any comments on the goodness/badness of this particular lease deal?
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any comments on the goodness/badness of this particular lease deal?
hi friends,
ok, never having leased before, and trying to keep all the various components in mind as they relate to conventional vehicle financing, I wanted to bounce these numbers off the group at large.
the vehicle is an 07 E550 configured as described in my .sig below.
Doing the MSRP math brings the car to about 68,000 as optioned. My decision to lease is based on the upcoming (during the life of the lease) full redesign of the W211, and not wanting to get caught holding the bag on that resale value/trade in hit once the W211+1 comes out.
I'm doing a no trade, 0 down, 39 month, 15,000 mile/yr (48750 mile total) lease with a money factor of .00241, for about $1150/month, against a gross capitalized cost (including the pro-rated taxes and fees) of 67,681. The residual is about 32,700 at the end of the 39 months. Only $1150 (1st month's payment) is due at signing.
Given that the money factor is roughly on par with current interest rates it would seem that I'm not being overcharged for the funds (I can get a 60 month note for 5.74%, which would give me a payment under the same 0 down circumstances of about 1250).
Any general thoughts? the thing I noticed is a $795 lease acquisition fee and, at the end, a $395 lease turn in fee.
What is this lease-novice (me) missing?
thanks
-james
ok, never having leased before, and trying to keep all the various components in mind as they relate to conventional vehicle financing, I wanted to bounce these numbers off the group at large.
the vehicle is an 07 E550 configured as described in my .sig below.
Doing the MSRP math brings the car to about 68,000 as optioned. My decision to lease is based on the upcoming (during the life of the lease) full redesign of the W211, and not wanting to get caught holding the bag on that resale value/trade in hit once the W211+1 comes out.
I'm doing a no trade, 0 down, 39 month, 15,000 mile/yr (48750 mile total) lease with a money factor of .00241, for about $1150/month, against a gross capitalized cost (including the pro-rated taxes and fees) of 67,681. The residual is about 32,700 at the end of the 39 months. Only $1150 (1st month's payment) is due at signing.
Given that the money factor is roughly on par with current interest rates it would seem that I'm not being overcharged for the funds (I can get a 60 month note for 5.74%, which would give me a payment under the same 0 down circumstances of about 1250).
Any general thoughts? the thing I noticed is a $795 lease acquisition fee and, at the end, a $395 lease turn in fee.
What is this lease-novice (me) missing?
thanks
-james
#2
Here are the Mercedes lease prices for November, graciously provided to us by leasecompare:
2007 E550 4matic 4dr Sedan / Compare Instant Lease Quotes
24 mo/15k mi – Residual Value 63% of MSRP – .00220 Base Money Factor Rate
36 mo/15k mi – Residual Value 52% of MSRP – .00220 Base Money Factor Rate
Based on these numbers, both the money factor and residual value on the lease you were quoted are goosed to a few thousand dollars each. Now I've also heard there are some discounts available on this model for the winter, so you may be able to get the price down a few grand at least.
If I were you I'd shoot for a 65k cap cost on that car and a 36k/15k mile lease at the numbers listed above. I'm pretty sure you'll get it, and it will save you a LOT. Be patient, this isn't exactly prime selling season anywhere.
2007 E550 4matic 4dr Sedan / Compare Instant Lease Quotes
24 mo/15k mi – Residual Value 63% of MSRP – .00220 Base Money Factor Rate
36 mo/15k mi – Residual Value 52% of MSRP – .00220 Base Money Factor Rate
Based on these numbers, both the money factor and residual value on the lease you were quoted are goosed to a few thousand dollars each. Now I've also heard there are some discounts available on this model for the winter, so you may be able to get the price down a few grand at least.
If I were you I'd shoot for a 65k cap cost on that car and a 36k/15k mile lease at the numbers listed above. I'm pretty sure you'll get it, and it will save you a LOT. Be patient, this isn't exactly prime selling season anywhere.
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2003 E500
Hi
Actually those are the guys I went thru
Note that you cut and pasted 4matic numbers. My 07 is rear wheel drive which shifts the demand and this money factor numbers
The piint about residual is a good one
As I understand it is calculated as a percentage of MSRP rather than purchase price, which yields a higher residual value and therefore lower depreciation. Right?
Actually those are the guys I went thru
Note that you cut and pasted 4matic numbers. My 07 is rear wheel drive which shifts the demand and this money factor numbers
The piint about residual is a good one
As I understand it is calculated as a percentage of MSRP rather than purchase price, which yields a higher residual value and therefore lower depreciation. Right?
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Your thought on residual is correct. However, here my 2 cents.
If your sole concern is holding the "bag", I would reconsider the deal. You are simply not getting enough off of the car in the first place. I agree that you need about another $5000 off the top. The residual remains as is, so you end up with a $130/month savings right there bringing you closer to $1K per month. Next, you may want to make sure that the financing / leasing is through MB credit as they have realistic residual values (which actually helps you in the end). Why does this matter? Well, my philosophy is to rarely (if ever) walk away from a lease. I typically trade the car in for a new one LOOONG before the lease runs out. If you get another MB, they will not only waive the miniscule fee, but will actually give you an added discount above and beyond the going rate (loyalty program). I have even had the case where MB contacted me once about 6 months prior to my lease ending (and the new body 5 series being released) and offered me $10000 off any new MB. Obviously, I took it. Anyhoo, the point to this tale is why go for the 15000 miles per year up front? When you trade it in, all that matters is covering the residual. If the car is worth way more than the residual, then the dealer will low ball you and simply offer you the residual as a trade in. If the car is worth LESS than the residual (due to high miles), the dealer will have to suck it up more and give you a fair (ie closer to retail) trade in value. I typically get 10000 or even 7500 miles per year and go ahead and mod away, not worrying about lease returns. Even if you decide to walk from MB, most other manufacturers will do the same, since they know about the price difference in getting a new MB. I have also done that with BMW (traded in a leased MB for a sweet deal on an M3).
Overall, I'd say paying over $1000/month is a bit high for that car. I'm paying $1100 for my E55 and it had a $93K sticker and I only put $3500 down (which does include first payment). I only get 10000 miles per year, but the difference between that and 15000 is only about $75 per month. That is still too close to what you are paying.
I say shop around more and get a better deal. The money factor is good, but that is simply incentive from the manufacturer to move inventory. It isn't the dealer giving you ANY discount. Additionally, as someone else mentioned, the E-class currently has quite a bit of "trunk" money (incentives paid to the dealer for selling) that you have not yet seen. Find a high volume dealer and strike a deal before the month ends. Let us know how it turns out or if you need help!!
If your sole concern is holding the "bag", I would reconsider the deal. You are simply not getting enough off of the car in the first place. I agree that you need about another $5000 off the top. The residual remains as is, so you end up with a $130/month savings right there bringing you closer to $1K per month. Next, you may want to make sure that the financing / leasing is through MB credit as they have realistic residual values (which actually helps you in the end). Why does this matter? Well, my philosophy is to rarely (if ever) walk away from a lease. I typically trade the car in for a new one LOOONG before the lease runs out. If you get another MB, they will not only waive the miniscule fee, but will actually give you an added discount above and beyond the going rate (loyalty program). I have even had the case where MB contacted me once about 6 months prior to my lease ending (and the new body 5 series being released) and offered me $10000 off any new MB. Obviously, I took it. Anyhoo, the point to this tale is why go for the 15000 miles per year up front? When you trade it in, all that matters is covering the residual. If the car is worth way more than the residual, then the dealer will low ball you and simply offer you the residual as a trade in. If the car is worth LESS than the residual (due to high miles), the dealer will have to suck it up more and give you a fair (ie closer to retail) trade in value. I typically get 10000 or even 7500 miles per year and go ahead and mod away, not worrying about lease returns. Even if you decide to walk from MB, most other manufacturers will do the same, since they know about the price difference in getting a new MB. I have also done that with BMW (traded in a leased MB for a sweet deal on an M3).
Overall, I'd say paying over $1000/month is a bit high for that car. I'm paying $1100 for my E55 and it had a $93K sticker and I only put $3500 down (which does include first payment). I only get 10000 miles per year, but the difference between that and 15000 is only about $75 per month. That is still too close to what you are paying.
I say shop around more and get a better deal. The money factor is good, but that is simply incentive from the manufacturer to move inventory. It isn't the dealer giving you ANY discount. Additionally, as someone else mentioned, the E-class currently has quite a bit of "trunk" money (incentives paid to the dealer for selling) that you have not yet seen. Find a high volume dealer and strike a deal before the month ends. Let us know how it turns out or if you need help!!
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interesting observation...but, and I'm not trying to be difficult here, if the money factor is in the right neighborhood, and the lease is not from MB, I'm sort of not seeing any leverage points other than the residual percentage with the leasing company (*not* mercedes financial).
I hear what you're saying in terms of raw payment numbers, but I'm trying to figure out where the variable is that I have not yet pushed. So far it seems to be the residual value being too low.
The purchase price, actually, for the car is 1k *under* invoice, for an 07 E550. I'm not really sure how I'd do better than that at this point in time. (ie the price is 62,800 +TTL, for an E550, P2, side blinds, parktronic, bluetooth, and ipod kit. That configuration MSRPs around 68,000-69,000.
then when you add in the taxes and fees, that adds about 4-5k to the price, which brings us to the 'out the door' leased gross capital cost of 67,700ish, still less than the sticker of a car in that config.
The problem with MB financial is their money factors for the non-4matic E550 blow (00370, effectively 8.88% APR), and so I went to leasecompare and ended up with these numbers.
I'm happy to privately email the lease breakdown sheet to anyone who'd like to point out what I'm missing in the analysis, but with a starting point of invoice-minus-1,000 for the capitalized cost of the vehicle, I'm not sure where I'd maneuver from here.
the car is from MB, the lease is from leasecompare, so the two don't really have leverage 'against' each other in terms of month-end, given that I'm already at invoice minus 1000 on the car.
it is an interesting point to note that if I were to finance the car with 0 down, I would only be paying $150 a month *more* (ie about 1300) on a note that was building equity. My concern, though, is recapturing that equity once the W211+1 comes out a few years down the road.
Suggestions on what I'm missing in this computation?
-james
I hear what you're saying in terms of raw payment numbers, but I'm trying to figure out where the variable is that I have not yet pushed. So far it seems to be the residual value being too low.
The purchase price, actually, for the car is 1k *under* invoice, for an 07 E550. I'm not really sure how I'd do better than that at this point in time. (ie the price is 62,800 +TTL, for an E550, P2, side blinds, parktronic, bluetooth, and ipod kit. That configuration MSRPs around 68,000-69,000.
then when you add in the taxes and fees, that adds about 4-5k to the price, which brings us to the 'out the door' leased gross capital cost of 67,700ish, still less than the sticker of a car in that config.
The problem with MB financial is their money factors for the non-4matic E550 blow (00370, effectively 8.88% APR), and so I went to leasecompare and ended up with these numbers.
I'm happy to privately email the lease breakdown sheet to anyone who'd like to point out what I'm missing in the analysis, but with a starting point of invoice-minus-1,000 for the capitalized cost of the vehicle, I'm not sure where I'd maneuver from here.
the car is from MB, the lease is from leasecompare, so the two don't really have leverage 'against' each other in terms of month-end, given that I'm already at invoice minus 1000 on the car.
it is an interesting point to note that if I were to finance the car with 0 down, I would only be paying $150 a month *more* (ie about 1300) on a note that was building equity. My concern, though, is recapturing that equity once the W211+1 comes out a few years down the road.
Suggestions on what I'm missing in this computation?
-james
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First, you can reduce the monthly cost by placing a deposit that is refundable at lease end. The savings are lots more than you can currently earn on the money. This, I believe is only available to top tier credits. Second, the W211 successor will most likely be introduced in 2011 figuring an 8 year typical life of an MB body style. This is effectivly 4 years away. Are you wanting to keep this car that long. Third, in my analysis over many years of car ownership a lease only makes sense if you are taking a legit business write off for the car. Other than a lease the best deal is with a cash purchase and second with financing with a substancial down payment. People that use a lease to drive a car they otherwise cannot afford are kidding themselves. Think about this and a cash purchase if you are able to do it makes the most sense.
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EDIT: I like the idea of a refundable deposit; how does that differ from a capital cost reduction?
I generally agree with your observation that leasing's biggest benefits are for commercial entities rather than individuals without tax advantage (ie it's best for 'business' purposes rather than non-commercial owners).
So here's a window into my thinking.
My 03 was bought with a substantial deposit (probably about 30% down), and at this point I should be able to get that same amount back out (just under 4 years into the note).
My near term intent is to take that 'equity' out when I sell/trade-in my 03, and redeploy it to a real estate purchase, rather than putting it down into the 'next' car.
At this point I'm feeling I'm getting better use, and better principal protection, by deploying that cash into a (generally) appreciating asset (adding to a home purchase) rather than into the next car. I also think I'm fortunate at the current moment, in that I've paid for my 'use' of the car through the loan payments, and will hopefully come out of the 2003 car with the same financial position that I went in with, ie I'll have paid so much of the car while the car still retains sufficient resale value that I net the full amount of my deposit back out after selling and settling the balance of the note.
That added benefit, of taking back 'out' roughly the same cash that I put into the car 4 years ago, I think, is a good one and tough to figure into the raw computation, and one that I didn't articulate in the earlier post trying not to cloud the possible straight math issues with other, less-tangible (or more subjective) aspects of the deal like the take-out of equity.
So given these assumptions of minimum committment to the car, here's how I think it plays out (ignoring tax effects since this is not a commercial lease)
At the end of 39 months, I will have paid lease payments of $44,700ish. By contrast, at the end of 39 months on a 60 month note at 5.75%, I will have paid loan and interest payments of roughly $51,000, and still owe roughly $26,000 on a vehicle worth roughly$5-8,000 more than that.
Meanwhile the 30% deposit will have been working either earning interest or appreciating as equity in the home purchase.
If, on the other hand, I repeat my 2003 choice and do 30% down, then at the end of 39 months I will have paid loan and interest payments of roughly $36,000, and still owe roughly $18,000 on a vehicle worth roughly $13-16,000 more than that. That's still less than the 30% 'stuck' inside the car/loan for the duration. And those are with reasonably optimistic assumptions (and straight loan amortization tables).
Hopefully seeing this conversation will help other folks clarify their thinking (and hopefully help me clarify mine!). I'm mostly pessimistic about retained value in the W211 within 18 months of a new car release (ie at the end of the 39 month period), and think that while this has a greater demand on cash flow, the total spend is lower for the same 'use' of the car.
Of course I could be completely wrong still :-)
I generally agree with your observation that leasing's biggest benefits are for commercial entities rather than individuals without tax advantage (ie it's best for 'business' purposes rather than non-commercial owners).
So here's a window into my thinking.
My 03 was bought with a substantial deposit (probably about 30% down), and at this point I should be able to get that same amount back out (just under 4 years into the note).
My near term intent is to take that 'equity' out when I sell/trade-in my 03, and redeploy it to a real estate purchase, rather than putting it down into the 'next' car.
At this point I'm feeling I'm getting better use, and better principal protection, by deploying that cash into a (generally) appreciating asset (adding to a home purchase) rather than into the next car. I also think I'm fortunate at the current moment, in that I've paid for my 'use' of the car through the loan payments, and will hopefully come out of the 2003 car with the same financial position that I went in with, ie I'll have paid so much of the car while the car still retains sufficient resale value that I net the full amount of my deposit back out after selling and settling the balance of the note.
That added benefit, of taking back 'out' roughly the same cash that I put into the car 4 years ago, I think, is a good one and tough to figure into the raw computation, and one that I didn't articulate in the earlier post trying not to cloud the possible straight math issues with other, less-tangible (or more subjective) aspects of the deal like the take-out of equity.
So given these assumptions of minimum committment to the car, here's how I think it plays out (ignoring tax effects since this is not a commercial lease)
At the end of 39 months, I will have paid lease payments of $44,700ish. By contrast, at the end of 39 months on a 60 month note at 5.75%, I will have paid loan and interest payments of roughly $51,000, and still owe roughly $26,000 on a vehicle worth roughly$5-8,000 more than that.
Meanwhile the 30% deposit will have been working either earning interest or appreciating as equity in the home purchase.
If, on the other hand, I repeat my 2003 choice and do 30% down, then at the end of 39 months I will have paid loan and interest payments of roughly $36,000, and still owe roughly $18,000 on a vehicle worth roughly $13-16,000 more than that. That's still less than the 30% 'stuck' inside the car/loan for the duration. And those are with reasonably optimistic assumptions (and straight loan amortization tables).
Hopefully seeing this conversation will help other folks clarify their thinking (and hopefully help me clarify mine!). I'm mostly pessimistic about retained value in the W211 within 18 months of a new car release (ie at the end of the 39 month period), and think that while this has a greater demand on cash flow, the total spend is lower for the same 'use' of the car.
Of course I could be completely wrong still :-)
Last edited by jposhea3; 11-28-2006 at 10:35 PM.
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#8
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interesting observation...but, and I'm not trying to be difficult here, if the money factor is in the right neighborhood, and the lease is not from MB, I'm sort of not seeing any leverage points other than the residual percentage with the leasing company (*not* mercedes financial).
I hear what you're saying in terms of raw payment numbers, but I'm trying to figure out where the variable is that I have not yet pushed. So far it seems to be the residual value being too low.
The purchase price, actually, for the car is 1k *under* invoice, for an 07 E550. I'm not really sure how I'd do better than that at this point in time. (ie the price is 62,800 +TTL, for an E550, P2, side blinds, parktronic, bluetooth, and ipod kit. That configuration MSRPs around 68,000-69,000.
then when you add in the taxes and fees, that adds about 4-5k to the price, which brings us to the 'out the door' leased gross capital cost of 67,700ish, still less than the sticker of a car in that config.
The problem with MB financial is their money factors for the non-4matic E550 blow (00370, effectively 8.88% APR), and so I went to leasecompare and ended up with these numbers.
I'm happy to privately email the lease breakdown sheet to anyone who'd like to point out what I'm missing in the analysis, but with a starting point of invoice-minus-1,000 for the capitalized cost of the vehicle, I'm not sure where I'd maneuver from here.
the car is from MB, the lease is from leasecompare, so the two don't really have leverage 'against' each other in terms of month-end, given that I'm already at invoice minus 1000 on the car.
it is an interesting point to note that if I were to finance the car with 0 down, I would only be paying $150 a month *more* (ie about 1300) on a note that was building equity. My concern, though, is recapturing that equity once the W211+1 comes out a few years down the road.
Suggestions on what I'm missing in this computation?
-james
I hear what you're saying in terms of raw payment numbers, but I'm trying to figure out where the variable is that I have not yet pushed. So far it seems to be the residual value being too low.
The purchase price, actually, for the car is 1k *under* invoice, for an 07 E550. I'm not really sure how I'd do better than that at this point in time. (ie the price is 62,800 +TTL, for an E550, P2, side blinds, parktronic, bluetooth, and ipod kit. That configuration MSRPs around 68,000-69,000.
then when you add in the taxes and fees, that adds about 4-5k to the price, which brings us to the 'out the door' leased gross capital cost of 67,700ish, still less than the sticker of a car in that config.
The problem with MB financial is their money factors for the non-4matic E550 blow (00370, effectively 8.88% APR), and so I went to leasecompare and ended up with these numbers.
I'm happy to privately email the lease breakdown sheet to anyone who'd like to point out what I'm missing in the analysis, but with a starting point of invoice-minus-1,000 for the capitalized cost of the vehicle, I'm not sure where I'd maneuver from here.
the car is from MB, the lease is from leasecompare, so the two don't really have leverage 'against' each other in terms of month-end, given that I'm already at invoice minus 1000 on the car.
it is an interesting point to note that if I were to finance the car with 0 down, I would only be paying $150 a month *more* (ie about 1300) on a note that was building equity. My concern, though, is recapturing that equity once the W211+1 comes out a few years down the road.
Suggestions on what I'm missing in this computation?
-james
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First, you can reduce the monthly cost by placing a deposit that is refundable at lease end. The savings are lots more than you can currently earn on the money. This, I believe is only available to top tier credits. Second, the W211 successor will most likely be introduced in 2011 figuring an 8 year typical life of an MB body style. This is effectivly 4 years away. Are you wanting to keep this car that long. Third, in my analysis over many years of car ownership a lease only makes sense if you are taking a legit business write off for the car. Other than a lease the best deal is with a cash purchase and second with financing with a substancial down payment. People that use a lease to drive a car they otherwise cannot afford are kidding themselves. Think about this and a cash purchase if you are able to do it makes the most sense.
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EDIT: I like the idea of a refundable deposit; how does that differ from a capital cost reduction?
I generally agree with your observation that leasing's biggest benefits are for commercial entities rather than individuals without tax advantage (ie it's best for 'business' purposes rather than non-commercial owners).
So here's a window into my thinking.
My 03 was bought with a substantial deposit (probably about 30% down), and at this point I should be able to get that same amount back out (just under 4 years into the note).
My near term intent is to take that 'equity' out when I sell/trade-in my 03, and redeploy it to a real estate purchase, rather than putting it down into the 'next' car.
At this point I'm feeling I'm getting better use, and better principal protection, by deploying that cash into a (generally) appreciating asset (adding to a home purchase) rather than into the next car. I also think I'm fortunate at the current moment, in that I've paid for my 'use' of the car through the loan payments, and will hopefully come out of the 2003 car with the same financial position that I went in with, ie I'll have paid so much of the car while the car still retains sufficient resale value that I net the full amount of my deposit back out after selling and settling the balance of the note.
That added benefit, of taking back 'out' roughly the same cash that I put into the car 4 years ago, I think, is a good one and tough to figure into the raw computation, and one that I didn't articulate in the earlier post trying not to cloud the possible straight math issues with other, less-tangible (or more subjective) aspects of the deal like the take-out of equity.
So given these assumptions of minimum committment to the car, here's how I think it plays out (ignoring tax effects since this is not a commercial lease)
At the end of 39 months, I will have paid lease payments of $44,700ish. By contrast, at the end of 39 months on a 60 month note at 5.75%, I will have paid loan and interest payments of roughly $51,000, and still owe roughly $26,000 on a vehicle worth roughly$5-8,000 more than that.
Meanwhile the 30% deposit will have been working either earning interest or appreciating as equity in the home purchase.
If, on the other hand, I repeat my 2003 choice and do 30% down, then at the end of 39 months I will have paid loan and interest payments of roughly $36,000, and still owe roughly $18,000 on a vehicle worth roughly $13-16,000 more than that. That's still less than the 30% 'stuck' inside the car/loan for the duration. And those are with reasonably optimistic assumptions (and straight loan amortization tables).
Hopefully seeing this conversation will help other folks clarify their thinking (and hopefully help me clarify mine!). I'm mostly pessimistic about retained value in the W211 within 18 months of a new car release (ie at the end of the 39 month period), and think that while this has a greater demand on cash flow, the total spend is lower for the same 'use' of the car.
Of course I could be completely wrong still :-)
I generally agree with your observation that leasing's biggest benefits are for commercial entities rather than individuals without tax advantage (ie it's best for 'business' purposes rather than non-commercial owners).
So here's a window into my thinking.
My 03 was bought with a substantial deposit (probably about 30% down), and at this point I should be able to get that same amount back out (just under 4 years into the note).
My near term intent is to take that 'equity' out when I sell/trade-in my 03, and redeploy it to a real estate purchase, rather than putting it down into the 'next' car.
At this point I'm feeling I'm getting better use, and better principal protection, by deploying that cash into a (generally) appreciating asset (adding to a home purchase) rather than into the next car. I also think I'm fortunate at the current moment, in that I've paid for my 'use' of the car through the loan payments, and will hopefully come out of the 2003 car with the same financial position that I went in with, ie I'll have paid so much of the car while the car still retains sufficient resale value that I net the full amount of my deposit back out after selling and settling the balance of the note.
That added benefit, of taking back 'out' roughly the same cash that I put into the car 4 years ago, I think, is a good one and tough to figure into the raw computation, and one that I didn't articulate in the earlier post trying not to cloud the possible straight math issues with other, less-tangible (or more subjective) aspects of the deal like the take-out of equity.
So given these assumptions of minimum committment to the car, here's how I think it plays out (ignoring tax effects since this is not a commercial lease)
At the end of 39 months, I will have paid lease payments of $44,700ish. By contrast, at the end of 39 months on a 60 month note at 5.75%, I will have paid loan and interest payments of roughly $51,000, and still owe roughly $26,000 on a vehicle worth roughly$5-8,000 more than that.
Meanwhile the 30% deposit will have been working either earning interest or appreciating as equity in the home purchase.
If, on the other hand, I repeat my 2003 choice and do 30% down, then at the end of 39 months I will have paid loan and interest payments of roughly $36,000, and still owe roughly $18,000 on a vehicle worth roughly $13-16,000 more than that. That's still less than the 30% 'stuck' inside the car/loan for the duration. And those are with reasonably optimistic assumptions (and straight loan amortization tables).
Hopefully seeing this conversation will help other folks clarify their thinking (and hopefully help me clarify mine!). I'm mostly pessimistic about retained value in the W211 within 18 months of a new car release (ie at the end of the 39 month period), and think that while this has a greater demand on cash flow, the total spend is lower for the same 'use' of the car.
Of course I could be completely wrong still :-)
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2010 ML550, 2010 E350 4M, 1966 Corvette Convt C2
I disagree with a few points. First, the refundable deposit only gets a slight reduction in payments and I am one that believes that money can be used better. Second, the 2009 model will be the new body, so he is actually 2 years away. Third, a lease or a finance with a good rate is not at all bad given the opportunity costs you lose when you lay all the cash down. Get of the dickdum of leasing is stretching your means as it isn't You always get what you pay for. Always. Leasing simply allows you to pay ess up front whereas financing lets you put up more up front. I'll take that 30% deposit you are using to buy a car and get a rental unit instead. i'll sell it in 5 years and buy the car outright. What part are you lost on? Don't let your misperceptions hold you back. Stay open to new ideas.
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2003 E500
I can't speak for Jangy, but I know in my case I don't view the real estate as a trade or a liquid investment, it would be contributing to a primary residence in my case, so the liquidity issue doesn't actually fit me.
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BMW FTW
All I have to say is that residual value sucks for the 550. That is almost the same residual value that our E350 has that we just leased 39 months also. Cap cost of about $47k end of lease value of about $32k. Paying about $650 a month with $2k down.
#16
Your Overall, I'd say paying over $1000/month is a bit high for that car. I'm paying $1100 for my E55 and it had a $93K sticker and I only put $3500 down (which does include first payment). I only get 10000 miles per year, but the difference between that and 15000 is only about $75 per month.
Your deal is once in a life time so there is NO comparision!
jposhea3,
I would walk away from that deal and look here: http://fleetrates.com/specials_inven...s&SBmodel=E550
Good luck.
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2010 ML550, 2010 E350 4M, 1966 Corvette Convt C2
Primary residence is quite important both financially as a long term investment and as a quality of life factor. Putting money into an upgrade of that is more important than a car. As for some of the other comments here re lease terms and prices, remember, if it sounds too good to be true its not.
#18
EDIT: I like the idea of a refundable deposit; how does that differ from a capital cost reduction?
I generally agree with your observation that leasing's biggest benefits are for commercial entities rather than individuals without tax advantage (ie it's best for 'business' purposes rather than non-commercial owners).
So here's a window into my thinking.
My 03 was bought with a substantial deposit (probably about 30% down), and at this point I should be able to get that same amount back out (just under 4 years into the note).
My near term intent is to take that 'equity' out when I sell/trade-in my 03, and redeploy it to a real estate purchase, rather than putting it down into the 'next' car.
At this point I'm feeling I'm getting better use, and better principal protection, by deploying that cash into a (generally) appreciating asset (adding to a home purchase) rather than into the next car. I also think I'm fortunate at the current moment, in that I've paid for my 'use' of the car through the loan payments, and will hopefully come out of the 2003 car with the same financial position that I went in with, ie I'll have paid so much of the car while the car still retains sufficient resale value that I net the full amount of my deposit back out after selling and settling the balance of the note.
That added benefit, of taking back 'out' roughly the same cash that I put into the car 4 years ago, I think, is a good one and tough to figure into the raw computation, and one that I didn't articulate in the earlier post trying not to cloud the possible straight math issues with other, less-tangible (or more subjective) aspects of the deal like the take-out of equity.
So given these assumptions of minimum committment to the car, here's how I think it plays out (ignoring tax effects since this is not a commercial lease)
At the end of 39 months, I will have paid lease payments of $44,700ish. By contrast, at the end of 39 months on a 60 month note at 5.75%, I will have paid loan and interest payments of roughly $51,000, and still owe roughly $26,000 on a vehicle worth roughly$5-8,000 more than that.
Meanwhile the 30% deposit will have been working either earning interest or appreciating as equity in the home purchase.
If, on the other hand, I repeat my 2003 choice and do 30% down, then at the end of 39 months I will have paid loan and interest payments of roughly $36,000, and still owe roughly $18,000 on a vehicle worth roughly $13-16,000 more than that. That's still less than the 30% 'stuck' inside the car/loan for the duration. And those are with reasonably optimistic assumptions (and straight loan amortization tables).
Hopefully seeing this conversation will help other folks clarify their thinking (and hopefully help me clarify mine!). I'm mostly pessimistic about retained value in the W211 within 18 months of a new car release (ie at the end of the 39 month period), and think that while this has a greater demand on cash flow, the total spend is lower for the same 'use' of the car.
Of course I could be completely wrong still :-)
I generally agree with your observation that leasing's biggest benefits are for commercial entities rather than individuals without tax advantage (ie it's best for 'business' purposes rather than non-commercial owners).
So here's a window into my thinking.
My 03 was bought with a substantial deposit (probably about 30% down), and at this point I should be able to get that same amount back out (just under 4 years into the note).
My near term intent is to take that 'equity' out when I sell/trade-in my 03, and redeploy it to a real estate purchase, rather than putting it down into the 'next' car.
At this point I'm feeling I'm getting better use, and better principal protection, by deploying that cash into a (generally) appreciating asset (adding to a home purchase) rather than into the next car. I also think I'm fortunate at the current moment, in that I've paid for my 'use' of the car through the loan payments, and will hopefully come out of the 2003 car with the same financial position that I went in with, ie I'll have paid so much of the car while the car still retains sufficient resale value that I net the full amount of my deposit back out after selling and settling the balance of the note.
That added benefit, of taking back 'out' roughly the same cash that I put into the car 4 years ago, I think, is a good one and tough to figure into the raw computation, and one that I didn't articulate in the earlier post trying not to cloud the possible straight math issues with other, less-tangible (or more subjective) aspects of the deal like the take-out of equity.
So given these assumptions of minimum committment to the car, here's how I think it plays out (ignoring tax effects since this is not a commercial lease)
At the end of 39 months, I will have paid lease payments of $44,700ish. By contrast, at the end of 39 months on a 60 month note at 5.75%, I will have paid loan and interest payments of roughly $51,000, and still owe roughly $26,000 on a vehicle worth roughly$5-8,000 more than that.
Meanwhile the 30% deposit will have been working either earning interest or appreciating as equity in the home purchase.
If, on the other hand, I repeat my 2003 choice and do 30% down, then at the end of 39 months I will have paid loan and interest payments of roughly $36,000, and still owe roughly $18,000 on a vehicle worth roughly $13-16,000 more than that. That's still less than the 30% 'stuck' inside the car/loan for the duration. And those are with reasonably optimistic assumptions (and straight loan amortization tables).
Hopefully seeing this conversation will help other folks clarify their thinking (and hopefully help me clarify mine!). I'm mostly pessimistic about retained value in the W211 within 18 months of a new car release (ie at the end of the 39 month period), and think that while this has a greater demand on cash flow, the total spend is lower for the same 'use' of the car.
Of course I could be completely wrong still :-)
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2010 ML550, 2010 E350 4M, 1966 Corvette Convt C2
Its not a matter of trusting resale values as it is without question a depreciating asset. There have been very few of the 70 cars I have owned that I have made any money selling. You should plan for the worst and compared to other makes and models its not really that bad.
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2015 ML 350
On the other hand, had you NOT put all that money into a down payment 4 years ago, you'd STILL have it (as opposed to be getting it back), you would have paid 1/2 the sales tax on the new car, and your car payments whould have been 1/3 to 1/2 less per month (lease rates are usually less than purchase rates because Manufacturers would rather you lease) ... so who knows... I'm also confused about the math, and whether to lease or buy anymore. It used to be so clear cut to me. I always Bought.
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2010 ML550, 2010 E350 4M, 1966 Corvette Convt C2
On the other hand, had you NOT put all that money into a down payment 4 years ago, you'd STILL have it (as opposed to be getting it back), you would have paid 1/2 the sales tax on the new car, and your car payments whould have been 1/3 to 1/2 less per month (lease rates are usually less than purchase rates because Manufacturers would rather you lease) ... so who knows... I'm also confused about the math, and whether to lease or buy anymore. It used to be so clear cut to me. I always Bought.
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2003 E500
Yeah, I'd actually agree with the last 2 posters.
Unless it's a heavily subsidized lease, with a high residual, then for individuals a purchase (net of all the hassles, etc) works out to be the best. The 'worry' about resale/trade-in offsets the lack of 'worry' about mileage and wear/tear limits (or vice versa if your *preference*, psychologically, is to lease).
As we've seen there are some very aggressively priced leases, but those tend to be for moderately optioned cars, and for short terms (see, for example, the 2 year MB Winter specials, which I suspect are designed to keep a certain number of units flowing out the door during the otherwise low-sales days of winter).
Unless it's a heavily subsidized lease, with a high residual, then for individuals a purchase (net of all the hassles, etc) works out to be the best. The 'worry' about resale/trade-in offsets the lack of 'worry' about mileage and wear/tear limits (or vice versa if your *preference*, psychologically, is to lease).
As we've seen there are some very aggressively priced leases, but those tend to be for moderately optioned cars, and for short terms (see, for example, the 2 year MB Winter specials, which I suspect are designed to keep a certain number of units flowing out the door during the otherwise low-sales days of winter).
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2015 S212
I always purchased too, until I had legit business expensed car use. What it boils down to is this, in most circumstances the only sensable thing to do is purchase, best with cash and secondly by financing.The reason that the manufacturers would prefer that you lease is that the odds are you will do so in the future when the lease is up. As for sales tax what you said is not entirely correct as say in PA the sales tax on each lease payment is 9%, not the 6% you would pay on a purchase.The disposition fees, etc if applicable are also taxed at this rate. The worst thing about leasing is that you have no equity and if you put on lots of miles the lease becomes a worse way to go. The advantage is that you know going in what depreciation you are facing and you are only paying for a portion of the car. When you run numbers there is always a method to make it come out like you want (ie: Enron) But if you run the numbers straight up front and compare then with a purchase there is no way a lease will be better in most circumstances. Quite frankly if I were not using both of our cars for business I would just write a check for the purchase.
Why would you not prefer to invest your money, instead of paying cash? I couldn't imagine EVER paying $100k in cash, when I could pay a low interest payment and have that money make me more? Maybe I've been lucky with investments, but seems to me that stagnant money is useles and will only drop with inflation.
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2010 ML550, 2010 E350 4M, 1966 Corvette Convt C2
Why would you not prefer to invest your money, instead of paying cash? I couldn't imagine EVER paying $100k in cash, when I could pay a low interest payment and have that money make me more? Maybe I've been lucky with investments, but seems to me that stagnant money is useles and will only drop with inflation.
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SL/M6
Didnt read all the posts but accordong to your intial deal...I would not be satisfied with that price or payment for that car...especially this time of year.
Last edited by CY; 12-01-2006 at 10:56 PM.