Lease vs. Finance??
Thread Starter
Junior Member
Joined: Jun 2014
Posts: 15
Likes: 0
2015 S550
Lease vs. Finance??
Need a little MBA advice...
Lease @ 36 months, 10,000 miles per year, all taxes rolled in with no down payment and a money factor of .00226 comes to $2146 per month
OR
Finance @ 1.9%.
Not sure what that money factor equates to vs. interest rate.
Any thoughts??
Lease @ 36 months, 10,000 miles per year, all taxes rolled in with no down payment and a money factor of .00226 comes to $2146 per month
OR
Finance @ 1.9%.
Not sure what that money factor equates to vs. interest rate.
Any thoughts??
Junior Member
Joined: Jun 2014
Posts: 46
Likes: 2
2012 ML63; 2012 XKR Conv
This is a no brainer. .
We have done more that 20 leases. .
At the end of the day - a lease is about financing only a part of the car not the whole car
A car (regardless of make) is a mess of capital and functional depreciation - until they become a classic (likely 20 years out).
If you believe in new technologies; recognize that cars are not repaired, but replaced one part at a time; it makes no sense (to me) to own a car. It is a completely different value proposition from a house - which may actually appreciate. With the half-life of technology becoming shorter and shorter; and the dependence on computer technology - regardless of what changes in design, the underpinnings of cars will continue to evolve faster every year - why would you bog yourself down with a technology platform that progressively gets further and further behind while you are making car payments?
PS - I have an S65 on a boat arriving at the end of June. . and a 911 C4S cab arriving in August - both will be leased!
At the end of the day - a lease is about financing only a part of the car not the whole car
A car (regardless of make) is a mess of capital and functional depreciation - until they become a classic (likely 20 years out).
If you believe in new technologies; recognize that cars are not repaired, but replaced one part at a time; it makes no sense (to me) to own a car. It is a completely different value proposition from a house - which may actually appreciate. With the half-life of technology becoming shorter and shorter; and the dependence on computer technology - regardless of what changes in design, the underpinnings of cars will continue to evolve faster every year - why would you bog yourself down with a technology platform that progressively gets further and further behind while you are making car payments?
PS - I have an S65 on a boat arriving at the end of June. . and a 911 C4S cab arriving in August - both will be leased!
MBWorld Fanatic!
Joined: Feb 2010
Posts: 1,523
Likes: 394
'25 S63 AMG E Performance, '26 CLE 53 AMG
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!
Last edited by MTrauman; Jun 19, 2014 at 09:54 PM.
MBWorld Fanatic!
Joined: Oct 2004
Posts: 2,604
Likes: 125
2026 Mercedes CLE53A4 AMG Cabriolet and 2025 MAYBACH EQS680V4
The reason I lease my cars is because I don't want to take the depreciation risk. I think this is a much bigger risk than the interest rate differential.
MBWorld Fanatic!
Joined: Apr 2006
Posts: 2,139
Likes: 41
Tesla Model S P100D
Whether you realize it or not, I think by leasing you are already taking the maximum expected depreciation hit for the car that they have calculated. Otherwise they'd be loosing money on the lease.
I'm with the CPA. I think you are better off buying it for cash and then holding on the car for 4-5 years so you can amortize the depreciation over a longer period. I always buy my cars outright and use them for 5-6 years to get the maximum value out of them.
The only big benefit I see with leasing is that it makes your tax deduction more straightforward. Either way with these cars you loose a ton of money in depreciation and the best justification to get them is that they are fun to own and enjoy
MBWorld Fanatic!
Joined: Oct 2004
Posts: 2,604
Likes: 125
2026 Mercedes CLE53A4 AMG Cabriolet and 2025 MAYBACH EQS680V4
At the ~$2K lease rate the OP quoted, you are looking at $72,000 in 36 months. I doubt the car would depreciate $72K in 3 years.
Whether you realize it or not, I think by leasing you are already taking the maximum expected depreciation hit for the car that they have calculated. Otherwise they'd be loosing money on the lease.
I'm with the CPA. I think you are better off buying it for cash and then holding on the car for 4-5 years so you can amortize the depreciation over a longer period. I always buy my cars outright and use them for 5-6 years to get the maximum value out of them.
The only big benefit I see with leasing is that it makes your tax deduction more straightforward. Either way with these cars you loose a ton of money in depreciation and the best justification to get them is that they are fun to own and enjoy
Whether you realize it or not, I think by leasing you are already taking the maximum expected depreciation hit for the car that they have calculated. Otherwise they'd be loosing money on the lease.
I'm with the CPA. I think you are better off buying it for cash and then holding on the car for 4-5 years so you can amortize the depreciation over a longer period. I always buy my cars outright and use them for 5-6 years to get the maximum value out of them.
The only big benefit I see with leasing is that it makes your tax deduction more straightforward. Either way with these cars you loose a ton of money in depreciation and the best justification to get them is that they are fun to own and enjoy
Back when the new body style SL's came out in the early 2000's, I owned several of them. I got hit hard each time on the trade-ins. I eventually changed over to a lease and have been leasing since then.
Frankly, I haven't looked at the comparison in a very long time so I am not sure where it all ends up now. I know for me, a lease requires very little effort.
For some, the convenience of a lease may have some value.
Last edited by LovinMercedes; Jun 20, 2014 at 09:02 AM.
MBWorld Fanatic!
Joined: Feb 2014
Posts: 1,938
Likes: 396
From: Iowa
2025 EQS580
At the ~$2K lease rate the OP quoted, you are looking at $72,000 in 36 months. I doubt the car would depreciate $72K in 3 years.
Whether you realize it or not, I think by leasing you are already taking the maximum expected depreciation hit for the car that they have calculated. Otherwise they'd be loosing money on the lease.
I'm with the CPA. I think you are better off buying it for cash and then holding on the car for 4-5 years so you can amortize the depreciation over a longer period. I always buy my cars outright and use them for 5-6 years to get the maximum value out of them.
The only big benefit I see with leasing is that it makes your tax deduction more straightforward. Either way with these cars you loose a ton of money in depreciation and the best justification to get them is that they are fun to own and enjoy
Whether you realize it or not, I think by leasing you are already taking the maximum expected depreciation hit for the car that they have calculated. Otherwise they'd be loosing money on the lease.
I'm with the CPA. I think you are better off buying it for cash and then holding on the car for 4-5 years so you can amortize the depreciation over a longer period. I always buy my cars outright and use them for 5-6 years to get the maximum value out of them.
The only big benefit I see with leasing is that it makes your tax deduction more straightforward. Either way with these cars you loose a ton of money in depreciation and the best justification to get them is that they are fun to own and enjoy
Trending Topics
Member
Joined: Apr 2014
Posts: 187
Likes: 3
From: Traverse City, Michigan
2023 AMG SL55,2015 S550 4MATIC, 2023 BMW X5
At the ~$2K lease rate the OP quoted, you are looking at $72,000 in 36 months. I doubt the car would depreciate $72K in 3 years.
Whether you realize it or not, I think by leasing you are already taking the maximum expected depreciation hit for the car that they have calculated. Otherwise they'd be loosing money on the lease.
I'm with the CPA. I think you are better off buying it for cash and then holding on the car for 4-5 years so you can amortize the depreciation over a longer period. I always buy my cars outright and use them for 5-6 years to get the maximum value out of them.
The only big benefit I see with leasing is that it makes your tax deduction more straightforward. Either way with these cars you loose a ton of money in depreciation and the best justification to get them is that they are fun to own and enjoy
Whether you realize it or not, I think by leasing you are already taking the maximum expected depreciation hit for the car that they have calculated. Otherwise they'd be loosing money on the lease.
I'm with the CPA. I think you are better off buying it for cash and then holding on the car for 4-5 years so you can amortize the depreciation over a longer period. I always buy my cars outright and use them for 5-6 years to get the maximum value out of them.
The only big benefit I see with leasing is that it makes your tax deduction more straightforward. Either way with these cars you loose a ton of money in depreciation and the best justification to get them is that they are fun to own and enjoy
MB World Stories
The Best of Mercedes & AMG
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
5 Underrated Mercedes-Benz Models That Don't Get the Love They Deserve
Verdad Gallardo
Mercedes 300D Has Pushed Well Past 1 Million Miles and It Ain't Stopping
Verdad Gallardo
Super Member
Joined: Oct 2013
Posts: 904
Likes: 41
From: Dallas
08 E63 AMG P30, 2013 S550, 09 E63, 14 E63 S Wagon, 14 E350 Wagon(current), 13 C63 P31 (current)
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!
It all depends on your financial situation and outlook
I like this thread
Super Member
Joined: Mar 2012
Posts: 619
Likes: 34
From: East part of Texas
2017 CLS550
I have never leased a car in my life. If I want a car I buy it and sell my old car individually (rather than as a trade-in). In 50 years of car ownership I have done pretty well that way. I have averaged about 9,000 miles on a car most years since I retired in 1995, and I buy a new car every four years. Such low mileage and fairly short ownership term makes me a good candidate for leasing, however, I do not lease for reasons other than money or "financial" sense.
The real reason is that the restrictions are too great, especially if I decide to some day go over the mileage I'm locked into. What if I want to debadge? Can't do it. What if I want to yank the stereo system and replace the system with better speakers? Can't do it. What if I want new wheels? Can't do it. What if I want pin stripes? Can't do it. And heaven forbid I should get a dent in a parking lot and try turning it in that way.
I want a car to be mine totally so I can put whatever mileage I want on it and do what I want with it in terms of modifications. If that costs me a few bucks overall so be it. I would not drive Mercedes if I was concerned about a few dollars, just like I am not too concerned about the price of gas or my car's mpg. Bottom line advice (for me anyway) is never lease unless you can't afford the car otherwise and simply must have it no matter what, or you can write it all off as a business expense.
The real reason is that the restrictions are too great, especially if I decide to some day go over the mileage I'm locked into. What if I want to debadge? Can't do it. What if I want to yank the stereo system and replace the system with better speakers? Can't do it. What if I want new wheels? Can't do it. What if I want pin stripes? Can't do it. And heaven forbid I should get a dent in a parking lot and try turning it in that way.
I want a car to be mine totally so I can put whatever mileage I want on it and do what I want with it in terms of modifications. If that costs me a few bucks overall so be it. I would not drive Mercedes if I was concerned about a few dollars, just like I am not too concerned about the price of gas or my car's mpg. Bottom line advice (for me anyway) is never lease unless you can't afford the car otherwise and simply must have it no matter what, or you can write it all off as a business expense.
MBWorld Fanatic!
Joined: Feb 2010
Posts: 1,523
Likes: 394
'25 S63 AMG E Performance, '26 CLE 53 AMG
I want to make sure I am clear about my earlier post since I calculated and posted the interest rate on the lease money factor in response to Dr. Bob's question.
The comparable rate to the finance rate Dr. Bob quoted of 1.9% is a money factor rate of .0008. If Dr. Bob can negotiate down to that money factor then there is more of a level playing field with the lease v. buy decision.
There are many factors in a lease v. buy decision. With that said Dr. Bob put some numbers "on the board" and I wanted to make sure that with that information it is a no brainer since the lease rate is not competitive--not even in the ball park. In this case the lease company will make a huge profit on Dr. Bob in the current environment just on the lease alone--of course that is why they are in business. BUYER BEWARE!
The other part of the equation is the residual value. In December '13, ALG quoted on a '14 S550 with an MSRP of $118,700 a 48% residual value. That means that after three years 52% of the value has been lost due to depreciation. In this case the three year depreciation cost on a '14 S550 would be $61,724.
I hope this helps the discussion.
The comparable rate to the finance rate Dr. Bob quoted of 1.9% is a money factor rate of .0008. If Dr. Bob can negotiate down to that money factor then there is more of a level playing field with the lease v. buy decision.
There are many factors in a lease v. buy decision. With that said Dr. Bob put some numbers "on the board" and I wanted to make sure that with that information it is a no brainer since the lease rate is not competitive--not even in the ball park. In this case the lease company will make a huge profit on Dr. Bob in the current environment just on the lease alone--of course that is why they are in business. BUYER BEWARE!
The other part of the equation is the residual value. In December '13, ALG quoted on a '14 S550 with an MSRP of $118,700 a 48% residual value. That means that after three years 52% of the value has been lost due to depreciation. In this case the three year depreciation cost on a '14 S550 would be $61,724.
I hope this helps the discussion.
MBWorld Fanatic!
Joined: Oct 2004
Posts: 2,604
Likes: 125
2026 Mercedes CLE53A4 AMG Cabriolet and 2025 MAYBACH EQS680V4
For me, it makes no sense to pay a lease for three years when the two year lease number may be only slightly more.
This is what the Finance Director at my dealership quoted me so I would check into it.
The other part of the equation is the residual value. In December '13, ALG quoted on a '14 S550 with an MSRP of $118,700 a 48% residual value. That means that after three years 52% of the value has been lost due to depreciation. In this case the three year depreciation cost on a '14 S550 would be $61,724.
Last edited by LovinMercedes; Jun 20, 2014 at 09:23 AM.
MBWorld Fanatic!
Joined: Dec 2006
Posts: 4,949
Likes: 39
From: Clifton, NJ
96 and 08 911 turbos
If you are really concerned about that small difference, your best bet is to buy a 2014 holdover in a few months. Probably save yourself more than a few grand.
Remember also that in some states, on a lease you only pay sales tax on the percentage of the value you use, while in a purchase they hit you with the full boat.
Remember also that in some states, on a lease you only pay sales tax on the percentage of the value you use, while in a purchase they hit you with the full boat.
Senior Member
Joined: Sep 2013
Posts: 268
Likes: 37
From: near Birmingham, AL
2014 E350 Sedan; 2025 GLB 250
Most of your depreciation happens in the first few years. So I buy a car, with cash, that has already taken that big hit. If it has a CPO, you are covered there as well. This, to me, makes the most sense from a financial perspective.
Last edited by labguy; Jun 20, 2014 at 10:46 AM. Reason: fix typo
Senior Member
Joined: Feb 2013
Posts: 320
Likes: 6
From: DFW
2 2001 E320s, 2005 E320 4Matic
If you are really concerned about that small difference, your best bet is to buy a 2014 holdover in a few months. Probably save yourself more than a few grand.
Remember also that in some states, on a lease you only pay sales tax on the percentage of the value you use, while in a purchase they hit you with the full boat.
Remember also that in some states, on a lease you only pay sales tax on the percentage of the value you use, while in a purchase they hit you with the full boat.
Member
Joined: Dec 2013
Posts: 105
Likes: 0
2015 S550 4Matic
I have leased as well as bought my vehicles in the past. The reason I have leased my vehicles is that I usually only use them for like 3 years and will change cars anyways. Another factor is that after the lease is done, you can just return the car back to the dealer (not withstanding some wear and tear issues if there are any, however I have not experienced anything from my dealerships thankfully).
If you cash bought your car or financed and you were selling the vehicle away and your car has been into just only one accident, the depreciation of that car will already decrease significantly due to that, whereas if it were a lease, as long as the car is repaired, you can just give it back to the dealer and they wouldn't care for the crash.
That being said, I decided to buy my S550 this time because I am planning to keep this vehicle for at least 4-5 years this time. My other vehicle is still leased though.
If you cash bought your car or financed and you were selling the vehicle away and your car has been into just only one accident, the depreciation of that car will already decrease significantly due to that, whereas if it were a lease, as long as the car is repaired, you can just give it back to the dealer and they wouldn't care for the crash.
That being said, I decided to buy my S550 this time because I am planning to keep this vehicle for at least 4-5 years this time. My other vehicle is still leased though.
Super Member
Joined: May 2009
Posts: 810
Likes: 182
From: Laguna Niguel
'94 SL600,'05 SL600,'06 S65,'07 E63,'14 E63S,'09SL600 all sold, ‘15 S65,‘18 E63S,'17 SL65, '17S65Cab
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.
MBWorld God!
Joined: Jul 2010
Posts: 31,277
Likes: 3,916
From: on my way
2012 CLS63
I've always seen a lease as a 'borrowed' car that you have to give back, can only drive a certain distance per year, and the fact that someone else makes money off of you......
in NC one also has to have full insurance coverage on the vehicle......just too many people with their hand out for a car I wouldn't even own.......
I only have liability on my cars.....the minimum......if I have an accident I'll be damned if it would have been my fault......and if so, I'll accept responsibility and shell out for repairs.....I really hate the game of insurance....
my 2 cents
in NC one also has to have full insurance coverage on the vehicle......just too many people with their hand out for a car I wouldn't even own.......
I only have liability on my cars.....the minimum......if I have an accident I'll be damned if it would have been my fault......and if so, I'll accept responsibility and shell out for repairs.....I really hate the game of insurance....
my 2 cents
MBWorld Fanatic!
Joined: Feb 2010
Posts: 1,523
Likes: 394
'25 S63 AMG E Performance, '26 CLE 53 AMG
I've always seen a lease as a 'borrowed' car that you have to give back, can only drive a certain distance per year, and the fact that someone else makes money off of you......
in NC one also has to have full insurance coverage on the vehicle......just too many people with their hand out for a car I wouldn't even own.......
I only have liability on my cars.....the minimum......if I have an accident I'll be damned if it would have been my fault......and if so, I'll accept responsibility and shell out for repairs.....I really hate the game of insurance....
my 2 cents
in NC one also has to have full insurance coverage on the vehicle......just too many people with their hand out for a car I wouldn't even own.......
I only have liability on my cars.....the minimum......if I have an accident I'll be damned if it would have been my fault......and if so, I'll accept responsibility and shell out for repairs.....I really hate the game of insurance....
my 2 cents
Make sure your car does not get stolen or totaled. That would be a hell of a loss! You won't have to worry about depreciation. It will be 100% depreciated if stolen.
Junior Member
Joined: Apr 2014
Posts: 31
Likes: 1
Lexus LS
one payment lease
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.
Was this one payment plan from MB? I was going to pay cash but if I can get a big tax deduction and not get raped on the vig I would do it.
MBWorld Fanatic!
Joined: Apr 2006
Posts: 2,139
Likes: 41
Tesla Model S P100D
When I buy my new car next year it will have an Agreed Value policy. If my car is stolen or totaled they will replace it with a new one assuming I insure it for the full value of the car.
MBWorld Fanatic!
Joined: Apr 2006
Posts: 2,139
Likes: 41
Tesla Model S P100D
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.
Junior Member
Joined: Apr 2014
Posts: 31
Likes: 1
Lexus LS
With the "one lease payment" approach how does it affect your taxes? Do you take the entire one payment as one big deduction for one year or deduct 1/3 of it each year for the 3 year duration? What you did is smart as you don't end up paying a money factor or interest for the money you'd be otherwise borrowing and you can focus your negotiation of bringing down the cost of the car and bringing up the residual value of the car.
MBWorld Fanatic!
Joined: Feb 2010
Posts: 1,523
Likes: 394
'25 S63 AMG E Performance, '26 CLE 53 AMG
I agree about not paying the interest factor. I am assuming a prepayment will obivate that. But maybe not. That is why my question. I would take the entire deduction in one year as that is when I paid it. I assume the timing of the payment would not effect the residual payout but I would sure look at it.
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.
