SW17LS

Right...so for me there is a financial benefit.

And no...I do not pay my financial planner and accountant for every conversation we have.

I never said they had a place in every financial climate or for every borrower, I said they do have a place in certain situations. Even with low fixed rates, ARMs are lower...if you're only going to own the property for 5-7 years an ARM might be a good fit.

I think the bottom line is you need to worry about yourself and stop worrying so much about what other people are doing.

Explain how?

I guarantee you very few people who bought a home and then sold it 20 years down the line consider it a poor investment. The bottom line is homeownership is the greatest source of American wealth, thats just a fact. Homeownership is not a fad.

Unless you live somewhere that has very low home values, the MID makes it so you have no choice but to take the itemized deduction when filing your taxes. The vast majority of taxpayers benefit from the MID.

Thank you for your perspective on what can and cannot be a priority for me. People have multiple priorities. I have plenty of income to both lease my car that I enjoy and invest for the future, as well as to live a wonderful lifestyle with my family.

Theres still a benefit to the average consumer IF they are going to trade out of a car every few years anyways.

bitkahuna

iTrader: (20)

hard to believe this thread is still going.

IS350jet

This just doesn't make sense. You want your mortgage as large as it can be, which means, it’s the most you can afford. You also have a $700/month lease payment on your car, and you say investing is your priority? I’m sorry but this just doesn't add up. People that make investing a priority don’t purchase brand new cars, plain and simple. They have mortgages that are a tiny fraction of their income. People that make investing a priority find a way to live on less than a small fraction of their income. You obviously have priorities and luxury is clearly one of them but it’s clear to anyone reading your posts that investing is not one of them.
How's the saying go? "Don't tell *me* what your priorities are, show me where you spend your money and I'll tell *you* what your priorities are"

SW17LS

You misunderstand me about the mortgage. When I say "as high as it can be" I don't mean "as much as I can afford", I mean as high a loan to value as possible. Meaning, I'm not really interested in paying my home off as long as I have income to deduct interest from...and rates remain low.

I don't mean to sound boastful but my car payment is a very small percentage of my monthly income, as is my mortgage. I have plenty of room left in my budget for investing.

People can have multiple priorities. Just because investing is a priority for me doesn't mean I allocate all of my income to investing.

JerryT

Yes and you don't mind paying for it but don;t make it sound like its a great financial choice!!

OF course you would say that investments make more than zero interest. I lived in Vegas 15 years and Always heard of the winner stories. Never heard people say I lost 5 large last night,..Everyone is lucky and everyone who invests is a winner ,No one wants to say they lost,


I Invest too but I do it in the reverse..... I only use profits to buy my three four year old cars, IF I am not in the black I don't buy another car, I keep what we have, In the interim no bank holds the lien, deed or title to my stuff, have Zero payments on anything. We can have it both ways, Drive nice cars and not pay every month for the privilege,

It is not a matter of saving a few dollars "to invest" by not paying cash. If those car buying dollars are THAT important to the portfolio, perhaps a lesser vehicle would be more appropriate?

How much will $20,000 really generate in none risk investments over three years? $2000? In the mean time the Cap reduction cost and $18000 or more would have been used up to "rent" a car you have no equity in. But yeah you are driving a $60,000 "on paper" I get it. IS three year old technology worth $40,000? I don't see it looking back.

Its not about the Interest! Its about the cost of driving that car per month with nothing to show for it at the end of the day. Its the banks car. There is where the toilet money is, The money that cannot be invested,

I can see from a personal standpoint how it works but financially it is a major rationalization,.

JerryT

BINGO....Finally someone who "gets it"

People who are car fanatics and extremely wealthy just buy cars and trade them every few years
They don't lease, They want to know they OWN that car or home or whatever, People who lease just want to drive a really a nice car and pay thousands a year of money that could be invested instead of just owning a Camry or used Lexus.

SW17LS

I never said it was! I simply said that if someone is going to be trading a car anyways every 3 years, leasing may save them money. Unlike everyone else here I am not forcing my financial rationale on others.

I know what my money earns me.

I'm glad that works for you. I don't want to drive 4 year old cars so it doesn't work for me. Even if I did buy a 4 year old car...I wouldn't pay cash unless the cost of a loan was higher than the return I was getting on that money, thats just my financial mindset. If its not yours, thats fine.

Again...I am not saying its not cheaper to buy a used car and keep it, in fact I said repeatedly that was cheaper. However...I don't want a used car. I will not buy one, cheaper or not. When you compare the cost of leasing the car vs buying it and trading it after three years leasing is cheaper for me, when you factor in the tax savings its even cheaper. If that doesn't work for you fine, but don't tell me and others what works for us.

You can't buy a good 3 year old GS for $20,000. Buddy of mine bought a 2010 the same day I bought my 2013, he paid $37k. The negotiated price of my 2013 was $54k. So...the new technology would have cost me $17,000 had I paid cash at that moment...not $40k. Is it worth $17k to me to have the new model car and features over the previous model? Frankly yes. If I could only spend $37k I'd lease a new car at that price point.

LOL, I don't care. Quite frankly, I have plenty of disposable income and I enjoy driving a new car...so that's what I'm going to drive...and leasing saves me money over buying and trading so that's what I'm going to do.

Worry about yourself, I'm doing just fine.

JerryT

You spend a lot of time and energy trying to convince strangers of your "success" and financial wizardry!!

I know why you lease now

BTW You are driving a used car right now..........But I won't tell anyone. Live your fantasy

rominl

iTrader: (4)

JerryT exit this thread

Diesel350

I'm confused, where is the financial benefit to you if you are paying MORE over time?

So my opinion somehow equates to me worrying about other people? Ok

I saw the numbers somewhere in a publication. Sorry I don't have the time to dig them up but it's a pretty well known fact in the dealership industry that more profit is derived from leasing cars.

You're right, a Nobel Prize winner in economics has no clue what he's talking about but you have it all figured out.

Not only do home prices, on average, not produce real returns over time, but history shows they could actually decline over the long haul. Also, who wants to buy a house with 30 yr old roofing, old appliances, carpet etc. You have to remember to adjust prices for years of maintenance and repairs. Just take a look at the home price index's over the last 20 yrs and there hasn't been a huge increase.

You buy a house to live in it, put a roof over your head, not invest in it. If you want to invest in housing. buy rental or commercial properties. Buy bank owned properties, fix them up and sell them for a profit but buying an owner occupied property as an investment is nothing but a fallacy.

This is a fallacy. I don't live in a community that has low home values and I still have to take the standard deduction because it's still higher than if I took the itemized deduction.
Never heard a true investor say leasing cars was a priority to them. To each his own.

swajames

Who says you have to pay more if you lease? With artificially inflated residuals and discounted money factors it can be the cheapest way to drive a car for three years or so. The purchase price doesn't change depending upon how the deal is financed and if you bought you could suffer depreciation greater than the estimated residual set by the leasing company.

Dealer profit on any deal is wholly contingent dependent upon the buyer's level of knowledge and understanding, not the means of financing.

SW17LS

I'm not paying more over time. Like I have said 20 times, I am going to buy a new car anyways every 3 years. That is what I want to do and will do. Because of that fact leasing makes it so that I spend LESS over time because it is less expensive that buying a new car and trading it in every three years. Leasing also nets me a bigger tax deduction over 3 years. THAT is the financial benefit.

Theres nothing wrong with your opinion. Your financial rationale is sound, and it works for you which is great. However, this is not an objective discussion of opinions...you and Jerry are making value judgements about the wisdom of our decisions (mainly my decisions) and somehow this has turned into a discussion of MY finances.

Your way is not the only way...my way works for me and accomplishes my goals. Your way works for you and accomplishes your goals. Hence my suggestion that you worry about yourself and your own finances.

don't doubt that, but the reason for that is how easy it is for dealers to hide profit in a lease, not the lease product itself. When a lease is calculated correctly, theres no more profit in it than a finance. All it really is is financing.

This is entirely off topic but I'm in the real estate industry and I see the data and I meet people selling their homes after 30 years where they paid $20,000 for it and sell it for $800,000. I see families where their only inheritance is their parents home. The wealth that comes from real estate is real, whether the "actual return" is as strong as that given improvements and costs or inflation is one argument, but there is a return and for most people their home is their greatest source of wealth. When those people get that $800,000 for their home, thats their future.

As to value appreciation over time, it depends on where you live. 30 year average where I live is nearly 8%, and yes that includes years of significant decline. YoY for this year values are up 12%.

That doesn't make sense. So, I'm an idiot for leasing a depreciating car, but I am also an idiot for buying a house which at least has a fair chance of going up in value (I realize you aren't calling me an idiot). So I should buy my car and rent my house?

How does it make any sense that rental properties are an investment but a primary residence is not. Aren't I just renting my own home if its my primary residence? The costs are the same, upkeep is the same, appreciation potential is the same. I agree rental properties can be an excellent investment, but your logic here doesn't work. Commercial property is a whole other animal with a whole other set of risks.

As for flipping bank owned houses being a safe investment, we will have to agree to disagree. Whether thats effective or not depends a lot on market timing. Right now in my area the demand for the initial bank owned houses is so high (there arent many) you have to pay too much to get one to make the profit you need in the flip. You live in FL, your market sucks...one of the worst markets in the country. Its different depending on where you live. Flipping is very high risk.

I have never met someone in my area that takes the standard deduction unless they rent or own a home outright. The standard deduction for 2013 is $12,200 (married filing jointly. If you have mortgage interest and real estate taxes that total less than $12,200 I certainly would classify you as living in an area where you have lower home values. In my area...for a lot of folks thats just the real estate taxes. My MID and taxes are $35,000...and I live in a simple townhouse. Even if I had 5 children I still couldn't take the standard deduction.

What is a "true investor"? In order to be a "true investor" must the person eschew all other costs or desires in their lives that cost money? What about vacations? Can I be a "true investor" if I spend $5,000 on a vacation? That $5,000 I could invest. What about eating in nice restaurants? Should I always eat Ramen so that I can be a "true investor"?

I never said I was a "true investor" anyways I simply said that I can invest what I want to invest irregardless of whether I spend money leasing my car or not.

TomMartin

Leasing is just another form of financing...IF you fully understand 1) "capitalized cost", 2) "residual/buyout" value...and you can correctly analyze the ACTUAL internal "interest" cost rate of the lease...and you plan on buying at the end of the lease term.

To be honest...not many car buyers can actually calculate the TRUE interest factor in the lease. Also, IF I lease...it is still with the full expectation that I will purchase the vehicle at the end of the lease...so the miles/per year and condition at end of lease are of NO concern to me or the lease company since I will buy it at lease end.

Some buyers truly do buy only for the payments and to turn in the vehicle at lease end...that is OK also Tom

SW17LS

It is true that most car buyers cannot actually calculate and do not understand the way a lease works. You can see that just in how people come here and ask questions about a lease, they just don't understand. All the info is out there, there are great write-ups and tutorials on leasing all over the internet, every consumer needs to make sure they know what they need to know before making decisions.

Where I disagree Tom is when you talk about leasing THEN buying the car. Short of there being some sort of a big rebate when you lease (i.e. Lexus has $3k in rebates on the 2013 GS right now to lease), or if you have tax reasons for leasing, in general its cheaper to just buy the car initially than it is to lease it then buy it out of the lease at the end.

Good leases have high residuals, and a lot of times the buyout terms aren't great.