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Old 04-15-2015, 01:10 AM
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Lease vs Run into the Ground vs Replace every 1.5 years

I've been wondering this for a while and I'm curious how this all works out with respect to Jeep Grand Cherokees and resale value.

We used to replace our cars at around 100K. Usually took a loan and paid off early. The last few cars my wife and I both liked and kept them much longer. A 99 Passat and a 2002 GC. Both with well over 200K miles.

We figured we'd continue doing the same with a 2011 VW CC and a 2014 GC Limited.

Then I decided, what the hell, I really had wished I bought the Technology Group on the Limited. So I decided to "Fix it" and just eat the loss.

We'll the "loss" turned out to be NIL !!

We paid $37,500.00 for the 2014 Limited. If I amortize that over 10 years that comes to $315.00/mo to own it. Not including gas and maintenance.

When I bought the 2015 Overland I got approx the same deal. About 4% below invoice. But I got back $32,000.00 on the 2014 GC Limited.

So that was $5,500.00 to own it for 18 months or $305/mo to own it !!!
And I put 27,000 miles on it. Roughly 18,000 miles per year.

I got all the "Taxes" back as well because I only pay taxes on the difference.

Part of the "savings" of keeping a car 10 years, is due to it, well being OLD. So you'd expect the cost of ownership to be higher when new and cheaper when older (excluding repairs).

So the $305 was cheaper than the amortized price over 10 YEARS.

Not only that it requires $0.00 in maintenance and would not require even an extended warranty.

So I'm asking, why not replace it, every 18 months !!! It's cheaper to own than keeping it for 10 years.

I don't think it was just luck. I saw other threads here quoting similar trade in value and it's not terribly hard to get 4% below invoice.

Now there is one catch. I did "Trade Up" in Trim. Maybe if I traded for a Limited I might not have got quite as good a deal.

I tried running the numbers on my wifes 2011 VW CC and it does not work out like the 2014 Limited. Is it because we are past the sweet spot in time.

Now keeping a car this "New" will raise cost of excise taxes quite bit and insurance. But not that much. Probably less than cost of Maintenance and/or Extended Warranty for keeping it long term.

Is this the same as "Leasing". I don't think you could touch $305/mo (no money down) 18K miles a year for a $37,500 Vehicle.

I must be missing something this seems to good to be true. That it's cheaper to buy a new car every 18 months than to keep it for 10 years.

Is 18 months a sweet spot? In that it's young enough that it can be practically sold as new. But long enough that you good reasonable use out of it. Still under 3/36 Warranty.

You would not even need tires or brakes in this time frame. You probably wouldn't even need wiper blades. All it needed was oil changes.

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Old 04-15-2015, 08:09 AM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

I haven't purchased tires nor done a brake job since 1990 on an '87 Bronco II. I have had several vehicles that have had nothing but a single oil change. My current vehicle will be one of those.


From a financial point of view I am way ahead of my friends and neighbors who spend too much time at the local casino. I don't visit the casino.


But I am spending much more than any of them on vehicles. You can manipulate numbers to make anything look good or bad. In the end, just buy what you want as long as you can afford it.


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Old 04-15-2015, 12:14 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

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Originally Posted by bill_de View Post
I haven't purchased tires nor done a brake job since 1990 on an '87 Bronco II. I have had several vehicles that have had nothing but a single oil change. My current vehicle will be one of those.


From a financial point of view I am way ahead of my friends and neighbors who spend too much time at the local casino. I don't visit the casino.


But I am spending much more than any of them on vehicles. You can manipulate numbers to make anything look good or bad. In the end, just buy what you want as long as you can afford it.


---
I agree you can make it look like what you want. But that's why I am asking. Did I miss something. It makes no sense it's effectively cheaper to keep replacing often than to run it into the ground.

I'm really shocked. I really expected to only get like $27K on the trade.
I know used prices are crazy high these days. I'll bet the dealer will probably sell my limited for like $34K or more. What nut would spend $34K for used limited. When you could get a new one (similarly equipped) for a few K more.


Too funny. I just found my old Jeep listed for $34K


http://www.brighamgillmotorcars.com/...2e172f9108.htm
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Old 04-15-2015, 12:36 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

Interesting topic. I would say that a lot of it is going to depend on trade values. If you get a good trade in it may work out that way but if you get a low one then the numbers would be flipped.


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Old 04-15-2015, 01:25 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

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Originally Posted by jbjones85 View Post
Interesting topic. I would say that a lot of it is going to depend on trade values. If you get a good trade in it may work out that way but if you get a low one then the numbers would be flipped.


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I'd think it would require either a very limited production run or special build such that used prices stay really high, or increasing prices on new versions, or the vehicle is of such basic sellability that it is desirable even as a used, or a combination.

One could argue that the numbers are incomplete unless you factor in running one into the ground, where you got lucky and only regular fluid changes and service are your costs, and your licensing fees drop down to well under $100 after several years such that your running costs are pretty much gasoline, parking, plus a tiny bit of service/taxes. And, you never really run it into the ground, but pick up a few K like any well maintained GC will fetch.

But, some folks like buying new vehicles every year or so, some like living with old friends even if they puke/pee on the garage floor every now and then, and some set in the middle of this. Bless all of them--they keep both ends of the market going.
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Old 04-15-2015, 02:28 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

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Originally Posted by lstowell View Post
I'd think it would require either a very limited production run or special build such that used prices stay really high, or increasing prices on new versions, or the vehicle is of such basic sellability that it is desirable even as a used, or a combination.

One could argue that the numbers are incomplete unless you factor in running one into the ground, where you got lucky and only regular fluid changes and service are your costs, and your licensing fees drop down to well under $100 after several years such that your running costs are pretty much gasoline, parking, plus a tiny bit of service/taxes. And, you never really run it into the ground, but pick up a few K like any well maintained GC will fetch.

But, some folks like buying new vehicles every year or so, some like living with old friends even if they puke/pee on the garage floor every now and then, and some set in the middle of this. Bless all of them--they keep both ends of the market going.
Those figures you have there are something to consider I never really looked at it that closely. I typically keep my cars a long time but to me one of the bigger expenses that I hate about new cars in my state is the property tax. The first year of property tax on this GC was nearly $1700 per year, this past year it was over $1500 and the problem is that though it declines a little each year continuing to pay that tax every year is not a fun check to write. Driving a new car every year or so would be another $16000 over 10 years vs driving a junker with very little tax value. And that doesn't even factor in that the price and book value of new cars is going to continue to increase every year with new models. This is of course is all very state dependent.
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Old 04-15-2015, 05:11 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

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Originally Posted by silvermax04 View Post
Those figures you have there are something to consider I never really looked at it that closely. I typically keep my cars a long time but to me one of the bigger expenses that I hate about new cars in my state is the property tax. The first year of property tax on this GC was nearly $1700 per year, this past year it was over $1500 and the problem is that though it declines a little each year continuing to pay that tax every year is not a fun check to write. Driving a new car every year or so would be another $16000 over 10 years vs driving a junker with very little tax value. And that doesn't even factor in that the price and book value of new cars is going to continue to increase every year with new models. This is of course is all very state dependent.
Yes, I totally agree. Excise Tax would be much higher in the long run.

But that is "rightfully" so. You're taxed based on the luxury of a new Vehicle. Insurance would be higher too keeping a newer truck insured.

It would be fairly complicated to run ALL the numbers.

But I bet zero Maintenance and zero need for Extended Warranties would put a heavy dent in increased Tax and Insurance.

I really expected it to be a LOT Cheaper just based on keeping it a LOT longer independent of all other factors. But it just doesn't look that way.

I wouldn't mind paying a bit more in taxes and insurance if I actually had something of better value. But is that the only savings?

I was talking to the Landlord that leased an Overland and the same dealer said his residual value will be very high when it comes to end of lease. Used Jeeps have very good resale value. I think that is the key here and what I mean by sweet spot. I think there is a cliff if you wait too long (i.e. over 3 years). Probably anything well under 3yr/36K miles (say 2/24, which is what I was close to) and attractive for dealer to directly resell is a good candidate.

There was nothing special about this Jeep. So it was not a supply and demand. Other than there is good demand for used Jeeps. At least right now.

I'm gonna see what a trade will be say 2 years from now on the exact same time frame. Either Washington's Birthday or the Friday before the last weekend in that month. If the deal looks the same I might just continue doing it.

For some strange reason my insurance is still cheaper on the 2015 Jeep than my Wifes 2011 VW CC that has a book value of like $12K. So insurance is not an issue. I might just switch my wife to a Cherokee
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Old 04-15-2015, 05:19 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

My insurance dropped a not insignificant amount when I traded my '07 WK for my '14 WK2. I chalked it up to the safety features of the advanced tech group.

It'll be interesting to see what the trade value does later on, two, three, four years down the road. Currently I plan to keep my '14 about seven years; that may change if it works out favorably to trade up sooner. I bet the WK2 values will take a little hit when the next one comes out in a few years.
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Old 04-15-2015, 05:51 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

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Originally Posted by MBDiesel View Post
My insurance dropped a not insignificant amount when I traded my '07 WK for my '14 WK2. I chalked it up to the safety features of the advanced tech group.

It'll be interesting to see what the trade value does later on, two, three, four years down the road. Currently I plan to keep my '14 about seven years; that may change if it works out favorably to trade up sooner. I bet the WK2 values will take a little hit when the next one comes out in a few years.
Definitely helped but I see you likely were under 25 with that rig. And now you are over and 25 is a decent crossover point for insurance rates as well.
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Old 04-15-2015, 06:46 PM
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Quote:
Originally Posted by mswlogo View Post

Yes, I totally agree. Excise Tax would be much higher in the long run.

But that is "rightfully" so. You're taxed based on the luxury of a new Vehicle. Insurance would be higher too keeping a newer truck insured.

It would be fairly complicated to run ALL the numbers.

But I bet zero Maintenance and zero need for Extended Warranties would put a heavy dent in increased Tax and Insurance.

I really expected it to be a LOT Cheaper just based on keeping it a LOT longer independent of all other factors. But it just doesn't look that way.

I wouldn't mind paying a bit more in taxes and insurance if I actually had something of better value. But is that the only savings?

I was talking to the Landlord that leased an Overland and the same dealer said his residual value will be very high when it comes to end of lease. Used Jeeps have very good resale value. I think that is the key here and what I mean by sweet spot. I think there is a cliff if you wait too long (i.e. over 3 years). Probably anything well under 3yr/36K miles (say 2/24, which is what I was close to) and attractive for dealer to directly resell is a good candidate.

There was nothing special about this Jeep. So it was not a supply and demand. Other than there is good demand for used Jeeps. At least right now.

I'm gonna see what a trade will be say 2 years from now on the exact same time frame. Either Washington's Birthday or the Friday before the last weekend in that month. If the deal looks the same I might just continue doing it.

For some strange reason my insurance is still cheaper on the 2015 Jeep than my Wifes 2011 VW CC that has a book value of like $12K. So insurance is not an issue. I might just switch my wife to a Cherokee
Yes i agree you make good points and not all states have property tax. My friends 30 miles down the road in another state pay no annual car tax which furthers the point you make.

These jeeps do seem to hold there value fairly well. Something else i found funny well not really funny but the state assesed the value of the jeep after the first year of my ownership higher than what i had paid for it a year ago lol.
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Old 04-15-2015, 07:18 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

This needs to be calculated on a case by case basis. But just as it is obvious that the cost is not linear.
You loose most of your depreciation on the day you take the new car from the lot.
Then you have a sweet ownership spot before major maintenance or breakage kicks in.

I buy my cars and trade them in around every 2 to 3 years. I think this is the sweet spot for American cars.
You don't pay any MTC and there is something exciting that was added to your car that makes the new one nicer.
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Old 04-15-2015, 10:58 PM
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Re: Lease vs Run into the Ground vs Replace every 1.5 years

Quote:
Originally Posted by MBDiesel View Post
My insurance dropped a not insignificant amount when I traded my '07 WK for my '14 WK2. I chalked it up to the safety features of the advanced tech group.

It'll be interesting to see what the trade value does later on, two, three, four years down the road. Currently I plan to keep my '14 about seven years; that may change if it works out favorably to trade up sooner. I bet the WK2 values will take a little hit when the next one comes out in a few years.
Yes, new models I'm sure put some bends in the curve.

I was thinking of using Kelly Blue book and plot out a curve on resale values over the years with progressive miles at the rate I drive on a Jeep GC and maybe a VW CC and compare them.
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