Leasing vs Purchasing
Thread Starter
Almost a Member!
Joined: Oct 2006
Posts: 48
Likes: 0
Leasing vs Purchasing
I did a search on "leasing" before I posted this thread and didn't see the discussion I was looking for. I hear arguments in favor and against leasing. I am curious what your analysis and conclusion is as to leasing or purchasing the S550. I am retired and lately have been paying cash for my cars. When I was working I would lease and take the appropriate deductions. I'll probably keep the S550 for 3 to 3/12 years. I looked at the WSJ financial calculator "tools" and also read some articles that advocate "never" leasing. I have also read financial consultants who say always lease because you are only paying for what you use etc etc
Just curious what you all think and why. Thanks in advance.
Just curious what you all think and why. Thanks in advance.
MBWorld Fanatic!
Joined: Mar 2003
Posts: 2,018
Likes: 148
From: South Florida
ML350
When i bought my SL55 in 2003 the sales guy was heavily pushing leasing and said all his doctor clients leased....i was a bit skeptical just because he was pushing it so much.....later my accountant told me the deductions are the same. So i think it simply depends on your interest rate when comparing buying vs leasing.
T
T
Super Member
Joined: Dec 2001
Posts: 633
Likes: 0
From: NY
14 'E550
It really depends on your situation, if you only keep cars for 3 years it might pay for you to lease.
The argument goes both ways, with a finance you can get out whenever you want with ease. With leasing, you don't have to worry that if your car get's in an accident it will have a potential affect on your resale value.
Righ now with the Sclass, the lease interest rate through MB financial is still about 8.9% for Oct. So, you can still secure a slightly lower finance rate with good credit.
Of course being able to take the deduction on a lease is a great thing, but that's not the only reason why one should lease......despite what some think.
Personally, I just think it depends on the car. Not all cars lease out well. The S550 happens to lease out fairly well, you can get a good discount on them at this point....and it has a descent residual, especially with 12k/miles year (the rate could be a bit better though).
Its really a personal decision on what's right for your situation.
The argument goes both ways, with a finance you can get out whenever you want with ease. With leasing, you don't have to worry that if your car get's in an accident it will have a potential affect on your resale value.
Righ now with the Sclass, the lease interest rate through MB financial is still about 8.9% for Oct. So, you can still secure a slightly lower finance rate with good credit.
Of course being able to take the deduction on a lease is a great thing, but that's not the only reason why one should lease......despite what some think.
Personally, I just think it depends on the car. Not all cars lease out well. The S550 happens to lease out fairly well, you can get a good discount on them at this point....and it has a descent residual, especially with 12k/miles year (the rate could be a bit better though).
Its really a personal decision on what's right for your situation.
Last edited by Beltfed; Oct 8, 2006 at 01:28 PM.
Super Member
Joined: Jun 2005
Posts: 516
Likes: 0
From: Oakville, ON
'12 ML350
For me, I lease the cars that we use as daily drivers as I own my own company and buy cars that have the possibility of keeping longer than 36 months. I get bored with cars easily so a new daily driver every 24-36 months gives me a chance to drive something new on a regular basis.
The A8L is leased and when it ends, I'll lease another car through the company - same thing with my wife's LX470.
I bought the SL500 new thinking I would keep it longer but now that we have a baby, it's not at all practical without the possibility of fitting a baby seat so it's going, to be replaced by a 911 in the spring. And I'll be purchasing the 911, either new or used depending on what I find at the local dealers' inventories, in the hopes that this will be a car that I'll keep for longer than 36 months again...at least that's what my wife hopes!
The A8L is leased and when it ends, I'll lease another car through the company - same thing with my wife's LX470.
I bought the SL500 new thinking I would keep it longer but now that we have a baby, it's not at all practical without the possibility of fitting a baby seat so it's going, to be replaced by a 911 in the spring. And I'll be purchasing the 911, either new or used depending on what I find at the local dealers' inventories, in the hopes that this will be a car that I'll keep for longer than 36 months again...at least that's what my wife hopes!
MBWorld Fanatic!
Joined: Aug 2006
Posts: 2,915
Likes: 0
From: Fremont, Ca
EVOTECH Mercedes AMG
Both lease and financing payments can be written off. However, on leasing programs, you have to choose how many miles you are allowed to drive in a year. Also, by the end of the contract, you have to return the car or purchase it if you intend to keep it longer. My opinion is, if you really like the new S class, finance it instead of leasing it because i am sure its a keeper!
MBWorld Fanatic!
Joined: Sep 2005
Posts: 2,098
Likes: 0
From: Lawrence, KS (USA)
S500/W220/2000
For me, I lease the cars that we use as daily drivers as I own my own company and buy cars that have the possibility of keeping longer than 36 months. I get bored with cars easily so a new daily driver every 24-36 months gives me a chance to drive something new on a regular basis.
The A8L is leased and when it ends, I'll lease another car through the company - same thing with my wife's LX470.
I bought the SL500 new thinking I would keep it longer but now that we have a baby, it's not at all practical without the possibility of fitting a baby seat so it's going, to be replaced by a 911 in the spring. And I'll be purchasing the 911, either new or used depending on what I find at the local dealers' inventories, in the hopes that this will be a car that I'll keep for longer than 36 months again...at least that's what my wife hopes!
The A8L is leased and when it ends, I'll lease another car through the company - same thing with my wife's LX470.
I bought the SL500 new thinking I would keep it longer but now that we have a baby, it's not at all practical without the possibility of fitting a baby seat so it's going, to be replaced by a 911 in the spring. And I'll be purchasing the 911, either new or used depending on what I find at the local dealers' inventories, in the hopes that this will be a car that I'll keep for longer than 36 months again...at least that's what my wife hopes!
Trending Topics
MBWorld Fanatic!
Joined: Sep 2005
Posts: 2,098
Likes: 0
From: Lawrence, KS (USA)
S500/W220/2000
Both lease and financing payments can be written off. However, on leasing programs, you have to choose how many miles you are allowed to drive in a year. Also, by the end of the contract, you have to return the car or purchase it if you intend to keep it longer. My opinion is, if you really like the new S class, finance it instead of leasing it because i am sure its a keeper!
MB World Stories
The Best of Mercedes & AMG
7 Craziest Things AMG Gas Ever Built
Verdad Gallardo
New Electric Mercedes-AMG GT 4-Door Coupe Unveiled: 10 Things You Need to Know
Verdad Gallardo
6 Mercedes Models That Did NOT Age Well (But Are Somehow Still Cool)
Verdad Gallardo
Manual Mercedes? 6 Times Sindelfingen Let Drivers Have All The Fun
Verdad Gallardo
Mercedes SLR McLaren 722 S Is Extremely Rare Example Modified by McLaren
Verdad Gallardo
8 Classic Boxy Mercedes Designs That Have Aged Like Fine Wine
Verdad Gallardo
Flawlessly Restored Mercedes 190E Evo II Heads to Auction
Verdad Gallardo
Electric Mercedes C-Class Unveiled: 11 Things You Need to Know
Verdad Gallardo
Mercedes EQS Gets A Major Update: Everything You Need to Know
Verdad Gallardo
Thread Starter
Almost a Member!
Joined: Oct 2006
Posts: 48
Likes: 0
I am not a financial guru guy (and I know there are some very good ones who contribute to this forum and might jump in here) but I was looking at the leasecompare.com site and it shows "money factor" figures from .00022 to .00038 for 36 months. Anyone know how that might compare to MB leasing or does it vary dealer to dealer?
Thread Starter
Almost a Member!
Joined: Oct 2006
Posts: 48
Likes: 0
After reading a few on line articles it appears the write-offs apply equally to leases or purchases. So bear with me for a minute. If the car sells for $100,000 + $8000 (approx 8%) sales tax + $1500 license and registration ($109,500).
If I lease with 0 down I figure about $1800-$1900 per month (based on residual of $58,000 (58%) after 36 months) $64,800-$68,400 out of pocket
If I write a check for $109,500 I save $64,800-$68,400 but I have lost depreciation ($42,0000), paid sales tax ($8,000) and $1,500 (license and registration) and have lost the minimum of 5% return per year on my $109,500 if I had kept my cash ($5475 x 3 =$16425) So to recap:
Lease costs me---$64,800-$68,400 for 3 years +/offset by 5% return on $109,500 cash I didn't spend of $16425 for a net cost of $48,375-51,975
(and I still have my cash but no S)
OR
Cash payment costs me--$109,500 + $16425 (loss of 5% return on that amount over 36 months)=$125,925 BUT I have a fully paid S worth (according to 58% redual) $58,000 for a net cost of $67,925.
This is not my area of expertise so please feel free to tell me what I missed in my basic analysis. Of course, I didn't factor in anyone's personal tax situation.
If I lease with 0 down I figure about $1800-$1900 per month (based on residual of $58,000 (58%) after 36 months) $64,800-$68,400 out of pocket
If I write a check for $109,500 I save $64,800-$68,400 but I have lost depreciation ($42,0000), paid sales tax ($8,000) and $1,500 (license and registration) and have lost the minimum of 5% return per year on my $109,500 if I had kept my cash ($5475 x 3 =$16425) So to recap:
Lease costs me---$64,800-$68,400 for 3 years +/offset by 5% return on $109,500 cash I didn't spend of $16425 for a net cost of $48,375-51,975
(and I still have my cash but no S)
OR
Cash payment costs me--$109,500 + $16425 (loss of 5% return on that amount over 36 months)=$125,925 BUT I have a fully paid S worth (according to 58% redual) $58,000 for a net cost of $67,925.
This is not my area of expertise so please feel free to tell me what I missed in my basic analysis. Of course, I didn't factor in anyone's personal tax situation.
MBWorld Fanatic!
Joined: Sep 2005
Posts: 2,098
Likes: 0
From: Lawrence, KS (USA)
S500/W220/2000
After reading a few on line articles it appears the write-offs apply equally to leases or purchases. So bear with me for a minute. If the car sells for $100,000 + $8000 (approx 8%) sales tax + $1500 license and registration ($109,500).
If I lease with 0 down I figure about $1800-$1900 per month (based on residual of $58,000 (58%) after 36 months) $64,800-$68,400 out of pocket
If I write a check for $109,500 I save $64,800-$68,400 but I have lost depreciation ($42,0000), paid sales tax ($8,000) and $1,500 (license and registration) and have lost the minimum of 5% return per year on my $109,500 if I had kept my cash ($5475 x 3 =$16425) So to recap:
Lease costs me---$64,800-$68,400 for 3 years +/offset by 5% return on $109,500 cash I didn't spend of $16425 for a net cost of $48,375-51,975
(and I still have my cash but no S)
OR
Cash payment costs me--$109,500 + $16425 (loss of 5% return on that amount over 36 months)=$125,925 BUT I have a fully paid S worth (according to 58% redual) $58,000 for a net cost of $67,925.
This is not my area of expertise so please feel free to tell me what I missed in my basic analysis. Of course, I didn't factor in anyone's personal tax situation.
If I lease with 0 down I figure about $1800-$1900 per month (based on residual of $58,000 (58%) after 36 months) $64,800-$68,400 out of pocket
If I write a check for $109,500 I save $64,800-$68,400 but I have lost depreciation ($42,0000), paid sales tax ($8,000) and $1,500 (license and registration) and have lost the minimum of 5% return per year on my $109,500 if I had kept my cash ($5475 x 3 =$16425) So to recap:
Lease costs me---$64,800-$68,400 for 3 years +/offset by 5% return on $109,500 cash I didn't spend of $16425 for a net cost of $48,375-51,975
(and I still have my cash but no S)
OR
Cash payment costs me--$109,500 + $16425 (loss of 5% return on that amount over 36 months)=$125,925 BUT I have a fully paid S worth (according to 58% redual) $58,000 for a net cost of $67,925.
This is not my area of expertise so please feel free to tell me what I missed in my basic analysis. Of course, I didn't factor in anyone's personal tax situation.
Thread Starter
Almost a Member!
Joined: Oct 2006
Posts: 48
Likes: 0
Again, don't take this as the "end-all" in this ongoing debate. This could be totally faulty reasoning, we might discover, after a "financial" person contributes to this thread. Just my rough "2 cents" to the discussion,
MBWorld Fanatic!
Joined: Mar 2006
Posts: 4,278
Likes: 379
From: San Jose area
'19 E63S sedan
The lease offers a couple of advantages beyond those calculations. One has been mentioned: if the car has an accident, you can return it at the end of the lease with no penalty, although the repair work has in fact reduced the value considerably.
The other is that you're in good shape should the residual (which is, after all, only a prediction) turns out to be inaccurate. If the car is worth less that the predicted residual, you just walk away after having "rented" more value than you paid for. If the car is worth more, you can buy it for the contracted residual and either keep the car or sell it at a profit.
I've just leased my first MB, after having bought 6 in the past. The situation is different now, I feel, because owning an S off warranty is such a crap shoot. They are so expensive to repair that I wouldn't want to make the leap of faith that the 221 will never break after 50,000 miles. A 39-month/15k-mile lease is, not coincidentally, exactly covered by the 50,000 warranty.
The other is that you're in good shape should the residual (which is, after all, only a prediction) turns out to be inaccurate. If the car is worth less that the predicted residual, you just walk away after having "rented" more value than you paid for. If the car is worth more, you can buy it for the contracted residual and either keep the car or sell it at a profit.
I've just leased my first MB, after having bought 6 in the past. The situation is different now, I feel, because owning an S off warranty is such a crap shoot. They are so expensive to repair that I wouldn't want to make the leap of faith that the 221 will never break after 50,000 miles. A 39-month/15k-mile lease is, not coincidentally, exactly covered by the 50,000 warranty.
Thread Starter
Almost a Member!
Joined: Oct 2006
Posts: 48
Likes: 0
The lease offers a couple of advantages beyond those calculations. One has been mentioned: if the car has an accident, you can return it at the end of the lease with no penalty, although the repair work has in fact reduced the value considerably.
The other is that you're in good shape should the residual (which is, after all, only a prediction) turns out to be inaccurate. If the car is worth less that the predicted residual, you just walk away after having "rented" more value than you paid for. If the car is worth more, you can buy it for the contracted residual and either keep the car or sell it at a profit.
I've just leased my first MB, after having bought 6 in the past. The situation is different now, I feel, because owning an S off warranty is such a crap shoot. They are so expensive to repair that I wouldn't want to make the leap of faith that the 221 will never break after 50,000 miles. A 39-month/15k-mile lease is, not coincidentally, exactly covered by the 50,000 warranty.
The other is that you're in good shape should the residual (which is, after all, only a prediction) turns out to be inaccurate. If the car is worth less that the predicted residual, you just walk away after having "rented" more value than you paid for. If the car is worth more, you can buy it for the contracted residual and either keep the car or sell it at a profit.
I've just leased my first MB, after having bought 6 in the past. The situation is different now, I feel, because owning an S off warranty is such a crap shoot. They are so expensive to repair that I wouldn't want to make the leap of faith that the 221 will never break after 50,000 miles. A 39-month/15k-mile lease is, not coincidentally, exactly covered by the 50,000 warranty.
Super Member
Joined: Jun 2005
Posts: 516
Likes: 0
From: Oakville, ON
'12 ML350
Yes, I am getting a Carrera S as it has a "rear seat", which is really a shelf appropriate only for pint sized human beings strapped into car seats. The SL has a shelf behind the seats but somehow I don't think my wife would like me suggesting we strap our 5 1/2 months old onto that! This also meant that the GT3 is out of the question as it doesn't have a rear seat either.
MBWorld Fanatic!
Joined: Nov 2005
Posts: 1,547
Likes: 0
From: Los Angeles, CA
SL/M6
I bought (cash or financed) my first 5 cars....then leased the SL....I will lease from now on. I personally like a new car every 2 years or so and lately with all the accelerated model changes its hard to keep a car THAT long.
Plus, if you play your cards right and wait for the low money factors/incentives/bump of the residual- you'd be amazed with the deals Mercedes sometimes has. The extent of their incentives aren't usually advertised on the highline models so its up to you to investigate.
Plus, if you play your cards right and wait for the low money factors/incentives/bump of the residual- you'd be amazed with the deals Mercedes sometimes has. The extent of their incentives aren't usually advertised on the highline models so its up to you to investigate.
Junior Member
Joined: Sep 2006
Posts: 53
Likes: 3
From: Virginia
GLC 300
Mercedes lease factors are usually much higher than outside banks, except if you want a vehicle without much demand, like the R series. They do have special lease rates, but they are not available for the kind of cars the people in this forum are considering (nothing against the R series or the six cylinders E series for example). On the other hand, outside leasing companies will have a lower residual. You usually still end up significantly ahead in payments with and outside leasing company.
Super Member
Joined: Dec 2004
Posts: 972
Likes: 28
From: DFW
BMW M850i Gran Coupe
When i bought my SL55 in 2003 the sales guy was heavily pushing leasing and said all his doctor clients leased....i was a bit skeptical just because he was pushing it so much.....later my accountant told me the deductions are the same. So i think it simply depends on your interest rate when comparing buying vs leasing.
T
T
So, in that this is the S-Class forum, a $2000 per month lease payment on an S600, less 25% personal use, would result in an annual deductible expense of $18,000.00, which is $2500 more than you could deduct over FIVE years on a depreciated asset acquisition.
MBWorld Fanatic!
Joined: Mar 2003
Posts: 2,018
Likes: 148
From: South Florida
ML350
UPDATE:......my new accountant said leasing is better if all things are equal. So...the verdict is that my old accountant sucked.....mods...plz delete this thread and ban me for 1 week for hearsay.
T
T
MBWorld Fanatic!
Joined: Mar 2006
Posts: 4,005
Likes: 711
From: ATLANTA
R Nine T
The deductions for people who use their vehicle for business purposes are NOT the same. Cash purchase or finance acquisitions are subject to IRS limitation rules. The maximum deduction (depreciation), less personal use, over 5 years (last years guidelines) is $3200/$5300/$3200/$1900/$1900 for a total deduction of $15500. Conversely a lease payment as a business expense is fully deductible, less once again, the personal usage factor.
So, in that this is the S-Class forum, a $2000 per month lease payment on an S600, less 25% personal use, would result in an annual deductible expense of $18,000.00, which is $2500 more than you could deduct over FIVE years on a depreciated asset acquisition.
So, in that this is the S-Class forum, a $2000 per month lease payment on an S600, less 25% personal use, would result in an annual deductible expense of $18,000.00, which is $2500 more than you could deduct over FIVE years on a depreciated asset acquisition.
Excellent financial points MBZFAN, i would just like to point out that the terms of the lease (lease factor) or finance (interest) are so important, especially on 100k cars. If you want an approx translation for a lease factor just times it by 24. EG a factor of .00345 x24 will give u an approx interest...... Also, I have a friend who leased a cl ....the residual was 25k higher than actual value after 39 months so u are protecting yourself in a very volatile market. These things depreciate like hell maybe invest the dollars instead.
MBWorld Fanatic!
Joined: Mar 2006
Posts: 4,278
Likes: 379
From: San Jose area
'19 E63S sedan
Money factor simplifies the arithmetic but makes the computation seem very arcane, although it's pretty simple.
