valley_isle

Does anyone know if MB Financial does high mileage leases of 30-35k miles per year? I’ve been buying CPO S classes, 1-2 years old (with 5,000 miles or less) and then running them out to the end of the CPO time, taking advantage of the unlimited mileage warranty. Rinse. Repeat. I would consider a 30-35k miles/year lease on a 36 month term and cover the car with a 100k mile ELW. Car is a business expense and I can expense it out whether I lease it or buy it. Thanks in advance for any input.

places

Interesting post. On math alone, cheaper to buy with that type of annual mileage but I can totally understand the benefit and desire to lease since you deduct the whole expense under a lease whereas a purchase will require scheduled depreciation.

cetialpha5

So have you gone 7 years on the CPO or did you just do the one year on CPO and not buy the 2 additional years? I'd just like to see the look on the SA's face when you come in for warranty work on a car with 200k+.

I would assume that you could just go with the max normal amount of miles and just buy the additional miles in advance, but it's probably cheaper to just buy the car than to do the lease

valley_isle

No, I just stay with the remainder of factory warranty and the 1 year CPO from MB. That's why I specifically try to find S classes with 5,000 miles or less and as recent an In Service Date as possible, and I run a coast to coast search (dealer location doesn't matter to me as I can pick up the car anywhere). The local dealer knows my driving patterns, as does MB. I have owned 10 MBs (between my wife and I) in past 12 years so MB is familiar with me as well. ;-) I basically "squeeze" every dollar of driving out of the cars. The day after the warranty runs out, I sell it to the local CarMax. And, (yes this may sound unusual), I even carry 2 extra Run Flats in my trunk (1 front, 1 rear) whenever I am on long business trips. I have had the experience of having flats in remote areas where I was able to get one of my "spares" on the car and continue my journey instead of getting stuck somewhere while they took two days to order tires of the right size. The S is a comfortable and good workhorse for me!!!

valley_isle

I have leased Audi A8s and Jag Xjs in the distant past with the 33,000 miles/year option, but never did that with MB. I know that most leasing companies won't do more than 100,000 cumulative miles on a lease. And yes, deducting the whole lease expense is a lot cleaner than taking the scheduled depreciation (even though with recent tax law changes, I can accelerate some of the dep). That's why my preference would be to lease for 3 years, 100k miles--at least that way I can order the color combo of my choice from my local dealer vs. trying to look for a sub 5,000 mile CPO car coast to coast in a color that may not be to my liking. :-) And, I can change out of the cars more frequently rather than waiting for the dep schedule to play out.

valley_isle

A few years ago, MB replaced a transmission for me on an S with 168,000 miles (I had driven 45-60k miles/year those years). They knew they had to do it under the warranty but made me produce all service records (I have all my non-warranty service done at a local import garage with whom I have a professional relationship).

They also bought back my wife's 2008 ML 350 in Dec 2009 (with 15k miles) because it would suddenly stop at highway speeds and they could never figure out the issue (they duplicated the problem) and swapped her into a new 2010 ML350 with same equipment for $0 changing hands along with a signed NDA.

Hence, my statement about them knowing me for a while, along with S class warranty service at high miles on an ongoing basis. :-)

Sorry, veered off topic.

places

Wow that's a ton of mileage. The S is certainly the car for it. Let us know what you decide to do. Curious as to what a high mileage MB lease on an S looks like.

valley_isle

The local dealer (who I had been talking to about this), just got back with me. A $136,760 MSRP S560 4Matic on a 15,000 miles/year lease with $0 cap cost reduction (just paying tag fees, dealer doc and first month up front) would be about $2,200/month on a 36 month term. Add another 18,000 miles/year (for a total of 99,000 miles over 3 years) and the payment goes to about $2,500/month. So, my outlay for the car itself would be $90k over the 3 years. In addition, I would need to buy the ELW to take the warranty to 100k miles (which I will pay for separately, not include in the lease).

So, off to my CPA to run the calculations now. :-)

rakaye47

Does MB still charge $0.25/mile overage with no limit?

valley_isle

My understanding is that the lease can be structured up front with a cumulative total of 100k miles over the 24 or 36 or 39 month lease term, paying in advance for anything over 15k miles/year. Any excess miles above the 100k at the end of the lease is charged upon turn in at 0.25 per mile. No limit on mileage driven as long as the excess mileage penalty is paid. That last part would be a moot point for me because I won’t keep the car a single mile past the warranty and the ELW on the new cars only goes to 100k miles.

aypues

why not get the 18” wheel size so you can have a square set up and only need to carry 1 spare? (unless you are doing this already!)
I’d imagine you’d get more wear life out of the 18s and a modestly smoother ride.

valley_isle

Hadn’t thought about that. I’ll definitely look into that. Thanks for the suggestion!

bkdc

With that kind of mileage, I’d buy a 2018 CPO S560 with 2 year extension. But passing the expenses to the business without depreciating is definitely clean and easy.

valley_isle

That's exactly what I have been doing for the past few years but my CPA suggested that expensing out the lease payment on a new lease (with high mileage built into the lease) may be simpler than a scheduled depreciation on a purchase. It's basically come down to which is the more tax efficient option at this point.

bkdc

The lease is definitely tax-efficient, but the total outlay for a CPO is going to cost far less and at 3 years out, you will probably be ahead with the CPO purchase. Sell the high mileage CPO vehicle after you drive it for 3 years and then you get to depreciate everything when you sell it off.

valley_isle

Agreed. I think that is the case as well and I need to pencil it out both ways. The challenge now is that I will likely be doing a lot more driving in the next 12 or so months during Covid. I normally used to fly in the past when my meetings were more than 5-6 hours driving distance; but with the dynamics of Covid and reduced airline schedules, I have been driving a lot more in the past 3 months and see that continuing until things "normalize", whenever that may be! My wife is more comfortable with me driving, staying in a hotel overnight, conducting my meetings the next day and driving back, than sitting in an airport lounge or airplane and dealing with delays, cancellations, etc. My estimate is that my annualized driving mileage will change from 35k to 50k while Covid related disruptions are going on. With THAT particular variable penciled into the calculations, I think the CPO will continue to be a better option than a high mileage lease.

TNS550

How much of a reduction in his fee will your CPA give if he doesn't have to calculate depreciation?

valley_isle

Old grad school buddy. :-) He "scratches my back and I scratch his". Not an MB driver, sadly. Has to drive Cadillacs, due to family business reasons.

bkdc

Given the number of highway miles you’re talking about, I also think you should consider a S450 instead of S560.

MagnoWhitew222

On a vehicle with a 100k plus MSRP it doesn't make sense to buy more than 10k miles even if you will drive 15k. Residual goes down by 3%, the penalty will be less for 15k miles at 25 cents a miles ($3750 + tax) then it will be to prepay your miles

places

He's not driving 15K, more like 35K per year. He's looking at over 100K in 3 years.

rakaye47

Just curious, for the OPs situation, what is the best number of miles to prepay?

z32turbo

I’m a 30K-35k mikes per year CPO S Class guy as well. Very curious to see how the end up for the OP.

Wolfman

Ok, let's just populate some sample numbers. The OP can make up his mind how that compares to a used car cost net after trade-in...

Here are some ballpark figures. When dealing with high mile overages, the 15k miles a year lease will beat the 7500 mile one, even if the residual drops by 4% between the two
A new negotiated S560 will cost around $58K for the lease (36/15k). The overage will be 19% more with $13,750, so a ball park total will be between $71k to $72k
A new negotiated S450 will cost around $39K for the lease (36/15k). The overage will be 26% more with $13,750, so a ball park total will be between $52k to $53k

Since the S560 has a lower residual and higher MF, the S450 will cost quite a bit less...

What plays into the cost scenario is the state of the OP. Many states only assess sales tax on the lease portion rather than the full cost of the car. These figures are based on this. If taxed at the cars value, the numbers change accordingly.

stever500

Just curious, what kind of work has you driving 35K-50K miles during Covid? Wow, that must be an interesting line of work. The things you see on our highways. Such a cool problem to have right now. Obviously the "buy" idea makes more sense than the lease (to me) when you're driving 50K miles per year.