Lease vs buy?

[stevegillings]

I don't mean to offend, I just like to see young people save and not dig a hole for themselves early on, by not making sound buying decisions. Respectfully, Bill

This is exactly the reason that keeps on drawing me back to this thread, and why I tried to help JD with the facts. Bill, you have taken the time to respond in detail to what Willard said - and he is no doubt on the wrong path. A big thumbs up for that.
One thing I disagree with you on: it's the type of investment you should use for long term returns. Any money not needed over the next 20-30 years should be in the market IMO, choosing low cost index funds of course. You will most likely see returns in the double digits (10% or more), and I am sure you know what kind of difference that will make after 20+ years.
But, to be honest, looking at your analysis, I am sure you know that and you just kept it simple for an 18 year old who starts out, making your point using guaranteed returns.
- Steve.

[Bill Anderson]

Thanks Steve. I was really trying to keep it simple to make the point, as you said. 5% is extremely conservative especially in this market. If a person is not a risk taker, they can earn 5% in any market. I agree with you on investing in the market. 10-12% returns, on average, are a reality today. If JD would take his $550 per month and $9000 and put it in the market, continually contributing, at 12% annual growth, he would have $2,245,777.00 in 30 years. And as far as I am concerned that is conservative, in terms of amount of money invested every month, and maybe rate of return to an extent. So, basically, by the time JD is 48 he could be worth several million dollars, and most of that was made through using money wisely, and not having to break your back everyday, barely scraping by. He could afford a Tacoma for everyday of the week, if he wanted (I wouldn't really do that either). Just my thoughts. And JD, if you are reading, just be patient, and wait it out. Thanks again Steve. Regards, Bill

Originally Posted by stevegillings

Any money not needed over the next 20-30 years should be in the market IMO, choosing low cost index funds of course. You will most likely see returns in the double digits (10% or more), and I am sure you know what kind of difference that will make after 20+ years.
But, to be honest, looking at your analysis, I am sure you know that and you just kept it simple for an 18 year old who starts out, making your point using guaranteed returns.
- Steve.

[Splicer]

Originally Posted by Bill Anderson

10-12% returns, on average, are a reality today. If JD would take his $550 per month and $9000 and put it in the market, continually contributing, at 12% annual growth, he would have $2,245,777.00 in 30 years.

Returns on equities have been higher than average in recent years (though not in the past month). But you need to consider historical averages, with the realization that long-term returns will always return to the average. Historical average is 8% at best -- and given recent run-ups, future returns are generally expected to average 7%.

Not trying to rain on anyone's parade (I would love 12% over 30 years), but 12% average for 30 years is well beyond anything I have ever heard. Of course it's possible to beat the averages if you are very good and very lucky most of the time. But some awfully smart professionals fail to do it consistently.

[jimk59]

Anderson is correct, close to 12% average annual return since 1926, compound return closer to 9%. Still much better to buy used with cash than lease or buy new. You can't beat the math.

Also why beat up a new truck with weekend carpentry jobs? Buy used.

[Splicer]

Well, there are plenty of places out there to get numbers, and I won't argue with yours (actually, I prefer them to mine). And there are so many things to consider... I recently ran across this regarding the value of today's market:


Is the Market Overvalued? Look at the Stock Market's Historical Performance and Decide for Yourself…
The historical performance of the stock market shows the average price-to-earnings ratio of the market has been 15.3 - which means that people have traditionally been willing to pay $150,000 or so for $10,000 in annual earnings.
However, today, the price-to-earnings ratio of the stock market is 39.95 - meaning you would have to pay nearly $400,000 in investments for $10,000 in annual earnings. That's 161% higher than the historical performance average! Put another way, the stock market would have to fall over 60% before prices are back in line with the historical average value.




Do I necessarily believe it at face value? Nope -- I'm staying invested.


Just wanted to point out that equity investing, which I very much believe in, is complex and carries risk. It's a long-term commitment and I wouldn't want to steer someone into it without them realizing that there are risks involved.

[stevegillings]

Political Calculations: The S&P 500 at Your Fingertips

[WillardBubby]

Yes, a car salesman is definitely not your friend. I learned that lesson the hard way when I was in the Navy and on my own. I got screwed. Everytime I go into a dealer for something, they swarm like mosquitoes. I usually walk past them as fast as I can.
At the end of my last lease, I walked in talked to the Fleet Sales Manager (which is who I normally deal with), he got me the truck I wanted, and had it shipped from another dealer. In two days, I went back, turned in my 03 Tacoma and drove away in my 06 Tacoma. I had several small scratches and door dings, but otherwise it was in great condition. I never was charged anything for them.

Residual values are how lease payments are calculated.

I may be young (32) but I certainly have not dug myself into a financial rut. I started to get into trouble when I was in the Navy, but I realized this was the wrong path and took steps to correct myself. I'm doing pretty well compare to most people my age: married, two kids, good job and very little debt.
Anyway, I think it all comes down to what I orginally said about everyone having unique situations. I have owned vehicles in the past and they all ended up costing me more money than what they were worth in the end. Nothing lasts forever and eventually you have buy new car, unless you never drive it. You may own the vehicle, but after its paid for, what do you really own? You can't turn around and sell it for more that what you paid. Especially after you factor in maintanence, repairs, etc. over the life of the vehicle.

[peiscooter]

The only vehicles I would (and have ) leased are Hondas and Toyotas. The Tacoma is the perfect lease vehicle, whose residual value is perhaps the highest of any vehicle. You pay substantially lower monthly payments, and at the end of the lease you can buy the truck out for 25% less than market price. At that point you keep it or sell it to someone else at market price. With the extra money you make (we're talking 4000 - 5000 here) , you got a nice down payment on your next lease / purchase. I have actually done this and it works.

[jpmorrisvb]

Well, this has certainly turned into an interesting thread.

[elfiero]

Simple and to the point- Jr., you can't afford a new truck yet. Once you're off your apprenticeship, maybe. Listen to the guy that posted earlier and make "payments" to your savings account until you can buy it with cash. This is undeniably the cheapest way to drive anything. The only people who EVER make out leasing are those that can write it off(lord knows we wouldn't want them to actually pay what they owe in taxes!!!). Back to the point- when you can walk in and write a check for the total amount, you can afford a new truck- NOT BEFORE. Flame away boys.

[stevegillings]

Back to the point- when you can walk in and write a check for the total amount, you can afford a new truck- NOT BEFORE. Flame away boys.

No, no flaming from me. I agree.

[NitroPye]

Originally Posted by elfiero

Back to the point- when you can walk in and write a check for the total amount, you can afford a new truck- NOT BEFORE.

I agree with that as well.

Hard way to live by at first, but well worth it.

[gdctaco]

Rule of 72. 72 is a magic number! you take 72 and divide it by the interest your earning and you get the amount of years until it doubles.
72/10%= 7.2 yrs for your investment to double.
72/5%= 14.4 yrs.
Just thought some people might find that interesting given the financial topics covered here.
My vote is to buy a slightly used 2005/06 taco for much cheaper than dealer and find a private sellers to save money on taxes. At least here in Ontario you'll save 8%.

[elfiero]

Buying used new style Tacos may work in some parts of the country, but here, unless they have lots of miles on them, they cost within 15% of new so buying used isn't a wise choice.

[stevegillings]

Elfiero, same here. I have actually seen some that were equipped like mine, and the seller wanted more then what I paid new .... That was the main reason for me to buy new.
But you never know what it is finally sold for unless you talk to the buyer. Asking price and what it finally goes for are two different things --- most of the time.