Originally posted by ///M-Spec BTW, anyone one interested in a 1998 M3 Sedan? 5-speed. 76k. Slightly autocrossed and tracked, but fanatically maintained and in otherwise mint condition? Lots of pics avail. PM me.
I used to be totally financially irresponsible. I have spent the past two or three years repairing the damage done, and sucessfully. I think the turning point was buying my house, which was more difficult than it could've been had I already been responsible. I learned to budget and use restraint in purchases. Now everything is predictable and planned many months in advance. Money and payday used to occupy a lot of space in my head. Now going to the bank to deposit my check is more of an incovenience than anything else (yes, that's right, no direct deposit). I knew for a long time there had to be a better way because for the amount of money my wife and I make there was no excuse to be broke all the time. I found it and feel good about it. It really is a significant success for me. I'm finally in a position to be thinking beyond paying bills and planning for the long term future. It feels good.
My parents hardly ever use credit cards even and my Mum doesnt even have one. The trick is to never get into the cycle of debt. Its the interest thats gets you.
Originally posted by danoff If you add up the lease costs, they go over what you would pay buying and selling in that amount of time. That's because you probably start the lease at the beginning of the life of the car. Plus you have mileage caps.
If you compare leasing a new car to buying a 2-3 year old car, yes. Buying will almost always make more sense. But of course, you are comparing apples to oranges --on one hand you get a brand new car, on the other hand you don't.
But leasing new vs. buying new is trickier. The key component of leasing is the residual value of the car at the end of term. This is what the leasing company says the car will be worth at the end of the lease. If this number ends up being lower than market value, you end up screwed. But if this number is higher than market value (and it sometimes is), then you may end up ahead.
If a manufactuer or financial subsidiary ends up throwing incentives to lease programs by allowing a optimistic residual on a car, then leasing can actually be a good deal. Volkswagen, Volvo, BMW currently have very aggressive lease programs out in an attempt to move more cars. BMW currently assigns a residual value of 64% on a 36 month lease for a 3 series. That is really, really quite high. The result is you end up paying less over term if you lease one.
If a manufactuer or financial subsidiary ends up throwing incentives to lease programs by allowing a optimistic residual on a car, then leasing can actually be a good deal. Volkswagen, Volvo, BMW currently have very aggressive lease programs out in an attempt to move more cars. BMW currently assigns a residual value of 64% on a 36 month lease for a 3 series. That is really, really quite high. The result is you end up paying less over term if you lease one.
This is something I've been wondering about for a while. I've noticed that a lot of rich people lease and I've been wondering why they do it.
I figured they just wanted a new car all the time and didn't want to go through the hassle of buying and selling. This makes more sense to me though.
Anyway, you're right, in a way I was comparing apples to oranges. In another way I was not. Is the new car worth the extra cash vs. getting one that's like a year old? Not for me.
Apple 1
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New Car
Apple 2
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1 year old car + cash
Anyway, thanks for clearing up the lease situation for me. I've really been wanting to know why people do that so often.
No problem. One other reason why many wealthy people lease when they can easily afford to buy is if they are a business owner, they can write off leasing easier than a straight purchase. A leased company car is an operating expense. A purchased company car is a capital asset. The taxes work differently, and leasing ends up saving you a bunch.
This is why my pop has been driving a leased company car for 15 years.
