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To Buy or Lease? Which will you do for the C8?

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To Buy or Lease? Which will you do for the C8?

 
Old 06-08-2019, 05:36 PM
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f-16pilotTX
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Default To Buy or Lease? Which will you do for the C8?

I am planning on leasing the C8 with Kerbeck.

Which will you choose to do? Buy or lease, and why?

Thought it would be a interesting topic that we havenít discussed yet!

Only a couple of more weeks fellas. I am sure the car will look and perform beautifully!

SEE-YA!,
Austin
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Old 06-08-2019, 07:03 PM
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I can think of only one scenario where leasing is a good idea financially: the leasing payments can be deducted from your taxes as a business expense. Otherwise it makes no sense to me.
I have always paid cash. My last two 911s were a 993 and a 997S. The negotiated prices for these cars was 73K and 95K respectively. I kept the 993 for 9 years and sold it for $56K, and I kept the 997S for 7 years and sold it $67K. So I got to drive cars that I really enjoyed for 16 years and it cost me $45K. Leasing 911s for 16 years would have been astronomical.

What I do is to buy exactly the car I want, which means a custom ordered car. The worst thing to do is to buy a "compromise car" and then sell it 2 or 3 yeas later when the car incurs its maximum depreciation. I maintain the car according to factory recommendations, and then sell in a private sale. So my recommendation is to buy a C8 configured exactly the way you want, and then keep it for at least 6 years, hopefully even longer.
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Old 06-08-2019, 08:03 PM
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Paying cash is almost always lower cost than any other route.
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Old 06-08-2019, 08:29 PM
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IF I were to get a first year car, Iíd lease. Sure, your kinda throwing money away, but you are potentially doing that anyway if the car has a lot of issues (which is entirely possible if it has all of these new systems that are rumored to be in it). And your exposure would be limited. Plus there is sure to be a facelift in a couple of years, likely widebody versions, etc. And possibly a manual.

Which is all why I most likely will wait.

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Old 06-08-2019, 08:32 PM
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My bought new Corvettes are toys. I'll always pay cash for toys. It just so happens that I am also able to write it off against my earned income. That's just fun for a self employed chap to do.....

..

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Old 06-08-2019, 08:35 PM
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Assuming the financial institution is not doing any hanky-panky, lease/buy is simply two different ways to pay the exact same costs... neither is "better" or "worse" its just like rent vs buy on property.

The biggest factor is how long you intend to keep the car... many people like to own a new car, and have total warranty coverage... in this case a 36 month lease makes the most sense. If you plan to keep the car more than 5 years, buying it will reduce total life-cycle cost. (BTW, there is no tax benefit to leasing other than it makes the accounting easier)

The big difference is how depreciation cost is covered (and depreciation is by far the largest cost of having a car).

BUY: Capital cost (principle) is fully recovered in the higher monthly payment, but the owner builds equity... ("dead" equity).

LEASE: Only depreciation is recovered, plus cost of money (interest)... thus monthly payments are lower, but essentially there is no equity... at the end of the lease, you just "drop the keys" and walk. (Also, the lease protects you from depreciation risk)

Some twists and turns....

FIrst, do not compare APR in a lease... look at the residual... Premium European brands often offer favorable lease deals through their captive finance arms as a form of hidden "discounting", by playing with the "residual" (the cars stated value at the termination of the lease). I find this practice is much less common in American Brands that tend to favor up-front discounts off sticker...(just a cultural thing).

Second, look at the depreciation history of the car... typically "bread and butter" Sedans, SUVs, and Pick-ups tend to depreciate down to scrap over their life... better to lease...however, "special interest" cars (Sports, Performance, and Convertibles), tend to flatten out, and maintain values over time...better to buy.
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Old 06-08-2019, 08:35 PM
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I buy cars and generally keep them a minimum of 10 years.
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Old 06-08-2019, 08:48 PM
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GM has traditionally not had favorable rates for Corvettes...the cost of a lease may be cost prohibitive. I think the strategy of leasing the base model and driving it until the GS/Z/ZR(x) versions are released is a good plan, but I think this may be why GM inflates the rates, as they want to sell new C8's not lease returns at auction.

Jeff
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Old 06-08-2019, 08:59 PM
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Originally Posted by NY09C6 View Post
I buy cars and generally keep them a minimum of 10 years.
To me that means you know exactly what you want and keep it for long time. If more buyers were like you, car dealers wouldn't be happy. They like constant churn.
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Old 06-08-2019, 09:03 PM
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Originally Posted by orclubduck View Post
GM has traditionally not had favorable rates for Corvettes...the cost of a lease may be cost prohibitive. I think the strategy of leasing the base model and driving it until the GS/Z/ZR(x) versions are released is a good plan, but I think this may be why GM inflates the rates, as they want to sell new C8's not lease returns at auction.

Jeff
About the only company that gives good leases is BMW. Porsche is horrible. A base 911 which stickers for about $91K will cost over $47,000 for a 3 year lease. Of course the actual lease costs will be higher since almost no one buys a base car with no options.

PS The costs above are just the cumulative lease payments. Total due from customer at signing: $9,919.31 (first month's payment, acquisition fee of $1,095, and capitalized cost reduction of $7,525). And when you turn the car back in, there's a $600 disposition fee. So when you add it all up, it comes to nearly $57,000.

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Old 06-08-2019, 09:08 PM
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Originally Posted by f-16pilotTX View Post
I am planning on leasing the C8 with Kerbeck.

Which will you choose to do? Buy or lease, and why?

Thought it would be a interesting topic that we havenít discussed yet!

Only a couple of more weeks fellas. I am sure the car will look and perform beautifully!

SEE-YA!,
Austin
i've leased twice and bought the 2nd one. my thing is if the car is troublesome over 3 years i give it back. if it proves to be just great i buy it.
i would love to lease a C8 but i suspect GM figures they don't have to offer any lease for 3 years.
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Old 06-08-2019, 09:31 PM
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Originally Posted by jcp911s View Post
BUY: Capital cost (principle) is fully recovered in the higher monthly payment, but the owner builds equity... ("dead" equity).

LEASE: Only depreciation is recovered, plus cost of money (interest)... thus monthly payments are lower, but essentially there is no equity... at the end of the lease, you just "drop the keys" and walk. (Also, the lease protects you from depreciation risk)
You say essentially there is no equity. So then you may or may not be aware of the following when it comes to leases. People think because they lease a car they can't end up with equity in the car. They can actually end up leaving thousands of dollars on the table that belongs to them at the end of a lease.


Find Out The True Value Of Your Leased Car

The second important number you need is a true value. Unfortunately, finding a true value is not easy to do, and it is impossible to do online. None of the trade-in values online are accurate, especially on vehicles that are only 2-3 years old. The values online are often too high, but I see many cases where the values are extremely low. Either case can skew your decision-making process at the end of a lease. If youíve listened to my radio show for any amount of time, youíve heard me say ďa car is only worth what someone is willing to write a check forĒ. The P.S. to that is Kelly Blue Book, Edmunds, and the others donít write checks.

So how do you actually find out what your leased car is worth? You get an offer from a dealer. It can be a new car dealership, every one of them buys cars, but the trick is talking to the used car manager. If you talk to a salesperson, youíll end up getting a trade allowance, which can be manipulated. When you speak to the used car manager, just ask him should you decide to sell it, what would he pay for it?

In most markets, there are large used car dealers who advertise they want to buy cars and have an easy process for making you an offer. CarMax is the largest in the country, but there are many others who pay top dollar.

I Have The Two Important Numbers Ė Now What?

Now that we have the two important numbers (the residual value and the true value) it is decision time to figure out which of the three options above is the smartest. Letís use three examples:


#1.
You found a dealer ready to write a check for $20,000 for your leased car. The residual value is $18,000. You have $2000 in true equity that belongs to you. You can trade the car in and use the $2000 to reduce the next payment, whether you buy or lease, or you can take your leased car to the dealership that was high bidder, it will pay it off and write you a check for $2000 that you can do with as you wish. Remember, in both these scenarios, you owe nothing further to the lease company.


#2.
The opposite numbers apply. The residual value is $20,000 and the best offer youíve gotten is $18,000. This is when we walk away. Factor in the disposition fees, wear and tear, and any mileage charges.


#3.
The real value and the residual value are the same, both $18,000, for instance. Then youíll want to trade the car or sell it to a dealer to avoid the end of lease charges.

If you love your leased car and just donít want to part with it, thatís OK, but you still want to go through finding the true value. There is no reason to way overpay for your own car. I think it is reasonable to pay a little more for your own car since you know the history of it.

In Conclusion

Iíve told the story on the air several times, but a personal friend of mine who is on a cycle of leasing was about to walk away from a low mileage Cadillac Escalade. She was just going to turn the Cadillac in where she leased it, and then lease an Infiniti. I made her go through the process above, and she had $9000 in equity she pocketed.

Will everyone have equity? No, there are many factors including what is going on in your market. For instance, cars coming off lease in South Texas right now are bringing huge money due to the hurricane (assuming your lease car was not flooded). There will be a ton of leases ending there soon with equity. Discontinued cars will not often provide equity, and convertibles in the dead of winter probably will not have equity. Every case is different.

No matter what kind of vehicle you have, or where you are located, you should want to know where you stand before ending your lease.
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Old 06-08-2019, 09:58 PM
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PAy cash and the first few years the depreciation will be minimal should you decide to trade in or sell orivately.

cheaper than leasing.

if the car has mo real unsurmountable issues then just keep for ten years unless the higher performance models call out your name.
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Old 06-08-2019, 10:26 PM
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None. Iím broke and have a newborn baby.... unless anyone wants to buy me one or take me on a ride lol
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Old 06-08-2019, 10:29 PM
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Buy in the beginning, lease later after the car has been out a couple years... just like most other cars

Cars hold their value well on the first couple years of a new model, so you don't need a residual to catch you, you just sell the car outright any time and you will be ahead of where a lease residual would have been.

No manufacturer offers strong lease deals on a car that is selling fine on its own, the rates will be sky-high for the first 2 years.

When the big rebates come, that is the time to lease a car. Brings the cap costs down.

I have not looked at a 2019 c7z lease recently, ill have to run one next week, I'm sure they are good now with all the rebate money and vette loyalty, unless they got smart and chopped the residuals due to the c8 on the horizon.

Originally Posted by RedMercy View Post
None. I’m broke and have a newborn baby.... unless anyone wants to buy me one or take me on a ride lol
Congrats, you will be happier with a kid in the long haul than you will a car. And by the time he/she is 3 or 4, you can get another vette, and he/she can sit on the center hump. Its how I was raised and I lived.

Congrats again.

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Old 06-09-2019, 12:28 AM
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Originally Posted by NY09C6 View Post
I buy cars and generally keep them a minimum of 10 years.
I buy new cars and RVs. I always keep them 10 to 20 years. However, my new Corvettes have always been toys. I consider mine fungible assets, and treat them as such. To me, its just moving money around.. Money is just a tool or asset of wealth. I only buy things I really want. The new Corvettes fit that description.
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Old 06-09-2019, 08:23 AM
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I buy certified used. I miss the big depreciation hit when buying used and all the finance costs of leasing. I also get to take a good long look at the new C8 before I decide to buy. In addition, I get to see the VIS track record of the car I buy so I avoid cars that are problematic.
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Old 06-09-2019, 10:22 AM
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Lot of fuzzy stuff here...

First, the "cost" of a car is Depreciation, Insurance, Maintenance, and Fuel... these costs are exactly the same regardless of how the car is financed...(cash, mortgage, or lease). When you "acquire the rights to use a car", you assume those costs and will pay them, one way or another.

Second, the lease "residual" is a speculation on what the car will be worth 36 months from now. its exactly like a stock option... nobody knows what that will be, but both the "lessor" (finance company), and the "lessee" (you) have an interest in getting this as close as possible... (BTW, if you can accurately predict what something will be worth in 3 years, you'll be a gizillionaire very soon). But understand you are entering into a binding 36 month financial commitment... early termination will kill you.

- If the residual is set too high, the "Lessor" take a capital loss at the end.

- If it is too low, the lessee pays too much.... but this is not "equity" until you actually buy the car.at the stated residual... if you keep it, no harm no foul... or you can "flip" it, but then you are assuming the market risk, and hassle if selling it...a PIA, and not always a great deal.

A third statement that "cars don't depreciate the first year" is not true... the opposite is true. Yes on certain "Hot" cars (e.g. Porsche GT, or "the NEW C8), you can maybe buy a car at MSRP, and sell it for MSRP a year later, but that is a rare and special case and financially misleading...

- First, Corvettes typically sell at a 5-10% discount, so paying "only" MSRP is effectively an ADM

- Second, most cars are subject to State Sales Tax at purchase, in PA for example, a $60K car generates $3,600 in tax which lost the day its titled.

So... if I buy a new C8 in PA, and sell it 12 months later for what a dealer is now charging for a new one (at the typical 6% discount), I've still lost $7000 on the car (tax plus the forgone 6% discount)... and if I buy a new C8 to replace it, I lose another $3,600 in additional Sales tax.

I am not advocating any approach... my point is they are all pretty much equal financially... its really a personal matter of how often you buy, how new you want your car to be, and what your personal "opportunity cost" of cash is.
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Old 06-09-2019, 10:55 AM
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BTW... not to over-complicate this, but the "residual" is only an "option" to the lessee, you can negotiate. For example, we leased a new 2011 BMW Convertible for my wife through BMW Finance. No money down, 40 months at $630/mo, including 10% Pa lease Sales Tax. Residual was $34,000.

At expiration, market on the car was about $30,000. I offered to buy it if they could CPO it, and give me a 60 month payment of $630. Which they happily did. ($630/mo for 60 months was closer to $30K cap cost)... so effectively we got our own car with a $3-4000 discount, plus CPO for free. (this included refinishing the wheels, full detail, new tires, brakes, 30K service, and 3 year factory warranty).
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Old 06-09-2019, 12:17 PM
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Originally Posted by roadbike56 View Post
I buy certified used. I miss the big depreciation hit when buying used and all the finance costs of leasing. I also get to take a good long look at the new C8 before I decide to buy. In addition, I get to see the VIS track record of the car I buy so I avoid cars that are problematic.

From a financial perspective,buying a certified used car is without doubt the best way to go. In my case I always buy new because I'm very particular as to what I want in a car, and I don't like making compromises.

I would never lease a car because I want to own the dam thing, and I also don't like having to make $800+ payments / month on a car ad infinitum. I understand the argument that you can sell a leased car before lease expiration, but that's easier said then done on high end cars. Selling any car but especially an expensive car is challenging to do, and it's doubly challenging when you have to sell it within a constricted time frame. For example I know of three people who tried to sell their leased Porches. They all had 3 year, 10K miles/yr leases, and they all had far less than 30K miles on the odometer. So they all put their cars up for sale six months prior to lease expiration, but only one was able to find a buyer and even he had to sell it for a lot less than he hoped. They all incurred advertising expenses, and more importantly spent many wasted hours showing their cars to people who weren't serious buyers.

I'm not suggesting that selling a used car that you own is easy, but at least you don't have to sell it by a particular date. So if there's not much market interest in your car, you simply take the car off the market and try to sell it at a later date.

As I posted earlier if you can legally deduct the lease payments from your federal income taxes, it would be foolish not to lease. For example friend of mine who is a lawyer has a 42 month lease on a Porsche Turbo S. His lease payments are $3220 a month or $38,640 a year. He claims that he uses the car 75% for business and 25% personal. So that gives him a $28,980 tax deduction each year. Now if I could legally do that I would be a lifetime leaser.
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