skrontz

Bentley production volume is artificially deflated to justify the premium. They could make a lot more money if they ramped it up and invested into R&D, but that would make it less exclusive. Since the perceived exclusivity is pretty much the only benefit of the brand, it cannot be compared to W221 on any level.

While it's not the largest MB market (Germany always was), US does command about 18% of MB worldwide car sales. MB tries to make up for the lower prices on the volume, but the ultimate cash cow for them is definitely financing. Additionally, the lower prices imply fewer options (i.e. no refrigerator, no rear tables, poor man's rear seat package w/no massage and dynamic seats, and so on). Outside the US, the majority of worldwide S Class purchases are cash only.


So, everyone would just walk places? That would be great for gas prices, ecology, and people's health ;-)

Not getting a lease/loan is actually a great fixed-income investment. You're earning the interest rate you would otherwise pay your bank. Since it's typically 5-8%, it is way better than any of the guaranteed securities out there. Seeing how quite a few people lost 80% of their 401K value over the last 2 years, buying a car with cash is a great deal for an average consumer.

Quite the opposite, it's a guaranteed gain of whatever the interest rate on your loan/lease contract is. There are some low-interest loans out there for those with stellar credit records, but it's not the majority of the buyers. The interest rates on leases are just a plain robbery. You can never reliably know when the next cycle will be and what would do well, so you're taking a risk. Choosing between saving 5-8% by not taking out a loan or chasing after an uncertain return somewhere else, some people would sure go for the former. Furthermore, debt reduction is something a lot of business owners are looking into; I had seen people who had to liquidate their personal cars to convince banks to keep their business credit lines intact. In a time of uncertainty, debt is bad.

The main advantage of leasing through a company is the ease of cost deduction. You're saving some money through taxes, but you need to keep in mind that you're likely paying more in lease interest. Not to mention how much of a nightmare your life becomes when you are suddenly audited and have to prove that you indeed used your car for business purposes as much as you had claimed. Many business chose to purchase cars instead of leasing them; the benefits (including the flexibility of the residual at the end) are quite significant if you play your cards right.

Dema

Depends on geography, for North California it is $250K+ considering house payments below $14K.
Next question where you should work to get this income.

skrontz

$14K/mo (not possible with $250K/y) or $14K/y (less than the payments on a new S550)?

MichaelB.

Skrontz... I dig your write up.

skrontz

Thanks! Unfortunately, people learn best in the hard way...

emilner

A- Show me the poor sap who is down 80% in their 401k, there can only be a couple alive. Anyone I know is still down 10-20% from their peak not including new contributions.

B- If your credit sucks bad enough to pay 5-8% on a new car then you should buy a ten year old Honda and get your affairs in order. Every credit union around here is quoting mid to low 3% notes for 4-5 years. If you cannot qualify for them, you should not be getting a new Mercedes or any other new car for that matter. And if you cannot beat 3% over the next five years just give up, success is not for you. I do not know how you calculate a 50% loss in principal in the first 3 years of ownership as a gain.

The only people who should not CONSIDER a lease are those who do high mileage and those who hold onto vehicles for quite some time. I say consider because you have to look at the raw numbers. If the residuals and interest rate are favorable then lease if not then buy.

skrontz

Had you checked any major mutual fund at the beginning of 2009, you would typically see losses over 50%. Those who were scared enough to dump and run, would be in that boat. And -- trust me -- there was no shortage.

We could all go and apply for credit around you, but I have a feeling that not everyone (including quite capable S Class buyers) is getting these rates. Given the fact that MB Finance is offering 6.24% APR on August leases, maybe you should tell them to refer their customers to Honda (or Nike) dealers instead.

Are you saying that one would not take a loss on depreciation with leasing/financing? Quite the opposite, you would be paying depreciation (and a much higher one at that with leasing) and interest.

Leasing also makes little sense when you drive low miles and take care of your car, since such a car is almost always (especially, considering inflation) worth more than the residual. Of course, you can buy it back at the end of the lease, but why pay the associated lease closing costs as well as the interest in the first place? Obviously, one should always consider all the options, but miracles rarely happen.

Maybe you should ask the people you know who are down 10-20% in their 401Ks whether 6.24% guaranteed annual return is good enough for them. If there're so many opportunities for such great guaranteed investments elsewhere, I'm sure they would be happy to get in on that.

emilner

First off we are down from 80% to 50%. Good start. Anyone working with a relatively competent advisor did not not sell at the bottom of the market. Most held, some bought, very few cashed in. And if you were in a 401k the chances were extremely slim that you cashed out in March of '09. 99% of 401k investors set and forget. Frankly they were too afraid to open statements.

Depreciation. Either way the car is going to depreciate by the exact same amount depending on your driving and the environment. You either take the risk yourself that depreciation will be better than expected or let MB take it. Most of the time you wind up ahead because they want to sell cars and they are a little 'favorable' on the residuals to make deals.

Interest. Yep you pay more on a lease. But it isn't always 6+%. Like I said, you have to look at the numbers and see if it makes sense. Maybe the rate is high but the residuals are great, maybe you should finance. I have had interest rates at less than 1% on leases. There are plenty of cars today you can get at less than 3%. Depends on what products they want to move.

One thing that makes buying a disadvantage is TAXES. In most states you have to pay tax on the depreciation only with a lease. In NY that is a $5k difference right there.

Driving low miles- it has an effect on values, but not huge. If you drive few miles and are going to hold the car, then like I said buy it. But if you are going to sell the car in 3 years there is not all that much difference $2-3k on a $100k car (assuming a car with 36k vs say 20k).

Low rate financing is everywhere. Like I said if you cannot find it, work on getting better credit. I just locked in a 15 year mortgage for 3.375% with no points. It is out there, you need to find it and have good credit. If your credit is not 750 and above stay away from luxury vehicles and build your credit.

As I have said, leasing is for those who get a new car every 3 years. When you lease you take away the BIGGEST hassle of buying a car- trade in. You could get more privately but then you lose the tax value. So you are stuck with haggling on two ends on the car. And chances are you are what is called upside down, you owe more than the trade in, depreciation worked against you.

Just as an FYI- I own both cars I have now, they are not leased. But I am sure as hell not opposed to leasing. 2.5 years ago I leased a truck with a $71k MSRP for $590 a month with $800 total out of pocket. The deal made sense, other times it does not.

But if you are going to blanket say "leasing will never work for me" without looking at the numbers then you have not done your homework...

MichaelB.

This is an education for all just reading this thread.

A bit off topic here: Hey Emilner. I have been meaning to ask you... I think I remember you buying that E-Class... Now I see you rolling in an S-Class with the E-Class gone. I may have missed it but what was the deal there?

I purchased my wife an '10 E and have put some drive time on it. I think it is a stellar vehicle. Did the '07 S-Class just outweigh the new E to the point you traded off? I have told some that if I had driven my wife's E prior to purchasing my S that I may have just kept the cash difference and bought two E's.

emilner

I did not like the 2010 E. I felt it was a step back from the 211. I also had more then a few issues with it. Eventually the car was lemoned. I don't think you can really compare the two cars though. You can read my review of the S under my thread:
https://mbworld.org/forums/new-s-cla...yesterday.html

Trinsoca

i have kept my 401K and i am up 10%. I have always been on the + side for all the years that i have owned it. Biggest problem is that people just leave it sitting there or leave it in someone's else hands and keep their fingers crossed.

Any way to each his own the main thing is that we all love our cars and that's the main thing. However you obtained it does not matter, the only thing is that you enjoy every mile.

bigben320e

I understand what you are saying, and it may actually work, but it does not change what I posted earlier. Quite a few people I know like I said, are not buying cars with cash that could afford to do so. I wasn't saying if it was a good or bad move, just stating a fact in regards to people I know. This will vary from person to person.

80% of 401K's? Where are you getting these numbers from? Please quantify and qualify. Personally, I lost about 3-5% of my own 401K. I changed around funds back in 2008, loss was very minimal. Gained every dollar back, and then some. A lot of other people I know did the same.

BTW- What "average consumer" has over $80K to plunk down on a car? At that level you are not average by definition.


Exactly. Sitting back and letting it ride on any investment is foolish. You have to be active in reviewing. It is your money after all.


Like I said from the start of the thread, there are so many variables in someone's financial picture just asking a blanket question: "Can you afford a S550?" Is not possible to answer for all. Bottom line, you have to use common sense and due diligence into looking at your financial picture to determine that.

Beyond that, enjoy your rides.

MichaelB.

Great 3 pager. I can certainly agree with your assessment of the S class. If I could only drive one car everyday - it would be it.

Shame you had gotten a lemon E tho'.

usctrojans1

The best way to acquire a S is by leasing through your business. That is, if you are fortunate enough to have a business.

skrontz

We can argue all day long, but it all boils down to the primary reason why most people lease or finance. That is they do not have the cash to buy the car outright. Leasing/financing allows them a relatively easy opportunity to do so. It also happens to be very advantageous to the lenders, so good deals pop up very infrequently. Yes, you may be able to score a fair deal when the macro conditions are right (i.e. the lender cannot make a better return on their money elsewhere) or when the manufacturer is trying to liquidate stock (in this case, you're likely buying a brand new car that is a year old in terms of book value). However, the majority of people will take a hit on the finance charges, excess mileage, required out-of-pocket repairs (including cosmetic stuff), one-time lease fees, and artificially lowered residual value; I had run some numbers back in the day, and they would always come up to more than the sales tax savings (tax deductible in some states, mind you).

If your bank can afford to loan you money at 3% rate, it basically means that they cannot get a better return elsewhere. If this ROI is good for a bank, an average car buyer should be happy with it, too. And yes, "over 50%" loss covers -80% as well; simple math there.

skrontz

I very much doubt that the individuals in question make their 401K statements public, so not sure I can cite a source. I understand that you personally had made wise financial decisions, but you were in the minority. Otherwise, we would have had no crisis.

Not everyone buys their cars new and not everyone drives an S-Class. The discussion became a bit more generic as we went along.

emilner

1-You have not run lease numbers in quite some time. That says it all. I do it every time I buy a vehicle. I then crunch the numbers over the expected hold time for the vehicle to see which works better. Under most circumstances leasing it worked out better.
2-I have never paid for any repairs on a vehicle at turn in, some with major damage, I am probably lucky but with companies interested in keeping you a customer they rarely bust *****.
3-The repairs you would have to do at turn in are probably equal to the decline in the value of the car with the so called damage.
4-Mileage, go over you pay, yep and guess what when you trade in or sell your car that you own you get less for it with more miles.
5-Leasing fees and bank fees are usually identical.
6-Most of the time residuals are artificially HIGHER on leases to make the numbers right and move cars. Most people do not buy out their cars at lease end because the residual buyout is way too high. My 2007 E550 had a $40,000+ buyout and they were selling for $35-36k. Same with my '08 Escalade, $51k buyout and trucks selling for $44-45K.
7- Mercedes is offerring lease rates as low as 1.4%. Again it is vehicle specific.
8- I know many people who could pay cash for some nice Gulf stream's, yet they finance/lease their vehicle because they know one simple investment fact. Whenever possible try to never buy a depreciating asset, and when financing it, if rates are cheap never pay cash.

9- As I have said before, if you get a new vehicle every 3 years and put on reasonable mileage then it would be very difficult for you to do better buying a car vs leasing it.

GFEAR

HERE IS MY PROBLEM WITH LEASING, I BUY MY ,MERCS 2 OR 3 YEARS OLD FOR HALF OF WHAT THEY COST NEW, PUT 10 OR 20K DOWN AND HAVE A NICE LOW PAYEMNT AND BUILT IN EQUITY, KEEP THE CAR FOR A YEAR TO 2, AND GET BAC THE BULK IF NOT ALL OF MY DOWN PAYMENT BACK AND MOVE ON TO ANOTHER CAR.

GO LEASE A NEW S CLASS, PAY 1300 A MONTH FOR 36 MONTHS, IN MONTH 37 I AM DRIVING THE SAME CAR FOR 600 A MONTH.

emilner

You problem is not with leasing but with buying a new vs used car.

Your other problem is YOUR YELLING....

skrontz

1. Appreciate your power of perception, but I ran them last in 09/2009 when I was ordering my S550 and was encouraged to do so by my dealer (wonder why, yeah).

3. Probably is far from certainly. The dealer will likely charge you more for the cosmetic repairs than an average buyer of a used car would care about.

5. Acquisition fees are typically higher than bank loan fees (which most lenders waive anyway); disposition fees do not exist outside of the leasing world.

6. On S Class, they always were (and still are, looking at used car prices vs 06/2010 residuals from MB) about $3K lower than the actual value. Mind you, that does not take inflation into account; the MSRP of S Class has been climbing steadily for several years now. This especially holds true if you drive way less than 10,000 miles a year and take good care of your car. The residual values discount all that.

7. Never seen 1.4% leases on S Class. Here are the "latest" rates (looks like 06/2010 for S Class):

http://www.leasecompare.com/auto_lea...hp?f=18&t=3873

8. A person who can easily buy a Gulfstream with cash would unlikely consider $100K to be of much investment value; such people typically operate with much higher amounts, and $100K is petty cash to them (heck, last time I checked, round-trip first class tickets to Europe were about $8K/seat -- not that much to many folks even without a private jet). As we had discussed earlier, one cannot avoid depreciation when acquiring a car, and "cheap" rates are a relative concept.

9. And as I have said before, it can easily be better to purchase than lease/finance (more flexibility, less debt on your credit report, better return, higher resale value, and so on) even if you do not drive your car beyond the original warranty. I am perfectly fine with this disagreement.

GFEAR

work computer is caps lock only, sorry, i forget sometimes when i get on the net

mac911

I think it's true that a S class doesn't have to be a car owned by the most wealthy. If it's the "car," for someone with a more modest income, they could make it happen.

However, it's often the case those that are the types to "stretch," in their spending are younger in careers. These types might not choose S class for their first car.

Therefore, the S class buyer seems to be a bit different on average.

Just my take.

I think the S is a wonderful true luxury sedan.

K-A

This has nothing to do with you said really (kind of), but for a car enthusiast, on an emotional level, buying a Classic probably never seemed more enticing. Guaranteed enjoyment (if you accept the cost to keep 'em running, etc.), and guaranteed money back, or even profit. Insure 'em, and you have no real worries.

Exactly, on both parts. Check by check is NEVER fun, even for something you love. Just hope that the money keeps coming while in that Lease/Finance . I fall into the your category, I love cars, so they are my vice, and where I spend my money VERY un-wisely. This is where "you only live once, if you can afford it, do it", blah blah, comes in for me. If I treated cars as an appliance, my Bank Account would be very happy.

That makes me kind of sick. I'm paying a lot more than that for a car that cost over $10K less.

Everyone "advised" me to Lease this time around, as those who know me, know that I like to pretend like I'll cherish and keep my car forever, then end up selling it asap.

I crunched the numbers, and I feel that right now, since I'm spending about $8K in "Rental Fee's" through 39 months, and am putting on very minor mileage.... at the end of my Lease, I either give back a pristine, very low mileage E-Class, and hose $10+K in usage fee's that I didn't use, or I buy it, and eat those some of those fee's anyway, but at least can benefit from getting what I know is a worthy car. If I bought the car straight up (or Financed a portion), I feel like in 3 years I could have sold it, and probably gotten back enough money to keep me ahead of where I'll be at the end of my 39 month Lease. Maybe.

Also, how much did your Lease on your E cost out of curiosity? I wonder what the new E550's have as a buy-out, I know my car ($57K MSRP) has a $32K buyout, which sounds like a fair amount to me.

I technically could have bought my car outright, sure, but I guess my "coin-toss" of a decision, was mainly because I didn't feel right tying $60+K into a car of my own cash (although half of that will be spent over 39 months, and even more than the original cost, if I buy it at Lease end). Even financing, $30K down would still keep payments at or higher than what I'm paying now.

Which is another Luxury of Leasing, you pay extra in the long run (if you end up buying it), for the luxury of having that decision at the end, and to keep your money printed on your Bank Statement.

As you see, this is a confusing subject for me. I'm still young, and learning as I go along. I'm usually wise with my money, even in my car obsession (all things considered), but jumping into Leasing without doing the proper research might have been a lesson I'll be able to use for the rest of my life. Hopefully it won't be too painful of a lesson.

I usually follow this, and I feel it is the smartest financial move as well, when it comes to cars. I ended up doing something I NEVER thought I'd do this time though, which is get my car Brand New. I will say, it's a nice experience, on an "emotional" level (not fiscal), that I do enjoy on a level.

emilner

Nope, there is nothing fiscally responsible about buying a new car. We all know you can wait and let the first owner take the hit. In life we are faced with many decisions. Most involve some form of financial consideration. If we were to always pick the most economical, cheapest method we would leed very boring lives. Anyone who owns a Mercedes or any other luxury car for that matter can attest to making some decisions that are not the financially most wise but emotionally are. We could all drive an Accord and get to work in the same matter as we do now, but our love for cars, luxury, performance, and prestige (yes you have to want this to get a Mercedes) compels us to go the expensive route.

My 2010 E550 was $933 a month with roughly $2600 total out of pocket with NY taxes rolled in. The MSRP was $66ish. I can't remember the residual. Keep in mind I got the car two or three months after they first rolled off.

What is the $8k in rental fees including? Must be interest right? Driving very few miles certainly does not work in your favor when leasing although I have had it work with my wife's truck. That $71k truck I turned in (it was a 24 month lease) with 15k miles. The numbers still made ridiculous sense. No way I could have been better off financially if I had purchased the truck.

I look at a lease from a total estimated cost perspective. I look at the cost of the vehicle plus taxes and fees rolled into a 5 year note and I look at the amort schedule to see what the note will be in 3 years. I then add up the cost of those payments and upfronts in the first three years. Then I take the total lease payments and upfronts and add them up. I know the residual value from the lease numbers. I then look at three year old versions of the same car with anticipated mileage and see what they are selling for open market and trade in. I then compare the numbers and see if the purchase option makes sense. If my cost on the lease is within $3-5k of the purchase then I lease and give the risk to the leasing company. If it is more than that then I purchase. Quite often the cost on the lease is less than $3k difference and sometimes it is higher to purchase even with only a five year note.

One thing you have to keep in mind- I do not keep cars for more than three years. EVER. Financial sense, no. Emotional sense, HELL YES. I have turned in three vehicles now that had at least 8 months of lease payments left on them and have made out each time. I waited until the numbers worked...

K-A

Yeah, all good points and advice ^^.

Yeah, the $8K "Rental Fee's" I think are basically the interest from the Lease? They've gotta be. Out here we have that lovely almost 10% Tax, so that's adds very nicely to the monthly payment.

The low mileage (so far) is my biggest issue as to why I Leased. If I turn the car in with (say 15K), then I'll feel like what was the point of that whole thing, lol. If I buy it, then at least I have a nice car that I know I "prepped". But again, I like to romanticize that I'll own my car forever, but in 2 years I've bought 4 cars, lol, 3 of them being progressively newer/more expensive Benzes.

I do know, I usually research obsessively and know exactly what I'm getting myself into.

I went to the Dealer to look at a super low mileage, CPO E350 with P1, and ended up Leasing a brand New E350 with P2. I crunched the numbers and made a couple phone calls to friends who Leased the same car, to make sure I was getting a better deal, and bargained for a while, then did it. Now, knowing the specifics of Leasing, and what all those tricky numbers mean, I know I would have been able to get my same car for probably about $3K less than what I'm paying now (total cost during Lease period). You live and learn.