JTK44

I agree with you.

However when you you buy:

• In New York you must pay the sales tax on the purchase price: when you lease only on the sum of the lease payments. This is savings of between $3000 and $4000
• When you figure in the cost of money for both the purchase price + tax, the break even vs. leasing is closer to 6 or 7 years, not 4 years.

JTK44

I am really confused: buying a car and paying sale tax and then trading in a few year (less than 6 years of ownership) is a very, very inefficient use of money. The only way to get back part of that sales tax is to trade in your car. You just posted that you financed your car through Chase. That means you would have to pay off the loan.

None of this makes any financial sense to me.

Just my $.02

Elvisfan0108

with interest rates being so low and the stock market going crazy, it doesn’t make any sense to me to pay cash for a car. My interest rate is 2.54%. Why would I pay cash?

Elvisfan0108

I’m not upside down on the loans when I trade. Except once or twice. Cars are my one vice. I’ve never said what I do is smart. It’s one extravagance.
All I’m saying is I like to buy and it doesn’t make any sense to me to pay cash.

JTK44

No argument there:

When you buy a car vs. leasing you take on:

1. Depreciation risk; and
2. If the car is in an accident, then loss of value

When you lease the risk of depreciation and loss of value if the car is in an accident is on the lessor not the lessee.


Because you have assumed both the risk of depreciation and the potential loss of value if the car is in an accident, you must be financially compensated: owning must be substantially cheaper than leasing.


For owning to be cheaper than leasing you must hold the car a minimum of 5 years. Anything less than 5 years, it is substantially cheaper to lease.

Elvisfan0108

I like the flexibility of buying.

JTK44

On a lease, if properly structured you are almost always upside down which is good. That means that with the lease I am paying only part of the depreciation.

If on a loan, you are not upside down, that means your monthly payments are considerably higher than on a lease. You have then tied up money in a non income producing asset as opposed to investing it in the market - the reason you gave for financing. Putting down a deposit makes no financial sense to me. As your correctly pointed out, why put down $10,000 when you could be borrowing that money at 2.54%.

Leasing is the least amount of out of pocket leaving more to invest. .If you like to have new cars, which I do, the most efficient way to do that is to lease - not buy and trade every 2 to 4 years.

As to your "one extravagance": Congratulations and go for it! If cars make you smile wonderful!

JTK44

You can have a lease for 24, 30, 36, 39 or 48 months.

Do you need more flexibility than that?

Elvisfan0108

We are getting into personal finance here. I like to keep my monthly expenses at a certain level. I go to the well once as opposed to every month. I’m retired.

JTK44

Nothing personal:

Whether you finance or lease you are still "going to well" every month.

Numbers are numbers - they do not lie:

If you want to keep your monthly expenses to a minimum level then leasing makes far more sense than financing: In leasing over 36 months you are paying interest and about 42% of the MSRP of the car as depreciation, the residual being 58%. . The depreciation is roughly 14% per year. A three year car loan would require you pay 33% per year, or more than double per month. As your are borrowing substanially less when you lease vs. financing, you can afford to pay slightly more interest than if you financed.

To achieve the same level of payments you would have to finance for 7 years: 14% per year.

You indicated that you put $10,000 down when you financed. That of course reduced you monthly payments. On a $75,000 car your, 7 years, your monthly depreciation component of the loan would be $892. If you put down $10,000 the monthly depreciation of the loan ($65,000) would be $773, a savings of $118, 15%

On a three year lease, 58% of $75,000 is $43,500, the depreciation is $31,500 $875 per month, If you put down $10,000 the depreciation component would be $597, a savings of $277, 46%.

The purpose of the above is to demonstrate that unless you keep your car for 5/6 years or more, the most efficient use of money is to lease.

Hope this clarifies.

This has been edited to reflect the correct amount of depreciation on a 36 month lease. As the residual is 58%, $43,500 the difference $31,500 is the depreciation component.

teksurv

At the end of the day, whether you purchase in cash, finance or lease, as was already mentioned these are luxury items. I ended up purchasing my E coupe after the lease ended (not usually the best way to buy a car) because of this silly market. I'm happy I don't have to start the negotiation (lease variables) anytime soon. But when I'm ready for a new car, I expect to lease. It's the best use of funds on something like this.

Elvisfan0108

Again,I clearly know that I would pay less a month if I leased. I like the flexibility of just buying. I like to buy when I’m ready. For what I’m paying , I could have leased an E450 cab. Of course, I’d still be waiting for it. I don’t like being on a schedule. That’s me. I appreciate all the information.

Elvisfan0108

The most efficient use of money would be to keep cars until they are too expensive to fix any more. This has never been about the most efficient use of money. This is about what I am comfortable doing.

shekmark

These lease vs buy conversations always leave me confused. I waste FAR too much money on cars, boats and motorcycles, and I am not at all smart about it. . I also buy, but almost always CPO . Yes I get two or three year old tech, but in these cars, they are advanced anyway and a lot of depreciation is done. I actually like my infotainment unit better than my wife's CPO 2020 GLC.

JTK44

Buying used, 2-3 years old CPO is always the cheapest way to own a Mercedes.

ua549

Until the repair bills start flowing. When I sold my 2 year old W211 that was just out of warranty, my dealer told me that the car needed brakes and air struts all around. At that time the cost was about $13,000. Whoever bought that car was also getting a huge maintenance bill as a bonus. I'd rather buy new instead of someone else's maintenance headaches.

JTK44

My reference was to the purchase of the 2/3 year old CPO car - one that has a warranty.

I agree owning a Mercedes beyond the warranty is problematic at best.

I will edit my post to include CPO. Thanks.

cetialpha5

It's important to avoid the dealers. I think I get brakes done for under $400, usually the rotors are around $100 and the pads are a tad under than. But at the dealer, that's typically 1k+. Same with the air struts, they say they're going to go but who knows when they actually go. But OEM dealer air struts I think were like 1k+ per corner but Arnott aftermarkets were more like $500. Still a tad over 2k to replace them all instead of 4-6k at the dealer. The key way to avoid maintenance headaches when the car is out of warranty is not to go to the dealer.

JTK44

Final update:

I was initially told that if I wanted to have MBFS finance my end of lease purchase, that I had to go through a Mercedes Benz dealer. My first dealer quoted me an "origination fee" of $2,000; a second dealer a fee of $1,500.

After a very long wait on the phone to MBFS, I got in contact with their remarketing department: Once through everything went smoothly: It was worth the hour wait.

• Remarketing told me, that whoever in MBFS told me that it was necessary to go through a dealer was in error.
• I was told that I could finance the purchase at lease end with no application fee except the $150 provided for in paragraph 9 of my lease: residual + $150.
• The interest rate for 36 months is 2.64%: for 48 months 2.74%. No money down.

My car is a 2019. In 2025, 3 years, it will be 6 years old and probably have about 50,000 miles on it - time to get a new one. I intend to get an extended warranty: the warranty on my car ends in December 2022.

For these reasons I took the 36 financing.

Hope this helps others in a similar situation.