Buy vs Lease: Is this a good deal?

No offense, but this is exactly what is wrong with America.

You have two virtually BRAND NEW vehicles, upside down on both by a substantial margin on each, 5+ years which to me says at least 6 year loans, and you want to dump them and lose more money to lease a couple more cars you can't afford, each alone worth more than the two you are upside down on combined?

If you aren't interested in buying vehicles, why on earth did you buy a 2011 within the last year, and turn around and do it again for a 2012 within the last what, six months?

$10k downpayment to lease with $1000+ payments for the duration? You do realize YOU are paying off the loans you are upside down on, NOT the dealer. The dealer is rolling your negative equity into the lease, and knows you don't understand that. Wait for the buyout/balloon payment at the end of the lease too.

Live below your means. This isn't even a lease vs. own debate, this is just common sense vs. no common sense. Somewhere America has really lost this, where every college grad (not saying you are one) or anyone thinks they can afford/need a car far beyond their means. Borrowing to the hilt, we still haven't learned our lesson.

If I were you, OP, I would probably just stick with what you have. Your cars are new, eventually you will own them unlike a lease, and barring totaling them, eventually you will crawl out from being upside down on them once you get them paid off, should you manage to keep them for six years or however long your loans are for; really, I think you are stuck in that situation.

eltigas said:

oh, and no offense, but I can afford them, just want to get off this whole "up side down" issue by leasing and not running into these issues again, 12/24/33/36 months from now... and all I'm asking is whether or not, comparing all 4/5 vehicles and terms, if this is a good deal.

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Why not just put the money for the downpayment into paying off your current loans sooner? That's what I'd do, then once you fully own your current cars keep them until you can actually afford to buy a new one. There's no reason to change cars that often.

eltigas said:

trying to understand what you mean by "you'll be paying off the negative equity, not the dealership."

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Exactly what I posted. The dealer is not going to give you several thousand dollars more than the trade in value without getting that money back from you elsewhere in the lease. Why would they just give Joe Schmoe X thousands of dollars and start themselves out X thousand in the hole on your lease? Like Homer Simpson, Mercedes didn't get rich by writin' checks.

If I walked in without a trade-in they would ask for $4,900 downpayment anyway (for both vehicles), it says so in the dealer's website, under specials.

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$4900 is a LOT for a lease downpayment, I wouldn't really call that a special. There are much better leasing deals to be had, that's $4,900 per car going right out the window.

Now sure, I'm sure they're not loosing money here, and there's a trick behind the deal, but I was hoping you/someone focused on it? Or just told me whether or not this is in fact a good deal/change?

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They are going to make it up in the monthly payment, the downpayment, or the buyout/balloon payment at the end. I'm not them so I can't say exactly what they are scheming to willingly pay thousands more than even they value your cars to get you into theirs, but I assure you they will come out ahead in the end.

In regards to the common vs no common sense, to be honest, these ARE better cars, why did I buy?

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I'm not sure, why did you? Twice? Very recently?

oh, and no offense, but I can afford them, just want to get off this whole "up side down" issue by leasing and not running into these issues again

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Honestly if you could afford them, you would've put a substantial enough amount down to not be upside down; if you truly can afford them, you should be able to pony up the cash to get them back to upside right. Running into a pair of leases to get out from under them strongly suggests to me that you are trapped and can't afford them and are desperate for a way out. What I don't understand is why if you are going to put $10k down on leases to get out from being upside down on your current two vehicles, why not just apply that $10k to your current loans to get out from being upside down on your current two vehicles, without getting trapped under two more vehicles?

Remember, just because you can make the payment doesn't mean you can really afford the car--I could buy a car with an $800 payment and I assure you, the payment would be made every month and early at that, but I still realize I couldn't actually afford the vehicle. I could also knock the payment down to $500 a month by stretching the term to 84 months, but again, I couldn't really afford the vehicle if I had to drag it out that long. Making the payment and affording are two different things in my view.

Long story short, no, it's not a good deal.

puma1552 said:

No offense, but this is exactly what is wrong with America.

You have two virtually BRAND NEW vehicles, upside down on both by a substantial margin on each, 5+ years which to me says at least 6 year loans, and you want to dump them and lose more money to lease a couple more cars you can't afford, each alone worth more than the two you are upside down on combined?

If you aren't interested in buying vehicles, why on earth did you buy a 2011 within the last year, and turn around and do it again for a 2012 within the last what, six months?

$10k downpayment to lease with $1000+ payments for the duration? You do realize YOU are paying off the loans you are upside down on, NOT the dealer. The dealer is rolling your negative equity into the lease, and knows you don't understand that. Wait for the buyout/balloon payment at the end of the lease too.

Live below your means. This isn't even a lease vs. own debate, this is just common sense vs. no common sense. Somewhere America has really lost this, where every college grad (not saying you are one) or anyone thinks they can afford/need a car far beyond their means. Borrowing to the hilt, we still haven't learned our lesson.

If I were you, OP, I would probably just stick with what you have. Your cars are new, eventually you will own them unlike a lease, and barring totaling them, eventually you will crawl out from being upside down on them once you get them paid off, should you manage to keep them for six years or however long your loans are for; really, I think you are stuck in that situation.

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Good advice - may seem harsh - but he wants you to see your bad decisions and shock you into a different mindset. Embrace it!

Spink10 said:

Good advice - may seem harsh - but he wants you to see your bad decisions and shock you into a different mindset. Embrace it!

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Thanks, basically.

We as a society try to avoid consequences, and as a result, we make the same bad decisions over and over again and don't learn.

Stick with what you have. Take care of them so they last a while, pray you don't get in an accident, and stick with your brand new, perfectly fine cars until you own them outright and even beyond that when they are paid off, keep them for awhile and keep throwing $700+ a month (what would be your payments) into a savings account for a few years and next thing you know it you'll be able to go buy a car or two brand new with a nice down payment + your trade values, and I bet your cars won't even be ten years old by then.

puma1552 said:

Thanks, basically.

We as a society try to avoid consequences, and as a result, we make the same bad decisions over and over again and don't learn.

Stick with what you have. Take care of them so they last a while, pray you don't get in an accident, and stick with your brand new, perfectly fine cars until you own them outright and even beyond that when they are paid off, keep them for awhile and keep throwing $700+ a month (what would be your payments) into a savings account for a few years and next thing you know it you'll be able to go buy a car or two brand new with a nice down payment + your trade values, and I bet your cars won't even be ten years old by then.

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Depending on the terms of the loans usually you wouldn't be right side up with some equity until the 3.5-4 year mark, more than likely closer to 4 years.

As far as your balloon payment comment it's a moot point since he is talking about a lease. If the residual is too high he just lets the car go at the end of the lease. Lease payments will never increase over the term of the lease, and if the residual is too high you just turn in the keys after the lease term is up.

While the ops situation isn't ideal to get out from under the negative equity he has it's not entirely too bad either. With that huge down he isn't rolling anything in to the lease, he is paying it up front at lease inception, maybe I misunderstood what he said, but thats how I saw it since there is a abnormally huge down for a lease.

OP look up the new numbers, this is all I could find on a quick google search. Knowing this and how it works will help you with the deal if you decide to go forward. Mercedes-Benz Financial's January buy rate lease money factor and residual value for a 30-month lease of a 2012 GLK350 4Matic with 15,000 miles per year are .00135 and 54%

I lease all my cars, mainly because I get bored of them and want the newer model or to drive a different brand car all together. I really like what I have now (2012 Audi S4 Prestige) but considering its only a month old to me that might wear off in 34 more months. Either way even if I decided to buy my next car, which is unlikely, I would trade this one in for a newer model. Purchasing a leased vehicle at the end of the term is a big no imo.

Look at purchase rates too, when I leased my current car the monthly payment difference was only $160 ish between buy and lease. Audi tends to make their residuals just right or with some equity at the end so their lease rates tend to be on the higher side. BMW tends to leave you with negative equity at the end but the lease payments are lower, Ive never shopped for a Merc so I have no experience with them.

Good luck to the op whatever you decide to do.

I've gotta be honest with you. 10k down on 70k (2 cheap MBs). You understand that you could own 33% of one of the new MBs or 50% of a 2010 GLK or 2010 E-class for that down payment alone.

Are you leasing them for the tax-deduction? I really hope so.

I also agree with the American comment, as most households I know with low/mid-6 figure salaries don't even buy one new MB per household (in Germany). Hell, most people I know in that income bracket, use the subway in the winter and ride a bicycle to work when the weather is good.

What am I missing here?

edit: also having an E- or GLK-klass is a pretty "lame" dream car. They're old people's cars (at best). In that price range, you could get into an Audi RS3 or a BMW 1M.

eltigas said:

thanks again for the replies. I sincerely appreciate it.

I guess I was too focused on the fact that:
1) I'm looking at a $140-$390/month difference for two undeniably better cars (maybe even $ less) Sure, there's still the issue of owning vs leasing.
2) I do have around $10,000 of negative equity on the vehicles I own, so I guess I saw this as a "way out" of a mistake I made last year. But I guess you're saying that in your opinion, this would be another mistake?

I guess the issue here is that I don't see this as something I want to own. What I see is that I'm paying $709/month for Y car and with $850-$1100 I would drive Y*3,4,5,6 (subjective) in quality.

I'm a young guy, I have a pretty safe and amazing job, make (very) good money, always wanted a mercedes, dream car, this opportunity came, thought it was worth pursuing.. maybe not. guess i was hoping for someone to focus on the numeral facts and own vs. lease, and chrysler/jeep vs mercedes, and what I got vs. deal offered.

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...Please focus on the details on the message, no need to over generalize, be sarcastic, funny (?) and patronize. Don't even need to get upset over this, but trust me I make a pretty good living and I could wake up tomorrow and go buy an e class, cash.. You don't know me, I just asked you focused on the numbers and info I gave you. Guess you preferred the other route.

It's called priorities.. the $10,000.00 and $1,100.00/month is something I can (easily) do. These numbers are limits I set myself, from the priorities I have. It could easily be $30k DP and $2k/month payments, it's something i have, but something I don't want to do..

whatever..

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If you're that flush, do what you like. Being rich is all about living the high life! I've got a car I love right now, and it's paid off, but it took driving a couple Ferraris to realize that they're not really worth the money. Do girls walk straight up and throw themselves at you? Yes. Is it nice to drive a nicer car? Sometimes, sometimes not. Can life throw you a curve and you find yourself not so rich? Absolutely, says the man who once had (among other things) a Porsche 930 Turbo, two houses and a building that took up an entire block in Los Angeles, and Honda as a "permanent client."

I'm done with leases. For me, it was a lesson learned quickly. You can sometimes come out with relatively less damage in a lease, but it's still damage and a waste of money. I just hope you want them for *you* and not for some imagined status, because anybody who knows better doesn't care what car you drive, just like people who've "made it" for real are usually much cooler and grounded than wannabes who haven't really made it, and are complete, flaming ******s.

On a positive note, there's something to be said for fulfilling a dream, because once it's reached, you can move on to something greater. I know firsthand that even a new Ferrari gets ordinary really quick.

EDIT: This is in response to e^2Studios

You bring up some good points, I would say that in regards to the first comment, that means you still aren't putting enough down if you are negative into the three year mark. IMO for a $30k car you'd need around $10k+TTL down to be in a comfortable position, and pay aggressively on it the first year (i.e. more than the minimum payment). You really should never be upside down at all IMO, even after suffering the drive-off-the-lot hit.

The one thing I'm noticing with the OP though is the classic mistake--worrying about the price of the payments, not the price of the car. Even with a lease, it's good to think about the price of the car in terms of how much you pay over the years in payments + down + residual/buyout and see where things land in comparison to having financed it for the same amount of time and trading/selling etc. at the end of the term to see which one is favorable. Like I said I haven't looked into Merc's terms for the deals, but like you I know he's paying that negative equity, and as you said the majority of it is likely on the front end with that huge down payment.

I also agree on buying out at the end, that's not a wise move at all. I've seen many people go that route and end up taking a 4 or 5 year loan to buyout a vehicle they had already made payments on for three years under lease. One thing to think about with a lease though, OP, is that you still have to save for the next down payment on top of the lease payments, regardless of whether you plan to buy or lease next time around, since obviously you can't use the car's trade-in as your downpayment as you could with a loan/purchase (of course assuming you weren't upside down). This is one way in which people get stuck buying out at the end of the lease; they don't have a down payment to put towards either a new lease or purchasing a new car, and then they get stuck with what they have.

OP we are trying to help you. You can tell me all day long that you can buy an E class cash and that you can afford $2k per month in payments and then teach me about priorities, but if you really had your priorities straight you wouldn't be $10k in the hole, and if you could really afford an E-class cash then you wouldn't be here asking us how to get out of your two brand new cars.

I've given you my advice OP. Stick with what you have, pay them off, and take care of them and drive them until you can afford something else comfortably.

acidfast7 said:

I also agree with the American comment, as most households I know with low/mid-6 figure salaries don't even buy one new MB per household (in Germany). Hell, most people I know in that income bracket, use the subway in the winter and ride a bicycle to work when the weather is good.

What am I missing here?

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I don't know, but there's another thread on the front page of this forum about a twenty something with a quarter million dollar budget, apparently.

Seems to be a lot of twenty somethings here on MR who have $50k, $100k, quarter million to blow on cars.

No.

eltigas said:

First off, thanks! Finally someone that decided to actually read my initial comment and not make it about me as a person, but about the deal (what I have vs what they offered). That's exactly how I feel, don't really care about residual, or money factor, (maybe I should, here's where I wanted to get advice/help?) all I'm looking to get is the right car, for the right monthly payment.

You need to care about two things with a lease, the money factor and the residual. Both are key factors to your payment as well as what the car is valued at when your lease is up. If you come out having to turn in the car most high end manufacturers have whats called a key fee, so you pay $300-$500 to give the car back to them. I've never paid one, but I've always been able to squeeze some equity from my leases and use loyalty or incentive offers to help get me in to the next one.



Could you please explain this further? I was able to cap the DP at $10,000.00 . And again, I initially didn't see this as a bad thing since they would take the two cars I own off my hands, paying what I owed, which in reality (according to kbb and others) is in fact approx $10,000.00. So I see it as a lease without DP, but sort of paying off my two cars + getting the lease... or an ideal combination of the two.

So basically you are paying off the negative equity for both your cars when the lease is started. You are paying nothing down on the lease and rolling the tax/license in to the lease. The dealer might be covering your first payment for you, at least it seems that way from what you've said. In a lease its nearly impossible to roll much more than 1-3k in to it, there are set limits each company has and they are very small usually. The whole point to this is they don't want the car back, they want you to trade it in so the dealer buys it (they offer incentives for this to dealers on the back end), or they want you to buy it at the end of the lease.

If the residual is too high you won't be able to get financing too easily or it may be too expensive. Most places again have limits, so x car is worth 5k but the residual is 10k, no way you're getting a loan for that. You just give back the keys in that case. The flip side to that is the leasing company doesn't want to see this, if they get the car back they wholesale it which means they lose money on the deal most likely. BMW got themselves in a huge mess in 06 ish, they had the residuals set too high as well as the MF being off. When the car market fell from under them they were left with a surplus of BMWs coming off lease that no one bought and the dealers wouldnt touch. Long story short, this is why they set limits as to how high that residual can go, and likely why you're paying 10k up front.



Could you please help me understand this? I'm new to leasing. The lease offers I found online are all based off of base vehicles, and the ones I got the deals above all have options, including but not limited to: nav and rearview camera.

Money Factor is basically the interest rate, how much you are paying to drive their car every month. Residual is how much the car will be worth at the end of the term. Cap cost is how much the car depreciates while its under lease. All of those equal your payment and what the car is worth at the end.

Exactly how I feel, but I guess I learned (am learning) that the wrong way.. Always wanted mercedes, am literally in love with them, but like mentioned in an earlier reply, my priorities at the time involved spending the cash in different things.. But now that I saw this window, decided to get help and advice on whether or not this would be a good way out.. Thoughts? Thanks!

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Basically keep in mind that 10k is gone, you'll never see it again. Since you are leasing with nothing down the payment is higher, ask about any incentives or if any of the cars qualify for any trade in incentives.

Good luck, PM me if you need any help with the lease stuff beyond this.

eltigas said:

Well, the cars you mentioned don't really play in the same league as a MB GLK and C class, but okay, appreciate your reply. Don't see both these cars as a status thing.. there are thousands, literally, of them where I live (bay area).. so it's really a matter of simply fulfilling a dream, a brand I love, that my family always drove.. guess wanted to get on track with keeping the legacy?

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Yep, and I get that. The thing is, if you have a lot of money, it's easier to keep more of it by using it smarter. The people I see in leases are usually not very smart with their money, and use the "I get new cars all the time, so it's worth it" line to convince themselves they're not wasting money.

I think if you really love Mercedes, buy the car you really want and take care of it, and take more vacations. Don't you like to travel?

wonderspark said:

Yep, and I get that. The thing is, if you have a lot of money, it's easier to keep more of it by using it smarter. The people I see in leases are usually not very smart with their money, and use the "I get new cars all the time, so it's worth it" line to convince themselves they're not wasting money.

I think if you really love Mercedes, buy the car you really want and take care of it, and take more vacations. Don't you like to travel?

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My personal thoughts on leasing is that while it may be great for some people, and it may have its benefits (business write off, etc.), I look at it largely as a way for people to get into a car they otherwise (or actually) can't afford. My rule of thumb is basically this--if you can afford to lease it, could you also afford to finance it to own it on a 5 year or shorter loan? If the answer is no, then leasing really just is putting you into a car you can't really afford.

eltigas said:

Hi everyone. Looking for some sincere and constructive advice.

Here's what I'm financing now:
2011 Chrysler 200 Limited (roughly $6,000.00 negative equity)
2012 Jeep Compass (roughly $4,000.00 negative equity)
Monthly payments: $709
Still have 5+ years to pay both cars off.

Here's the offer I got:
(THESE ARE LEASED, 15,000 miles, 36 month)
Mercedes E-Class
Mercedes GLK
Downpayment: $10,000.00
Monthly payments: $1,100.00 could probably get it down to $1,000.00

OR

(THESE ARE LEASED, 15,000 miles, 36 month)
Mercedes C-Class
Mercedes GLK
Downpayment: $10,000.00
Monthly payments: $900.00 could probably get it down to $850.00

I would be trading in my old vehicles and the dealership will pay the outstanding balance/debt on my vehicles, have it in writing. They would pay all $22k+ of the Chrysler 200 and $18k+ of the Jeep (their trade in value is $17,5k and $14,5k respectively). So in addition to the cars mentioned above, I would be cleared off of the old ones.

So basically we're looking at a $390-$290 difference p/ month on first and $190-$140 on the second option. I'm personally not really interested in owning a car, would potentially trade it off at the end of the three years by a more recent model.

What do you guys think? Is this a good deal? Buying (what I own now) vs leasing (the vehicles mentioned above)? Thanks!

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so your gonna spend 46k dollars over 3 years to not even keep the car afterwards pretty much on that lease. Thats out of control and stupid. Buy the Jeep Grand Cherokee that the mercedes ml class is based on for way cheaper. The Grand Cherokee is way better looking too and universally praised by the auto press. (it is one of the nicest all around vehicles on the road right now in any class, a huge step above any previous chrysler product) No auto magazine is going crazy about the glk or the c class. Their pretty much regarded as the boring soulless entries in their segments. Certainly not worth the money and they aren't very attractive looking either. The GLK's proportions are really off and look awkward. Mercedes is not what they once were. Their vehicles are now unreliable and mediocre for the price and segments they want to compete in.