kjkj

Who did a lease and who did a finance? What’s the better option for the GT’s you believe?

Thanks.

thecutter64

Finance. The lease price is almost identical and when the lease is up, you're out loads of money and the car goes back to dealer. When you're done financing, you keep the car or sell it and recoupe some money to roll into your next car.

kjkj

Hi, Thanks for taking the time to explain.

In the lease there is still the option at the end of the term to buy back the vehicle though by paying the residual, what’s are your thoughts on this? Isn’t lease a better option since you have the choice later anyways?!

thecutter64

A lease always ends up costing more. Leasing is a luxury.

You pay to customize someone else's car. Those add ons add to purchase price and lease payment. You are limited in allowable miles and have to return the car in pristine shape.

Buting at end of lease ads is usually higher price when you add up all the payments.

AMG 17GT

As discussed before, lease rates are double the interest rates usually or more for the convenience of turn your car in after specific term.

surfah

Leasing makes sense if

A. You use the leased car for work and can claim lease payments as a business expense

B. You have car ADD and jump in and out of new models every 2 or 3 years. You don't have the time or patience to sell your old vehicle.

If a frequent leasee, you can often get out of a traditional 36 month lease agreement 6 months or so early and into a newer model.

For me, buying a vehicle in cash works best. I don't like having monthly payments and I exceed the 5000 mile per annum mileage restrictions of most attractive lease agreements.

My state allows me to not pay Excise Tax on the value of my traded-in vehicle which has historically netted a savings of $7000 to 12000 depending on the price of the traded-in vehicle.

guynamedsean

Leases are only cheaper if you keep the car 3 years. Once you get the itch to dump it early, the dealer has to work it as a trade in. The trade in us lousy because you're paying taxes at the beginning of a lease. I don't like being stuck in a car. If the car gets in an accident and has to go to the body shop I want to sell it the minute I get it back

sneezix

Neither. I won mine in a raffle.

surfah

What a rip off that the all the taxes for the 36 months are collected up front.

I also heard the dealer can nickel and dime you at the end of the lease for paint damage, scratches, curb rash etc. Seems like a PITA.

FourT6and2

What about sales tax? When you lease, you pay sales tax on the monthly payment right? Do you pay just the one time or every month?

Where I live, sales tax will add like another $17,000. So if you only pay tax on the monthly, you save big time. But I've never leased, so I don't know how that works. There's also tax deductions as a business expense for leases as someone else said. Might be worthwhile to create an LLC to buy the car and do something like blog or whatever as a business.

How about we add in another option? Lease vs finance vs buy outright.

There are lots of articles online about this but they don't really go into too much detail.

For example, I can afford to buy the car outright, cash. But should I? Is it better to lease or finance instead?

guynamedsean

this is true. The don't nickel dime you if you're buying another car from them. If you're trying to just walk away they often do.

guynamedsean

interest rates are very low so it may be better to have more cash on hand to invest in real estate, start a business etc.

FourT6and2

Yeah, that's true. I'm waiting to see where Amazon decides to build their new headquarters. Might want to invest in housing/real estate wherever that happens. 50,000 new jobs are going to open up...

But I still need to run the numbers on a lease or finance vs buying. The rates I've seen locally are quite high... 6-7%

surfah

Guys in Cali set up LLCs in Montana that has no sales tax but seems like a PITA and somewhat nefarious endeavor without legitimate Montana business.

Good point about paying sales tax only on lease payments which may be advantageous in high excise tax states like California, NY, etc. If you have a 65% residual at 36 months you're saving excise tax on that 65%. Plus, Cali doesn't allow excise tax savings on value of trade-in vehicle which makes buying and trading in like I do less fiscally attractive.

Interest rates are low, depending on your financial situation you may be better off investing in stocks or real estate. I just don't like to owe money, it's a personal thing. Plus, stocks and real estate go up and down but interest rates always stay the same 24/7 and 365 days a year.

California John

In California at least, the sales tax is charged and collected monthly in the lease payment so you end up paying sales tax on only the payments for the amount of time you have it. This calendar year my lease payment declined slightly as sales tax went down.

FourT6and2

Yeah, I've read about that. And some friends told me that's everyone in the overlanding/van life community does since they travel around the country and have no permanent residence.

But it is, by definition, tax evasion. And I'd rather not get caught doing that and have to owe back taxes or fines or anything.

I need to find out the details on that. Like do you pay a tax on every monthly payment? Tax on the down payment? Tax on just the first payment? I don't know how that works.

Same here. I don't like being in debt. Not broke, but as in having credit debt or owing on payments, etc.

My credit is good. Tier 1. Somewhere around 745 I think. I can afford to buy the car in full. But who knows... most of my investments are long term. For retirement. I'm 33.

surfah

6-7% is too high. Your investment would have to return 12-14% to break even assuming you're not deducting your car payments.

Historically Mercedes lease rates are not as attractive as say BMW in my experience.

FourT6and2

Interesting. It's all based on where you live, right?

I'm in San Francisco. The tax is like 8.5% or something like that. Not sure exactly. But registration and sales tax on a flat out purchase is over $17,000 for a GTR.

By leasing, and paying tax only on the monthly... Estimating the numbers looks like I save about $7,000 on tax over 4 years. But with a lease, you wind up paying more in the end for the car itself right? I'm not sure what that would look like just yet.

FourT6and2

Yeah the rates are super high. I haven't gone through the actual credit or financing process. Just an estimate from the various dealers I've talked to.

Might not make sense to finance or lease in my case unless I can find a low rate.

guynamedsean

If you have 100k plus balances in your bank accounts, and good credit your own bank where you have the large balances should be happy to finance this car for you for 3% or less

FourT6and2

Hmm. I don't think Charles Schwab extends lines of credit for cars. But my brokerage and checking/saving is with them. I'll inquire.

AMG 17GT

Penn fed credit union (costs 25$ to join), is 1.75 % over 36, 48 months I believe. Lease money factors are like 5%. Just will not add up to lease an AMG ever that I have seen. But I stroked a check this time.

You can deduct for business per mile either way. That works best for me.

Vic55

Lease taxation is based on the state. Some states are called "up front" states and thus one has to pay the tax on the gross capitalized cost of the car all at the start which negates some of the state tax benefits afforded to those who live in non up front states where tax is assigned only to the payment each month and to the first capitalized cost reduction down payment (this is the true down on a lease that only lowers the cost of the negotiated price).

A lease should always be negotiated like a purchase with price in mind as the terms like residuals and miles allowed per year are not dealer manipulated. What is manipulated is the lease money factor or the retail installment contract apr equivalent. This is where the rate is not fully disclosed like a truth in lending box on a retail contract. It can be backed into if one knows how to pencil a lease or has a calculator.

The lease rates are generally much higher on AMG's, Porsche's, and other highline units. Where a lease is attractive is when the factory and their captive lender subvent a lease rate to move allocation. I have never seen this on AMG units of higher prices. What I have seen is factory to dealer trunk money and even some times factory to buyer money or "money on the hood" but this is very rare. But recently dismal sales on the 16 GTS's throw out 10k trunk money (16's back in March) and I even think there is 17's with trunk money but I have not checked.

As everyone has stated there are pluses and minus to each option and its all about your finances and how your lifestyle is set up. I could go into money factor amortizations and other things but that would just be boring

My best advice is if you plan on keeping the car a long time, buy it and pay the tax up front. You can obtain favorable retail rates but alot of banks check out after financing 150k or higher so it all depends on the down. If you think you are going to keep the car for a short period of time- maybe you lease it at a high money factor rate but that rate is associated with each lease payment and you dont pay that lump tax up front and just the tax per payment. So you will have lower monthly payments but you will not have ownership at term. Some colleagues I know only lease depreciating assets and like to trade them quickly (every year or less). In this case your net loss is less when you dump the car because you wont have the 17k outlay (in your case) assigned to what you paid whether it was cash or financed. But you will have a lease interest rate that reduced the principal payoff on each payment you made for the first 12 months or whatever time frame you keep the car. It works for some but if you plan on keeping the car for over the lease term you will slowly catch up on the lost money with the higher taxation because of your lower APR assigned to the retail contract. Again this is if you choose to lease or finance the car. If you pay cash then its all relative to what you have or what you could have done with that money investing it elsewhere *see your CPA.

The last time I checked the std MF on Benz leases was .00200 for Tier 1A (auto approval regardless of fico) which is 4.80% APR equivalent. Thats very high but in the industry its standard. PFS (Porsche) has been running .00200 for over 11 years now. BMW M cars tend to run in the .00130's and thats usually the lowest for a higher line performance car. And these are dealer "buy rates"- they can mark these rates up .001 to .002 depending on the bank and clearly make reserve on you. The can do this because so many people go into a lease transaction with a payment in mind vs first working the price and the rate. But again, the rate is not disclosed on a lease, just the total dollars paid via the rent factor (money factor).

Wolfman

Leasing makes a lot of sense on some cars but not all and then it depends which state.

Here in MN, sales tax can only be applied to the leased amount and some MF rates can be very attractive.
We switch every 2 years due to rapid advances in tech and most MB leases will offer a 6 month pull aheads with the 30 month lease often being a sweet spot due to higher residual rates.
MF rates can always be negotiated, including all non-discounted rates that typically apply to AMG's. These are retail rates after all.

My rule is a simple one. If the residual value of a lease is anywhere close to the real selling price of the car, I would never bother buying. Trouble for nothing.

If you keep it longer than 3 years, buying is a no-brainer, buying used even more so...

The other option is to lease and then negotiate the purchase after the end of lease. Since virtually all cars go to auction MB often discounts the residual, just not on the first try. If you can get $20k off residual with decent MF, it might be cheaper than the purchase.

surfah

I'll reiterate my earlier point about buying and trading in in my home state. This is a nice perk of buying outright and having equity in the traded-in vehicle.

My state allows me to not pay Excise Tax on the value of my traded-in vehicle which has historically netted a savings of $7000 to 12000 depending on the price of the traded-in vehicle.