Hi,
I'm not an finance expert. But I'm trying to compare the lease vs buy on the 08 S550. I've read through different posts on the forum and articles online. I know the pros and cons for each financing option. Since I'll probably buy/lease through my company, I'll consider tax deductions on my calculation. I'll list out the figures below and please kindly comment on whether my calculation makes sense or not. Figures quoted are for discussion purposes and to my best knowledge. Assume I will use the car for business 90% of the time.

### Buy ###
Assuming I finance 100%.
Purchase price $95,000
Tax at 7% $6,650
Interest at 6% for 60 mos $40,000 (is that too much?)
Total cost for 5 yrs $141,650
Total cost per year $28,330
Total cost per month $2,360
Yearly tax deduction $2,585 (annual depreciation figures from IRS: $3060, 4900, 2850, 1775, 1775 for the first 5 years; I took the average times 90% of business use)
Yearly tax savings at 39% $1,008
Monthly tax saving $84
ACTUAL COST PER MONTH $2,276 ($2360-84)

### Lease ###
Monthly payment $1,600 including tax
Term 36 mo
Drive off $3,000
Total cost for 3 yrs $60,600 (1600x36+3000)
Total cost per year $20,200
Total cost per month $1,680
*by writing off 90% of the full lease payments
Yearly tax deduction $17,064 (1680x12x90% minus "yearly inclusion amount" from IRS - $1080 in average)
Yearly tax savings at 39% $6,655
Monthly tax saving $555
ACTUAL COST PER MONTH $1125 ($1680-555)

Let's say I lease another car at similar figures, the monthly difference between buy and lease is $1151/mo and it's $69,060 for 5yrs. That's a lot of savings plus other advantages on lease (even considering you can resell the car after 5yrs). After 5 yrs, I can even use this saving to purchase a newer car than the 5yrs old S550. Of course, there's the mileage restriction concern. But I'll have multiple cars and I should be okay with the mileage allowance from the lease.

Please feel free to criticize my calculation. Again, I'm no finance experts. Thank you very much.

 

Haven't closely reviewed the calcs, but generally $0-down, 2-3yr leases are cheaper than owning any car if fully value all costs/risks of each scenario....

Also may want to price in total mtce costs of each scenario...
Extra mileage....generally makes most sense to pre-buy as few miles as poss in any lease....and IIRC, extra miles on MB leases are fairly cheap....
Carefully review early termination provisions of any lease....varies by state...
If keep any car for 5yrs, need to price in cost of lack of warranty cvg in 5th yr of use...or purch of extended warrranty (and risks that extd warranty has loopholes/counterparty issues)....

Safety....biggest reason I always advise non-car-oriented/interested colleagues to algorithmically replace each of their cars every 2yrs, not 4-5yrs.....mfrs claim that lifespan of airbag systems is 10yrs; but what's the decay curve? IOW, what % effectiveness do 4-5 yo airbag systems have, w/decay of airbag propellants and crash sensors???.....given that a car is one of the few settings where an affluent guy's life/health faces daily risk of potentially being destroyed within a few secs through no fault of own, IMO a new S550 every 2yrs is an incredibly efficient (and needed) form of health insurance.....

 

The loan amount $95,000 plus the sales tax of $6,650 is $101,650. At 6% the total interest over 5 years is $16,261, not $40,000.

Your payments are $1,965.18. If you are buying this through a business the interest is reduced by your assumed personal use (10%) is non-deductible, the depreciation is calculated similarily.

The business can expense, in addition to the interest and depreciation, cost of insurance, operating costs, etc.

I am a fan of leasing for several reasons, first, the payments are smaller, and second you do not have to own a car that can be expensive to maintain after the warranty period expires.

Good luck and Happy New Year.

 

So, it's better to just get 10K/12K miles per year for the lease and pay for the extra mileage when returning the car?

With the new calcuation, the difference between lease and buy is about $840/mo and it's about $50,000 for 5 years. It seems it makes most sense for me to lease based on the figures above?

 

If the use is business its a no brainer ...Lease. If its not a business expense leasing makes no sense. You did forget one of the important items in the purchase scenario and that is recapture of the depreciation upon sale. That will make your purchase even more expensive when the vehicle is disposed of. If sold outright the proceeds of the sale become taxable income on a fully depreciated vehicle or if traded you only get a writeoff on the cash difference on the replacement vehicle.
As for what someone said regarding safety issues after so many years, thats BS. Perhaps he is a consultant but its not correct and he certainly would not consult for me.
I ran throught this scenario many years ago and now both of my vehicles (my wife's) are leased thru my business as my wife is also very active in the business and also a shareholder.
As for the miles, MBCC has had changes in their policy and I am not up on all of them, however, I estimate the miles I use and have the lease written accordingly. I may have walked away from a few miles I have left at the end but is not a big deal and you will have no surprises. At this point I have leased 5 MB vehicles in this fashion and the normal terms of these leases is from 39 to 48 months. On one occassion I extended the lease for an additional year to get the next vehicle that I wanted and was not yet being sold when my lease had expired.

 

Lease it. Your homework convinced me that you'd be best off leasing. Other than the error in purchase interest, your calculations convinced me you'd be better off leasing.

 

I'm in the same dilemma and wondering what to do. I just posted a new thread on a 08 S550 that I'm looking to buy/lease.

My view point is this: If you lease, you just dropped around 50k for a 3 yr. lease and get NOTHING back when you turn it in. OTH, if you buy it, you'd still get SOMETHING back no matter when you sold it!

Right? Yes/No?

 

In short, no. Your car will depreciate no matter you buy or lease. When you lease, you are paying for the depreciation and such. there are pros and cons for leasing vs buying and it really depends on each individual situation. For buying, you get the flexibility on what to do with the car. You can sell it whenever you want to. You can put on high miles. But you still have to deal with depreciation and it's subject to the market value when you decide to sell, not to mention the hassle of selling the car. For leasing, the residual value is locked in and you know almost all the costs for driving that car for the next 3 years upfront.

As you can see, my choice is quite obvious after discussing with other forum members. For me, I have a business and can write off the expenses for tax-saving purposes. Plus, I have other cars that I can use so that I won't put too many miles on the leased cars. And I don't want to worry about out-of-warranty issues on expensive cars and I like to switch cars every 3 years.

There are some good articles online. Try searching for "lease vs buy" and also go to sites like edmunds.com.

I'm no finance expert, but hope this helps.

 

Thanks jaris. That was insightful. I guess, I need to read up some more.

I guess it's a personal issue for the most part - and in my situation, I like the feeling of knowing that I'm driving something that I can afford (even though I might be making payment on it via a loan or some such ). Add to that, the very idea of a lease for me implies something "temporary" - that it's not really my car but instead I'm borrowing it from the dealership.

Looks like the main factor for those who lease is that they know that they'll be in a new car in 3 years. Me? Not so sure. Although, coming to think of it now, I'm sure I'l be salivating over the 2012 S550 when it's out and then think that my 08 clunker needs to be sold

Sigh!

 

no matter which way you take, there are pros and cons

 

I'll throw in another point of consideration for those who are on the fence about leasing vs. buying:

I've always leased because I like replacing cars, especially our daily drivers, about every 3 years to stay within the warranty and get something new in the garage.

But in December, my wife rear ended someone with my then 4 months old E63 with less than 2,200 miles on the clock. The total bill for repair was just under $10,000, even though it wasn't a very hard hit and the air bags did not deploy. The only mechanical repair/replacement was the radiator as everything else was cosmetic: the bonnet and the front bumper.

If the car was purchased, you can bet its depreciation curve just got a LOT steeper and if I'd owned or financed it, come 3 years' time the trade-in value was be a lot lower than if it was accident free.

So leasing the car also gave me some insurance against depreciation due to accidents - and keep in mind, it doesn't matter who's at fault, if the car was involved in an accident, there is an associated depreciation.

So I'm more convinced than ever that leasing is the way to go for me and my family 90% of the time.

Now, when the time finally comes that my expendable income can be spent on a Ferrari instead of the house, landscape, child, <insert any other expenses here>, then I'd be buying it for sure!

 

Good topic Jaris,

In my experience there are always two worlds. I have purchase and lease vehicles. As of now I'm leasing my E350 for 2 1/2 years then afterwards I'm not sure what will be my next vehicle but I like to have that option that I dont have to keep paying the car for the next 5-7yrs. That's one reason I prefer leasing, to have that option to get another newer car but of course something that I can afford. Still it comes down to pros and cons and personal preference on each individual IMO

 

I think people who argue you should buy because otherwise you are getting nothing in return at the end of the lease are wrong.

Sure, you pay $50k in lease payments and at the end of 3 years you get nothing.

However, you buy the car for the $95k and pay payments for 3 years (at which time it's worth 60k) and then sell.....you likely either will get $60k back which leaves you with nothing after you pay the loan or more than likely you owe $70k after 3 years and then once you sell the car you STILL owe $10k.

If you lease, you walk away. I am probably done buying Benzes as opposed to leasing.....each one I have sold has been upside down loanwise once I sold it. That being said, it probably is not good for the value when I drive 25k miles per year.

 

I agree with this. If you are looking to own for a longer 4-6 year period until the next model in 2012 (ish) then leasing makes no sense to me if there are no tax advantages as a business owner. In the latter stages of your ownership you will have already absorbed the worst depreciation. In the lease scenario you would need another lease on the same vehicle/model for yet another 3 years to get you to 2012/13, when instead you could be enjoying zero/smaller monthly payments on a vehicle that as the original owner you alone have driven (and have confidence in) and can buy a full extended factory warranty for. Also you do still have some value in the vehicle when you eventually sell - though it is small and I regard it purely as a pleasant bonus.

Personally I dislike the idea of paying $2K/month on consecutive leases for years on end, when I can enjoy some years of no payments at all on a quality vehicle once the car is paid for. You should be able to absorb the cost of the vehicle and/or associated loan in a reasonable time period, (The first 1-3 years - don't go near those horrendous 6 year loans you hear about) and be confident in your self discipline in not getting bored with your car!

Chris

 

BINGO!!!

Nail .... meets hammer!