What's better...buy or lease??
04-16-2003, 08:01 AM
#1
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What's better...buy or lease??
I'm sure this question has been rehashed over and over again....but I will ask it anyways. I just gave my dealer a $500 deposit on a 2003 E55. At first he said he wasn't able to order any more 2003's...but then he said he could....I was confused. He said it would probably be ready in the Fall some time. So my next question is can I afford the monthly payments???? My dealer tried feeding me a line saying that if I lease the car for a few years the lease payments will be cheaper and then I can buy the car after the lease runs out. I thought this would be spending more money to own the car in the long run, but my dealer keeps telling me that there is no difference....I would spend the same amount of money on the car either way. I find this hard to believe and think the dealer is looking out for his own pocket! Is he right? Should I lease first, then buy?? A lease would be a lot cheaper at first?? Anyone here done this before....any advice would be great
Thanks
Thanks
04-16-2003, 08:46 AM
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2000 E 430
A lease may be cheaper up front as your only paying depreciation on about half the car (over 36 mo.) plus interest, as opposed to borrowing $76k and paying it back over 36 mo.
Even at 5% interest your monthly payment on a purchase would be $2,278 over three years. A lease payment would be half that amount.
However, the interest component of a lease will be substantially higher than on a conventional loan.
Remember in a lease you pay your depreciation and then you pay a finance charge that is calculated by taking the cost of the car plus the residual and then applying the money factor. i.e. $76k, 55% residual equals $117,800 times .003 is $353 per mo in interest.
The interest on a conventional loan at 5% over three years would be about $167 per mo.
So in my example over three years you'd pay an additional $6700 in interest on a lease and then you'd have the option to buy at the end.
Hope this helps.
Even at 5% interest your monthly payment on a purchase would be $2,278 over three years. A lease payment would be half that amount.
However, the interest component of a lease will be substantially higher than on a conventional loan.
Remember in a lease you pay your depreciation and then you pay a finance charge that is calculated by taking the cost of the car plus the residual and then applying the money factor. i.e. $76k, 55% residual equals $117,800 times .003 is $353 per mo in interest.
The interest on a conventional loan at 5% over three years would be about $167 per mo.
So in my example over three years you'd pay an additional $6700 in interest on a lease and then you'd have the option to buy at the end.
Hope this helps.
04-16-2003, 09:15 AM
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2000 E 430
New Leasing Fees
By the way, if you look at page D7 of the Wall Street Journal today, you'll see that Mercedes Benz is taking on $1K to its acquisition fee because of problems they are having with "vicarious liability laws" in the states of New York, Connecticut, Rhode Island and Kentucky.
So Stiggs, if you're going to lease you'd better do it before it goes into effect May 1st.
Just another example of why leasing is so costly...........acquisition fee, disposition fee, higher interest etc. etc. etc.
So Stiggs, if you're going to lease you'd better do it before it goes into effect May 1st.
Just another example of why leasing is so costly...........acquisition fee, disposition fee, higher interest etc. etc. etc.
04-16-2003, 08:57 PM
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Also keep in mind that one of the biggest unknowns in the leasing equation is the actual value of the car at the end of the lease.
You will be quoted a residual value up front, which is a rough estimate of the likely value of the car at lease end. The amount of money you pay over the term of the lease is basically the cost of the new car, minus the value at the end of the lease, plus whatever fees/interest are added. In a lease you pay, basically, for the amount of the car's value that you "use up" (the depreciation) during the time you are in possession of it.
But sometimes the actual value at the termination of the lease ends up being quite different...often less, seldom more than predicted.
Banks vastly overestimated the residual value of many SUV's during recent years, for example, and as such, at the end of the lease term the returned vehicles couldn't be sold for what was originally predicted in many cases. Since monthly payments were based on an inflated residual value, which didn't pan out, the banks took a beating on the (artificially low) monthly payments AND had to sell the returned vehicles at a loss.
So if your goal is to buy your leased car when the lease is up, you won't want to lock into that strategy until you know for sure if it will hold its value. (Actually if it drops a lot more than expected and you like the car you can win both coming and going, so to speak).
Many of the high end specialty cars (like AMG's) have dropped in value faster than expected in recent years due to the soft economy and job market. At the same time, specialty cars were holding value better than expected 4 years ago when everything was humming.
It's a bit of a crapshoot.
There are lots more good tips on lease vs. buy at edmunds.com, and in some of the archived files here at MBWorld.
You will be quoted a residual value up front, which is a rough estimate of the likely value of the car at lease end. The amount of money you pay over the term of the lease is basically the cost of the new car, minus the value at the end of the lease, plus whatever fees/interest are added. In a lease you pay, basically, for the amount of the car's value that you "use up" (the depreciation) during the time you are in possession of it.
But sometimes the actual value at the termination of the lease ends up being quite different...often less, seldom more than predicted.
Banks vastly overestimated the residual value of many SUV's during recent years, for example, and as such, at the end of the lease term the returned vehicles couldn't be sold for what was originally predicted in many cases. Since monthly payments were based on an inflated residual value, which didn't pan out, the banks took a beating on the (artificially low) monthly payments AND had to sell the returned vehicles at a loss.
So if your goal is to buy your leased car when the lease is up, you won't want to lock into that strategy until you know for sure if it will hold its value. (Actually if it drops a lot more than expected and you like the car you can win both coming and going, so to speak).
Many of the high end specialty cars (like AMG's) have dropped in value faster than expected in recent years due to the soft economy and job market. At the same time, specialty cars were holding value better than expected 4 years ago when everything was humming.
It's a bit of a crapshoot.
There are lots more good tips on lease vs. buy at edmunds.com, and in some of the archived files here at MBWorld.
Last edited by amg55; 04-16-2003 at 09:04 PM.
04-16-2003, 09:08 PM
#6
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wow...thanks to everyone for all the info.
I do agree with the Kwik- if you can't afford it , don't buy it. I don't know if I can afford it....but I sure am going to try!!!:p
Already put down the $500 deposit....
I made a promise to myself after my CLK430....never to lease again. It just wasn't worth it....paying all those payments and not getting anything at the end. I felt empty. So I will buy it!!
I do agree with the Kwik- if you can't afford it , don't buy it. I don't know if I can afford it....but I sure am going to try!!!:p
Already put down the $500 deposit....
I made a promise to myself after my CLK430....never to lease again. It just wasn't worth it....paying all those payments and not getting anything at the end. I felt empty. So I will buy it!!
04-16-2003, 10:11 PM
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Leasing is the way to go if you can write the car off on your business. Otherwise ownership is the rule unless there is a factory subsidized lease program that would make a lease more attractive and you can be sure there won't be one for the E55.
