patrick.net

chanakya4773 says

sorry , your cost = (next car cost - equity )+ 36* monthly payments you paid

correct.

but the next 36 mos payment are also principle reduction again adding to the value of my equity which after another 36 leaves me with owing ZERO on my fourth lease at which point the car is mine, and I start again.

So I drive a brand new maintenance free car for 12 years and retained virtually all the value of my investment

So why put down $23k cash, you lose liquidity and the answer is after 12 years your car is old. I drive a new one every 3 and maintain light depreciation, infact I profit under US tax laws.

chanakya4773 says

sorry , your cost = (next car cost - equity )+ 36* monthly payments you paid + 2K you paid for the difference (23K - 21K)

I already included the 2k by rounding down the equity from $9k to $6k

ha ha ha! I win!

edvard2 says

ha ha ha! I win!

You lost big time. You own two beaters ,25 year old cars that will be crushed sooner or later.

Leaving you with the option to drop another $20k down.

You lose ,you drive a 25 year old car! By choice!

You also paid a balloon payment of $21k which you could have invested for a net return like me!

You know how much HP you lose over 25 years?

chanakya4773 says

the equity rollover causes too much confusion :-)

Not for me. I have never been happier owning cars.

Buy low, sell high.

chanakya4773 says

OK then you pay 3K over three years.

The loss is deductible , lol

You guys should understand business finance a little better.

chanakya4773 says

the numbers will be around 6K for a 23K car lost in three years.

Nothing is lost.

chanakya4773 says

if you buy full and sell it at 5K lower ..thats deductible too

Depends. It's not a lease. Leasing has different tax rules.

also if your first year loss is $5k your second year could be even more, third year even more. After 20years it's all gone.

mine is the same year over year.

chanakya4773 says

loss = monthly payments * 36 - money that went to principle + money paid for difference during trade-in

the loss is mitigated, the payments go towards principle + there is no money paid by me during the trade in! NONE! The equity reduces the new principle leaving a lower pay off balance on the new lease

SFace says

The guys basic argument is he buys low and sells high.

Like sign a lease for a basic model Suburu outback for 23K

and sells it three years later to the dealer for 21K.

You decide whether that is real or not. End of story.

You can't get an outback for $23k

chanakya4773 says

THE PROBLEM IS WHAT HAPPENS TO ALL THE LEASE PAYMENTS.

As I explained the lease payment pays down the principle value of the lease.

at the end of the lease you have these options.

A) Give the car back, nothing else owed b) finance c) buy it cash d) trade!!

which one makes you money!!!!!!!! D)

chanakya4773 says

enough of this bull shit...looks like you are a subaru car salesman

No. Lol.

I think I have been called everything in this forum.

I am a Business Consultant, Social Media Scientist, Internet Guru and a Futurist.

My name is also not Hussain, LMFAO

SFace says

Like sign a lease for a basic model Suburu outback new for 23K

and sells it three years later to the dealer for 21K. 3 years 9% depreciation. Edmonds estimated 42% for the 2012 Outback. Almost all cars are around 40% -50%.

You decide whether that is real or not. End of story

Not an outback. Your estimates are meaningless. Edmonds is pointless. There is a shortage of new and used Suabrus. Is Edmonds going to tell you that?

Thedaytoday says

dmonds estimated 42% for the 2012 Outback. Almost all cars are around 40% -50%.

LMFAO

It's not an Outback. Those figures are silly.

Have you ever bought and sold cars? You see when I was younger I enjoyed buying and selling sports cars, I would buy them at auction, drive them for 6 months and profit of every single car I bought. I would usually have 20 or around, Porsche's, Ferrari's, Maserati's, Aston Martins the usual ans Roll Royce and a Bentley or two.

I think I may be able to solve this riddle. Thedaytoday is correct, if you lease, SOMETIMES the residual is so low that you can buy the car from the leasing company and sell it retail. The reason is that the residual is usually what the leasing company estimates it will get when they wholesale the car at auction. I have done this a couple of times and made about $2K or so per car.

Where his model fails is the $6K spread. It is rare that the dealer/leasing company will get the residual so wrong that there is a $6K spread. It's more likely the $23K car's residual after 3 years is $12-$14K, not $21K. This is true even if it is a Subaru.

There is one exception...entirely new models. I have a 2011 Hyundai Sonata whose three year lease is over this spring. Been paying $328/month. It is a car whose value has held up likely due to it being a hot car with rave reviews. The car new was $27K, the residual is $15K, but the retail on it now is about $20K. I plan on negotiating the residual rate down (done this before so they dont have to spend money getting rid of the car), and selling it on Craiglist, Cars.com, or somewhere else.

SFace says

There may be a shortage of Subaru's but it is still not selling at 90% after 3 years it came off the lot. I get your strategy, just don't buy the fact it is essentially free.

Your wrong.

Waitingtobuy says

I think I may be able to solve this riddle. Thedaytoday is correct, if you lease, SOMETIMES the residual is so low that you can buy the car from the leasing company and sell it retail.

At the end of every lease you are offered the car for the value of the what is left on the lease. Everyone gets that choice.

I do not do this.

I TRADE!!!

and make more.

Waitingtobuy says

The reason is that the residual is usually what the leasing company estimates it will get when they wholesale the car at auction. I have done this a couple of times and made about $2K or so per car.

Wholesale auction has nothing to do with what I am discussing.
At the end of every car lease you have the option of paying the remainder of the lease to take the car.

Nope. I win because I don't have any car payments. You do. Too bad.

edvard2 says

Nope. I win because I don't have any car payments. You do. Too bad.

or any value in your cars

, too bad

it's like your driving around in two wheel barrows.

Your cars are 25 years old !!! You win nothing.

Your so proud of losing all your money, I'm so happy for you Edvard.

Waitingtobuy says

There is one exception...entirely new models. I have a 2011 Hyundai Sonata whose three year lease is over this spring. Been paying $328/month. It is a car whose value has held up likely due to it being a hot car with rave reviews. The car new was $27K, the residual is $15K, but the retail on it now is about $20K. I plan on negotiating the residual rate down (done this before so they dont have to spend money getting rid of the car), and selling it on Craiglist, Cars.com, or somewhere else.

I only buy BRAND NEW CARS. Is that not obvious by now.

If you listen to me you will do better in the future and find a car with a better ratio of residual . Subaru has the best residual in SUV CLASS!

SFace says

There may be a shortage of Subaru's but it is still not selling at 90% after 3 years it came off the lot. I get your strategy, just don't buy the fact it is essentially free.

Mainly because of the awesome tax tax code

zzyzzx says

I still drive my 1995 Ford Escort that I bought new in October 1995.

The last car I bought 3-4 years ago is a 1999 Oldsmobile that I paid $500 for, and only had 19K miles on it at the time and still is essentially a new car.

Explains everything.

edvard2 says

Why do people waste so much money on cars?

I think we all know why and we all grapple with the issue all the time.

Lust for material things or whatever you want to call it. Don't most of us struggle with this ? "You only live once" - or something to that effect.

On the one hand, my 10 year old honda is fine, the miles aren't that high, no car or lease payment,...it's economical.

On the other hand, I'm so tired of it. I want this feature or that. Or, "I work so hard - I'm ready for a much nicer car,...pamper myself for a few years, ...you only live once."

I understand it, this argument with myself, and understand it must be somewhat universal.

THen there are those with a high enough income, that the extra few hundred a month, really makes it seem like too good a deal to pass up
(that is cars that lease for about 400 - 500/month), not to do it.

(But that's not the 60 to 90K cars you were talking about.)

I'm not in that category, but if I were making say 2 or 3 times what I make as a teacher, I could see that the quality of life benefit, I would get from spending say $500/month on a car might seem very much worth it, regardless of the future value of doing without for the next 20 years.

You're right though.

And I wonder how many of the boomers that are so far from having enough saved for retirement, are living way beyond their means.

marcus says

On the one, hand my 10 year old honda is fine, the miles aren't that high, no car or lease payment,...it's economical.

On the other hand, I'm so tired of it. I want this feature or that. Or, "I work so hard - I'm ready for a much nicer car,...pamper myself for a few years, ...you only live once."

bet you would love bluetooth hands free!

Thedaytoday says

Waitingtobuy says

There is one exception...entirely new models. I have a 2011 Hyundai Sonata whose three year lease is over this spring. Been paying $328/month. It is a car whose value has held up likely due to it being a hot car with rave reviews. The car new was $27K, the residual is $15K, but the retail on it now is about $20K. I plan on negotiating the residual rate down (done this before so they dont have to spend money getting rid of the car), and selling it on Craiglist, Cars.com, or somewhere else.

I only buy BRAND NEW CARS. Is that not obvious by now.

If you listen to me you will do better in the future and find a car with a better ratio of residual . Subaru has the best residual in SUV CLASS!

I know you buy new cars. Sure, you could hand it back to the dealer, but they have to do something with it for them to hand you a check $6K. I've never seen a dealership give anyone the retail price for a car. After all, it is not their car, but the leasing company's. And again, it is highly unlikely the car, no matter what the make, has depreciated only $2K in $36 months. The car depreciates 10% the minute to drive it off the lot.

Either all of us, including me who has been leasing cars for 20 years, don't get this, or it is way above our heads and you haven't explained it well enough. I don't get how you get a check for $6K.

marcus says

On the one, hand my 10 year old honda is fine, the miles aren't that high, no car or lease payment,...it's economical.

How much do you think you car cost you in maintenance and devaluation per month over 10 years? would you say about $250 per month?

I like my completely depreciated reliable toyotas.

Since they are old and depreciated, there is no need for collision, so insurance is low. Since they are old and depreciated, California annual registration fee is (relatively, - this is California) is low. Since they are old and depreciated, there is no interest payment.

Those are my fixed costs and they are all low. Yes I have had some repair costs but they are manageable.

Thedaytoday says

every penny I put into the lease I GET BACK!

Please explain this. I don't understand it. If it's possible I would like to do it.

chanakya4773 says

You guys are ignoring the payments that you have already made to the car company.

You don't make any payments to the car company. It's is a lease, financed by the bank. The bank "OWNS" the car until you payoff the remaining balance. The payments like any other loan goes towards principle and interest (zero in my case)

swebb says

Thedaytoday says

every penny I put into the lease I GET BACK!

Please explain this. I don't understand it. If it's possible I would like to do it.

Do you have a business?

EBGuy says

think we need to take a step back and look at where Thedaytoday is coming from. Early on he said:

For every penny I invest the government deducts it off my tax bill

Do you use this car for business purposes?

I can't believe that you guys got in such a long argument with someone who doesn't even know what a tax deduction is.

He or she maybe needs to do some really stupid rationalization about what he spends on his car. Appropo for this thread.

Either that or he is just trolling you.

chanakya4773 says

Ok good. so you are saying the car company then says that the residual value of your car is 90% of the original value after 3 years ?

When you trade into a brand new car and a new lease with a dealer who has maintained and knows the vehicle your trading, it gives you leverage on what you can get for your car.

I went to multiple dealers before going to my own dealer and got written quotes to show them the quotes ranged from 17-20k

I got $21k due to the following

A) The dealer is making money selling you the new car(if you time this correctly you will do it when they want to hit quota or have shortage of used inventory) YOU NEED A MAIN DEALER!

and

B) The dealer makes money on the lease

and

C) The dealer profits from selling your trade

and

D) Timed correctly dealers are offered rebates from manufacturers I was offered $500 to get into the same vehicle.

marcus says

For every penny I invest the government deducts it off my tax bill

I was generalizing, not 100% , but enough combined a lease and with 0.55 per mile for business use to make it cost efficient

Thedaytoday says

Make sure you pick a vehicle with a very high retained value , forget the additional extras, leather seats and you will be driving a FREE CAR NOT TOO LONG!

Three questions if I may:

1) Does an automatic transmission count as an extra here? From what I can tell the Forrester comes standard with a manual.

2) I gather this model only works if you have a business for which you can claim a leased car as a company car but not if you are a standard employee or the car is to be used as a family vehicle, correct?

3) You mention you got a great deal due to Fukashima - how difficult is to to negotiate a similar deal without the assistance of a once-in-a-century disaster?

You guys are ignoring the payments that you have already made to the car company.
if you signed a new car lease for a 20K car and then paid 5K in payments over three years, as long as the company offers the same car to you for more than 15K , the car company is making profit.
if its offers the car to you for 17K then the car company makes 2K profit.
typically people make so much payment within the three years that the car company always makes good money. thats why they "encourage" people to lease vs buy.

in your case, your car was 27K, you probably made 12k in lease payments. As long the car company can sell you the same car to you for for more than 27K - 12k = 15K , they make money.

this is the only case where you get the car for free only if
(new car value that you bought for - residual car value) > total paid in lease payments

in your case,

27K - 15K > your total paid in lease payments

I am curious how this math looks in your case.

_________________________________________________________

Your math is correct and I'm not ignoring my payments. I paid $300/month and the rest was sales tax. If with sales tax I paid $328/month on the lease, times 36 months, I paid $11808.

If the residual is $15K, and I sell it for $20K, then my costs are $328-$138 ($5K/36 months) or $190/month.

If I bought the $27K car, put $1000 down, and I financed it over 60 months at 2.6%, then I would have payments of about $500/month for 36 months or $18K. I would also have paid tax of $2430. Total of $21,430. (anyone know if the vehicle registration cost is based on the whole value of the car and in a lease it is just on the annual amount of payments?)

I would owe the bank $10,806 after 36 months. I get $20,000 for the car. I get back $9194.

So, $21430-$9194= $12,236 /36 months = $340/month

So $340/month to buy or $190/month to lease. Leasing is the much better deal.

New Renter says

2) I gather this model only works if you have a business for which you can claim a leased car as a company car but not if you are a standard employee or the car is to be used as a family vehicle, correct?

Business is preferred but not 100% necessary.
None of my calculations included the business miles or deductions for tax!!!! Infact I rounded down considerably.

A percentage of the lease is deductible and business miles are easy to calculate. Keep receipts.

You want to get a Subaru, Auto, with "the" highest residual, it will be around 23k or under, base model I think is 21995!

The 2014 is updated with even more room and I can tell you it is a crazy 360 view.
There is also a Turbo model now, but I would check the residual again.

I also got the moon roof, people like those for trades.

Work with your dealer on the highest residual possible,i think my dealer originally calculated about $18k but after 3yrs I got $21K in the end. That was due to all the factors I list above.

Waitingtobuy says

If the residual is $15K, and I sell it for $20K, then my costs are $328-$138 ($5K/36 months) or $190/month.

How often is there a spread like that ?

B) The dealer makes money on the lease

and

C) The dealer profits from selling your trade

________________________________________________

B is incorrect. The dealer doesnt make money off the lease. They make money off of A, selling the car. The leasing company makes money off the lease.

In my case, I have Hyundai Finance as my leasing company. The car company owns the leasing arm to sell more cars at low money factors and make some money too.

C is also incorrect. No dealer would buy a 3 yr old $23K car for $21K. More like $12-$13K, they mark it up $2K, and sell it on their lot.