dmvp29

Personally if you ask me, I think 90% of luxury car owners who lease are people who are living far beyond their means and will probably have to downgrade their standard of living by a full social class or two during retirement.

BOBFSPORT

Keyword in your statement is THINK. Wealthy people understand that you don't put up cash for things that depreciate. What is my cash worth up front for a vehicle? Wouldn't my cash be better spent in the market or in real estate? Incentives are only given out on leases. The guy who pays cash or finances gets none. Also i don't have to pay uncle sam tax on the entire purchase but rather only for the monthly payment. At the end of a lease the lender assumes 100% responsibility for the value of the vehicle. So lets go back to the guy who purchased his luxury car 1.He paid all of his taxes up front 2.He made higher payments for the same car 3. When he got to the end of three years and started thinking about a new car he still owed more than the current value of the car and now thats his problem and not the banks. I don't THINK your assumption is wrong. In fact i know it is.

Cheers, Jordan

Joeb427

iTrader: (1)

Also no Carfax hit depreciation with a lease.

BOBFSPORT

This may be the greatest point of all. If i crash my car or someone crashes into me i now have a dirty carfax report and lose thousands of dollars in resale value on a vehicle that i own. If i lease the car the bank assumes responsibility of selling their vehicle with its dirty carfax report.

keyframe13

That's only if you get screwed by insurance company. You should receive the depreciation money from the insurance company.

Bass Mech

actually your totally wrong here.
for instance i am putting my money into cash value life insurance because there is no other investment tool that
1. with as little as a few hundred bucks a month i can turn it into a million tax free income for my family the very next day
2. grows at currently 8.5% interest with absolutely 0 market risk even if the stock market crashes it will always have positive interest rates.
3. allows me to have 100% liquidity any time i want with no penalty. (even if i decide to pay cash for a car or house i can borrow it from myself and pay no interest)
4. allows me to grow a lump sum of money with no limits to supplement my retirement for the rest of my life
5. allows me to use my death benefit before i die to pay for the costs to put me in a home rather than buy long term care to cover it so i don't burden my family with the rising cost of nursing care waiting for me to die.

find me 1 single investment that allows all of these things and you get a gold star...

here is a couple facts and i just ran a case today as a matter of fact as an example.

Index Universal LIFE policy on a 34 year old female as a SMOKER none the less.

600,000 death benefit with only 400 bucks a month.
at age 65 she will have a little over $450,000 in cash with a premium outlay of only about 127,000 in premium payments for the same time period.
at age 65 she can stop making payments and collect 61,000 a year for the rest of her life up to age 120 (not likely anyone lives that long) basically she gets to use her death benefit of 600k in installments while still living.

so let's do some math here, just rough numbers…

remember i said she paid into the policy $127,000 over the course of 30 some years? if she is receiving 61,000 a year at age 65 and stopped making payments didn't she just in only 2 years get basically a full refund of the premium payments she made? (and still has at this point a free life insurance policy and death benefit of almost 600k)
still has a decreasing death benefit for the rest of her life and continues to take loans against the 600k death benefit which by the way she is paying no taxes on, and never pays any of the loans back and is basically using up her death benefit in payments to the tune of 61k a year FOR LIFE!

pretty neat stuff..

another thing to consider. do you think taxes will be higher or lower in the future? let me ask the question another way, do you think taxes will be higher or a LOT higher in the future?
do you think social security will be paying more or less or will it even be available for you when you retire? do you think it will keep up with the cost of living?

so let me ask you a question, do you think it's smarter to put your money into investments such as real estate, stocks, bonds, CD's mutual funds or a 401 k?
the problem with these things is they are ALL subject to market risk and they ALL require you pay taxes (likely in the future at a much higher tax rate) when your ready to liquidate these assets for retirement.
and like i said before there is also risk you could have less money in the future than you actually put into these things because the market fell out the bottom when your ready to retire. best case scenario is you do well and make say 8% interest. the problem is you now owe taxes on the 8% gain (or in a 401 K all of the money) but you didn't take into account the fact that inflation has been a factor at 7% the entire time. so what you didn't give up in taxes, you actually lost because the value of the dollars you still have doesn't buy as much as it used to, so really you lost money.

the most important rule of investing is to NEVER NEVER LOOSE MONEY! can we agree on that?

so if you put your money someplace that you have a guarantee that it will never loose money, your already winning! if it grows at any interest rate your money ahead and if you never pay taxes on the growth of the money you get the benefit of actually having money to retire with.

someone once told me if you had 2 choices which would you pick?

1. the chance to invest money and you might possibly get rich…
2. the guarantee that you would NEVER, NEVER, EVER be poor...
which would you pick?

now getting back to your statement. if it were me and looking at the fact our country has never been 17 trillion in debt, we have never had an idiot running this country into financial ruin, we have not had as many people out of work as we have now in a very long time, and we have never seen the fed pumping money into the market propping up the value of stocks and causing inflation at such an alarming rate ever before in our lifetimes.

that said here are your 2 options.
1. pay cash for your car and tie up your money into an asset that depreciates by the day leaving you no money to put away in any type of investment. (unless you drive it into the ground which few people actually do Especially from this site!)
2. spend as little on payments, repairs and maintenance keeping cars only till the warranty runs out, paying the least amount of money for the car as you can get away with, and for a business owner such as myself be able to write off the entire car payment further saving me money on taxes.
which do you pick?

if you ask me, i would rather have a nice car with a low payment so i can better myself and live in a better position than i do now. sure if you actually paid a car off and drove it till the wheels fell off but who does that! certainly no one from this site.
so to say people who lease cars at living far beyond their means is the dumbest thing you can come up with.
furthermore it's all relative to how much you make. for some people who make millions a year, spending 50k on a car is like dropping a 20.00 bill on the collection plate.

BOBFSPORT

Wrong. If the accident is your fault your insurance company is not going to pay for your cars diminished value and if the accident is not your fault you'd be lucky to get half of your economic loss back from the offenders insurance company.

BOBFSPORT

Hahahahaha another epic write up! I completely forgot about writing off lease payments as a business owner. This fact alone discredits the foolish statement about lessees living above their means,

Dark9t316

I don't think dmvp29 is wrong here. Sure financing makes great financial sense for many people, especially for business owners who can do business write offs, but more people than you think live beyond their means. From cars to houses to mattresses to cable, someone can easily look at their paycheck and say yea sure I can pay $400/mo for that car and $2000/mo for that house. Just about everything can be financed these days, these people can "afford" the payments, but they don't leave any room to account for the risks (economic downturns). These are also the same people who aren't thinking about investments, and probably have no concept of present vs future value of money. When the economy goes south, why do you think so many people lose their cars and houses? Some people can't even afford their payments anymore because their ARM rate went up 2 points? These people are in every kind of neighborhoods, some with low income and some with high income but likewise they are all living beyond their means.

BOBFSPORT

No doubt that plenty of people live well beyond their means. To say 90% of people who lease luxury cars are living beyond their means is wrong! Lets also add in the fact that the most attractive low lease payments are only given to those with top tier credit and a steady income. Greedy idiots living beyond their means rarely have top tier credit.

Dark9t316

Yea 90% has got to be an over exaggeration lol. I think low interest rate will definitely entice people to buy more, sometimes maybe even beyond their means. Personally I have great credit, and can borrow a lot at super cheap rates but I know my limits, some people just don't know the difference between what's responsible and what's dumb. I know someone who took on a 12% loan to finance an Accord.

Slust

If there was one way that made 100% sense than that is what all of us would be doing ...or at least all of us that do our research before hand. But all of us are in different scenarios, approach situations differently and have different needs. So the tipping point is really subjective, though I would agree with McBrain. I think leasing only makes sense if you don't plan on keeping the car longer than 3 years ...maybe up to 5 but I think the numbers work against you at this point, but I'm too lazy to work the calc.


Far as financing and depreciation goes these cars really hold their value. My 2IS was taken out by some punk. From what I paid and what the insurance gave me I lost 7.5k'ish. Let's round up to 9k to account for interest even though my interest rate was only 1.9% with half paid on down payment and I paid the car off in a year and a half. So 43 months of ownership (i.e. worst depreciation hit - first 2-3yrs) and I lost 9k ...ish. That means I paid $209.30 per month to own/rent that car. About $35 less per month if you remove the fudge.


Financing isn't evil on cars that hold their value, it's simply another path.

dmvp29

Oh dear lord you are doing it wrong.

Here's a hint: you're not getting 8.5% per year on your money at "zero risk." No such investment exists, and "cash value life insurance" policies certainly don't offer anything close to that. Just FYI if you wade through the fine print you'll realize that you're losing money.

I appreciate the investment advice and I know you mean well, but please for your own sake dig a little deeper into your life insurance policy and you'll almost certainly find that you've been duped if you honestly think you're getting 8.5% compounded return on your money.

In what world does that make sense for the insurance company? Why would anyone ever offer a guaranteed, zero risk 8.5% return on your money with 100% liquidity without getting anything in return? A good rule of thumb (in life) is if it sounds too good to be true, it probably isn't true.

dmvp29

You should always, always get term insurance.

Also, my only point about leasing vs writing a check is this - what costs more over the long run? Buying a car outright and driving it until it breaks down, or perennially leasing a brand new car every 3 years?

The answer is it depends on how long you're able to drive the car until it breaks down. Roughly speaking, if it's anywhere around 10-12 years you will almost certainly come out ahead by buying the car outright versus leasing.

Of course by leasing you're renting a brand new car every 3 years, but you're paying dearly for that in the long run.

The point here is that it's more expensive in the long run to lease a relatively reliable car like a Lexus IS than it is to write a check for one outright and drive it for 10 years. Thus, logically, if you can't afford to write a check for the car with the intention of driving it for 10+ years (in principle), then you cannot afford to lease a comparable car every 3 years. It's simple math that most people don't bother to go through. That was my only point about leasing vs buying outright, and I think that was the point that McBrain was trying to make.

BOBFSPORT

I completely agree and i don't think financing is wrong if you plan on keeping a luxury car more than three years. Who the hell wants to keep a luxury car more than three or four years though? It is just that, a LUXURY car. Not a car of necessity but rather a car you buy to have the latest and greatest and spoil yourself with the newest tech and luxury features. Buying a luxury car to drive it into the ground makes no sense at all. Honestly is a luxury car stlll luxurious five years down the road? A 2013 Corolla is more of a luxury car than a 1st generation IS. Again my point in all of my posts on this thread is that most people choose to lease luxury cars because it makes more sense for them not because they cant afford to buy it in cash.