50 ms·

When I rent a car I am not responsible for repairs. If I am on the hook for the repair bill I should get a choice in how the car is repaired. I can buy whatev

by mulmen 5y ago

When I rent a car I am not responsible for repairs. If I am on the hook for the repair bill I should get a choice in how the car is repaired. I can buy whatever tires I want for a leased car. If Tesla wants to make these kinds of demands then the repair should be part of the warranty and priced in to the car. > I would read this as a cautionary tale against renting your cars. If you can’t buy it, don’t! This holds true for any depreciating asset. If the asset depreciates what's the benefit in buying it? The fact that cars depreciate seems like the best reason to "rent" them. The manufacturer ends up dealing with the now less valuable asset.

yarky 5y ago
Not the OP but "If you can’t buy it, don’t!" might mean not owning/renting it. Either buy it or don't even think about it.
- mulmen 5y ago
  Why though? What if renting makes more sense for my use case? Why not leave the dealer/bank on the hook for the depreciation and maintenance?
  - kuratkull 5y ago
    The dealer/bank are running a profitable business. They are not on the hook for anything, you are paying for it all.
    - mulmen 5y ago
      When I lease a new car repairs happen under the warranty. The manufacturer is “on the hook” for fixing the car. Not necessarily because it is leased but because it is under warranty. Leases are a way to always have a car that is under warranty. You are replying to a counter argument to the claim that leases are always a bad idea.
      - lolinder 5y ago
        The article this thread is on is a strong counterexample to your assertion. You may very well end up on the hook for a repair that isn't covered by the warranty.
    - ljm 5y ago
      They're on the hook for the finance, if you're leasing. If you're talking about a short-term rental to pootle around in for a while: they're on the hook for the car itself, because that's now a car they can't rent to someone else. If they weren't on the hook for anything, there wouldn't be much of a business.
  - kube-system 5y ago
    If it makes sense for you, do it. The question isn't who pays the depreciation or maintenance (this is explicitly factored into leases) -- the question is, who can predict it more accurately?
    - mulmen 5y ago
      The question is how much utility I get per dollar.
  - lelanthran 5y ago
    > Why though? What if renting makes more sense for my use case? Why not leave the dealer/bank on the hook for the depreciation and maintenance? They aren't on the hook for anything - those costs are billed to you in the standard lease so you're paying the cost of the vehicle, plus the cost of the expected maintenance, plus a profit for the bank. Trust me, no bank is leasing assets at a loss.
    - mulmen 5y ago
      Expected repairs and actual repairs are very different. The expected repairs are exactly that, expected. I know what they are up front. There’s value in that predictability.
- deleted 5y ago
  [deleted]
olyjohn 5y ago
The benefit of buying it is that you can drive it well after it's paid off. Leasing and trading up all the time means you're constantly making never-ending payments. It's not that hard to sell your car when the time comes to get rid of it.
- ricardobeat 5y ago
  Those never-ending payments are covering depreciation. Unless you keep your car for 10+ years and it’s one of the rare models that holds value after that, you’re not much better off buying it.
  - Retric 5y ago
    That calculation ignores transaction costs. Selling every 10 years is cheaper 9 years. 9 years is cheaper than 8 years etc. Eventually starting over is cheaper, but that’s usually at 15+ years when facing a major repair.
  - amf12 5y ago
    Eh, that depends. Typically car depreciation is not linear. Depreciation is higher in the initial years and the % depreciation reduces each year. Buying a car, keeping it for 5 years and selling it off might be cheaper than leasing a new one every 3 years.
  - throwawayboise 5y ago
    Buying 10 year old cars that are nearly fully depreciated is where you save big money. You can get a dependable car for a few thousand dollars, and even if it needs more repairs than a new car you still come out money ahead especially if you can do small repairs yourself.
    - quickthrowman 5y ago
      > Buying 10 year old cars that are nearly fully depreciated is where you save big money. Not in my experience. You either pay in depreciation or in maintenance, there is no escaping car expenses. A 10 year depreciated car may need a timing belt/water pump, possible head gasket issues, possible transmission issues, etc.
jakemoshenko 5y ago
> The fact that cars depreciate seems like the best reason to "rent" them. The manufacturer ends up dealing with the now less valuable asset. Except that they charge you for all of the depreciation plus a rental fee. The dealer/manufacturer ends up with an asset that is more valuable than the price they paid for it less the money they've received for it through the terms of the lease.
- mulmen 5y ago
  The asset isn’t always worth more. If you don’t believe me ask GM and Chrysler. Further, it doesn’t matter. I don’t care if the manufacturer makes or loses money. I only care about maximizing utility per dollar.
  - mekal 5y ago
    Do you only drive like once a month or something? If you drive every other day or so then buying is the way to go...otherwise I agree, renting is probably going to be a better deal than owning a depreciating asset that you rarely use.
    - rdtwo 5y ago
      It’s a complicated formula sometimes it works for you but most of the time the manufacturer gets gets the better deal
      - lolinder 5y ago
        Why would that be? If I'm leasing a vehicle, not only does the manufacturer need to earn back the cost of manufacturing plus some margin, they also need to earn back the cost of administrating a lease and the cost of selling the car again later (with depreciation). They're not going to cover those extra costs for free, they're going to pass them on to the consumer. So how can leasing a vehicle possibly work out in the consumer's favor?
        5y ago
kube-system 5y ago
> When I rent a car I am not responsible for repairs. You certainly are, in most places, if you crash it into something. This wasn't a failure of the manufacturer's materials or workmanship, it was a collision loss.
- barrkel 5y ago
  It's a stretch to describe road debris hitting the undercarriage of a car a "collision". You should expect a vehicle to be engineered so that small objects hitting the undercarriage don't cause significant damage. Making subassemblies replaceable in part rather than in whole is definitely a bonus. When they're only replaceable in whole, I do consider it deficient engineering, especially if a small change would make it possible. An example from motorbikes: I would never buy a Triumph Tiger 800 because the rear subframe is welded to the rest of the frame. Any drop which causes a bend in the rear subframe - easily enough done since the passenger footpegs and exhaust are attached to it - would require replacing the whole frame to fix. In most high performance bikes, the rear subframe is bolted on.
  - kube-system 5y ago
    These terms are clearly defined in auto policies and are strictly regulated. I just read mine, and the things that are covered under my comprehensive policy are in a plain-english list that, clear as day, wouldn't cover this. Although if we're just talking plain-english and not legalese, I'd say that your assertion is a stretch: that colliding with debris is not a "collision". And yes, Tesla repairability is poor. That's kind of what you can expect to get when you prioritize time-to-market above anything else. I like to buy old motorcycles that don't have any parts availability and everything has to be custom done... but I wouldn't do that with my daily driver.
    - barrkel 5y ago
      As pointed out in another comment, I think this is a case of US / UK difference in insurance jargon. Debris damaging the undercarriage would not be covered by the closest UK equivalent of collision insurance (CDW on rentals), as I understand it. I also think insurance is a bit of a red herring here. You wouldn't claim on insurance for a flat tyre either; some things are just bad luck. It's the quality of engineering - what I do think is on topic - which controls the risk.
fshbbdssbbgdd 5y ago
It really just comes down to math. A lease has a “residual” which is the expected value of the car at lease end. You pay for the difference between the new value and the residual with your lease payment. It’s essentially like buying a car with an installment loan, except you’ve pre-arranged to sell the car after 3 years at a determined price. There’s also a “money factor” which is the implied interest rate you are getting in the lease. It turns out that Tesla leases have a high money factor, which makes them a bad deal. Tesla lessors pay for depreciation the same way owners do, but the lease is effectively bundled in with a 6% APR loan, which is a lot worse than people with good credit would pay for a new car auto loan.
gimmeThaBeet 5y ago
A bit of splitting hairs, the notable exception I can think of is that if it comes with run-flats, you are expected to return it with run-flats since it's a specification. Higher end cars also usually have a "similar quality" clause in addition, but I don't know how frequently that is enforced, if at all.
lelanthran 5y ago
> The fact that cars depreciate seems like the best reason to "rent" them. Like any other depreciating asset, the renter charges the rentee(sp?) the depreciation anyway, plus a small profit. You appear to be under the impression that renting is better; this cannot be correct. The rent for any asset is ($COST_OF_PRODUCT + $COST_OF_ADMIN + $PROFIT). How do you figure that it's cheaper to pay those additional costs than to buy? You only rent if you want something temporarily and don't want to deal with the hassle of resale. For this convenience, you pay extra.
- deleted 5y ago
  [deleted]
- mulmen 5y ago
  > You appear to be under the impression that renting is better; this cannot be correct. Except that it obviously can be correct by virtue of being a common financial construct. Your formula is meaningless to a person making a choice between buying a renting. There’s seller profit in both situations but it’s irrelevant to the purchaser. A fundamental assumption of our economic system is that value can be created in parallel with profit. If I always want a car that is less than five years old then a lease is a great option. It’s a matter of what fulfills my needs for the least money. That could be buying or leasing depending on my needs.
- robocat 5y ago
  Hiring a car can be significantly cheaper if there are odd tax laws in the country the car is in. For example, if there is heavy tax on new cars, but no tax on cars over 6 months old, then you add more terms to your addition: + $DEPRECIATION - $EXTREME_TAX
- jcheng 5y ago
  For car dealers and manufacturers, the math is more complicated than that--the lease can be a loss leader, which may be useful to the dealer or manufacturer for any number of reasons. In the early 2000s it was not unusual for leases on slow-selling models to have negative interest rates (and that's with a realistic residual), not sure if that is still the case today. I certainly don't ever remember seeing a negative interest rate on non-lease financing offers, not sure why.

by mulmen 5y ago

yarky 5y ago

Not the OP but "If you can’t buy it, don’t!" might mean not owning/renting it. Either buy it or don't even think about it.

mulmen 5y ago
Why though? What if renting makes more sense for my use case? Why not leave the dealer/bank on the hook for the depreciation and maintenance?
- kuratkull 5y ago
  The dealer/bank are running a profitable business. They are not on the hook for anything, you are paying for it all.
  - mulmen 5y ago
    When I lease a new car repairs happen under the warranty. The manufacturer is “on the hook” for fixing the car. Not necessarily because it is leased but because it is under warranty. Leases are a way to always have a car that is under warranty. You are replying to a counter argument to the claim that leases are always a bad idea.
    - lolinder 5y ago
      The article this thread is on is a strong counterexample to your assertion. You may very well end up on the hook for a repair that isn't covered by the warranty.
  - ljm 5y ago
    They're on the hook for the finance, if you're leasing. If you're talking about a short-term rental to pootle around in for a while: they're on the hook for the car itself, because that's now a car they can't rent to someone else. If they weren't on the hook for anything, there wouldn't be much of a business.
- kube-system 5y ago
  If it makes sense for you, do it. The question isn't who pays the depreciation or maintenance (this is explicitly factored into leases) -- the question is, who can predict it more accurately?
  - mulmen 5y ago
    The question is how much utility I get per dollar.
- lelanthran 5y ago
  > Why though? What if renting makes more sense for my use case? Why not leave the dealer/bank on the hook for the depreciation and maintenance? They aren't on the hook for anything - those costs are billed to you in the standard lease so you're paying the cost of the vehicle, plus the cost of the expected maintenance, plus a profit for the bank. Trust me, no bank is leasing assets at a loss.
  - mulmen 5y ago
    Expected repairs and actual repairs are very different. The expected repairs are exactly that, expected. I know what they are up front. There’s value in that predictability.
deleted 5y ago
[deleted]

olyjohn 5y ago

The benefit of buying it is that you can drive it well after it's paid off. Leasing and trading up all the time means you're constantly making never-ending payments. It's not that hard to sell your car when the time comes to get rid of it.

ricardobeat 5y ago
Those never-ending payments are covering depreciation. Unless you keep your car for 10+ years and it’s one of the rare models that holds value after that, you’re not much better off buying it.
- Retric 5y ago
  That calculation ignores transaction costs. Selling every 10 years is cheaper 9 years. 9 years is cheaper than 8 years etc. Eventually starting over is cheaper, but that’s usually at 15+ years when facing a major repair.
- amf12 5y ago
  Eh, that depends. Typically car depreciation is not linear. Depreciation is higher in the initial years and the % depreciation reduces each year. Buying a car, keeping it for 5 years and selling it off might be cheaper than leasing a new one every 3 years.
- throwawayboise 5y ago
  Buying 10 year old cars that are nearly fully depreciated is where you save big money. You can get a dependable car for a few thousand dollars, and even if it needs more repairs than a new car you still come out money ahead especially if you can do small repairs yourself.
  - quickthrowman 5y ago
    > Buying 10 year old cars that are nearly fully depreciated is where you save big money. Not in my experience. You either pay in depreciation or in maintenance, there is no escaping car expenses. A 10 year depreciated car may need a timing belt/water pump, possible head gasket issues, possible transmission issues, etc.

jakemoshenko 5y ago

> The fact that cars depreciate seems like the best reason to "rent" them. The manufacturer ends up dealing with the now less valuable asset. Except that they charge you for all of the depreciation plus a rental fee. The dealer/manufacturer ends up with an asset that is more valuable than the price they paid for it less the money they've received for it through the terms of the lease.

mulmen 5y ago
The asset isn’t always worth more. If you don’t believe me ask GM and Chrysler. Further, it doesn’t matter. I don’t care if the manufacturer makes or loses money. I only care about maximizing utility per dollar.
- mekal 5y ago
  Do you only drive like once a month or something? If you drive every other day or so then buying is the way to go...otherwise I agree, renting is probably going to be a better deal than owning a depreciating asset that you rarely use.
  - rdtwo 5y ago
    It’s a complicated formula sometimes it works for you but most of the time the manufacturer gets gets the better deal
    - lolinder 5y ago
      Why would that be? If I'm leasing a vehicle, not only does the manufacturer need to earn back the cost of manufacturing plus some margin, they also need to earn back the cost of administrating a lease and the cost of selling the car again later (with depreciation). They're not going to cover those extra costs for free, they're going to pass them on to the consumer. So how can leasing a vehicle possibly work out in the consumer's favor?
      - 5y ago

kube-system 5y ago

> When I rent a car I am not responsible for repairs. You certainly are, in most places, if you crash it into something. This wasn't a failure of the manufacturer's materials or workmanship, it was a collision loss.

barrkel 5y ago
It's a stretch to describe road debris hitting the undercarriage of a car a "collision". You should expect a vehicle to be engineered so that small objects hitting the undercarriage don't cause significant damage. Making subassemblies replaceable in part rather than in whole is definitely a bonus. When they're only replaceable in whole, I do consider it deficient engineering, especially if a small change would make it possible. An example from motorbikes: I would never buy a Triumph Tiger 800 because the rear subframe is welded to the rest of the frame. Any drop which causes a bend in the rear subframe - easily enough done since the passenger footpegs and exhaust are attached to it - would require replacing the whole frame to fix. In most high performance bikes, the rear subframe is bolted on.
- kube-system 5y ago
  These terms are clearly defined in auto policies and are strictly regulated. I just read mine, and the things that are covered under my comprehensive policy are in a plain-english list that, clear as day, wouldn't cover this. Although if we're just talking plain-english and not legalese, I'd say that your assertion is a stretch: that colliding with debris is not a "collision". And yes, Tesla repairability is poor. That's kind of what you can expect to get when you prioritize time-to-market above anything else. I like to buy old motorcycles that don't have any parts availability and everything has to be custom done... but I wouldn't do that with my daily driver.
  - barrkel 5y ago
    As pointed out in another comment, I think this is a case of US / UK difference in insurance jargon. Debris damaging the undercarriage would not be covered by the closest UK equivalent of collision insurance (CDW on rentals), as I understand it. I also think insurance is a bit of a red herring here. You wouldn't claim on insurance for a flat tyre either; some things are just bad luck. It's the quality of engineering - what I do think is on topic - which controls the risk.

fshbbdssbbgdd 5y ago

It really just comes down to math. A lease has a “residual” which is the expected value of the car at lease end. You pay for the difference between the new value and the residual with your lease payment. It’s essentially like buying a car with an installment loan, except you’ve pre-arranged to sell the car after 3 years at a determined price. There’s also a “money factor” which is the implied interest rate you are getting in the lease. It turns out that Tesla leases have a high money factor, which makes them a bad deal. Tesla lessors pay for depreciation the same way owners do, but the lease is effectively bundled in with a 6% APR loan, which is a lot worse than people with good credit would pay for a new car auto loan.

gimmeThaBeet 5y ago

A bit of splitting hairs, the notable exception I can think of is that if it comes with run-flats, you are expected to return it with run-flats since it's a specification. Higher end cars also usually have a "similar quality" clause in addition, but I don't know how frequently that is enforced, if at all.

lelanthran 5y ago

> The fact that cars depreciate seems like the best reason to "rent" them. Like any other depreciating asset, the renter charges the rentee(sp?) the depreciation anyway, plus a small profit. You appear to be under the impression that renting is better; this cannot be correct. The rent for any asset is ($COST_OF_PRODUCT + $COST_OF_ADMIN + $PROFIT). How do you figure that it's cheaper to pay those additional costs than to buy? You only rent if you want something temporarily and don't want to deal with the hassle of resale. For this convenience, you pay extra.

deleted 5y ago
[deleted]
mulmen 5y ago
> You appear to be under the impression that renting is better; this cannot be correct. Except that it obviously can be correct by virtue of being a common financial construct. Your formula is meaningless to a person making a choice between buying a renting. There’s seller profit in both situations but it’s irrelevant to the purchaser. A fundamental assumption of our economic system is that value can be created in parallel with profit. If I always want a car that is less than five years old then a lease is a great option. It’s a matter of what fulfills my needs for the least money. That could be buying or leasing depending on my needs.
robocat 5y ago
Hiring a car can be significantly cheaper if there are odd tax laws in the country the car is in. For example, if there is heavy tax on new cars, but no tax on cars over 6 months old, then you add more terms to your addition: + $DEPRECIATION - $EXTREME_TAX
jcheng 5y ago
For car dealers and manufacturers, the math is more complicated than that--the lease can be a loss leader, which may be useful to the dealer or manufacturer for any number of reasons. In the early 2000s it was not unusual for leases on slow-selling models to have negative interest rates (and that's with a realistic residual), not sure if that is still the case today. I certainly don't ever remember seeing a negative interest rate on non-lease financing offers, not sure why.