JTK44

Again I am confused.

The residual on my car, the buyback is $41,936, call it $42,000. With sales tax $45,000. If I do not want the car, I can turn around and sell it for $49,000 putting $4,000 in my pocket after sales tax.

In several years when supply and demand are in more equilibrium, I expect the premium in my car to disappear. If I had bought my car instead of leasing it, any premium I presently have in a few years will also disappear. So I am the same whether I bought or leased.

ADDITIONAL THOUGHT:

There are certain Tesla leases where at the end of the lease you do not have the right to buy the car - I believe on the Model 3 and perhaps also the Model Y. Those folks who's leases are coming due now are not in a good situation: When they go to release they may wind up paying hundred of dollars more per month.

But as long as you have the option to buy at lease end you are protected.

Alan Smithee

The argument for leasing falls apart if you buy at the end. You will have paid a higher interest rate than if you had financed, and you will have paid sales tax on that interest as well as the full transaction price, losing one of leasing's big advantages. You are also now exposed to loss of value in the even of an accident, again losing one of leasing's big advantages. And in my case, if I buy at the end of the 33 month term, before long I will need to buy a set of new tires and do a service, neither of which are inexpensive for a Range Rover, so it would make sense to then keep it longer to amortize those costs. Those with longer terms will be up against the end of a warranty. And while value is relatively high at the moment, in my case an all-new version will be out shortly, which when combined with the hopeful end of this supply shortage, will expose me to significantly lower value...again one of the benefits of leasing lost.

JTK44

When I spoke to MB Financial and asked if I extend my lease what part of my monthly payment will be going to reducing the residual? The answer was $896 my monthly payment. I then asked what is the interest rate. MB Financial replied .0025%. I then asked do you mean the money factor is .0025 which is 6%. MF Financial replied "no .0025%".

So each individual lease is different and you cannot always assume that the interest rate for financing will be less, the same or more than leasing. Often manufacturers in order to move inventory support their leases by either below market interest rates or above market residuals.


You are correct. In New York we not only pay tax on the interest but if you roll the taxes into the lease, that is considered part of the amount you have borrowed, and you pay tax on the tax. As the interest rate was only .0025% the tax on the interest was virtually non-existent.

You are again 100% correct and I have pointed this out in this post and many other posts on this forum. But on the other hand I am (you) no worse off than if I (you) you have bought.

You are again 100% correct and why I lease for 36 months 10 miles per year. But like the loss of value in the event of an accident, I am now no worse off than if I had bought instead of leased. In my particular case although I had plenty of tread left 7/32", I had to replace both front tires because of bubbles. So if I purchase at the end of the lease I will take advantage of the new tires and in 10K miles just get two new rear tires.

Again I agree with you: I have seen people, in order to reduce the monthly payment take a 4 year 15K miles per year lease. I really do not understand their thinking. No one should lease beyond the warranty period of the car. Can you imagine at 55,000 miles and in the 45th month of the lease a failure in the engine or transmission? You are required to return the car with both the engine and transmission in working order which will be at your expense!

I have been leasing MB since the mid 80's. When I lease I do not intend to buy at the end of the lease. In almost 99% of the time the leases are "upside down" - the residual is higher than the market value, so there is no point in buying.

We now have an unusual situation where the residual is substantially lower than the market value. I see no reason not to take advantage.

Alan Smithee

And that is the only point I was trying to make. As such, some are lucrative, and some come out very expensive.

Elvisfan0108

When I spoke to MB Financial and asked if I extend my lease what part of my monthly payment will be going to reducing the residual? The answer was $896 my monthly payment. I then asked what is the interest rate. MB Financial replied .0025%. I then asked do you mean the money factor is .0025 which is 6%. MF Financial replied "no .0025%".

The above paragraph is precisely why I don’t lease. That makes no sense to me. That must be monthly. Which APR would come out to .03%. No lender is going to lend at that rate. . It doesn’t make sense. Maybe because I’m no financial whiz, I like financing. You only need to know 2 things. Selling price and APR.

JTK44

What do you not understand?

A lease payment is made up of two things:

• Interest
• Depreciation

When interest rates are very low, in this case the interest is .0025%, almost 100% of the monthly payment goes to depreciation. So each monthly payment reduces the residual. My lease provides for a residual of $41,946. If I extend my lease for two months and make two additional monthly payments of $896, total of $1792, the new residual will be $40,154 (41,946 - 1792). I will in fact extend for as many months as possible as my lease is in effect an interest free loan.

As I posted Manufacturers often support their lease programs, by either and/or interest rates below market value or residuals above market value. Either or a combination makes for an attractive lease payment. You may question why Mercedes charged such a low interest rate. I prefer to say "Thank you!"

As I posted, Mercedes E Classes and above, 85% are leased. Very few pay cash and even fewer finance.

Hope this clarifies.

Elvisfan0108

I understand below market rates. I just find it unusual to be offering those types of rates when they basically have you over a barrel. It’s a seller’s market right now. I guess it’s in their best interest for you to hold on to the car. That means that when/if your car comes in, they can charge top dollar. They are basically giving you an interest free loan when they really don’t have to.

JTK44

This is not a "new interest free loan." It is a extension of an existing lease (loan.)

I have a Ford Edge Sport on lease. The lease ended September 30. Ford extended the lease for another year at the same monthly payment. On that lease more than 90% of each payment is going to the reduction of the residual.

Almost every car manufacturer is doing this. If they did not, I would turn in my car and look for another car - but certainly not a Ford! So it makes sense for the manufacturers to extend their leases and keep me as a customer!

BTW: I am sure you have heard of ZERO percent financing from GM, Ford, Toyota for up to 72 months. So MB Financial on a lease charging .0025% seems reasonable.

There are many reasons for today's high monthly lease payments including:

• Lack of supply: instead of a discount from MSRP as I received in 2018 on my E450, there is now a premium to MSRP: "They you over a barrel"
• Lower residuals: The residual on my E450 10K miles per year was 59%; today the residual is 55%
• Higher interest rates

This is all because of the imbalance between supply and demand.

Elvisfan0108

Once again, it looks like I got my car just before everything went crazy.

JTK44

UPDATE:

Something is afoot: I have now two dealers, who only 30 days wanted $4,000 above MSRP, willing to order me a 2022 E450 specked out the way I want it, for MSRP. Delivery is 6 to 8 months, with a refundable deposit.

I am thinking that with orders dealers are able to get additional cars beyond their allotment?

6 to 8 months may not work for everyone, but it works for me: I have only 21,000 miles on my car, just did the "b" service, and my warranty is in effect through December 2023.

Mikey53

“I am thinking that with orders dealers are able to get additional cars beyond their allotment?”

That is certainly not my understanding.

mercedesmax

In normal times there is a turn and earn component. which is why a lot of the big urban dealers were willing to give big discounts.
That isn't the case today. Mercedes has cut back their allocations big time.
Also, an E Class sedan isn't prime merchandise these days,not like say a GLE or GLS. So an order @ MSRP is perfectly normal.

JTK44

Has anyone else been quoted MSRP or a discount on ordering an E Class?

JTK44

UPDATE:

Was prepared to place an order and questioned the interest rate quote, 7.98% on a 36 month, 10K miles per year lease.

I checked another dealer and was told the money factor from Mercedes Benz Financial is .0018, 4.32%. The difference in the interest rate results in a monthly payment increase of $170, $6,120 extra over the term of the lease.

I then contacted the dealer and while I knew he was selling me the car at MSRP, I asked him if he was adding a premium to the Mercedes Benz Financial MF. That was last Wednesday.

To date no reply: I assume the answer is "YES".

Again, has anyone placed an order for a 2020 E450 at MSRP and MF of .0018? So far every dealer I have dealt with either wants a premium on either MSRP or the MF.

Alan Smithee

I would not trust any dealer to give me a straight answer. Unbiased reliable third party lease info here:

https://forums.edmunds.com/discussio...als-and-prices

I have a verbal agreement at MSRP or less for an All-Terrain. Dealer would not commit to anything in writing until we get closer to delivery in February.

JTK44

I looked over both the residual and money factor in Edmunds:

All too often they are dated and wrong: remember residuals and MF change every 30 days.

For example residuals for 36 months/10K miles per year are between 53% and 55%. These are residuals in October for a 2022 model. As time goes on, the residuals will go down.

Last week I was quoted a residual of 58% substantially higher than the posted residuals in October for the same car so clearly those residuals are not correct.

Equally, money factors of .00057 equates to 1.3%. This too is unrealistic.

2022 AT

If the dealer has not committed in writing to MSRP, I assume you have the right to "walk away" from the deal and if a deposit has been given it will be refunded.

I too have learned that there is always a reason a dealer will not commit to deal in writing.

Alan Smithee

Yes, the residual and MF change monthly, and vary by E450 model. If you post there and ask for December numbers for your terms and model, you will get accurate information.

No deposit; in CA we always have the right to walk away with a refund. Unless it is for something rare, I have never had a dealer ask for one. I'm not concerned about them trying to play pricing games with a non-AMG wagon...they sit on lots here for months, even with the car shortage.

teksurv

A money factor equalling ~8% with base rates where they are is just silly. Ask them what the buy rate is and try not to laugh.

JTK44

I agree: this was the dealers way of leasing the car at MSRP instead of MSRP plus a premium: just make the premium (markup) on the money factor.

Elvisfan0108

Again, this is why I buy. They have to be up front with prices. They can’t sneak in ways to increase their margin. Just my opinion.

JTK44

In today's environment, which is a seller's market you may be correct: the dealer tells your MSRP and add $5,000 to that.

In normal times I believe leasing is no more difficult and in fact just as as easy as buying: by email you give the dealer your build, and ask the monthly payment for 36 months, 10K per year including lease acquisition fee and sales tax included in the monthly lease payment. Each dealer gives you a monthly payment and you pick the monthly payment that works best for you. When you go to pick up the car, the first months payment plus motor vehicle fees are put on your credit car. This all takes less than 90 minutes. The first and only time you are at the dealer is when you pick up the car. If the dealer is more than 50 miles away, they will even deliver the car to your home!

It has been nearly 40 years since I last bought a car from a dealer: How is it now done? Does the dealer accept cash? Will the dealer accept a persona check? Do you have to wait until the check clears? Do you have to go to the bank to get a certified check? Can you put the purchase price on a credit card?

This all seems to me to be extra work that you do not have to do if you lease.

Elvisfan0108

I can only tell you my experience. I ordered the car by phone. Put $5k on a credit card. I was 1200 miles away. This was in March. Later I realized I should have gone through Costco. I threatened to walk. This was in April. They lowered the price to $2,000 off MSRP. I could have gone with the Costco price, but I would have had to do another order. Who knows how that would have worked out. I went to the dealer once after I got home to test drive a car. I arranged financing through Chase. Went to the dealer after they did the paint protection and did the paperwork. I wanted to put the other $5k on a credit card. They wouldn’t let me. I wrote a personal check. It took about an hour.
Only 2 things to know, selling price and interest rate.

teksurv

When you finance, you negotiate purchase price, APR ( I hope!) and you determine loan duration. Leasing is quite similar. IF you change cars every 2-3 years, and you stick with the same brand (pull ahead forgiveness), leasing makes the most sense. If you keep the car 4 plus years, don't lease.

Elvisfan0108

sometimes you don’t know if you are going to keep the car. We have had my wife’s car over 4 years now. My last car I had 3 years. The one before that was 2 years. I don’t like having a deadline. Now would be a bad time to buy a car. The fact that you can buy your lease car and make money selling now is no different than the extra value on trade ins right now. There is an advantage on sales tax when leasing. However, you get some of that back when you trade. Depending on your state.

JTK44

I never finance luxury items. If I cannot afford to buy the car, I buy one I can afford.

Just my $.02.