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  #25  
Old 11-26-2015, 04:14 PM
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Re: first post, seeking advice from current owners!

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Originally Posted by Jim_in_PA View Post
Your question is a good one. Depreciation is important to someone who's leasing as it has impact on the calculated residual value at the end of the lease...and that goes into the subsequent lease payment calculation.
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Originally Posted by overlanding View Post
Yep a lease is pretty much financing the calculated depreciation.
Regardless the depreciation is 100%. You pay until the lease is over. Then you return the car and have nothing to show for it. What the car is worth is immaterial because you don't own it.

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  #26  
Old 11-26-2015, 04:57 PM
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Re: first post, seeking advice from current owners!

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Originally Posted by wangstarr03 View Post
My school of thought is that either way (most likely) I will turn the car in (if leasing) or trade/sell it (if buying) after a few years, anyway. By leasing, I can walk away clean and start fresh with something else or if buying certified/pre-owned, it limits the possibility of having to deal with negative equity.

Not if you pay cash.
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Old 11-26-2015, 05:04 PM
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Re: first post, seeking advice from current owners!

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Not if you pay cash.
Can't argue with that.
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  #28  
Old 11-27-2015, 08:33 AM
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Re: first post, seeking advice from current owners!

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Originally Posted by wangstarr03 View Post
My school of thought is that either way (most likely) I will turn the car in (if leasing) or trade/sell it (if buying) after a few years, anyway. By leasing, I can walk away clean and start fresh with something else or if buying certified/pre-owned, it limits the possibility of having to deal with negative equity.
That's not a very good reason for leasing. (Not that there is a good one). As the lyrics of the 1970's Billy Preston song said, "Nothing from nothing leaves nothing". Still as true today as it was then. Yes, you'll be, "walking away clean", but everything you spent on the lease is in the dealers pocket, and not yours. And on top of that you have to give him back the car. He collects everything of value monetarily, and you get zero. I can't think of a worse way to obtain a new car.

You should never even consider purchasing a vehicle, if a "negative equity" condition is ever going to occur during your ownership of it. Owing more than the car is worth at any point in it's lifetime, flat out indicates you simply cannot afford it. Most banks would not underwrite an auto loan, anymore than they would a home mortgage, if that were ever a possibility. They tried it back in 2008, and look what happened to the real estate market. But the way lending institutions operate in today's day and age, I guess anything is possible........ Providing you as the borrower allow it.

Automobiles are a bad enough investment as it is, considering the way they depreciate. You don't want to make matters worse by borrowing too much to buy them. Paying interest on a depreciating asset is about as bad as it gets in the investment world, because it creates a compounded loss. And leasing should never be on the table, as it is nothing more than a long term rental contract. Pay everything, and walk away with nothing. Hell, the Mafia gave out loans with better terms than that.
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  #29  
Old 11-27-2015, 09:07 AM
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Re: first post, seeking advice from current owners!

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Originally Posted by billt View Post
That's not a very good reason for leasing. (Not that there is a good one). As the lyrics of the 1970's Billy Preston song said, "Nothing from nothing leaves nothing". Still as true today as it was then. Yes, you'll be, "walking away clean", but everything you spent on the lease is in the dealers pocket, and not yours. And on top of that you have to give him back the car. He collects everything of value monetarily, and you get zero. I can't think of a worse way to obtain a new car.

You should never even consider purchasing a vehicle, if a "negative equity" condition is ever going to occur during your ownership of it. Owing more than the car is worth at any point in it's lifetime, flat out indicates you simply cannot afford it. Most banks would not underwrite an auto loan, anymore than they would a home mortgage, if that were ever a possibility. They tried it back in 2008, and look what happened to the real estate market. But the way lending institutions operate in today's day and age, I guess anything is possible........ Providing you as the borrower allow it.

Automobiles are a bad enough investment as it is, considering the way they depreciate. You don't want to make matters worse by borrowing too much to buy them. Paying interest on a depreciating asset is about as bad as it gets in the investment world, because it creates a compounded loss. And leasing should never be on the table, as it is nothing more than a long term rental contract. Pay everything, and walk away with nothing. Hell, the Mafia gave out loans with better terms than that.
I don't agree with your assessment beyond that a vehicle is a depreciating asset, and an oxymoron at that as nothing that depreciates can be termed an asset.

Everyone has different needs and circumstances when it comes to transportation. Buying or leasing are options a person can choose from to best fit their individual circumstances. Both have their pluses and minuses.
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Old 11-27-2015, 09:44 AM
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Re: first post, seeking advice from current owners!

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Originally Posted by MDBones View Post
I don't agree with your assessment beyond that a vehicle is a depreciating asset, and an oxymoron at that as nothing that depreciates can be termed an asset.

Everyone has different needs and circumstances when it comes to transportation. Buying or leasing are options a person can choose from to best fit their individual circumstances. Both have their pluses and minuses.
Cars depreciate. That is concrete fact. Always have, and always will. They will never be worth more than the day you buy them. (Unless you're talking the collector market, and we're not). And every day after they will be worth less. Until they're worth nothing. There is no monetary plus to leasing because it's simple math, and the numbers will never add up.

Now, aside from that you can argue a vehicle has worth beyond it's numerical cost, and you would be correct....... To a point. It's not practical to save money by not buying a car, and taking the bus or walking instead. But from a financial standpoint, you will not find an investor who will advise you to spend more than is absolutely necessary, because of these factors. If an individual is independently wealthy, where a purchase of a high dollar luxury vehicle is basically a drop in the bucket, that's different. But not many people fit into that category. For most people, the most difficult thing in life is the accumulation of wealth. It is why so few have any.

Leasing was unheard of 40 years ago because it made no financial sense. It still doesn't today, except to large corporations who leased large numbers of vehicles, and are able to deduct large amounts, because of the way their corporate taxes were structured. People lease today because most can not qualify for a loan, simply because they don't have enough cash to put down. Along with non sufficient income due to other financial obligations.

When you lease you give the dealer an "Acquisition Fee", which is nothing more than a down payment you'll never see again. People go for it because it's smaller than the down payment required for a loan on the same vehicle. The difference is they want the car so bad, and there is no other way for them to qualify to actually obtain, (not purchase it).... So in essence they rent it for a while, then give it back. A bit like the businessman at the Hertz counter at the airport, but for a longer term.

The leasing market has been a financial boom for dealers. Just as the rental market has for Hertz, Avis, and Budget. They basically collect cold, hard cash for the entire term of the lease. Then, when you turn in the car you're assessed for every little scratch, dent, and stain. And God help you if you go over on the small mileage allotment they give you, or you'll be writing more checks before they let you out the door. They can't lose. And the thing is this. All of this is driven by the customers who want the car so bad they'll sign on to the worst possible financial terms imaginable in order to get it. Even if it's only for a few years. After which the dealer details it. Sticks it back on the lot, and sells it off to someone else for even more profit.
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  #31  
Old 11-27-2015, 10:23 AM
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Re: first post, seeking advice from current owners!

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Originally Posted by billt View Post
Cars depreciate. That is concrete fact. Always have, and always will. They will never be worth more than the day you buy them. (Unless you're talking the collector market, and we're not). And every day after they will be worth less. Until they're worth nothing. There is no monetary plus to leasing because it's simple math, and the numbers will never add up.

Now, aside from that you can argue a vehicle has worth beyond it's numerical cost, and you would be correct....... To a point. It's not practical to save money by not buying a car, and taking the bus or walking instead. But from a financial standpoint, you will not find an investor who will advise you to spend more than is absolutely necessary, because of these factors. If an individual is independently wealthy, where a purchase of a high dollar luxury vehicle is basically a drop in the bucket, that's different. But not many people fit into that category. For most people, the most difficult thing in life is the accumulation of wealth. It is why so few have any.

Leasing was unheard of 40 years ago because it made no financial sense. It still doesn't today, except to large corporations who leased large numbers of vehicles, and are able to deduct large amounts, because of the way their corporate taxes were structured. People lease today because most can not qualify for a loan, simply because they don't have enough cash to put down. Along with non sufficient income due to other financial obligations.

When you lease you give the dealer an "Acquisition Fee", which is nothing more than a down payment you'll never see again. People go for it because it's smaller than the down payment required for a loan on the same vehicle. The difference is they want the car so bad, and there is no other way for them to qualify to actually purchase it.... So in essence they rent it for a while.

The leasing market has been a financial boom for dealers. They basically collect cold, hard cash for the entire term of the lease. Then, when you turn in the car you're assessed for every little scratch, dent, and stain. And God help you if you go over on the small mileage allotment they give you, or you'll be writing more checks before they let you out the door. They can't lose. And the thing is this. All of this is driven by the customers who want the car so bad they'll sign on to the worst possible financial terms imaginable in order to get it. Even if it's only for a few years. After which the dealer details it. Sticks it back on the lot, and sells it off to someone else.
I used to look at leasing pretty much the way you still do. But like everything else, circumstances change over time.

My last GC was an 02 and after almost 12 years I decided to replace it. I also have an 08 Accord that I bought new and is paid for that currently has 32K miles and has never seen winter road salt.

I could've bought my Overland but decided to finally give leasing a try because 1) I didn't want to trade both vehicles to get one, and 2) with the employment instability I felt that if my job was terminated it would be easier to walk away from a lease than losing my only transportation.

Even though people claim they plan on paying it off and keeping a vehicle long term I believe few (outside of the well to do) actually do as life circumstances can change those plans in a heartbeat.

I've always figured that I'll be making a car payment of some kind and if I am then I'm going to be driving something within my means that I want and like. So I took a closer look at leasing this time around.

I leased for 3 years and 45K miles. I currently only have 19K on the GC and the lease expires next May. I have a decent monthly payment, I'm only paying sales tax and interest on my actual use of the vehicle, and with a 3 year lease there's no need to spend a dime on an extended warranty or have to worry about expected maintenance, tires, etc. after the basic bumper to bumper warranty expires.

Other than my Accord and keeping my 02 GC for as long as I did, I'd usually trade after 3 years to hit that sweet spot. So in that regard leasing is no different... I'll be in a new one next May. Or, if I decide to keep this one then the buyout is decent enough to consider... even if I do it just to trade it in to buy the next one if the next lease term isn't as favorable.
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  #32  
Old 11-27-2015, 10:30 AM
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Re: first post, seeking advice from current owners!

From a black and white perspective, I agree that you are mainly correct but there is more to finances then just that. When purchasing a car, the depreciation is a sunk cost; it will be there regardless of how much you put down. For me, if I can finance at or near 0%, I’d rather keep my money and invest it where I’ll theoretically get a larger return. My net net is higher. This requires discipline (to keep the money invested and not spend it elsewhere) but is a better use of your capital. Again, it’s personal preference though. Some people would rather be debt free and have piece of mind, which carries more “value” to them than the returns they could get on the cash.

Overall, budgeting is about dollars and cents as well as people’s personal preferences. If you save enough in retirement/rainy day, have little debt etc etc, then your discretionary money is yours to spend on what you want. If you love cars, trade them in often and this habit/personal preference fits within your discretionary budget, then leasing “makes sense” and you should have at it!

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  #33  
Old 11-27-2015, 11:31 AM
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Re: first post, seeking advice from current owners!

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For me, if I can finance at or near 0%, I’d rather keep my money and invest it where I’ll theoretically get a larger return. My net net is higher.
The so called "Zero Percent Financing" scam is just that. A total scam, and a complete ruse designed to attract unsuspecting buyers. You gain nothing, and in fact, it usually results in you paying more.

Car dealers, (or banks for that matter), will not lend out money for nothing. They wouldn't be in business very long if they did. Much like the old Fram oil filter commercials, you'll either pay now, or else pay later.

You will never get a vehicle for "0% Financing" at the same price you would have gotten it for cash, or by financing through a bank at competitive rates. All you'll be doing is paying for the financing up front, in the higher purchase price they'll charge you for the car.

About the only exception to this rule is on very hard to move vehicles, that have become unpopular, or never were to begin with. And as a result, the dealers want to rid themselves of costly, hard to move inventory. (Watch how fast "0% Financing" pops up everywhere at Volkswagen dealers on their once popular diesel models, since the whole EPA fiasco started). The Jeep Grand Cherokee does not fall into any of these categories.

I proved all of this to myself, (rather the dealer actually admitted it to me), when I purchased my Jeep last April. After much back and forth, I negotiated the best cash price I could get on the vehicle I wanted. Afterward I asked him about "0% Financing To Qualified Buyers", just to get his reaction. He flat out told me they did not offer it on Grand Cherokee models. And he said if they did, there was no way he could sell me the car at the agreed upon cash purchase price we had just negotiated. When I played dumb and asked him why, he told me, (rather honestly I thought), "Because we're not in the business of losing money".

"0% Financing" amounts to nothing more than fuzzy math. When all is said and done you'll wind up paying more, not less. And as we all know, automobile dealers are very good at coming up with ways to separate you from as much of your money as possible. "0% Financing" is one of the best ways yet.

Don't Fall for 0% Financing

Tips and Advice - Know the Facts: 0% Financing

The 0% Financing Scam and How to Avoid It
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  #34  
Old 11-27-2015, 01:54 PM
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Re: first post, seeking advice from current owners!

If you know what you are doing leasing can make perfect sense, especially if you plan on keeping the vehicle less than 5 years either way.

If you understand how the lease calculation works, and time your purchase to a good residual and good incentives you are often better off leasing than owning and selling in 3-4 years.
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Old 11-27-2015, 02:11 PM
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Re: first post, seeking advice from current owners!

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If you know what you are doing leasing can make perfect sense, especially if you plan on keeping the vehicle less than 5 years either way.

If you understand how the lease calculation works, and time your purchase to a good residual and good incentives you are often better off leasing than owning and selling in 3-4 years.
As I've said before, with a lease you're paying 100% depreciation. It is simple math. There is no way around it. Selling off a vehicle after 5 years or less means you are taking the biggest depreciation hit you can possible take, owning over such a short time span. Why would you do either when both represent the most costly ways you could possibly purchase and own, (or rent), a new car?
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Old 11-27-2015, 02:23 PM
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Re: first post, seeking advice from current owners!

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As I've said before, with a lease you're paying 100% depreciation. It is simple math. There is no way around it. Selling off a vehicle after 5 years or less means you are taking the biggest depreciation hit you can possible take, owning over such a short time span. Why would you do either when both represent the most costly ways you could possibly purchase and own, (or rent), a new car?
It just depends on the wants/needs of a person. Some people like having new cars after 3 years or so. Others don't want to have a car past warranty.

If you are the type of person that keeps cars for the long term, then leasing wouldn't make any sense. But if we are comparing leasing to buying (cash or not) and selling the car in under 5 years, a lot of the times you can come out ahead in leasing.
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