HBerman

North Carolina has a personal property tax on vehicles assessed at registration renewal. I was checking for a preview of my December bill this afternoon and I was surprised at how low that valuation is now. My vehicle, purchased in December 2023, has an MSRP of $131,000, but the DMV wants to value it at $49,660! Admittedly, they usually just look at the base vehicle prices w/o options, but I'm impressed. My tax bill will be 1/2 of what my 2021 E63S wagon was in December 2023! I'm glad I only leased my machine. I'm delighted with the performance, comfort, and style (well, I could make a few styling suggestions here) of my vehicle. It's a fun trip every time I start it up. YMMV

ehildum

That should make you unhappy as it is going to mess with your end of lease options. It also likely boosts your lease payments a bit, assuming Mercedes priced it correctly.

That value impacts you if you lease or if you plan to sell the car before its end of life. If you purchase and hold, the intermediate price drop doesn't matter. If you are purchasing used, then it helps you a lot.

OldManAndHisCar

Bleeding edge.....never know what your going to get. You had an open ended residual value on the note? Makes no sense to me....but, what do I know....

HBerman

I know EXACTLY what the residual is on the car will be in December 2026. I assume that the residual amount will be much higher than what the actual value is worth and I will just turn in the keys at that point. There is only the unknown if the actual cash value is higher, which is very unlikely.

HBerman

Why should I be unhappy? The lease payments are fixed, the amount owed at lease end is ZERO (unless there is chargeable damage). I've done this for years. MBFS sets the residual on the car. If it is higher than ACV, then I just turn in the keys. If it is lower than ACV (like it was with my 2021 E63S wagon) I get cash back! I've never purchased a car from my lease in 31 years.

HBerman

MB, BMW, VW, etc all use their leasing arms to create vehicle subsidies. The higher the stated residual percentage is, the lower the assessed lease payments will become. There's no magic.

OldManAndHisCar

I leased a car once, never again - just not for me. I do enjoy having fixed assets and not just padding the banks pockets. Plus, I guess at the end of the day it is good for the 99% of car buyers who are not buying new (I have not purchased a new car for me in years, the business has).

For me, I feel it is more and more and more into the mantra of "You will own nothing, and you will like it".....yes, I am turning into a crazy old man. Plus I do a ton of driving.

HBerman

I'm not an asset collector (except for numismatic investment). Unless you have a C-corp, all the vehicle purchase costs have passed to you. I'm just happy with 1 car at a time.

OldManAndHisCar

Just wait to see if that is subject to taxing "Unrealized gains" if KamalaToe gets in....they will be raiding little Timmy's penny collection and baseball cards........

HBerman

I'm really not interested in conducting a tax preparation course on asset management and recovery. Thanks

ehildum

When I ran the numbers, there was no way I could make the lease cost competitive with just purchasing the vehicle even including financing costs. If I could have written off the lease cost against taxes, it might have helped, but even then I am not sure leasing makes sense as I would be able to depreciate the car and deduct interest costs.

I am curious as to how you make this work financially. Do you have something you can write off the lease costs against that would not work for purchasing?

OldManAndHisCar

Us as well. We were looking at paying in a rather large sum. What we did (at the advice of accountants) was spend money on a Certified GLS 580 - we did not take the initial capitol loss on the MSRP, did get the full write off. This (I guess) is not an option for a lease, I am no tax expert that is for sure. I only know what worked for us.

Only thing I ever contrived on my own was to title the Porsche in Montana to save a bank on Illinois taxes....that worked like a charm.

HBerman

I change vehicles every 3 years. The highway use tax in NC is 3% and is only assessed against the lease payments, not the total capital cost. Assuming you are financing a car, you would need about a 66-month term to have the payments about equal, but you would still have to pay the use tax at purchase (66-month rates are around 7.25% not tax deductible). At the end of the finance term you now own the vehicle which is probably worth only 35% of its original value so you've spent 7.25% to retain that amount. In the meantime, you've tied up your disposable income in a depreciating asset. If you don't want to keep the vehicle that long, you will probably be underwater on your loan as well. If you keep the car until the loan is paid off, you run the risk of costly repairs because the original warranty has expired. Of course, you can purchase an extended warranty to offset that repair possibility, but you need to factor the cost of that as well. The extended warranty for my 2021 E63S wagon was about $7300 for 7 years and 100,000 miles so you need to factor the cost of that protection into your comparison equation. I turned the car in after 35 months so I got that money refunded at lease termination.

I prefer not to be encumbered by an auto loan and I'm certainly not willing to shell out $130,000 of cash to buy the car outright. Walking away from the car after 3 years with no liability is very satisfying.

ehildum

Okay, I think I see why it makes sense for you. I don't have a highway use tax, and my financing rate is much much lower than yours. I also don't purchase extended warranties as I find they usually cost more than covering whatever repairs are needed when they arise for the period you can usually get extended warranties for. As I tend to drive cars to 250,000 to 300,000 miles, which is about the point that repairs no longer make sense, my cost window is considerably different than yours.

I also really hate the car buying process, so the idea of having to do it every three years is off-putting.

HBerman

EXACTLY! You purchase a car and then drive it until the "wheels fall off"! Your perspective is correct! I also believe you haven't looked at current auto financing rates. The rate I referenced was from my CU for a 66-month loan at 100% for a new vehicle. Automakers have subsidized rates as low as 2.99%. My typical 3 year mileage is around 35,000. Thanks for the discussion.