% you’ll see a payment of $636.32, which includes current tax and fee rates required for the purchase. That works out to a total of $15,271.68 (24 x $636.32) in payments over the 24 month period. The 5 year total then is $23,515.68 ($8,244 + $15,271.68).

Therefore, if you intend to keep your Camry for 7 years (or really any time period 5 years or greater) you’ll save at least $1,948.68 if you buy instead of lease first and then buy after lease maturity. Keep in mind the savings is predicated significantly by the interest rate received when financing the previously leased vehicle. If interest rates spike, which could very well happen, the savings could go well above $2,000.

Many customers often wonder whether they should lease or purchase their next vehicle. I encourage all customers to run through similar analysis when making that decision. An important note when leasing is to over allow slightly for mileage. Leases can and should be constructed to compensate for one’s realistic annual mileage. Under no circumstances would I ever advise a person to enter a lease where he/she knows he/she will exceed the mileage.