Author Topic: Leading Financial Blogger Leases Brand New Car WTF?  (Read 7668 times)

RapmasterD

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Leading Financial Blogger Leases Brand New Car WTF?
« on: September 17, 2014, 03:31:54 PM »
I've seen Sam and "Financial Samurai" talked about before on this overall forum. Apparently, after the soon to be death of his heavil used Jeep, he weighed the merits of buying versus leasing a new automobile. He decided to lease a brand new 2015 Honda Fit. Now, admittedly it's just a Fit, but he backs up his decision with what he says are undeniable facts?

So...what say YOU? I'm not asking whether this move is mustachian or not...who cares? I'm asking if his rationale holds up FACTUALLY.

Fire away....

LINK TO POST: http://www.financialsamurai.com/deciding-on-leasing-or-purchasing-a-new-car/#comments

DollarsAndDissonance

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #1 on: September 17, 2014, 03:46:56 PM »
He seems to have analyzed the decision quite a bit, so maybe it's the right one for him.  I'm sure he's put more thought into it than 99% of people who lease a vehicle.

That said, I find the biggest flaw in his logic to be the notion of the "optionality" of being able to buy the vehicle or return it to the dealer after the 3-year lease (and his willingness to pay $2k for this option).  I'd argue that purchasing the vehicle gives you the ultimate optionality: if you love it, you can keep it indefinitely, and if you hate it, you can sell it on Craigslist tomorrow.

deborah

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #2 on: September 17, 2014, 08:52:07 PM »
He doesn't appear to have explored the option of vendor finance to buy the vehicle. This may be less than the .9% lease, and still give him the cash flow he wants. In Australia I was recently looking at new cars, and vendor finance was at 1% - 1.5% (depending on the manufacturer). When you consider that a term deposit gives 3.75% over pa over the same period, you would be mad to pay cash.

beltim

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #3 on: September 17, 2014, 08:59:22 PM »
I never thought Sam really had his head screwed on straight.  On his estimated 4,500 miles per year, he's guaranteed to pay $8,462 in lease payments.  That's 63 cents per mile in lease payments, which, if he doesn't keep the vehicle, perfectly equates to depreciations.

How he reconciles 63 cents per mile in depreciation with his bizarre 1/10 rule for buying cars is beyond me.

RapmasterD

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #4 on: September 17, 2014, 10:39:33 PM »
Yeah I don't get the 4,500 mile per year thing either with a car parked in SF. I'd be buying a used Prius in his shoes and riding it into the ground. He could get a nice one for 12K.

naloj

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #5 on: September 18, 2014, 09:36:34 AM »
Kind of wondering why he didn't just include the money factor of his lease instead of his lease vs buy calculations.

He says he likes leasing because of the option of returning it in 3 years.  He seems to have forgotten that easier to pay off the loan in full and sell it with a clear title than to try to do a lease takeover if he wants to get rid of it in less than 3 years. He also doesn't mention that he will get charged if the car isn't nearly flawless if he turns it back in.

CaliToCayman

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #6 on: September 18, 2014, 12:21:48 PM »
To be fair, I think the blogger makes over $150,000 a year in passive income so the reality is he can afford the car.

The problem I have with the article is that many people who read these types of blogs are trying to achieve financial independence and many may never get to the point where they are making the amount of money he does in passive income. For the person just starting out, this is horrible financial advice. Instead it is being passed off as a smart financial decision to lease instead of buy.

If he had just simply said that he realizes leasing a new car may not be the optimal financial outcome but that at this point he's earned his perceived convenience, I would have no issues with it.

tooqk4u22

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #7 on: September 19, 2014, 12:19:22 PM »
I didn't get it either...especially with the mileage he drives and the alternative options that are available in SanFran....Uber, car share, public transit, bikes....I mean San Fran is like the nirvana of a place to not need a car.

I'll admit that I liked reading FS in the past because he provided a view different than MMM but with a similar message. 

But it seems that since the .com world has come back and he started his consulting gig...he has turned more into a ridiculous purveyor of consumption and other non-sense. "I make this so I can afford it so no big deal....." "Look how much money I have and how many homes I have...."

Blah blah blah.


Bob W

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #8 on: September 19, 2014, 12:25:11 PM »
A lease is called a "fleece" for a reason.   I would run from any financial blogger suggesting one for personal use.   Now for corporate use that may make sense because the accounting is way different in that world. 

socaso

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #9 on: September 19, 2014, 12:57:18 PM »
I don't know that I trust any financial blogger who posts a picture of his car parked at his "tennis club" next to a Tesla. Don't they have tennis courts at the park?

galliver

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #10 on: September 19, 2014, 01:06:40 PM »
I didn't get it either...especially with the mileage he drives and the alternative options that are available in SanFran....Uber, car share, public transit, bikes....I mean San Fran is like the nirvana of a place to not need a car.

If all you want to do is hang around SF, sure. But I for one find that paying a premium to live in CA just to live in a city is ridiculous. You have wine country (many wineries offer free or $5ish tastings), gorgeous beaches, mountains, redwood forests, Sequoias, Joshua Trees, Lassen Volcanic, and even some ridiculously fun caves far up north (almost Oregon). Zipcar will cost you $80-100 for a day's use (and demand on weekends might be ridiculous). At 4 days/month (let's say 2 weekend trips camping), that's 3840-4800/year. If you have a place to park it (e.g. already live in place with garage), you might as well buy a car.

Leasing, however, is a ridiculous concept and the Fit we test drove did not feel like it could handle hills at all, making it a strange choice for SF. To each their own, I guess.

strider3700

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #11 on: September 19, 2014, 01:44:03 PM »
This guy may be a financial logger but if he's making $150,000 per year in passive income there is nothing wrong with getting a lease.    If I was magically rich I'd probably do the same thing.   Every 3 years give back the vehicle for a newer one and not need to worry at all about.   Having a giant stache lets you do this.     If you don't have a giant stache  or for some reason 150k isn't enough for you then sure do the more economical thing and buy a beater and save your bucks.   

arebelspy

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #12 on: September 21, 2014, 05:34:41 PM »
There's a number of popular financial bloggers I'm pretty meh on.  This is one, and this decision doesn't surprise me.

But hey, it's his money, he can do what he likes.
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Another Reader

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #13 on: September 21, 2014, 05:56:49 PM »
Yep, I left my thoughts at the post.  A "samurai" would have made a very good deal on a deductible business expense.  Sliced and diced the various parts of the contract and walked out the winner.  I think he just took the standard lease offer and didn't quibble.

usmarine1975

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #14 on: September 21, 2014, 08:04:40 PM »
We had to replace two cars beginning of 2014. Both totaled.  We considered new and went to Hyundai dealer to check out the Sonatas. While there I chatted with a couple that leased a car. I think they were on hour 3 of negotiations on purchasing the leased car or leasing another. Leasing rarely makes sense for an individual but dealerships love pushing them.

Our salesman was more concerned with trying to get us to love the new car then actually talking the numbers. His reasoning was most people don't know what they pay for their car only if they could afford the payment.  He obviously didn't understand that I know what I have paid for every vehicle I have ever owned. 

We bought a used one for cash from a used car dealer.

randomAustinGuy

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Re: Leading Financial Blogger Leases Brand New Car WTF?
« Reply #15 on: September 22, 2014, 02:35:05 PM »
I find that a bit amusing.  I mean, if the guy has even half the money he claims, why would he waste time with a lease on such an inexpensive car?  It would be more efficient to simply write a check and be done with it.  It's not like a new Honda is going to depreciate so much in three years that one couldn't simply trade it in on something else.  I don't buy his math at all on this one.  But I find I generally disagree with most of his posts, so there is that.