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I have been caculating whether we would be better off selling our car and leasing and I was hoping someone could tell me if I am thinking correctly about the costs of owning verses leasing.
We own outright a suv worth 20K that gets 20 MPG.
It seems when I add :
1)lost interest if 20 K were invested, (166/month)
2) 3k/year depreciation on suv, (250/month)
3) $100 -$200 extra gas suv costs because of MPG
4) possible repair/maintenance costs
.... I am getting over $500 (even using 100 gas figure)
Why wouldn't it be better to lease something for 300/month
that gets 30 MPG or better ?
Another reason leasing makes sense to me is that auto companies are going to be coming out with much better MPG autos making the lower MPG cars depreciate faster.
My goal is not to be in more car than I can afford, but to be as frugal as I can be while still driving a car with the latest safety features.
How did you determine the worth? There is an over supply for SUVS right now so its unlikely you are going to get what its traditionally "worth".
Quote:
1)lost interest if 20 K were invested, (166/month)
Where do you plan on getting a 10% after tax return on your money? You're not going to get a low-risk return of more than 3~4% (pre-tax 50-66/month) right now.
" Where do you plan on getting a 10% after tax return on your money? You're not going to get a low-risk return of more than 3~4% (pre-tax 50-66/month) right now."
Long term investments in agressive growth diverse mutual funds earn 10 to 12 % a year. Not each year ,but over the long haul.
There's a lot of articles on this topic available online. My conclusion because I was going to use the new vehicle for business purposes was that leasing was right for me. My advice to those who aren't necessarily going to use their vehicle for business write-off purposes is however similar - leasing makes a lot of sense if you don't have the cash to just buy a car outright. Your payments will be lower, you'll only use the car during the reliable portion of its lifecycle, and in a couple years when alternatively fueled vehicles are more mainstream you will 1) not have to worry about selling your older technology vehicle and 2) you will be able to obtain a new vehicle either through buying or leasing, whichever appears to be a better fit at that time. There's even a potential 3rd benefit of leasing... very often upon lease ending you can negotiate a better deal than the recorded depreciated price of the vehicle you used if you want to buy it (dealers/banks would rather you buy the car than for them to go through the hassle of selling it to someone else).
Whatever you choose to do, be smart about it. Personally, I wouldn't ever dream to lease a vehicle which is above and beyond my means to purchase. Unfortunately I know that many people get suckered into leasing a vehicle that is a good 10-20k more in value than they can really afford and my advice is don't do it.
Last edited by belovenow; 05-27-2008 at 11:57 AM..
But a lease is 100% depreciation as soon as you sign the contract.
If plan "a" cost 400/month and plan "b" cost 300 /month;
does it matter what the money goes to?
My original post shows that owning
has depreciation,lost investment potential,more gas due to MPG,
plus maintenance. I think you have to weigh all the cost of both options.
It would be like calculating owning verses renting a house. If you rent you do save a few things like maintenance and taxes. If you compare you have to consider all the cost to own and all the cost to rent.
There's a lot of articles on this topic available online. My conclusion because I was going to use the new vehicle for business purposes was that leasing was right for me. My advice to those who aren't necessarily going to use their vehicle for business write-off purposes is however similar - leasing makes a lot of sense if you don't have the cash to just buy a car outright. Your payments will be lower, you'll only use the car during the reliable portion of its lifecycle, and in a couple years when alternatively fueled vehicles are more mainstream you will 1) not have to worry about selling your older technology vehicle and 2) you will be able to obtain a new vehicle either through buying or leasing, whichever appears to be a better fit at that time. There's even a potential 3rd benefit of leasing... very often upon lease ending you can negotiate a better deal than the recorded depreciated price of the vehicle you used if you want to buy it (dealers/banks would rather you buy the car than for them to go through the hassle of selling it to someone else).
Finally ...someone who gets what I am thinking..even the fact that auto's
fuel MPG and type is going to be changing fast and alot of people are going to be stuck with older tech. cars
Thank you..because I was beginning to think no one could see my point.
One question... We do have the money to buy outright and the SUV
we have is paid for but I don't see how that changes things. That money
could be earning 166/month long term by my calculations. I factored
that into the cost of owning (lost investment earnings)
Finally ...someone who gets what I am thinking..even the fact that auto's
fuel MPG and type is going to be changing fast and alot of people are going to be stuck with older tech. cars
Thank you..because I was beginning to think no one could see my point.
One question... We do have the money to buy outright and the SUV
we have is paid for but I don't see how that changes things. That money
could be earning 166/month long term by my calculations. I factored
that into the cost of owning (lost investment earnings)
Your thinking aligns with mine - and I signed my lease a month ago (I have no remorse). Good luck with your decision whatever it is.
If plan "a" cost 400/month and plan "b" cost 300 /month;
does it matter what the money goes to?
My original post shows that owning
has depreciation,lost investment potential,more gas due to MPG,
plus maintenance. I think you have to weigh all the cost of both options.
It would be like calculating owning verses renting a house. If you rent you do save a few things like maintenance and taxes. If you compare you have to consider all the cost to own and all the cost to rent.
Plan "a" doesn't cost $400 a month though. Your depreciation isn't realized until you sell the SUV. And your calculations don't include the savings/investment potential of the $300 a month you'd be losing on the lease. The lease payment is a 100% loss right out of the gate.
You're also not calculating the recovery of any money you'd get if you sold the SUV; you're only counting the theoretical depreciation.
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