this question is for all you financial gurus. what is your preferred method of purchasing your autos, cash, finance or lease? for me, paying cash is out of the question. what do you all think of the home equity car loan? (might not be the correct term) this loan allows you to write off the interest. do you all like shorter or longer terms? sorry if its off topic.

 

Not that I am a financial guru or anything, but one question you have to ask yourself is how long you plan on keeping the car? If you traditionally get a new car every 3-4yrs, I would lease. If you drive the car until the wheels fall off, I would finance. Now, to home equity or not to home equity, that is the question. I, personally would not use the equity in my home to buy a car, just for the simple fact that I never know what is going to happen around the next curve. Meaning I would use that in a situation of repair or renovation, not to buy something that is going to loose it value. That brings me to my final statement, a car is a depreciating asset and unless, again this is the last car you will ever buy or it is a car you plan on keeping for ever, don't finance. Lease the car, you put less money down, you pay less in monthly payments and "god forbid" you were in an accident, let the bank deal with the car being worth half the blue book value, because it has frame damage. You did your part and fixed the car, that was all you were obligated to do & don't worry with trying to trade the car in at the end.


MarcusBenz
H.O.I. MBZ

 

Marcus Benz, you could not have put it any better!!! I sold my '94 Pathfinder in '96 and I was upside down like a freak on a double loop roller coaster !!! I had excess rolled into my '96 Pathfinder lease which I leased only for 3 yrs. My car after that was a '99 540 and now an '02 clk430. I realized that I like changing my cars every 30-36 months therefore leasing is for me. However, last year I bought my wife an '02 X5 and we are planning on keeping that till the wheels roll off!!

As for home equiting a car???? NO!!!!!!!!!!!! Use your money for things that appreciate i.e. down payment on another home or property.

My 2wo cents worth!!

 

The other advantage of leasing is that you don't have to put as much cash down. Especially with interest rates as such, and I'm sure the new E will have a high residual value, the monthly payments should be pretty attractive. The other plus, is that dealers get a kick back from the lender and you can negotiate a little bit in terms of lowering your drive off costs by a few hundred dollars or get them to through in the CD Changer for free. The one thing to keep in mind is the mileage. You don't want a bill for mileage overage at the end of your lease. In most case 12,000 miles a year should suffice most leesees. I usually get 15,000 per year because I live in Southern California.

And if you end up really liking the car, you can always buyout your lease. In most cases it comes pretting close to traditional financing.

 

humm, leasing is an interesting option. i have never given much thought to leasing because of the mileage limitations. i know there are different types like the open or closed end lease. whats the difference?

 

There are no banks that any major dealer will use that has open-end leases, most all leases today are closed-end. This is the best way to go from a consumer stand point, because everything (terms & conditions) must be spelled out in the contract. The consumer will know the residual at the end of the term, what the money he puts down a signing is including and what it is used for in the contract & mileage limitation with price per mile penalties if you exceed. This way the bank cannot play tricks with you when it is time to turn in the car. When leasing first became popular for the dealer, there were a lot of shaddy things the banks would do and not disclose to the consumer & this is why a lot of people are afraid of leasing now!!! This way gives you so many options to choose at or during the lease it is way more flexible than the conventional finance or (I chringe when I say this) paying cash!! Unless you just have so much money laying around you have to move it to go the the bathroom, I would never advice anyone to pay cash. There are so many more things you can do with your money that will yield you a better return that sticking it into something that will more than likely be worth less than half its original value in 4-5 yrs. If you like having a new car every 3-4yrs & like the fact that you are never out of warranty, I say that leasing is the way to go; Not to mention the tax advantages!!!


MarcusBenz
H.O.I. MBZ

 

Almost forgot, the issue with the mileage will only come into play if you keep the car the full term of the lease. Like most people in So. Cal. they get tired of things fairly quickly and if you have 3mos
left on the lease, trade it in or work with the dealer to figure in your last remaining payments in the deal. Depending on what car you are leasing & what time of the month it is (The closer to the end the better) the more they will become flexible.


MarcusBenz
H.O.I. MBZ

 

you mentioned tax advantages to leasing. could you please explain?

 

Pesonally speaking, I love to own to cars, and collect nice ones. I bought mine and financed w/ my credit union. If you can, always go w/ a credit union to finance your car.

I got an excellent rate of 4.9% for 36months, which most, if not, any banks can match. The benefits are two-fold. Less interest, and quick payoff time. In terms of differences b/t financing and leasing, i would think if you are a car nut like myself and enjoy doing mods, then leasing may not suit your preferences. Plus the limitations of mileage doesn't appeal to me. If you getting a Benz, enjoy your ride and drive freely w/o worrying about 12K per year.

Leasing is proabably better suited for people who like to switch up every 2yrs or so, and no particularly care for modifying their cars. Tax wise, if you have a business, you can write off the leased car as an expense.

DJ Amer

**************
2002 CLK320 - brillant silver/ash - K4 - cd changer
H&R Cup Suspension Stage 3.5
17' AMG
Stoneguard Protection
**************

 

Not many people ( unless you own your own business ) can take advantage of the tax write offs involved with leasing a vehicle. I prefer to buy because I have no worries about excess mileage and the interest you pay is substantially less than leasing.

Whether you lease or buy you lose money through depreciation, obviously. But if you finance through a credit union at a low interest rate, you'll only pay interest on the amount of money you borrow (less than the full price of the car if you put money down).

If you lease a $50,000 car and the residual is 50% they take the residual value or $25,000 and add it to the purchase price which in this example equals $75,000 and apply the money factor (interest rate) to $75,000 to get your interest charge. Ask your dealer to spell it out. Yes you can put less money down through leasing to get a lower monthly payment, but the actual interest cost (assuming you cannot write it off) is substantilly more leasing.

 

now that is something i didn't know! i don't know a whole lot about leasing anyways, but that seems criminal! there was a poster who called them "stealerships". that name fits to a tee!

 

I bought my ML strickly for business use...it qualifies as a truck under IRS guidelines....I had my accountant analyze lease versus buy...and we determined substantial depreciation benefits with buy versus lease...I can't remember the exact #s or low exactly we applied it...but it was clearly a no brainer to purchase over lease.

Everyone that I have consulted on this issue claim that you ALWAYS pay more under a lease.

 

That calculation is correct and the reason is that the money factor is not a true interest rate in the general term. If you put a lease and a purchase using similar rates and money factors (ex. 6.9% interest & .00290 money factor) side by side and pencil them out using the same term the lease will be less money in payment, out of pocket & total if you were to buy the car out at the end. Granted the whole idea of leasing is to change cars every 3-4 yrs & I will say the leasing is not for everyone. Like I stated in my previous posts, if you keep your cars for long periods of time, you should finance. My next statement will not apply to all people, but you might want to check into this even so; Say you were to get into an accident in your W210 with Sport pkg. and the insurance adjuster comes out & lets you know the car is what they consider totalled. If you have leased the car, you have Gap Insurance that will pay off the car completely, no matter what you owe. If you have financed the car, MOST insurance companies will only give you market value for your car. Example, your balance to the bank is $30k and the insurance company tells you the market value of that car is $25k. YOU must pay the difference between the two amounts out of your pocket. A lot of people don't know this and this is just another advantage for those who consider leasing to fit thier needs.



MarcusBenz
H.O.I. MBZ

 

MarcusBenz

You are a financial genius!

Now pls. tell me, where can I get a good return and be SAFE, after having taken a bath in the market and hearing over and over and over...that we are now in a real estate bubble.

The financial system is on the verge of collapse.

What is an investor to do??

TIPS?

 

Mutual Funds.

 

Let's face it. Leasing is for getting more car with less money. everybody says leasing is for business. Bull. Dealers make more money on leases than anything else. For business you actually do better to purchase. Personally, you should never lease. The only advantage is getting a nice car with no money. Comes down to priorities. I purchased my 1999 CLK 320. Made payments from business. Now I am gettin a CLK 500. Instead of just giving my car back to the dealer to make more profit on the same car, I have a significant down payment in the value of the car. Not only that, I am only going to sales tax on the difference financed. Adds up to a lot on 60k car. Only problem is selling the car. Haven't had much luck, but haven't really treid either.

 

I hate to disagree, but that is the beauty of this forum. I would say that in the So. Cal. area alone, 70 to 75% of the people that buy MB's lease them. Just take Newport Beach (the MB capital of the USA) possibly one of the richest areas in the nation, if you polled those people 9 out of 10 are leasing thier cars. Now, I'am no financial genius, but I would say those people are pretty educated to get where they are in life and you're telling me that they all are fools with their money? Maybe the way people think is different here on the west coast, but I encounter way more buyers who lease than finance.

 

Another thing about your comment, the car does not go back to the dealer. When the lease is finished, the car is returned to the bank that handled the lease. The bank will take the car to the auction & many dealers are able to bid on the car.

Now, another point to leasing. You don't have to give the car back to the bank. Case in point, if the residual on the car is $25k and the going market on the cars in the papers & Autotraders is $30k, you can sell the car yourself and keep the $5k as your profit to put down on another car. Now, on the other hand, if the residual is $25k and the going market is $20k, give the car back and let the bank deal with the NEGATIVE EQUITY. You got your use out of the car and saved quite a bit in monthly payments & down payment. The car you have is rare case, where you could sell the car and make money, but as for those people with cars that are a dime a dozen, if you tried to sell it on your own it will take precious time and effort to maybe break even.

 

Please correct me if I am wrong as I am learning as much as I can about leases and the like. My understanding of how leases are normally calculated are as follows. The dealer will figure out for instance, a 3 year depreciation scale on X car (36 month lease) and then charge some sort of lease premium (6-8% I believe) which will give the total amount of lease payment. Divide and you have your monthly payment. Now I realize this is very simplified and in real life it is MUCH more complicated, but BASICALLY you pay on the part of the car you use when you lease. If you lease really short, then you pay more because the car depreciates the most in the first 2-3 years. My main question is this...if someone were to outright purchase in cash a car VS. lease wouldn't the only benefit from the lease be that you would have a new car every X years? If one were to purcahse a car, they would have to keep it at least 6 or 7 years for it to be worthwhile I believe. Also, wouldn't the amount of money (depreciated amount) lost on an outright purchased car be less after say 2 years than the total lease payments over 2 years (because of lease premium?) If you've read this far thanks a lot and any input/enlightenment is MUCH appreciated!

 

Buy low and sell high!

Best 2002 MB cars for 2004 residuals in the top 10 list are:

CLK55 AMG = 73 %

CL55 AMG = 72 %

CL500 = 70 %

E55 AMG = 70 %

http://www.cars.com/carsapp/national...residuals.tmpl

Use the calculator to see which method is more propitious: LOAN or LEASE


For Marcus:
Which mutual funds?
Lots of activity in antique car investing...

 

karl k,


I like funds that are diversified, don't put your eggs all in one basket as the old cliche says. I not really high on the technology sector right now. Although companies that are dealing with server upgrades & bandwith might be alright. I think the drug market is a good place to be and anything dealing with health issues. The antique car market is fickle, lots of ups and down. The hard part is finding the right project and the time that is invested in completing, but hey if you have the time and patients by all means enjoy.

 

i have also heard that it's best to negotiate from the invoice up, as oppossed to the MSRP down. and to keep the issue of trade-in seperate from price negotiations. any comments.

p.s. MarcusBenz, if you're not a financial guru you're damn close!

 

For those weighing the pros and cons of leasing vs buying, a great source of objective info is at Edmunds.com
Here's the URL: http://www.edmunds.com/advice/

There is no single answer to the question "Is it better to buy or lease?" Depends on a host of factors, especially residual value of car, investment climate (amount of money you could make by investing $$ not spent up front to purchase, which is very low right now, but was quite high 3 years ago), whether business write-off is possible (laws are now VERY restrictive), expected length of ownership, etc etc.


As regards residual values, ran across this list

Automobile Leasing Guide's 2002 Residual Value Awards:

Best Residual Value Brand-wide: Mercedes Benz

Compact Car: Mini Cooper
Midsize Car: Volkswagen Passat
Near Luxury Car: BMW 3 Series
Luxury Car: Mercedes-Benz CLK-Class

 

MBW Members, et al:

I've always tried hard not to write my 'opinion' about issues posted here on MBWorld. Rather, I find it much more helpful to the readers/members to post 'official' information and let the 'un-official' posts fall where they may. Occasionally, I read posts that just go beyond the scope of harmless hearsay and cause my stomach to rumble. My following rebuke is not meant to be directed to anyone, personally. Most of you have no formal training in the economics of cars acquisitions and have only heard others express themselves. All too often it's not sound advise.

I've been fortunate to have worked for one of the top M-B dealers in the world and the professional training I received there was extensive. I'm also an ex-CFO by profession and have long term related experience with corporate asset and cash flow management. No, I'm not ex-Enron or Arthur Anderson , either.

Therefore, I hereby express my 'opinion' by saying:

I sincerely hope the majority of M-B people who read this particular forum have better financial advisers than some of the 'opinions' posted here regarding leasing vs. buying. Why ANYONE would pay cash or finance a high-line, depreciating asset such as a Mercedes-Benz is beyond my comprehension. Recommending otherwise is just not understanding the economics of cash management, pure and simple. It has very little or NOTHING to do with a dealer's profit center or the ability to 'write-off' the lease costs, either. The car market tells us that 99% of all cars are a terrible investment and, therefore, you should do everything possible to control and minimize the losses. Buying one doesn't qualify, except in rare cases.

'Smart-Money' people lease expensive cars because their cash is more wisely invested in assets that will appreciate in value. Who do you know willingly purchases stock that is guaranteed to be worth 50% less after 4 or 5 years. I emphasize the word, willingly, for those of you recently tainted by the stock market. I'm not all heartless.

Enough said? Thank you for allowing me to express my frustration. ...RAB

 

I could not have said it any better! It is not a profit statement, it is a wise money management statement.