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Look at the post I replied to - it seems "depreciation" is used a reason to lease. How else could this make sense if the poster didn't believe, incorrectly, that leasing somehow allows you to "escape" the consequences of the vehicle going down in value?
What I said was:
"they understand the value of limiting their exposure on a depreciating asset"
"they understand the value of limiting their exposure on a depreciating asset"
Which is exactly what leasing does.
Why does it matter how much is "exposed" to a depreciating asset if you are paying for that depreciation one way or the other? What you should really be concerned with is the net present value of the decision, not the "exposure".
Why does it matter how much is "exposed" to a depreciating asset if you are paying for that depreciation one way or the other? What you should really be concerned with is the net present value of the decision, not the "exposure".
Because one way, all your money is tied up in it, and the other way, you're only 'exposed' to the actual depreciation that someone is predicting (and will have to suck up if they're wrong).
Because one way, all your money is tied up in it, and the other way, you're only 'exposed' to the actual depreciation that someone is predicting (and will have to suck up if they're wrong).
Ok, so now we aren't talking about the expected loss in value, but the uncertainty. Fair point, however, what is actually relevant here is not the depreciation per se, but rather the "insurance" factor on the value that is implicit in the lease. The same argument could be made about renting vs. owning a house, as its future value is unknown, even though generally real estate is not a depreciating asset. The fact that we expect the vehicle to lose value is, logically, neither necessary nor sufficient to the argument. Expected value and uncertainty are not the same thing.
Anyone who buys a brand new car is not very financially savvy, whether they finance it or not. And I agree with the OP. I would never finance a depreciating asset.
Yea, I've never seen a financial advisor in a new car, or any very rich who do very well financially. Great point.
Last edited by Northeaster; 01-14-2016 at 11:50 AM..
A couple people are always, interminably, talking about the dangers of "depreciation" when you buy a new car.
This is a bogus argument, in my opinion and likely many others, unless you're flipping cars every couple years. Depreciation pretty much evens out at about year 4-5 and after that is not an issue.
I have a 2002 Taurus bought new that has 250K on the odometer. The car is worn out although it still runs and I'm probably going to send it to the recycler in the next few weeks. How much has that supposed depreciation from buying it new impacted me?
Right, I bought a new yaris when I was doing 750mi a week. paid $14,800 sold it 6years later for $8,000.
Also, some people don't care about paying a little extra over the term of a 60 month loan so long as they can keep their cash on hand. A few k over the span of 5-6yrs is really nothing. Not everyone lives their lives to bank every cent. There are people believe it or not who actually make enough money to go the extra mile and splurge every once in a while!
I lease a brand new car every 3yrs and take about 4 vacations a year. I dine out with the wife every friday night. Do I need to? No but its something I enjoy doing. It's not effecting my savings or retirement fund so why not? I have no children (nor do I plan on having any). If I did, the money that I'm spending on things that I actually enjoy would have gone towards raising a child.
Life is short. Do what makes you happy so long as you're financially responsible about it. I have no intention of working myself to the bone just to save money until death. That's for people who are merely on this earth existing rather than actually living life! To each their own I guess.....
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