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Luxury Performance Sedans

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  • jimbresjimbres Posts: 2,025
    Guilty as charged, Dave. Certainly not my brightest move. I should've gotten rid of that clunker when it turned 10. But life & work were so crazy then that I had no time for car stuff. The easy way out was to hand my credit card to my mechanic & tell him to call me when he had fixed the Green Turd.

    I do think, though, that he should've put me on his Christmas card list after that.

    I'll probably never again keep a car past its 10th birthday.
  • drtraveldrtravel Posts: 395
    Hpowders: Recheck the M boards. Almost all of the problems reported concern the moonroof (rattles--where there is at lease one TSB) or noise level. A few people have some type of problem with a heat-exchanger or something making a racket as the car is cooling (after parking).

    My M was on the second shipment from Japan and had both the moonroof rattle and exhaust pinging sound during cool-down problems. My dealer bent over backwards in correcting both problems (TSBs were issued for both - that's my car in the picture!). The engineers were really eager to find out about and to resolve any issues with their new baby. Infiniti quickly changed their production methods so both of these are no longer an issue. I've had no other issues with the car. My complete story is documented on the Edmunds forums.

    I'm a previous owner of a 5-series, E-series, Porsche and Lexus Coupe. All were first years of their design and all had issues. The difference is that not only did the BMW and M-B have more problems but their service departments treated me so poorly - I'm wasn't sure that they cared about such mundane things as quality. Lexus acted liked Infiniti has - Porsche in the middle.
  • hpowdershpowders Posts: 4,269
    Good to hear Infiniti took care of your problems.
    In 12 years of BMW's, the only service visits were for oil changes, hot chocolate, bottled water and Famous Amos chocolate chip cookies.
  • I need to ever so slight amend my position: insurance, INCLUDING self-insurance is what I was speaking about, generally.

    I, like many folks, do indeed self insure many things. I self insure appliances, but not my uber expensive washer and dryer -- considering the cost of the insurance was $29.95 per year.

    I read with "concern" the posts from folks who have NOT had such and such a car that are both positive and negative and based on the person's proclivity at that time, apparently, they use this as part of the rationalization to buy or not buy.

    "I wouldn't have such and such because Consumer's Opinion magazine said they have such and such issues."

    Based on such reports and the hostility (almost) against Mercedes (for instance), you'd think they would be pulling out of the US sometime in the near future. Yet Mercedes and BMW are neck and neck to be either one or two in terms of popularity based on unit sales.

    Were I to acquire a Mercedes, I might, for instance, allocate (as a journal entry) an expense item, "reserve for bad debt" (or the automotive equivalent.)

    Or I might consider extending the factory warranty for a price that at the time seemed appropriate.
  • I don't know.

    I didn't want the older tech, thirsty engine.

    I have had three Audi 4.2 engines -- they were very enjoyable and quite thirsty. An FSI version at the time was not available. I love the sound of the 4.2 when it is angry.

    I drove both.

    Under urban conditions the differences were certainly noticable but not compelling even though my preference would be for the V8 all other things being level.

    I also found the M35X was certainly adequately powered, too.

    I miss my 2.7T with a 6spd manual. I'll bet my current car with the manual treatment normally passed on by Audi (lower final drive ratio and different gear ratios) coupled to the exact same engine would be perhaps 1/2 second quicker. And more fun and more likely to impart the feeling of control.

    Traffic and perhaps even my age have made me reconsider the need for ever greater engine displacement especially considering I am convinced that $4+ gal gas is coming soon to a pump near you.

    I did not even price or configure the 4.2. I had configured the M35X and the A6 3.2 as comparably as possible and I was willing to drive either car for at least 33 months.

    Since then, I have driven the 530xi auto and found the A6 3.2 auto preferable. But the STS V6 completely blew me away when I was offered the opportunity to compare it to the 530.

    No stick version with AWD of the BMW is or has been avail to test, but I suspect it would get my dollars today over either the M or the A6 (assuming all 3 were close in cost.)

    My A6 was $53,286. Lease is $642 with no upfront money and 15K per year for 3 years. I am NOT displeased with the car, the technology, the appearance or the cost.

    Actually I am very pleased with just about everything with this A6.

    My decision, once the financial playing field was leveled, was not particularly rational; but, it was not insane.

    A combination of reading, test drives, experience and edmunds posts made and read lead me to the conclusion that the LPS cars generally discussed here are pretty darn close to each other in terms of content and performance (and even, today, reputation, given their past 15 year or so history in the US.)

    Audi is the big loser in terms of monthly sales (or is it Acura?) Yet, 2005 for Audi was a fantastic year when they compared the year to their own history rather than the other LPS cars here discussed. Mercedes or BMW (one of them) was the winner in 2005, but wow Mercedes must need a technician and a parts inventory or both in the trunk to read some of the posts.

    Lexus seems to "get the reliability" defense more than the performance, safety or fun to drive argument. Yet, other than the car magazines, not much negative is ever written about Lexus cars -- it is just that beyond reliability it certainly seems that even repeat owners seem less interested in driving than they are in frequency of repair.

    Yet, even this, is most likely my own bias showing through. The BMW folks have to be the most passionate, at least this would be my take based on what is written here. Infiniti M drivers and even RL drivers are quite powerful advocates for their cars. And a few of us seem very pro Audi, but I read many very passionate "I wouldn't consider an Audi because they are unreliable" posts even though not many of them seem to come from past or present owners.
  • jimbresjimbres Posts: 2,025
    Were I to acquire a Mercedes, I might, for instance, allocate (as a journal entry) an expense item, "reserve for bad debt" (or the automotive equivalent.)

    That's just what I've done for years, except that I do it for all of the stuff in my life that might go wrong - both automotive & non-automotive.

    Here's how I look at it. The odds are fair to good that at some time in the next 90 days, I'll have to cough up at least $2K to cover an unexpected expense.

    Perhaps my wife's Lexus, out of warranty now for 3 years, will require surgery. Or my beloved 330i, also out of warranty, will break down in some expensive, characteristically BMW, way.

    But my experience has taught me (& 13 years of Quicken data will confirm) that large unexpected expenses are far more likely to be house-related than car-related. I have no idea how old our washer & dryer are - they came with the house - but the color scheme suggests that they date back to the glory days of disco. And then there's the designer oven, which was cutting edge in the 2nd Reagan administration but which is beginning to beep in a strange & alarming fashion. I'm almost certain that I'll spend far more money on appliance repair or replacement during the coming year than I will on car repairs.

    And that's only a small part of what can go wrong in modern life. We have a new puppy, & my vet might nail me with a 4-figure bill (my sister spent over $6K last year after her beloved pointer was hit by a car) or I might have to bail out my brother-in-law or the IRS might dun me for back taxes.

    All of this goes to the heart of my objection to "extended warranties." When you don't know what will go wrong next, you can't afford to lock up dollars in a single-purpose service contract. For real peace of mind, you need nothing less than a sizeable interest-bearing slush fund.

    My wife sometimes talks about replacing her Lexus with an E-class. Am I concerned about post-warranty repair costs if she goes ahead with this? Yup. Will I buy a service contract? Nope. But I will add more dollars to my slush fund. For this sort of thing, you can't beat money in the bank.
  • bjbird2bjbird2 Posts: 647
    Great post, I hardily concur. ;)

    Regarding 10+ year old cars, I passed down my 93' Infiniti J-30 to my son, and 13 years 142K miles later, it is still going strong. He was six when I bought the car. The only major cost was a timing belt replacement, even though I had a contingency slush fund. My only "service contract" was the extra cost for synthetic oil.
    My son still gets the Saturday car washes, coffee and donuts at the Infiniti dealer, and they treat his car, and him, just like the guy that drove the new M35 off the lot.
  • lexusguylexusguy Posts: 6,419
    "And, I hope you are not saying that BMW and Lexus are putting significantly lower quality tires on their cars compared to Audi."

    Thats not really what I was getting at. All-season tires are by definition "compromise tires". Where were those compromises made? In C&D's big tire test from a few months ago, the differences on the skidpad of tire grip mounted on the identical car in wet conditions were as much as .20g from worst wet tire to best wet tire. I would think that if they did a skidpad test on ice, the differences could be even greater still.
  • calidavecalidave Posts: 156
    Jimbres: Sounds like it's time to replace that washer and dryer. Your utility companies (water and electricity/gas probably offer great rebates. Using an old washer/dryer is like throwing money down the drain, and probably more than you think.

    It's a tough trade-off, but we found that a new unit paid itself back in about 5 years. PLUS the new units are so much quieter,they get the clothes cleaner, they look better, and ours are stackable, so we gained a nice spot in the garage (much needed in our cramped California "two-car" - yeah right - garages)

    and....er....then we have more room for the Luxury Performance Sedan of our choice......
  • jimbresjimbres Posts: 2,025
    You're probably right, Dave. This is shaping up as the Year of the Major Appliance.

    I also hope that at some point in 2006 my lovely wife will settle on a replacement for her '99 Lexus ES 300.

    Over 6 months ago, at the beginning of last summer, I suggested that she test drive the Japanese Big Three: the Acura RL, the Infiniti M & the Lexus GS. I was certain that she'd come home with the GS.

    Several weeks later, she announced that she had narrowed the field to 2 candidates: the Lexus ES 330 & the Mercedes E350.

    I know what you're thinking & what someone will probably say: these cars are in altogether different categories & happen to be some $20K apart in price. No one who knows anything about cars would cross-shop these 2. And you wouldn't be wrong to say this. That would certainly be my response.

    But my wife isn't a car nut & doesn't think along these lines. It doesn't matter to her that 1 of these cars is a sub-$35K front-driver that some would describe as a dressed-up Camry while the other is a north of $50K (well north when you add the stuff that most of us want in our cars) rear-driver. All she knew was that these were the 2 cars that she found most appealing. She liked both the way they looked & the way they drove. For a bunch of reasons, she didn't like any of the original Big Three enough to go back for a 2nd test drive.

    (FWIW, if I had been permitted to make this decision, I would have picked the Infiniti M. But my wife hated it. It seems to me that the Infiniti M, more than the others discussed here, is a guy's car. Women's reactions to it range from indifference to outright dislike. Has anyone else noticed this? Any ideas why?)

    Finally, after listening to her hem & haw ("I really like the Mercedes, but I'm not sure that I like it $20,000 more than I like the Lexus"), I suggested that she wait until the spring of '06, when Lexus will roll out the next-generation 2007 ES 350, which, it has been speculated, will feature a 6-speed transmission. (This is one of the benefits of owning, as opposed to leasing, a car. You can always put off these decisions until next year.)

    I've also heard that the E-class is up for a mild exterior refresh & that these '07' cars will hit the showrooms sometime in the 2nd quarter.
  • jimbres,

    It seems that our wives have a lot in common. My wife has a '98 ES300 that she has loved from day one.

    She recently drove the new GS300, but said that it didn't feel or drive any different from her ES300. Really liked the LS430, but felt that the styling was looking a bit dated. The Mark Levinson sound system in both was a BIG disappointment, compared to the Nakamichi system in her ES300.

    She really likes the styling of the E-series MB, but the reliability issues are a deal-breaker. Every MB owner that she has talked to (including her sister) has had nothing but problems!

    I keep telling her to wait for the new 2007 ES350(?). With my luck, however, the new 2007 LS-series will be "drop-dead" gorgeous, in which case I will be writing a much bigger check!

    Martin
  • anthonypanthonyp Posts: 1,857
    Sounds to me as though both you guys may be writing substantual checks...The same happened to me a few month ago Tony
  • lexusguylexusguy Posts: 6,419
    The Avalon may also be worth considering. No info on the ES yet, but considering how nice the new Camry is, I'm sure it will be very impressive, and will have a lot more high tech features than the E class, for a lot less cash.
  • aas5aas5 Posts: 50
    I still don't understand how you seem to be fine living with the premise that you expect to shel out $2K on car related issues (and I don't know whether this is per car or total) within the next 90 days while the extended warranty for my M45 sport for 10-years and 100K miles is less than $2K. As much as I believe in reliability of japanese makes, my parents' 10 year old Camry required $4K to $6K in repairs every year until we traded it in. And if you do the research, you can find more than one A+ rated companies that are underwriting these extended warranties, and even these companies have performance bonds so if they go out of business there is an insurance company that will pay for your repairs. I just don't understand the premise of tying up capital if we are talking less than $2K up front on a $55K+ car.
  • calidavecalidave Posts: 156
    I don't think there is an extended warranty out there that is going to pay for repairs on a 10-year old car. Most of us will hit 100k miles long before ten years. It's essentially a 7-year warranty. So you'd be SOL for those $4-6K/year in years 10, 11, etc.

    If there is a true ten-year warranty (without a mileage limit), it will cost more than 2k.

    if extended warranties were such a good idea for the consumer, they'd be more expensive

    ;-)

    but you guys get my meaning

    the insurance companies do make money on these policies, or they wouldn't sell them. Insuring against a 5k loss is just bad home economics. If you can't afford to fix a car when it needs a repair, then you probably spent too much on your car to begin with. You should have bought a used one and saved your money for when the repairs come.

    for every one of us with a story about how great extended warranties are, there are ten of us who have bought an extended warranty and never made a claim
  • Wondering:

    "what is the dollar value of the factory 50,000 mile warranty or warranty/maintenance?"

    Wondering:

    "would you take a new XYZ with a 'credit for no warranty' or would you jus' go ahead and pay the price for the car with the warranty?"

    My neighbor's 7 year old SUV is paid for. His maintenance costs are probably somewhat higher on this vehicle than on a 2006 model. His "fix" costs, so he claims have exceeded, $4,000 per year (so he says) for the past 4 years. I keep trying to cipher and speculate and calculate, because this, apparently, doesn't include tires, oil changes and "wear and tear" items.

    He has no payments (no fin or lease payments), but he is apparently running some $350 per month AVERAGE to keep it going (not including the expensive maint items like tires, etc.) I dunno how much the thing cost new but it is a Chebby Suburban, Land-Yacht edition (and he does love the car, so that is a factor.)

    I just wonder if my "permanent" car payments (which includes 'everything' since I have one Audi and one BMW both with full maint and warranty to 50,000 miles) are that much different than my neighbor's?

    Someone here will certainly tell me where my thinking has derailed -- but, it seems he has had the same car for 7 years (not that there is anything wrong with that), meanwhile for similar out of pocket money I have a current technology (and hopefully superior content) vehicle and in the same period of time have had three vehicles.

    I don't know that this makes sense, most of us seem to be ready to argue that this "story" even if we accept it as 100% true and accurate is an anomaly. In fact it seems that some folks here think "reliable German cars" are an oxymoron (or just an anomaly) but that "reliable Japanese cars" are standard normal expected outcomes.

    I'm probably wrong headed and what's wrong with this country today, but I'd rather cough up my monthly lease payment which includes the "insurance policy" from the factory in the price, rather than be in my neighbor's situation. It just smells like he spends about the same as I do, but has a 7 year old car that seems to need something worked on regularly and frequently.

    The Audi CPO at ~ $1295 seems like a great way to "self insure a bit and spread the risk a bit."

    If the 1 in 10 comment is accurate, and I have no way to prove or disprove it except that it seems to make sense, perhaps simple self insurance still is prudent and my neighbor's situation would be the 1, rather than the 9.

    I'm so confused -- I thought I had a pretty rational approach, you have made me reconsider it.

    Ignorance may actually be, after all, bliss. :confuse:
  • calidavecalidave Posts: 156
    anyone spending $4k/year to keep a $20,000 (at BEST) vehicle alive is a moron.

    Granted, we never know what next year is gonna bring, and we all hope that today's big car repair expense is going to be the last one for a while, but....

    I can see spending that money in year 4...and year 5...but AGAIN in year 6???...AND year 7? not likely
  • jimbresjimbres Posts: 2,025
    Go back & re-read my post. My point (& perhaps my style of writing obscured it) is that past experience has taught me that this $2K expenditure will probably be house related - not car related. I then went on to list all of the stuff in my house (antique washer/dryer, etc.) that will likely head south during the coming year. My conclusion is simply this: if you don't know what tomorrow's crisis will be, you're far better off building up your savings.

    Suppose you spend $1800 on a gold-plated service contract on your new car. Six months later, your cesspool caves in. Wouldn't you have been better off if you had stashed that $1800 in, say, EmigrantDirect.com's 4% savings account?

    (I'm not a shareholder in or an employee of Emigrant Bank. Just a satisfied customer.)
  • jimbresjimbres Posts: 2,025
    There's another way of looking at this, Mark.

    Yes, the $4K per year that your neighbor is spending to keep his SUV on the road seems like a lot of money. Hell, it is a lot of money.

    But the 1st-year depreciation on a new $35K SUV will be at least $6K. So you could argue that your neighbor is actually saving a cool $2,000 per year by fixing what he already owns.

    At some point, of course, he'll grow weary of the hard seats, old magazines & bad coffee in his dealership's service area waiting room, march into the showroom & pick out something new & shiny. We're only human, after all. We can only take so much.

    But your neighbor isn't dumb. I've observed that most folks worry too much about post-warranty repair costs & too little about depreciation. Most of the time, what it costs to keep an old car on the road is less than what depreciation will cost you in the 1st year that you own (or lease) a new car.
  • calidavecalidave Posts: 156
    But your neighbor isn't dumb. I've observed that most folks worry too much about post-warranty repair costs & too little about depreciation. Most of the time, what it costs to keep an old car on the road is less than what depreciation will cost you in the 1st year that you own (or lease) a new car.

    you are right (and don't forget the sales tax on that new car) - but 4k/year for a 7 year old Suburban? Maybe it's smart to do that on a $60,000 vehicle, but there's no way that's smart with a Suburban that is 5-years old and has become a money pit.

    and the car's big depreciation is in year 1, not years 2, 3, 4, 5. So even with 6k depreciation, the guy is "making mone" half-way through year 2.

    I agree with keeping old(er) cars on the road, but not at 4K/year.

    I'm still not sure how you spend $4k/year on repairing a Suburban. It's probably completely rebuilt by now.
  • jimbresjimbres Posts: 2,025
    Something else to consider is what I call the "strand factor" - the possibility that an older vehicle's breakdown might leave you stranded far from home. You obviously want this machine out of your life before this happens to you, particularly if you live out in the sticks. (But I haven't been stranded since I got rid of my cursed Audi 5000 back in '87.)

    Broadly speaking, I don't mind spending $2K annually to keep an older car on the road if - & this is a big "if" - I like the car.
  • Something else to consider is what I call the "strand factor" - the possibility that an older vehicle's breakdown might leave you stranded far from home

    That's my feeling exactly, though I'd take out the "far from home" caveat. I don't care where a car strands me, unless I'm reasonably sure it's a one-time issue, that car is history.
  • LPS car: $54,000.

    Cash up front or mo pay these days, argument can be made that the differences (opportunity cost, e.g.) are minor.

    :confuse:

    Cost of LPS car "just to have it" - $750 per month for 6 years and you own it. If it is one of the cars that has maintenance and/or can be CPO'd (this is why I picked 6 years) from date of service to 100,000 miles or 6 years, it is for purposes of a broad brush analysis said to be literally $750 per month, free maint for 50,000 miles, free repairs for 100,000 miles and probably 2 sets of tires beyond the OEM tires (maybe three sets if the tires are really high performance and possibly four sets if they are off the wall high performance versions.)

    At the end of 6 years the out of pocket cash will be $54,000 for the acquisition and for the miles above 50,000 there will be some maint costs -- oil change every 10,000 miles, "tune up" every 30,000 miles etc. Other maint items (not repairs since they will be effectively free) will certainly be required as well, but let's assume they are really minor (set of brake pads, etc.)

    What will a $54,000 car with 90,000+ miles on it be able to be sold for in 6 years? If the nominal residual after three years is 50% then after another 3 years will it still be worth 50% of that ~$13,500? I assume it ought to be, but someone here needs to speculate since I am totally making this latter part up.

    $54,000 cash out to acquire residual value at 6 years and 90,000+ miles $13,500, acquisition cost $40,500. Cost per year $6,750 (assuming you traded or sold the car at 6 years and 1 day for $13,500) or $562.50 per month.

    Maint during the last 40,000+ miles $1,000? (too low, too high?) -- increases monthly number to $576. Two sets of tires (beyond the factory original) $1,400 (@ $175 per tire.) Monthly number now $595.

    Lease @ 15K per year for 36 months, $640. During the 36 months you may have purchased one set of tires out of your own pocket for $700. Cost of "ownership" for 36 months rises from $640 to $659.44 -- total out of pocket if this car came with factory maintenance = $23,739.84 and at 36 months and 1 day you have nothing and owe nothing and have spent nearly 24 large.

    Rinse lather repeat the process. At the end of 72 months, then, you would be coming up on the end of your second 36 month lease and your OOP for two new cars with full maintenance, etc, would be $47,479.68 and you would have nothing, no car no payment.

    Assuming you did sell your car at 6 years and 1 day in the first example, you would have nothing, no car no payment and you would have effectively put out of your pocket $42,800 ($4639 less.)

    If you keep the car, the monthly payments stop, and your out of pocket is $56,400 (but you have a car, admittedly one with no warranty and one that needs a set of tires.)

    You will have spent $13,600 more over 6 years than the person who leased two cars of the same price in that same time frame.

    Continuing a monthly payment of $640, it will take over 21 months to break even in the amount of cash the person in example one would have laid out. Then your 93 month old car starts to "save" $640 a month. Since you would have the car and have no payments and would have spent the same amount out of pocket (assuming at the milage which would now be ~ 120,000 you had no repair issues, just on going maint issues.)

    Example 1: 2005 LPS "German Car" (Audi or BMW) followed by a 2008, followed by a 2011 that the LPS driver would be driving in month 93.

    Example 2: 2005 LPS "German Car" (bla bla bla) 93 months later in 2011 and at ~ 120,000 miles.

    Both the LPS "drivers" would have between 2005 and 2011 put out the exact same amount of cash over this 7.75 year journey.

    The 93 month old 2005 MY car should have SOME value at 93 months right?

    Should there be a "strand" factor taken into consideration?

    Should there be a "value of the content changes" factor taken into consideration?

    Should there be a "value of improved efficiency, emissions, performance and safety" (that one would hope would accrue over this time period) taken into consideration?

    Should there be a value placed on the "joy or pleasure" that [may] accompany the newer vehicles, even if it is entirely perception based (perception, after all, being reality?)

    I keep being persuaded (by some of the posters here on edmunds) that these LPS vehicles are only sanely looked at if they are purchased either in cash or with below real interest rate deals.

    I call my Audi and BMW dealer (in the spirit of full disclosure) and am told over 75% of the cars are NOT sold, rather leased and that at this point in time the leases appear to be on a path of being "permanently" subvented.

    The allure of no car payments remains, but when I factor in both the objective and the subjective (values), I would rather be driving a 2010 or 2011 MY car in 2011 than a 2005, especially if I knew I had spent the same amount of money during that 93 months.

    Luckily I am not in the market right now, for, I bet someone here will "set me straight" and make the argument that the ONLY sensible and pragmatic and prudent thing to do is to "make a deal, write and check and drive it till the wheels turn square!" And, then, and only then, repeat the process.

    At this point, I can't (under the market conditions that are out there now) make the case for buying (unless buying "used" [CPO'd]at say 25,000 miles is taken into consideration.) :confuse:
  • I think your leasing scene makes more sense than buying except for those motorists who don't take care of the vehicle, and the long -distance drivers that go way over on the miles at the end of the term.
  • bartalk3bartalk3 Posts: 692
    Good analysis, Mark. Very convincing case for leasing. However, what about the intangible thing called "pride of ownership"? What's that worth? Can you put a dollar figure on that? The joy of waxing your own car on Sunday morning and the pleasure of all the TLC you would never give to a leased vehicle.

    I've rented (leased) many an apartment in my day, and it was convenient, but nothing is as satisfying as OWNING your own home (or car?).
  • bdr127bdr127 Posts: 950
    I've rented (leased) many an apartment in my day, and it was convenient, but nothing is as satisfying as OWNING your own home (or car?).

    The funny thing, though, is that most people who "own" their cars or homes don't actually ever own them.... Their bank does! :P
  • I agree there is a value (your value) not the market value mind you, but there is a value that can be placed on pride of ownership.

    I have washed, waxed, dressed the tires, etc, my leased cars and for the 30 - 36 months have a great sense of Pride of Ownership.

    The house car satisfaction is somewhat of an argument that must be based on an assumption that is rarely true. That assumption is that houses and cars either retain, rise or decline in value in synch.

    My brand new house in 1990 has doubled in market value (even in one of the weakest [economic] US states, Ohio), few cars will even retain their value let alone grow in a like period of time (unless the car is/was a collector's car or in some way a vehicle that will or may become a classic or collector's item.)

    As a mortgage amount switches from interest and principal to principal and interest (and even before) it is very easy to turn that principal (equity) into cash with a second mortgage. A fifteen year old car would have little liquidity unless it just happened to be so special and/or so rare that you could convert it to cash by selling it or by finding a financial institution willing to loan against the asset.

    Of course, there is, today, (in some cities) an argument against buying your own house. Generally, buying your own house eventually generates a nice entry on your balance sheet. Generally, the same cannot be said about a car.

    And, with subvented leases (as noted in my example) leasing actually is a decent way to have minimal and predictable impact upon cash flow.

    In my example, above, I assumed the buy of the car was both at 0% interest and was somehow free from sales tax. Conversely, I assumed the lease example included sales tax and did also include a money factor greater than 0.

    Finally, I assumed total expenses from 50,001 to 90,000+ miles would be $1,000 plus $1,400 for tires. It seems that this assumption was perhaps a little light, but I let it stand just in case the car in question was a Lexus (of course the Lexus would NOT have included maintenance for the first 50,000 as would the Audi and the BMW.)

    Now all of this goes to heck in a handbasket if leases stop being subvented. Moreover, although there are still below market financing rates out there today, 0% has become a rare bird indeed.

    Then there is the "high mileage" argument. I assumed 15,000 miles per year. I also assumed that the person who wanted to argue for value would literally have to sell the car at year 6 + 1 day to actually recapture the $13,500 estimated market price. A 6 year old car with 90,000 miles on it may not be able to be sold that quickly 1 day after the payments cease. And, as a practical matter, every day that passes tends to erode ever so slightly the market price of the car.

    If you drive 6,000 miles per year does this equation change in favor of one vs the other? I don't know, but it seems that it would be more desirable to "buy" the car if your total mileage at 6 years and 1 day was only 72,000.

    Of course the cost per mile of the lease would drop too in that example and it would rise if the mileage instead of 15K per year would rise to 20K per year, etc.

    My attitude seems to have come full circle, I will buy commercial and residential real estate, I will rent cars and computers (for business use.)

    Of course conditions change, and this analysis and these conclusions are based on what seems to be the case "today."

    Realistically, it seems hard to imagine BMW, for example, can stop subventing their customers leases. My wife, an attorney, not an accountant not a financial analyst, said to me recently, "My $47,000 BMW is $580 per month, it will be hard for BMW to convince me to pay much more than that for a comparably priced car in 2008." In other words, when she goes back to BMW for her 2008 Bimmer and the price comes in at $47K (or a couple thou more or less) the payment will have to remain in the "range" that they have already established.

    I don't know if she is correct, I know that with that thought process going on, BMW will be hard pressed to convince her to pay significantly more per thousand than she is currently paying. For right or wrong, BMW, then seems likely to continue subventing. Ditto Audi and probably some of the other guys.

    Pricing pressure from Japan, Korea, China! and even as reflected by GM's price decreases (announced this month) are highly unlikely to encourage significant rises from the "we've been attracting customers by subventing" crowd.

    Random Thought/Question

    Why would the Chinese bring a car to market and name it Geely? Haven't they ever heard of the movie of a similar sounding name from Ben and Jen? :confuse:
  • mg808mg808 Posts: 22
    Very good analysis. LPS in any dress is a considerable investment. Buying vs. Leasing has always been a good topic.

    Right now, Leasing looks to be the better value due to the "nice" monthly payments and lower out of pocket.

    Why doesn't everybody lease? I understand your theory of 6year lease vs. 6year ownership. Your analysis is a perfect scenario, kind of like having the car in the garage and never driven.

    I can't see how and why people would every purchase a car outright if it was true.

    If I can go into a dealer and lease $50K car with $640 no questions asked, then I will do it. But, the endless fine print and gap insurance this and fine print that, its never $640.

    BMW, Mercedes & all the LPS manufacturer's lure the buyers by saying, lease a LPS for $599 for 36months....with $3500 due at inception. Then the fine print comes and in the end, you probably will owe more than the $25K they calculated.

    Leasing is the dealers advantage. If it wasn't we would never have the option of leasing.
  • jimbresjimbres Posts: 2,025
    Good post, Mark. I appreciate the time & effort that you clearly put into it. You've given us a lot to think about.

    The only thing that puzzles me is your seeming belief that other posters here are insisting that buying (as opposed to leasing) is the only right way to get into the game.

    I haven't seen that here - not on this board, at any rate. All of us would agree, I think, that there is no single correct solution to this complicated business of acquiring & operating an automobile.

    My experience has taught me that the economic "sweet spot" of a car's life is the 4-year period that begins in its 5th year.

    By this point, you've paid off most or all of any loan that you might have taken out to finance the initial purchase. Depreciation, which is at its fiercest during the 1st 4 years of a car's life, levels off significantly. And although the warranty has expired by now, repair costs are manageable - assuming, of course, that you've maintained your car properly. Also, you're likely to see a drop in your insurance premiums. (This seems to be the case in downstate NY.)

    For me, the cost per mile during these years is as good as it gets. I'm not sure, though, that there is much benefit in keeping your car beyond its 8th birthday & I know that I will probably never again hang onto a car for more than 10 years. (I did keep 1 car for 13 years. That was a mistake; I won't do that again.)

    So this is what works for me, but I wouldn't dream of pushing this approach on someone else. I also wouldn't rule out leasing in the future, although I've always owned & must admit that I'm not entirely comfortable with leasing.

    Some years ago, a fellow who posted on the Edmunds Audi A4 board (but who has since disappeared, unfortunately) offered what I've always thought was the most convincing argument in favor of leasing. Put simply, it came down to this: "I work hard at a stressful job. Leasing may cost a couple of extra dollars per day, but a new car every 3 years gives me real pleasure & makes my long hours more bearable."

    I've never come up with an effective rebuttal to that. Our vices, after all, are what make us interesting.
  • bartalk3bartalk3 Posts: 692
    Another advantage of leasing: not having to go through the hassle of selling your car privately to dozens of strangers who come to your house and want to take it for a long test drive, or trade it in to a dealer who will always give you much less than you know it's worth.
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