JenniferW213

I love my 2017 E220d (194HP 2.0 litre diesel. Probably not available in the USA).

The warranty will expire in about a year or so. I'm a bit sceptical of something expensive breaking. E.g. the Led Matrix lights, infotainment screen, panoramic roof, engine etc.

I've looked online but I'm still not sure what to do. I see no reason to change it other than what might break. It still looks like a million dollars and drives like a beauty.


Any advice?

CarFan1

Why not buy an extended warranty?

JenniferW213

Extended warrenty is not available unfortunately.

jimbg

Are you in the Uk? If so then from Mercedes https://www.mercedes-benzwarranty.co.uk/Start or companies like Warranty Direct, etc

JenniferW213

I am in Norway. We have 5 years / 60.000 miles factory warranty with no option of extending it. My car insurance cover the most basic engine- and gearbox failures, but there are som many parts on these cars that potentially could break and thats why I am a bit uncertain as to whether to keep it or not.

ua549

IMO electronics and electro-mechanical features such as soft-close doors & windows tend to need service/repair from year 5 onward. I used to keep cars for 6 years. Now I keep them only while covered by a full factory warranty.

fleuger99

If you like the car and it's been trouble free so far, put money into a savings account every month and keep it in the event something has problems. If not, you have cash to put towards your next car in several years.

JenniferW213

Thats a good idea. I just don't want to spend too much maintaining the old one instead of trading it in for a 2021 model with all the benefits of a newer car.

If these cars are solid I'd like to keep it. If many people experience expensive issues then I'd rather take the depreciation on a new one instead of repairing the one I already got.

fleuger99

That is a sound plan. I am about to get my E450 estate in early January. I didn't like the new AllTerrain so found a new 2020 and will get that.

JTK44

I feel exactly the same way and that is the reason I lease.

Leasing for either 36 or 48 months is far more efficient use of money than buying and trading in every 3 to 4 years.

JenniferW213

Interesting. Whats the down payment, monthly, and how many miles are included?

JTK44

I am speaking only about the United States: We have leases here for 36, 39 and 48 months, with mileage allowances of 7,500, 10,000, 12,500 and 15,000 miles per year.

The correct way to lease is do what is called a sign and drive: you put down zero, and at lease inception all you pay is the first month's lease payment, any sales tax having been rolled into the lease.

I believe you said you are in Norway, so I have idea if leasing is available and what happens if during the lease your car is either stolen or totaled in an accident. Because of the way our insurance laws are structured, it is not advisable to put any money down on a lease.

You can do a "search" where I have posted why when you lease in the United States, you should never put any money down on a lease.

ua549

Not always. There is a cost to being locked into a rental car for 3 or 4 years in addition to the interest costs. Personally I would never go into debt for consumer goods. If I can't pay for something I do not buy it.

JTK44

I agree: to go into debt for a luxury item like a Mercedes is very, very foolish.

I would also be extremely foolish to lease a car you cannot afford. For example if your budget is $500 a month to finance a purchase of a Ford, you instead spend $500 a month to lease a Lincoln that would be a mistake. If you cannot afford the payments on a luxury car, do not fool yourself that you can afford the same amount on a lease.

But a lease is not going into debt, anymore than renting an office is. Leasing does not tie up capital. It frees capital and also protects you against depreciation.

Too many people do not understand the concept of leasing and just say "leasing is going into debt": this is totally incorrect.

There is an old adage that applies:
For most people, not necessarily Mercedes owners, a car after a home, is their second largest purchase. Unlike a home, which in most cases either holds its value or appreciates, a car is a rapidly depreciation asset. If you can rent it, it makes financial sense.

The "break even" point, where owning becomes cheaper than leasing, is ownership for a minimum of 5 and usually 6 years, way beyond the warranty period of a Mercedes.

Many of us, myself included, do not want to own any German car, Mercedes included, beyond the warranty period. For us leasing is far more efficient use of our capital than buying and trading in every 3 to 4 years, before the warranty ends.

Leasing may not be for you. But the fact remains that over 85% of Mercedes E and S class cars are leased. There are sound economic reasons why 85% of Mercedes are leased and not bought.

.

ua549

Leasing is debt because one is contractually obligated to repaying some amount of money to the leasing company regardless of the status of the vehicle. Lease obligations have a negative effect on a credit report. Lease interest rates are significantly higher than the US Federal Funds rate. In my case leasing costs more than an outright purchase. Leasing does not provide any tax benefits to me. As I stated leasing is not always advantageous. At best it is a case by case determination.

JTK44

NO: You can rent an apartment, a lease, or buy an apartment.

You rent a car, lease it, or you can buy a car.

We have been over this ad nauseam: In your mind you consider a lease no different than financing. Nothing anyone on this forum can post can change your mind.

ua549

I'll stick with legally accepted accounting standards, not your twisted view of financial recording and reporting.

There are 2 kinds of leases - capital and operating. The kind of lease is determined by what happens at the lease end.
If the lessee has an option to purchase, it is a capital lease. If the lessor decides the disposition of the item, it is an operating lease.
You are viewing auto leases as operating leases when they are capital leases.

A capital lease is a financing method recognized as such in GAAP (Generally Accepted Accounting Principles) regardless of your opinion. The asset is depreciated over time.
A capital lease is recorded as an asset in the amount of the purchase price. The matching liability is for the total lease amount less any down payment.
It is considered a financing expense.

An operating lease is recorded as an expense as each payment is made. The matching asset is cash. It is considered an expense. There is no depreciation.

I've have a lot of experience with operating leases for equipment such as computers and related peripherals.
I made sure that the leases did not contain purchase options in order to qualify as operating leases.

JTK44

In autos there are two kinds of leases:

• Closed end
• Open end

Nearly 100% of leases are closed end: the residual is fixed

ua549

Closed end leases with NO option to purchase are operating leases.
Closed end leases with an option to purchase are capital leases.
Open end leases are capital leases.

Open and Closed relate to the terms of a lease whereas Capital and Operating refer to how they are recognized on financial statements.

jhpmbusa

Seems like we have our typical accountant vs finance debate!

for the average joe, the bottom line question should be this = how much did you end up spending on your e class after 36 months or (whichever length you decide to lease) vs how much you would spend if purchasing it or financing it.

That is the bottom line. And it should differ slightly depending on the individual and depends on what you can factor in.

If you pay full cash for the vehicle it would basically be what you paid for it vs what you can get for it at the end, plus whatever else you want to factor in like tax advantage etc etc if that even applies to you.
For the lease its just the total amount of payments & down etc and whatever else you want to factor in, if even plausible.

Unless you wind up with an extremely ripped off horrible lease deal for 36 months, i highly doubt you would still pay more than if you out right purchased an e class in cash even without any interest. These things depreciate like a tank. Plus that means you are taking out 70k out of your savings/market etc etc

The difference between leasing and financing is that for leasing you are only paying X % of the total vehicles cost of depreciation. For example the vehicle is worth 70k, you borrow it for 3 years and if the residual is set for 35k after 3 years. So therefore you pay 35k worth of payments with no ownership at the end.

With financing you are obtaining a loan to fully pay of the total vehicle of 70k, therefore obviously the payment will be significantly higher.

JTK44

Thank you!



The only thing that is important is how much have you laid out of pocket in three years leasing vs. buying.



It is very important to understand, that 99% of leases are upside down: that means at lease end the residual or buyback is higher than the resale value of the car.



A lease is made up of two components:

• · Depreciation
• · Interest

Using my car as a specific example:



The MSRP on my 2019 E450 was $71,095, selling price $63,096, the residual $41,946, 59%. My monthly payment, all in, is $896, for three years $32,256.



My cost if I had bought the car would have been $63,096 plus sales tax @8.625% $5442, total of $68,528. This is my net cost.



As I have most of my money invested, I do not have $68,000 “sitting under a mattress”, I have to take that $68,000 from income producing securities. If I just give a value of 2% to that money, the use of money at 2% for three years on $68,528 is an additional $4,112 for a total cost after three years of $72,640. (I actually give use of money a value of 5% but for this example I have used 2%)



If the my E450 has a value in three years of $41,946 (the residual) my cost of ownership is $30,694.



That makes owning $1561 cheaper than leasing.



As I get closer to closer to lease end, I check the trade in value of my car with KBB.com. I have found that KBB.com trade in value is pretty close to wholesale, what my car is worth.



I have only 12,000 miles on my car, but despite this low mileage, the present value of my car is $43,000. A year from now my car will be worth substantially less and certainly less than the residual of $41,946.



A 2018 E450, 3 years old today, what my car will be next year, with the exact same equipment KBB.com has a value of $35,000. That is what I anticipate my E450 will be worth next year at lease end.



With a value of $35,000 the cost of buying would be $37,640 ($72,640 - $35,000) vs. leasing $32,256.



Leasing after three years is $5,000 cheaper than owning, plus I do not have the headache of treading in a car.



Another item to be considered:



If you own and your car is stolen or totaled your insurance covers the value of the car. After two years, your car has a value of $43,000 which is what your insurance company will pay you. Your cost for the two years is $29,640 ($72,640 - $43,000).



Two years of lease payments are $21,540 ($896 X 24).

In the above scenario, leasing vs. owning would be $8,000 cheaper.



The fact is that for owning to be cheaper than leasing you must keep the car for a minimum of 5 years and probably closer to 6 years. Anything less than 5 years, leasing will always be a more efficient use of your money.

ua549

You made your point with very short ownership periods. I keep my cars for about 6 years or until the warranty expires. Two of my cars (now sold) had a 10 year factory warranty. The average age of cars on the road is about 12 years.

I could care less about finance or cash flow statement. I live by an income statement and balance sheet.

JTK44

See your post #6 and I quote:


Keeping a car for only the warranty period - 4 years or less: Leasing wins hands down every time!

ua549

You took the above quote out of context. It was referring only to the the vehicle type being discussed, namely MB E Class.

What part of I keep my cars for about 6 years or until the warranty expires didn't you understand? The length of full factory warranties vary significantly by brand and optional extensions offered. They are not just 4 years or less.

JTK44

Stop beating the dead horse: He has left the barn!

I know of no mainstream cars that have a warranty beyond 4 years 50,000 miles.

If I am wrong, please correct me.

You pride yourself on being an accountant. Do you disagree with any of the calculations in my post #21.

I am not an accountant, but a businessman. I look at the forest not the trees!