OT: lease verse buy auto

[Jazzmammal]

A lot of you guys are missing the point of leasing because you're not wealthy enough. It's called OPM or Other People's Money. Someone said leasing allows people to get into more car than they could otherwise afford. Nothing could be further from the truth. I used to be a finance manager at several car dealers years ago including BMW, Porsche and Audi.

 

To lease a luxury car you need gold balls with diamond studs credit. BMW Financial or Mercedes requires assets, money in the bank plus a high credit score. People like that can easily write a 75K check for the car or put up a nice down payment but they have better uses for the money than that. It's like the old joke about financing a yacht. You have to prove you don't need the money before they'll give it to you.

 

First months payment plus security deposit but lots of car companies even waive the first months payment. So they're into a high end car for 3K up front and $4-500 a month. When you do the deal it's usually from your desk at your office on the phone. The fleet manager runs the numbers, the salesman takes the new car to you, you sign the papers and he drives your old lease return back. Everything including basic maintenance is covered, when the car needs to go in for service the dealer picks up the car from you and gives you a loaner. They have nice lounges with leather couches, expresso machines and a big screen if you need to actually go there.

 

Mileage isn't a problem because it isn't your only car but if it does go over by five thousand miles, so what? Those people don't care, trust me. You guys need to think bigger when it comes to leasing.

 

Down here where the rest of us schleps live, absolutely, buy a nice car and keep it until the wheels fall off. That's what I've done with my Benz's for the last 25-30 years. I started buying very clean high mileage Mercedes long ago and never looked back. I'm on my sixth one now, a gorgeous 03 CLK500 with 145K on it I paid $5,500 for off Craigslist. It took a while for that one to pop up but I'm patient. It looks like new and drives perfect. I have no doubt it'll last me 4-5 years or so, I'll sell it for maybe $2,000 and go on to the next one.

 

Bob

[WesG]

Good advice, Math. Another thing I do is shop for 3yr old cars that are the top trim level for the line. Trim level depreciates the fastest.

[Markay]

A lot of you guys are missing the point of leasing because you're not wealthy enough. It's called OPM or Other People's Money. Someone said leasing allows people to get into more car than they could otherwise afford. Nothing could be further from the truth. I used to be a finance manager at several car dealers years ago including BMW, Porsche and Audi.

 

To lease a luxury car you need gold balls with diamond studs credit. BMW Financial or Mercedes requires assets, money in the bank plus a high credit score. People like that can easily write a 75K check for the car or put up a nice down payment but they have better uses for the money than that.

 

I am constantly amazed at how little dudes like Warren Buffet know about how to manage money.

 

I have had several brushes in life with people (not Warren Buffet) who have more money than they can count and all drove real ordinary cars.

 

Amazing they could have worked out how to make and keep their fortune and yet failed to understand that they could have leased a prestige car and "invested " in a yacht.

 

Once your income gets above subsistence level it is not what you make but how you choose to spend it.

 

As for the gold plated MB, BMW, Roller and Bentley house finance customers, I have been to a few repo auctions with vehicles consigned by these finance Co's and looking at the state of some of the one or two year old vehicles wondered 'what drugs were they on when they approved finance to this guy'?

[burningbusch]

A lot of you guys are missing the point of leasing because you're not wealthy enough. It's called OPM or Other People's Money. Someone said leasing allows people to get into more car than they could otherwise afford. Nothing could be further from the truth. I used to be a finance manager at several car dealers years ago including BMW, Porsche and Audi.

 

To lease a luxury car you need gold balls with diamond studs credit. BMW Financial or Mercedes requires assets, money in the bank plus a high credit score. People like that can easily write a 75K check for the car or put up a nice down payment but they have better uses for the money than that.

 

I am constantly amazed at how little dudes like Warren Buffet know about how to manage money.

 

I have had several brushes in life with people (not Warren Buffet) who have more money than they can count and all drove real ordinary cars.

 

Amazing they could have worked out how to make and keep their fortune and yet failed to understand that they could have leased a prestige car and "invested " in a yacht.

 

Once your income gets above subsistence level it is not what you make but how you choose to spend it.

 

As for the gold plated MB, BMW, Roller and Bentley house finance customers, I have been to a few repo auctions with vehicles consigned by these finance Co's and looking at the state of some of the one or two year old vehicles wondered 'what drugs were they on when they approved finance to this guy'?

 

Agreed. I worked for a guy worth a cool $billion and he drove a 10 year old car. These are people who are in control, not the money.

 

A $100,000 MB S-Class will depreciate $61,000 in five years. A $32,000 Honda Accord will depreciate $16,000. Your lease payment covers interest and depreciation. You can choose to throw away $61,000 or $16,000, but that's not OPM, that's yours.

 

Busch.

[burningbusch]

A friend who is a mechanic is dead-set against anyone carrying a car payment or lease. He says, "if you own a car, just put the $300/month away in a savings account and when you have enough, buy a new car outright. You were willing to pay it anyway, so why not you get the full benefit from that money?" Something to be said for that logic...

 

Not trying to persuade anyone to lease, buy or anything else, but we will live in a time of very low interest rates and many car companies provide extremely low rates in order to entice you. Honda/Acura for example will do .9%. A five year loan on $25,000 will cost you a whopping $576.09 of total interest. Really, it's damn near a zero interest loan. If that interest rate was more typical, let's say 8% you'd pay $5,414.59 in total interest. Yes, you do need good credit to get the .9% rate.

 

Busch.

[Jazzmammal]

I knew someone would take the bait, I wasn't talking about billionaires.

 

There's exceptions to everything. Over half of lux brands are leased so yeah out of millions of leases there are always a few that make you wonder. Don't forget, all the dealer wants to do is move the car and a lease is a sale to the bank so as far as the dealer is concerned, it's gone. That one crap lease to the wrong guy might have been on the last day of a factory promotion that qualified the dealer for a 50K bonus some of which goes to the finance person. I never did that though...

 

http://blog.caranddriver.com/the-most-commonly-leased-car-brands-in-america-and-the-most-commonly-purchased/

 

Bob

[timwat]

I am constantly amazed at how little dudes like Warren Buffet know about how to manage money.

 

I have had several brushes in life with people (not Warren Buffet) who have more money than they can count and all drove real ordinary cars.

 

Amazing they could have worked out how to make and keep their fortune and yet failed to understand that they could have leased a prestige car and "invested " in a yacht.

 

Your observation is more revealing than you think.

 

Trust me, professional asset managers like Warren Buffett, Michael Price, or know how to manage their own money.

 

Allow me to suggest their perspective on a "prestige car" is dispassionate, calculated and the choice to drive their 10- to15-year old Honda Accord is intentional and deliberate. For some, the car is simply a tool, not an outward token of value or esteem. In other words, their choice of car is consistent with their values and convictions about wealth and materialism at large.

[MathOfInsects]

Your observation is more revealing than you think.

 

Trust me, professional asset managers like Warren Buffett, Michael Price, or know how to manage their own money.

 

Allow me to suggest their perspective on a "prestige car" is dispassionate, calculated and the choice to drive their 10- to15-year old Honda Accord is intentional and deliberate. For some, the car is simply a tool, not an outward token of value or esteem. In other words, their choice of car is consistent with their values and convictions about wealth and materialism at large.

 

My investment-banker cousin put it this way: If that [insanely expensive car] is their everyday car, they don't have as much money as they want you to think.

[Markyboard]

A friend who is a mechanic is dead-set against anyone carrying a car payment or lease. He says, "if you own a car, just put the $300/month away in a savings account and when you have enough, buy a new car outright. You were willing to pay it anyway, so why not you get the full benefit from that money?" Something to be said for that logic...

 

Not trying to persuade anyone to lease, buy or anything else, but we will live in a time of very low interest rates and many car companies provide extremely low rates in order to entice you. Honda/Acura for example will do .9%. A five year loan on $25,000 will cost you a whopping $576.09 of total interest. Really, it's damn near a zero interest loan. If that interest rate was more typical, let's say 8% you'd pay $5,414.59 in total interest. Yes, you do need good credit to get the .9% rate.

 

Busch.

 

Can't tell you how many people I've encountered over the years that spout the low interest advantage in one context or another and then always complain they have no money. While theoretically true that by getting a very low or no interest loan you can actually make money with the money you held on to, most don't. If I have 50k "hanging around" and I'm needing a new 25k car I can take out a low interest loan or lease and invest that 25k earning higher interest/ dividends. But what about that other 25k? Well for most people I know (self included) money available means money to spend on other things. If you have less money available you'll spend less. And money invested is almost always still available but maybe with a penalty for withdrawal. I think everyone has that minimum threshold that says stop buying shit. That's why every time I saved up a chunk of money I put a good part of it towards paying off my home. By doing so that money was no longer available and it also now motivated me to earn more money and/or to fight/haggle for lower prices on stuff.

 

Also to me a car is not an investment. Nor is a primary residence for that matter (although hopefully you recover your money when you move). You do always need a place to live and almost always need a car(or 4). When I purchase a 25k car I've spent 25k and own a car. I'm not thinking depreciation, worth in 5 years etc. That money's gone. If you don't like the fact that the book value drops 60% or whatever, don't buy new. When you lease a car it's easy to forget you don't own a car. While you can always lease again in 3 years I think it's a vicious cycle and causes people to live a more expensive life style than they should. Getting access to a new car every 3 years isn't free, it's a luxury; one I never cared to pay for.

 

[mate stubb]

My current car is a long in the tooth Acura RL. I bought it when 2 years old, a lease car turned in with 25K miles on it. I paid about 27K for a car that sold for 45K a couple of years before.

 

Been driving that sucker for 13 years now with no car payment. It has worked out so well, that's what I plan to do again next time.

[timwat]

To quote Prince:

 

"Style ain't the jeep you bought when you know your broke ass got bills,

Style is lettin' your lover drive while you talk on the phone and chill."

[stillearning]

I'm 62, and a bit of a car guy. I've only bought one new car in my life, and never leased. My sentiments lie along with the idea that two good used cars > one new car. Between my wife and I, we have four cars. Two everyday drivers, a roadster for summer cruising, and an AWD SUV for those rare ocasions when such a vehicle makes sense. Two Hyundais, a BMW, and a Honda. We wait for good deals, pay cash, and drive 'em till the next good deal comes along. My everyday driver just hit 148k, the SUV has 160k, but the roadster has only 20k. To me, leasing only makes sense if you can take advantage of the tax breaks of leasing.

[timwat]

Like a lot of financial decisions in life, I believe identifying the general pros and cons are relatively straightforward. And they may even apply for "most" folks of a particular homogenous group.

 

But presuming that everyone falls into that group, has the same presuppositions - and more importantly - the same financial objectives, access to resources and means - well that's another thing.

 

It would be unwise to presume everyone on this board lives with a particular level of wealth at their disposal. I'm sure we'd probably be surprised. And that leads to different personal decisions about automobiles, among many other things.

[slowtraveler]

Im the happy owner of a lovingly maintained, low-mileage 1999 Toyota Avalon. Mostly, Im comfortable with my basic strategy of driving it until the wheels come off. This makes the most economic sense for me. Sometimes, I am tempted by the automotive equivalent of GAS. Usually I get over it.

 

Just lately, though, I find myself noticing that we are nearing an inflection point in the market for automotive transportation. It looks to me as if the advent of self-driving cars could change the economics of obsolescence and, thus, disrupt the entire basis for choosing new vs. used cars, at least during the transition period if not permanently.

 

Frankly, as long as I can charge my iPad off the Avalons cigarette lighter, I can live without GPS, Bluetooth integration, TPMS, and lots of other snazzy features that my 1999 workhorse lacks. But when we get to the point where these sonofabitches can drive themselves, well, dang, sign me up for a new one.

 

More than anything else right now, this notion is what keeps me motivated to nurse the Avalon for a while longer. Barring mishaps, I think Im good for another five years. Is that enough time to get us to the autonomous promised land? And do shorter-term transitional steps like auto cruise control and collision avoidance make a difference in anyone's decision making about new vs. used?

 

[ElmerJFudd]

There's a lot going on in travel - disruptive forces like self driving vehicles, self driving vehicle on-demand (future Uber), fully electric self driving vehicles on demand, high speed rail has never really taken off in the US - but something like Hyper Loop San Fran to LA could be the beginning of something.

 

But unfortunately, we need to get places today.

 

I could easily become a car guy - it's not that I haven't always loved a nice vehicle. I do enjoy driving manual and winding out my gears. But I don't love it enough to tie up my finances in it. It's a game for wealthier fellows than myself - or for gear heads that love working on classics as much or more than driving them.

 

In the meanwhile - it's more than likely that we'll all be stuck buying at least one or two more generations of combustion engine user driven cars with which to get to work, pick up the kids, get the groceries, and get away for the weekend.

[slowtraveler]

...it's more than likely that we'll all be stuck buying at least one or two more generations of combustion engine user driven cars with which to get to work, pick up the kids, get the groceries, and get away for the weekend.

If you're turning over a lease every 36 months, sure. But according to your OP, you've owned only three cars in the last 28 years! If, like me, you base your buying decisions on the assumption that you'll own a car for a decade or more, I really wonder about that time frame.

 

I worry more about autonomous driving than any other change you mentioned, because I think there might be moral hazard implications that work to the disadvantage of people who pilot manually in an increasingly autonomous driving world, perhaps analogous to the advent of ABS braking systems. Drivers of cars with ABS were able to stop more quickly than drivers without, so drivers without ABS tended to get in more collisions as time went on.

[ElmerJFudd]

True, then maybe this will indeed be my last combustion engine user driven car.

 

I'm ok with that as long as the powers that be don't create a situation where % of income for travel is worse than it is today. And obviously, there's no reason to change if they can't improve the environmental, health, safety, mortality rates, etc. of our current systems.

[Daniel Wade]

The potential cost of replacing the battery, is the one thing that always made me hesitant about buying a hybrid. It may, or may not, be something to consider.

 

http://www.greencarreports.com/news/1078138_toyota-hybrid-battery-replacement-cost-guide

 

http://www.autoblog.com/2015/09/02/real-costs-chevy-volt-road/

[MathOfInsects]

I worry more about autonomous driving than any other change you mentioned, because I think there might be moral hazard implications that work to the disadvantage of people who pilot manually in an increasingly autonomous driving world, perhaps analogous to the advent of ABS braking systems. Drivers of cars with ABS were able to stop more quickly than drivers without, so drivers without ABS tended to get in more collisions as time went on.

 

I'm going to car-nerd out for a moment, so forgive me, but this isn't quite accurate. ABS generally lengthens stopping distance, particularly if the road isn't perfect and dry. When cars were transitioning to ABS as standard equipment, two things happened: one is that people were still pumping their brakes, which undermines the technology and increases stopping distance even more, and the second is that people developed a false sense of confidence, so drove a bit more aggressively and braked a bit later than they should have. Both of these resulted in a a short-term INCREASE in accidents for people with ABS vs. those without it...although this changed over time, both as people learned to keep their foot on the brake, and as the equipment became more common/standard.

 

The autonomous driver situation...that one is really fascinating. How do you program morality? The safest options (and there is no doubt it will be safer than driver-controlled cars) are sometimes those that sacrifice the driver or even the driver's kids, in the algorithmic interest of saving 10 other people. But by programming a car to make the safest choices, you will also frequently be programming it to undermine the mortal will of its owner.

 

That's got some deep existential implications...

 

[Markay]

Stay tuned for a slew of Darwin Awards when driverless cars hit the roads.

[slowtraveler]

I think there might be moral hazard implications that work to the disadvantage of people who pilot manually in an increasingly autonomous driving world, perhaps analogous to the advent of ABS braking systems. Drivers of cars with ABS were able to stop more quickly than drivers without, so drivers without ABS tended to get in more collisions as time went on.

I'm going to car-nerd out for a moment, so forgive me, but this isn't quite accurate. ABS generally lengthens stopping distance, particularly if the road isn't perfect and dry. When cars were transitioning to ABS as standard equipment, two things happened: one is that people were still pumping their brakes, which undermines the technology and increases stopping distance even more, and the second is that people developed a false sense of confidence, so drove a bit more aggressively and braked a bit later than they should have. Both of these resulted in a a short-term INCREASE in accidents for people with ABS vs. those without it...although this changed over time, both as people learned to keep their foot on the brake, and as the equipment became more common/standard.

 

The autonomous driver situation...that one is really fascinating. How do you program morality? The safest options (and there is no doubt it will be safer than driver-controlled cars) are sometimes those that sacrifice the driver or even the driver's kids, in the algorithmic interest of saving 10 other people. But by programming a car to make the safest choices, you will also frequently be programming it to undermine the mortal will of its owner.

 

That's got some deep existential implications...

At the risk of causing this thread to skid completely out of control:

 

Yeah, I oversimplified about ABS, but the increased risk-taking you mentioned is what I was getting at. I used the term moral hazard in the strictly economic sense, to describe a situation in which some people are forced to bear the cost of risks taken by others.

 

There is evidence that drivers with better safety equipment (ABS, seat belts, motorcycle helmets) tend to take more risks than those without. Its not indulging a false sense of confidence, exactlypeople just tend to consume the extra margin of safety by taking more risks. Unfortunately, the costs of these risks are borne in part by other drivers, hence the moral hazard.

 

Regarding the three laws kind of question about what moral rules should govern autonomous driving, I wasnt even going there, but I agree with youits a fascinating problem.

 

I dont really worry about this stuff over the remaining expected life of my 99 Toyota, but if I were buying an almost-new car today and planning to drive it for another ten years, I think I would be a little freaked out.

 

[slowtraveler]

Stay tuned for a slew of Darwin Awards when driverless cars hit the roads.

I'm just wondering whether you can be a proper Darwin Awards candidate if it's a robot that kills you. Maybe we'll have to establish a new category for ignominious deaths caused by automation. The Asimov Awards, perhaps?

[Markay]

Yep room for a new category.

 

The idea of connected autonomous driven cars mixing it with unconnected drivers is frightening. What happens when a DDoS is unleashed?

[Michael W]

I've been doing three-year leases for probably 15 years, and it works well for me.

 

With no money down, and $320/month, I currently drive a 2015 Honda Accord EX-L V6. I think the sticker on this car was ~$33K. I don't know what the purchase price is at the end of the lease, but I don't care, as I have no intention of purchasing the car. I will lease another one.

 

In order to purchase the car for about $320/month, I'd have to put $14K+ down and make payments for five years. Sure, I'd own an Accord after five years, but if I wanted a new car I'd have to trade in the Accord right away while it was still worth about $14K. And I'd be right back there with my $320/month car payment - for another five years.

 

So the way I figure it, is that if I lease the car I get a new one every three years, and I never have a car that is out of warranty. All I have to do is change the oil and do minor maintenance. To maintain that same payment when buying, I have to wait five years to get a new car, and drive each car for two years without it being under warranty (and having to replace tires and brake pads and whatnot).

 

By the way, when leasing you're basically covering the cost of depreciation. As a result, I've found that lease quotes for Hondas are much lower than lease quotes for comparable Chevys or Fords, for example. Maybe others will have had different experiences.

 

[Chris Link]

I leased a 91 Saab Turbo convertible I was looking to buy only because it was a ridiculously good deal. Zero down, about 15% off sticker, the interest rate was under 2% IIRC and the buyout after three years ended up around $7000 under the blue book retail. I never put enough miles on to worry about going over. I looked at it as a three year test drive. Kept it for almost 20 years and was still under 80000 miles.

 

 

[BluesKeys]

The last 5 cars I bought have been used and I paid cash for them. Learned a long time ago "Do not borrow money on a depreciating asset." Yes sometimes I have had some costly repairs, for instance the 1997 Ford Explorer I had to put a transmission in. Cost about $1900 (about what I paid for the vehicle). However I have driven the Explorer 85,000 miles that means with all I have in it I am at about .05 cents a mile. Try that with a new car that only cost $20,000 you would have to drive it over 400,000 miles.

[burningbusch]

It's great to see all the frugality regarding purchasing an auto. Wonder why we don't see as much of that talk in the threads around here when the OP is asking if he/she should spend $4000 on one shiny new keyboard vs. another, when the previous generation can be found on CL for maybe half the price?

 

Busch.

[ElmerJFudd]

Most of us play keyboards in the sub-$2.5k area, some sub $2k, and some sub $1k. The high end $4k cats are in the minority (although envied). We love keys more than cars. And being frugal on cars lets us have our keys!

[Daniel Wade]

It's great to see all the frugality regarding purchasing an auto. Wonder why we don't see as much of that talk in the threads around here when the OP is asking if he/she should spend $4000 on one shiny new keyboard vs. another, when the previous generation can be found on CL for maybe half the price?

 

Busch.

 

You know that's not a bad idea, especially if they started putting some kind of keystroke counter (like an odometer) on the keyboard so you would know how many keystrokes were on it, and maybe a built in gyro meter or accelorometer, that could generate a keyfax to let you know if it has ever been dropped, or fell off an x stand.

 

Bush, I think your on to something.

 

[ElmerJFudd]

Haha. I think that's exactly what the Garage Sale is for. It's a great resource for the bottom dwellers to get a 3 year old model and for those that yearn for the latest and greatest to sell off and fund the next purchase.