# Buy or leasing your personal vehicle



## KillerToiletSpider (May 27, 2007)

I pay cash for my vehicles, I buy them new in Sept/Oct when dealerships are looking to unload last years models, and I deal only with the owner of the dealership or the sales manager. They will do a lot of things for you if you have the purchase price in your pocket in hundred dollar bills, my 2003 GMC Sierra Z71 stickered for $42,000, I got that truck out the door for $29,000 with a seven year 150,000 mile warranty thrown in.


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## Mike Finley (Apr 28, 2004)

Demo as a deal are a myth created to sucker you. Manufacturer sold that vehicle to the car dealer for the same amount as he sold him the other ones that he didn't put into his demo fleet. They don't own it for any less because somebody drove it. But it sure sounds good, - obviously as so many buy into it hook line and sinker. There is no depreciation on a vehicle as long as the dealer owns it. Their cost of ownership of that vehicle is unchanged.



> They will do a lot of things for you if you have the purchase price in your pocket in hundred dollar bills,


Another myth. It's all cash to the dealership, whether you lay out green backs or lease it or finance it. Green backs they have cash for the car the day you drive it away. Lease or Finance they have cash for the car 3 days after you drive it away the lending institution funds the transaction in 3 days. Just another one that sounds good to you so the sales dept goes along with you, "Oh you're paying cash? Wow, we can make you are better deal!" Somebodies nose is growing.

If you want to take advantage of depreciation purchase 3 year old vehicles that hold their resale value the most.

Lease or buy? - pull out the calculator, it won't lie to you. 

I've paid cash for cars, paid one payment leases too. Then I figured out how to leverage my money. Lump of $30,000 in cash. Buy a depreciating asset and drive it into the ground for the next 7 years and have no payments and nothing to show for it but a $2000 vehicle. Or make $400 in payments and take my $30,000 and buy an appreciating asset like a property. Hmm, 7 years later I have $80,000 in equity. You've got a $2000 car.:no: Sure you can make payments to yourself after you pay cash for your car but what do you have at the end of 7 years? Enough cash to pay cash for another car! Whipty doo, you're getting no where.

Calculator won't lie. Use one.



> Rule #1 in accumulating wealth. NEVER buy anything that depreciates.


Exactly.

Look around, ask those people who are acumulating wealth and find out what they are doing. Ask your accountant what they do. 

*If I'm going to be asking for advice on how to throw the perfect fast ball, I'm going to ask a major league pitcher, not some guy that can't break out of the minors.*


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## thom (Nov 3, 2006)

Mike, you miss the longevity factor. 

In '94 I bought my Buick Roadmaster (personal car 135,000 now) for $22,000. It's needed only minor repairs over the years, probably $3000 when you include tires so it's cost me $25,000. It sits in the garage during the day while I'm driving my work truck, still looks and drives almost new. Cost (assuming no residual value) $160/month.

In '99 I bought my F350 dually crew cab. It's a play truck. Used it to go windsurfing originally, pulled a travel trailer. Now it carries my hot air balloon. currently has 36,000 miles, sits in the garage, looks and drives almost new. Cost $35,000 plus $2000 in repairs and tires. If you figure no residual, that it's junk now, it cost me $342 per month. BUT, this is an almost new Ford dually with a diesel.

I bought my '89 work truck (C3500 utility body) in '94. Paid $10,000 and another $6000 in repairs since. Cost $103 per month., This truck runs fine, but it's old and worn. Very little residual.

My wife gave away her 25 year old Cadillac a few years back and replaced it with a Buick. The caddy had 150,000 miles on it when she gave it away (no residual), Never dented, garage kept. The vinyl top looked like new. It was well taken care of and looked great when she gave it away. The monthly cost on that was minimal.

We live in the desert where things don't rust. If you take care of a vehicle it will last a long time. The biggest issue is keep it out of the sun.

So the issue is, you figure you won't buy a depreciating asset, yet you pay someone else to buy it for you. Either way, you are paying for the depreciating asset. If you buy a new vehicle and keep it a long time, you come out way ahead. Getting a new vehicle every few years, leasing or buying, may stroke your ego, but it won't build wealth.

Oh yea, I'll match your degree in economics (BA) and raise you with a Masters in Business Administration, emphasis in Finance.


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## PressurePros (Jul 3, 2006)

Of course there are scenarios where outright ownership is better. Very high mileage situations or situations like you mention, Thom where you own the car until the body is redesigned by the manufatcurer three times before you think about getting rid of it. That is the minority of people. Most will update their vehicle at least every five years. Most people won't keep their vehicle in a garage, change the oil every three months and baby the car or truck so that it lasts. They should, but they don't. 

It all comes down to your vehicle habits. If you keep your vehicle for 8-9 years then you should buy. But to me, smarter is to buy a three year old vehicle and keep it for five. When you run those numbers out, there is no comparison. But if you are like the majority of America and owning a newer vehicle is mandatory, don't sell leasing short.


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## AtlanticWBConst (Mar 29, 2006)

_"Never buy Anything that Depreciates"_ ... is a good piece of advice, unfortunetaly when it comes to vehicles...you have no choice.

You can't buy a piece of junk and rely on it, and some of us don't want to sink $400 to $600+ a month into a lease over 2 or more years. 

A better adage would be:

"Don't put _alot of money_ into a _necessity_ that depreciates"....


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## Kent Whitten (Mar 24, 2006)

> Never buy anything that depreciates


Ah, but you do have a choice in vehicles. Older vehicles that are in good condition, like west coast cars or southern cars that have not seen salt, could very well APPRECIATE in value. I bought a '71 GMC custom camper for 4500, drove it for 3 years and sold it for the same amount. I also had a beater Chevy Luv (stop laughing!) paid $500 for it, sold it 2 years later for $450. 

If you buy new, it's the worst thing you can do. Buy something 2 years old or so and you're doing better. Buy a classic vehicle and it's an investment. My truck was indestructable, but also got maybe 8 mpg. You could possibly upgrade the engine to a fuel efficient new engine and have that thing last more than a decade.

Although I'm not taking my own advice right now. I bought a 2002 Suburban right before the special GMC family rates a few years back, plus the gas guzzler, I am driving a money pit.


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## Mike Finley (Apr 28, 2004)

There are exceptions to every rule. 99.99% of us don't live the exceptions.

Here is a real simple on the surface but complex in the analyzation process scenario.

*Scenario:*

I own my own home. 
It is worth $500,000.00. 
I owe $150,000.00 on the remaining balance of the mortgage. 
Payments are $1400 per month.
I have $150,000.00 in cash sitting right next to me.

Should I pay off the mortgage?

(I'm predicting that Ken Fenner will say no.) What do the rest of you say?

Also, the objective here is building wealth over the long term of say the next 30 years.


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## mickeyco (May 13, 2006)

Mike Finley said:


> There are exceptions to every rule. 99.99% of us don't live the exceptions.
> 
> Here is a real simple on the surface but complex in the analyzation process scenario.
> 
> ...


Depending on the rate I might refinance, but I wouldn't pay it off, you should be able to do and make more with the money.

Back on the car leasing, I usually buy a year old from a dealer with the extended warranty and drive it till it's dead, but I think a lease is a great option for people that need a presentable vehicle (many use their personal vehicle for sales calls and taking clients out) and don't want to be bothered with maintaining a vehicle. To me buying a brand new car is akin to throwing money out an open window.


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## ruskent (Jun 20, 2005)

mickeyco said:


> Depending on the rate I might refinance, but I wouldn't pay it off, you should be able to do and make more with the money.
> 
> Back on the car leasing, I usually buy a year old from a dealer with the extended warranty and drive it till it's dead, but I think a lease is a great option for people that need a presentable vehicle (many use their personal vehicle for sales calls and taking clients out) and don't want to be bothered with maintaining a vehicle. To me buying a brand new car is akin to throwing money out an open window.



I think going on sales calls in a nice vehicle can help you alot if you are selling to high end clients. High end clients want to know that they hired the best possible company for their job. If you show up in a expensive vehicle it will show your successfull.

Now if your not selling high end services, this could really hurt your business.


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## PressurePros (Jul 3, 2006)

You are correct, Mr Mike. I would say no. Money is still relatively cheap to borrow yet difficult to accumulate. If one has $150K they could purchase a turnkey business (hands off) that will generate much more cashflow than any savings in interest. 

Even if my little turnkey franchise was generating a $40,000 salary for me that would be plenty to cover mondo equity payments towards my house and shorten the term of my loan. At the end of 5 years I would now own two appreciating assets as well as increased my passive income substantially.


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## thom (Nov 3, 2006)

Mike Finley said:


> *Scenario:*
> 
> I own my own home.
> It is worth $500,000.00.
> ...


Pay it off. 

When you pay off your mortgage it is an absolutely secure investment. There is nothing you can invest in that is more secure than yourself (because any other investment, if it is productive, can be taken to pay off your other debts anyway). So, for a guaranteed investment you can't do better than the interest rate on the mortgage you're paying off.

Paying off your mortgage gives you one less issue to deal with, makes things a little less stressful.

If you may need the cash (but probably will not) you can take out a line of credit secured by your home. It will just sit there unused with no interest and no payments until such time as you need it, then it's immediately available.


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## ultimatetouch (May 27, 2006)

PressurePros said:


> Rule #1 in accumulating wealth. NEVER buy anything that depreciates.
> 
> I hear the anti leasing thing very often and when I ask the person why they dislike leasing they never have an answer. Its just what someone else said to them. The "I'll have something at the end of my payment" arguement. Yeah you will have a 4000 lb hunk of steel that you have to market, show and sell. If you keep it, you have a vehicle with no drivetrain warranty. If you trade it in for something else you are going to lose even more equity because you will be paid wholesale for it. In any of the above, you have already paid the depreciation and put equity into a lousy source.
> 
> ...


Can I lease a used vehicle? Whats the best way to negotiate a lease?
I am looking to leas an 07 Denali with all the options and there is no way I will put 47,000 into a depreciating hunk of steel. I can but Id rather have that money liquid or earning money for me.


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## ultimatetouch (May 27, 2006)

Mike Finley said:


> There are exceptions to every rule. 99.99% of us don't live the exceptions.
> 
> Here is a real simple on the surface but complex in the analyzation process scenario.
> 
> ...


I am sure this post will open more threads since I have a lot of questions on financing.. I am in the same boat Mike. I have money to pay off my house.. My house is worth 375,000 and I owe 60,000. Im not going to pay it off I am going to keep the money liquid for further investments since I am paying 7.8%.


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## Mike Finley (Apr 28, 2004)

PressurePros said:


> You are correct, Mr Mike. I would say no. Money is still relatively cheap to borrow yet difficult to accumulate. If one has $150K they could purchase a turnkey business (hands off) that will generate much more cashflow than any savings in interest.
> 
> Even if my little turnkey franchise was generating a $40,000 salary for me that would be plenty to cover mondo equity payments towards my house and shorten the term of my loan. At the end of 5 years I would now own two appreciating assets as well as increased my passive income substantially.


There are at least a dozen or more scenarios, but none of them involve throwing $150,000 away by paying off a 6% opportunity cost of money.



> Money is still relatively cheap to borrow yet difficult to accumulate.


That's real good way of putting it.


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## Mike Finley (Apr 28, 2004)

ultimatetouch said:


> Can I lease a used vehicle? Whats the best way to negotiate a lease?
> I am looking to leas an 07 Denali with all the options and there is no way I will put 47,000 into a depreciating hunk of steel. I can but Id rather have that money liquid or earning money for me.


If there is one carved in stone policy about leasing it is to *never* lease a used vehicle. If you read my first reply to this it talks about the manufacturers who set the lease rates, used rates will never even coming close to a new vehicle rate. Plus a big plus with new leasing is no out of pocket expenses other than oil and your payment. A used vehicle will not be under warranty.

If you want to lease, always lease a new vehicle.


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