Leasing a car or buy it with cash

Did anyone consider the option “add cash to crypto staking and pay leasing while potentially make gains”?

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I would consider that as high risk. Never, use money that you can not afford to lose in the crypto space. If there would be any decent CHF DeFi/CeFi solution maybe but with other stable coins you have the currency risk and with tokens well it’s not really a bull market right now.

Well that’s pretty much the same option as “lease and invest the difference to cash purchase”.
What one invests in is a sub-option. :slight_smile:

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Dear all, thank you for all your input. We went ahead and decided to buy it cash.

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A margin loan could also be an option, but I would say that the total loan shouldn’t be more than 10-20% (max for me) of the total value of your assets.
Probably the best credit you are going to get.

I may not fully understand the calcualtion, but it seems the residual value has been accounted for in all 3 cases. Please correct me if I’m wrong.

For cash and loan purchases, the residual value is deducted from total costs, because you get it back when you sell the car. For leasing, the residual value is not deducted from total costs, because you return the car instead of selling it.

Yes. In case of leasing, the residual value is paid off after 5 years. In all 3 cases the car is sold after 8 years, using 12% annual depreciation to tell the price.

I record each payment when it happens, and discount them, each year is discounted by 7%. So the more in future a payment is, the less its present value is.

Ok, so your calculation is based on buying the car after the lease term? In my calculations I assumed selling the car after the calculation term (in the case of cash and loan), or returning the car in the case of leasing.

‘‘The dealer would have the right to hit me with lots of deductions for stuff that I would never fix on my own car. And the repairs would be done at Swiss dealership prices.’’

This is the theory I feared too. In reality, if you renew your leasing on your car or on another one with the same company/car dealership they will close their eyes on reasonable scratches. I experienced it with BMW

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But then of course you are tied into the dealership…

The problem is, the longest loan term is 8 years, but leasing only 5, and I wanted to compare for 8 years. So after 5 years leasing I buy out the car, and 3 years later sell it. But what do you say about it? From my calculation, with the conditions given by Tesla, leasing looks ok. Buy with cash only if you wouldn’t invest the money, but let it sit.

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Has somebody done that before? from a financial perspective that sounds pretty reasonable and I guess you’re right unlikely that you get better rates. What’s the down site of that approach?

Me. I have a margin loan at IB and I own a 2nd hand car

Downside is risk of margin call or losing all your hair with stress. In my case my loan is 10% of assets at IB and I don’t have any 2M mortgage or any other big debts so I feel safe

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Hahah I do not have many hair left and the ones that I still have are precious to me :wink:. With your solution with 10% of the assets (or even 20%) the risk for a margin call is only if your portfolio is down 90% (or 80% with 20% assets pledged) is that correct or what is the trigger for the margin call? I’m not into cars in general, I own a 2014, 2nd hand family van which I bought two years ago so I hope that that will last some more years. Furthermore, I guess I would rather try to increase my mortgage and use that money for a new car, but it’s very interesting to know the option with IB.

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There is nothing better than an ELOC (Equity line of credit) almost no bank will give you cheaper rates than IBKR as well…

Just don’t do any substantial amount of borrowing. If you only borrow 10 or 15% you’d need something like a 80% drop without the ability to contribute… It’s not like IBKR will call margin loans left and right out of nowhere.

High level summary: in IB you can usually borrow 50% of your stock value. If you have assets of 100 and loan of 10, assets could usually decline to 20 (-80%) before margin call.

See this page especially initial margin and Reg T.

Exceptions apply

This is not financial advice, do your own research !

Thanks a lot @Barto and @CHRad for your inputs. Really interesting topic. I was always with the mind set that all debt is bad. But indeed there is more behind that topic. However, I also know that it’s a slippery ground. So, if I ever come closer to the point of potentially trying it out I will need to do a lot more research on that. It looks almost to tempting to get a loan in USD for 1% and do staking with USDC for 10% :star_struck: but I know high yields, high risk

Ok. That’s assuming the leasing company lets you buy out the car. I’ll assume that is the case with Tesla’s leasing service? Not all leasing company’s let you buy out the car at residual value. Another factor which complicates the equation is that with electric cars, the battery is often leased. Even if you buy the car, you have to pay ongoing leasing fees for the battery. Taking that into account, leasing could work out cheaper than buying. I’m not sure what the story is with Tesla. My calculations were based on cars with internal combustion engines, so I have to admit here that I am not up to snuff with regards to the costs of owning or leasing electric cars.

@Cortana double checked and they allow it. Never heard about battery leasing.

Allowed what? Not following.