c4004matic

I have leased cars in the past, and like you, I swap cars rather frequently (hopefully if this E class is reliable Ill keep for 4 years plus) but that was in the days when I needed more car than I could afford. For example, a new minivan for the kids. However those days are long past and I'm at a point that I can afford pretty much whatever car I want (wife whining is the only real limit) thus its nice to always have some money in the vehicle. With leasing all you are doing is paying the depreciation on an asset while never reaping any capital in the process, its money straight down the hole. The ridiculous residuals that these leases have now are precisely to dissuade you from ever buying the car which they will later sell on the used car market at a much lower price and make a huge profit in the process given that you already paid all the depreciated value and more.

mjsbenz

But......even if you own it, you will experience depreciation and you have tied up all your money (or financed some of it). That depreciation is never recovered. Leasing is another form of balloon payment financing.

Last attempt to win you over... Financial advisors will tell you not to put your capital into depreciating assets. Unless you have to.

white_raven0

C400, I don't understand what your argument is... If I know I will only own a car for 3 years and will then trade in for a new car, and I know that I ll trade in probably around 50% of the value of the car (pretty easy to do some research and find out), yet the dealer is offering me when I purchase the car to buy the car back from me in 3 years for 62%. Why the hell wouldn't I sign such a futures contract?


It's not about whether one can afford a car or not, but a simple financial decision. 62%>50%. If I am given an offer for 62% guaranteed, I would be stupid to reject it. That's the benefit of leasing.

ua549

I wish that I still owned my first car, a 1959 300SL roadster (W198 II). I paid about $10k new and sold it in the mid 60's to buy a family sedan. Today a W198 is selling for well into 7 figures.

cetialpha5

I don't think you understand the way current leasing works. I also used to be against it in principle, but if you read the terms of the deals, it's actually better than buying if the manufacturer is offering the right incentive. The key points is the money factor, incentives/rebates and the residual. When they all line up in the buyer's favor, it's better to lease than buy. You should check out leasehackr.com. The major mistake in your thinking is that they actually make a profit when they get the car back, they actually take a loss when the residual is too high, they're basically kicking the can down the road. Lots of car companies report weak financials due to lease losses. They just like the losses on the lease better because they don't have to discount the car as much, but in order to keep the payment low, they have a high residual. Also other people are also making the point that the S&P was up almost 12% last year and averaged a little over 8% for the last 3 years and a little over 14% over the last 5 years. You could borrow money for about 1-2% on a new car. Even if you had the cash, it was better to stick the money in the S&P 500 over the last 5 years.

ua549

Investing in the securities market has its own significant risks. I would never recommend that someone borrow money to invest in the stock/bond market.

A few years ago (May 2007 - April 2009) leasing/borrowing for 2 years and investing that cash in the S&P would have incurred a loss of 43%.

I never borrow for living expenses. If I can't pay for something, I can't afford it.

mjsbenz

That 300SL must have been a beauty. Unfortunate that you did not hold onto that car.

In 2000, my Porsche indie in Manhattan had taken in a customer's 190SL and offered it to me for $17K. Silver over a red gut. White steering wheel and dashboard knobs. Very classic. I decided to pass as I had two air cooled 911s in my garage in NJ and had no room. Triple fail as I also sold the two air cooled for 50% of today's market.

I think we all should have held onto what we once drove.

DKTVAV

This whole page 3 (actually more than that: the last 10 posts) has nothing to do with the title. Now back to topic: anyone got a good deal since new year? I guess the price must be less now, right?

cetialpha5

Investing is for the long term. I've been through the dot com bust and the down markets of 2008. There were also some really spectacular years when the market returned 30 to 40 percent in one year. Long term average is about 7-8% and that includes those down years. If you're just going to lease one car for a set period and then never again, your point makes sense, but people tend to keep leasing continually so over the long term, it's a viable strategy. Although a good reason to pay cash is lock in your gains and diversify a little.

mjsbenz

$500 incentive is no longer available. No new incentives announced. Doesn't help getting a good deal. I think a very good deal is around 9% off.

makris0000

If you are a member of the American Bar Association then you get a discount. For the E it's currently $1K. They have the 2016 S at $10,500 and the 2017 S at $4,500. The discounts from the ABA range from $500-$10,500

mjsbenz

Just to expand on your comment, the same discount is available to those who hold a United Explorer Plus card, and other professional associations. The discount is MB's "Fleet" discount and applies to many companies as well. Unfortunately, they are not stackable.

thefisch

These posts are good reasons why I would lease but I don't. Always kept cars at least 6 years (more like 8 years recently). Usually leasing favors the higher end luxury cars for the reasons mentioned (and because the payments are affordable to a larger group versus purchase) and I typically get my cars new or used for $35k or less, finance or cash depending on rates. So there is not much at stake for me.

Once I get the bug for changing cars more often or want to purchase in a higher price bracket, I may look into it. Not looking forward to having more deal factors to consider or mileage limits or having to shop for a car more often, but hopefully the pros outweigh the cons.

Btw, should start another thread on earnings 5-7% on cash without taking much risk. Interested to here more about that. Of course I guess it depends on what you consider to be 'much' risk.

c4004matic

The percentage is immaterial! At the end of a lease you have exactly ZERO dollars for your investment. If you pay for the car at the end of three years you will have 50% of what you paid! Simple math guys with a lease you pay less money but get zero in return. There is no doubt that a car is a depreciating asset but leasing is like acquiring an asset that depreciates 100%!!!

ngerstman

Sorry to say that I'm not paying anything anymore for my e43. Couldn't deal with the bad deal, no discount on a $90,000 car when people are getting 8% or more off on their e300's. After being Mercedes customer for 30 years, bought an Audi s8, absolutely awesome. Hope everyone enjoys their e's. Happy trails! Regards. Ned.

mjsbenz

Ned.

Best of luck with the S8. It is a great automobile.

My E300 will be delivered end of next week. My dealer has 3 E43s in stock and I am positive they would deal on them. Not sure why your local dealer was so inflexible.

ngerstman

Thanks. I picked up the s8 yesterday. I got a loaded 2016 new at a great discount, same as the 2017's. What a rediculous beast, the engine breaths fire but without all the audio enhancements that Mercedes seems to be putting on their amg's. The Miami area has a lot of super rich people so I guess that they felt that they didn't need to deal at all despite the fact that I'm a 30 year Mercedes customer, never owned an Audi or a BMW. I noticed a bunch up in NJ in inventory, not sure why it's so lean down here. Still can't believe that they only offered me $1000 off a $91,000 car and that was a battle to get. I guess I could have gone for the e300, they're really nice but my muscle car mentality is still hanging around. I'm still mad at Mercedes for not offering an e400 option and certainly disappointed in the local dealership for taking advantage of the early lean inventory situation in e43's to not meet me somewhere in the middle. I'll miss you guys but take a peak every now and zen to see how everyone likes their e's. The e43 would have been my forth e so it is a bit sad. Thanks. Regards. Ned.

threeMBs

Congrats on S8. Clearly a more expensive car even with "a great discount", but also clearly significantly more of a car. Enjoy!

ngerstman

Thanks. A shame the dilemma that Mercedes has created for long time loyal customers, big money grab. They "forced" me into something insane! You only go around once. Regards. Ned.

mjsbenz

Ned,

Don't look back! I think you were dealing with the South Florida MB dealer network. I hate to group them all into one general commentary that they are not that customer friendly. From your NJ days, you know that you have many dealerships competing for your business and a few (not all) are willing to deal to get your business.

I only raise this point as you said " A shame the dilemma that Mercedes has created for long time loyal customers, big money grab.". Once you find a dealer or two who aggressively wants your business, the discounts begin to flow from many of them.

threeMBs

E43 is just hitting show rooms. Why would they discount a relatively limited production car, if they know they can get MSRP (or very close to it)? Oh, but there's E63 you'll say? Yes, but it'll be 1/3 more expensive and go for MSRP too.

ngerstman

You're right, it was a South Florida dealer. The dilemma I was referring to is the no e400 option without the need to potentially overpay just to get something with a 6 and/or at least 300hp. I was really feeling like they were sliming me. Just a bad taste all around that I'm not sure was going to go away. Thanks. Regards. Ned.

cetialpha5

With simple math, you have to do the actual math. The example would be why pay $800 a month with financing when you can pay $600 a month with leasing. At the end of the lease, you might have 5k in equity in the car, but you paid an extra $7200 for that. And you don't end up tying up those extra dollars. Leasing makes sense with the right terms. You can't just say leasing is bad without examining the terms. The manufacturers have shifted the terms so that leasing is sometimes better than financing or paying cash. They have decided to subsidize the lease so you mind as well take advantage of it when they offer it.

mjsbenz

I understand some of the points you are making. But I do not see the E43 as a limited production car. There are no special allocations required for the dealer to be able to order it. The dealer can get as many as it is comfortable selling.

If the demand is exceeding the supply, the discounts are not going to be very big (if at all). When the E300 first came out, it was going for close to MSRP but that changed quickly. For the E43, with the hefty premium over the E300, the demand is not exceeding supply. All you need is one dealer who wants to sell one of several E43s they have on their lot and is willing to be aggressive to earn your business.

Also, the internet has changed the dynamics of how dealers can price vehicles. You can send 20 RFP (Request for Price) in 10 minutes and then compare. And some dealers who are not nearby are willing to deliver the car in enclosed transport. So when I hear that South Florida dealers are playing hardball with no discount, then I would go to North Carolina and buy my car there.

I know it is not only about the price and that supporting your local dealer can be important but holding firm on a E43 price is not a smart strategy. They lost Ned and probably dozens more.

Mike__S

As for E300 pricing, there are solid 10% discounts at my local dealer for slower moving cars and easy 6-7% generally, if you approach them positively. They are often happy to make the money money on the financing. At the end, you tell the Finance and Insurance person you will bring a check in the morning.

However and all too often, the dealer will kill you on the trade. So discounts are very relative term. Unless you are very insistent on both ends of the deal, the trade and the buy, there will a winner and it won't be you. We sell privately as a result, so when we talk discount, we know what we are getting. During the downturn we bought a new Benz for all cash at a 25% discount. (I doubt we ever see that again, at least for everyone's sake I hope not.) I'd expect to do a minimum -10% next time round, but not for an E43. At the moment, have my eye on a Classic with 17 inch wheels and an odd mix of options.

Ah, the vanity of it all....indeed, we do pay cash and keep our cars six to eight years. We have always had two and at times three cars. How long we keep them has simply depended on accrued mileage, but sometimes questions of the long term reliability of the particular model (an early direct injection engine, for example). Why do we do this?

Everyone knows that depreciation is huge the first two years. What people fail to realize is that after a while the depreciation cost becomes less and less, all the while we are making 'lease payments" to ourselves in the form of a rigorous saving plan. Those years four, five, six or beyond become sublimely affordable period of ownership as that cash piles up.

Very simply, a lease is another way to solve a cashflow problem for a fee. This fee is sometimes less costly than a purchase loan, but only if the asset is not held long enough. That is the idea of an asset. You hold an asset. Use it fully, at the very least until the cross-over point is reached.

This value is reached when dividing residual book value over remaining useful life of the asset is greater than the depreciation expense for the period computed using a declining balance method. It is why one buys and holds onto cars for six to eight years.

A different way to look at this is the depreciation expense at this extended point of ownership may become as low as $150 a month, while the opportunity cost of owning a new car during this same period in terms of depreciation is huge, in the $1,250-1,500 per month range or more. This decision to own a car or not is not a "finance question". It is an asset management question with a very formal and positive answer.

I think it also important to point out that a high percentage of leasing for a given model vehicle does not influence asset valuation or depreciation other than it floods the used car market with good, solid, low mile vehicles that are an excellent (highly depreciated) value for the used car cash customer. Of course, this makes owning the same car for only two or three years a miserable experience, too. You get killed on the depreciation. Dealers are pretty clever, are they not?

So naturally, one thinks the lease is the better deal. The "deal" is one is not thinking a long enough time horizon to fully appreciate the true value of asset ownership.

The really effective, smart money way to own a Benz or any frequently leased luxury car is to sit on your cash until you see the clean, low mile (15-30k) vehicle you want. Then, pounce and keep that for six or more years. Modern cars are usually reliable until 150,000 miles. If garaged when ever possible, kept out of the sun and kept clean in winter, there is no reason a Benz or other well engineered car should not run 8-10 years very economically, as has proven for three generations of our extended family. Some buy new, some buy used, but all do so at infrequent intervals.