Buying Cash vs. Payments vs. Lease: A Social Hierarchy

Well, honestly I don't know who in the local community has leased/financed and who has paid cash. It never crosses my mind to ask, and I don't think anyone who actively hangs out with us really cares either. What business of mine is it how others spend their money?

Even assuming you have a point, where would you see a line? Is it better to own a 328 vs leasing a 360?

 

I look at it this way, I leased my 365 (hell, I was making $16k a year at the time) and paid cash for the last two. The lesson I learned was that I couldn't afford the 365 at the time and ownership was dumb. That changed as my income increased.

You can go back and forth as which option makes the most sense, but at the end of the day, its the individual that needs to figure it out for themselves.

 

well said.

they are just options to suit individual need. doesn't really mean anything.

 

I'm with Tillman on this one... I've rarely seen it come up... and I've never seen any such attitude associated with it.

I might have an opinion on what's the better financial approach... but that would have nothing to do with "social class"... it would be in the category of "I wouldn't have put my money in that stock" or "I wouldn't have financed the company that way" or similar. And those things vary over time AND situation.

With that said, I do see people SEEMINGLY spending beyond their means... but without getting financial statements, its hard to really know... so, I just assume the best whenever I see such symptoms. But, it has become rather common the past couple decades for people to spend more than they should... that's why the credit card companies send out soooo many credit card offers... because they make TONS of money off people who spend unwisely...

General recommendation: if you're running credit card debt, sell your Ferrari and get a cheaper one such that you can get out of that debt... its really, really expensive financing. FWIW...

 

If you're buying a depreciating luxury asset, you're pretty much making a financially foolish decision to begin with. So who is the bigger fool - the guy who plunks down $250,000 for a 612, and sells it 5 years later for $125,000, or the guy who leases it, and puts the $125,000+ into the market for 5 years?

 

And, if you stole yours,...?

 

Agreed. It goes both ways. The consultant driving the new sports car? It means nothing to me; I have no idea if it's because he'/he is that good at what they they do - heck maybe their partner bought it for them as a birthday present. The single guy driving the Honda living in a 1600 sq/ft ranch? Maybe he's worth millions; who knows?

Ryalex, perhaps the attitude you speak of is more prevalent in one area of the country vs. another?

 

I would forget the stigma thing. If you can afford to do something, do it. whether you buy,finance or lease depends on your stage in life. When you lease you assume all the liabilities of ownership and little of the equity. If you're over sixty like I am, financing only makes sense if the interest can be deducted. I have worked and saved all my life so I bought mine because it will most likely be my last. If you're on the way up and young, go ahead and finance.

As with so many other things such as boats, don't overfinance and go "upside down." I've seen people have to pay their way out of boats, cars, and even houses. Analyze your debt level overall.

I fear that, with spiraling property taxes, rising energy costs and interest rates, many people with high credit card and other debt are in for serious trouble.

I have no credit card debt and less than four years left on my mortgage. My decision was to buy the 360. What is your position? Only you know that. Good luck, and forget what people think.

 

why do you care what other people think about how you acquired your car????

doody.

 

I at times pretend that cars that I own are financed(some are). eg, "No it's not my car, it's the banks", and to the common "nice car, how about we swap", I will usually respond, "yeah no problems, I'll GIVE you $20K if you'll take over the lease"

 

Ryan.

I understand what you mean. I've seen plenty of posts here that either start or finish with, "If you finance it, you can't really afford it." or, "I never buy a Ferrari with anything but cash", or words to that effect.

I don't let it bother me. What do I care if someone else doesn't agree with how I pay for a car. Even a (gasp) Ferrari.

And, why tell or ask in the first place? Clearly, there is some snobbery that goes along with owning these cars. I guess one way to separate the wheat from the chaff is to decide that paying cash for a car makes you "extra" special.

Although Premier Financial and a couple others seem to make a fine living leasing and financing these types of cars, so there must be a market out there.

DM

 

Your example does not take into account the fact that a lessee will pay the projected depreciation as part of the lease payment. There is still a time value of money effect in having the "depreciation" money up front versus paying it out over time, but the difference is not as great as your example implies.

 

I'm with you Tillman.

 

i am one of the ones that lives my my own rule of not financing older cars. it has nothing to due with society or snobbery. for me it has very much to do with a 20 or 30 year old more or less hand built car with a very stressed engine full of old sodium filled valves.

meaning : things break in big ways sometimes. several years ago i had a nice "Bandit" edition 4 speed trans am launch the connecting rods all over the place at about 70mph while cruising. not racing, not hot dogging, just going to the beach in a t top Trans am. i had ( and still have) several engines, and spare trans at home as spares, so no big deal.

however, if one of the 308's blows up, it must be fixed, and i dont have extra engines ect laying around. i am buyng a Lotus Turbo soon, cash, and an older Lambo , cash. if i get a Countach or a Boxer, i dont want to be making payments on something that's that old, and possibly broken some/most of the time .

folk of the means to buy the 100K+ newer cars can do as they wish either way, seems a newer car would be easier to finance for cash flow reasons.
the cheap carb cars i mess with are best to own outright, as they can break, or be sold on a whim. $20k to $40k is just not a lot of money anymore.


just my thoughts.

 

Leasing is usually a dumb idea, except in a few instances. Financing is ok as long as you can afford to go into dept for a toy.
Anything and everything I've ever bought was cash. Someday when I get a home.....cash, a Ferrari or Lambo....cash, it's just the was I am, the bank doesn't get my money.

Now, if you're getting a new 430 and are going to flip it or sell it in 2-3 years for the same price you payed for it (or a lil profit) then leasing/financing are fine, you basicly drove a Ferrari for free and just keep along the same path and your expecnces will be limited to insurance, taxes, and maintanece
BTW, I got my NSX from a millionaire who only leased it for tax reasons, so I'm thankful for leases!

 

though i have never leased before -- i can understand the business side of leasing a vehicle. i do not, however, understand the value in leasing a "luxury vehicle", although i am sure some exist. in someways this is the nature of some people today (i.e. instant gratification), if you can't afford soemthing, then you buy it on credit, or in this case lease it. with that said, wether you lease, own an f-car outright, or aspire to one day have one, i say do whatever makes sense for you. cheers, kelly

 

Well I guess some would call me the frugal enthusiast,
and others have called me much worse.
But I live by a few twisted rules when it comes to transportation.
My number one rule when buying a car, is never buy a new car!
The biggest loss monetarily with a car usually comes from depreciation on a new vehicle.
Rather than paying to be first in line, I'm more than happy to let someone else with abundant disposable income purchase the car new,
and take the sock on depreciation.
Rule number two is, service the vehicle myself.
I was lucky enough to grow up in San Diego at a time when the school system had great automotive classes, like auto mechanics,
auto electric, auto body, small engine repair, advanced diagnostics and so on.
We even had a chassis dyno and full Sun diagnostic center in high school.
So rather than pay $75 - $150 an hour for service on a vehicle,
I will perform the service myself, unless the job is beyond my scope, or I lack the proper tools to carry out the job.
And rule number three, is never finance a toy!
I consider a toy to be a boat, ATV, track car, Ferrari and the like, which are not necessities.
I always pay cash for my toys.

 

If the debate is buy vs. lease, it's really a question of the time value of money, expected depreciation and the relative tax consequences. If the debate is pay cash vs. buy over time because the buyer doesn't have enough money right now, I think that the observations of some that the "guy can't afford it" are correct, intuitively. We all recognize that with very few exceptions, these cars are not very good investments. All but the biggest Tifosi would be hard pressed to argue that they fall into the "need" category, so buying one before you can afford one would be foolish, IMHO. Fortunately, we live in a free country where buying stuff that you cannot afford is not only legal, but extremely common. People are free to make financially dumb decisions if it pleases them.

 

If anyone asks you such a thing, they're obviously nosey, ill-mannered and frankly it really is no one's beeswax. The only guy who should be asking is your CPA anyway.

RMX

 

I think things change with age, income and experience. I'm pretty debt-averse. Virtually everything I own is debt-free, even real estate. I could just as easily finance or lease, but at this stage of my life I'd just as soon pay cash, as I did for my 330GTC.

Leasing is a viable alternative, to be sure, but I've never been in the situation where leasing had inherent financial advantages for me, as it does for some others.

Psychologically, I would feel funny leasing a car....like I didn't really own it. And "ownership" is an important part of the experience for me, but I don't project those attitudes onto others' motivations for leasing or financing.

Jack

 

It sure is nice when you don't have to cut a check each month.

 

For most of us, it comes down to priorities. That is, you spend your money on things that are important to you. So, if you can't afford a late model Ferrari, you look around for a different used cool car that is pretty much fully depreciated. You can then use this equity to trade up as your income increases. After you do this a few times, you'll have enough equity (i.e., equity means that the car is no longer depreciating) that you can get a used Ferrari. Then the happy day comes when you can afford buy a new Ferrari. At this point, if you buy right, (like a Stradale), you'll be able to drive a new Ferrari for pennies because the right car will hold its value.

The problem you're gonna face is kids. Man oh man are kids ever expensive. I don't think that it is possible to be able to make enough money to stay ahead of that game.

Dale

 

If you can finance at 5% and use the money to make 12%, you win by finacing. If you use a home equity line fo credit, you get to add a tax write off. I am debt free, including my home, but I do tap into my equity line at times when it makes sense. I never borrow more equity however than 10% of my cash assets. So to borrow $50,000 equity on my house, I have to have $500,000 in cash based assets (my Vanguard account primarily). It is a rule I live by so that when the sh*t hits the fan, I am still in the clear. Nothing worse than Sept 12th 2001 and having to sell you Ferrari at a $30,000 loss because your home and stock holding dropped 25% the day before, you wind up spiralling downhill fast. The above illistration is just that, it did not happen to me, but I am sure there are a few Fchatters it did happen to. If you live beyond your means it is just a matter of time before you get in trouble, its not an IF its a WHEN.