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The Future Looks Bright, But Expensive

Hey Cool Car Fans,

I was recently reading one of the car magazines that I subscribe to and came across an article about new technologies.  These included things like thin-film solar panels on the roof and new windshield displays, along with five other new whiz bang features

I grew up in the Star Wars and Star Trek era where I hoped as a kid to be driving a land speeder by now. However, I also spend a small fortune each year repairing and fixing used cars.  If you haven’t had to pay to put in a windshield into a Mercedes Benz S550 with rain sensing wipers then you might get excited about solar panels on the roof of a car.  If you have had to fork over $1,500 or more for a windshield than you get where I am going with this article.

THE COST OF NEW TECHNOLOGY

New and improved technology is fantastic, until it is out of warranty and it breaks down.  The labor costs alone on many vehicle repairs are getting obscene.  There are franchise dealers in Denver charging $165 to $200 an hour just for labor and these are not to repair your Ferrari, but your daily driver.  When you add in the cost of expensive parts, suddenly the cost of ownership outside of the manufacturer’s warranty can be crazy high.

One of the new technologies that were mentioned in the article were putting batteries in the body panels.  This sounds like a great idea conceptually and it will probably even work.  Do you want to be the sucker though that buys that vehicle and pay the bill to insure the vehicle?  Think about the added cost when someone runs a red light and plows into the side of the car.  The body shop wouldn’t just be replacing a door or a few panels, but battery packs inside a door and panels. If sellers think they are getting screwed by a bad CARFAX now after an accident is reported, just wait until this new technology hits the market.

How about shock absorbers that turn energy created from a pothole into more miles per gallon?  Let’s be honest because most of the cars on the road today ride like crap because nobody wants to spend the money to replace their vehicle’s existing shocks or struts.  It’s already an expensive repair unless you are a gear head or mechanic and you can do it yourself.  Now add the additional complexity that the engineers want to add for better fuel economy and most used vehicles will need new shocks like they need new tires.  Only the majority of drivers won’t have the extra money to replace them.

Google, Apple and other Silicon Valley companies are investing heavily into the automotive industry.  The big automotive manufacturers are starting to embrace the “geeks” in California and their highly profitable business models.  Let me forwarn you now that you had better grab your wallet and hold on tight!  You may find in the future that leasing a vehicle is the only option that actually makes financial sense.

If you are enamored with the brilliance of Silicon Valley, you apparently haven’t had your kids break their, made in China, iPhone yet out of warranty and have to replace it for $200 or $300?  Have you seen the upgrade Tesla offers on their batteries for the older roadster at $25,000 for 350 miles of juice?  Who is going to flip the bill if you own an autonomous car from Google when it breaks down?  These companies are run by billionaires who know how to earn a buck off of the masses. I see the word “sucker” when I read about sone of these new whiz bang technologies.

An air suspension ride on a Mercedes Benz or BMW is fantastic until it goes out and you have to buy new air bags.  I see first hand how many people have to get out of their expensive vehicles when repair bills start cleaning out their bank account.  If the cars of the future continue adding more expensive technology that can and will fail it will get far worse.  One of the things that made Luke Skywalker’s Land Speeder such a cool ride was the simplicity of it.  It might be time for the car manufacturers to remember the old marketing saying, “less is more”.

Which is one of the reasons why buying older vehicles or classic cars that someone can fix up is starting to make much more sense for many people.  If you’re not going to lease a new one to share in the risk of repairs with the leasing company or the manufacturer with a lower monthly payment, why not drive an older and much cooler car for a far less overall cost of ownership.

I am getting more requests from people to help them find older classic cars, even like a 1979 Mercedes Benz 450SL that you can pickup for under $15,000 most of the time in pretty good condition.  It’s like getting the movie star look on a Wal-Mart budget and people are starting to realize that these vehicles are not going to depreciate in five years like the newer vehicles are doing in a year.  It’s something to think about isn’t it?

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John Boyd

Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant with his license at a car dealership in Denver, Colorado. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

2015 Mercedes Benz GLK350 4Matic Used Vehicle Lease

Hey Cool Car Fans,

2015_GLK350.1Recently, I had a former client contact me about getting out of her 2013 Nissan Rogue lease and into a “luxury” vehicle this time around, but she wanted a low lease payment without having to put a great deal of money down.  I know that many people see the low lease payment offers on television and they believe the dealerships that they can lease an $35,000 to $50,000 vehicle for under $400 a month with nothing down.

However, what most people discover is that in the fine print of the advertisement the manufacturer wants more money down or have an annual mileage restriction of 10,000 miles or even 8,000 miles.  If you drive 15,000 miles a year for three years and you purchased an 8,000 mile lease than your vehicle will have a vehicle that is three years old with 45,000 miles and you told the leasing company that you were only going to drive 24,000 miles a year.  This happens all the time!

The salesperson tells the person not to worry about the miles because at the end of the lease they can buy it out, but what if the leasing company bet wrong on the residual and the residual is $26,500 and the vehicle is selling at auction for $24,000?  You get to buy it for $26,500 or $2,500 more than what the vehicle would actually trade for.  This is still better than being over your miles by 21,000 miles at $.25 a mile, if you give it back to the leasing company where they will cream you for $5,250 in additional depreciation, plus any additional damage the vehicle might have as well.  Which is why it’s important to purchase the right miles to begin with or get as close to where you think you’re going to drive as possible.

The Used Vehicle Lease Option

2015_GLK350.2Why do people buy used vehicles?  Because they want someone else to take all the initial depreciation on the vehicle when it drives off the showroom floor.  When you lease vehicle you are paying for the depreciation and the leasing company is setting a number on what they believe the vehicle is going to be worth, two, three, four or five years from now.  They are taking an educated guess and rolling the dice that the vehicle is going to be worth X if you put on X number of miles during the term of your lease.  As I just mentioned, many times the leasing company will be wrong and that’s a benefit for you!

What if my client had purchased the Nissan Rogue and after three years she wanted to get out of it?  In her case, she had backed into her husbands vehicle with her car and did about $500 in damage.  On top of that though, Nissan had bet wrong so the vehicle was worth about $2,000 less for trade value than the residual value was, so if she had financed it for five years and wanted out she would probably owe about the same as what her residual value was.  Now she could just give it back to the leasing company, cover the

A used vehicle lease transfers some of the risk of ownership of a used vehicle back onto the leasing company again and this is an awesome concept that you are probably not going to hear about from a franchise car dealership.  They are in business to do new vehicle leases because the manufacturer wants them leasing new cars and not leasing used cars.

You can now see the benefit of how a used vehicle lease is similar to purchasing a used vehicle. Much of the depreciation has already taken place, so you are able to transfer some of the risk of driving that used vehicle onto a leasing company.  If the vehicle gets hit with hail or in an accident, while you are driving it and you own it than you get stuck with the bad CARFAX report and I get those calls all the time from people trying to figure out what to do with their vehicle with the bad CARFAX.

A Lower Payment & A Lower Residual Value

2015_GLK350.3When you lease a used vehicle, like the pictures of this 2015 Mercedes Benz GLK350 AWD, that I ran lease numbers on for my client, a great amount of depreciation has already taken place.  For example, I ran a scenario with 12,000 miles a year instead of the 8,000 or 10,000 on a similar manufacturer’s lease with only $1,000 down, plus the first payment and 12,000 miles a year.  The numbers below are based on approved credit and you need a minimum of a 680 FICO to qualify for a used vehicle lease with most leasing companies.

This is a vehicle that I could purchase at the Dealer Auction for her with about 30,000 miles on a 2015, so it still has the remainder of the four year factory warranty from Mercedes Benz.  If she was to lease this vehicle using the estimate that I ran, which could be less depending on what I can purchase this vehicle for or one like it for through the auction it would be a very affordable lease.  It could be slightly more, but I’ve been doing this for 12 years and I’m pretty good at estimating, but I will drill down a specific vehicle for her if she decides to go in this direction.  I’m not sure why someone wouldn’t want to do this?  There is very little downside and it can be great for people in business.  Not everyone knows how to structure these leases properly though, so if someone tells you they know how to do used vehicle leases it doesn’t mean they will have the same results.

You can see the Base Payment, which is what dealers normally quote before sales tax is added to the lease payment.  Also be sure and look at the residual.  So if she were to decide to lease this really cool vehicle for 48 months she can buy it out at the end of the lease for $15,400, which is below wholesale based on sales at the Dealer Auction of 2011’s with about 78,000 miles like this should have at 12K a year.  Which is a case where if she were to put more miles on the vehicle than what she purchased she could find herself in a safe position based on the depreciation that already took place.  This is also a simple interest lease, which is another discussion all together.

 

Term Adjusted Cap Cost Residual Base Payment Sales Tax % Sales Tax Amount Total Payment
24 $30,445.00 $20,583.00 $467.05 7.85 $36.66 $503.71
30 $30,445.00 $19,521.00 $419.09 7.85 $32.90 $451.99
36 $30,445.00 $18,459.00 $386.73 7.85 $30.36 $417.09
42 $30,445.00 $16,929.00 $373.92 7.85 $29.35 $403.27
48 $30,445.00 $15,400.00 $363.87 7.85 $28.56 $392.43
54 $30,445.00 $14,132.00 $351.12 7.85 $27.56 $378.68
60 $30,445.00 $12,863.00 $340.67 7.85 $26.74 $367.41

This is a payment that many people can afford and put more money into their savings or an investment vehicle, a business venture, use for their household expenses, while still driving a late model Mercedes Benz.  How cool is that!  A person could be driving a 2015 Mercedes Benz AWD SUV for less than what they would pay to drive an American or Japanese Import. Which is why I’m The Cool Car Guy.

If you want to have me run some scenarios for your situation and have me assist you in finding a different vehicle just send me an email at the address below.
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John Boyd

Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant with his license at a car dealership in Denver, Colorado. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

2009 Audi A6 Quattro Prestige Residing In Montana

SAM_0820_resizedHey Cool Car Fans,

In February I had an Audi Fan, we will call him Mark, call me about a 2009 Audi A6 Prestige that I had for sale that another Audi client of mine had traded for a newer Audi A6 Prestige.  It was a pretty sweet ride with about 82,600 miles on it at the time and it was priced to sell at $15,300. I don’t know if you have checked the prices on a new Audi A6 Quattro Prestige, but if you visit Edmunds.com they start at $62,500.  I bring this up because I want to make a point about buying used luxury vehicles like Audi’s, BMW’s, Mercedes-Benz and even Acura’s.

About the same time that Mark was coming down to pickup this sweet Audi A6, I had another client who was looking for a Ford Ranger Pickup.  I went out to the Denver Auto Auction to bid on a 2010 Ford Ranger XLT Extended Cab with four-wheel drive and about 65,000 miles and I stopped bidding at $15,700!  Now stop and think SAM_0814_resizedabout that for just a minute.  That little “bean can” of a pickup truck sold for more through the dealer auction wholesale than what I was retailing an Audi A6 for online.  How incredibly stupid is that?  One vehicle sold new for about $21,000 with a 6 cylinder motor and the other sold new for over $55,000 in a Prestige with a supercharged 3.0-liter V6 and 300hp, along with amazing luxury and amenities.  Autoblog had a great review of this vehicle back in 2009, but think about picking up a vehicle that in 2016 is starting at $62,500 for around $16,000.

Now I get this question all the time from people, “Aren’t Audi’s and other luxury vehicles expensive to repair?”.  Compared to what?  I just had a 2007 Dodge Ram Diesel truck that I was going to have to put brakes on after the right caliper seized up and the cost for front brakes was ridiculous.  Let alone putting on new upper and lower ball joints, a water pump and serpentine belt and other repairs.  I spend a ton of money fixing vehicles each year and I can tell you from experience that they are all expensive to repair, especially if you don’t have people you can go to that can save you money on repairs.  Have you SAM_0815-2_resizeddone head gaskets on a Subaru lately with the 2.5 motor?  If you haven’t and you own one, you probably will at some point and it’s not cheap.

The quality of the components are better on high-line vehicles, like this Audi and they last longer, plus if you get in an accident you’re not being protected by a body that is a step above tin foil (I’m joking, so don’t send me hate mail) in some of these “fuel efficient” vehicles today.  I’ve seen so many vehicles go through hail storms in Colorado and it looks like they have been chipping golf balls at the car.  That can happen to any vehicle, but I’ve seen a Mercedes go through the same hail storm as a Toyota and one has no dents and the other has thousands of dollars in required repairs.  Why do you think that is?  Because one is using more expensive and better materials plain SAM_0819_resizedand simple.

Mark is a serious Audi enthusiast though, who has owned numerous Audi’s and he has had great success with the brand.  Which is another thing that many non-automobile enthusiasts and “price only” shoppers lose out on big time.  I’ve saved so much money over the years by knowing the “car geeks” of particular brands.  The guys who can tell you that on a 2011 BMW 335xi you might have to replace the oil filter housing or a water pump.  That information is great to know going in and if you know guys who can do it for less you will save money.  Mark was thrilled to get this Audi A6 after a few other people had come to look at it and quite frankly were “clueless” about what they were buying.

I would say that you get what you pay for, but today that is not always the case because vehicles are really expensive.  Which is why I encourage SAM_0823_resizedmore people to look at the luxury brands all the time because on the used market there isn’t as much demand as there is supply and you can be driving a pretty nice ride for about the price of something that sold new for half the price.  And like I said, you can get plugged into a club or find guys like Mark who can save you time and money when it comes to repairs because they know these vehicles.

He sent me a few photos of his new ride that I’m posting here , so he sent me some photos and an email that stated the following…

“John

 Not the greatest backdrop however I wanted to get you some. I spent the weekend washing SAM_0822_resizedclay barring then waxing her. Christine doesn’t care for the gray wheels so I’m looking into repowdercoating the bright silver. We needed spacers to run the rims and I had a set of  25 mm. ones, but they made our studs a little short so we ordered 15 mm.  These were shot with the 25’S on the front and nothing on the back. By weeks end it should be all set up. I will forward more in a prettier setting.

Thanks again

Mark”

That’s why I love what I do!

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John Boyd

Auto Consultant – John Boyd: The Cool Car Guy

John is an auto consultant with his license at a car dealership in Denver, Colorado. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

Can You Get Rid Of Negative Equity On Your Vehicle

Hey Cool Car Fans,

2015 Chrysler 300C Platinum

2015 Chrysler 300C Platinum

I am always amazed by some of the articles that I read from financial gurus, like one guy who recently wrote in an article on the topic of negative equity that “If you have negative equity in your vehicle, you shouldn’t be trying to buy a different vehicle.” Really?  That is really ridiculous because every used vehicle is different.  That is a bit like saying that if you are losing money on a stock in the stock market that is dropping in value, you should never sell it, but just wait until it comes back someday.

What if the vehicle you are upside down on is a piece of junk that you keep having to sink money into a financial black hole at the repair shop?  How is that a financially wise decision?  I see it happen to people more often than I care to because every vehicle is different.  Like the person I recently spoke with who purchased an old Isuzu Trooper for $2,000 on Craigslist and now they are into it for $8,000 after repair bills and it’s still not running well.  There is a shocker!  They asked me what to do and I told them to sell it and cut their losses.

Many of these “financial experts” advise their students to drive around a 1995 Honda Civic that they found on Craigslist for $500 to “save money”, while they are earning millions from their books, radio programs and television appearances.  I doubt that they are driving around a junk car like they want all of their listeners to drive around.  I digress, but here’s my two cents on negative equity.

First of all, there are ways to get rid of negative equity.  Especially if you know how to structure a lease properly and you can find the right new or slightly used vehicle that can carry the negative equity into the lease.  This way you can get a payment that won’t kill your budget, while getting a new or newer vehicle that is under warranty.

2015RamRebelRecently, I looked at a deal on an AWD Chrysler 300C that could bury as much as $9,000 in negative equity using a unique lease program that had to be done outside of the manufacturer.  I also saw a deal on a four door RAM 1500 truck that had a similar program that could bury around $6,000, or even more depending on qualifications, in negative equity using a third-party lease program.

That’s pretty significant and the benefit is that at the end of the lease a person can start over, while having a late model vehicle that isn’t going to be breaking the bank on their wallet or breaking down on the highway.  I have also done a number of leases on late model used vehicles to bury negative equity that goes into the lease structure, so that at the end of the lease term the person has eliminated their negative equity. Most of the time people will buy out the vehicle at the end of the lease since they are typically in an equity position instead of a negative equity position at the end of the lease.

Let me state clearly though that not everyone knows how to do this just because they work at a car dealership.  There are many horror stories about “leasing”, which is why people tend to shy away from them.  If you are not working with someone who knows what they are doing, you can get burned and end up still having your negative equity at the end of the lease.  And just because someone calls themselves an auto broker or a finance manager doesn’t mean that they have a clue about how to properly structure a lease for maximum benefit.  I know owners of dealerships who have told me that they have no clue about leasing and are as ignorant as the average person off the street.  In fact, you can have the same payment on the same vehicle with two different leasing companies and one has more money going toward interest, while the other is going more toward lowering the purchase value at the end.

This doesn’t mean that leases should be avoided though.  People lose money in the Stock Market all the time, but that doesn’t mean that there are not people earning money on the same stock that someone else lost money on.  It all depends on the knowledge and expertise of the person who is involved in the transaction.  Leasing is not the only option, but I have eliminated negative equity with financing the right vehicle as well.  I just think that leasing works much better most of the time because you are not dealing with the full amount of the vehicle like on a finance.

So, if you know someone with negative equity and they are frustrated about their situation be sure and let them know that there are potential solutions available to them to solve their problem.  Their only option is not necessarily to keep driving their vehicle until they have eliminated all of their negative equity.  It is dependent on the entire situation and the structure though, including the amount of negative equity, the condition of their current vehicle, their credit, job history, money or no money down, required monthly payment and what they are willing to drive to solve their problem.

________________________________________________________________________

John Boyd

Auto Consultant – John Boyd: The Cool Car Guy

John is an auto consultant with his license at a car dealership in Denver, Colorado. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! jboyd@coolcarguy.com or Twitter @coolcarguy

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