jasonw

I guess I should have said payments forever is the worst possible scenario for your bank account...

Maybe there is a way for the dealer to make a profit without costing you extra money but I haven't heard of it yet.

Morris

If the auto is business use and expensive, it makes more sense to lease than buy. With leases you write off the business portion of your payments. If purchased, you depreciate the vehicle, but there are limits on the amount of depreciation you can deduct each year. Then with a lease, there is an "add back to income" of an amount from an IRS table based on the value of the car (when leased) and the year of the lease. However, the add back does not come close to reducing the benefit to equal the benefit if you bought and depreciated. A few years ago I remember a client leasing a V-12 Mercedes. His lease payments were 18000 per year, the add back was less than a thousand, but the depreciation (had he bought) the first year was under 2,500. (remember this was a few years ago- there are new things to consider such as bonus depreciation) So it depends on your circumstances, how much the car is and what you use it for.
Ask your CPA. It's worth paying him/her to compute the difference.
(self-serving advertisement)

Colin

Well not really, if I had the money to pay cash for an S2000, I'd certainly use it as a down payment on some property here in Hawaii where property values have doubled in the last 5 years. IMO, it's better to buy appreciating assets and rent depriciating ones (let someone else own something guaranteed to go down in value). BTW, on a factory supported lease special (or finance for that matter), the dealer makes no extra profit.

jasonw

One market correction or "bubble burst" and your strategy will backfire bigtime!!!

If a car payment is preventing you from buying real estate though, maybe you just can't really afford the car...

michaelr

For me the lease is like power windows. or power doors on a minivan. Or navi. No you don't need them. Old-schoolers will say they are a waste. But for a nominal price, there is undeniably increased convenience. Same with a lease - drive it hard, with no worries about what will happen at 75000 miles. New car feel and smell and the knowledge that it has never been driven by anyone else. Full warranty (I love that part). New car every couple of years. But it's not for everybody, I know.

temin

LOL.

In relative terms, hardly anyone buys cars with cash in hand. Sure there are people that keep $40k in the bank for times they need a new car, but those are far and few compared to the sheer amount of people that finance. For every person that can pay the full amount in cash, there's probably 1000 people that finance for 60+ months.

And the money that dealerships make from financing compared to the actual sale of the car? PEANUTS.

If my bank account can't handle making car payments every month for the rest of my life then I need to wake the up and adjust my lifestyle. I don't have a family to worry about so I can't speak from that perspective, but as a single dude I make more than enough to cover my bills, dump cash into savings, contribute to a 401k, and still have money to screw around with.

Colin

Very funny, a car payment is not the problem, but paying cash for a car is just not a wise thing (IMO) when there are better things to use 30K for.

jasonw

That's still better than leasing...

Also consider that at least 4x as many people rent compared to own their house in the US. Does that make renting wise? Nay says I.

jasonw

You mean like finance charges?

temin

I don't call taking a 30 year mortgage on a house, owning.

Renting an apartment or even a house can have its advantages over buying a house just like leasing a car can have its advantages over buying a car. It comes down to your lifestyle. To think otherwise is just being closeminded.