teksurv

I agree with what JTK44 has said WRT leasing. I also lease, because I like a new car every 3 years (less with the 5-6 month pull ahead offered by MBFS). I can pay cash for these cars but that makes no financial sense for me. I would add one other thing, if at the end of your lease you do decide you want to purchase the car, you can negotiate with your dealer. See, MBFS will let the car go to auction at lease end. Dealers have option to purchase, at far less than your stated residual. Negotiate a price (I would include CPO) and you can get it cheaper.

JTK44

Interesting:

My residual is completely upside down.

I contacted MF Financial and they said the residual was "non-negotiable". I plan to turn the car in in December when I replace it with a 2019 E450 already on order.

I just had my 2015 Ford Edge Sport go off lease. It too was up "side down". We liked the car, it only has 20,000 miles on it and at the right price would have considered buying. Liike MB Financial Ford Credit would not negotiate.

In the past (15 years ago) I was able to negotiate the buy back price. But since then, with two BMW's, Two Acura MDX's, one Audi and now my Mercedes plus the Ford Edge, there was no negotiating the price.

When we leased a replacement Ford Edge Sport, I asked the GM of the dealership, if they were interested in the car. He said not at the residual price. He said Ford would take it back, ticket it for auction, and they could then bid on it - but could not renegotiate the buy back price.

I think this is all because the financial arms of the manufacturer have taken out their own GAP insurance on the cars, protecting themselves from what the car brings at auction to the residual. Basically they do not care, as they have insurance to cover their loss - the difference between the residual and what they get at auction.

teksurv

Hmm, that's strange. I'll reach out again to a dealer to see what they say. You are correct, MBFS will not negotiate the residual. They also don't want to keep the car, and it will be slated for auction as described. As I understood it, MBFS knows the average selling price at auction and allows for dealer interest to bypass the headache and fees. I'll report back once I have contacted dealers for current policy.

lensjack

All interesting and welcome information. Much appreciated. This forum has been a great learning resource, even though I've ordered a coupe. Way more activity here than in the coupe/cab forum. Anyway, I expect that unless I've soured on MB three years down the road, I'll want to lease a new one rather than purchase the leased car. MBUX should be installed and debugged across all models by then, and the rapidly evolving options tech should continue to improve. I was disappointed at not being able to order HUD in this build cycle; I don't plan on missing out next time.

JTK44

Teksruv:

You posted:


If that is accurate, at the end of lease, the lessee (me) has only two choices: buy at the residual or return the car.

Is there third option? I only ask because you state at the end:

teksurv

Yes there is, or at least was a third option. That being, you terminate your lease with MBFS, turn in the car at a dealer. You negotiate with that dealer on a purchase price, effectively a newly originated transaction. Once you end the lease, the dealer has (or had in past) access to the car and negotiates with MBFS for acquisition. I've reached out to see if things have changed.

JTK44

OK now I think I understand:

You turn in the car. The dealer now buys the car. But before he can sell you the car, he must inspect and certify the car, adds on his profit as he selling you a CPO car.


My problem with what you are suggesting, is why having bought the car and inspecting it and then making it a CPO car, the dealer will sell it to you cheaper than its fair market value? In other words it is a CPO car and he can sell it to you or anyone else. So I would not expect any big savings - small savings vs. the market on a CPO car, but not a huge savings.

I think when all that is done,you will be pretty close to the residual.

I also think, but I am not sure, that most CPO cars are either trade in or demos.


IMO, the only way this can work is for you to directly deal with MBFS (as was done in the past) and negotiate the price which we both agree cannot be done.

The basic underlying problem is that the wholesale value is so much lower than the residual. That is why I believe they have insurance and to collect on the insurance they need to demonstrate an "arm's length" transaction - a sale to a dealership would not qualify. for their insurance.

After you speak to you dealer let us know what your find out.

JTK44

Follow up to post #49.

There is another additional cost to owning vs. leasing which is quite important and I apologize for omitting it:

Using $70,000 MSRP and a discount of 10% you have a cost of $63,000 on which you must pay taxes at 8.625% for a total out of pocket of $68,430.

The car I am leasing, the 2019 E450 has a MSRP of just over $70,000. The lease payments are $899 a month for 36 months, $32,364.

Over the three years of the lease that is a difference of $36,000 is cash outlay.

Assuming that this difference were invested at just 5%, for three years, that amounts to $5,400.

So to the extra cost as outlined above of $7,000, must be added this lost investment income of $5,400 for a total of over $12,000.

$12,000 is the additional cost of ownership vs. leasing over a 3 year period.

Is it then any wonder why over 70% of E, G and S Class Mercedes are leased!

rbrylaw

Wowsa, 8.625% tax? And I thought the 7% we pay in Florida was a lot. I think you've done a great job of showing how leasing can make more financial sense in a lot of situations. Still for me, I'm going to own my car and if it ultimately costs me more, that's OK. The car is mine lock stock and barrel.

JTK44

As I posted, for someone who likes a new car every year or every two years, owning is better than leasing.

As a wise man once said: "If it floats, flies, drives or fuc**" better to rent than own!

rbrylaw

LOL......guess I'm not such a wise man then!

ua549

Keep in mind that a lease is a depreciating asset. It can be bought, sold and traded just as any other asset. Just to throw off a few calculations, in Florida we only pay tax on the difference between the purchase price of a vehicle and the trade-in value, if any. My last purchase was all cash, but the one before it had a $60k trade on a $75k purchase so the tax was 7% of $15k or a bit over $1k. Personally I would never go into debt (a lease is a debt) for a personal asset such as a vehicle or real estate. I keep personal finances separated from business finances. Since I've been retired for 20+ years, I don't have much in the way of business finances left to worry about.

PatrixUSA

straying somewhat ot, but interesting discussions on leasing vs buying nonetheless...
...except for when you renew that relationship with that rented depreciating asset again and again and again... incurring perpetual monthly payments...

my 2¢...
the lease vs buy approach largely depends on one's preference and approach to cars and finances imo... as if you've truly been leasing since 1986, no doubt you've spent more money and have little to show for those monthly expenditures than you would have had you bought and keep your cars... no?

ex.
buy a $70,000 car every 8 years, so since 86 that's roughly 32 years, so 70k x 4 = 280,000
lease a $70,000 car every 3 or 4 years, with your posted monthly payment of 899/mo, over 32 years that's 345,000

no right or wrong here, but notwithstanding the incidentals of both approaches, the financial breakdown of leasing vs buying largely depends on one's ability to, and preference for, owing vs owning, and how long one is willing to keep, or likes to keep their cars...

bc in the end, however closely or divergent the finances may break down, one must not forget the REAL difference between leasing and buying - with one you've spent all that money and have nothing to show for it (short of the enjoyment of having driven different cars every 3 or 4 years), with the other you have 4 cars...

JTK44

Dear UA549:

When you trade in a car in New York, the sales tax is also on the difference between the purchase price and value of the traded in car, same as Florida.

Dear PatrixUSA:

I do not consider a lease a debt. I consider it a rental agreement. Unlike a finance agreement where you own the car and pay it off over time, a lease is a rental agreement. It is an obligation but not a debt.

The argument that with leasing at the end of the day you have nothing to show for it entirely misses the point of efficient allocation of resources.

I have set out numbers that show that if you change cars every 3 to 4 years, leasing is far, far more efficient than owning. If my numbers are incorrect please advise.

If you can show that owning a car for 3 or 4 years, taking into account depreciation, cost of money and taxes, is cheaper than leasing, please post those numbers so that all of us can benefit.

At the outset I posted that if you change cars every 1 to 2 years or plan to keep a car more than 5 years owning is more efficient than leasing. In fact for each year over 5 years until about 12 to 15 years the cost per year of ownership goes down. At 12 to 15 years, especially on a Mercedes the cost of repairs can approach the value of the car. Remember, just because your 12 year old Mercedes is now worth $10,000 as compared to $70,000 when new, replacement parts cost the same and labor rates are the same.

It is one thing to pay a Mercedes mechanic $165 an hour (the labor rate here on Long Island) to work on your new $70,000 Mercedes and another to pay him the same hourly rate to work on a 12 year old car worth $10,000! Parts costs the same whether your Mercedes is worth $70,000 or $10,000.

Some of the downside of owning a Mercedes for more than 4 years are:

1) Reliability
2) Maintenance cost: car is no longer under warranty
3) Safety features
4) Hassle to either sell the car or get "killed" when you trade in

Again, I look forward to you posting numbers that show that owning for 3 to 4 years is cheaper than leasing.

teksurv

Another benefit to leasing, for the OCD among us, is that if the car is wrecked but not totaled (GAP for totaled) you turn it in and walk away. If your budget allows for a monthly payment, you get a car always under warranty. Every 2-3 years you get the latest and greatest. Conversely my wife loves her SLK (purchased) and has no plans to change in the near term. There are benefits to both ways of thinking.

JTK44

Another benefit of leasing: If you Mercedes is in a crash and is repaired to Mercedes specifications, at the end of the lease you return it and you are done.

But if you own the car, it will be worth thousands of dollars less, no matter how good the repairs: the fact is that once a car has been in a major accident it value goes down dramatically.

Our third car is a 2008 Boxster: It was originally on a lease. When the lease ended we had less than 6,000 miles on it. (today is has less than 10,000 miles. It is a perfect third car: good looking, fun to drive and virtually no depreciation). In three years the MSRP of the Boxster had risen so dramatically that the used market for Boxsters was soaring. The residual reflected this fact and was less than market value of the car, i.e., the residual was less than the market value and we had "equity" in the car. There wasn't that much difference between a 2008 and a 2012 so we just bought it at the end of the lease.

As I prevously posted this is an example of "win-win".

JTK44

Dear Patrix Usa

You wrote:






Yes you correct:

You have a 32 year old Mercedes, a 24 year old Mercedes and, a 16 year old Mercedes the total value of all three is close to nothing!

The only car that has any value is the the 8 year old Mercedes, maybe $10,000.

What you did not add into your cost of $280,000 was use of money and repairs. Repairs, including tires, brakes, batteries, tune ups, filters and other miscellaneous items, for 4 years (after the warranty has expired,) conservatively are $1200 per year, $4,800 per car for 4 cars, total $19,200. When this amount and use of money is added in you are at $320,000 less the value of the 8 year old Mercedes ($10,000), $310,000.


So by leasing for an additional $35,000 or just over a $1,000 a year, you are driving a new car every four years under full warranty with all the latest safety features, bells and whistles vs. driving an 8 year old car.

IMO,that to me is money well spent. Do you disagree?

If my numbers are incorrect, please advise.

rbrylaw

I'm glad that leasing has worked out so well for you. I've personally hated every lease I've been stuck in with a car. It you want to only treat a car as a financial transaction that's fine. I personally don't look at my car as only a transaction. I will continue to purchase my cars and know they are MY cars. You can continue to lease yours and that's just fine. I think we've taken this thread off-rail as it was originally about negotiating a price for an ordered car.

Perhaps you or someone else would like to start a thread on the pros and cons of leasing vs buying?

PatrixUSA

getting woefully off topic, so apologies to op... & last ot post for me...

@jtk44, no sweat either way, as there's no reason to debate opinions... like i posted there's no right or wrong here, leasing vs buying largely depends on one's ability to, and preference for, owing vs owning, and how long one is willing to keep, or likes to keep their cars...

as for financial sense by the numbers, i haven't check your numbers, over-complicating a simple concept imo... which is the principle of perpetual lease payments with nothing to show for it at the end doesn't appeal to some people - but to each his own...

JTK44

Dear Patrix USA:

In your figure of $280,000 you forgot to add in sales tax. (I also forgot the sales tax. My apologies). My figure of of $899 includes sales tax.

When you add in sales tax to your $280,000 at 8.625%, that is an additional $24,000.. Add that to $310,000 and you are up to $334,000.

So using your numbers at the end of 32 years:

You have four Mercedes: 32 years old, 24 years old, 15 years old and 8 years old. IMO the only one that has value is the 8 year old Mercedes. The other three are worthless.

Although leasing would have cost you $10,000 more over 32 years, less than $400 years, you would have been driving a new car every 3 years vs. driving an 8 year old Mercedes; had no maintenance issues, never had to sell your car (to me a real headache), and you would have had the latest safety and technology.

That seems like very little money ($400 per year) spent for a whole lot more!

The numbers are pretty straight forward and not complicated and helps explain why over 70% of Mercedes E, G and S Class are leased rather than bought.

ua549

A lease is a contractual obligation to pay someone for the use of an asset. It is a financial obligation, aka a debt. It is part of one's credit rating. There is also opportunity cost of money when leasing. After a certain age Mercedes vehicles appreciate in value. A 32 year old G55 is worth about $90k. OK, I cherry picked that. A 1986 560SL is worth between $15k and $20k. Neither are worthless. IMO most people lease for the substantial tax benefits. That is changing under new tax codes.

JTK44

IMO it is not: If you enter into a rental agreement for office space, that agreement is not carried as a debt on your companies’ financial statement. It is footnoted. I believe a lease is like a rental agreement for office space. Many items on your credit rating are not debt.

My calculations do not consider any tax benefits - just raw numbers. Everyone's tax situation is different. Having said that, from a tax deductibility standpoint, I know of no advantage of owning vs. leasing. However, I do know of many advantages of leasing over owning, but again my calculations are devoid of any tax considerations.

The standard E Class we are talking about I think we all can agree are not destined to become "classics" like a 560 SL or the Gullwing!

Normal rules as to depreciation will apply.

Just went to KBB.com and priced a 2008 E350 4matic with 80,000 miles.. Price range is $7,500 to $10,000.

see: https://www.kbb.com/mercedes-benz/e-...tion=very-good

ua549

If it is on your balance sheet, it is part of your credit report. Before accounting standards changed in 2016, you didn't list operating leases on the balance sheet at all. The change requires that you now enter operating leases as a liability.

Under a capital lease, you treat the property on your financial statements as though you bought it. This isn't optional; you have to treat the arrangement as a capital lease if it meets any of various conditions such as the length of the lease covers at least three-quarters of the asset's useful life or you have an option to buy the asset at a below-market rate after the lease ends. There are other conditions as well.

JTK44

You are correct that capital leases are on the balance sheet.

However, to be consider a capital lease the following must be met:

• The length of the lease covers at least three-quarters of the asset's useful life.
• You have an option to buy the asset at a below-market rate after the lease ends.
• When the lease ends, you assume ownership.
• The value of the minimum lease payments is 90 percent of the value of the asset when the lease begins.

As you see non of the above apply to a car lease

A lease on a car is not considered a capital lease but rather an operating lease which is expensed out and not treated as a liability.

ua549

Starting 2 years ago (2016) all operating leases must be on the balance sheet.

Not all of the conditions you stated above must be met to be considered a capital lease. The 2 purchase conditions are mutually exclusive. Meeting a single condition is sufficient. Depending upon the specific lease terms 2 out of the 4 conditions may be routinely met in a vehicle lease - useful life and purchase option.