On Physicians and Automobile Leases

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Advantages, Disadvantages and Types

[By Dr. David Edward Marcinko MBA CMP™]

Dr. Marcinko 1972 VetteThe Rites of Spring!

As a former licensed state insurance agent, and financial advisor, I know that leasing a car may have advantages to a physician – and others – such as convenient maintenance, low down and monthly payments, no resale responsibility, and tax savings since you pay sales tax on the lease portion rather than the purchase price of the car.

It might also be worthwhile if the after tax borrowing cost of a home equity loan is less than the lease financing rate.


Spring 2011 - NIH

[First Days of Spring 2017]

May Day Weekend 2011 [Dr. David E. Marcinko MBA]


Types of Leases

There are two major types of leases: open and closed ended. In the former type, if the car is worth more than the set price upon expiration of the lease, you are responsible for the underage or coverage. In the more advantages later type, the responsibility of the value of the car is shifted to the leasing company. Other tips on care leasing include:

  • Inform the lessor how you want the auto equipped; do not accept unwanted options.
  • Obtain all delivery, and other, charges in advance, including down payment, security.
  • Deposit, registration fees, interest rates, residual value, rebates and all taxes (sales, personal property, use and gross receipt).
  • Know the capitalized cost (selling price) of the car
  • Know annual mileage limits, usually 15-18,000 miles, and all excess use charges.
  • Avoid maintenance and service contracts, and arrange for your own insurance.
  • Understand that terms, such as money factor, or interest factor, may be used instead of the term interest rate. In this case, simply multiple the rate by 24 for an estimate of the true interest rate involved.
  • Read the contract and understand all penalties, especially for premature or late termination, purchase or return terms, and consequences of theft.
  • Check the lease terms through an independent company, such as First National Lease Systems.

Rough Rules of Thumb

A rough rule of thumb to determine whether to buy or lease involves multiplying all the payments required by the number of months you will have to pay, and add the down payment to yield the total amount of the purchase. Then, multiply the lease payment by the number of months, and add required up-front costs, as well as residual value (end of lease buyout cost), to determine the total amount to lease. Compare the two figures to determine the most economical deal.

Typically, a cash deal is less expensive in the long run, providing a higher after tax rate of return is not available, as an alternate investment, for the funds.


Jaguar Touring sedan XJ-V8-LWB***


But, there are dis-advantages to auto leasing, too!

Perhaps the worse reason to lease a car is to drive one that you could not otherwise afford to drive. This is because most low monthly payments are only composed of two portions: interest on the note and the prorated cost of auto depreciation. No money is applied to ownership of the vehicle.


Finally, beware Spring-Fever and do not likely buy “gap” insurance to cover the difference between what your auto insurer would pay if your car was totaled, and what you would owe the leasing firm. It’s usually too expensive and the risk is minimal.


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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)



4 Responses


    Start with interior cleaning

    First, remove all trash. Look under the seats and other spots where you know you’ve been throwing “stuff.” Next, vacuum your vehicle, starting at the top and working your way down because gravity pulls dirt and pollen towards the floor. You’ll need hand attachments that can get into tiny spaces around the seats. Use a can of compressed air to dig dirt from hard to reach corners.

    Take out removable floor mats and wash them with soap, rinse and dry before replacing. If the carpeting and seats are dirty, use automotive carpet/upholstery cleaner and follow directions for application. Use a cleaner recommended for your car’s dashboard surface. Leather, plastic or other synthetics each require the appropriate cleaning method to keep them looking their best.

    Wash the exterior including the tires

    After the grit and grime of the winter season, be sure to focus on the underbody of your vehicle. Use a strong hose spray or a power wash attachment to get under your car and in the front and back of your tires. When washing the outside of your car, use only products recommended for this purpose. Hand dry using soft, preferably natural-fiber cloths that are absorbent and that won’t scratch the paint.

    The extra step of waxing will not only give your car a sparkling shine, but also protect the finish that helps maintain resale value. Choose the type of wax that works best for you, either paste, liquid or spray.

    Get fluids checked and refilled

    Some fluids, like window wiper fluid, deplete more quickly during the winter, and oil should be changed around every 5,000 miles or so.

    Replace wiper blades

    With spring showers on their way, your wiper blades should be at the best. If you notice that your blades cause streaking or aren’t clearing as much water, it’s a good idea to invest in a new pair.

    Get tires inspected and aligned (if needed)

    Changing temperatures often affect your tire pressure, not to mention the wear and tear that occurs every time you take your vehicle out on the road. For a quick test of whether your treads are too low, stick a quarter into each tire’s grooves. If Washington’s head isn’t completely covered, it may be time to find new tires that will keep you safe on the road. Also check to see if your wheels are out of alignment after the challenging winter road conditions.

    Dr. David Edward Marcinko MBA CMP™]


  2. 18 Auto Lease Terms

    Leasing is more confusing than buying. Purchasing a vehicle comes down to the terms of financing and a negotiation on price.

    In a lease, you’re basically paying for the vehicle’s loss of value over the term of the agreement, plus a finance factor, a.k.a. the interest rate.


    But, it’s never that simple. The language, plus a daunting number of line items and special fees, can turn leasing into a salesman’s shell game. Dealers exploit the complex maze of leasing terms and numbers to enhance their profits by manipulating the many figures to their favor.

    So, study your leasing form, because nothing makes a dealer wealthier than an ignorant buyer.



  3. Summer Auto Leases

    I recently read an article written by Earl Stuart, who runs a Toyota dealership in Lake Park, Fla., discussing how salespeople ”flip” potential buyers into taking out a lease. I know the area well and visit relatives frequently, there.

    According to Stuart, if you get a good price for a car and buy it, the dealer typically makes a profit of $1,000, while the salesperson makes a $200 commission.

    But, if you go for the lease, the dealer eventually may realize a $15,000 profit, and the salesperson could earn a commission as high as $3,000.

    More tips in our new book.


    Docs, and all, beware!

    Dr. David Edward Marcinko MBA CMP™


  4. Auto Purchase

    Follow the 20/4/10 rule suggested by Interest.com and others.

    Make a down payment of at least 20 percent, finance a car for no more than four years and don’t let your monthly vehicle expense (including principle, interest and insurance) exceed 10 percent of your gross income.



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