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Buy new, buy old, or keep current car?

Discussion in 'Other Guitars, other instruments' started by naveed211, Oct 21, 2020.

  1. JL_LI

    JL_LI Friend of Leo's

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    The lease on my BMW 430 runs out in May. I think I’ll pay the divorce settlement and walk away. I love the car but detest the dealer. I own a Mercedes Benz SLK and love the dealership where we have it serviced. I’m thinking seriously about buying a C300, GLC, or maybe a GLB. I don’t know how many corners were cut in the small SUV. I’m a little afraid of that. If I decide on a GLB I’ll probably lease it. The reason for purchasing is that I’d like it to be the last car I buy. At 70 going on 71, the car and I probably have the same life expectancy.
     
  2. charlie chitlin

    charlie chitlin Doctor of Teleocity Silver Supporter

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    So...we now need 20 minute video tutorials to teach us how to save up for something we want in order to buy it outright.
    I hope we don't need to be taught this.
    Sheesh.
     
  3. charlie chitlin

    charlie chitlin Doctor of Teleocity Silver Supporter

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    Sounds like some tough choices ahead, amigo.
    Life is hardscrabble out on The Island.
     
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  4. Titletone

    Titletone Tele-Meister

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    Used car prices have been at an all time high recently, but there are signs that they are dropping. Compare the buyout price with the trade in or retail value. You may be able to buy the car out, sell it, and put a few dollars in your pocket.
     
  5. TwangerWannabe

    TwangerWannabe Tele-Holic

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    Trying to save money, get out of debt and buying new car are not practical.

    People will rationalize in their heads the "need" for a new car, but it's more that they "want" it.

    As another poster mentioned above, "drive what you can afford". If you're trying to get out of debt and think this means buying a car that you can make the monthly payment on, you're not understanding. If you have to make a monthly payment on a vehicle that means you really can't afford it. If you don't have a choice and/or just refuse to buy a cheap car and pay cash it looks like the best option here would be to buy out the lease if it is, according to you, "a good deal". Plus, you're in Wisconsin and have a kid, so the safety of the Subaru AWD is a no-brainer in the winter.

    A few years ago I was on a mission to get out of debt. Student loans, car payment and a little credit card debt. I was considering selling my car since I actually had equity in it, buying a cheaper, smaller vehicle and putting the rest towards the debt. I did end up just keeping my car (2017 Outback Limited) but also paid off all my worldly ($87k) debt in less than 3 years. I learned how to use credit properly, didn't take a vacation for 3 years that involved hopping on a plane or expensive accommodations (only road trips, camping, staying at friends places, etc.), no snowboarding or season passes, sold off quite a few guitars and all my amps except for one, and just budgeted and sucked it uppitiest for the greater good. I had a pretty small emergency fund, and everything that was left over after paying rent and bills went toward the debt. Everything. Once one debt was gone I added that money onto another debt, like a snowball effect. Anytime I wanted to buy something or thought I "needed" something I waited until the next day or sometimes a week, and usually ended up rationalizing that I didn't need it. I also never worked any overtime, I just budgeted and was frugal. Some friends and coworkers would make fun of me, but to this day I'm still 100% debt free, no car payment, no credit card debt, my credit score is now well over 800 (at one point is was 550) and I'm currently paying cash for grad school.

    I don't ever want student loans or any other looming, revolving debt over my head ever again unless it's a mortgage on a home, and if that means driving an older vehicle I paid cash for over having a car payment, I'd make that choice in a millisecond.
     
    Last edited: Oct 21, 2020
  6. sudogeek

    sudogeek Tele-Meister

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    One other option is to trade in the car and do another lease structured to benefit YOU. Never accept the dealer’s advertised pre-packaged lease or first lease offer - that’s for the rubes. You can, and you should, negotiate on the terms of the lease. The upfront costs (Pre-payment of depreciation, financing prepayments, loan originating costs), early termination fees, length of the lease, mileage allowance, the residual value (pay-off at end of lease), and the monthly payment (and therefore the imputed interest rate) are all negotiable. Not only the dealer but many others will lease you a car. I have leased through credit unions, banks, and, most recently, through a professional association. Check it out - a lot of businesses and associations offer leasing deals. Why? Because they are profitable.

    The best deal was to have my business (LLC) lease the car (paying with pre-tax dollars) with a low negotiated residual value for buy-out by the lessee at the end. Then you can keep or flip for a profit.
     
    Last edited: Oct 21, 2020
  7. David C

    David C TDPRI Member

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    My advice is simple, very simple. First, put together a budget for your family. Leasing is not the way to go as you have discovered. Consumer Reports has car reliability ratings annually. You can get Consumer Reports online or in print form. Online let's you find what you want when you need it, print versions means you have to wait around until the issue comes up. Hondas and Toyotas always do well in Consumer reports. I have only paid for oil changes, filters, brakes, in the hundreds of thousands of miles I have racked up in those two brands of vehicles. I would stay with a Camry or Accord if you are really trying to save money. They last forever and don't cost anything to drive. Another consideration these days is that later model cars have new safety features that can really matter. Things like back up cameras matter. So if being economical is really your interest, then think differently and buy what you can afford.

    I don't know what any of this has to do with guitars and amps. I suppose this is the left over money from my budget that I spend.
     
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  8. naveed211

    naveed211 Tele-Afflicted

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    Really good advice. I’m starting to lean toward saving up and paying cash outright for an older vehicle.

    Being completely debt free by age 40 (other than mortgage) is a tantalizing and realistic goal.
     
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  9. Sidney Vicious

    Sidney Vicious Friend of Leo's

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    You don't nor do I - I am completely debt free with two kids a wife two cars and a house - but look around - "we" do.
     
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  10. stephent2

    stephent2 Poster Extraordinaire

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    I vote stay w/ the Legacy (assuming it's in great shape and you've taken care of it).
     
  11. stealyerface

    stealyerface Tele-Afflicted

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    I love when these threads come up and the car "experts" start giving advice... The resulting advice ranges from comical, to wrong, to just flat out hysterical...

    You cannot negotiate your own residual buyout with Subaru based on your lease. If so, people would lease the car at a payment that the residual was based on, then attempt to negotiate the residual value. That would undo the whole idea of the lease taking the "resale" value out of the equation.

    Subaru especially will not negotiate their own resale values with customers.

    Worse than that, read your lease contract. If you choose to end your lease early, and return the car, and pay your remaining payments in full. So, for example, you owe three payments left at $200, you return the car three months early, AND give them the remaining $600 you owe. If Subaru takes the car to the auction, and it sells for less than the residual as-stated, you are responsible for the shortfall between the selling price and the contracted residual you signed three years ago. Trust me, Subaru is not in the business of taking losses by negotiating pries with customers they have already signed contracts with. That advice of "negotiating leasing residual values"- Especially Subaru- Busted. Not true.

    I'd break down all the other sage words in these threads, but I'd grow weary of reading utter nonsense.

    I have always offered my services with regards to our TDPRI members buying cars, leasing, etc... and have helped a few members secure sweet deals on whatever they might be looking for. Feel free to PM me, and I will answer honestly, and with the understanding that I have no vested or monetary stake in discussions.

    Just thirty years of being in this business, and the tips and tricks that can work, and the other tips and tricks that people post in here, that make them look cool and car-savvy, but that I know are utter horse****.

    Getting back to the OP, your Legacy residual value, in today's state of the used car market craziness, is probably a fair, possible undervalued amount, for a one-owner car that you know all of the history of.

    I don't know the original MSRP, but I am guessing mid $20's and a residual (based on your mileage)of 59-62% so a used car you can buy for mid teens. Plus tax remember. You didn't pay tax on any of the residual value, so you'll have to ante up for that.

    Feel free to PM me details, and I'll pull all the account info if you want, and we can discuss.

    Good luck, and for Pete's sake, take half of the stuff you read in these car threads and divide it in half, and you'll still have half a load of nonsense.

    ~syf
     
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  12. Bob M

    Bob M Tele-Afflicted Silver Supporter

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    Just my 2 cents-understand a car is not an asset. It will never appreciate in value. Don’t fall in love with a car. Don’t assume it will continue to run problem free. Today’s cars are better made than cars of any past era. That said you can’t afford to own a modern car out of warranty.

    Why not lease a new car?
     
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  13. naveed211

    naveed211 Tele-Afflicted

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    Well, my car needs have changed quite a bit since I started leasing. I went to work from home which actually helped my mileage, and I should be well below my limit at lease end.

    However, we’re also planning to move out of state in a year or less, and it’ll be a three hour drive to see my family versus now where it’s an hour. We don’t see them all the time, but more driving miles per year will definitely be a factor. I already upped my mileage to 15k versus 12k on this lease, I’d probably have to do something similar if I leased again, if not planning for more miles per year than that, which increases the monthly payment.
     
  14. Festofish

    Festofish Tele-Afflicted Silver Supporter

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    Subaru. You know the history. That is unless you live in an area that has decent public transportation. It sucks but it’s relatively inexpensive and they follow a schedule plus the whole carbon footprint thing.
     
  15. teletail

    teletail Tele-Afflicted

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    The devil you know is better than the devil you don't. Keep it.
     
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  16. chris m.

    chris m. Poster Extraordinaire

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    Stealyerface is correct. The residual value is the residual value-- at least for calculating the lease terms. Now, whether they will sell it to you for more or less than the residual value? I would say that depends on comparing the residual value to what the current market is like. If the residual value is much more than these cars are actually selling for in the real world (dealer price, not private seller price), then the dealer might be willing to consider a slightly lower price, I would think. However, if the residual price is comparable to what dealers can get for them, then the dealer would have no incentive to give you any discount off the residual price. If the residual price is actually lower than what these things go for then you are getting a great deal on the price, and now you need to look at what kind of financing you can get since you don't have enough cash on hand to buy it outright.

    There's a good rule of thumb on borrowing money. If it's something you truly need-- in this case a car so you can get back and forth to work in all seasons-- if the length of the loan is shorter than the life of the asset then maybe it's OK. For example, you get a four-year loan and drive the car for six years. A bad sign is when you end up upside down-- you owe a lot more than the car is worth, or you're still paying off the loan after the car is dead. Interest rates are at historic lows-- if you can get a nice low rate on a used car loan then you do the math and maybe it's not so bad.

    I don't know what the status of your home loan is. Depending on the interest rate you are paying on your current mortgage, the payoff amount left, the number of years left on the loan, the actual current appraised value of your home, and the interest rate you can get, etc., then if you were planning to refinance your home it might actually make sense to get something like a 20-year, 3.5% rate on a home mortgage and pull out some cash at the same time to pay off other loans and finance a vehicle. Assuming your home value has appreciated the math might work, and it might make sense. This is not to be done lightly, and not to be repeated. But if your original loan was at a significantly higher interest rate, your home has significantly appreciated in value, and you have the credit rating to get a rock bottom interest rate currently on offer, then it might be quite possible to use this one-time opportunity to consolidate debt into a much lower interest rate loan. Your monthly payments overall would go down. The other issue is how many years you are stuck paying a mortgage payment. If you are on the hook for 20 more years and you change it to be on the hook for 30 years, that ain't so great. Ideally you would refinance to a loan that results in a lower payment but where you still pay off the loan in about the same amount of time, but lock in a significantly lower interest rate, which makes a huge difference financially.

    The big mistake Americans make on a re-fi deal like this is they keep doing it, thereby siphoning off the equity in their home in order to finance a lifestyle beyond their means. This is why this would be a one-time thing, taking advantage of crazy low interest rates, and not something to make a habit of.

    It makes sense to have a plan to become debt free. But a little bit of leverage isn't a bad thing either, especially in an era of historically low interest rates, if you do it in a smart way for things that are not wants but true needs. A home and one or two sensible cars are not profligate expenditures by any means.
     
  17. 1 21 gigawatts

    1 21 gigawatts Tele-Meister

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    Getting people to view a car payment as a normal part of life was a huge coup for the auto dealers. The next logical step was convincing people that leases are a great idea. Always driving a car that is under warranty sounds great, but if I expect to need a warranty for something, I'm not buying it in the first place. I expect any modern car to be able to drive 120k miles with minimal maintenance. Yet the car manufacturers have convinced a huge portion of their customers that they need to get rid of a car before the warranty expires- and replace it with a new version of the same thing.:lol:

    Of course, I love leases because it means that there are plenty of low milage used vehicles available for me to buy. Let someone else pay the depreciation for the piece of mind of having a warranty. I'll buy it for half the original MSRP and drive it for another 100k trouble-free miles.


    Never finance a depreciating asset!
     
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  18. Phrygian77

    Phrygian77 Friend of Leo's Gold Supporter

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    I've normally always been in this camp. We're getting to the point where it's not practical any more, not with modern cars. Too many things to go wrong. Things that may not be fixable. After having a GDI engine failure, sure let's just forget about 100+ years of having fuel flow over the valves to keep them clean, I decided I'm never buying used again. I'll take the warranty and buy new from now on.
     
  19. chris m.

    chris m. Poster Extraordinaire

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    Wait a minute-- you're moving. If this means selling your current house and buying another house, you really need to factor that in as well. If you do it right, with a nice low interest rate on your new mortgage, you might end up with a tidy profit that can be used to pay off debts, buy a car, and also end up with a lower mortgage payment. Depending on the prices in the two markets, to pull this off probably means you don't use the move opportunity to bite off an even bigger house, but you remain modest in your home-aspirations. A smaller, well designed home in a prime location can actually feel more comfortable than a bigger house, anyway.

    Also, if you're moving, what about trying to buy a house that's in reasonable walking/biking distance to one of the jobs? You might be able to get buy with one car, or one car plus an e-bike, or one car plus a bike, and save a ton of $$. A little less convenient, but hey, take the thousands of dollars of savings and reward yourself and your partner with a nice splurge on a small chunk of the big savings. If you can save $15k or $20k and splurge $2k of that on a nice reward you still end up saving a ton.
    For those rare times when you absolutely need a second car you can always rent one from Enterprise or whomever.
     
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  20. joe_cpwe

    joe_cpwe Tele-Holic

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    It's math and I don't pay much per mile for cars. My philosophy on cars is probably different then most...

    Two weeks ago I handed off my '03 Park Ave to my HS senior with 275k miles on it because I spent $4,250 on a super clean '07 Grand Prix w/ 95k miles on it. I may put the next 150k miles on that Grand Prix over the next 6 years.

    I bought that '03 Park w/ 130k miles on it 6 years ago and paid $3,300. Sure, there were a few repairs, every cars needs repairs after a few years.
    The Park Ave I ran before that had 102k miles on it when I paid $4,700 for it and I sold it after about 7 years for $800 with 265k miles on it.

    I pay 4 or 5 cents per mile for the second 100k miles while the first owner(s) pay about 30 cents per mile for the first 100k miles.
    Of course, if you can expense your mileage at over $.50 per mile...well...whatever...easy math.
     
    Last edited: Oct 21, 2020
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