In my view, swapping cars frequently has nothing to do with owning vs leasing. In fact, I feel it’s the lease that will force me to keep a certain car longer not the opposite.
I see them as separate factors unless the plan is to keep a car longer than 3 years

 

If you're buying new and you're going to ditch it within 5 years the math supports leasing jst from a total loss perspective. If you buy CPO thats another matter.

I'm usually ready for something new every 3 years or so so leasing works, from a business perspective leasing also works well because I can write off both cars. If you write off foe business and depreciate you have to keep a car 5 years or you have to pay recaptured depreciation. A leased car is just an expense so when you trade out you just trade one expense for another expense.

 

Not really how it works all the time. The new depreciation on the replacement if it’s of same or higher value would wash off the re-captured depreciation. Plus, you can still report the car as an expense or business use, if that’s the case or if you can prove it, even if it’s not a lease. You just need to track mileage. For trading every 1-2 years, whether new or CPO, my total cost of owning most of the cars that I owned was nearly half the case of leasing the same one, if not lower. That’s simply because sometimes I managed to make some money on some of them, and second because in most cases even regular depreciation over one year was less than the lease cost over 1 year. If I know I want to stay in the same car for 3-4 years, maybe I would consider leasing, but for 1-2 years ownership, leasing is not always the best financial decision… Understanding that the situation can be different for some people, but I know how to sell my cars or negotiate, so maybe that’s a factor for my case that is heavily weighted.

 

It’s just much more straightforward to write off a lease. You can do mileage with a lease too but the total vehicle expenses give you the best deduction when you have cars this expensive. The math for you at 1-2 years is because you’d be getting hosed getting out of the lease that early, are you comparing it to 2 year leases? I’ve never done the math trading that early because I always do it at 3 years. At 3 years though the leasing is cheaper in any math I have ever run.

I also don’t mess with selling my cars I just trade them in.

 

Just my $.02:

If you are going or intend to change change cars every 3 years of less, then leasing is the only way to go. Depreciation in the first 5 years of ownership is your single greatest expense. When you lease you fix that expense.

In New York the sales tax is:

• When you buy on the full purchase price of the car:
• When you lease on the sum of the lease payments

Here is the real world.

Assume the purchase price is $75,000. The sales tax where I live is 8.625%. The sales tax is $6,487.

Now assume I lease for 36 months, the monthly payments are $1100. The total of the monthly payments is $39,600. The sales tax $3,415. That is a tax savings of $3,000.

I do not know about you, but every time I have owned a car when I go to trade the dealer does not even give me blue book. Selling privately is not really an option on a 2 or 3 year old car that has a value of $40,000 plus. Private sales at that price point are very difficult, plus you have total strangers coming to your house.

I know of no one who wants a new car every 2,3 or 4 years that does not lease. Buying and trading in every few years is the least efficient use of your money. It should never be done.

Finally, when you lease, at the end of the lease you are free to go where you want and buy what you want. The freedom to choose what you want at the end of the lease is invaluable.

 

The problem is in some states, like MD where I live, we pay taxes on the whole purchase price even in a lease. Which sucks. That’s one reason also why I trade my cars in instead of turning them in because they subtract the trade value from the purchase price of the new car and you only pay sales tax on the difference. If you turn the car in at the end you lose that tax you paid.

With that even if sometimes I’m a little upside down the tax savings helps.

 

I could not disagree more:

If you speak to your accountant ask him which will trigger an audit quicker: depreciating a car or writing off the lease, I know of no accountant who will advise buying and depreciating.

If you intend to write the car off, then why are making something simple - a monthly lease payment - into something complicated: depreciation, keeping track of mileage, etc.

As I posted if you are changing cars every 2/3 years and it is a luxury car, in a private sale you are looking for a buyer who has $40,000 plus in his pocket. What inevitably happens, is you decide it just easier to either sell it to a dealer or trade it in: Either way you know what is going to happen and it is not being kissed by the dealer!

Finally, if you are a businessman, keeping capital for business is important: it make no sense to tie up $75,000 plus (working capital) in a car that is depreciating.

There is an old saying in business that is appropriate and should be forgotten:


Other than a boat, I can think of no asset that depreciates faster than a car. In business whenever possible rent (lease) do not own.

 

Two year leases are expensive except when you compare buying and trading every 2 years!

The depreciation is greatest the first year and then next the second year: The only thing more expensive than buying and trading very two years is buying and trading every year.

If your intention is too keep the car less than 3 or even 4 years, then never buy: only lease!

 

You are correct: Unlike most states, where the sales tax is on the sum of the lease payments, the sales tax in Maryland is the same whether you buy or lease: it is on the purchase price.

You are also correct that if you buy and trade, the value of the trade reduces the purchase price of the new car for sales tax purposes.

What so many people do not calculate is the use of money when you buy:

For example, if you pay $75,000 for a car and keep it for three years, you have tied up $75,000 for three years: at just 5% the loss of income on the $75,000 is $11,250: The $11,250 must be added into your cost when you buy.

Not adding in to the cost of buying, use of money, is an error.

 

Since you asked me, I’ll share more..
My personal experience with multiple cars shows that these points may not apply to everyone. My average ownership period is usually shorter than a 3-year lease. However, I know how to sell my cars effectively and can contact the right people and negotiate more than well. The fact that you never received the Blue Book KBB trade-in value is a red flag, so yeah, you are right about not buying so u can avoid selling yourself (lease maybe better here for you, I don’t know)... In my experience, I have never received less than the KBB trade-in value, and I always sold for more than KBB trade or just around it… The first thing I do is to present a printed page that I know what the KBB trade value is, along with a number of similarly equipped cars on the market and how much they are retailing for.. That leaves no room for the dealer to low ball me; we meet in the middle, and we’d be both happy. I have always negotiated slightly above the KBB trade in, always. The relationship with the dealer is also important. Consignment has always been an option for me, which has a big advantage, at least with my BMW dealer. My Mbenz dealer probably wouldn’t but I never tried, and even worse, the GM that I know has left. I also never finalize a deal on the same day, and I am willing to delay and let the salesman call me again the next day, even if I am satisfied with the offer. I can often negotiate an additional 1-3K by pretending to leave or waiting until the next day.

Also, I don’t always go for brand new cars unless the market conditions are favorable and I am getting a substantial discount off the MSRP, combined with rebates and an excellent trade-in or consignment. I switch between certified pre-owned cars and brand new ones depending on the situation.

When selling, I haven’t needed to go to private sales for many cars, but 4 out of my last 11 were sold privately, and I made money on 3 of them this way, except one, even after owning them for ~1 year. One of my cars was sold to a forum colleague here in fact, and it was a great experience. I sometimes spend more energy and time selling a car, which is why I do it, but it’s worthwhile given how frequently I trade and my lower ownership cost compared to the positive experience and fun part of it.

 

I hate to break this news to you: If you are getting above Kelley Blue Book or Kelly Blue Book, the dealer is making it up on the selling end - the price of the new car. So many people "brag" about what they got for their trade in. What they neglect is that they did not receive the same discount on the new car that others received without a trade.

What you are describing, over the long run, is not possible: By getting above Blue Book or Blue Book, on your trade there is little room for the dealer to make a profit when he goes to either wholesale the car or sell your car which he needs to do to stay in business.. Hence, the discount on the new car is not as much.

Plus you are not accounting for use of money nor sales tax consideration. Tying up thousands of dollars in a car cost a lot of money. Paying sales tax every two years on a new purchase is also costly.

We all know, at least up to now, the residual values on a lease are supported: that means that at lease end the leased car is upside down: the car is not worth the residual: that is why at lease end 85% of leased cars are turned in. When you buy, the value of your car is below residual. You are already "behind the 8 ball".

If you sit down and work the numbers correctly, including use of money and sales tax, you will find that for someone who gets a new car every 2/3 years leasing not buying is the most economically efficient use of money. Plus there is much less work when you lease: at lease end just turn in the car and shop for whatever car suits your fancy - no hassle with a private sale, no negotiating with the dealer no waste of time.

 

Like I said, you are just making assumptions here. I'll go back to just about early 2024, why would I ever have doubt that when I got way more than KBB trade in, combined with 12% OFF MSRP and 2K rebates on an X7 is a bad deal? I literally know exactly how many dollars the dealer made on that deal; I have seen how much they asked for my car after I sold it to them, and I know how much money they made by selling me a car with 12% OFF MSRP+rebates.

And, no, the dealer is NOT making it up on the selling end all the time (sometimes yes, but not always. It's called negotiation). They are counting on a picky person like me to bring the car at least a few time for warranty repair. That's literally the same joke that the GM and I repeat each time I negotiate hard. That's where most dealers make money, and that's why dealers don't care about out of state buyers for negotiations. A local buyer is worth a lot more money than the sale/trade numbers because of the fact he'll be there for service. All these are factors to consider during negotiations (How many cars your bought for service, how many times service had seen your car/cars over the years, etc). If you lack this vision for negotiations, then there is no doubt you are doubting all of what I said. I am not bragging about anything; we are just (virtual account users) here. You just want to frame things as if there is no way I know what decisions to do and that the dealer is taking advantage of me somehow. No; I've been around this for so long and I know the ins and outs of it and I know what am doing. If that's not the case for you, am sorry for you, but some of us know how to handle it and make good decisions without being taking advantage of by a dealer (e.g.: Aiming for a healthy balance between what am getting vs what am leaving for the dealer)

Lol, okay? I didn't know that i live in the impossible. I don't think I owe anything to prove anything to you. If it seems too hard for you, it is what it is, but it's not for others. I responded to this point already above.

Wrong. I live in a state where I only pay taxes on the trade difference. Meaning if I buy a car for 100K today, trade it for 90K a year after, and I buy another car for 90L, I pay zero taxes on my new car. I would have lost tax portion on 10K only over 2 cars, in this particular example (e.g.: about 500-600 USD)

 

I can negotiate and sell my car privately too, I just don't want to be bothered. Its a measure of whats the most cost effective way compared to how much energy I'm willing to put into it. So, I negotiate the best trade I can and just trade them in. I have always been able to get out of a leased car with no loss and have sometimes come out a little ahead.

At the end of the day, I don't really care how they allocate the money as long as I am getting the payment I want, if it makes it work for them to give me more on the trade and less discount, whatever!