The Art of Buying a New Car - Protection Plans etc

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Postby marty123 » 05 Jul 2009 09:46

kcowan wrote:If we buy another car, we will be faced with storage costs in November when we retun to Mexico. Also comprehensive insurance and depreciation. Renting is costing us $236 a week, slightly lower by the month.


Check out the few RedFlagDeal.com threads on car rentals. A lot of promotional deals are posted there, and quite a number of posters appear to go from rental-to-rental for months at a time instead of buying.

Also check your credit card CDW coverage:

- Make sure your rental duration is not longer than what they support (typically 28 days)
- Make sure you switch credit cards every 28 (or XX) days (because they consider 2 consecutive rentals to count as one as far as CDW coverage is concerned)
- Make sure the CC CDW extends to your spouse. Some cards don't, some cards do when the spouse has an extra card.
- Make sure your card doesn't state that it doesn't disqualify you if you just exited coverage from another card. I don't know if it's legal for them to do, but I'd read carefully to be sure. It may also be a limitation if the CC companies use the same insurer.

A somewhat new car for less than $1,000/mth for a few months of the year with no maintenance, no mileage limitations, no storage costs and no insurance is not bad, considering the headaches you save yourself IMHO.
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Postby kcowan » 05 Jul 2009 11:59

Thanks for all the food for thought. I looked at a 2000 Mercedes ML430 yesterday, and also a Lexus LX470. So far I am not impressed. I cannot find one 2000 BMW X5 to look at (my emotional choice).
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Postby agraham » 05 Jul 2009 17:36

marty123 wrote:...go from rental-to-rental for months at a time instead of buying.
...
A somewhat new car for less than $1,000/mth for a few months of the year with no maintenance, no mileage limitations, no storage costs and no insurance is not bad, considering the headaches you save yourself IMHO.


This is what I did last winter. I didn't feel like walking or bussing to work in the snow. Budget had an off-season deal: $199 a week for a midsize (Hyundai Sonata). I wound up keeping the car for a month.
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Postby deaddog » 05 Jul 2009 19:17

kcowan wrote:Thanks for all the food for thought. I looked at a 2000 Mercedes ML430 yesterday, and also a Lexus LX470. So far I am not impressed. I cannot find one 2000 BMW X5 to look at (my emotional choice).


Why are you looking at a soon to be 10 year old car?

If you are planning on re-sellling it's easier for buyer to get financing if the vehicle is 7 years old or newer.
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Postby kcowan » 06 Jul 2009 10:07

kcowan wrote:...
We have the option of buying a car that we can drive to Mexico, convert to national plates and then sell. It provides the added benefit of another trip down the Pacific coast and another load of personal effects in the back.

Mexico only permits 10yo cars to be imported and nationalized. So if we drive in a 2000 model, we can nationalize it and resell it there in 2010. Very frustrating!
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Postby arthur » 06 Jul 2009 15:36

http://www.autonation.com

Buy one in TX and drive across the border.
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Postby kcowan » 06 Jul 2009 16:26

arthur wrote:http://www.autonation.com
Buy one in TX and drive across the border.

But we want the car in Vancouver for the summer. We looked at Bellingham but then we have to import it and pay GST and PST.
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Postby N. Vestor » 06 Jul 2009 17:28

Here is a list of 10 yr olds in the Northshore Automall. The first two - the low mileage Mustang and the AWD Volvo wagon could be of interest - assuming the prices can be negotiated.

www.northshoreautomall.com/used.php?s2= ... rmat=thumb
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Postby beluga » 06 Jul 2009 17:32

I used to own a 2001 ML320. Built like a tank but drank gas like no tomorrow. I cringe thinking about how much premium the ML430 will guzzle.

Have you considered picking up something like a pre-owned BMW Z4 convertible?
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Postby kcowan » 06 Jul 2009 19:13

Yes I am not impressed with the MLs.

Currently considering a Range Rover HSE. We need the space to take stuff and want something that will appeal to the Mexican ego. But we are severely constrained in choices here.
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Postby westinvest » 06 Jul 2009 22:13

If you liked the bimmer but want a bit more carrying capacity, have a look at the 3 series Touring (wagon). I have owned 3 of these since 2002 and consider them a perfect balance between style and performance and practical carrying capacity. Canadian versions are AWD. Fuel economy and performance are similar to the sedan.
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Postby brucecohen » 15 Jul 2009 13:30

Canadians and our roads are obviously much harder on cars than Americans and US roads.

Subaru Canada says my 2009 Forester should undergo its first oil change and service at 6 months or 6,000 km, whichever comes first.

Curiously, the Subaru US website says the initial service should occur at 7.5 months or 7,500 miles.

I've sent Subaru Canada a message requesting an explanation for the difference. Don't think I'll hold my breath while waiting for a reply. :evil:
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Postby brucecohen » 15 Jul 2009 15:54

Gee, I should have held my breath. It took Subaru Canada only three hours to reply to my message. Here's what they said:

Thank you for contacting Subaru Canada, Inc.

Because Canada is considered to have extreme weather and road conditions and to be able to maintain the vehicle in these extremities, these recommendations in the warranty booklet were put into place.

We trust this information is valuable to you.

Given that they were so prompt in responding, I didn't have the heart to ask if Canadian weather and roads are more extreme than Wyoming's, Montana's, North and South Dakota's, Alaska's, etc. :roll:
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Postby marty123 » 15 Jul 2009 16:33

brucecohen wrote:Given that they were so prompt in responding, I didn't have the heart to ask if Canadian weather and roads are more extreme than Wyoming's, Montana's, North and South Dakota's, Alaska's, etc. :roll:

Or Texas, Alabama, Florida or Arizona, where outdoor temperature reaches 100 degrees quite frequently, or in Los Angeles where it's not unusual to put in 3 or 4 daily hours of bumper-to-bumber commute for a 50km round trip. Just look at your temperature gauge when you're stuck in traffic, and listen to the fan kick in. Add the fact that A/C would be used more extensively and be even harder on a southern car, and it has to make anyone wonder. Driving in southern USA has got to be more demanding on oil then driving in Canada.

It's a cultural issue. Canadians don't question "common knowledge". We're sheep, doing what we're told, so we keep believing the myth. The manufacturers are not going to change the books, because they'd canabalize revenues from those of us that go to the dealers.

Americans have been questioning this myth for a long time. See the wiki article about the 3000 mile myth. A google search on 3000 mile oil myth returns 8,960,000 hits and the first page of hits all says the same thing.
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Postby biker » 15 Jul 2009 16:37

brucecohen wrote:Given that they were so prompt in responding, I didn't have the heart to ask if Canadian weather and roads are more extreme than Wyoming's, Montana's, North and South Dakota's, Alaska's, etc. :roll:


A small company like Subaru would not likely have it's own cold weather testing facility and recognizing that Toyota manufactures for Subaru my bet is they rely on the Toyota test centre in Timmins for data. Cold as hell there in my experiance.
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Postby Taggart » 22 Jul 2009 06:03

For those interested in vehicle crash tests, the Insurance Institute For Highway Safety, has just released the tests for a few models of two door cars.
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Postby MaxwellMcGee » 22 Sep 2009 13:46

marty123 wrote:You are buying a series of negative cashflows, a few penalty clauses, and a significantly out-of-money call option.

Negative cashflow: monthly payments are based on a vehicle value that has since deflated
Penalty clauses: limits are imposed on what you can drive and how you can terminate the contract, and penalties will apply. These limits may already have been exceeded and a liability may already exist.
Out-of-money call option: you have an option to buy at a price which will likely far exceed the market value of the car. At the time the car was leased out, there was a financial value associated to this call option. Not anymore.

The other guy owes you for at least the three reasons above.


Considering a lease take-over and wanted to bat this around with those more knowledgeable than me.

First a general question: what does it mean if someone is selling a car (or trying to get out of a lease) that is very close to brand new: e.g., a 2009 model year car? Any particular reason to be concerned, particularly if I can get a mechanic review?

I'm comparing the purchase of a slightly used 2009 TSX vs. a lease take-over on the same car.

- Purchase price: according to auto-trader, purchase price would be about $32,000 plus taxes.
- Lease take-over: up front pay-out to buyer of $1120, followed by monthly payments of $614 (incl. taxes) for 24 months with option to buy the car at the end of the lease for $21,000. http://www.leasebusters.com/en/details.asp?ID=84243

When I run the numbers and copare buying vs. leasing, I end up with NPVs that are relatively close depending on what discount rate I use. One noteworthy point about this particular lease take-over -- the buy-out price of $21K for a 2009 model 2 years from now is significantly lower than the resale price of 2007 model year cars available for sale today. So in this case, it's likely that the call option actually will be in the money at expiry.

So in this case, where the NPVs between leasing and buying seem to be equal, is there any reason to prefer one option over the other? Any additional considerations I should keep in mind?
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Postby Norbert Schlenker » 22 Sep 2009 13:57

MaxwellMcGee wrote:... what does it mean if someone is selling a car (or trying to get out of a lease) ...
- Lease take-over: up front pay-out to buyer of $1120

I haven't time to look at all the numbers right now but my first question is ...

Why are you considering paying someone upfront who wants to get out of their obligation?
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Postby MaxwellMcGee » 22 Sep 2009 14:23

Norbert Schlenker wrote:
MaxwellMcGee wrote:... what does it mean if someone is selling a car (or trying to get out of a lease) ...
- Lease take-over: up front pay-out to buyer of $1120

I haven't time to look at all the numbers right now but my first question is ...

Why are you considering paying someone upfront who wants to get out of their obligation?


Sorry if that was unclear, but it was meant the other way around. I.e., the current lease-holder is paying the buyer (me) $1120 to take over the lease.
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Postby marty123 » 22 Sep 2009 21:41

MaxwellMcGee wrote:I'm comparing the purchase of a slightly used 2009 TSX vs. a lease take-over on the same car.

- Purchase price: according to auto-trader, purchase price would be about $32,000 plus taxes.
- Lease take-over: up front pay-out to buyer of $1120, followed by monthly payments of $614 (incl. taxes) for 24 months with option to buy the car at the end of the lease for $21,000. http://www.leasebusters.com/en/details.asp?ID=84243


Could be because it's a lemon, or because the original lessee didn't like the colour.

Too many variables and too much research. I haven't checked the link, but here is a starting point:

- (24 x 614)/1.13 + 21000 = $34,040. Substracting the $1120 = Obligation of $32,920 + taxes - interest
- Is the $32,000 from auto-trader realistic? Is it for a new one, or a used one slightly used? Wouldn't you expect a 3% to 10% additional discount?
- How's the market for resale these days?
- How is the mileage on the one you are getting? How does that compare with the allowance over the full lease?
- How's the interest lease rates these days? Off the top of my head, a 0% interest rate = $32,920, while a 5% rate = obligation of $30,200.
- How much would a new lease cost fromt he dealer?
- How good a deal did the lessee negotiate from the dealer? If he left money on the table and the $1120 is not covering it, you're paying for his bad negotiation skills.
- How much of a bind is he in? $1120 seems low to me for a favour considering that the car got used, unless he had an awesome deal to start with
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Postby 2 yen » 23 Sep 2009 03:26

Just bought a new Hyundai. Was offered undercoating, tire and glass protection. Turned it all down and put the $1000 towards the next vehicle. Seemed a better way to allocate the $1000 than give it to the dealer. I don't anticipate the next vehicle for at least 6 years, but $1000 towards a new Hyundai is not chump change.
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Postby MaxwellMcGee » 24 Sep 2009 10:17

marty123 wrote:Could be because it's a lemon, or because the original lessee didn't like the colour.

Too many variables and too much research. I haven't checked the link, but here is a starting point:

- (24 x 614)/1.13 + 21000 = $34,040. Substracting the $1120 = Obligation of $32,920 + taxes - interest
- Is the $32,000 from auto-trader realistic? Is it for a new one, or a used one slightly used? Wouldn't you expect a 3% to 10% additional discount?
- How's the market for resale these days?

I'd negotiate a higher discount. The same car new would sell for $34,500 plus $2,000 of freight/AC taxes plus GST and PST. On the road price would be about $41K.

A used car at $32K would cost $32K + 8% PST (if purchased via private sale) meaning a total on the road price of $34,500. So you're looking at ~$6,500 in savings vs. buying new. Roughly a 15% discount for a car that has ~20,000 KMs on it. You're right, probably not enough.

That said, I've been tracking used TSX prices for a while now, and their resale values seem to be very very strong.

- How is the mileage on the one you are getting? How does that compare with the allowance over the full lease?

Mileage allowance on the lease is not an issue. Under the terms of the lease I'd be able to drive ~25,000 KMs per year -- I usually average around 16-18,000 so this is plenty.
- How's the interest lease rates these days? Off the top of my head, a 0% interest rate = $32,920, while a 5% rate = obligation of $30,200.

What are you suggesting the appropriate discount rate on an NPV calculation should be? I feel that for me, the best discount rate to use would be the fixed rate I pay on my mortgage -- call it 4%. So for all of my NPV calculations I try to use 4% as the appropriate discount rate.
- How much would a new lease cost fromt he dealer?

I've never really considered leasing from a dealer directly -- it's always felt as though the pricing was always too high relative to what could be negotiated on a cash purchase.
- How good a deal did the lessee negotiate from the dealer? If he left money on the table and the $1120 is not covering it, you're paying for his bad negotiation skills.
- How much of a bind is he in? $1120 seems low to me for a favour considering that the car got used, unless he had an awesome deal to start with

Negotiating is also the one area where I can see the advantage going to buying the car outright. It's probably much easier to negotiate a discount on a cash sale -- say knocking down the $32K to $30K, vs. negotiating a higher up front kick back on the lease. Taking $2K off a $32K sale price would be a ~6% discount whereas increasing the up front kick back would be asking the seller to triple the amount their willing to give away up front.
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Re: The Art of Buying a New Car - Protection Plans etc

Postby 2 yen » 30 Aug 2013 09:23

In a "you only live once" moment we bought a new Lexus RX350 yesterday. I'm waiting for the business manager to call and try to sell me various protection plans. I'm going to say no to all pitches. Any one ever had a hard sell from Lexus on protection plans, or are they above that?

FYI: The seats, quietness and general fit and finish quality sold us.

Thanks.
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Re: The Art of Buying a New Car - Protection Plans etc

Postby AltaRed » 30 Aug 2013 15:03

2yen wrote:In a "you only live once" moment

Hopefully, you have other such moments from time to time. Makes life more interesting.
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Re: The Art of Buying a New Car - Protection Plans etc

Postby 2 yen » 30 Aug 2013 20:08

AltaRed wrote:
2yen wrote:In a "you only live once" moment

Hopefully, you have other such moments from time to time. Makes life more interesting.


Thanks Alta! We'll try.
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