4.9% Leasing vs 8.9% Financing: The surprising truth behind interest costs for Leasing and Financing

When comparing leasing and financing, most people focus on the interest rate. Lower rates seem better, higher rates look like a bad deal. But what if we told you that sometimes, a higher financing rate can actually lead to a similar, or even lower, total cost compared to leasing?

We illustrate this with an example: a 4.9% lease for a Porsche Macan and an 8.9% financing for a Rolex Day-Date. Both are pre-owned and valued at their market price. Here, we are not considering the potential change in value of the car compared to the watch. However, it’s worth noting that the watch will likely retain its value better over time, or even appreciate, compared to a car.


The familiar choice: Leasing a Porsche Macan

Most people know and trust car leasing. Let’s break it down with a concrete example in the table below.

After 5 years, your total payments will be CHF 58,026 at a 4.9% leasing rate. This total includes CHF 43,026 in monthly payments over the 5 years, plus an additional CHF 15,000 residual value payment at the end if you decide to keep the car. Of this total, CHF 8,026 are interest costs. Please note: interest costs on a leasing are not tax deductible for private customers in Switzerland.


The luxury icon: Financing a Rolex Day-Date

Now, lets compare this with financing a pre-owned Rolex Day-Date.

At first glance, the 8.9% financing interest rate looks much higher than the car’s 4.9%. But in reality, the total costs are very similar. Over 5 years, your total payments will be CHF 58,142. This total includes CHF 50,000 to pay off the watch itself, plus CHF 11,631 in interest costs. However, the interest is tax deductible for private customers. With a 30% marginal tax rate (as in this example), this reduces your net interest cost to CHF 8,142

Why are the interest cost almost the same? Key factors explained

Interest Costs are tax deductible
As mentioned, in Switzerland only financing interest costs are tax-deductible for private customers.
In this example, we used a marginal income tax rate of 30%.The higher a customer's marginal tax rate, the greater the tax benefit and the lower the actual net interest costs. Leasing interest costs, on the other hand, are not tax-deductible for private customers.

Faster repayment, no big final payment
With financing, you repay the full value of the asset through higher monthly payments and there’s no big final payment at the end, like in leasing. Because you pay down the amount faster, the amount on which interest is charged is lower (this is the "Average financing amount" shown in the table).
In leasing, you have a large final payment, the residual value. This lowers your monthly payments, but it also means you pay down the loan more slowly and end up paying more interest overall.

The key takeaway: Similar costs, different needs

When comparing leasing and financing options, don’t focus only on the headline interest rate.
Calculate the total payments, including the residual value amount that is due at the end of the lease term. Subtracting the purchase price of the car from the total payments helps you calculate the interest costs.

Some new cars are offered with a 0% or 0.9% interest rate for leasing. While this is a strong marketing tool, it simply means that the car dealer covers the interest costs on your behalf, similar to giving a discount on the car price. According to Swiss law (Federal Act on Consumer Credit), car dealers are required to indicate the interest rate and monthly payment, but they do not need to show the total interest amount in detail.

However, with financing, both the total interest costs and the monthly rate must be communicated clearly and transparently. At Yourasset, we believe in full transparency, which is why we provide this detailed overview comparing the real costs of leasing versus financing. It’s important to understand how different calculation methods and marketing strategies can affect your perception of the true cost. While financing may initially seem more expensive, it can actually be just as reasonable as the seemingly more attractive leasing rate. In the end, both options are valid, the right choice simply depends on your personal needs.

Advice

When evaluating different payment options, it’s important to remember:

➜ Look at the total payment, not just the interest rate.
➜ Consider possible tax advantages, especially if you have a high marginal tax rate.
➜ Think about the flexibility you need during the financing period.

With the Yourasset financing option, customers can pay for their next watch in up to 60 months, via a transparent and regulated approach. Whether you're eyeing the Rolex Day-Date or another iconic model, our solutions are built to support your passion, with no compromise.