3 year lease or the 6 year loan?
08-30-06, 05:34 PM
#16
Lexus Test Driver
Another good example, Kaius88. Your house value doubled and you sold it at a big profit. Now, lets see if you buy $150k house today (asking price), and it will drop in the following 6 month. Again, don't know how is real estate on West Coast, but here asking prices dropped by as much as $100k in the last few month. It makes no sense to invest in real estate right now.
08-30-06, 05:50 PM
#17
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I don't know much about real estate, but there are no such thing as a $150,000 house in southern california. You'll be lucky if you can find a decent house for $500,000 now; which sucks for youngin like me who's looking to save up to buy a house.
08-30-06, 09:13 PM
#18
The best quote I've heard in years....."You cannot borrow your way into prosperity"
The best night's sleep you'll ever have is being debtfree and knowing the next paycheck is all yours...after Uncle Sam of course!
Dave Ramsey (Radio financial guy) has a good benchmark for buying a new car.....Have a million dollars in the bank. The average new car loses half it's value in 3 years. Can you afford to lose that much money????
2003's were $38,000 or so new. Trade in now $18,000. $20,000 lost in 3 years before you factor in how much you spent in interest which I'm guessing is $6,000 or so. What's insurance for a year?
At a salary of $40,000. After taxes = $27,000 net. 1/3 of net pay is going towards a depreciating "asset"
Later,
JU
The best night's sleep you'll ever have is being debtfree and knowing the next paycheck is all yours...after Uncle Sam of course!
Dave Ramsey (Radio financial guy) has a good benchmark for buying a new car.....Have a million dollars in the bank. The average new car loses half it's value in 3 years. Can you afford to lose that much money????
2003's were $38,000 or so new. Trade in now $18,000. $20,000 lost in 3 years before you factor in how much you spent in interest which I'm guessing is $6,000 or so. What's insurance for a year?
At a salary of $40,000. After taxes = $27,000 net. 1/3 of net pay is going towards a depreciating "asset"
Later,
JU
08-31-06, 07:02 AM
#19
Instructor
Thread Starter
Hey guys, thanks for all the great replies and advice. I see alot of good points. I just thought, if i am trying to save to marry my girlfriend and someday buy house, leasing might be better for me because i don't have to put money down. I have a few thousand saved i would use to marry her. I always thought if i am always gonna have a car payment because i'll trade my cars in every few years, mines well lease for a cheaper payment rather than higher payment with financing. Am i wrong to think like this?
08-31-06, 07:29 AM
#20
I think you just answered your own question then.
Ultimately, from a financial sense, you've recieved what is the correct "technical" answer. But if you really plan on having a car payment all of the time and trading every few years, then leasing is going to be the right option. As long as you can keep it within the right mileage.
Ultimately, from a financial sense, you've recieved what is the correct "technical" answer. But if you really plan on having a car payment all of the time and trading every few years, then leasing is going to be the right option. As long as you can keep it within the right mileage.
08-31-06, 07:43 AM
#21
Mike,
You mentioned home purchase. I'd talk to a banker now and plug-in both your incomes and see what you need to do to get the home you want first and then see what's left for car payments.
It will cost you more later to terminate a lease in order to qualify for a mortgage.
JU
You mentioned home purchase. I'd talk to a banker now and plug-in both your incomes and see what you need to do to get the home you want first and then see what's left for car payments.
It will cost you more later to terminate a lease in order to qualify for a mortgage.
JU
08-31-06, 08:37 AM
#22
Instructor
Thread Starter
I am just saving for the ring first i guess and then i'll pop the question in 2 to 3 years. So right now leasing works for me. I'll be finishing college this year and she'll finish next year so i'm not in a major rush. I guess living at home helps me out too. I guess leasing for me works right now and she also leases. I still save money because of a cheaper payment vs financing payments but like you said once we own a home that might change. Is the interest on a 50 year mortgage through the roof and does the montly payment change that significantly. lets say $400,000 house over 30 years or 50 years with 20k down. I know this is an lexus forum but since we are on the subject. thanks guys.
08-31-06, 09:58 AM
#24
Well, then is sounds like a Toyota Corolla would be the perfect option. No offense.
We can all live well beyond our means, but the more money one saves and invests now, the more Lexus we can buy later.
We can all live well beyond our means, but the more money one saves and invests now, the more Lexus we can buy later.
08-31-06, 10:03 AM
#25
Lexus Test Driver
Mike,
Considering what you described to us above about your current situation, I would highly recommend you getting a used car or, like I said before, a cheaper new car with 0% financing. You already have a girlfriend, so there is no need to impress ladies. You have serious plans to start a life together with her, so every penny you can save now will help you in a near future. You are too young to think right now that life is passing you by without a brand new luxury car. You have all this ahead of you in a near future. Now, how "near" is that future all depends on you.
I know its probably not easy to budget your life now since you are still in school, and, unless you already have a job which you will continue working at after graduation, you don't know about your income/expense ratio. From what I read on this forum, an average lease is around $500 or more. Again, just in my opinion, that is a big chunk of change (plus insurance) for someone in your financial situation and future plans you set ahead. Workout a comfortable monthly payment which will make sense to you, than work your way back to figure out what car can you afford with it, and than search for a car that way.
BTW, on $400k house, you will have to put a minimum of $40k downpayment and than pay additional PMI surcharges. Idealy you need $80k, not to mention you will have to furnish the place and pay regular bills and utilities (have you seen NJ gas prices lately going up by 30%?). Oh yeah, than you will have a real estate taxes (not sure which part of Jersey you are in), but that will be an average of $10k a year... If you gonna put down only $20k, your monthly payment will be huge...
Anyway, all this is off-topic of course, brought up by a desire to wanting to buy an ES350 while thinking how to afford it
Again, I'm making some assumptions in here, but all these big financial decisions have to be made when you know your current income. So, if you are planning to get a job after graduation, figure out your income (after taxes) first before you get yourself into anything...
Good luck!!!
Considering what you described to us above about your current situation, I would highly recommend you getting a used car or, like I said before, a cheaper new car with 0% financing. You already have a girlfriend, so there is no need to impress ladies. You have serious plans to start a life together with her, so every penny you can save now will help you in a near future. You are too young to think right now that life is passing you by without a brand new luxury car. You have all this ahead of you in a near future. Now, how "near" is that future all depends on you.
I know its probably not easy to budget your life now since you are still in school, and, unless you already have a job which you will continue working at after graduation, you don't know about your income/expense ratio. From what I read on this forum, an average lease is around $500 or more. Again, just in my opinion, that is a big chunk of change (plus insurance) for someone in your financial situation and future plans you set ahead. Workout a comfortable monthly payment which will make sense to you, than work your way back to figure out what car can you afford with it, and than search for a car that way.
BTW, on $400k house, you will have to put a minimum of $40k downpayment and than pay additional PMI surcharges. Idealy you need $80k, not to mention you will have to furnish the place and pay regular bills and utilities (have you seen NJ gas prices lately going up by 30%?). Oh yeah, than you will have a real estate taxes (not sure which part of Jersey you are in), but that will be an average of $10k a year... If you gonna put down only $20k, your monthly payment will be huge...
Anyway, all this is off-topic of course, brought up by a desire to wanting to buy an ES350 while thinking how to afford it
Again, I'm making some assumptions in here, but all these big financial decisions have to be made when you know your current income. So, if you are planning to get a job after graduation, figure out your income (after taxes) first before you get yourself into anything...Good luck!!!
08-31-06, 10:29 AM
#26
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Yikes, 50 year mortgage. Fast, run in the other direction.
The only thing a 50 year mortgage will be good for is dragging out the agony.
When I bought my first house the interest rates were over 13%. Sure, houses cost a lot more now. But the cost of money back then was outrgageous. Imagine 13% on todays $400K mortgage. That would be equivilant to an $800K mortgage at todays rates.
But forget about a 50 year mortgage.
The only thing a 50 year mortgage will be good for is dragging out the agony.
When I bought my first house the interest rates were over 13%. Sure, houses cost a lot more now. But the cost of money back then was outrgageous. Imagine 13% on todays $400K mortgage. That would be equivilant to an $800K mortgage at todays rates.
But forget about a 50 year mortgage.
08-31-06, 10:46 AM
#27
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My bizzaro bro Twister and Jeff kinda took the words out of my mouth. I noticed that Mike didn't mention what kinda job he has lined up or anticipates when he graduates. If he can make over $100k a year from his 1st job, he MIGHT be able to afford everything he plans on getting. If his GF can help him pay for stuff, that's even better. However, I am assuming most new college grads (non-science majors) make less than $40k nowadays, and it goes up by 30% if you're an engineering major. You're gonna have a lot of burden especially if you have a student loan to pay off.
Here's what I would do....and again...just a suggestion:
1) Open a Roth Ira account and contribute $4k every year. Open a SEP IRA if you make over $150k a year.
2) Save money like MAD. I mean, minimize eating out, buying unnecessary stuff (if you have a GF and a bed, you have entertainment
). Have a set budget goal, and stick with it.
3) Get a fuel efficient car..... Dont get Luxury for now...you'll have time in a few years to enjoy it later...
4) Get married and save money together. With 2 incomes, the savings increase faster because, assuming she makes same $$ as you, your income doubles but your expenses don't (you dont consume twice as much housing costs, utilities, food, etc).
5) Get a nice home and raise a family.
Oh, a comment to my Bizzaro bro Twister.... It's not a good idea to try to time the Real Estate market because so many factors are in play. In the long run they will all appreciate in value. If you refrain from buying thinking that the prices will crash, that can actually hurt you when you are ready to buy. I always tell people to buy ASAP whatever they can afford at the best interest rate possible at the time (me being a Real Estate accountant). Even though I sold my 1st house at a higher price, I also paid a higher price for the new home. But I consider it a trade-up, and I have 5% interest fixed for 30 years. Indeed I overpaid for my current home, but you gotta buy it when you need it. Since im raising my family here, I have a stable place to live for the next decade at least. This is what a real investment should be. IMHO
Here's what I would do....and again...just a suggestion:
1) Open a Roth Ira account and contribute $4k every year. Open a SEP IRA if you make over $150k a year.
2) Save money like MAD. I mean, minimize eating out, buying unnecessary stuff (if you have a GF and a bed, you have entertainment
). Have a set budget goal, and stick with it.3) Get a fuel efficient car..... Dont get Luxury for now...you'll have time in a few years to enjoy it later...
4) Get married and save money together. With 2 incomes, the savings increase faster because, assuming she makes same $$ as you, your income doubles but your expenses don't (you dont consume twice as much housing costs, utilities, food, etc).
5) Get a nice home and raise a family.
Oh, a comment to my Bizzaro bro Twister.... It's not a good idea to try to time the Real Estate market because so many factors are in play. In the long run they will all appreciate in value. If you refrain from buying thinking that the prices will crash, that can actually hurt you when you are ready to buy. I always tell people to buy ASAP whatever they can afford at the best interest rate possible at the time (me being a Real Estate accountant). Even though I sold my 1st house at a higher price, I also paid a higher price for the new home. But I consider it a trade-up, and I have 5% interest fixed for 30 years. Indeed I overpaid for my current home, but you gotta buy it when you need it. Since im raising my family here, I have a stable place to live for the next decade at least. This is what a real investment should be. IMHO
08-31-06, 12:56 PM
#28
Instructor
Thread Starter
Sorry i didn't mention my job earlier. I have been working for a pharmacuetical marketing company since i was 18 and have been working full time here ever since. So i know when i graduate school, i already have a job lined up. I appreciate all the input here and i'll will continue to try to save and when my lease is up on my pontiac next year i will evaluate my current sitiuation. I am gonna try to live out home as long as possible. lol
09-14-06, 02:26 PM
#29
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Since i am an accountant, I will give you some realistic financial perspectives worth considering, but of course you can ignore my opinion. 
Leasing is perhaps the worse thing you can do with your money, as you build no equity and you end up with nothing at the end of your lease. Leasing is only marginally acceptable if you use it for business purposes, in which you can deduct rental expense (lease payments) from your income taxes. You can't deduct asset depreciation if you dont own it, so you only have a partial tax advantage even if you use it for business.
...
My advice: Dont lease if you dont own a business. Dont finance if you dont own a business (interest expense is only deductable for business use). If you can afford the car, pay all cash. If you cant afford the car, buy a lesser car. Remember, your car is NOT an investment. It does not produce a monetary return (unless its a rare antique car). You are entitled to enjoy what you can afford. If you want to enjoy it now even though you can't afford it, expect to suffer a little later on. It's a trade-off. If you must have a new car every 3 years, well.... that's why some of us can afford to buy our 1st home at age 26 while some of us are still renting apartment at age 50. It's a personal choice. IMHO
The crazy accountant
Leasing is perhaps the worse thing you can do with your money, as you build no equity and you end up with nothing at the end of your lease. Leasing is only marginally acceptable if you use it for business purposes, in which you can deduct rental expense (lease payments) from your income taxes. You can't deduct asset depreciation if you dont own it, so you only have a partial tax advantage even if you use it for business. ...
My advice: Dont lease if you dont own a business. Dont finance if you dont own a business (interest expense is only deductable for business use). If you can afford the car, pay all cash. If you cant afford the car, buy a lesser car. Remember, your car is NOT an investment. It does not produce a monetary return (unless its a rare antique car). You are entitled to enjoy what you can afford. If you want to enjoy it now even though you can't afford it, expect to suffer a little later on. It's a trade-off. If you must have a new car every 3 years, well.... that's why some of us can afford to buy our 1st home at age 26 while some of us are still renting apartment at age 50. It's a personal choice. IMHO
The crazy accountant
Great forum you all have here. I wonder if you could expand a bit more on the leasing for business aspect.
I sell real estate for a living and I claim 80% business use of my vehicle.
I tell uncle sam that drive 20K miles a year, but in reality, I only drive about 15K.
My own accountant confuses me when I ask her about my vehicle options, I'd appreciate a second opinion from you, if possible.
What would be the better choice to get in to this car if I was planning on putting down about $15-20K in cash and trade? A 60 month finance of $20-25K or a 36 month lease?
By better choice, I mean best business financial decision (max tax benefit).
All things being equal, my customers and I would prefer a new car every three years.
09-14-06, 03:38 PM
#30
BTW...The sharpest real estate agent I've worked with dazzled me with her knowledge and actions rather then her older Caddy with gaudy trim and 100M+ miles......turns out she was the area manager/mentor and top in sales!
JU