I'm a car salesmen, Go ahead and ask me anything

[yads]

Originally Posted by Peanut

I have a question. We brought the ML in for service today and they told us at our mileage they recommend changing out the spark plugs and transmission fluid (all for the low low price of $700). We said no thanks.

When the lease is up in a year and we go to return the car, are we going to be forced to pay for these maintenance items?

Does your contract say anything about what happens at the end of the lease?

[TimSJ]

Originally Posted by worth

Tim, where can I get the best deal on a plaid jacket with leather elbow patches?

I could sell you one of mine.

[You Need a Thneed]

Originally Posted by 3 Justin 3

He asked about warranty I said "If buying Japanese don't bother". Why buy warranty on something that won't break, or extended warranty. Maybe the extra comma through you off? I didn't mean don't buy Japanese, I mean don't buy extended warranty on them.

Exactly, that's what I assumed you intended to write. The problem is a spelling error that changes the entire meaning of the sentence.

[Peanut]

Originally Posted by TimSJ

What year is it? and how many km's

2005. I think it just hit 90,000kms.

We leased it at the end of 2007, I think it had about 70,000kms on it at the time. Lease is up end of 2010, but the extended warranty runs out mid-2010. Based on previous history with the vehicle, I think we might trade it in when the warranty expires and just pay out the remaining 6 months of payments.

[Peanut]

Originally Posted by yads

Does your contract say anything about what happens at the end of the lease?

Mmm... probably? But we've moved since getting the vehicle and digging up the contract from the abyss of boxes in my basement will probably be annoying. Just wondering in general if "recommended maintenance" is something people have to pay for at the end of a lease.

[TimSJ]

Peanut, i assume the lease is with MB financial

If so as long as the service indicator is not showing on the dash you will not be charged anything. As for the plugs i don't think they need replacing until 160k.. It is expensive though as there are i think that engine had 2 plugs per cylinder and they are a pain to chnage.

Tranny fluid is reccommended but i don't think you will have any issues if you don't do it.

[DrPepper]

Whats better? financing a car or buying it all in full?

[DementedReality]

Originally Posted by DrPepper

Whats better? financing a car or buying it all in full?

well it will depend on the finance terms ... at a 10% interest rate, you should buy it ... at a 0% interest rate you should finance ... everything being as usual, leasing is the best in my opinion.

proof? American car companies no longer offer leasing as an option. if it was so BAD for the consumer, they wouldnt have taken it off the "menu"... clearly they were getting killed on leasing, which must mean it was GREAT for consumers.

bottom line? i prefer to pay 55% of the MSRP and in 1/4 increments.

[Sliver]

Originally Posted by DementedReality

well it will depend on the finance terms ... at a 10% interest rate, you should buy it ... at a 0% interest rate you should finance ... everything being as usual, leasing is the best in my opinion.

proof? American car companies no longer offer leasing as an option. if it was so BAD for the consumer, they wouldnt have taken it off the "menu"... clearly they were getting killed on leasing, which must mean it was GREAT for consumers.

bottom line? i prefer to pay 55% of the MSRP and in 1/4 increments.

To me leasing is just a way for people to drive cars they can't afford.

[DementedReality]

Originally Posted by Sliver

To me leasing is just a way for people to drive cars they can't afford.

can you back this statement up?

my personal experiance is not the case, my lease costs me $300 per month and to buy would have cost me $550 for the same 48 month period.

i prefer to not own a car after 4 years because i dont like unexpected repairs an a 4 year old car is ripe of them. i prefer to spend as little as i can on a car, i dont like seeing my $$ tied up in metal and bolts in my driveway and becoming worth less and less each month.

my goal is to be as upside down as possible in my car, but that doesnt mean i drive a car i cant afford, just that i want the bank to subsidize it as much as possible.


but thats me.

[Winsor_Pilates]

Originally Posted by DementedReality

can you back this statement up?

my personal experiance is not the case, my lease costs me $300 per month and to buy would have cost me $550 for the same 48 month period.

i prefer to not own a car after 4 years because i dont like unexpected repairs an a 4 year old car is ripe of them. i prefer to spend as little as i can on a car, i dont like seeing my $$ tied up in metal and bolts in my driveway and becoming worth less and less each month.

my goal is to be as upside down as possible in my car, but that doesnt mean i drive a car i cant afford, just that i want the bank to subsidize it as much as possible.


but thats me.

That's you, and that makes sense,
But a lot of leasers go out and upgrade from the car that would have cost $550/mth to own, and get a car that's $550/mth to lease. This completely eliminates the financial benefit leasing might have gave them, but gets them a nicer car they couldn't otherwise afford.

[DementedReality]

Originally Posted by Winsor_Pilates

That's you, and that makes sense,
But a lot of leasers go out and upgrade from the car that would have cost $550/mth to own, and get a car that's $550/mth to lease. This completely eliminates the financial benefit leasing might have gave them, but gets them a nicer car they couldn't otherwise afford.

ok, on that i agree ... but its not quite the same thing as i was thinking ..

i was thinking that someone had nailed down their choice of car and now needed to decide how to pay for it ...

[tigger777]

couldn't agree with you more!!!!

Originally Posted by Winsor_Pilates

That's you, and that makes sense,
But a lot of leasers go out and upgrade from the car that would have cost $550/mth to own, and get a car that's $550/mth to lease. This completely eliminates the financial benefit leasing might have gave them, but gets them a nicer car they couldn't otherwise afford.

[Sliver]

Leasing is just a glorified way to rent a car. That's fine I you like to do it, but from a purely financial perspective it is a poor decision.

Also, four year old cars typically don't require an onerous amount of maintenance and it's certainly less than the $300/month you're going to be paying on your plan of never-ending lease payments. I prefer to have my money going towards things that will make my life better/more financially secure than to a rental fee of a car in my driveway that I can't afford to buy.

[DementedReality]

Originally Posted by Sliver

Leasing is just a glorified way to rent a car. That's fine I you like to do it, but from a purely financial perspective it is a poor decision.

Also, four year old cars typically don't require an onerous amount of maintenance and it's certainly less than the $300/month you're going to be paying on your plan of never-ending lease payments. I prefer to have my money going towards things that will make my life better/more financially secure than to a rental fee of a car in my driveway that I can't afford to buy.

rent things that depreciate
own things that appreciate

do the math!

[Sliver]

Originally Posted by DementedReality

rent things that depreciate
own things that appreciate

do the math!

lol I really hope for your sake you're not basing all of your financial decisions on that flawed rulenof thumb.

[You Need a Thneed]

If you are going to buy a car to drive until the end of it's life, buying it outright is always going to be the best decision.

[DementedReality]

Originally Posted by Sliver

lol I really hope for your sake you're not basing all of your financial decisions on that flawed rulenof thumb.

show me how its flawed?

[Sliver]

Please forgive this copy paste but I'm on an iPhone with only 3G Internet (on vacation in bc). Anyway, though the following isn't in my own words it does reflect the reasons I believe a lease is a poor financial decision.

Dear Gary,
Is it better financially to buy or lease an automobile since it's a depreciating asset?
Mark

Like most people, Mark is probably attracted to the lower monthly payments of an auto lease. But, even with the lower payments it's usually better to buy. There are a couple of reasons that's true. You don't build up equity in a leased auto. You'll also be prone to trade cars more often and you give up flexibility if you need to get rid of the car quickly.

Mark's question points to the main reason why leasing isn't the best deal. A car is a depreciating asset. And a car depreciates more quickly when it's newer. A $15,000 car will lose approximately 25% of it's value in the first year. From year two through year six the car will lose between 6 and 9% each year with the bigger loses in the earlier years.

Once you lease an auto you're much more likely to drive a new car every few years. And the first miles are the most expensive that you can put on a car. Your cost of ownership drops dramatically if you keep a car 6 or 7 years.

For instance, if you drive 12,000 miles per year, the depreciation alone during the first year on a $15,000 car will cost you 31 cents per mile. By the time you get to the sixth year those miles only cost 7 cents each. Clearly those first couple of years are very expensive ones.

Let's take a look at a fairly typical dealer ad. It offers a popular new model for $13,998 with 1.9% financing or a four year lease with $1,000 down and monthly payments of $249.

If Mark takes the lease deal he'll pay a total of $12,952 over the 48 month period including his $1,000 down payment. So he's pretty much paid for the entire car. But, when the lease ends he won't own the car. He'll be required to turn it in. And, if he's put on more mileage than the lease allows or the car shows any unusual signs of wear, Mark will face extra charges.

Suppose he chooses to buy the car instead. He'll spend $13,508 over a 48 month period. That assumes a $1,000 down payment and the 1.9% financing. His monthly payment would be $281. Not much more than the lease.

Let's suppose that Mark's credit isn't good enough to qualify for the 1.9% financing. We'll assume that he pays today's average rate of 8.4%. That would bump his monthly payment to $319. That's $70 more each month than the lease, but he'll be building equity in the car.

The big advantage to buying comes at the end of the 4 years. He'll own the car outright. It will be worth approximately half of it's original $13,998 purchase price. So he'll end up with an asset of about $7,000 that he can continue to drive.

If he had leased there would be few choices. He could buy his old car from the leasing company. That would mean adding a couple more years of payments. He could be paying 6 or 7 years on the same $14,000 car! Or he could turn the car in and go find something else. Probably another lease. And he'd join the ranks of those who will always be driving new, but expensive cars.

Maybe Mark is concerned with the reliability of a four year old car. Most cars can give more than four years of dependable service. But let's buy an extended warrantee that would cover the car until it's six years old for an additional $850. So instead of signing a new lease at $250 per month, he's spending about $35 a month for the extended warrantee. In the fifth and six year he'll have saved $5,100 on lease fees plus he'll have his old car to use as a down payment for a newer car.

Besides the ownership issue, a lease could set Mark up for a nasty surprise. Sure, he expects to drive the car for four years. But everything doesn't always go according to plan. A lost job or sick child could make that car payment too big to handle. If he should need to get out of the deal early, it's harder to terminate a lease. Most carry a hefty penalty if you want to turn the car in early.

If you've purchased the car it will still be costly to sell it after a year or two. But you will have the opportunity to offer it to whoever is willing to give you the most money. Unfortunately with a lease you don't have that option.

OK, one final argument. What happens if Mark can only afford the $249 per month. Maybe $319 is too much for his budget. The correct answer for Mark still isn't to lease. It's to find a car that he can buy that fits within his budget. It might be smaller. Maybe used. But at the end of four years he'll own a car instead of walking away from the dealership empty handed.

From this site (again best I could pull up with my limitations today )

www.stretcher.com/stories/01/010611e.cfm

[blankall]

Originally Posted by Sliver

Please forgive this copy paste but I'm on an iPhone with only 3G Internet (on vacation in bc). Anyway, though the following isn't in my own words it does reflect the reasons I believe a lease is a poor financial decision.

Dear Gary,
Is it better financially to buy or lease an automobile since it's a depreciating asset?
Mark

Like most people, Mark is probably attracted to the lower monthly payments of an auto lease. But, even with the lower payments it's usually better to buy. There are a couple of reasons that's true. You don't build up equity in a leased auto. You'll also be prone to trade cars more often and you give up flexibility if you need to get rid of the car quickly.

Mark's question points to the main reason why leasing isn't the best deal. A car is a depreciating asset. And a car depreciates more quickly when it's newer. A $15,000 car will lose approximately 25% of it's value in the first year. From year two through year six the car will lose between 6 and 9% each year with the bigger loses in the earlier years.

Once you lease an auto you're much more likely to drive a new car every few years. And the first miles are the most expensive that you can put on a car. Your cost of ownership drops dramatically if you keep a car 6 or 7 years.

For instance, if you drive 12,000 miles per year, the depreciation alone during the first year on a $15,000 car will cost you 31 cents per mile. By the time you get to the sixth year those miles only cost 7 cents each. Clearly those first couple of years are very expensive ones.

Let's take a look at a fairly typical dealer ad. It offers a popular new model for $13,998 with 1.9% financing or a four year lease with $1,000 down and monthly payments of $249.

If Mark takes the lease deal he'll pay a total of $12,952 over the 48 month period including his $1,000 down payment. So he's pretty much paid for the entire car. But, when the lease ends he won't own the car. He'll be required to turn it in. And, if he's put on more mileage than the lease allows or the car shows any unusual signs of wear, Mark will face extra charges.

Suppose he chooses to buy the car instead. He'll spend $13,508 over a 48 month period. That assumes a $1,000 down payment and the 1.9% financing. His monthly payment would be $281. Not much more than the lease.

Let's suppose that Mark's credit isn't good enough to qualify for the 1.9% financing. We'll assume that he pays today's average rate of 8.4%. That would bump his monthly payment to $319. That's $70 more each month than the lease, but he'll be building equity in the car.

The big advantage to buying comes at the end of the 4 years. He'll own the car outright. It will be worth approximately half of it's original $13,998 purchase price. So he'll end up with an asset of about $7,000 that he can continue to drive.

If he had leased there would be few choices. He could buy his old car from the leasing company. That would mean adding a couple more years of payments. He could be paying 6 or 7 years on the same $14,000 car! Or he could turn the car in and go find something else. Probably another lease. And he'd join the ranks of those who will always be driving new, but expensive cars.

Maybe Mark is concerned with the reliability of a four year old car. Most cars can give more than four years of dependable service. But let's buy an extended warrantee that would cover the car until it's six years old for an additional $850. So instead of signing a new lease at $250 per month, he's spending about $35 a month for the extended warrantee. In the fifth and six year he'll have saved $5,100 on lease fees plus he'll have his old car to use as a down payment for a newer car.

Besides the ownership issue, a lease could set Mark up for a nasty surprise. Sure, he expects to drive the car for four years. But everything doesn't always go according to plan. A lost job or sick child could make that car payment too big to handle. If he should need to get out of the deal early, it's harder to terminate a lease. Most carry a hefty penalty if you want to turn the car in early.

If you've purchased the car it will still be costly to sell it after a year or two. But you will have the opportunity to offer it to whoever is willing to give you the most money. Unfortunately with a lease you don't have that option.

OK, one final argument. What happens if Mark can only afford the $249 per month. Maybe $319 is too much for his budget. The correct answer for Mark still isn't to lease. It's to find a car that he can buy that fits within his budget. It might be smaller. Maybe used. But at the end of four years he'll own a car instead of walking away from the dealership empty handed.

From this site (again best I could pull up with my limitations today )

www.stretcher.com/stories/01/010611e.cfm

This argument is a little bit flawed in that the difference between lease payments and rental payments are substantially more than in the example provided.

Usually residuals on a 14k car are at least 7k. So you are really only paying off the 7k over 4 years.

The financing forces you to pay the whole 14k. Which either means almost doubling your payments or increasing the length of the term.

You should also take into account when you buy a car you have to pay taxes on the entire capital of the car upfront. On a lease you only pay on the individual payment, and you do not pay on the residual at all.

The one solid piece of this argument is that you pay the most depreciation in the first year. So assuming you are leasing a new car every 4 years, you are paying for the first year depreciation every 4 years.

This is just the cost of driving new cars. If you really wanted to avoid this depreciation you would just buy used. If you're in a situation where your earning capacity is likely to increase, leasing can make a lot more sense.