Except that it obviously can be correct by virtue of being a common financial construct. Your formula is meaningless to a person making a choice between buying a renting. There’s seller profit in both situations but it’s irrelevant to the purchaser. A fundamental assumption of our economic system is that value can be created in parallel with profit.
If I always want a car that is less than five years old then a lease is a great option. It’s a matter of what fulfills my needs for the least money. That could be buying or leasing depending on my needs.
In the early 2000s it was not unusual for leases on slow-selling models to have negative interest rates (and that's with a realistic residual), not sure if that is still the case today. I certainly don't ever remember seeing a negative interest rate on non-lease financing offers, not sure why.
Pushing those costs years into the future can be to my advantage. That argument applies to any loan.
Leasing also gives me the option to buy the car at the end of my term, so I can end up owning the car while deferring much of the up-front cost in exchange for interest payments.
It’s stuff like this that’s the real reason dealerships love leases. Their much more complex than a sale so the dealerships have far more options to screw people.
Close but it's a little more nuanced.
You lease a trendy car (4Runner or something) and they expect able to turn it around, detail it and sell it on their CPO lot for way to much money to someone who thinks they're being savvy by buying CPO. You wanna keep it then you gotta pay them the way too much money they'd otherwise make.
You lease a black sheep (say a Sentra, Chrysler 200, Focus or some other cheap lower end compact that there's gonna be a ton of with high miles in a few years) and the buyout will be minimal because they expect to make peanuts reselling it.
Your lease rate is based in part on their expectation of how much profit the car will get them at the end of your lease. Something with a low MSRP and customer base that drives the used value straight into the ground won't make them squat after cost of turning it around and selling it used. So in those case you pay much less on the buy out.
They loose more money but they make up for it in volume and get to book profits now and losses later (financial engineering).
I don’t think leasing a 4Runner ever makes financial sense unless you flip though cars every 2 years and live in a high sales tax state.
For example, if there is heavy tax on new cars, but no tax on cars over 6 months old, then you add more terms to your addition: + $DEPRECIATION - $EXTREME_TAX
Like any other depreciating asset, the renter charges the rentee(sp?) the depreciation anyway, plus a small profit.
You appear to be under the impression that renting is better; this cannot be correct. The rent for any asset is ($COST_OF_PRODUCT + $COST_OF_ADMIN + $PROFIT). How do you figure that it's cheaper to pay those additional costs than to buy?
You only rent if you want something temporarily and don't want to deal with the hassle of resale. For this convenience, you pay extra.