Why lease??
Thread Starter
Member
Joined: Jan 2005
Posts: 162
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From: Hawaii
SL-500 (mine), Ferrari Spider convertible (was Husbands, mine now!)
Why lease??
Can anyone tell me the advantage of a lease if the following is true?
-You can pay cash for the car.
-It is not deductable as a business expense.
Thank You.....
-You can pay cash for the car.
-It is not deductable as a business expense.
Thank You.....
Super Member
Joined: Sep 2003
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From: Earth
CLS
Originally Posted by Natalie
Can anyone tell me the advantage of a lease if the following is true?
-You can pay cash for the car.
-It is not deductable as a business expense.
Thank You.....
-You can pay cash for the car.
-It is not deductable as a business expense.
Thank You.....
FYI... the correct spelling is convertible
Former Vendor of MBWorld
Joined: Jan 2005
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From: Cincinnati, OH
Natalie-
The first question is how long do you plan to keep the vehicle? If you plan to keep it for more than five years then go ahead and pay cash.
If you trade it in before that time then a lease will be more attractive as you will only be paying for the "use" of the vehicle, unlike buying where you pay for the whole vehicle.
Take the $$$ you would tie up buying the vehicle and invest that in an instrument that pays a higher rate of return than the lease money factor.
Also, in most states you will pay less sales tax by leasing.
Let me know if this helps.
The first question is how long do you plan to keep the vehicle? If you plan to keep it for more than five years then go ahead and pay cash.
If you trade it in before that time then a lease will be more attractive as you will only be paying for the "use" of the vehicle, unlike buying where you pay for the whole vehicle.
Take the $$$ you would tie up buying the vehicle and invest that in an instrument that pays a higher rate of return than the lease money factor.
Also, in most states you will pay less sales tax by leasing.
Let me know if this helps.
Super Member
Joined: May 2004
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From: Rhode Island
Debadged 6-Speed '05 C320 Sports Coupe
If the time and mileage periods are acceptable, then the vehicle cost is completely specified. There are no surprises when trading, because the vehilce is turned in, with normal wear and tear.
The dealerships like leasing, because they know you'll be back in their showroom in three years, when the ride is returned. They know that you'll be back in three, not four, five or later.
The dealerships like leasing, because they know you'll be back in their showroom in three years, when the ride is returned. They know that you'll be back in three, not four, five or later.
Senior Member
Joined: Sep 2004
Posts: 315
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From: Orlando, FL
2008 E350
Originally Posted by wingless
If the time and mileage periods are acceptable, then the vehicle cost is completely specified. There are no surprises when trading, because the vehilce is turned in, with normal wear and tear.
The dealerships like leasing, because they know you'll be back in their showroom in three years, when the ride is returned. They know that you'll be back in three, not four, five or later.
The dealerships like leasing, because they know you'll be back in their showroom in three years, when the ride is returned. They know that you'll be back in three, not four, five or later.
GGM
Thread Starter
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Joined: Jan 2005
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From: Hawaii
SL-500 (mine), Ferrari Spider convertible (was Husbands, mine now!)
Originally Posted by LeaseCompare
Take the $$$ you would tie up buying the vehicle and invest that in an instrument that pays a higher rate of return than the lease money factor.
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C'mon. If it's not specifically a tax issue, we all know that the unspoken reality is that leasing for people who can't afford to buy. For most people, it makes no more sense to lease a car than to enter into a long-term deal with Avis. It's the same thing, but no one wants to admit that they lease because they can't afford the car they want if they don't.
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Joined: Jun 2004
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From: Washington Twp., Michigan
AMG, Ferrari, Lexus
Originally Posted by billycwhatup
C'mon. If it's not specifically a tax issue, we all know that the unspoken reality is that leasing for people who can't afford to buy. For most people, it makes no more sense to lease a car than to enter into a long-term deal with Avis. It's the same thing, but no one wants to admit that they lease because they can't afford the car they want if they don't.
Former Vendor of MBWorld
Joined: Jan 2005
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From: Cincinnati, OH
You are right, if you keep the car for more than 5 years then buy it. Most people don;t keep their cars that long and end up with negative equity by trading it in before they pay off the finance contract.
Setting up a lease for the term you actually keep the car should provide lower monthly payments and no negative equity.
Setting up a lease for the term you actually keep the car should provide lower monthly payments and no negative equity.
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From: Obama Land
K Car
Originally Posted by LeaseCompare
You are right, if you keep the car for more than 5 years then buy it. Most people don;t keep their cars that long and end up with negative equity by trading it in before they pay off the finance contract.
Setting up a lease for the term you actually keep the car should provide lower monthly payments and no negative equity.
Setting up a lease for the term you actually keep the car should provide lower monthly payments and no negative equity.
An advantage in leasing is when you get a high residual value on the car (that is: higher than what you could actually sell the car for at the end of the lease). If this value is equal to the car's value, then you are really only paying the depreciation on the car, plus the leasing fees. Most finance deals I see are significantly better in terms of interest.
So assuming an accurate residual value, if I go out and lease a car for $500 per month for 3 years, and then compare a finance deal of $500 per month for 4 or 5 years, I be better off after 3 years with the finance deal because more of my $500 is going toward the depreciation of the car.
Also, on your example of leasing a car and using the cash to invest.... I think you would have a much better chance of your return beating the interest rate on a financed vehicle than the money factor on a lease.
I'm not trying to totally slam leases because I do think there is a need for them. When the residual on the car is high, and the money factor isn't "massaged" to make up for it, then a lease can be a good deal.
Former Vendor of MBWorld
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From: Cincinnati, OH
I understand your point and I wasn't trying to make a blanket statement because you can't, whether you are for or against leasing.
Here are the facts that we deal with every day.
1) More than 40% of the people that finance and trade in before the end of the term are upside down. Putting money down on a finance will help lower that possibility but more and more people are not and it's not the best use of your money dumping it into a depreciating asset.
2) With interest rates on the rise leasing will become even more of an advantage.
3) We don't agree that leasing with an artificially inflated residual is a good thing. Try getting out early, for whatever reason - we hear them all, and you will really be in a negative situation.
We look at each client's needs and driving habits to structure a lease that is good for them during and at the end of the lease.
Here are the facts that we deal with every day.
1) More than 40% of the people that finance and trade in before the end of the term are upside down. Putting money down on a finance will help lower that possibility but more and more people are not and it's not the best use of your money dumping it into a depreciating asset.
2) With interest rates on the rise leasing will become even more of an advantage.
3) We don't agree that leasing with an artificially inflated residual is a good thing. Try getting out early, for whatever reason - we hear them all, and you will really be in a negative situation.
We look at each client's needs and driving habits to structure a lease that is good for them during and at the end of the lease.
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From: Long Island, NY
W220 S65 AMG
Leased cars usually take a beating.
I know that I do beat on my 2 leases a little more than I would on a car that I was planning on keeping.
Leasing is cool, but my next vehicle is going to be a purchase.
I know that I do beat on my 2 leases a little more than I would on a car that I was planning on keeping.
Leasing is cool, but my next vehicle is going to be a purchase.
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Non-MB
Plus depreciation
Originally Posted by Natalie
If I lease a CLS, $69544, the MBUSA rate is $824/mo. That means I would need an investment that pays about 15% right???
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2000 W210 E55->2003 R230 SL500->2004 W211 E55->2007 997TT+2007 E63->2010 GLK350->2012 E550 4matic
Don't forget depreciation if you get into accidents.
I lease for my wife as she routinely gets into accidents which makes my selling her car privately quite a headache.
With leases, I return the car, no questions asked.
I lease for my wife as she routinely gets into accidents which makes my selling her car privately quite a headache.
With leases, I return the car, no questions asked.
Thread Starter
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Joined: Jan 2005
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From: Hawaii
SL-500 (mine), Ferrari Spider convertible (was Husbands, mine now!)
Originally Posted by King///AMG
He's got a point. If you have the money, I would finance the car for a period of 60 months or so with a low interest rate.
I'm a little ignorant on financing. How much is the average rate to borrow the money? Without getting too complicated, where would you suggest investing the cash that you would have paid for the car?
Former Vendor of MBWorld
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From: Cincinnati, OH
Take the money factor, for example .00220 and multiple by 2400 (5.28%) to get an idea of what the comparable interest rate would be and then look for something to invest in that pays more than that.
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From: Obama Land
K Car
Tarry, thanks for the response.
Sorry if I came off sounding like this. It's more the deceiving lease commercials I hear on the radio all the time. Not that the info is false, they're just not comparing apples to apples.
Agreed. But you can also be upside down if you try to get out of a lease early. I see an awful lot of 4 and 5 year leases out there.
Admittedly, I do not completely understand what drives money factors on a lease, so help me to understand this. With rising interest rates, won't these also transfer over to the money factors on a lease? What's the driving force behind the money factor?
Yes, you have a great point. I was saying they were good to have when comparing to a finance deal, when you are going to keep the car until the end of the lease term and turn it in. Of course, having such a high residual is a negative if you try to get out early.
It sounds like your company is really doing it's part to help the consumer. Again, I apologize if my last post came off a little negative on leasing, you, or your company.
I understand your point and I wasn't trying to make a blanket statement because you can't, whether you are for or against leasing.
1) More than 40% of the people that finance and trade in before the end of the term are upside down. Putting money down on a finance will help lower that possibility but more and more people are not and it's not the best use of your money dumping it into a depreciating asset.
2) With interest rates on the rise leasing will become even more of an advantage.
3) We don't agree that leasing with an artificially inflated residual is a good thing. Try getting out early, for whatever reason - we hear them all, and you will really be in a negative situation.
We look at each client's needs and driving habits to structure a lease that is good for them during and at the end of the lease.
Super Member
Joined: Apr 2005
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From: oregon
2011 C300
if you lease, lease SHORT term, then it still has residual value at the end of the lease. Long term leases are no good, beacuse the vehicle depreciated to nothing, and has hardly been paid for.
Last edited by JDM; Apr 7, 2005 at 06:15 PM.
Former Vendor of MBWorld
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From: Cincinnati, OH
No problem.
We don't recommend long term leases for the reason you mention.
Money factor rates usually increase with finance rates.
We have people contact us every day needing to get out of a lease early. Most people say "I'll stay in the whole term", but there are many things that can happen. We just had someone that got a DUI, he's not driving for a couple of years. He ended having to stay in it as it was a subsidized VWS lease and it was more expensive to get out early than to keep making the payments.
There is not always a clear lease vs buy answer.
We don't recommend long term leases for the reason you mention.
Money factor rates usually increase with finance rates.
We have people contact us every day needing to get out of a lease early. Most people say "I'll stay in the whole term", but there are many things that can happen. We just had someone that got a DUI, he's not driving for a couple of years. He ended having to stay in it as it was a subsidized VWS lease and it was more expensive to get out early than to keep making the payments.
There is not always a clear lease vs buy answer.
Originally Posted by revstriker
Tarry, thanks for the response.
Sorry if I came off sounding like this. It's more the deceiving lease commercials I hear on the radio all the time. Not that the info is false, they're just not comparing apples to apples.
Agreed. But you can also be upside down if you try to get out of a lease early. I see an awful lot of 4 and 5 year leases out there.
Admittedly, I do not completely understand what drives money factors on a lease, so help me to understand this. With rising interest rates, won't these also transfer over to the money factors on a lease? What's the driving force behind the money factor?
Yes, you have a great point. I was saying they were good to have when comparing to a finance deal, when you are going to keep the car until the end of the lease term and turn it in. Of course, having such a high residual is a negative if you try to get out early.
It sounds like your company is really doing it's part to help the consumer. Again, I apologize if my last post came off a little negative on leasing, you, or your company.
Sorry if I came off sounding like this. It's more the deceiving lease commercials I hear on the radio all the time. Not that the info is false, they're just not comparing apples to apples.
Agreed. But you can also be upside down if you try to get out of a lease early. I see an awful lot of 4 and 5 year leases out there.
Admittedly, I do not completely understand what drives money factors on a lease, so help me to understand this. With rising interest rates, won't these also transfer over to the money factors on a lease? What's the driving force behind the money factor?
Yes, you have a great point. I was saying they were good to have when comparing to a finance deal, when you are going to keep the car until the end of the lease term and turn it in. Of course, having such a high residual is a negative if you try to get out early.
It sounds like your company is really doing it's part to help the consumer. Again, I apologize if my last post came off a little negative on leasing, you, or your company.
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From: Orlando FL
2010 ZR1 2011 JGC Overland 2013 ML63 on order
Ok, now here's a real question for ya..
I was involved in a conversation before with a customer at a dealership and they mentioned somthing called a "1 payment" lease? What are the advantages to doing a 1 payment 36 mo. lease as opposed to the standard 36 mo lease with regular monthly payments? Is this something that is commonly offered by dealerships these days?
Former Vendor of MBWorld
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From: Cincinnati, OH
The only advantage of a one-pay lease is that you will normally get a discounted rate. You can usually invest your money and make more than the discount offered.
Most indpendent lenders do not offer this as an option.
Most indpendent lenders do not offer this as an option.
Originally Posted by Tony007
I was involved in a conversation before with a customer at a dealership and they mentioned somthing called a "1 payment" lease? What are the advantages to doing a 1 payment 36 mo. lease as opposed to the standard 36 mo lease with regular monthly payments? Is this something that is commonly offered by dealerships these days?
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From: Irvine, CA
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Originally Posted by billycwhatup
C'mon. If it's not specifically a tax issue, we all know that the unspoken reality is that leasing for people who can't afford to buy. For most people, it makes no more sense to lease a car than to enter into a long-term deal with Avis. It's the same thing, but no one wants to admit that they lease because they can't afford the car they want if they don't.
