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As with most kids, my daughter knew better than I did and "leased" her current car. I know this opens an entirely different discussion, but thought it was worth mentioning since her lease will be "up" in a few months. She put $3500.00 down on the car, has made three years of payments on it, as well as paid for maintenance... and now she'll be walking away with "nothing" in a few weeks. The "cycle" begins all over for her now.
Yes, the lease payments were substantially less than a loan payment would have been ($249/mo as opposed to $369/mo), BUT she's paid for roughly three quarters of the MSRP that car originally had - and she'll have to get a loan if she wants to keep it now, OR go through the leasing process again for another car. Essentially, she gave a substantial down payment, and made three years of payments and maintenance bills - all to walk away with nothing now.

Unless you can write a lease payment off to a business you own or operate, leasing is probably not very beneficial for an individual ... especially now with record low interest rates on car loans.

Just a little more food for thought.
Agreed - we leased once with the intention of purchasing at the end. When I went in to talk to them lo and behold they wanted to charge me another $500 documentation fee or some other silly thing. I told them they could keep the car. Went somewhere and bought a new car, but not having a trade-in really made the payments high.

I'll never lease again. I suppose if you enjoy perpetual car payments or get a tax break somehow then it could work for you.

I bought a 91 Stealth ES in October 1990. Paid it off, kept it 12 years and 87k miles, sold it for $4500.
 

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Agreed - we leased once with the intention of purchasing at the end. When I went in to talk to them lo and behold they wanted to charge me another $500 documentation fee or some other silly thing. I told them they could keep the car. Went somewhere and bought a new car, but not having a trade-in really made the payments high.

I'll never lease again. I suppose if you enjoy perpetual car payments or get a tax break somehow then it could work for you.

I bought a 91 Stealth ES in October 1990. Paid it off, kept it 12 years and 87k miles, sold it for $4500.
Remember many people including members here never keep the car long enough to pay it off as they get the newest greatest model coming down the pipe. :smileup:
 

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Discussion Starter #43
My in-laws are "lease people"...don't know if they write theirs off as a business expense but they like having a new car every 3 yrs. They had been leasing Jaguars but my MIL most recently switched to Audi. Believe my FIL still has a Jaguar. Having said all of that, they're in their 70s so I'm sure not having to wheel and deal every 3 years trying to sell the car they bought (had they gone that way vs leasing), has a lot to do with it. They have the money, so it's less headaches for them and they have peace of mind that the car they're driving is never more than 3 yrs old and should not be a question when it comes to reliability.

The only advantage is see in leasing is it allows you to afford a nicer car than your budget would normally allow when buying.
Agreed, but you walk away from the lease with nothing (except possibly additional fees for mileage or damage). If you want to keep the car, you have to buy it - a new negotiation process begins. :4-dontknow: Leases work in certain situations, but for most people, buying the car makes the most sense - especially now with incredibly low financing rates and incentives.
 

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-Refinancing-


Here's an old consideration that has many people making mistakes with current interest rates being so low now.
As I alluded to in the "Payments" section, all financing companies "load the interest" for the entire loan to the beginning of the repayment schedule. On installment loans (specified purpose loans for a specified time), the "Rule of 78th's" applies the interest and principle amounts inequitably for consumers - beneficially for the banks.​

IF YOU CURRENT CAR LOAN IS MORE THAN 50% PAID (i.e.; you've paid 3 years on a 5 year loan), AND
if you're NOT in dire financial straits, you WILL NOT benefit from refinancing your existing loan!

All you be doing is paying more interest on a car you've already paid the majority of the interest of the initial loan on! Your "payoff balance" will be more than half the amount you borrowed due to the way the payments are applied.​

This was actually recommended to me by the dealership and confirmed by my credit union. Back in June I was pre-approved for $35k by my CU. I started my Challenger search one week later and, as I was finalizing the deal with the fleet manager, he recommended financing through Chrysler Financial to receive $1000 in consumer cash incentives. I initially declined because the rate was 2.99% and I already had locked in 1.69% with my credit union, but the fleet manager ran the numbers and showed me that the difference was less than $100 and he advised that after 4 months, I could re-fi the loan anyway and recoup the interest savings on top of the consumer cash incentive. I called my CU and confirmed I could apply my pre-approved loan in this manner.
 

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Agreed, but you walk away from the lease with nothing (except possibly additional fees for mileage or damage). If you want to keep the car, you have to buy it - a new negotiation process begins. :4-dontknow: Leases work in certain situations, but for most people, buying the car makes the most sense - especially now with incredibly low financing rates and incentives.
I hear ya...but like I said, at their age, my in-laws aren't worried about walking away with anything. They're not looking to keep the car at the end of the lease.

I've only had one experience with a lease, when the company I worked for switched from Ford Escort (station wagon) to Chevy Astro mini-vans (cargo style, 2 bucket seats, a cage & no side glass other than in the doors). That took us from having 2 vehicles with which we could shuttle kids around, to only 1. So, we leased a Saturn with the intention of using it sparingly (well, that was MY intention) so that we could turn it in at end of lease and walk away from it. The thinking was my employer might go back to passenger cars after the mini-van experiment. As I didn't really have a "need" for another car IF the company provided a passenger car, I was hoping for the min-van experiment to die a quick (or relatively quick...3 yrs) death. The reason for "my" in caps a sentence or two back was because my wife had other ideas. She saw a new car sitting in the driveway, rarely being used and decided she wanted to drive that instead of the Olds Delta 88 she had been driving. We battled it out and I gave in out of frustration even though I knew we'd never turn that car back in. She used it for the 3 years, ruined the interior and busted the passenger side mirror off. I replaced the mirror on my dime (well, a mountain of dimes) but the interior was stained beyond help. Plus she ran up the miles on the car as if gas never went above a penny a gallon. Everything I figured (and feared) would happen, did and there was no way we could turn it in and not get hammered with penalties for over mileage and overall condition of the car. So I had no choice other than to buy it. That was my last involvement with a car lease. Hard to believe, huh? :D
 

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Discussion Starter #46
Buying A New Car - More Tips - Trade or Sell Your Trade

With the 2015 models coming out now, and the addition of the Hellcat to the lineup, I wanted to share a few tidbits related to the original topic of this thread; Vehicle Financing Tips.

A few things I wanted folks to consider when buying a new car are related to the choice of trading-in vs selling outright. Each have their benefits and drawbacks.
Obviously, trading in is easier, but doesn't always bring the "book value" for your car, so many of us decide to sell our trade "outright". But there are a few things you should consider before deciding which way to go.

Let's use the new Hellcat for an example.
We're talking about a $60K+ car here. Where I live, sales tax is 8.25%, so I'm looking at around $5,000.00 in sales tax on a cash deal on a new Hellcat. While sales tax can still be a tax write-off (if you itemize your returns), you have to spend it to write it off, and I'd rather not spend it. :sad:

IF you sell the car you'll be getting rid of outright - to put cash down on the Hellcat, you could have to pay "Income Tax" on the sale of that car IF you sell that car for more than you paid for it. "Flipping a car" for a profit can result in the profit being taxable income. :shakehead:

IF
you trade-in a car on a new car, the trade-in value is removed from the cash sale (taxable) price.

Let's say you trade in a Corvette on a $65,000.00 Hellcat, and the dealer will give you $35,000.00 for the Corvette on trade. Now you pay sales tax only on the $30,000.00 difference.
By doing the math, at 8.25% sales tax;

the tax on a "cash deal" on the $65,000.00 Hellcat would be $5,362.50. The total sale price (before Title, Registration and Inspection fees) would be $70,362.50.

By getting $35,000.00 for your trade and paying 8.25% on the $30,000.00 difference, the sales tax would be $2,475.00. This saves you $2,887.50 in sales tax. In essence, you just increased the dealer assessed value of your car "on this deal" from $35,000.00 to $37,887.50. The cash price now of the Hellcat (before Title, Registration and Inspection fees) would be $32,475.00 .
You just took $2,887.50 off the table and put it back in your pocket. :smileup:

The reason I'm putting this out here is because we'll all face this dilemma when we buy our next car. And we'll all feel at least "a bit" insulted when the dealer offers us less than what we feel our car is worth.

Another consideration (especially in lieu of getting a Hellcat or other high-demand new car) is the fact that the dealer will be inundated with trade-ins for the new model. In my case (and I'm sure others like me), the dealer will have loyal Challenger owners rolling in "ad-infinitum" looking for top dollar on their trade for a new Hellcat. The result is a lot full of used Challengers, and diminishing return as those cars pile up on the dealers' lots..... "He who hesitates is lost", or in this case. "...loses more". So, don't be surprised by what you feel is a "low trade-in offer".
I guess the best strategy is "get there early" or "wait until the dust settles". :4-dontknow:

A last consideration (for me, anyway) is the location of the dealership.
If you're doing business with a local dealer, this point is moot. BUT if you're doing business with a dealer from another state or a good distance away, trading-in eliminates the necessity for arranging/paying for transportation to pick the new car up or having it shipped (and paying more taxes).
The cost you have when trading-in your current car is for gas and tolls, and if necessary, food and lodging during the trip there and back. A "cash deal" will require more planning and cost.


Granted, there are people that have no concern for monetary costs, and are motivated only by want. I'm not one of those people, and I think most of us here aren't either. I work hard for my money, and want to keep as much of it as I can - to spend as I wish.
I hope this helps a few others to save some of their money while they get what they "want". :smileup:
 
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