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Posted on 12/14/2018 11:44:59 AM PST by rintintin
Agreed. If I were rich I think I'd lease a new BMW 7-series car every 2-3 years and just turn it back in so I wouldn't have to fool with selling or trading the old one.
There are financial advantages to leasing when the dealership or the financing firm offers proper incentives.
Case in point, my gf had intended to buy a 2018 Lexus, hoping to get a deal before the end of year. (the 19s are already on the lots)
Lexus offered a $4500 discount on leases for the 2018 model she wanted. The incentive was not available on 2019s. She signed up for the lease, then bought herself out of the lease 30 days later. Paid the residual on the car, and was done.
She came out $4500 ahead of what she would have paid to buy the car outright.
Anyone who talks about a vehicle as a "depreciating asset" should first consider that a vehicle is providing value as it is being used. There is always an intangible value of the convenience, the flexibility, and the mobility a vehicle provides in any situation.
Another thing to consider is that owning a vehicle for a long time works really well if you get a LOT of business use out of it. The beauty of the tax code is that the IRS establishes a fixed rate for tax deductibility for all passenger vehicles and light trucks. It's currently 54.5 cents per mile. Imagine owning a vehicle that is fully paid off and costs only fuel, insurance, and repairs to operate. Drive that vehicle 15,000 per year for business use, and you've got a mileage deduction in excess of $8,000 to report on your tax return. Even with $3.00/gallon gasoline and a low fuel efficiency of 15 mpg you're looking at no more than $3,000 in fuel expenses for the year. Add another $1,000 for insurance and you're up to $4,000. That leaves more than $4,000 from your $8,000+ deduction to cover the expenses of operating the vehicle. It would have to be a junkyard candidate in order to have more than $4,000 in annual maintenance expenses!
You can get a great deal on a low-mileage, one-owner car.
There is a ton of inventory on 2015, 2016's with 20 to 40K miles on them - just broken in.
That raises a good point: Leasing is a great deal for the SECOND person who drives the car!
On my 4th lease, never had a problem turning in the car. Minor scratches were no problem, little dings no problem, extra mileage, N/A, car turned in with less than 36K. As a senior driver, its worth the $144 - 179 a month with no head ache repair bills. One car was totaled out, and they accepted the Ins Co offer. Nissan Corp. (1 Versa, 2 Altimas)Retired seniors don’t put too many miles on the car, and you get a new one every 3 years. less headaches. Keep the scheduled maintenance and all is fine. (3-4 oil changes, new wiper blades, and add your own seat covers as insurance.) The cleaner it looks, the quicker the turn in. If you use it for business or a carrier for construction goods, beware!
+1.
What he said. Exacly my experience as well.
“Owning assets that decline in value sucks regardless of it’s a business (or personal). This is the key reason for leasing. Let the leasing company eat the loss.”
The expected depreciation is built into the lease terms. If the car depreciates less than expected (compared to the “residual value”) over the duration of the lease, and your lease agreement gives you the option to buy the car at lease end for that residual value, then in principle you can come out ahead by simply buying the car. In any case, the leasee always implicitly pays for the (expected) depreciation.
“It makes absolutely no sense if you intend to keep it for a long time”
Not necessarily. We just leased a truck because the credit union would kick in over $12,000 into the deal if we did. We can also refi at any time.
Our 2002 Toyota Sienna paid off in 1 year now has 130k miles and has had no issues other than normal maintenance and a couple repaired fender benders. Maintenance has been done religiously. She is showing her age though. I expect she’ll stand up to another 10 years and get to 200k before the body starts to fall apart around the engine.
Our 2012 Prius has been the road warrior now at 160k miles - regular maintenance, ice related fender bender and no other issues. I get the feeling she is going to last a lot longer than 200k. I have noticed the mileage has dropped from 50mpg on average to 45mpg on average. I assume this is due to mechanical wear resulting in a loss of efficiency. Bought it cash off the lot after getting the local two Toyota dealers in a bidding war.
The only other car that was a real trooper for me was a 1982 Mazda RX-7. After 200k miles I sold it to my sister for $1 so she had something to drive to school. That little rotary engine only caused one problem for me when an air valve broke stranding me in FL while on leave...had to scrounge up the money to fix it to get back in time.
Everything else I’ve owned - an old GM monster (Forget the model), a Ford Taurus, and a 92 Nissan Pathfinder all had major issues - though the pathfinder did give me 50k miles (bought it at 150k) as long as I put the $s in to fix the ongoing issues.
I sold the Nissan for $1000 to a work mate for his kid. He was driving it to get emissions checked and the engine threw a rod. He figured the new tires alone would get his money back and was just happy his kid wasn’t driving - else he’d of accused him of raving the engine.
“The only way to get a good deal on a car is to buy one that is just off-lease, if it’s a certified pre-owned used car (CPO). An off-lease car is usually relatively low mileage, often well taken care of, and the new car depreciation has been absorbed. Many CPOs, like BMW, MB, Audi, etc., and others offer a good CPO warranty for anywhere from 3-4 years after purchase.”
that’s EXACTLY how i bought my last Honda Accord. basically paid 1/2 the price of a brand new one ...
“Lexus offered a $4500 discount on leases for the 2018 model she wanted. The incentive was not available on 2019s. She signed up for the lease, then bought herself out of the lease 30 days later. Paid the residual on the car, and was done.
She came out $4500 ahead of what she would have paid to buy the car outright.
that’s pretty slick!
Bkmk
We have bought our last 3 cars like that. One year old cars that were super low mileage and leased. A jaguar and 2 Mercedes. Got great deals on them.
We figured it out long ago.
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