Vehicle Leasing
- Happy
- Happy
- Kirk
- DennisL
- AL_W
- DennisL
- KLR
- Kirk
- DennisL
- mpenfield
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» Happy - alternative investment
The decision to pay cash or lease depends on your net cost of the lease, and whether you think you can put the cash in an alternative investment such as the stock market and make more than the net cost.When I did an IRR analysis I was being charged about 5% for keeping the use of my cash. Since this is a business auto, I am able to deduct the lease payment in full. This brings my costs down to about 3%. So, you have to ask yourself, can I beat 3% by investing the cash in an alternative investment?
In 1997 when I leased my Cadillac, I put the 40k in the S&P500 and doubled my money over the next 3 years. But since 2000, when I leased my Lexus, I have lost money, as well as paid 3%. It is a gamble. It is very similiar to the decision of whether to pay cash for a house or take a mortgage out, and invest the cash elsewhere.
Of course, all the above presupposes you have alread decided to get a car, and the only decision is whether to lease or pay cash.
-- posted by Happy
» Happy - I forgot to mention that whether you pay cash or lease makes no
I forgot to mention that whether you pay cash or lease makes no differce to the dealer. If a dealer leases a new car, he collects cash from the manufacturer who finances the lease through such companies as GMAC or Toyota Financing etc.In fact the price is normally negotiated before the decision to lease, or pay cash is made.
-- posted by Happy
» Kirk - Re: Thanks!
In response to message posted by DennisL:The way I see it, if you value a new car and can afford it (i.e. have your plan in place as you do) then it is just a matter of is a new car every 3 years a luxury you want rather than new skiis and several ski trips, or windsurfing gear or a nice cruise, having a stay-at-home-spouse, etc... Once nice thing about having money that you earn is you get to spend it on things that you enjoy.
So, what did you buy? Got a URL to show us?
-- posted by Kirk
» DennisL - Re: Re: Thanks!
In response to message posted by Kirk:Well stated, Kirk. We all pick and choose our luxuries. I don't take extravagant vacations, buy fancy clothes and jewelry, or engage in expensive hobbies. In fact, I live a rather frugal life, similar to much of what you read about in The Millionaire Next Door.
All of my life, I have driven rather ordinary cars that I kept for a very long time. My new lease is only my fourth car in over 30 years of driving.
Things are going well enough for me now, given that I am more than half way to critical mass, my saving and investment plan is on cruise control, and I am only five years away from owning my home free and clear. So, for once, I decided to really splurge on something and lease a nice new automobile--a 2001 Cadillac Sedan DeVille. She's cabernet (wine colored) with a neutral shale (pretty close to beige) leather interior. It came with an optional comfort/convenience package, an optional safety/security package, and premium chrome wheels. Most of the roads I drive on are in lousy condition. This car handles them really well. It's a terrific ride.
Sorry, I don't have a URL to show you pictures of mine because I don't have a digital camera. (Remember, I live pretty frugally ;-) ). The closest I can get you to it is cadillac.com's photo gallery.
Click here for a look from the rear.
Click here for a look at the control panel. Mine has digital rather than analog read-outs, has the shift lever on the steering column rather than on the console, and doesn't have the optional navigation system below the heater and AC controls.
Click here for a look at the front seating area.
Click here for a look from the front left.
-- posted by DennisL
» DennisL - My New Lease -- Follow-Up
Since my last post here, I have spent quite a good deal of time at that great leasing information Web site, http://www.leasetips.com , that KLR posted above (many thanks again, KLR!!). I have read and learned much more about car leasing than I thought I knew. The site even provides a worksheet that breaks your lease down line by line, determines your money factor and APR (annual percentage rate), and helps you determine if you got ripped off by the dealer or the leasing company.After completing the worksheet, I determined that I got a pretty fair deal from the dealer and GMAC. My APR is only 2.86%. I could not detect any of the eleven most common leasing scams in my contract.
What I will do differently if I ever lease a car again is (1) negotiate harder for a lower purchase price, which on this car is only $2785 below the $45,385 sticker price, and (2) try harder to get the dealer to waive the "administrative fee," which in my lease is a whopping $595 and is capitalized over the duration of the lease. On the positive side, I did get the dealer to waive the $500 "security deposit."
All in all, I think I got a decent deal. It could have been a little better, but it also could have been much, much worse.
Most importantly, I am thrilled with the car. It is the first time in my life that I have ever splurged for something extra special and nice, and I love it!
-- posted by DennisL
» KLR - Re: My New Lease -- Follow-Up
In response to message posted by DennisL:Attaboy Dennis,
Glad you are happy with your new car. BTW you mentioned that you "only" $2785 off below the sticker price. I bought a new car just about a couple of years ago and paid $2000 over sticker as an "availability" add-on. Pure gouging on a hot car. At that time the dealer was surprised that I was paying cash and suggest instead that I lease the car and put my money in the stock market instead where I "could double my money" instead. I should have taken the money out of the market and bought four cars instead. 
-- posted by KLR
» Kirk - Re: My New Lease -- Follow-Up
In response to message posted by DennisL:Most importantly, I am thrilled with the car. It is the first time in my life that I have ever splurged for something extra special and nice, and I love it!
GREAT! It is a nice looking car too.
IF I put the cash I paid for my 'vette into the MSFT, Intel and IBM stock I bought in 1993.... well, I could buy many of them today. But, I also put money into a Vanguard Annuity and allocated it to foreign funds.... Did OK there, but still not enough to buy another 'vette from the $10K I put there. Still, you have to live and I am glad I bought the 'vette in Jan 94. Heck, we could kick ourselves for not buying the right lotto numbers too!
Thanks for making the topic. I think there is good information here to help others.
-- posted by Kirk
» DennisL - Re: Re: My New Lease -- Follow-Up
In response to message posted by Kirk:IF I put the cash I paid for my 'vette into the MSFT, Intel and IBM stock I bought in 1993....
What is nice about a good and fair lease is that I get to keep the money (about $22,000 in my case) that represents the residual value of the car at the end of the lease invested and working for me for three years. Even in a money market fund, that money will earn more than 2.86% (the APR on my lease). At the end of three years, assuming I like the car, I will buy it outright with the $22,000. That $22,000--taking three years of inflation into account--will be less in real terms at that time. Let's not forget, too, that I also have three years worth of salary increases coming before I have to fork over the $22,000.
I sort of view it as a "pay me now or pay me later" situation, deferring the "down payment" for three years and having that money work for me instead.
For someone who drives a very small number of miles each year (I take public transit to work), who takes real good car of a car, and keeps a car for a very long time (seven years or more), as I do, I think this approach is a good one. By my estimate, at the end of three years, my car will have about 9,000 miles on it, and it will still look and run like new. Knowing myself and my history with cars, I will most likely keep the car for at least seven more years after the lease ends.
Wow, it's exciting thinking about the future. Three years of car payments, then $22K, and I own a beautiful luxury car outright <img src=/images/emoteicons/happy.gif alt=smile> Then, just two years after that, I own my house outright, too! <img src=/images/emoteicons/happy.gif alt=smile> <img src=/images/emoteicons/happy.gif alt=smile>
Yipee!!
-- posted by DennisL
» mpenfield - Re: Re: Re: My New Lease -- Follow-Up
earlier you mentioned http://www.LeaseTrading.com as a site to help exit a lease prior to maturity and avoid penalties. if you are acquiring a vehicle and want to minimize cash out of pocket, the best way is to assume someones lease. often there is no money out of pocket and certainly no first and last month deposit (or comparable). reinvest that savings along with the other cash being conserved and get some furniture for that house you will own.-- posted by mpenfield
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