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'Value' for the Enthusiast: Buying New & Holding vs. Buying Cheap & Used vs. Leasing
- Thread starter McQueen77
- Start date
McQueen77
Banned
Hahaha
Too long didn't read but took the time to post that it was too long and I didn't read it. How about, who gives a shit? If you don't want to read it, don't comment.
RicoA
Passed Driver's Ed
I guess I don't understand how you lose money when you lease. Your payments are low and every penny you put on the car after tax, goes toward paying the car off. Leasing has probably changed greatly over the years. When I bought my 2010 new I thought about buying vs leasing. Leasing to me was a no brainer. I kept my down payment, had ultra low payments, and had the piece of mind that if I get rear ended and have $10,000 worth of damage done and the car is now worth shit, I can just hand it back to them. The mileage doesn't scare me because I can just buy the car for what i still owe on it, or trade it in. Dealerships treat leases just like owning a car. What you still owe on the lease would be like what you still owe on your loan. Plus, no interest like you'd pay on a loan.
Bender1
Banned
It really depends on what YOU value.
From a purely economic perspective buying that $900 Volvo at Auction, by FAR, is the best thing you can do. Car payments are terrible as that is capital that you are not investing into a return bearing account. At the end of four years he can sell that $900 volvo for $500 and buy another. $100 a year for a car, not bad. Worst case it sucks, its in the shop, he sells it early for $500 and tries again.
Also from an economic perspective the lease is the ABSOLUTE WORST. Unless you have a... creative... accountant there is no upside. You pay more, you don't actually own the car, yet you are responsible for it. At the end of the lease you are left with no asset for your investment. If the only way you can afford a car is via a lease, then you can't afford the car. Now if you get the lease for ease and can afford to be on a money losing position, constantly, then who cares? Generally, no one "should" lease.
The middle of the road is buying new. You take a hit on depreciation, but you have an asset that has real value at the end of the road.
So why do I pick the "middle of the road option?" Because the benefits I receive (enjoyment) out weigh the monetary costs. I keep the car 6-7 years, I have a nice trade value and cash on my pocket for the next one.
I dislike car payments, they are a terrible investment, but sometimes the return on them is not in dollars, but rather in something else.
From a purely economic perspective buying that $900 Volvo at Auction, by FAR, is the best thing you can do. Car payments are terrible as that is capital that you are not investing into a return bearing account. At the end of four years he can sell that $900 volvo for $500 and buy another. $100 a year for a car, not bad. Worst case it sucks, its in the shop, he sells it early for $500 and tries again.
Also from an economic perspective the lease is the ABSOLUTE WORST. Unless you have a... creative... accountant there is no upside. You pay more, you don't actually own the car, yet you are responsible for it. At the end of the lease you are left with no asset for your investment. If the only way you can afford a car is via a lease, then you can't afford the car. Now if you get the lease for ease and can afford to be on a money losing position, constantly, then who cares? Generally, no one "should" lease.
The middle of the road is buying new. You take a hit on depreciation, but you have an asset that has real value at the end of the road.
So why do I pick the "middle of the road option?" Because the benefits I receive (enjoyment) out weigh the monetary costs. I keep the car 6-7 years, I have a nice trade value and cash on my pocket for the next one.
I dislike car payments, they are a terrible investment, but sometimes the return on them is not in dollars, but rather in something else.
Bender1
Banned
The ignorance in this comment makes me cringe for the future of america.
RicoA
Passed Driver's Ed
Maybe you should really take a look at leasing options then. At the end of the lease I AM left with an asset, the car. It has depreciated, but my residual value has already been set. From there I can give the car back, (rarely the right answer) trade it in, (just like you could if you owned the car) or, buy it for exactly what you still owe on it. You set the price of the car in the beginning and basically rent to own, but only pay a percentage, paying no interest. I plan on buying my car after my lease in a year and I will owe $10,xxx. For that I will get a short lease and my payments will stay the same. Effectively I "bought the car" in the beginning, I just payed no interest.
troyguitar
Go Kart Champion
This is only true for people like you who say they will keep their car for 6-7 years. I'll be keeping mine for 3 and it will cost roughly $9000 with no money down at all - and that is with quite mediocre credit getting a not so great deal. If I were to buy it (best I could get was 10% interest) I would end up spending at least as much money AND having to put $5k+ down.
Gunkata
Drag Race Newbie
Middle of the road is not buying new. middle of the road is buying a car 2-4yrs old, not getting hit with major depreciation, getting it certified as well, then keeping that car 5-7 years, imho.
Also, McQueen, not sure when he bought those cars, but a 325i, C300, and whatever else it was isn't really that "luxury" nor expensive, unless bought new and heavily optioned out. I still didn't read most of it though.... long stuff is long.
Also, McQueen, not sure when he bought those cars, but a 325i, C300, and whatever else it was isn't really that "luxury" nor expensive, unless bought new and heavily optioned out. I still didn't read most of it though.... long stuff is long.
Bender1
Banned
Sign... you did pay interest. The "money factor" is a sneaky way of doing an interest rate. For example, top tier money factor for VW is currently .00034, which is just shy of 1% APR. Not bad right now, but considering that so many of us are driving on 0% loans, it isn't great. The money factor APR will, 99% of the time, be higher than the purchase APR. usually by 1 - 2%, but I have seen them go 3-4% higher for people will less than perfect credit.
You have no asset at least end. You have nothing. When you make your last lease payment you have nothing. When I make my last loan payment, I have a $12,000 car. With the two year difference in payments, that means I have about $5,000 in net worth, where as a leaser has $0 in net worth. To get that asset you have to pay the residual to get. Residuals are typically higher at that point because of the money factor issue. To trade it in, you have to offset the residual with the dealer trade value, which almost never works out. Residuals are ALWAYS higher than the trade value.
I am not trying to be a dick, but its clear that you do not really understand what is happening to you and the fact that it is costing you money.
I run these calculations obsessively, before I buy, and have never found leasing to be the better deal. I fully understand why people lease, and I think it really makes sense for some, but there is no economic argument for leasing. Not one.
Bender1
Banned
Great point.
DougDome
Go Kart Champion
You clearly have no idea what the definition of an "asset" is. At the end of a lease you are obligated to return that car. Under no circumstances in a lease do you build equity on the car (meaning in the event that you have to get rid of the car, you'd get money back).
Also, let me quote this one part for you, real quick:
What.the.eff. You have no idea what a "lease" is. No, there is no distinction between "giving the car back" and "trading it in" because you have ZERO dollars invested in the car. You only paid for the miles driven on the car.
Also, just a quick reality check: Do you REALLY think that you beat the system and "paid no interest"? Please, calculate the sum of the total payments you will make on the car from both the lease period and the financing period, and I guarantee you will have paid more than any person who financed outright.
DougDome
Go Kart Champion
To the OP: Personally, I bought new because I didn't want to take the time to do a real search and be patient for the perfect used car. It would have been nice to own a nice mkIV or mkV r32, but they don't come around very often. Time is money, and I think a lot of people pay the premium for a new car so they don't have to deal with the due diligence required to buy used.
I think the only people whom leases are a financially good (not responsible) decision for are people who can afford to pay the premium of turning car ownership into a fixed cost. No maintenance to worry about ever, and they get to drive a brand new car every 3-4 years.
I believe that the best way to treat car ownership is the trade-up approach. Once my current car is paid off, trade it in and roll the equity into a more expensive car. The equity will lower the monthly payments to a manageable size and every 4-5 years I know that I will be driving a nicer car.
I think the only people whom leases are a financially good (not responsible) decision for are people who can afford to pay the premium of turning car ownership into a fixed cost. No maintenance to worry about ever, and they get to drive a brand new car every 3-4 years.
I believe that the best way to treat car ownership is the trade-up approach. Once my current car is paid off, trade it in and roll the equity into a more expensive car. The equity will lower the monthly payments to a manageable size and every 4-5 years I know that I will be driving a nicer car.
Chris@Revo USA
Go Kart Champion
I wouldn't say that is middle of the road right now, as in our current state of the car market.
2-4 year old cars are still over priced (many close to the price of new), interest rates on them are terrible compared to new and you are paying 2grand for a warranty you can hope to get 500 bucks out of.
You could easily end up paying about the same when you factor in interest on a 2 year old car vs a new one. Yes you will possibly have a little more to the warranty but to me CPOs are worthless.
Gunkata
Drag Race Newbie
true, the market is a lot different the last 4 years or so, however BMW and Audi have VERY competitive CPO financing rates, as low as like 3.9% from what I've seen, so if I'm saving $10-$15K, I think that's fine
As always, its to the buyers responsibility for doing his/her dilligence on what makes sense, as yes, there are many used cars now priced fairly high where it can make sense to buy the new one instead - it will vary by dealer, brand, and region.Chris@Revo USA
Go Kart Champion
Not 100% true.. rare but it can happen.
Again going back to current used car values they are up. I know multiple people who leased cars in 06-07 that came off lease in 2010-11 that simply due to the demand of used cars and short supply values were up. Their residual value on the lease was actually less than trade in values* in some cases with even more room if you bought the lease out and sold it privately.
Residual is a guess on what they think the car will be worth when the lease is up, if the market changes and the car is worth more then they guessed you could come out ahead.
*need to read the fine print, since the finance company legally owns a leased car not you many have terms that let them set a fair market trade in value that is not equal to the residual value. So your residual may be 10grand and trade in they want to give you 12.. the lease company gets 12 you don't keep the 2 grand.