Do you want to spend ~10% of your net worth on a vehicle every year?
Well Iām not a millionaire like the majority of people on here but I do enjoy cars. I have a high salary and I donāt think 6 figures is a low net worth for someone 5 years removed from college and in his Twenties.
I donāt mind paying a little bit for a nice car but i still want to get a great deal. And thatās why Iām debating what is the best route to go.
It doesnāt matter, you shouldnāt spend your net worth on a car. A car is a depreciating asset, view it as an expense instead of an investment. Your net worth should be parked somewhere where it can appreciate not depreciate (eg. a house, stock, bonds etc.). Granted I have no clue what your current predicament is, but you shouldnāt spend any portion of your net worth on a car especially for a lease. The portion you spend on a car should be disposable income.
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Iām not questioning whether you are doing well for yourself (and kudos if you are), but the question remains. How much of your salary and/or net worth do you want to spend on depreciating assets like cars, when you could put that towards long-term appreciating assets like real estate and your stock portfolio.
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Coming back to your specific example, with a 3yr old S-class you are still probably looking at $10k depreciation per year for the one-two years you plan to own it, plus the sales tax on the full price that you spend every time you get into a newer car.
If youāre willing to spend a bit of money on repairs to lower your tremendous depreciation cost, look at cars that have already depreciated 60+ percent, like a previous generation S-class or 7-series (most people wonāt know the difference).
Debadge and put some nice wheels on a 5-series or E550, and most people wonāt know the difference vs a E63 or M5.
Your best bet is probably a Gen I 997 which has depreciated close to fully.
I would say go for broke. If you put down 100% of your net worth as deposit, they will let you lease a Ferrari. YOLO 
Another poster just reminded us that a mere 5 years after bankruptcy, they were able to get their score back to 700. So now is the time to do it, and you can still get a house later a life
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Let me specify what I mean when I say I donāt plan on spending my entire net worth on car. Let me specify. Iām not going to buy a 150k car cash. But I do want to get a car in the range of 50-70k. Drive it for a year or so and sell it for a similar price that I bought the vehicle for. Should be a little lower thanks to depreciation. Sorry for the confusion.
Thatās what I mean by spending my net worth.
I know cars are a depreciation asset. Thatās why Iād never purchase a brand new vehicle. I also do plan on getting into stocks but Iāll leave the real estate alone.
LOLā¦ Sorry, but you are all over the place since you joined this forum.
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Either way (50-75k) the car is going to depreciate. I would never throw more than 10% of my net worth into a car at once. If it were my money iād lease something nice but cheap and invest the rest. That being said I have paid cash for new cars before, but it was a small fraction of my net worth. You have to keep in mind the time value of money, one dollar today isnāt going to be one dollar tomorrow, so might as well invest that money and have it appreciate so you could buy something better in the future.
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just to put it into context, I graduated with a phd In 2009, did a 3 year post doc, but have saved like crazy since my early 20s (i.e. maxing out IRA/401k whenever available to me) even though I have never earned more than $150K a year (which Iāll fully admit is make me privileged relative to the majority of the country, but isnāt particularly high for tech industry) but with intelligent index investing and frugal living (even in expensive locales such as manhattan and sf bay) have managed to build a nest egg just north of 7 figures as a single.
i.e. I could now āaffordā to buy those cars with cash, but still wouldnāt be a smart financial move. honestly, the smartest thing you could do if you think youāre going to be living in a certain area for a reasonable length of time (and which I wish I did, but didnāt do) is buy a residence, perhaps a 2 or 3BR and get roommates whose rent to you will help pay your mortgage.
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Just to give my $0.02 (or 10K). I have used this strategy (buy 2-3 year old luxury car and drive it for 18-24 months) for several of the 30+ cars Iāve owned over the years. Absent insanely unusual circumstances (spurned spouse selling the 911 for peanuts), you are going to take a substantial hit. Not nearly the hit youāll take on a new car but not nothing. For example, my best deal ever was an 18 month old Audi S8 from a private seller ā 2 years later I sold it for 14K less than my purchase price. Add in the brake job and ignore the taxes/fees and it was about $600/month for a car that listed at about $120K. Did close to the same on a 7 series and a couple of 5 series and just fine on a few other midlevel Audis. Got killed on a MB and a Volvo and a few other cars.
Bottom line ā there is no free ride. Leases give you the benefit of know your hit up front and (sometimes) getting subsidies from the manufacturer. Buying slightly used requires a bit more legwork and luck. Buying new and selling in 18- 24 months is a suckerās game.
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I think leasing is better option
You have to remember that when a $100k car that is only worth $50k in 5 years needs repairs, it is still replacing parts of a $100k car
I had various s class Mercedes, BMW 7 series etc. in past and the repair fees were outrageous. Often times a simple repair like ac will cost $5k
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Except the LS460L that I bought at the end of '06 for 70k (great deal only had 6k miles and it was a brand new model vin number #69). It now has 110k miles and have never had a problem (aside from maitenance)
Thatās pretty damn good. Thatās the type of deal I have no problem taking. Averaging 600$ a month on a 120k car. Thatās a great come up.
But you canāt. An average tax rate (letās call it 7.5%) on a $70K car is a $5,000+ tax bill. How can the OP ignore that? And the more often he changes cars, the more often he pays those taxes and fees.
Sure, you have no problem taking that deal ā it was fantastic and its the best I had in over 30 strongly negotiated car buys. My point is that is an anomaly ā youāre much more likely to make out very poorly --(not quite as bad as buying new and flipping but still not good.
As for taxes, in IL (and some other states) tax on private party sales is far less than dealer buys. Still, its something ($1500 max in IL) to consider.
And to the other point on buy and hold ā absolutely, if you are ok owning a car out of warranty, you get your best per year cost by holding for a decade (on average). But lots of us love to drive a different car every year or two.
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You are absolutely correct. I am in Georgia which means 7% tax.
If you do go with swapalease, donāt pay the $59 fee. They email you about a week after registration offering a membership for $39.
Edit: Or per @Starkās suggestion, you can call them.
Not sure about a decade, but the OP would effectively cut his tax bill in half by holding for two years instead of one.