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Old 04-21-2015, 08:16 AM   #61
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Not sure at all where you are going with this or what your point is. My point is that a low interest loan (for example 2%) isn't necessarily a bad thing because the loan avoids liquidating investments that typically earn more than 2%. Its the same economics as the old pay off the mortgage argument and there is some risk that your investments might under perform the loan rate for the loan period but more often than not your investments will earn more than the loan rate. An "averages player" will take the loan.

That said, I rarely take a car loan unless there is some upfront incentive only because the potential spread isn't worth the hassle of making loan payments but with autopay now available I might reconsider it.
We disagree on mortgages as well

But car is even worst then mortgage. Because it looses value unlike house and you can not deduct car loan.

If it is smart investing to buy car on loan one should buy everything else on loans The average payer will take loan as you said....that is why average payer will hardly put together meager 1 million in investable assets.

I say so long, bye, bye to this topic of discussing cars....... because we are going round a round.
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Old 04-21-2015, 08:22 AM   #62
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How did I know that this thread would turn to "its cheaper to drive a car til the wheels fall off" even though I stated in the original post that we have decided to splurge and get new cars every 3 years even though we know it costs more in the long run than buying a car and driving it for 10 years or more?

I already know that and don't care anymore. We saved our butts off for decades so we could splurge and we want to splurge on always having new cars.
Right there with ya. We've done the drive it for 10 years most of our lives. Now it's splurge time. Never have done the lease thing, I don't think I'm smart enough to understand them but the restrictions would bug me. We negotiate a price and write a check, but did once do the finance for a discount but paid it off 3 months later (the dealer asked us to please wait the three months so we did).

We did the big splurge and no regrets. DW has wanted a convertible so it's a red BMW 435. It will take months to learn all the bells and whistles on the darn thing but it's a blast to drive. I gravitated to the BMW for one reason: 50k miles 4 years of absolutely no maintenance cost. Drove me nuts when annual on a Porsche Cayman S was $400-600. I know maintenance cost is minor compared to the cost of these vehicles, but I like the idea of one big payment and done. My plan is to trade it in at the end of the 4 years. I have no defense for this plan other than it seems like a fun way to get rid of some of the portfolio growth that is getting away from us! So go for it Utrecht, whatever feels best to you.

Oh, some of the features on the newer cars are amazing. Cameras, sensors, lane wander, it is a lot different. One thing I've noticed is the visibility on most cars has been really reduced making a lot of this quite useful. I've read the visibility is largely sacrificed for crash survivability. We opted for all these features because even a 64 I've noticed on occasional slight deterioration in reaction/attention.
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Old 04-21-2015, 09:06 AM   #63
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Then you are asking a wrong question. You should ask what is more enjoyable buying car or leasing it, not what is cheaper.

Buying it is more pleasure. Why?

Because you are free to own it for 7 months or 26 months or 7 years. It is all up to you when you get your next car.

Because you can take it around USA 20 times and put on it 200 000 plus miles and nobody will penalize you for it. You have no milage limits to worry about.

Because you don't need to worry about any dink or scratch on car. Nobody will tell you to pay for it at the end of the lease.

And I am talking about buying it like somebody who can afford it...That is in cash. Not like Marko's brother who is comparing monthly payments . If monthly payments is something you need to worry about then you may not be in a position to have car for a pleasure of it.

If I have to worry about somebody making dent on my car or about putting too many miles on it and I have to keep that car till specific date that is not splurging in my mind
Im not asking the wrong question. You're answering the wrong question. My original post states that I have always bought cars and ketp them for a long time and its obviously cheaper to do that...BUT...if a person has already decided that he will splurge and get a new car every 3 years, is it cheaper to buy and trade every 3 years or to lease for 3 years?
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Old 04-21-2015, 09:12 AM   #64
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Im not asking the wrong question. You're answering the wrong question. My original post states that I have always bought cars and ketp them for a long time and its obviously cheaper to do that...BUT...if a person has already decided that he will splurge and get a new car every 3 years, is it cheaper to buy and trade every 3 years or to lease for 3 years?
My apology Utrecht.

So in a nutshell if I wanted to enjoy cars I would do it the way H2ODude does.
Buy, enjoy and trade them in whenever I want.

I would not look at what is cheaper but what is more fun to do and more convenient for me.

It may be cheaper to lease, don't drive much around so you do not exceed allowed millage and garage it carefully so you
do not have to pay for any scratches. .... I do not know.....
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Old 04-21-2015, 09:14 AM   #65
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....If it is smart investing to buy car on loan one should buy everything else on loans The average payer will take loan as you said....that is why average payer will hardly put together meager 1 million in investable assets.

I say so long, bye, bye to this topic of discussing cars....... because we are going round a round.
We'll agree to disagree. But it is averages player, not average payer. An averages player is someone plays the averages, in this case assumes that their investment return for the relevant period will be average for the purpose of decision making while at the same time cognizant that it could vary from the average.
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Old 04-21-2015, 09:29 AM   #66
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Im not asking the wrong question. You're answering the wrong question. My original post states that I have always bought cars and ketp them for a long time and its obviously cheaper to do that...BUT...if a person has already decided that he will splurge and get a new car every 3 years, is it cheaper to buy and trade every 3 years or to lease for 3 years?
I think leasing a car is like renting a home. It is a good deal for the dealer/landlord or they wouldn't be in the business, but wouldn't some of the pro and cons for the lessee/renter hold true for both?

I see crazy cheap lease prices advertised in the paper, looks like <one-third the cost of a car payment for a fully financed new car, 1.9 percent, using msrp (I know, I know, but a random comparison trying to get near apples to apples--even if the lease payment iends up being half a car payment, still not bad). With 10 and 6 year old cars in our driveway, I can certainly see the appeal of a new car every three years and just turning it in. We too have never leased and paid cash for the two in the driveway, but hmm....
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Old 04-21-2015, 09:48 AM   #67
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Originally Posted by pb4uski View Post
Not sure at all where you are going with this or what your point is. My point is that a low interest loan (for example 2%) isn't necessarily a bad thing because the loan avoids liquidating investments that typically earn more than 2%. Its the same economics as the old pay off the mortgage argument and there is some risk that your investments might under perform the loan rate for the loan period but more often than not your investments will earn more than the loan rate. An "averages player" will take the loan.

That said, I rarely take a car loan unless there is some upfront incentive only because the potential spread isn't worth the hassle of making loan payments but with autopay now available I might reconsider it.

Yes, autopay makes a big difference.... I just bought a new car and financed it for 5 years.... put the payment into autopay and set it up for the 60 months... easy peasy.... now the money is sent and I do nothing....

At some point in time I might look at paying it off... but for now I am happy with the 1.9% interest...


Edit to add... I also set up my monthly mortgage payment on auto for 15 years.... been here 5 years and have not done a thing since I set it up...
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Old 04-21-2015, 09:50 AM   #68
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We disagree on mortgages as well

But car is even worst then mortgage. Because it looses value unlike house and you can not deduct car loan.

If it is smart investing to buy car on loan one should buy everything else on loans The average payer will take loan as you said....that is why average payer will hardly put together meager 1 million in investable assets.

I say so long, bye, bye to this topic of discussing cars....... because we are going round a round.

No, it is not smart to buy everything with a loan.... only big ticket items... and only if the interest rate is low....

The interest rate for most items are much higher than for a car or house....
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Old 04-21-2015, 10:00 AM   #69
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Im not asking the wrong question. You're answering the wrong question. My original post states that I have always bought cars and ketp them for a long time and its obviously cheaper to do that...BUT...if a person has already decided that he will splurge and get a new car every 3 years, is it cheaper to buy and trade every 3 years or to lease for 3 years?

OK... let me answer the question.... you will not know until the 3 years are up... period...

But, let me throw out a thought... do you think that leasing companies are going to price the lease where they lose money I do not think so... that would indicate to me that leasing will cost you more money in the long run.... but, look at my first sentence for the caveat....


What people are saying is there are some advantages to leasing... there are some advantages to owning (and not the run it till the wheels fall off)... cost is only one of the factors you have to look at... in the end I bet it will be close to a wash, so look at the other factors that really matter... IOW, if you buy the BMW and they do all service etc. for the 3 years.... that might mean a lot more than what you might save with a lease... (I bet they do service for a lease though....)....
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Old 04-21-2015, 10:17 AM   #70
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The one thing I've learned from this forum over the years is that there are no absolutes, no one-size-fits-all, and exceptions to even our most stringent personal rules.

I think we each try to find the balance in the calculation between getting the most out of life while being smart with our money.

My own personal rule of 'no debt--ever!' is violated every month as I do, in fact, lease myself a new Mercedes every 2 years--as I have been for over 20 years. I just like it, like the bells and whistles and like the idea of never having to pay for brakes and tires.

So there! (as an added bonus, at least here in Mass, your sales tax is 6.25% of your monthly lease payment, not 6.25% of the full price of the car, which -without doing the math, I think you come out ahead when you turn cars over relatively soon)

If your perspective is similar to what eta2020 says, that "$25K is peanuts" in the grand scheme of things, then it doesn't matter if you pay cash, loan or lease a car does it?

As is a stock answer on this forum, "it depends" on what works for you and what's important to you all within the envelope of being smart with your money overall.

Isn't it?
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Old 04-21-2015, 10:19 AM   #71
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... I also set up my monthly mortgage payment on auto for 15 years.... been here 5 years and have not done a thing since I set it up...
Same here, except the servicing has changed hands twice since I took out the loan so I've had to change the payee twice and reestablish the monthly recurring (push) payment.
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Old 04-21-2015, 10:27 AM   #72
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Something doesn't seem right with your lease numbers in that usually the sum of the upfront, monthly lease payments and residual value are more than the sales price.

According to TrueCar one should be able to buy a Dart for about 90% of MSRP and your purchase price was right there.
pb4uski and others: That's exactly why I asked. It seems to me that even if we buy it at it's residual value, we're still about 3 grand ahead. Since I never leased before, I thought I was missing something. The numbers are correct (no trade-in) but DH did receive a CDI discount (works for mfr). So I guess it was a nice benefit and not typical?
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Old 04-21-2015, 11:41 AM   #73
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We bought two new cars in the last two years. DW got a 2013 Hyundai Santa Fe and I got a 2014 VW Passat TDI. Both mid to high $20K cars. It's been a sellers market since the economy picked up (especially in Houston).

Cash is not king here.

You get a better deal negotiated using the seller's financing (and they found a bank to match PenFed's 1.9% or I would have walked). The dealers want their cut on the financing and get paid immediately whether or not you are waving a stack of 25 Large in front of them. Plus, in TX, document fees are $99 and that is a set fee. So you pay that.

The rest of the add on bullcrap is not necessary and is big dollars for the dealership (extended maintenance insurance, undercoating, stain protection, VIN engraved in the window glass, floor mats, wheel locks, etc.).

So we fianaced both and paid one off within a few months. I still have the note on the Passat and it's auto paid out of my PenFed RMD monthly pulls (over 70 1/2).

Leasing is trickey and it comes down to negotiating the interest rate for the time period and the residual value at end of lease. I have never leased a car because I want the flexibility of use and we drive a lot. BTW, most leasing is not done by the car dealers, but third party leasing companies and the cars are not owned by the dealers.

Anyone look into a lease takeover arrangement?
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Old 04-21-2015, 05:12 PM   #74
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How did I know that this thread would turn to "its cheaper to drive a car til the wheels fall off" even though I stated in the original post that we have decided to splurge and get new cars every 3 years even though we know it costs more in the long run than buying a car and driving it for 10 years or more?

I already know that and don't care anymore. We saved our butts off for decades so we could splurge and we want to splurge on always having new cars.
There's another option other than leasing a new (say $40k) vehicle every 3 years. Since you want to splurge, why not buy a 3-4 year old high end vehicle that listed new for $70k - $80k for around $40k and sell it 3 years later? After all, a new $40k car is nothing special these days, but there are some very nice high end used vehicles out there.
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Old 04-21-2015, 05:15 PM   #75
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There's another option other than leasing a new (say $40k) vehicle every 3 years. Since you want to splurge, why not buy a 3-4 year old high end vehicle that listed new for $70k - $80k for around $40k and sell it 3 years later? After all, a new $40k car is nothing special these days, but there are some very nice high end used vehicles out there.
Lots of just that come off 3 year leases around here since most people who drive $80K cars can't afford to buy them and lease.
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Old 04-21-2015, 06:42 PM   #76
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I worked for 24 years for a major auto manufacturer and managed the largest lease fleet in the U.S. I also taught common everyday car salesmen how to sell leasing vs. retail sales in order to increase their commissions.

I could write a novel about automobile/truck leasing, as there are so many angles to leasing a vehicle. I'm not going to get into it here.

But let me say that retail leasing is essentially financing a car with a balloon payment in 24, 36 or 48 months. This requires a customer with a high FICO score and good credit.

Many people know how to purchase a car--driving a hard bargain. With leasing, you're going for the lowest monthly payment. Unfortunately, very few people know how to lease a car, and their lease is based on the dealer being paid "MSRP" for their lease by the manufacturer's finance source.

If a dealer offers you a car that would cost $400 per month to buy, you might have an advertised lease payment of $299. If you offer the dealer $225 per month, he might can take the deal. PAYMENTS ARE NEGOTIABLE ON LEASES.

Another angle is that manufacturers often throw out large sales incentives on leases--much like they do on cars/trucks purchased. They can throw rebates to the dealer, or they often will buy down the inherent interest rate the lease is based on--or both. This is when leasing gets to especially be a bargain.

My current car is a Lexus IS, which I bought for the long term. Fortunately, my family owns a Lexus dealership and I can get in one at dead cost--$4K less than others would pay. I could probably lease such a car for about the same monthly payment as a VW Golf or Honda Civic. Hey, that'd be a great deal.

As a retiree, we're keeping our cars longer and just buying them. My 75,000 mile driving has dropped to 40K per year on 3 cars. We have the Lexus, a 2012 Civic and a new Ford Explorer (people hauler.) I also have an old diesel Ford F250 to haul my fifth wheel trailer.
I'm careful to drive low depreciating cars that are very durable--which makes them solid values.

With the average car costing $32K and trucks pushing $50-60k MSRP, you're going to see many people leasing cars that really cannot afford new vehicles. Maybe lease customer will one day figure out how to negotiate their transportation needs without making their car salesman rich.
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Old 04-21-2015, 07:09 PM   #77
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With the average car costing $32K and trucks pushing $50-60k MSRP, you're going to see many people leasing cars that really cannot afford new vehicles. Maybe lease customer will one day figure out how to negotiate their transportation needs without making their car salesman rich.
I hope to belong to group of people who CAN afford new vehicle without a lease

And courtesy to my habit of not financing items that cost peanuts as compared my net worth
I most likely will.

I am pretty sure I got to point of those things being peanuts by doing what I did..... and one of those things
is buying cars in cash.
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Old 04-22-2015, 07:12 PM   #78
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I lease my cars and I love it. Of course I'm still working and having a nice car that's never out of warranty is one of the few things I splurge on. I'm in the car a lot and for me, it's worth it. However, from a cost standpoint, it all comes down to one thing and while I didn't read every post in this thread, I only saw cost per unit alluded to. That one thing is cost per mile. When you buy or lease a car, you're buying miles. Make assumptions, run your numbers and you'll have your answer.

I used to get my cars from a person who would trade in their car. I would give them what the dealer would give them so it was a good deal. I used to be very proud to get my cost per mile in the 10 cents per mile range. (buy for $5000, drive 50,000 miles, spend about $1000 in repairs and sell the car for $1000 when done). I kept my cars in good repair and while well used, they were very reliable.

The challenge comes in when you make the decision to drive a nice car. I've run some numbers with friends and driving a newer car, keeping it for about 5 years, driving about 20K miles per year I'm seeing under 30 cents per mile. That's pretty good for a newer used car. Personally, I think this is the sweet spot and probably where I'll be in retirement - a couple year old, low mileage car driven for about 75K to 100K miles then replace.

If you want to drive a new car and replace it every 2 to 3 years, I've found it better to lease. Also, don't be so worried about going over on the miles. If you look at a lease, you buy a base set of miles for the monthly payment and the cost of additional miles is usually pretty good (around 25 cents per mile). Just don't go overboard or you'll be in the zone of excessive wear and tear.

My last several leases have been Buicks, which hold a 50,000 mile warranty. I get a two year lease with 50,000 miles (25K per year) at a cost of about 32 cents per mile.

One of the challenges I may undertake in retirement is to see if I can replicate the 10 cents per mile I was getting in my younger days (at least for one of my cars). After driving nice cars for so long, it will be difficult, but I think with one nicer car and one older car, I think I can do it.
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