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Why do people waste so much money on cars?
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2013 Jan 25, 12:10am 56,131 views 312 comments
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zzyzzx
2013 Jan 25, 10:04am
From what I am beginning to understand, Thedaytoday would want us to read this to further our financial education:
http://www.edmunds.com/car-leasing/3-ways-to-turn-your-lease-into-cash.html
Leverage the Equity in Your Leased Car
Rising used-car prices mean that dealers will sometimes buy out a consumer's lease and pay him for the equity in the car.
As an example of what is at stake when a leased car has equity, Weintraub gives the example of a client who had a Mercedes-Benz GL450 that was near the end of its lease. The car had minor body damage, and the client was going to pay $1,800 in excess mileages fees, as well as a $400 disposition fee, charged at the end of some leases. By arranging to sell the car to a dealer, the client incurred none of those expenses and actually pocketed $3,200 in equity. The client was "in shock" at the windfall, Weintraub says.
zzyzzx
2013 Jan 25, 10:15am
still don't understand how on earth leasing is better than buying.
Your 7% figure is high. Also, I would assume higher insurance costs would be incurred with a lease (full coverage on a new car is going to cost way more than liability only insurance in an old car). 6K maintenance on a car over a period of 20 years sounds low to me. Assuming a low fixed lease rate over 20 years seems a bit optimistic as well.
PockyClipsNow
2013 Jan 25, 10:17am
Stock market dont return 7% anymore thats pre 911, now were in zirp. Its sideways.
Thedaytoday
2013 Jan 25, 10:20am
I still don't understand how on earth leasing is better than buying.
That's because you have never leased a vehicle. You also would not lease the same car for 20 Years!!!! Obvious to most people.
It's about down payment, residual and new purchase price. If you see the upside on all 3 expect to make out like bandit like me.
Your examples make no sense, you analogy comparing it to a stock market investment, MAKES NO SENSE.
So to recap A) Down Payment B) Purchase Price C) Residual
For the record a Nissan Maxima would not have a high enough residual after 36 mos to do this.
In your example where do you TRADE!!!! for a new car? Where is the residual equity?
EXAMPLE:
person 1 : leases nissan maxima 3.5 every three years at $280/per month. He does this for 20 years.
Person 2 : Buys nissan maxima 3.5 at 30K and keeps it for 20 years
costs after 20 years :
person 1 = 20 (years) * 12 ( months) * 280 = 67.2 K
person 2 = 30 K + maintenance = 30K + 6K = 36 K
Incorrect. Math is not your strong point.
Thedaytoday
2013 Jan 25, 10:28am
ets assume you have 1.5 K residual after 3 years,.
No, lets not. That's shit. $1.5k residual is a joke.
I avg. about $6k every 36 Mos.
Thedaytoday
2013 Jan 25, 10:29am
There is a reason you are not showing YOUR MATH because its obviously flawed. i think your drank the sales man's "lease it" kool aid.
are you serious, read the fucking thread fukwit!
Thedaytoday
2013 Jan 25, 10:30am
There is a reason you are not showing YOUR MATH because its obviously flawed. i think your drank the sales man's "lease it" kool aid.
You have never leased and it shows. I have leased over 20 company cars at a time for over a decade .
shut the fuck up.
Thedaytoday
2013 Jan 25, 10:30am
Today wants us to believe he can find new cars from the dealer, drive it for three years and return it close to the original price. Good luck believing that.
Yup. I am that good and you need the right car.
I have used this method in my everyday life with nearly everything I have.
Buy low , Sell High.
Thedaytoday
2013 Jan 25, 10:33am
No, lets not. That's shit. $1.5k residual is a joke.
I avg. about $6k every 36 Mos.
ok fine..thats $166 per month. substract that from your monthly payments. The difference is what you are paying for 20 years.
???????? I am not paying anything for 20 years.
Your math is shit.
My depreciation is muted, limited and restricted. Again buy low sell high.
You cannot keep the same car for 20 years it will depreciate.
The trick as I keep telling you is zero down, zero interest, buy low, sell high. repeat.with the highest residual car in it's class.
Thedaytoday
2013 Jan 25, 10:35am
its simple math
Not for you.
You are still using a 20 year analogy, WHY?
WTF is $166?
Look up the thread , I have detailed the costs and residuals.
Thedaytoday
2013 Jan 25, 10:37am
???????? I am not paying anything for 20 years.
Your math is shit.
whats your monthly payment and total cost of the car if i were to buy full down ?
seriously i am curious ?
Look up the thread.
Thedaytoday
2013 Jan 25, 10:39am
$166 = Residual value / 36 months = 6000 / 36 = $ 166
so effectively you are only paying = $monthly lease amount - $166
You also forget a percentage is deductible business taxes.
My residual goes up again. You also get 0.55c per mile.
Thedaytoday
2013 Jan 25, 10:42am
you need the right car.
For example?
One with an industry leading residual, which I have pointed out numerous times is a Subaru. Lowest finance costs, low to zero down payment and highest trade in value.
Leased $23k 36 mos traded value $21k
by the 3rd time around I got $2k off the sticker and ended up paying about $9k for a $23k car (LEASED)
12k or 14,000 (36mos) x 0.55c business miles tax deductible.
Thedaytoday
2013 Jan 25, 10:45am
compare that to full payment $Y distributed over 20 years.
whats so hard about the math.
over 20yrs the same car devalues to ZERO
while the value in a short term leased vehicle is retained.
you also get to drive a new car every 36 mos and you are not stuck with a pile of shit in 20 years.
ASK YOUR WIVES WHICH THEY PREFER? 20 yr old car worth $2500 or a brand new car!
Peter P
2013 Jan 25, 10:48am
I have been eyeing an Outback. Perhaps I should start running the numbers.
Car GPS is useful though. It is not as safe to rely on the smartphone while driving.
zzyzzx
2013 Jan 25, 10:48am
Personally I'd never buy a Subaru. You are still wasting a lot of money on gas for the 4WD gas mileage penalty. Plus Subaru still makes cars where the engine explodes if the timing belt breaks (almost nobody else does that). That last part probably is irrelevant if you only keep it 3 years though.
Thedaytoday is right about the residual value on these things, people wildly overpay for used Subarus.
Thedaytoday
2013 Jan 25, 10:50am
Thedaytoday is right about the residual value on these things, people wildly overpay for used Subarus.
Go fuck yourself you racist bigot. Who the fuck asked you?
Piss off.
Thedaytoday
2013 Jan 25, 10:50am
I have been eyeing an Outback. Perhaps I should start running the numbers.
Car GPS is useful though. It is not as safe to rely on the smartphone while driving.
Forget the extras if you want residual. Do your homework first.
The 2014 Outback has been refreshed as well.
Subarus are all AWD. Compare to Toyota,Ford, Mitsubishi, Honda 4x4 or AWD is $10k extra.
it seems many are terribly concerned about having whatever happens to be the newest model.
they are not from the SFBA... more likely from Boston...
Charlie (from Boston) dont Surf...
A real Californian would rather drive a 30 year old slug. They are much more fun
to own and drive...
Peter P
2013 Jan 25, 10:51am
Personally I'd never buy a Subaru. You are still wasting a lot of money on gas for the 4WD gas mileage penalty. Plus Subaru still makes cars where the engine explodes if the timing belt breaks (almost nobody else does that). That last part probably is irrelevant if you only keep it 3 years though.
Thedaytoday is right about the residual value on these things, people wildly overpay for used Subarus.
Can you elaborate on the engine issue?
Peter P
2013 Jan 25, 10:53am
I have been eyeing an Outback. Perhaps I should start running the numbers.
Car GPS is useful though. It is not as safe to rely on the smartphone while driving.
Forget the extras if you want residual. Do your homework first.
The 2014 Outback has been refreshed as well.
Yeah, even going up the trim level is better than adding options.
Thedaytoday
2013 Jan 25, 10:53am
I can tell you that not one of the 20 leased Subarus I have has had any mechanical, engine issues ever! They run like new everyday.
Thedaytoday
2013 Jan 25, 10:55am
Yeah, even going up the trim level is better than adding options.
If you want to do what I am you will need to do a lot of homework. You may find the car you want but will not have the residual you want!
Buy a car with RESIDUAL IN MIND ONLY!!!!
Ask the dealer what he would trade for, ask him which lease on book has the best residual, they will tell you, the finance companies all know ahead of time.
Now comes the hardest part, not trashing it over 36 mos.!!! Buy car seat coves and wash it every Saturday!
Thedaytoday
2013 Jan 25, 10:58am
Plus Subaru still makes cars where the engine explodes
Shut the fuck up moron.
If your engine blows up under lease and it's a design fault you get a new fucking car. I have not heard one story of this every happening, LINK PLEASE BIGOT?
Thedaytoday
2013 Jan 25, 11:01am
Thedaytoday is right about the residual value on these things, people wildly overpay for used Subarus.
You know nothing about cars. There is actually a shortage! Trade in's are fought over.
So the next time you type something you know nothing about, think twice, fucking repuke.
Thedaytoday
2013 Jan 25, 11:02am
If you keep repeating this. you will be paying $305 per month for 20 years. of course you are driving new cars.
Stop using 20yrs as a multiplier.
Thedaytoday
2013 Jan 25, 11:03am
lets please ignore the tax deduction part for a while because its making things complicated and not everybody runs a bussiness.
everyone should, especially when leasing!
Individuals are slaves under US tax law, US Businessmen get 1000's more deductions. It cost $80 to form a DBA.
Thedaytoday
2013 Jan 25, 11:05am
OK now,
At the end of the year you paid = monthly lease amount * 36 + 23K - 21 K = 9K + 2K = 11K
$305 per month.
If you keep repeating this. you will be paying $305 per month for 20 years. of course you are driving new cars.
compare that to 23 K spread over 20 years = $93 / month.
payment is $250 pm MAX! first off.
cost 23k
$250 pm
trade in value $21k
repeat and get a better deal.
stop using a 20yr multiplier, it's not the same car.
Thedaytoday
2013 Jan 25, 11:06am
ok lets use 7 years then :
Nope, 36 Mos at a time.
I am also liquid the entire time of the lease.
Hence why business lease everything unless a purchase can be written of as a capital write down.
Thedaytoday
2013 Jan 25, 11:10am
Car A
Cost $23k
$250 pm
Sold $21k
Residual $6k
Car B
Cost $23 - 6K residual
250pm
Sold $21k
Residual $12k
Car C
Cost $21k - 12k residual
250pm
Sold ?
residual ? =
these are rounded down estimates
A $23k toyota,honda,ford is way more than $250 per month with zero down ask them
you will also not get AWD at 24MPG
Thedaytoday
2013 Jan 25, 11:14am
Paying 11k for using a new car worth 23K for three years is lot of money.
come on now!!!!!!!!!! I keep the 11k!!!!! It's mine!!!!!! Use your brain. on top of the that government pays me to drive it.
You are losing 5k, I am losing ZERO!!!!
I'm being paid 0.55c per mile to drive it and deduct a lot of the lease payment too, all go in my pocket.
Thedaytoday
2013 Jan 25, 11:16am
so who paid the 9K + 2K ?? did you not pay it ?
If I paid it, I KEEP IT!!!
I also remain liquid!
Thedaytoday
2013 Jan 25, 11:16am
so who paid the 9K + 2K ?? did you not pay it ?
If I paid it, I KEEP IT!!!
I am also not depreciating as fast as you!
Thedaytoday
2013 Jan 25, 11:18am
so who paid the 9K + 2K ?? did you not pay it ?
did you not pay 250* 36 = 9K ?
and I still have that money in equity in the vehicle
Thedaytoday
2013 Jan 25, 11:22am
DUDE how are you keeping it ? after three years, you have paid 11K to the dealer and now you have a new car with a new lease !!
The lease payments go towards the cost of the vehicle reducing the principle balance ok.
You trade your current vehicle which you paid for 36 mos for a new one.
The dealer gives you 21k you owe $14k to chase. GET IT?
You then put the residual into the new trade
Thedaytoday
2013 Jan 25, 11:23am
The dealer gives you 21k for your trade you owe $14k to chase. GET IT?
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As someone who lives in the Bay Area, its clear that many people here just love their Bimmers, sports cars, and large luxury SUVs. What's more, it seems many are terribly concerned about having whatever happens to be the newest model.
On each and every day of the week I am surrounded on the freeways by cars that cost 60k,80k, or even 100k+. So much so that many might as well be Camrys and Accords. Oh- another 7 series? Yawn. There's another 50 I'll see on the way home. No, granted these are unquestionably nice cars. But then again, to me its a big waste of money.
I drive two beater Toyotas, one that I've actually had since high school. Both went past 250,000 miles years ago. Neither have any problems. I've always taken good care of them give them a nice wax job every few months, change the oil every 3,000 miles and keep them looking nice. Doesn't matter to me that they're almost 20 years old now. They still run, drive, and look like perfectly fine cars. I make a pretty good income and could quite easily go purchase the luxury car of my choice if I so chose. Its not that I can't afford a 90k car, but more that I'd rather not spend almost 100k on something that's going to depreciate massively as it ages.
If you think about it from a purely financial perspective, let's say that the average luxury car buyer buys the latest-greatest car every 6-7 years. Let's say the average price is around 60k. That equals close to 120k every decade or several million over the course of a lifetime. Had that money been invested in a 401k or stocks, that same person could have literally retired decades sooner.
Lastly, if your car goes 0-60 in 4 seconds and has a top speed of 200MPH, well who cares? The US has speed limits and thus you can't actually really use the car for what it was designed to do. Sort of like buying a blender and only ever being able to use the slowest setting.