About to start a new job where I anticipate driving 18k+ per year and I would like something sporty and luxury. Been looking at Mercedes C and E class as well as Lexus IS and ES class.
I was thinking of financing or buying cash a 2016 certified pre-owned vehicle with at least 20k left on factory warranty and 2 years of extended warranty when that ends so i can drive it for 3 years and then change it for something else.
A salesperson told me today that if I can negotiate a really aggressive deal on a brand new lease with low mileage (10k per year) I can probably sell it at the end of the lease for at least what the buyout will be. Does that seem accurate.
You might get lucky and have the buyout work for you, but thatâs a huge gamble, and sounds more like a sale person just trying to push something. If you have a 10k per year lease and drive it 20k, you are going to not only lower the value of the vehicle further, but pay huge mileage penalties. That many miles doesnât lend itself to leasing. I think your idea of a CPO vehicle with an extended warranty (and thatâs included on some CPO vehicles) is the better idea.
The salesperson is the friend of a friend of mine which actually went with me to the dealer. He made it seem as though if he could get as many rebates and discounts on the agreed upon sales price for the lease, we have essentially worked a good portion of the depreciation on the front end which will allow me to at least break even at the end of the lease. I think he mentioned me simply purchasing the vehicle at the end of the lease and reselling it or trade it in.
Front end discount has no effect on residual value. Thatâs set by the bank and with your extra miles you will 99% not break even in a sedan in this market. Best scenario would be to lease a loaner C or 3 series and pay the extra miles. Maybe try to do a 24 mo lease to keep warranty active if the figures work out. Prob easier on a BMW than MB
Iâm in this same situation, actually I drive 22-24k/yr. I wrestle with this decision every few years. Many will tell you that leasing doesnât work for high mileage, but I disagree. If you drive this many miles, I would think twice about owning.
When BMW charged 0.16/mi leasing a 5er still made sense. That rate went up almost 50% since, to 0.23/mi. I donât want to own anymore because driving this many miles overexposes me to events that lower resale (been there done that, driving in NY/NJ, try to have a âcleanâ car after 65k mi in 3yr).
I also donât love the idea of buying BMW CPO but this may be my next move. It would have to be a low mileage 2yr old CPO (based on in service date) so that I can still be within the original warranty. But these cream puffs fetch a premium, youâll be paying close to what a new lease will cost on a similar BMW without any of the peace of mind of leasing. When you drive this many miles, donât underestimate the trouble youâll have unloading that thing for a decent price.
Splitting a DD with a beater never makes financial sense with this amount of mileage.
One thing you can try is swapalease. If you can find someone who has driven way less than contracted miles (eg have 1500mi+/mo remaining), you may make out even if you factor in mileage overage.
If you like premium cars AND drive a ton, there really is no easy answer here.
Driving this much, donât forget to factor in of gas in your overall cost.
Driving 20k/yr is just going to be pricy any way you slice it for a luxury car. Do a two year lease, the CPO wonât be that much cheaper payment wise, and youâll get killed on the back end. Just grind the best deal you can on a loaner and setup the appropriate amount of miles, otherwise youâll be back on here asking about what to do with your $4 to $5k negative equity.
Best bet: a 2/3 year old CPO Lexus with 20k miles and 5yr/100k CPO warranty.
You would be able to put the miles on it and only probably lose 20-25% depreciation of the MSRP. The first owner would have taken the bulk of the hit, the Lexus brand ensures that after 5 years it still has decent residual âŚ
Pretty bad advice from the salesperson. If youâre driving 20k/year (60k at lease end) and youâre allowed 30k youâre looking at $6k in negative equity (.25 per mile over for most brands) if you just pay the mile overage. Most manufacturers have inflated residuals so youâll more than likely be worse off trading it in than just covering the miles. Like others said youâre much better off buying a CPO with extended warranty. Check out CPO Infiniti Q50âs as well, those can be bought in the mid 20âs.
Edit: Make sure you either go a shorter term if you can afford the payment or get GAP insurance
Everyone is spot on in their assessment. If you question it and want to believe your friend/salesperson, go to other car websites to assess what a 2 or 3 year old car is asking for having 60k miles (depending on a 3 year lease). Also, go to Edmunds to determine the residual % on the current model. Compare the 2 prices.
For instance, if an 2018 Mercedes C Class is giving you a 55% residual after 3 years on a $45k car, then the residual is about $25k. Check car websites on what people are asking for a 2015 60k mile Mercedes C. Are they asking for more than $25k? Remember those prices are retail prices not private party, as in dealer asked prices.
Thanks a bunch for all your feedback. It appears that there is no one âbest way to goâ based on the responses.
I found a 2016 CPO Mercedes E350 Sport with 17 months/19k miles left on the factory warranty. When that factory warranty ends, the CPO extended 1 year warranty with unlimited miles kicks in. For another $1795 I can add on an additional year of extended warranty with unlimited miles. That gives me 3 years with warranty with a sales price of $32,680. They also charge a $799 dealer fee.
What do you guys think? How bad will I be on the back end?
That is actually a great deal. Car is worth nearly $32k at dealer auction. Somewhere between $30k-$31k trade-in. So $33k with 3 years of warranty is fantastic.
That said, if we look at a 2013 with 90k miles, it is about $13k trade. So youâve got $20k depreciation over 3 years, which is $555/mo (plus interest). Not exactly cheap.
I would probably look into those manufacturers who offer 18k/yr leases and see how they compare on a 2-yr term. Youâll only be 4k over, if you go the full term.
I got all excited when I started reading your reply and then had a mini anxiety attack once I got to 20k depreciation over 3 years. I am guessing if I purchased it cash that would not be so bad. Thoughts?
I just read an few articles about high-mileage leasing. The one from Autotrader said the followingâŚ
Our Take
To us, the idea of leasing a car with a high-mileage limit is one option for drivers who plan to drive a lot â but not necessarily the best option. In some cases, especially for luxury cars, monthly payments can go up so much that youâd be better off buying the car because your payment (and the carâs depreciation) probably wonât cost as much as the pricy lease.
Our view: Run the numbers before you sign the papers on any high-mileage lease. Some can be beneficial, but others are so expensive that you shouldnât bother. Depending on the cost, the vehicle and the exact mileage you want to drive, youâll have to determine if high-mileage leasing is right for you.
Please help me understand how I should go about ârunning the numbersâ before I sign? What should I focus on?
Just find a cheap 3 series loaner and buy the extra miles, itâll add about $100/mo to the payment($.25x10,000mi). Well worth it in my opinion, then you not jacking around with used. You depreciate the crap out of there car then walk away. I would think you could get into something like this for less than $600/mo, maybe $550. CPO route will put you at a similar payment with the liability at the end. Somebody correct me if Iâm wrong but BMW doesnât give you a break if you pre pay miles?
Probably the best route, but he mentioned performance so it would have to be a 340 M Sport (not sure if those come with the 704 suspension like the 540). A few cents cheaper if you pay for overmileage just prior to turn in.
Lexus does have a great CPO warrranty (unlimited) and great resale but theyâre such bland cars. Plus a CPO GS350 FSport with low mileage will be close to 40k.
If youâre married and wife doesnât care for cars, buy her an â18 Accord 2.0T and get yourself a BMW 3/5 lease with 15k miles. Drive the BMW 3-4 days a week, for the rest the new Accord is actually pretty quick and reasonably fun to drive.
True. But wouldnât a 2016 by summer of 2021 be in a similar boat? Of course, we canât predict what a car will be worth 3 years from now, but gotta go with the info we got.
