To those of you thinking of buying a Mercedes, Mercedes is now offering 0% interest for 36 months.

Does anyone know the MF for leasing? Usually the MF follows the interest rates.

see: https://www.mbusa.com/en/special-off...E&gclsrc=aw.ds

 

So you buy and car and they pay you each month? Good deal, if you can get it.

 

Good time to buy a E-class now + Costco $1000 incentive. Scheduled to take a test driver this afternoon.

 

As part of my Flat Badge business (closed long ago) I came to know several individuals who run, or work at multiple MB dealers. They tell me that very few people "Buy" a Mercedes, and when they do, they pay cash (no financing needed).

Here in Dallas, I know several sports personalities who can easily afford to buy any number of Mercedes-Benzes... but ALL of them are rented (leased) instead. This is also confirmed by my dealer contacts. I've been told that 92-95% of all new MBs (in the US) are rented.

There is no sense paying near MSRP for a $100K+ car that depreciates 50% within 2-3 years. Financial advisors suggest renting instead.

So, IMO this incentive program is just fluff, unless some facets of it are folded into leases.

 

Dear DFWdude:

You have seconded everything I have bee posting for the past two years on this board with regard to leasing vs. buying.

The only difference is that when I posted I said 80% of all luxury/premium cars, including Mercedes Benz are leased not purchased.

You are updating that to 90%.

My latest post is under the thread: A Paean to E450 Wagon

You wrote:
"Sales tax was included in the out the door purchase price and zero finance costs."

I do not think you understand the term or concept of "use of money" or "opportunity costs": Unless you had the purchase price including tax hidden away under your mattress, (highly unlikely) when you paid for the car including taxes that money had to come from somewhere: If it were in a "plain Jane" index fund over the past years it would earned a minimum of 8%.

Let's use real number to determine the true cost of ownership for 5 years vs. leasing for 3 years.

The MSRP of my 2019 E450 was $70,200. To this must be added 2-year maintenance, $899 and NY State sales tax $6,054 for a total out the door price of $77,153. I received an 11% discount so my actual out the door cost was $68,666. This is the same cost as in my lease, so we are comparing apples to apples.

To calculate "use of money" or "opportunity cost" at just 5% (30% less than if invested in a plain Jane index fund) multiply $68,666 by .05 by 5 (years), which equals $17,166. This "use of money" or "opportunity costs" when added to the cost of the car equals $85,832. As you are keeping the car for beyond the warranty period, there will be additional costs for tires, brakes, oil and filter etc. Assume only $2,500 for a total cost of $88,332.

Using C&D as a reference, the residual value, after 5 years, is 28% of MSRP: $70,200 times 28% is $19,656. When this amount is subtracted from $88,332 you have the true cost of 5 years of ownership, $68,676, or $1,144 per month.

My lease payments are $896. That monthly lease payment includes, NY State sales tax and lease inception fee. No money at lease inception other than the first months payment was made. That is a savings of $248 per month and I am driving a new car every three years.



If you work the numbers for three years of ownership, the monthly cost of ownership is even higher which makes leasing even more advantageous.


The reason why leasing is more efficient than buying is that the residuals are artificially high or as Hundens posted; the manufacture has suborn the lease. When you buy you lose this "suborn" from the manufacturer.

As I previously posted the break-even point, assuming "use of money" at just 5%, (when owning is cheaper than leasing) is between 6 and 8 years. Anything shorter than 6 to 8 years, leasing is a far more efficient use of your money..

and

One of the worst financial decisions anyone can make is leasing more car than you can afford.



I have seen, and this is the worst financial decision to make, someone who can only afford to finance a $30,000 Toyota for example, instead leases a $50,000 Mercedes because the lease payments on the Mercedes are only $50 more per month than the car payments on the Toyota. This is to be avoided at all costs.



A Mercedes is a luxury/premium car which no one really needs: It is something that someone wants. Just my opinion, but anyone who cannot afford to pay cash for a luxury item should not get that luxury item. Period: end of story.



No one should ever go into debt for a luxury item. If you cannot afford to pay cash, you are kidding yourself by leasing.



In my analysis, I assume the person can pay cash for the Mercedes: otherwise they should not even consider it. The decision then becomes whether it is cheaper to lease or to buy.



There are always those that drive more than 15,000 miles a year; intend to keep their cars for more than 6 to 8 years or until they die, or intend to drive their car for 3 to 4 years and then give it to their children. For these people it might make financial sense to buy rather than lease.



For everyone else, leasing is a far more efficient use of money: again 80% of all luxury/premium cars are leased.



Always keep in mind, at the end of the lease, if the residual is not upside down, (the residual is lower, instead of higher, than market value: i.e., you have equity in the car) you can always buy the car. This is truly a case where you “can have your cake and eat it!”



There is another compelling reason to lease: If you own and are in a substantial accident, your car will take a profound and substantial hit on its value: Your car could instantly lose 20% to 30% of its value. When you go to either sell or trade in the Carfax report will show the accident.



When you lease, that profound hit on value is the leasing company’s problem not yours.

I started this thread plus the $1,000 Costco coupon thread to just make sure that those who are considering buying instead of leasing are aware of the incentives presently being offered by Mercedes.

It was not meant as an endorsement of buying vs. leasing.

In all likelihood, if Mercedes is offering zero percent financing, then the MF should also be close to zero. If this is the case, then leasing is still a far more efficient use of your money vs. buying.

 

I think you've made some mistakes in the math but the basic premise is probably on target. For instance, on the lease, you still have the lease acquisition fee which is typically built into the lease so it's not really a factor as you're including the monthly lease cost. But there's the lease disposition fee which isn't included so your actual lease cost is more but only by a small amount. Also you get a different set of numbers if you just take the financing at 0%. And your assumption was that you make 5%. But it seems that in every 10 year period or so, the market takes a dump so instead of making an average of 5%, maybe you lose money instead.

 

I am looking to a MSRP $68K of E-class 350 at the moment and with great dealder discount (maybe 10-12%) and also 0 APR for 36months, additional to $1000 incentive from Costco. I will keep the car for more than 8 years maybe over 10 years. So I probably got the car at $58k or $59K level.
So buying maybe a good fit for me for long time hold not looking into change the car every 3-4 years. Any ideas?

 

Dear e90325m:

If you buy, the break even point vs. leasing is usually 7 years, so in your case buying may be better than leasing.

However, consider the following:

• If the event of accident, when you buy your absorb the loss of value immediately. When you lease there is no loss.
• If you love your car at the end of the lease you always have the option of buying it. If not, you are free to get something else. This is the case of "having your cake and eating it"

My main problem with buying vs. leasing is that when you buy, you are taking on much more risk than when you lease - your are putting your money upfront. When you take on risk, you must be rewarded. Here the opposite is happening: for the first 6 to 7 years you are penalized for taking on risk. This is completely upside down!

As long as the manufacturer is supporting the lease through either inflated residuals or below market financing, the MF, it just makes economic sense to lease vs. buying.

The other key point is to remember, leasing is neither financing nor taking on debt: The correct analogy is that leasing is like renting. For example, generally speaking owning a building is cheaper than renting: you are rewarded for your investment. Think about this: If renting was cheaper, than no one would ever buy. So people who put up money, take on risk, get a better deal than people who rent. That is what you would expect.

When you buy the car you get the exact opposite: People who do not put up money get the better deal.

IMO, from a financial point of view, the only time it makes sense to take on the risk of ownership is when it is substantially cheaper than to rent, i.e., to lease. If the buying vs. leasing is a "wash" (the same), why would you put your money at risk?

Remember the old adage:

 

Great! Thank you. I like the saying ""Own an appreciating asset: rent a depreciating asset".

 

Basically the real reason that leasing makes more sense these days is because the manufacturer is subsidizing the lease, not the sale. In the past, the manufacturers would offer huge incentives such as large rebates to buyers. But that tended to crater the used car market and made buyers unhappy. So instead of doing that, they offer a higher residual. Used to be the other way around. Manufacturer changes the rules so the advantage for one or the other flips depending on how the rules are set up. There's many stories where at the end of the lease, the lease holder turns it in and buys it back from the dealer for 5k less than the residual.

 

Entering into a multi-year lease agreement is the epitome of going into debt. Capital lease obligations are shown in the liabilities section of a balance sheet like any other debt. Debt is why I do not lease and never will. My philosophy is that if debt is part of a transaction, walk away. To be transparent, I obtained a 5 year mortgage to purchase my first house in 1966. That was something I regretted because I failed to live up to my own personal standards. That said, business standards are different. I fully believe in using leverage in a business. That includes tax deductible endeavors leasing vehicles.

 

Yep, simply put - what are the chances of you not getting into an accident in 7 - 8 years, or getting any bumps and bruises. Also, when was the last time you tried to trade/sell your car and you got anything close to what you were asking for? 2012, 100k S classes are worth 10k in value now....even 2017 E classes are on sale for 25k!!! imagine what that dealership bought it for. Thats more than a 50% hit in depreciation...

Additionally, do you really want to keep a car for 7 - 8 years. The amounts of complaints that we have with only 1 year of ownership on these highly new advanced vehicles are a lot more than the old basic cars. Im literally thinking about the next car i want to get after a month of getting into a new car haha!

 

Long story short if you bought your E class in January of 2017 for 65k and you wanted to sell in May of 2020 your trade in value is 20k. You spent 45K in 40 months thats 1,125 per month!!!

My 2018 e class has an MSRP of 65k and I am paying 515 a month. I am dropping this guy back off at the dealership in a few month and will not look back =)

But to each his own! Its whatever makes you fall asleep at night. Money can only take you so far!

 

Many years ago, back in the 1980's we used to lease with a buy back of $1. The leases were originally taken by companies who were able to deduct the entire monthly lease payment as a business expense. At the end of the lease the executive who leased the car bought the car for $1. He then could drive the car or sell it.

The IRS shut that down. Now residuals must be "reasonable".

As to buying the car from the dealer below the residual: that stopped happening about 10 years ago. The financial arms of the manufacturers companies now have "gap" insurance that protects them from the difference between the residual and the resale value of the car. That gap insurance is built into the lease payment - it is not extra.

US549: From an accounting point of view, you may be technically correct that a lease is a "liability" - just as rent is a liability. But I am not a business but a person and so this reference by you is totally irrelevant and immaterial. It only confuses matters. You are making something simple into something complicated.

All that matters is how much money it costs you for ownership for 3, 5 and 7 years: the simple answer, as I have posted is that up until the 7th year, it is cheaper to lease than to own.

The reason are many and include:

• residuals are artificial high
• MF are low

Both of these reduce the cost of leasing vs. buying. That is all that matters.

So do not fight the obvious: take advantage!

Finally, if you go to other of my posts, I have explained that never, I repeat, never put anything down on a lease to reduce the monthly payment: the acquisition fee, any taxes should all be rolled into the lease payment. At lease inception all you should pay is the first month and motor vehicle fees, usually less than $150.

Keep in mind that residuals are set by Mercedes. However, while MF is also set by Mercedes, some dealers may try to mark up the MF. So it is important to shop around.

There is one exception: in certain states, but not all states, for example NY where I live, you can prepay up to 10 months: this will substantially reduce the MF which in turn will substantially reduce your monthly lease payment. If you have the money to prepay, I have calculated the savings to be about 15% annually - not a bad return at all - so where available I recommend taking advantage of this program.

 

IMO saving money is not a reason to take on debt. I'd rather spend more to avoid debt. Period!
When I ran a business, the HR department would not hire anyone who had debt because it was a security risk. People in debt were much harder to to successfully vet.

 

Dear UA549:

One last attempt:

As you ran a business then you know the difference between a bookkeeper and a Treasurer: The bookkeeper puts the numbers in the correct category - a liability. The Treasurer looks at those numbers and decides where spending the companies assets produce the most profit.

The Treasurer tells you after 3, 5 and 7 years the company is better off financially leasing than buying - even before tax consideration.



Who do you listen to: the bookkeeper or the Treasurer?

 

and isnt financing and leasing both a financial obligation? aka debt? Unless you are buying the car full cash, but on that same note - you can buy the full lease with an one time payment as well. So technically no debt in both scenarios, but then we land on the same page again - how much $$$ did you actually spend during the same time period for the 2 different methods.

 

As I previously posted in several other threads: you never want to put anything down when you lease:

If your car is totaled or stolen, (which has happened to me twice - once stolen and once totaled) any money you have put down, whether in the form of cash cap reduction, aka down payment, sales tax and anything else, is gone PUFF DISAPPEARS into the ether - never to be seen again: This is because your insurance company is only obligated to pay off the remaining months in the lease.

So no: prepaying your lease is a terrible idea.

If you really think this is some kind of debt here is a solution:

• Case A: You withdraw $68,735 (MSRP of $70,200, two service $899 plus sales tax $6132, total $77,231, less discount of 11%) from your money in investments, turn it over to the dealer and he gives you a 2020 Mercedes. At the end of three years, you give him back your Mercedes and he gives you 40% of MSRP, $28,000. At the end of three years time you had the pleasure and joy of driving a Mercedes and $28,000 in your pocket.
• Case B: You lease the car for 36 months at $900 a month: you withdraw $32,400 (36 months @$900 a month) from your investments and put in under your mattress. Each month you go under your mattress and take out $900 and give it to the dealer. At the end of 3 years, after you had the pleasure and joy of driving the Mercedes and $36,335 in your pocket. ($68,735 what you gave the dealer less 32,400 the amount you put under the mattress).

So in Case B, leasing you have no debt, but at the end of three years you are ahead $8,335.

Of course your savings under case B is actually much more: the use of money on $36,355, the difference between $68,735 (the amount you gave the dealer) and $32,400 (the amount you put under the mattress), at just 5% (remember the $36,355 was left in investments) for the three years is $5,450.

So in Case B there is no debt and savings vs. buying of $13,785.

Hopes this helps you to get over your anxiety as to being in "debt'"!

 

haha i was just trying to simplify the situation for the novice. math is a hell of a monster!

 

Today, my wife and I end up finding a dealer loaner 2019 E450 Couple with 6000 miles and have a great discount. 0.0 APR on 36 months does not apply on this type of car, also Costco $1000 incentive only apply new 2020 model. This E450 Coupe MSRP price is about 72K and we got it with $58.8K. with addtional free one time service A and one time serivce B. Pretty happy with the deal for finding this car when we browsing the parking lot of dealer. And this is for my wife's car, she really love the E450 couple interior materials/color design than E450/E350 sedan. We have enough cash on hand and so not choose the lease option. Both of us enjoy the test driving and beautiful color combo bring us big exciting. We may keep the car for a long time and we are exprienced driver so we're confident that we will not have big accident during using the car..But any way, we can't assure someone hit your car.

At the same time, calculted the lease option, when you want to buy it at end of leave you will pay more than $2000-$3000 compared to buy it now. But that comparasion based on number which dealer gave us, and also if you negotiated well at the end of leasing, that may be break-even....
anyway, choose lease or buy, purly depend on youself and you finanical situation.


Macchiato Beige/Yacht Blue Nappa Leather.

2019 E450 Couple Polar White

 

@JTK44 In case B there is debt created by signing a lease whether the money is under a mattress or not. The debt will show up on any financial disclosure form such as those required by employers. You believe that personal debt is acceptable if one might gain by making risky investments in the stock market. I believe that any small gain is not worth the risk (all stock is risky). You are a risk taker and I am risk adverse so lets just agree to disagree.

 

Leasing gets you into more car for less monthly payment, some people do this because it fits their lower mileage needs, and many people do this because they like the newness and have to have the latest and best. It becomes self fulfilling that most people keep their MB for ~3 years. Of course! most were leased and the residual is artificially subsidized to be higher to keep payments low. But I suspect a large percentage decided on payment alone, not a calculation justified by their need to flip cars every few years. (I’m truly not trying to judge flippers. I get it and even consider it sometimes, since I’m so into cars. And it’s impossible to accurately calculate the psychological value of luxury experiences, we’re in MB land after all). Although it does seem people are getting very used to trading in.

But I still find it a stretch to broaden that into leasing is better financially than buying. You’re choosing to repeatedly hold a MB in its worst depreciation time when you flip every three years. With no chance of owning it for many years with no payments. They don’t ALL break. And the upside financially of owning with no payments for 10 years becomes significant after so many months with no payments. Longer and the differential keeps increasing quickly.

All that said, for people who can truly afford it, and want the new-new, Leasing is a cheaper way to pay for their luxury flip habit.

 

"All that said, for people who can truly afford it, and want the new-new, Leasing is a cheaper way to pay for their luxury flip habit."

I'm generalizing here but I think this discussion is likely more useful for those interested in the C-class or the GLC-class vehicles. By the time you decide to make a purchase above 60k for a Mercedes vehicle you've likely reached a point where you've been competently making financial decisions for a good while.

When I'm advising my own children and nieces/nephews who are starting off in life I don't encourage them to purchase/lease luxury vehicles of any kind. I tell them that time will come but that they shouldn't accept any pressure to spend on luxury goods and instead prioritize getting their financial house in order. To be clear, for young people, this discussion about leasing vs purchasing and others like is the kind of thing that I would encourage them to think about early and often.

 

I agree with the premise of leasing versus buying. That being said, here in Texas buying your car at the end of your lease makes no sense because of the way sales taxes are charged on vehicles. Here, if I lease a $70K E450 I pay sales tax up front on the $70K sales price. Then if at the end of my lease say my residual was 50%, when I go buy the E450 for $35K I am again charged sales taxes on the $35K purchase, there is no credit given for any sales tax collected from me for the lease. The only way to get sales tax credit is trading in a car you own. In Texas, one cannot roll their sales tax into your payment, it needs to be paid up front on the full sale price of the car. Texas is not the best state for leasing.

 

I have heard the same from my cousin who also lives in Texas. He advises, that in Texas, at least with General Motors (he has a Corvette) they have programs that are like leases, but avoid the double taxation problem.

Here in New York we only pay sales taxes on the total of the lease payments not on the purchase price. My tax rate is 8.625% and the tax savings on a lease are substantial: My MSRP was over $72,000, selling price about $64,000 - the sales tax is based on the $64,000. The tax if I had bought would have been $5,520. My lease payments, without taxes $814 a month, total with NY State Sales tax included, $896, which means sales tax of $82 a month, 36 months $2,952 a savings of $2,568 vs. buying.

In New York we are able to roll everything into the lease: acquisition fee (bank fee) and New York State sales tax. The dealer pays the NY State taxes on lease inception. As the taxes are rolled into the lease, and it becomes part of the purchase price, there is a tax on the tax! But this still comes out much cheaper than buying.