Lease vs. Finance??
06-20-2014, 04:45 PM
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06-20-2014, 04:50 PM
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We took delivery of our custom ordered E63S last Friday. My plan had been to pay cash, my wife wanted to lease. It is "her" car and she wanted to be sure it was gone in 3 years. I despise leasing and borrowing. What we did was a one payment lease. With these the money factor is somewhat less important and a higher residual value is more important. It is a good alternative to an all cash purchase.
There are some other discounts for MB's. UAL has a discount program if you are a frequent flyer. I am Global Services with them, I was able to get a $4,900 discount certificate. Also AMEX offers a $1,000 MB coupon for a 50% discount from the points needed to get a standard gift certificate.
There are some other discounts for MB's. UAL has a discount program if you are a frequent flyer. I am Global Services with them, I was able to get a $4,900 discount certificate. Also AMEX offers a $1,000 MB coupon for a 50% discount from the points needed to get a standard gift certificate.
06-20-2014, 06:46 PM
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Thanks
Different from JLamg I believe this is a no brainer in the other direction. The interest component of your lease equals 5.42% (must be MB Financial). The last time I looked 1.9% is better then 5.42%.
If one wants to get down to the nitty gritty, I personally would not lease a vehicle with that type of money factor in today's interest rate environment. I am used to breaking these things down since my business is in the finance/investment field and I am a CPA. On the other hand convenience has a price. The price here is 3.52% on the length of the lease. The other factor is depreciation. If you purchased the vehicle and sold it after 36 months could you sell it for about the same as the ALG residual value the lease company is using.
If one wants to really get down to the nitty gritty, all of us should buy used cars--for say $5000--maybe a Chevy Cobalt--opps maybe not. Hell I have purchased four new S Class cars in the past 10 years and a number of other cars. It certainly was not a great financial decision based on the significant depreciation. But it has been fun!
If one wants to get down to the nitty gritty, I personally would not lease a vehicle with that type of money factor in today's interest rate environment. I am used to breaking these things down since my business is in the finance/investment field and I am a CPA. On the other hand convenience has a price. The price here is 3.52% on the length of the lease. The other factor is depreciation. If you purchased the vehicle and sold it after 36 months could you sell it for about the same as the ALG residual value the lease company is using.
If one wants to really get down to the nitty gritty, all of us should buy used cars--for say $5000--maybe a Chevy Cobalt--opps maybe not. Hell I have purchased four new S Class cars in the past 10 years and a number of other cars. It certainly was not a great financial decision based on the significant depreciation. But it has been fun!
This is the info I was looking for. I wanted to know what that money factor equals out to vs. the interest rate.
I assume I can try to find a lower money factor away from MB.
Has anyone tried to get a lease outside of MB?
Thanks to ALL for the advice and info.
Last edited by dr.bob; 06-20-2014 at 07:58 PM.
06-20-2014, 07:12 PM
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Leases work if the money factor is good.
I hope that somebody is starting to list the buy rate versus the retail rate.
The buy rate is the interest rate that MB Financial is offering to the Dealer while the retail rate is the rate offered by the dealer to the customer.
That margin is what the dealer can pocket even if a car is sold at invoice or below. More importantly, the retail rate can easily be double the buy rate.
The key is to know that buy rate. MB appears to be releasing the rate on a monthly basis. It'll be at least twice as high for the S than the C-Class, but most likely come out to be around 2-3%.
After the price negotiation for the car, you can negotiate the money factor for the lease. This is not a fixed number!
I hope that somebody is starting to list the buy rate versus the retail rate.
The buy rate is the interest rate that MB Financial is offering to the Dealer while the retail rate is the rate offered by the dealer to the customer.
That margin is what the dealer can pocket even if a car is sold at invoice or below. More importantly, the retail rate can easily be double the buy rate.
The key is to know that buy rate. MB appears to be releasing the rate on a monthly basis. It'll be at least twice as high for the S than the C-Class, but most likely come out to be around 2-3%.
After the price negotiation for the car, you can negotiate the money factor for the lease. This is not a fixed number!
06-20-2014, 08:01 PM
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Leases work if the money factor is good.
I hope that somebody is starting to list the buy rate versus the retail rate.
The buy rate is the interest rate that MB Financial is offering to the Dealer while the retail rate is the rate offered by the dealer to the customer.
That margin is what the dealer can pocket even if a car is sold at invoice or below. More importantly, the retail rate can easily be double the buy rate.
The key is to know that buy rate. MB appears to be releasing the rate on a monthly basis. It'll be at least twice as high for the S than the C-Class, but most likely come out to be around 2-3%.
After the price negotiation for the car, you can negotiate the money factor for the lease. This is not a fixed number!
I hope that somebody is starting to list the buy rate versus the retail rate.
The buy rate is the interest rate that MB Financial is offering to the Dealer while the retail rate is the rate offered by the dealer to the customer.
That margin is what the dealer can pocket even if a car is sold at invoice or below. More importantly, the retail rate can easily be double the buy rate.
The key is to know that buy rate. MB appears to be releasing the rate on a monthly basis. It'll be at least twice as high for the S than the C-Class, but most likely come out to be around 2-3%.
After the price negotiation for the car, you can negotiate the money factor for the lease. This is not a fixed number!
Nice info on this thread!!
06-20-2014, 09:58 PM
#31
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I never lease.. Bottom line is, if you decide to finance and you're not happy with your purchase regardless of the amount of time that passes whether it's one year or three yrs you can always trade the car in without a loss. They both have their advantages but I hate being held to restrictions.
06-21-2014, 01:06 AM
#32
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You can probably find a better deal with the money factor however usually the residuals are not as high thereby making the payment higher.
06-21-2014, 02:21 AM
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06-21-2014, 02:28 AM
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We took delivery of our custom ordered E63S last Friday. My plan had been to pay cash, my wife wanted to lease. It is "her" car and she wanted to be sure it was gone in 3 years. I despise leasing and borrowing. What we did was a one payment lease. With these the money factor is somewhat less important and a higher residual value is more important. It is a good alternative to an all cash purchase. There are some other discounts for MB's. UAL has a discount program if you are a frequent flyer. I am Global Services with them, I was able to get a $4,900 discount certificate. Also AMEX offers a $1,000 MB coupon for a 50% discount from the points needed to get a standard gift certificate.
06-21-2014, 07:45 AM
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06-21-2014, 08:26 AM
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06-21-2014, 09:16 AM
#37
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If you lease a car and make a one payment lease and then have a total loss, the insurance company will replace the car and you still get to continue your lease with a brand new car.
You would not loose the value of what you paid for. Good insurance does not work that way when you have total replacement coverage and/or GAP coverage.
Am I misunderstanding what is being said?
Last edited by LovinMercedes; 06-21-2014 at 09:30 AM.
06-21-2014, 11:12 AM
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Ok so you got me thinking, I guess I was misinformed.. I just got off the phone with Mercedes financial. I was just told I would not lose ALL the money I put out upfront. The insurance company pays the current value of the car, so if the pay out from the insurance co is more than the end of lease buyout price(no reason why it's not) you would get the difference back from Mercedes. Unless you have GAP insurance(the gap would be what cars worth, and what you actually owe)
Example, here's some rough numbers..
If my 2014 cls550 is worth $56,000 after the 24 month lease, and I paid $22,000 upfront to lease for 24 months, current value after 7 months of ownership is.. idk lets say $66k. So I would only get back $10K, i'm out $12K over a 7 month period.. Sounds risky to me.
If you lease a car and make a one payment lease and then have a total loss, the insurance company will replace the car and you still get to continue your lease with a brand new car.... Not necessarily..unless you work something out with MB,where the money you would be getting back you roll into a new car that you would have to repurchase anyway.
Example, here's some rough numbers..
If my 2014 cls550 is worth $56,000 after the 24 month lease, and I paid $22,000 upfront to lease for 24 months, current value after 7 months of ownership is.. idk lets say $66k. So I would only get back $10K, i'm out $12K over a 7 month period.. Sounds risky to me.
If you lease a car and make a one payment lease and then have a total loss, the insurance company will replace the car and you still get to continue your lease with a brand new car.... Not necessarily..unless you work something out with MB,where the money you would be getting back you roll into a new car that you would have to repurchase anyway.
06-21-2014, 11:13 AM
#39
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I do not see how the loss is any greater than if I just purchased the car outright. The insurance will cover the value at the time of loss which will be greater than the residual value. So the lessor gets the residual, we get the excess. This is the first MB I did not purchase for cash. The out the door differerence in outlay was $60,000. My wife did not want to sell off any more investments to get the additional cash since they are earning above 10%. I respected her decision.
The AMEX deal can be found in the Rewards section of the website. Select Rewards, Gift Cards, Retail. There are three MB gift cards there, a service A, service B and the $1,000 certificate.
The AMEX deal can be found in the Rewards section of the website. Select Rewards, Gift Cards, Retail. There are three MB gift cards there, a service A, service B and the $1,000 certificate.
06-21-2014, 11:18 AM
#40
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Thank you.
I respect her decision too.
Last edited by LovinMercedes; 06-21-2014 at 11:20 AM.
06-21-2014, 11:43 AM
#41
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Thanks for the offer but am getting concerned the the earnings rate may flatten in the coming 12 months. I am still struggling with the reality of only borrowing the car for three years.
My wife keeps suggesting i replace my old S65 with a new S63. It is a spectacular car but the run flat tires were really objectionable. I am waiting for someone to install 10mm larger run flats to see how that improves the ride. It moves the sidewall outside the bead giving a softer ride. It made a major improvement on my S65 but those were not run flat tires. Interestingly I do not hear complaints about the SL63 with run flats. They come with the wider tires.
My wife keeps suggesting i replace my old S65 with a new S63. It is a spectacular car but the run flat tires were really objectionable. I am waiting for someone to install 10mm larger run flats to see how that improves the ride. It moves the sidewall outside the bead giving a softer ride. It made a major improvement on my S65 but those were not run flat tires. Interestingly I do not hear complaints about the SL63 with run flats. They come with the wider tires.
06-21-2014, 11:45 AM
#42
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Thanks for the offer but am getting concerned the the earnings rate may flatten in the coming 12 months. I am still struggling with the reality of only borrowing the car for three years.
My wife keeps suggesting i replace my old S65 with a new S63. It is a spectacular car but the run flat tires were really objectionable. I am waiting for someone to install 10mm larger run flats to see how that improves the ride. It moves the sidewall outside the bead giving a softer ride. It made a major improvement on my S65 but those were not run flat tires. Interestingly I do not hear complaints about the SL63 with run flats. They come with the wider tires.
My wife keeps suggesting i replace my old S65 with a new S63. It is a spectacular car but the run flat tires were really objectionable. I am waiting for someone to install 10mm larger run flats to see how that improves the ride. It moves the sidewall outside the bead giving a softer ride. It made a major improvement on my S65 but those were not run flat tires. Interestingly I do not hear complaints about the SL63 with run flats. They come with the wider tires.
06-21-2014, 12:01 PM
#43
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Thanks, I need to go back to the dealer when they have another S63 in stock and look again.
06-21-2014, 12:57 PM
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I do not see how the loss is any greater than if I just purchased the car outright. The insurance will cover the value at the time of loss which will be greater than the residual value. So the lessor gets the residual, we get the excess. This is the first MB I did not purchase for cash. The out the door differerence in outlay was $60,000. My wife did not want to sell off any more investments to get the additional cash since they are earning above 10%. I respected her decision.
The AMEX deal can be found in the Rewards section of the website. Select Rewards, Gift Cards, Retail. There are three MB gift cards there, a service A, service B and the $1,000 certificate.
The AMEX deal can be found in the Rewards section of the website. Select Rewards, Gift Cards, Retail. There are three MB gift cards there, a service A, service B and the $1,000 certificate.
No matter how much you paid down, the insurance would pay only market value of the car. After one year, the chance is high that the market value is about as much as the car minus your 3 year single payment.
MB Financial gets paid. You loose 2 years worth of lease payments. No new car from MB
The lease is closed out. That's it.
Gap coverage of the insurance doesn't kick in as the market value will most likely not be lower than the money owed to MB Financial.
This even happens with a down payment. In case of any loss, you loose anything that is more than the typical single payment. Best is to do a zero down.
06-21-2014, 01:06 PM
#45
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I don't understand why you say it is risky doing a one pay lease. Also, why are you borrowing the car? You may not own the car the day your lease starts but you have an absolute right to buy the car at anytime during the lease and at the end of the lease for a predetermined amount of money. You may even have an equitable title interest in the car when you lease it although I am not sure how the various state courts have viewed this on leases as opposed to land.
If you lease a car and make a one payment lease and then have a total loss, the insurance company will replace the car and you still get to continue your lease with a brand new car.
You would not loose the value of what you paid for. Good insurance does not work that way when you have total replacement coverage and/or GAP coverage.
Am I misunderstanding what is being said?
If you lease a car and make a one payment lease and then have a total loss, the insurance company will replace the car and you still get to continue your lease with a brand new car.
You would not loose the value of what you paid for. Good insurance does not work that way when you have total replacement coverage and/or GAP coverage.
Am I misunderstanding what is being said?
Insurance companies will only pay market value for your car model. Any Designo and customization costs are considered a zero-value add.
If you pay $160k for your car, after one year that car will probably be valued at around $80-90k for insurance purposes.
Let's say you pre-pay 2 years at $60k, you will still owe MB Financial $10k to $20k which will be covered by gap insurance. After that, the lease is closed out.
The gap insurance only covers the difference between market value and the pay-off for the lease.
No new car or replacement car (MB only does one car per lease, new car equals a new lease). If a loss occurs after 1 year, you'll be out $30k...
06-21-2014, 01:19 PM
#46
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I am actually surprised how many people on the forum discuss leasing versus ownership in emotional terms.
As a German, I was brought up to buy what you can afford and we always purchased cars outright. First used, then new and I would keep cars for 4-5 years.
The better the cars got, the more dramatic the depreciation but I never cared.
What made me switch from purchase to lease wasn't the ability to pay for it but simply the length of time I want to keep cars.
I find that especially with the rapid development of safety systems, semi autonoumous driving, engine power, fuel efficiency or even EV's I like to keep a car for no more than 2-3 years.
Replacing cars every 2-3 years only leaves leasing as the ONLY viable option. Cash or financing, no matter how low the rates would make no sense at all, given the depreciation curve of a car.
As a German, I was brought up to buy what you can afford and we always purchased cars outright. First used, then new and I would keep cars for 4-5 years.
The better the cars got, the more dramatic the depreciation but I never cared.
What made me switch from purchase to lease wasn't the ability to pay for it but simply the length of time I want to keep cars.
I find that especially with the rapid development of safety systems, semi autonoumous driving, engine power, fuel efficiency or even EV's I like to keep a car for no more than 2-3 years.
Replacing cars every 2-3 years only leaves leasing as the ONLY viable option. Cash or financing, no matter how low the rates would make no sense at all, given the depreciation curve of a car.
06-21-2014, 02:07 PM
#47
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I agree one should never buy what cannot be paid for. Some of us are fortunate enough to have the cash to purchase a new MB. That does not mean paying full cash is always the best use of that cash. The decision is complex and dependent on many personal factors. I tend to keep my cars about 10 years so I pay cash for them. In this case my wife was adamant she only wanted it three years so I deferred to her and did a single pay lease. I do not consider loss or theft risk since the car is insured and I feel the risk of total loss is less than 1% likely during the 3 year term. Also the $60,000 we left invested will likely grow to at least $72,000 in three years.
06-21-2014, 02:27 PM
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I agree one should never buy what cannot be paid for. Some of us are fortunate enough to have the cash to purchase a new MB. That does not mean paying full cash is always the best use of that cash. The decision is complex and dependent on many personal factors. I tend to keep my cars about 10 years so I pay cash for them. In this case my wife was adamant she only wanted it three years so I deferred to her and did a single pay lease. I do not consider loss or theft risk since the car is insured and I feel the risk of total loss is less than 1% likely during the 3 year term. Also the $60,000 we left invested will likely grow to at least $72,000 in three years.
The financial loss was very minor, but I guess I never considered the scenario and was personally very annoyed that programs like prepaid maintenance were not transferable to another car if not used.
06-22-2014, 02:18 PM
#49
Write-off of one time lease payment
Be careful about taking a deduction like that in one year. Seek tax advise on this from your own tax advisor. This assumes there is a business use of the vehicle.
As far as the lease is concerned, the one payment lease still has an interest rate component. Don't forget about the part of the car that you are not using. The leasing company had to pay for the full car while you are paying for only part of the car. The one payment lease still has an interest component and a depreciation component but since part of the full car is paid for by the one payment there is less of an interest cost since the one making the one payment has reduced the outlay for the lease company.
As far as the lease is concerned, the one payment lease still has an interest rate component. Don't forget about the part of the car that you are not using. The leasing company had to pay for the full car while you are paying for only part of the car. The one payment lease still has an interest component and a depreciation component but since part of the full car is paid for by the one payment there is less of an interest cost since the one making the one payment has reduced the outlay for the lease company.
Your are right. My CPA said "Nice try." I would have to write it off over the period the lease covers. It will be my business car, I use my other cars or wife's for personal.
06-22-2014, 08:36 PM
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MB Lease
Spoke with the dealer yesterday regarding the MB lease. According to him, MB Leasing is the "only game in town" and therefore the money factor (.00226) is what it is. So, just as with their miniscule discount off MSRP, MB pretty much says 'take it or leave it' for the S550.
After reading all the replies and doing some math, it seems that financing @ 1.9% vs leasing @ 5.42% is the way to go.
Unless my figures are wrong, selling the car after 3 years is not much different in cost as turning it in after the 36 month lease.
Thanks again to all for the advice.
After reading all the replies and doing some math, it seems that financing @ 1.9% vs leasing @ 5.42% is the way to go.
Unless my figures are wrong, selling the car after 3 years is not much different in cost as turning it in after the 36 month lease.
Thanks again to all for the advice.
