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Educate Me, Please - Auto Leases Pro & Cons

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Educate Me, Please - Auto Leases Pro & Cons

Old 09-12-2015, 10:32 AM
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Default Educate Me, Please - Auto Leases Pro & Cons

As the title implies I know absolutely nothing about leasing automobiles. Was at a dealership this morning and the salesman asked if I had ever considered leasing. He said with the way car prices are going up and up that leasing is the only thing that makes sense. It that more for him (dealer) or me? Can some of you help me with the pros and cons of the whole thing.
Thanks,
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Old 09-12-2015, 10:38 AM
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PROs of leasing

1. You get to drive a nice new car.
2. You have a low monthly payment.
3. You trade it in every few years and get another nice new car.

CONs of leasing

1. If you put a lot of miles on it, they'll rape you on overage costs.
2. You never "own" the car.
3. You "always" have a car payment.

There are more, but these are the main points.
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Old 09-12-2015, 10:45 AM
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Don't know about NC/SC, but in GA you pays taxes on the total car, not just the leased portion. No way to lease in GA. Gap insurance and excess mileage have never worked for my business use. Lease is great if you don't mind monthly payments and never own it. Good luck!
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Old 09-12-2015, 11:56 AM
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There are few, if any real "Pro's" to leasing.
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Old 09-12-2015, 01:53 PM
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PROs
-In FL, you only pay sales tax on the part of the car you lease (i.e. 50%).
-No maintenance costs (under warranty)

CONs
-limited miles 12-15K/year
-potential for excess wear and tear at the end of lease (although never had a problem)

For the dealer, it's still basically a "sale" as the car is purchased by their finance company or bank. Everything (interest rate & price) is still negotiable, although dealer will try to keep you focused on the monthly payment.
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Old 09-12-2015, 02:08 PM
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We have leased the admirals cars for the past 10 yrs with no issues. She never puts on more than 10k a year and we keep the car in perfect condition. As stated above you are always covered under the warranty. We choose to lease for 3 yrs but that's flexible. You negotiate the price of the car for lease just like you would if you were buying it. Some car manufactures charge a fee when you turn the car in after the lease ends so check that out.
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Old 09-12-2015, 02:17 PM
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Default Auto leases . . .

Auto leases (called by some "Fleeces")

Let's look at the average automobile dealership. At one time, the most profitable part of an automobile dealership was the Service Department.

No longer.

By far, the most profitable part of the automobile dealership is the Finance Department.

Why?

Well according to N.A.D.A (the National Automobile Dealership Association) the mathematics are quite simple.

Average profit (per car sold):

1. Dealership profit on the sale of car (not leased) = less than $80.00 per car sold;
2. Profit on a sale of a car where the dealership provides a loan on the car = $800 per car sold;
3. Profit on a Lease of a car = $1,400 per car sold;

So, is it any wonder, if the dealership makes 75% MORE profit on leasing a car to you, their sales people are trained to guide you towards an auto lease?

By the way, N.A.D.A also reports that the average car loses 25% of it's value the moment the car's front wheels leave the dealership lot.

So, if you are buying a $40,000 car, you have lost 10 grand the moment you leave the dealership. Wow! If you drive the car every day for the next year, your depreciation lost that first day would be like throwing $30 out the window every time you drive the car.

Such a deal!!!!!


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Old 09-12-2015, 02:18 PM
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Originally Posted by thefuzz View Post
There are few, if any real "Pro's" to leasing.
Agreed. Unless you can expense it for a business.

The reason dealerships advertise and push leases, is because a lease is far more profitable for them. You make payments to them, but never get to own the car. You give it back at the end of the lease term, after all those payments, and have zero asset equity. They get to re-sell it again.

Trust me, they didn't come up with the idea of leasing as a way for them to make less money.
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Old 09-12-2015, 02:29 PM
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Originally Posted by The Spit View Post
Agreed. Unless you can expense it for a business.

The reason dealerships advertise and push leases, is because a lease is far more profitable for them. You make payments to them, but never get to own the car. You give it back at the end of the lease term, after all those payments, and have zero asset equity. They get to re-sell it again.

Trust me, they didn't come up with the idea of leasing as a way for them to make less money.
Actually leases were created to "sell" cars to people who had no chance of purchasing them to begin with.

The average person is not going to finance 40k for 8 - 9 years to drive his or her car. So to keep the pace of rising prices and profits along comes the "lease" where residual values and depreciation allow for a vehicle to be "sold" twice and hence allow the manufacturer to design engineer and build a car the average person would not be able to afford.

Without leases the auto industry would be in big trouble.
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Old 09-12-2015, 02:41 PM
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Originally Posted by Bottom Scratcher View Post
Auto leases (called by some "Fleeces")


Dealership profit on the sale of car (not leased) = less than $80.00 per car sold;

:
I believe thats "net" profits .... and the auto industry sold approx 13M new cars in 2014 ..

Thats a Billion dollars in "net" profit ,,,, now add all the service, parts, etc....

Auto dealers are doing just fine
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Old 09-12-2015, 07:40 PM
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The last 3 cars we have leased we could have purchased the car at the end of the lease for residual value and sold the car for more than the residual. Agree that doesn't work with all vehicles depending on the type of vehicle, mileage, years leased, etc. Those leases were all less than 1.5% apr.
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Old 09-12-2015, 08:07 PM
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Lots of propaganda on this thread and some fact.


Here is the deal short and simple.

It's math.
Take a conventional loan of 5 years. Take the monthly payment and multiply it by 60

Take the lease payment and multiply it by the term or the lease
Then take the residual value and finance it for the balance of your conventional finance at a decent rate.
If it is a competitive lease then many times it will cost you less over 5 years to lease then buy.

Mileage penalties only hit you if you turn the car/truck in and throw them the keys. No way would you ever do that. Worst case scenario trade it a month or so prior to the lease expiring.

Yeah you'll lose money. You will anyway if the vehicle is financed. It's not like the car knows if it's a lease or purchase. What I'm saying is the miles you drive are the miles you drive.


If you finance a car and mile it up then trade it in 3 years you will lose money.
If you lease a car and mile it up and trade it in you will lose money.



If you have no issue with insane miles and intend on always having a vehicle payment then simply put usually cost of ownership is lower if you lease. Especially imports.

Numbers don't lie.

There are no tricks to leasing if you are fully educated on what it is.

Do an expense graph and it will be obvious which way to go.


I was in the business for 16 years so if you would like to run numbers or have my assistance I can and will help just PM me but, you are completely capable to figure it out with a calculator and asking for a sample lease agreement to proofread.
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Old 09-13-2015, 03:15 AM
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Lease is a way you can drive a car you normally could not afford.
Thats the red neck version.
Car world revolves around tax time every year. Folks get some money back, can make the down payment, drive out the door with a lot higher dollar car than they could afford if they were buying it.
Two lady friends I have just turned their cars in. Helping one buy a car now.

For the fun of owning something sporty, nice, ect. Lease might work.

For value, finding something 2 to 3 years older with low miles is a better offer.
Your credit score now, has everything to do with the value you get.
I'm in the low to mid 800s and bought the used 2010 at 2.4 percent. Told them if they didn't get be the best rate they can offer we didn't have a deal.
Thats not a new truck. New rates are lower but I was ok with the 2.4.
One of the ladies is going to buy a Toyota Sequoia.. She can't afford a 65000 car new, but one year old with 20 to 25 thousand I have found her a few on e bay in the 45,000 range. We're going to try the local dealership but have my doubts they are going to work with her on a used one at that much drop.

I really enjoyed the thread we had just a few days ago on here about LEO Body cams and how much it cost the Law enforcement depts for a new Tahoe. Lot of folks on here and I love it. Throw something out there, wait, someone just might have a answer. Kinda like trolling ain't it. LOL
Chevy is not selling those to LE or anyone they are not making money on the deals. Don't even go there if you try and argue that point, but our cost is in the mid to upper 50s while LE cost is in the high 20s.

You have to really stop and take a look at what your buying or leasing now before you put that name on that dotted line.
Pulling these things for a living, I have seen the price triple in the past 8 years. Double in the past 5 and SUVs and trucks are almost to the price you can buy a home on a short sale.

If LE can buy a Tahoe at 28000 with the V8 motor, police package already installed, and our price is in the mid to higher 50s, you be the judge at what value your getting when you buy a new anything.

Pickup I bought was 5 years old , perfect condition, got it for under 20 with less than 25000 miles on the clock.
Same lady i'm helping her , trying to get her in her dream SUV her brother fell victim to the Chevy sales pitch, of buying a bran new 2015 1500 for right at 50,000 and not having to make payments on it for a year.
Don't think that interest stops while your not paying it.

This is a joke but use the head on top of your shoulder instead of the one below the belt. What you sign depends on what you end up looking like in the end.

Just because they can make it happen for you, don't mean your getting a good deal. Everything and I mean everything,,, is in their favor.

I would love to have a new Ram 3500 to pull the race trailer and boats with. . 60G? Not a snow balls chance in hell..


PS. Want to add this. Car world revolves around Tax time but folks brains don't.
With the gas prices dropping or dropped, this high dollar SUVs and pickup trucks are selling now like hot cakes and I stayed busy this year, when last year when prices were higher at the pumps there were a couple of months I got 3 and 4 days off a week. Not this year.
Load I mentioned I pulled out of West Point on the thread I started was over flow and where Kia and who they have contracted to pull their units can't keep up with the demand the plant is putting out. They raise the rates we go in , pulled a load to Orlando, for a lot higher than normal price.

No payments for a year, There cars now with 200,000 miles lifetime power train warranty, I HAVE DELIVERED. Super low interest rate. All this is nothing but a way to get your name on the dotted line.
All that is happened is , instead of higher interest rates and lower unit cost, they lowered the interest doubled the price of the unit, where they make their money up front, and now, they just don't stop raising the price of the unit. Long as people will buy them they are gong to keep raising the price.
The 1800 dollars I paid over the Caddy for the Ford F150 was the return check off the 3 year warranty I bought when I bought the Caddy. It had already been paid. They can swing that where it comes to them now, instead of you. They have every nook, cranny, and option figured out for them to make a dollar... or 20,000 on the sale of their unit ,,,, TO YOU.
Whats going to happen when the gas/fuel prices sky rocket again???? You'll going to be unload those units like hot cakes and looking for something cheaper to drive. LOL. LOOK BACK. People forget this happens about every 3 years, UP DOWN, UP DOWN. How easy we forget. LOL

Makes ya stop and think when you look at the real numbers don't it. LOL
Later

Last edited by liveaboard74; 09-13-2015 at 03:45 AM.
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Old 09-13-2015, 06:20 AM
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Nothing wrong with leasing. As above, it is math. Do the math and figure out what is important to you.

I buy, mostly used. I agonize over the purchase and I wring every last dollar out of the seller, since I know there will be surprises I have to deal with later. I go into the deal knowing exactly what the vehicle will be worth 2 years, 3 years, 5 years later when I plan to sell it. On average I've driven some pretty nice cars and on average I probably "lose" $150-200 a month on most of them which is DEFINITELY cheaper than I could have leased them. Occasionally it is more like $100 a month and once in a while I sell one for more than I paid. Often I have to buy new tires, new brakes, or have some unexpected repair. Inevitably it will be in the shop a day or two during my ownership. Once a transmission blew up and then it was a surprise $3000 repair. I usually pay to get the car detailed when I buy it and when I sell it. Since they're usually a few years old, they get a coat of wax every 3-4 months and I stay on top of maintenance, fluid changes, etc. When I sell it's similar agony, listing on craigslist, autotrader, you name it. I deal with scumbag buyers and give a dozen test drives but eventually it will sell and I walk away happy and I will have gotten a great deal over the life of the car. It can be a bit of a sport, but it's definitely time consuming and I definitely don't always get what I want but close enough.

For the admiral, we now lease, as long as 12k miles a year will work. We go to the dealer and she picks out the car she wants. There is a fixed, KNOWN cost of $350-450 a month. She always has an almost new car, she never has to buy brakes, tires, pay for a "tune up" or get the transmission fluid changed. I never have to worry if the car is safe, or dependable, since it is brand new. I pay to get it waxed and detailed once, maybe twice. If she gets in an accident, not my problem, insurance will fix it and as long as it makes it 36 months that's ok. If we want to skip the oil change at 30,000 miles I can. After 3 years we can drive back to the dealer and pick out a new one, which shows up in a new color and has more airbags and more safety features than the last one, probably gets better gas milage and has better phone integration too.

Depending on how you look at it, that lease premium can be a bargain.

Last edited by Flot; 09-13-2015 at 06:31 AM.
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Old 09-13-2015, 06:28 AM
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to me it's one of two things...if you never want to own a car, and at the end of 2-3 years, pay out some more cash and get another lease and pay their car payment for them, do it....if you want to own a car and drive it for an extended period and at some time, not have a car payment...buy...with today's cars going 200,000mi easily without issues, buying is the way to go...IMO
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Old 09-13-2015, 06:51 AM
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In my opinion it depends how long you keep cars.... If you keep them 3-4 years and mileage is less than 15k a year.. Lease will be less down payment, half the taxes, and you know for a fact of you maintain the car in good shape you can hand over the keys with no liability. In addition down payment is usually far less than purchase and monthly payments are much lower since you are only paying for depreciation and not principal.

If you buy the same car, finance it for 60-72 months after 3 years you may be upside down on the loan. In this case you have given more money down, paid 20-30% more a month in monthly payments and you're upside down to the bank so you truly never "owned" anything.. Oh and if you get in an accident throughout your term of "ownership" your car depreciated tremendously. Leases do not care about accident history as long as they get car back in perfect shape.

I have done both and am currently in the "ownership" stage with my cars. Not any better or worse. Just a higher payment with knowing in the back of my mind if I don't keep them more than 5-6 years it doesn't make financial sense to buy over lease. I also am underwater on my wife's car only because a guy rear ended me and it costed Geico $600 to fix. Sound like nothing right? Well when I have had the wild hair to trade it in I am getting docked 2-4k on trade in because the car has a "Carfax incident"...

There are pros and cons. Personally I am going back to leasing when I can

Last edited by Searosis; 09-13-2015 at 07:13 AM.
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Old 09-13-2015, 06:58 AM
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Originally Posted by slickster View Post
to me it's one of two things...if you never want to own a car, and at the end of 2-3 years, pay out some more cash and get another lease and pay their car payment for them, do it....if you want to own a car and drive it for an extended period and at some time, not have a car payment...buy...with today's cars going 200,000mi easily without issues, buying is the way to go...IMO
Just for fun, let's run some numbers. You buy an accord and I'll lease one.

Honda Accord Sedan that you plan on driving 180,000 miles/15 years to make it easier.

To buy:
Purchase cost: $23,725. $2000 down, 60 months at 1.9% interest your payments are $380 a month for a total of $24,800. You were also thinking ahead so you bought a 7 year extended warranty for $1400.

You are going to own this car for 15 years so you'll want to take care of it. So let's break down maintenance.

Annual: Oil change, $29. Wax/detail, thrown in a can of techron, Misc upkeep, $71. (100/yr)

Every 3 years: Transmission and diff service, $250. Wiper blades, air filters, etc, $50. (100/yr)

Every 5 years: Tires and brakes. $650. (130/yr)

Every 7 years: Major service, timing belt, coolant, spark plugs etc. $1000. ($142/yr)

And last but not least, I think you are being optimistic with your longevity estimate. I will ballpark out that sometime between years 7 and 15, after the extended warranty ran out, you probably had $1200 of unexpected repairs - window regulators, air conditioner, seat motors, cooling fans.. you name it, there was something in there and frankly I think I'm ballparking this on the cheap side. (80/yr)

So adding up the cost of the car plus warranty - $26,200.

Then annual expenses - 100+100+130+142+80 = $552 a year x 15 = 8,280.

Buying your accord cost you $34,400 to own over those 15 years. At the end of it, you have a 2000 accord with 180,000 miles on it, which is still worth $1900 if you sell it on craigslist.

And looks like this: http://miami.craigslist.org/brw/cto/5204971517.html

So in the end you spent $32,500 to own the car for 15 years.

---------------------------------------------------------

If I lease the same car:

Car value: $23,725. $2000 down, $189 per month for 36 months. That's $8.804 every 3 years. My maintenance expenses are $34 a year, (oil change plus 1/3 of an air filter) so to keep it simple, let's call it $2969 a year, every year to lease a honda accord. (I realize that I'm not factoring in potential price or interest rate increases) Over 15 years, I will pay $44,535.

For a $12,000 premium - that's $800 a year - I've been getting a brand new car every 3 years that looks like this: http://automobiles.honda.com/accord-...hoto-tour.aspx

I have no questions about reliability and no concerns about unexpected expenses.

Was it really worth it to buy? Was it worth it to end up with a 15 year old car, to save $800 a year?

Last edited by Flot; 09-13-2015 at 07:54 AM.
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Old 09-13-2015, 07:05 AM
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Flot - Why is your maintenance cost only $29 annually ?
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Old 09-13-2015, 07:39 AM
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Originally Posted by triplenet View Post
Flot - Why is your maintenance cost only $29 annually ?
I took our 2012 pilot to the dealer three times during the 3 year lease. First oil change was free. My out of pocket costs for maintenance were 2 oil changes and an air filter. Turned it in with 35,300 miles and it was due for its 4th oil change. I may have changed the wiper blades in the middle.

I am certainly not advocating leasing for everyone, but I DO think people who say "I'm going to buy new and drive it until the wheels fall off" are being shortsighted. Even if you do all your own maintenance and repairs, it is not cheap owning a 10+ year old car. I have two buddies in this camp this week - one got a $1700 bill for cracked A/C evaporator core, the other just got his 90,000 mile honda diagnosed with a rod bearing failure, he's looking at $3500+.

Both say things like "yeah, well I don't have a monthly payment." Looks like they do, one turned out to be $140 a month and the other is $300 a month this year, assuming nothing else goes wrong and that neither has upcoming maintenance costs.

Obviously YMMV and depending on the car and terms the numbers can swing wildly... You can also get lucky and own a 15 year old car that has never needed any major service or repairs.

Last edited by Flot; 09-13-2015 at 07:58 AM.
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Old 09-13-2015, 08:01 AM
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Originally Posted by Flot View Post
Just for fun, let's run some numbers. You buy an accord and I'll lease one.

Honda Accord Sedan that you plan on driving 180,000 miles/15 years to make it easier.

To buy:
Purchase cost: $23,725. $2000 down, 60 months at 1.9% interest your payments are $380 a month for a total of $24,800. You were also thinking ahead so you bought a 7 year extended warranty for $1400.

You are going to own this car for 15 years so you'll want to take care of it. So let's break down maintenance.

Annual: Oil change, $29. Wax/detail, thrown in a can of techron, Misc upkeep, $71. (100/yr)

Every 3 years: Transmission and diff service, $250. Wiper blades, air filters, etc, $50. (100/yr)

Every 5 years: Tires and brakes. $650. (130/yr)

Every 7 years: Major service, timing belt, coolant, spark plugs etc. $1000. ($142/yr)

And last but not least, I think you are being optimistic with your longevity estimate. I will ballpark out that sometime between years 7 and 15, after the extended warranty ran out, you probably had $1200 of unexpected repairs - window regulators, air conditioner, seat motors, cooling fans.. you name it, there was something in there and frankly I think I'm ballparking this on the cheap side. (80/yr)

So adding up the cost of the car plus warranty - $26,200.

Then annual expenses - 100+100+130+142+80 = $552 a year x 15 = 8,280.

Buying your accord cost you $34,400 to own over those 15 years. At the end of it, you have a 2000 accord with 180,000 miles on it, which is still worth $1900.

And looks like this: http://miami.craigslist.org/brw/cto/5204971517.html

So in the end you spent $32,500 to own the car for 15 years.

---------------------------------------------------------

I lease the same car:

Car value: $23,725. $2000 down, $189 per month for 36 months. That's $8.804 every 3 years. My maintenance expenses are $34 a year, (oil change plus 1/3 of an air filter) so to keep it simple, let's call it $2969 a year, every year to lease a honda accord. (I realize that I'm not factoring in potential price or interest rate increases) Over 15 years, I will pay $44,535.

For a $12,000 premium - that's $800 a year - I've been getting a brand new car every 3 years that looks like this: http://automobiles.honda.com/accord-...hoto-tour.aspx

I have no questions about reliability and no concerns about unexpected expenses.

Was it really worth it to buy? Was it worth it to end up with a 15 year old car, to save $800 a year?
Not sure your scenario bears out - especially for all vehicles. Say you need an SUV to pull your boat/rv and that suv costs 50k+ new. Try leasing those numbers vs buying one that has come off a 2 year lease I think you will come up with a different outcome.

I know I have on a 99 Yukon that came off a 2 year lease - cost me 22k been very dependable that I still have and services me well.

I will be replacing it within the next 3 years since I will be retiring and go the same route.

Glamorous - no more efficient out of pocket for something I rarely use in the summer other than hauling plywood or moving my boat to the marina once a year and back at the end hauling an rv when I want and commuting in winters instead of tearing a sports car up on these effed up roads.

175k miles later it costs way less to insure no payments or tax since 2006 I can assure you I am way ahead vs leasing.
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