Quote:
Originally Posted by AndrewAZ
No that just stupid. If you have money then you know how to make it or it was given to you. If you know how to make it then you realize how stupid it is to put so much money into a depreciating asset. About 50% of people lease MB's and of the people who lease 80% of them are doctors/lawyers and other high income earners (according to my MB sales guy). Reason being is they are smart and realize that instead of wasting $50k out of pocket on a car they can put $1k out of pocket and invest the $49K and hopefully make enough money to offset some of the lease costs along with depreciating the car lease for business use.
My family used to buy all of our cars strait up but then when we sat down with the accountant and worked the numbers out being a small business owner we figured we would save a substantial amount of money by leasing our cars.
I could of traded in my last car worth $37k at trade in and paid in full that day for my new E90 along with getting cash back. But since it made more economic sense I put down $5k since you dont pay tax on the trade in value and got a check written to me for $32k and right now thats invested in a energy fund and my monthly payment on my car is $26X or $3,120 a year meaning that my investment has to make 10% a year to cover my yearly car payment. So essentially I am leasing a E90 for 27 months for only $5k well actually less since some of the cost is taken out because of business depreciation.
You dont get wealthy by writing out checks and being foolish with your money, make your money work for you dont work for your money.
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sorry, but this is not necessarily correct, and I wouldn't trust an accountant to tell me it is.
first of all, your investment taking on 10% per year per risk assumes a risk tolerance, YOUR risk tolerance, which you have not factored in. And you ar equating a risk investment with a riskless investment. Finance 101 - don't do that.
Second of all, I think your situation may involve certain tax implications/benefits for small business owners that don't apply to W-2 earners. Third, you don't mention the flexibility you lose when leasing, and the value of that to some people.
Fourth, you also assume that people pull the marginal dollar needed for a car purchase out of a high yield investment (i.e., i think you are overinflating the opportunity cost). Wrongo. many folks don't, I didn't. I keep x % of my total assets in money markets/equivalents, y% in the stock market, z% in real estate, a% in venture capital projects, etc. At the time, I was not comfortable investing MORE money in risk bearing projects, but was sitting on mounds of cash, so I used a relatively small portion of it pay for the car. So none of my higher return/higher risk portfolios were changed, and given my car is a measurable asset (albeit a depreciating one), I still kept my risk portfolio constant. This was right for ME, not necessarily for you.
Sixth, tax breaks for trade ins, and leasing taxes vary by state. so your blanket statement doesn't work in all places. We traded in a paid off E60 for our E90, and essentially paid almost no new taxes on the E90. (9% taxes here). That trade in tax credit would have not applied to a trade in, and in IL, you pay pretty hefty lease taxes. So why would I choose an option that increases my taxes?
My afer tax rate of return on my cash funds was well below the offered car interest rates, so FOR ME, my financial portfolio, and my risk tolerance, it was the RIGHT decision to pay cash for the car.
I could list more, but I won't.
ANY way you purchase a car, you are taking on the depreciation of an asset. If you think leasing allows you to bypass that, then you are being very, very naive.
SO, my point here is NOT to say YOU made a wrong decision for YOUR situation, but rather to say your assertion that what's right for you is right for everbody else on the planet is flat out, dead nuts wrong. And I am not going to go into it here, but trust me, I am more than qualified to fully analyze a simple car buying decision, including evaluating PERSONAL risk, oppportunity costs, PERSONAL financial portfolios, tax effects, etc. These models vary by a person's risk type, his/her wealth, etc. NOT a blanket model, which you imply.
Sorry to be harsh, but you started this by calling someone else's comments stupid, and then you launched into what happens to work for you.
I'll shut up now
