Buy, Finance or Lease - the Car Conundrum

[don]

Pre-Owned Lease Matrix

Cash sales for new cars are the smallest return for a dealership.

Financing a new car is much better.

Leasing a new car may be better still.

Pre-owned sales may be the best of all. Handsome return realized immediately at the point of sale.

Hitting the money on the 3-year lease rollover to another new-car lease is the sweet spot.

When that occurs, you have combined leasing with creating another pre-owned.


Does that sound about right?

[GRG55]

Re: Pre-Owned Lease Matrix

Cash sales for new cars are the smallest return for a dealership.

Financing a new car is much better.

Leasing a new car may be better still.

Pre-owned sales may be the best of all. Handsome return realized immediately at the point of sale.

Hitting the money on the 3-year lease rollover to another new-car lease is the sweet spot.

When that occurs, you have combined leasing with creating another pre-owned.


Does that sound about right?

We expect to be invited to the grand opening of your new car dealership don!

(and don't think you're going to get away with trying any of those tricks on us iTulipers...we're only coming for the donuts)

[shiny!]

Re: Pre-Owned Lease Matrix

Cash sales for new cars are the smallest return for a dealership.
Financing a new car is much better.

It shows when you want to buy. The Hyundai salesman was nauseatingly solicitous until I said I'd be paying cash. Then he couldn't get rid of me fast enough. He was in such a rush to move on, he forgot to disable the anti-theft device that prevents the car from being restarted when you take it out for a test drive. 118 degrees that afternoon... I drove off the lot, stopped to pick up my elderly cat at the groomer's on the way home... and the car wouldn't restart. I had the pleasure of sitting in a hot, sweaty groomers shop for an hour, waiting for someone from Hyundai to come out and unlock my car.

[Woodsman]

Re: keeping the car forever

204K and going strong on my 2001 Civic EX.

[don]

Re: Pre-Owned Lease Matrix

We expect to be invited to the grand opening of your new car dealership don!

(and don't think you're going to get away with trying any of those tricks on us iTulipers...we're only coming for the donuts)

Since Mr Don's Dealership will be located in South Florida, we feel it's wise to offer donuts and bagels.

Mozel Tov to all our future leasing customers - we love you

[lakedaemonian]

Re: Pre-Owned Lease Matrix

Since Mr Don's Dealership will be located in South Florida, we feel it's wise to offer donuts and bagels.

Mozel Tov to all our future leasing customers - we love you

Since it's Florida, and if Don's selling pick up trucks.......I'd suggest donuts, bagels, and free shotguns with a box of shells with every purchase.

[don]

Re: Cash for cars

lek: Patience. :-) We are all in the same swamp! I agree with don...

[GRG55]

Re: Pre-Owned Lease Matrix

Since it's Florida, and if Don's selling pick up trucks.......I'd suggest donuts, bagels, and free shotguns with a box of shells with every purchase.

Last time I was in Florida was more than a decade ago, in the Palm Beach area. Judging by the dominant numbers of them on the road I was left with the definite impression that the really big money in the Florida car biz was flogging white Cadillac de Villes. However, like many ancient Floridians, the venerable de Ville has passed away.

But don's in luck. Now he can flog a white Cadillac and a pick-up all in one lease. Ain't bailouts wonderful.
How much is the headache rack option to hold the shotgun don?

[don]

Re: Pre-Owned Lease Matrix

Shoot. I don't know, just gettin' into the biz.

I'm in PBC (Palm Beach County, for the uninitiated) where pickups are not the norm, at least in my burg. Northern Florida looked like pickup country when I drove through. Sat at a bar with a couple that loved the hotel/bar/restaurant combo we were staying at. They said they came a couple of times of year to get completely wrecked and didn't even have to leave the premises. Bemoaned what had happened to the "real" Florida.

[wayiwalk]

Re: Pre-Owned Lease Matrix

When I bought my commuter car 5 years ago, I shopped around for something I could park in high(er) crime areas without attracting attention, would require minimal maintenance on nice features (so I avoided them, ie, no power windows, the basic engine, boring stereo package, boring interior trim etc).

I had made up my mind on the particular car before I even stepped on the lot, did my homework on all the dealerships, etc. Got the salesman down and within $150 of my target price (which he didn’t know), and then got him to get another $200 off when I made like I was thinking, “I dunno, maybe a Toyota”.

After the price was agreed, I also got the standard $500 for the trade in (a trade in that was a basket case).

Then, I confirmed that I’d be able to use my “GM Card” bucks (“Yes”). If they had any idea during price negotiations I had almost $3,000 GM bucks to apply to a new vehicle purchase, I don’t think they would have bought my hemming and hawing on price nor that I was even considering anything other than GM.

Then I went to talk to the “finance guy”, and told him….I was going to pay CASH.

“But I can give you no interest for 12 months and then just 3% (or whatever it was, I can’t recall now)”

“No, cash is fine. It’s nice not having debt”

He looked at me like I had two heads.

I think the whole thing was under $11,000, all in, fees and taxes included. Not bad for a car which is just getting worn down by the day and does as good a job getting your from point a to b as a high end SUV or luxury car.

The part that I looked at him with two heads – was when I was told I could drive off the lot with the new car, and if I’m not mistaken, they took a personal check. I was like, are you kidding me.

But of course, this was back in the days of liars loans and such, I’m sure they’ve seen thousands of unqualified buyers get “credit” when they shouldn’t have.

Long story short – there’s been minimal maintenance so far on this boring 4 door chevy cobalt, which generally gets good gas mileage and transports me to where I need to go (and a handful of kids in a pinch). The things that will need replacement are the same things that ultimately need replacing on all cars….but on this smaller, domestic car, tend to be inexpensive.

Yes, I’d rather have a “nicer” car, but the great thing about putting in as little as possible is that when gas doubles in price, I’m “in” for less cost on a car I may choose to get rid of to upgrade to a car with better gas mileage.

Which brings up another thought, which was partly touched on elsewhere in this thread.

A lot of auto magazines or personal finance discussions talk about the importance of resale value of certain makes of autos. If you discard the consideration for higher quality or prestige, you basically pay for that higher resale value upfront, so in essence, aren’t you basically making a loan to the car companies for the same pile of metal/rubber/glass/plastic compared to other models? I look at it that, for a car I’m going to run into the ground (and hopefully one with a reasonable lifecycle cost, ie, on the low side) and I’d rather have the additional $10K to spend/invest elsewhere at that point of (cash) purchase.

Anyone else have thoughts on that aspect of “high resale value”?

[photoncounter]

Re: Buy, Finance or Lease - the Car Conundrum

I proudly drove my 92 Honda Accord for 2+ years after grad school. If I wasn't introduced to itulip through this very article, I would have ended up buying a BMW 3 series (probably 2nd hand) or a Pontiac Solstice I ended up saving and buying yello stuff in 2008.

When I decided to buy a more reliable car, I bought an almost new (15k miles) toyota corolla S in a private sale at a great price cause of toyota recalls (2010) with extra warranty. According to EJ, it was also time to make big ticket item purchases, before inflation started creeping in. Current price is still close to what I paid for it. Anyways, I won't be buying a brand new car and will buy a cool car only when I have extra cash lying around.

My rule of thumb has been -- only buy a car that I can drive worry-free, that is a scratch or a hit and run will not give me sweat and I am comfortable parking the car in any legal parking spot, worryfree, etc (you get the drift).

santafe2 is correct. It's a pre-financial crisis classic titled: "How Much of Your Car Should You Finance? Zero percent"

EJ started the thread in November of 2006 and the last post was by don in September of 2010. Not bad in this world of 15 second sound bites and short attention spans

Here's the link:

http://www.itulip.com/forums/showthr...e-Zero-percent

[lakedaemonian]

Re: Pre-Owned Lease Matrix

A lot of auto magazines or personal finance discussions talk about the importance of resale value of certain makes of autos. If you discard the consideration for higher quality or prestige, you basically pay for that higher resale value upfront, so in essence, aren’t you basically making a loan to the car companies for the same pile of metal/rubber/glass/plastic compared to other models? I look at it that, for a car I’m going to run into the ground (and hopefully one with a reasonable lifecycle cost, ie, on the low side) and I’d rather have the additional $10K to spend/invest elsewhere at that point of (cash) purchase.

Anyone else have thoughts on that aspect of “high resale value”?

New Zealand has a funny vehicle market.

About 20 years ago, New Zealand allowed the parallel importation of late-model used vehicles out of Japan.

Japan has a VERY weird vehicle market where you are disincentivized to own older vehicles.....bureaucracy intentionally created to cause late model vehicles sales churn.....up to the point of having a massive used vehicle export market to places like New Zealand, a back door into the UK, and now Russia hoovering up a big chunk of them.

Anywho, back to NZ.

Toyota NZ got into the game themselves to better control the 2nd hand market by developing a very large Genuine Pre Owned program called "Signature Series" to differentiate their own factory backed 2nd hand vehicles with those from the used car shark down the road.

The new vehicle market is pretty healthy with good numbers sold per head of population here, taking into account this crazy huge late model used car import market.

A customer and business acquaintance of mine owns most of the BMW dealerships here, and I know a bunch of his senior staff and customers.

If you buy a brand new BMW here at retail, and drive it around the block to trade in, you are going to bleed enough money to cause a heart attack or stroke.......Your could be looking at an easy 30-45% haircut.

It's insane, and I suspect even a good bit worse than a market like the US.

Of course THEY will kill it on recycling the 2nd hand cars in their own branded pre-owned program.

Apples to oranges......ever though they are both apples.....one just has an orange brand around it. ;)

[GRG55]

Re: Pre-Owned Lease Matrix

...Anyone else have thoughts on that aspect of “high resale value”?

Bizarre isn't it?

Can you think of ANY other new consumer durable with a sales pitch that includes the future "value" of selling something you haven't even purchased yet?

However, just like a washing machine or a new furnace that you don't replace until it is worn out, the cheapest way to own a car is to buy a good used one (or new if one can afford it), maintain it well, and drive it until the wheels fall off...and don't replace it any sooner than that.

[jpatter666]

Re: Pre-Owned Lease Matrix

Bizarre isn't it?

Can you think of ANY other new consumer durable with a sales pitch that includes the future "value" of selling something you haven't even purchased yet?

Housing. Even worse levels of con job as well....

[GRG55]

Re: Pre-Owned Lease Matrix

Housing. Even worse levels of con job as well....

"Housing never goes down". Just ask Bernanke...