The $2000-$4000 Car :) This made me wealthy so jump on board

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
stoptothink
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Joined: Fri Dec 31, 2010 9:53 am

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by stoptothink »

tibbitts wrote: Mon Apr 12, 2021 8:25 am
stoptothink wrote: Mon Apr 12, 2021 8:01 am
tibbitts wrote: Sun Apr 11, 2021 6:26 pm
stoptothink wrote: Sun Apr 11, 2021 3:58 pm
Ron Ronnerson wrote: Sun Apr 11, 2021 3:45 pm
Maybe the latest safety features provide the illusion of safety. Instead of driving into work, one could own a pogo-stick and live right next to their job. Whatever would have gone into paying for the cars can now be used toward increased housing cost. Another option is to continue to commute from far away in an old car but retire years earlier. Either way, the result is less time spent in these death traps known as automobiles. Safety could potentially be enhanced by not paying for the safety features.
Another great Ron post. The single best thing I ever did to improve "car safety" was to buy a home that allowed me to walk to work and pretty much everywhere else. Like most things, such a nuanced topic; paying for the newest safety tech is not the only answer and may not be the most effective (definitely not most cost-effective).
For many years I lived a few hundred feet from work. But I drove far more miles then than I did at any other time in my life, because I had so much free time without having to spend nearly a couple of hours a day commuting. So instead of plugging along at an average 25mph commuting, I could spend that time driving to the mountains and lakes at ... well back then I drove too fast, so I won't say how fast, but let's just say living a few hundred feet from work wasn't a win from a motor vehicle safety standpoint.
Well, that's a choice. As a family with two working professionals, we're <12k miles of driving total (we share a single car) per year, with a significant amount of that being vacations and road trips. We're never in the house, but that doesn't mean we have to drive to wherever we are going. We have several parks and mountain trails within a few miles of our home, but that's part of the reason we bought where we did.
And what percentage of people do you think could find both affordable housing and walkable employment within walking distance of mountain trails and several parks (well other than tiny neighborhood "parks")? I would guess probably a few more now than before the pandemic, but we're already seeing some reversal of that. Of course we have Bogleheads declaring they'll now only work from home forever, but that's Bogleheads, and I'm talking about the population at large.
For us, it was a choice between a SFH and a townhouse because there are zero SFHs within a few miles of my office (but several townhome communities). We chose lifestyle, of which not being dependent on cars was a large part, over a larger home. We're in a very middle-class community, where we earn 2x-4x most of our neighbors (and we are not high-income by Boglehead standards); cost is not the issue, priorities are (and if you prioritize a bigger house, good for you - different strokes).

Just saying, you increasing driving when you no longer had a long commute was 100% a choice, and something that probably greatly improved your QOL overall.
tibbitts
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Joined: Tue Feb 27, 2007 6:50 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by tibbitts »

stoptothink wrote: Mon Apr 12, 2021 8:47 am Just saying, you increasing driving when you no longer had a long commute was 100% a choice, and something that probably greatly improved your QOL overall.
No disagreement there!
smitcat
Posts: 7655
Joined: Mon Nov 07, 2016 10:51 am

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by smitcat »

tibbitts wrote: Mon Apr 12, 2021 8:25 am
stoptothink wrote: Mon Apr 12, 2021 8:01 am
tibbitts wrote: Sun Apr 11, 2021 6:26 pm
stoptothink wrote: Sun Apr 11, 2021 3:58 pm
Ron Ronnerson wrote: Sun Apr 11, 2021 3:45 pm
Maybe the latest safety features provide the illusion of safety. Instead of driving into work, one could own a pogo-stick and live right next to their job. Whatever would have gone into paying for the cars can now be used toward increased housing cost. Another option is to continue to commute from far away in an old car but retire years earlier. Either way, the result is less time spent in these death traps known as automobiles. Safety could potentially be enhanced by not paying for the safety features.
Another great Ron post. The single best thing I ever did to improve "car safety" was to buy a home that allowed me to walk to work and pretty much everywhere else. Like most things, such a nuanced topic; paying for the newest safety tech is not the only answer and may not be the most effective (definitely not most cost-effective).
For many years I lived a few hundred feet from work. But I drove far more miles then than I did at any other time in my life, because I had so much free time without having to spend nearly a couple of hours a day commuting. So instead of plugging along at an average 25mph commuting, I could spend that time driving to the mountains and lakes at ... well back then I drove too fast, so I won't say how fast, but let's just say living a few hundred feet from work wasn't a win from a motor vehicle safety standpoint.
Well, that's a choice. As a family with two working professionals, we're <12k miles of driving total (we share a single car) per year, with a significant amount of that being vacations and road trips. We're never in the house, but that doesn't mean we have to drive to wherever we are going. We have several parks and mountain trails within a few miles of our home, but that's part of the reason we bought where we did.
And what percentage of people do you think could find both affordable housing and walkable employment within walking distance of mountain trails and several parks (well other than tiny neighborhood "parks")? I would guess probably a few more now than before the pandemic, but we're already seeing some reversal of that. Of course we have Bogleheads declaring they'll now only work from home forever, but that's Bogleheads, and I'm talking about the population at large.
"And what percentage of people do you think could find both affordable housing and walkable employment within walking distance of mountain trails and several parks (well other than tiny neighborhood "parks")?"
Being without a vehicle would require 4 conditions to be met over time:
- stay at the same job long term
- stay in the same home long term
- no other activities/interests that require a vehicle
- you do not like cars/trucks or driving yourself.
We would have failed on all four, others are different - YMMV
dknightd
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Joined: Wed Mar 07, 2018 11:57 am

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by dknightd »

bg5 wrote: Sun Apr 11, 2021 3:48 pm To many people spend way to much money on vehicles. If you have the cash its not a big deal but I would assume most couples making under $100,000 have probably around $50,000 worth of cars or more in their driveway.

Thats a problem!
The problem for some people is they spend way too much of their income. Some spend it on cars, some on their house, some on other things. The problem is NOT cars. The problem is spending more than you earn, or even spending exactly what you earn. I do not consider myself wealthy. But if I wanted to I could go out and buy a new car today, actually did that last week, so I would probably not want to do it again today.. Why? Because the last car I bought was worn out (actually, rusted out), and needed to be replaced. It only lasted 15 years. I was disappointed.
If you value a bird in the hand, pay off the loan. If you are willing to risk getting two birds from the market, invest the funds. Retired 9/19. Mortgage payed off 5/21.
seawolf21
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Joined: Tue Aug 05, 2014 7:33 am

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by seawolf21 »

Confused by this thread. Some people stay at Motel 6 while others stay at Four Seasons while others fly basic economy sitting in the middle seat at the back of the plane while others sit in 1A.
RobLyons
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by RobLyons »

OpenRoad wrote: Thu Apr 08, 2021 3:15 pm
RobLyons wrote: Wed Apr 07, 2021 2:18 pm
Katietsu wrote: Wed Apr 07, 2021 8:16 am I am fascinated by the average age of cars in places like Texas. In my world, a Toyota driven for 15,000 miles a year as a daily driver in all weather gets taken out by corrosion well before it can get to 200k or 300k miles.

Exactly this. Here in New England cars start rusting out under 100k sometimes. Potholes galore so parts break earlier, alignments are needed more frequently, tires, rims, etc. It's nearly impossible to be a classic car enthusiast (I am one) unless one has a garage and drives the vehicle only during the late spring - early fall months.
I've always lived in northern states where the weather is more extreme and never have had this problem. Are people aiming for potholes and salt piles when they drive? :)

I try to buy new, within my means, and drive it 'till it won't no more. My current car is 16+ years.

I guess it depends on if you commute in big city or not? And how many miles you put on your vehicle? Potholes randomly appear in Boston and the suburbs all the time. I've chatted with mechanic friends and dealerships alike and they all agree the north is no place to maintain a car for a long time. (Maybe it's more hyperlocal when we discuss "North"). If you ever drive out of the Boston towards Rt 1 you will notice the Tobin Bridge is literally riddled with potholes. Lane 1 - the "fast" lane is a disaster. Maybe since they are doing work on the bridge or just due to time of year they haven't patched many potholes yet. A coworker just had a blow out in the middle lane. It's bad.
I've personally had 3 patches in the past 3 years due to construction debris / nails as it's non stop construction.
"Great parenting sets the foundation for a better world"
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snackdog
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by snackdog »

7eight9 wrote: Wed Apr 07, 2021 9:20 am
cshell2 wrote: Wed Apr 07, 2021 9:02 am
Broken Man 1999 wrote: Wed Apr 07, 2021 8:31 am A $700 car payment is extreme.

DD has a 2018 Toyota Highlander and her payment didn't break $400. Other family car is a 2020 Toyota Corolla, less than $300. The Highlander is paid off, the Corolla will be paid off this year.
Well, obviously you can't really judge the true cost by the payment. I'm assuming those cars had big down payments and/or they're 84 month loans.
2021 Corolla. Excellent credit. $1,160 down. $299/month - 72 months.

Toyota Payment Estimator - https://www.toyota.com/payment-estimator
You can lease a new Corolla for about $150/mo with about $1800 down.
alfaspider
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by alfaspider »

snackdog wrote: Wed Apr 14, 2021 4:23 pm
7eight9 wrote: Wed Apr 07, 2021 9:20 am
cshell2 wrote: Wed Apr 07, 2021 9:02 am
Broken Man 1999 wrote: Wed Apr 07, 2021 8:31 am A $700 car payment is extreme.

DD has a 2018 Toyota Highlander and her payment didn't break $400. Other family car is a 2020 Toyota Corolla, less than $300. The Highlander is paid off, the Corolla will be paid off this year.
Well, obviously you can't really judge the true cost by the payment. I'm assuming those cars had big down payments and/or they're 84 month loans.
2021 Corolla. Excellent credit. $1,160 down. $299/month - 72 months.

Toyota Payment Estimator - https://www.toyota.com/payment-estimator
You can lease a new Corolla for about $150/mo with about $1800 down.
At the end of the 3 years you own nothing. In the buy situation, you own the car outright after 6 years and have a payment of zero. If you do lease, never put money down.
Tingting1013
Posts: 1243
Joined: Mon Aug 24, 2020 5:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tingting1013 »

alfaspider wrote: Wed Apr 14, 2021 4:26 pm
snackdog wrote: Wed Apr 14, 2021 4:23 pm
7eight9 wrote: Wed Apr 07, 2021 9:20 am
cshell2 wrote: Wed Apr 07, 2021 9:02 am
Broken Man 1999 wrote: Wed Apr 07, 2021 8:31 am A $700 car payment is extreme.

DD has a 2018 Toyota Highlander and her payment didn't break $400. Other family car is a 2020 Toyota Corolla, less than $300. The Highlander is paid off, the Corolla will be paid off this year.
Well, obviously you can't really judge the true cost by the payment. I'm assuming those cars had big down payments and/or they're 84 month loans.
2021 Corolla. Excellent credit. $1,160 down. $299/month - 72 months.

Toyota Payment Estimator - https://www.toyota.com/payment-estimator
You can lease a new Corolla for about $150/mo with about $1800 down.
At the end of the 3 years you own nothing. In the buy situation, you own the car outright after 6 years and have a payment of zero. If you do lease, never put money down.
Not true that you own nothing at the end of a three year lease. That assumes the manufacturer got the forecasted depreciation exactly right, which is rarely the case.

People now are selling their leases for thousands of dollars in equity above the payoff
lazydavid
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Joined: Wed Apr 06, 2016 1:37 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by lazydavid »

alfaspider wrote: Wed Apr 14, 2021 4:26 pm
snackdog wrote: Wed Apr 14, 2021 4:23 pm
7eight9 wrote: Wed Apr 07, 2021 9:20 am 2021 Corolla. Excellent credit. $1,160 down. $299/month - 72 months.

Toyota Payment Estimator - https://www.toyota.com/payment-estimator
You can lease a new Corolla for about $150/mo with about $1800 down.
At the end of the 3 years you own nothing. In the buy situation, you own the car outright after 6 years and have a payment of zero. If you do lease, never put money down.
Ignoring for the moment the excellent point in the post above mine, at the end of the 3 years in both examples you own nothing. At the end of the 6 years:

With the lease you own nothing, and have never driven a car over 3 years old.
With the purchase, you own a 6-year-old car worth $11,000 (assuming today's red-hot used car market continues for another 6 years). For this privilege you have spent an additional $10,800 on payments.

Leasing sounds pretty good in this case.
alfaspider
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Joined: Wed Sep 09, 2015 4:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by alfaspider »

Tingting1013 wrote: Wed Apr 14, 2021 4:32 pm
alfaspider wrote: Wed Apr 14, 2021 4:26 pm
snackdog wrote: Wed Apr 14, 2021 4:23 pm
7eight9 wrote: Wed Apr 07, 2021 9:20 am
cshell2 wrote: Wed Apr 07, 2021 9:02 am

Well, obviously you can't really judge the true cost by the payment. I'm assuming those cars had big down payments and/or they're 84 month loans.
2021 Corolla. Excellent credit. $1,160 down. $299/month - 72 months.

Toyota Payment Estimator - https://www.toyota.com/payment-estimator
You can lease a new Corolla for about $150/mo with about $1800 down.
At the end of the 3 years you own nothing. In the buy situation, you own the car outright after 6 years and have a payment of zero. If you do lease, never put money down.
Not true that you own nothing at the end of a three year lease. That assumes the manufacturer got the forecasted depreciation exactly right, which is rarely the case.

People now are selling their leases for thousands of dollars in equity above the payoff
It's possible to end up with equity, but not something to count on. In any event, what you don't own is a car.

Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
lazydavid
Posts: 3699
Joined: Wed Apr 06, 2016 1:37 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by lazydavid »

alfaspider wrote: Thu Apr 15, 2021 8:11 am Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
True. Leasing is often not advantageous for people living in Texas and North Dakota for this exact reason. But the other 91% are ok in this regard. :)
Tingting1013
Posts: 1243
Joined: Mon Aug 24, 2020 5:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tingting1013 »

alfaspider wrote: Thu Apr 15, 2021 8:11 am
Tingting1013 wrote: Wed Apr 14, 2021 4:32 pm
alfaspider wrote: Wed Apr 14, 2021 4:26 pm
snackdog wrote: Wed Apr 14, 2021 4:23 pm
7eight9 wrote: Wed Apr 07, 2021 9:20 am

2021 Corolla. Excellent credit. $1,160 down. $299/month - 72 months.

Toyota Payment Estimator - https://www.toyota.com/payment-estimator
You can lease a new Corolla for about $150/mo with about $1800 down.
At the end of the 3 years you own nothing. In the buy situation, you own the car outright after 6 years and have a payment of zero. If you do lease, never put money down.
Not true that you own nothing at the end of a three year lease. That assumes the manufacturer got the forecasted depreciation exactly right, which is rarely the case.

People now are selling their leases for thousands of dollars in equity above the payoff
It's possible to end up with equity, but not something to count on. In any event, what you don't own is a car.

Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
What you can “count on” at the end of a lease is one of these two scenarios:

1. The manufacturer underestimated the depreciation, and you ended up paying for only a portion of the car’s value that you “consumed”. You end up better off than someone who bought the car and drove it the same amount.

2. The manufacturer overestimated the depreciation. You sell it to Carvana to reclaim the overage that you’ve paid. Cash in your pocket.

For anyone looking at a new car, leasing has no downside (and in fact only upside) to owning, assuming two things:

1. You can negotiate the selling price of the leased car to the same price that you would have purchased it at.
2. Your interest rate (I.e. money factor) on the lease is low.
alfaspider
Posts: 3557
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by alfaspider »

Tingting1013 wrote: Thu Apr 15, 2021 9:05 am
alfaspider wrote: Thu Apr 15, 2021 8:11 am
Tingting1013 wrote: Wed Apr 14, 2021 4:32 pm
alfaspider wrote: Wed Apr 14, 2021 4:26 pm
snackdog wrote: Wed Apr 14, 2021 4:23 pm

You can lease a new Corolla for about $150/mo with about $1800 down.
At the end of the 3 years you own nothing. In the buy situation, you own the car outright after 6 years and have a payment of zero. If you do lease, never put money down.
Not true that you own nothing at the end of a three year lease. That assumes the manufacturer got the forecasted depreciation exactly right, which is rarely the case.

People now are selling their leases for thousands of dollars in equity above the payoff
It's possible to end up with equity, but not something to count on. In any event, what you don't own is a car.

Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
What you can “count on” at the end of a lease is one of these two scenarios:

1. The manufacturer underestimated the depreciation, and you ended up paying for only a portion of the car’s value that you “consumed”. You end up better off than someone who bought the car and drove it the same amount.

2. The manufacturer overestimated the depreciation. You sell it to Carvana to reclaim the overage that you’ve paid. Cash in your pocket.

For anyone looking at a new car, leasing has no downside (and in fact only upside) to owning, assuming two things:

1. You can negotiate the selling price of the leased car to the same price that you would have purchased it at.
2. Your interest rate (I.e. money factor) on the lease is low.
The downside is it encourages always having a new car, which is in the steepest point of its depreciation curve.
Tingting1013
Posts: 1243
Joined: Mon Aug 24, 2020 5:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tingting1013 »

alfaspider wrote: Thu Apr 15, 2021 10:43 am
Tingting1013 wrote: Thu Apr 15, 2021 9:05 am
alfaspider wrote: Thu Apr 15, 2021 8:11 am
Tingting1013 wrote: Wed Apr 14, 2021 4:32 pm
alfaspider wrote: Wed Apr 14, 2021 4:26 pm

At the end of the 3 years you own nothing. In the buy situation, you own the car outright after 6 years and have a payment of zero. If you do lease, never put money down.
Not true that you own nothing at the end of a three year lease. That assumes the manufacturer got the forecasted depreciation exactly right, which is rarely the case.

People now are selling their leases for thousands of dollars in equity above the payoff
It's possible to end up with equity, but not something to count on. In any event, what you don't own is a car.

Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
What you can “count on” at the end of a lease is one of these two scenarios:

1. The manufacturer underestimated the depreciation, and you ended up paying for only a portion of the car’s value that you “consumed”. You end up better off than someone who bought the car and drove it the same amount.

2. The manufacturer overestimated the depreciation. You sell it to Carvana to reclaim the overage that you’ve paid. Cash in your pocket.

For anyone looking at a new car, leasing has no downside (and in fact only upside) to owning, assuming two things:

1. You can negotiate the selling price of the leased car to the same price that you would have purchased it at.
2. Your interest rate (I.e. money factor) on the lease is low.
The downside is it encourages always having a new car, which is in the steepest point of its depreciation curve.
Even if you intended to keep the new car for ten years, there is only upside to leasing it for the first three.
User avatar
Random Musings
Posts: 5964
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Location: Pennsylvania

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Random Musings »

For my wife, bought a new Honda Civic which will be driven into the ground. That car does not depreciate quickly, plus I don't want her to deal with having an older car with a higher probability of mechanical/electrical issues as well as older safety features. That's a no go.

Historically, I've bought brand new modestly priced cars and drive them into the ground. However last one I purchased was a 3-yr old car with 28,000 miles a few years back.

Modest cars and watching other spends is also a way to save more.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
alfaspider
Posts: 3557
Joined: Wed Sep 09, 2015 4:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by alfaspider »

Tingting1013 wrote: Thu Apr 15, 2021 10:46 am
alfaspider wrote: Thu Apr 15, 2021 10:43 am
Tingting1013 wrote: Thu Apr 15, 2021 9:05 am
alfaspider wrote: Thu Apr 15, 2021 8:11 am
Tingting1013 wrote: Wed Apr 14, 2021 4:32 pm

Not true that you own nothing at the end of a three year lease. That assumes the manufacturer got the forecasted depreciation exactly right, which is rarely the case.

People now are selling their leases for thousands of dollars in equity above the payoff
It's possible to end up with equity, but not something to count on. In any event, what you don't own is a car.

Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
What you can “count on” at the end of a lease is one of these two scenarios:

1. The manufacturer underestimated the depreciation, and you ended up paying for only a portion of the car’s value that you “consumed”. You end up better off than someone who bought the car and drove it the same amount.

2. The manufacturer overestimated the depreciation. You sell it to Carvana to reclaim the overage that you’ve paid. Cash in your pocket.

For anyone looking at a new car, leasing has no downside (and in fact only upside) to owning, assuming two things:

1. You can negotiate the selling price of the leased car to the same price that you would have purchased it at.
2. Your interest rate (I.e. money factor) on the lease is low.
The downside is it encourages always having a new car, which is in the steepest point of its depreciation curve.
Even if you intended to keep the new car for ten years, there is only upside to leasing it for the first three.
Depends on buyout terms. They aren't necessarily advantageous.
Tingting1013
Posts: 1243
Joined: Mon Aug 24, 2020 5:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tingting1013 »

alfaspider wrote: Thu Apr 15, 2021 11:00 am
Tingting1013 wrote: Thu Apr 15, 2021 10:46 am
alfaspider wrote: Thu Apr 15, 2021 10:43 am
Tingting1013 wrote: Thu Apr 15, 2021 9:05 am
alfaspider wrote: Thu Apr 15, 2021 8:11 am

It's possible to end up with equity, but not something to count on. In any event, what you don't own is a car.

Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
What you can “count on” at the end of a lease is one of these two scenarios:

1. The manufacturer underestimated the depreciation, and you ended up paying for only a portion of the car’s value that you “consumed”. You end up better off than someone who bought the car and drove it the same amount.

2. The manufacturer overestimated the depreciation. You sell it to Carvana to reclaim the overage that you’ve paid. Cash in your pocket.

For anyone looking at a new car, leasing has no downside (and in fact only upside) to owning, assuming two things:

1. You can negotiate the selling price of the leased car to the same price that you would have purchased it at.
2. Your interest rate (I.e. money factor) on the lease is low.
The downside is it encourages always having a new car, which is in the steepest point of its depreciation curve.
Even if you intended to keep the new car for ten years, there is only upside to leasing it for the first three.
Depends on buyout terms. They aren't necessarily advantageous.
The terms are always equal or better than buying upfront.

If the manufacturer overestimated the depreciation by the end of the lease, then you win by buying out the car for cheaper than you can find a similar used car.

If the manufacturer underestimated the depreciation, then you hand back the keys and buy a similar used car. You are better off than the first owner of that used car because you avoided the depreciation gap.

Leasing is essentially a call option on the value of the car.
alfaspider
Posts: 3557
Joined: Wed Sep 09, 2015 4:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by alfaspider »

Tingting1013 wrote: Thu Apr 15, 2021 11:14 am
alfaspider wrote: Thu Apr 15, 2021 11:00 am
Tingting1013 wrote: Thu Apr 15, 2021 10:46 am
alfaspider wrote: Thu Apr 15, 2021 10:43 am
Tingting1013 wrote: Thu Apr 15, 2021 9:05 am

What you can “count on” at the end of a lease is one of these two scenarios:

1. The manufacturer underestimated the depreciation, and you ended up paying for only a portion of the car’s value that you “consumed”. You end up better off than someone who bought the car and drove it the same amount.

2. The manufacturer overestimated the depreciation. You sell it to Carvana to reclaim the overage that you’ve paid. Cash in your pocket.

For anyone looking at a new car, leasing has no downside (and in fact only upside) to owning, assuming two things:

1. You can negotiate the selling price of the leased car to the same price that you would have purchased it at.
2. Your interest rate (I.e. money factor) on the lease is low.
The downside is it encourages always having a new car, which is in the steepest point of its depreciation curve.
Even if you intended to keep the new car for ten years, there is only upside to leasing it for the first three.
Depends on buyout terms. They aren't necessarily advantageous.
The terms are always equal or better than buying upfront.

If the manufacturer overestimated the depreciation by the end of the lease, then you win by buying out the car for cheaper than you can find a similar used car.

If the manufacturer underestimated the depreciation, then you hand back the keys and buy a similar used car. You are better off than the first owner of that used car because you avoided the depreciation gap.

Leasing is essentially a call option on the value of the car.
Call options are never free.
Tingting1013
Posts: 1243
Joined: Mon Aug 24, 2020 5:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tingting1013 »

alfaspider wrote: Thu Apr 15, 2021 11:20 am
Tingting1013 wrote: Thu Apr 15, 2021 11:14 am
alfaspider wrote: Thu Apr 15, 2021 11:00 am
Tingting1013 wrote: Thu Apr 15, 2021 10:46 am
alfaspider wrote: Thu Apr 15, 2021 10:43 am

The downside is it encourages always having a new car, which is in the steepest point of its depreciation curve.
Even if you intended to keep the new car for ten years, there is only upside to leasing it for the first three.
Depends on buyout terms. They aren't necessarily advantageous.
The terms are always equal or better than buying upfront.

If the manufacturer overestimated the depreciation by the end of the lease, then you win by buying out the car for cheaper than you can find a similar used car.

If the manufacturer underestimated the depreciation, then you hand back the keys and buy a similar used car. You are better off than the first owner of that used car because you avoided the depreciation gap.

Leasing is essentially a call option on the value of the car.
Call options are never free.
Numbers in this post:

viewtopic.php?p=5946730#p5946730
H-Town
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by H-Town »

Tingting1013 wrote: Thu Apr 15, 2021 11:30 am
alfaspider wrote: Thu Apr 15, 2021 11:20 am
Tingting1013 wrote: Thu Apr 15, 2021 11:14 am
alfaspider wrote: Thu Apr 15, 2021 11:00 am
Tingting1013 wrote: Thu Apr 15, 2021 10:46 am

Even if you intended to keep the new car for ten years, there is only upside to leasing it for the first three.
Depends on buyout terms. They aren't necessarily advantageous.
The terms are always equal or better than buying upfront.

If the manufacturer overestimated the depreciation by the end of the lease, then you win by buying out the car for cheaper than you can find a similar used car.

If the manufacturer underestimated the depreciation, then you hand back the keys and buy a similar used car. You are better off than the first owner of that used car because you avoided the depreciation gap.

Leasing is essentially a call option on the value of the car.
Call options are never free.
Numbers in this post:

viewtopic.php?p=5946730#p5946730
Okay.... let's see:

Leasing: you always have car payments every month. You're limit to annual mileage. You have to pay comprehensive car insurance.

Buying: you don't have car payments if you pay it off. You don't necessary have the newest car every 3 years, but you're free to take your car on long road trips. You can also downgrade your insurance since you no longer need comprehensive and collision policy. Your annual cost of car ownership will be much less than you lease if you keep your car 5 years or more. If you keep your car 10 years or more, you'd save a lot of money from not buying/leasing new car.

See Taylor's post on the upthread. He ran some numbers....
Tingting1013
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Joined: Mon Aug 24, 2020 5:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tingting1013 »

H-Town wrote: Thu Apr 15, 2021 11:46 am
Tingting1013 wrote: Thu Apr 15, 2021 11:30 am
alfaspider wrote: Thu Apr 15, 2021 11:20 am
Tingting1013 wrote: Thu Apr 15, 2021 11:14 am
alfaspider wrote: Thu Apr 15, 2021 11:00 am

Depends on buyout terms. They aren't necessarily advantageous.
The terms are always equal or better than buying upfront.

If the manufacturer overestimated the depreciation by the end of the lease, then you win by buying out the car for cheaper than you can find a similar used car.

If the manufacturer underestimated the depreciation, then you hand back the keys and buy a similar used car. You are better off than the first owner of that used car because you avoided the depreciation gap.

Leasing is essentially a call option on the value of the car.
Call options are never free.
Numbers in this post:

viewtopic.php?p=5946730#p5946730
Okay.... let's see:

Leasing: you always have car payments every month. You're limit to annual mileage. You have to pay comprehensive car insurance.

Buying: you don't have car payments if you pay it off. You don't necessary have the newest car every 3 years, but you're free to take your car on long road trips. You can also downgrade your insurance since you no longer need comprehensive and collision policy. Your annual cost of car ownership will be much less than you lease if you keep your car 5 years or more. If you keep your car 10 years or more, you'd save a lot of money from not buying/leasing new car.

See Taylor's post on the upthread. He ran some numbers....
Go read the numbers in my other post.

I don’t know anybody who doesn’t have comprehensive collision coverage on a new car they just bought, at least for the first three years. After year three the lessee turns into a full owner and can drop the insurance if they want.
inbox788
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by inbox788 »

Tingting1013 wrote: Thu Apr 15, 2021 9:05 amWhat you can “count on” at the end of a lease is one of these two scenarios:

1. The manufacturer underestimated the depreciation, and you ended up paying for only a portion of the car’s value that you “consumed”. You end up better off than someone who bought the car and drove it the same amount.

2. The manufacturer overestimated the depreciation. You sell it to Carvana to reclaim the overage that you’ve paid. Cash in your pocket.

For anyone looking at a new car, leasing has no downside (and in fact only upside) to owning, assuming two things:

1. You can negotiate the selling price of the leased car to the same price that you would have purchased it at.
2. Your interest rate (I.e. money factor) on the lease is low.
What you're describing is the built in option to the lease contract that like a stock options contract has some value and cost some premium. It's no free lunch, and surprisingly efficient, though currently there is a lot of volatility and more examples that may appear as inefficient, but the system is adjusting. Enjoy those mispricings that benefit the customer while they last, and if you don't need a car right now or can't find one of these mispricings, it's better to step back and wait for inflated used car prices to fall.
lazydavid wrote: Thu Apr 15, 2021 8:33 am
alfaspider wrote: Thu Apr 15, 2021 8:11 am Leasing can also be tax disadvantaged in some states where you pay sales tax on the entire price of the vehicle rather than just the total lease payments.
True. Leasing is often not advantageous for people living in Texas and North Dakota for this exact reason. But the other 91% are ok in this regard. :)
At first, I confused this with whether the trade-in value affects the sales tax paid ("trade in tax deduction"). In those states that only charge sales tax on the payments (not residual), you save about half in taxes.

In Texas, if you trade in a car worth $20k and lease a $40k vehicle (with $20k residual value), wouldn't you be paying the full tax on the $40k?

Then 3 years later, you turn in your vehicle instead of buying it out for $20k, and lease another $40k vehicle, are you're paying full tax on the $40k? ("Also, the purchaser (i.e., lessee) of a motor vehicle cannot trade in a vehicle they are leasing since they are not the title owner of the leased vehicle.")

What if instead you bought out the car for $20k (take title), and traded it in for a one pay lease on the $40k vehicle, can you apply the trade in value reduction?

https://comptroller.texas.gov/taxes/pub ... de-ins.php

I'm also a little confused about who holds title. I thought the leasing company hold a lien against the title, and the owner still holds title. I guess the arrangements may vary depending on how the leases are written up and by whom.

The more the governments benefit from double and multiple taxation on these sales transaction, the more it costs car owners and makes it a disincentive to buy or trade cars. And if they provide relief, it will encourage buyers to use these methods to their benefit.
Tingting1013 wrote: Thu Apr 15, 2021 10:46 amEven if you intended to keep the new car for ten years, there is only upside to leasing it for the first three.
All other things being equal, the lease acquisition fees, lease disposal fees or lease payoff fees are all extra and a discouragement to leasing. Those are some of the added costs of exercising a call option you bought. I know folks that have done that, and if you knew that was going to happen, it's generally better to purchase the car outright, even if you have to sell a few back. Same if you want to own the stock. Don't waste money paying call premiums if the plan or likely outcome is that you get assigned and hold the stock. Use these financial instruments in a way and time period they're designed for.
Last edited by inbox788 on Thu Apr 15, 2021 11:55 am, edited 1 time in total.
H-Town
Posts: 3562
Joined: Sun Feb 26, 2017 2:08 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by H-Town »

Tingting1013 wrote: Thu Apr 15, 2021 11:47 am
H-Town wrote: Thu Apr 15, 2021 11:46 am
Tingting1013 wrote: Thu Apr 15, 2021 11:30 am
alfaspider wrote: Thu Apr 15, 2021 11:20 am
Tingting1013 wrote: Thu Apr 15, 2021 11:14 am

The terms are always equal or better than buying upfront.

If the manufacturer overestimated the depreciation by the end of the lease, then you win by buying out the car for cheaper than you can find a similar used car.

If the manufacturer underestimated the depreciation, then you hand back the keys and buy a similar used car. You are better off than the first owner of that used car because you avoided the depreciation gap.

Leasing is essentially a call option on the value of the car.
Call options are never free.
Numbers in this post:

viewtopic.php?p=5946730#p5946730
Okay.... let's see:

Leasing: you always have car payments every month. You're limit to annual mileage. You have to pay comprehensive car insurance.

Buying: you don't have car payments if you pay it off. You don't necessary have the newest car every 3 years, but you're free to take your car on long road trips. You can also downgrade your insurance since you no longer need comprehensive and collision policy. Your annual cost of car ownership will be much less than you lease if you keep your car 5 years or more. If you keep your car 10 years or more, you'd save a lot of money from not buying/leasing new car.

See Taylor's post on the upthread. He ran some numbers....
Go read the numbers in my other post.

I don’t know anybody who doesn’t have comprehensive collision coverage on a new car they just bought, at least for the first three years. After year three the lessee turns into a full owner and can drop the insurance if they want.
So are we assuming that a leassee continue to be a leassee every 3 year? Or a leassee will buy the car after 3 year lease? On the first assumption, you'll always have your car payment and you will always take the steepest depreciation curve in the first 3 years. On the second assumption, why don't you just buy a car with straight-up cash? Why would you let the bank charge you with finance cost, application fee, and interest over the life of the loan?
inbox788
Posts: 8192
Joined: Thu Mar 15, 2012 5:24 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by inbox788 »

H-Town wrote: Thu Apr 15, 2021 11:55 aminterest over the life of the loan?
The current low interest rate environment (low and subsidized MF) is masking this effect. Enjoy it while it lasts.
Tingting1013
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Joined: Mon Aug 24, 2020 5:44 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tingting1013 »

inbox788 wrote: Thu Apr 15, 2021 12:01 pm
H-Town wrote: Thu Apr 15, 2021 11:55 aminterest over the life of the loan?
The current low interest rate environment (low and subsidized MF) is masking this effect. Enjoy it while it lasts.
Correct, you either pay the low interest in the lease or you pay the opportunity cost of tying cash up in the car. Either way you pay.
Luckywon
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Joined: Tue Mar 28, 2017 10:33 am

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Luckywon »

inbox788 wrote: Thu Apr 15, 2021 11:52 am All other things being equal, the lease acquisition fees, lease disposal fees or lease payoff fees are all extra and a discouragement to leasing.
I have leased many vehicles and have rarely had to pay the lease disposal fee. One time I did buy a car out at the end of the lease, and in that case, the lease disposal fee was waived. I currently lease two cars, and those leases have the same waiver if the car is purchased at the end of the lease. I believe this is fairly standard.

The lease disposal fee has also been waived whenever I leased another vehicle from the same manufacturer.

Another time, the lease disposal fee was waived because I had not used up all of the mileage allotted within the lease, and I asked if some accommodation could be made considering that. It seems that leasing company phone reps sometimes have discretion to waive this. Never hurts to ask.

Regarding the situation where you lease a car but it ends up being more valuable than its residual value at the end of the lease, it is not always necessary to take the car to Carvana to try to recover the excess depreciation that you've paid for. On one occasion I was able to get the dealership where I returned the car to compensate me partially for this. I believe the dealer I was returning the car to had the option from the lease financing division to keep the car on the lot and sell it, and they were willing to credit me some of the anticipated profit.

Another case where leasing ends up being advantageous is if you are in a significant accident. This reduces the value of the car and it is difficult to recover this from an insurance company. Much better to be in a lease at that point than to own the car.

For those that own businesses where the vehicle can be a business expense, the lease payment deduction is better than the depreciation schedule if the vehicle was purchased. This is a common reason business owners often lease vehicles rather than purchase them.
BogleMelon
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Joined: Mon Feb 01, 2016 11:49 am

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by BogleMelon »

I once bought a 2000 Honda Civic and paid $4000. It turned out to be a lemon and I spent $$$ fixing it. I sold it 4 years ago at $1500.
I decided to not bother with beaters again because:
- They are way less safe
- The time I spent finding a good mechanic, at the mechanic, picking it up from the mechanic worth money
- The time I would spend searching for a new vehicle every other year, negotiating, test driving, inspecting it, register it, search for a seller, finalizing the selling transaction, worth money
- Potential sellers drive testing my car comes with risks
- Buying and selling transactions involve some degree of financial risk (fraud)
- Beaters are not as comfortable as new cars
- They can not be trusted for long trips.
- They sometimes smell bad (carpet wear and tear)
- A mid-range car for me ($15K) that would last 8 years could make more sense and more peace of mind if I can't afford a brand new car
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather
inbox788
Posts: 8192
Joined: Thu Mar 15, 2012 5:24 pm

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by inbox788 »

Luckywon wrote: Fri Apr 16, 2021 10:39 am
inbox788 wrote: Thu Apr 15, 2021 11:52 am All other things being equal, the lease acquisition fees, lease disposal fees or lease payoff fees are all extra and a discouragement to leasing.
I have leased many vehicles and have rarely had to pay the lease disposal fee. One time I did buy a car out at the end of the lease, and in that case, the lease disposal fee was waived. I currently lease two cars, and those leases have the same waiver if the car is purchased at the end of the lease. I believe this is fairly standard.

The lease disposal fee has also been waived whenever I leased another vehicle from the same manufacturer.

Another time, the lease disposal fee was waived because I had not used up all of the mileage allotted within the lease, and I asked if some accommodation could be made considering that. It seems that leasing company phone reps sometimes have discretion to waive this. Never hurts to ask.

Regarding the situation where you lease a car but it ends up being more valuable than its residual value at the end of the lease, it is not always necessary to take the car to Carvana to try to recover the excess depreciation that you've paid for. On one occasion I was able to get the dealership where I returned the car to compensate me partially for this. I believe the dealer I was returning the car to had the option from the lease financing division to keep the car on the lot and sell it, and they were willing to credit me some of the anticipated profit.

Another case where leasing ends up being advantageous is if you are in a significant accident. This reduces the value of the car and it is difficult to recover this from an insurance company. Much better to be in a lease at that point than to own the car.

For those that own businesses where the vehicle can be a business expense, the lease payment deduction is better than the depreciation schedule if the vehicle was purchased. This is a common reason business owners often lease vehicles rather than purchase them.
Not all manufacturers charge a lease disposal or payoff fees, but last I checked, most do. What manufacturer and lender are your leases? If you purchase the car, it's not generally considered a disposal, so it's not so much waiving the fee, but that the fee doesn't apply, but some manufacturers have the other gotcha, a payoff fee. https://mytresl.com/blog/three-fees-awa ... car-lease/ And there are differences if the lease is from the manufacturer lender or a 3rd party. The more choices, the better chance of getting a better deal, or making a mistake overlooking a disadvantage, so you have to be careful.

The disposition fee is by design a barrier to competition, and a built in incentive to return to the brand. Similar to the brokerage fees to close out an account and transfer to another broker. And an FU if you leave.

All these lease fees are junk fees and pure profit. While they claim they're non-negotiable, like the $50 or $500 documentation fee, and their wish number appears on paper, it's all negotiable when it comes to the out the door price. It's a shell game hiding the numbers and making equal comparisons difficult on the consumer. When returning, you can ask, but they may have little incentive comply. If you're buying another vehicle, they'd be more than happy to try to roll that fee into the new vehicle, so yes, they'll "waive it", but there's no way to know how much they added it into the new vehicle transaction. In the worst case, it's actually more than the amount they waived because they've got you captive. Some (maybe many [lazy | busy | rich | price insensitive | etc.]) lease renewals don't shop around or price just the new lease without return.

The other differences you mention (higher actual residual value, diminished value, etc.) that benefit the lessee costs the leaser, so they recoup it in other ways or from other customers (gap insurance, higher built in profits and margins, etc.).

You can get good lease deals, especially if they have lease only incentives. But a $1000 lease only cash back is only offsetting these lease junk fees. Look for the $3000 lease incentives that don't have corresponding purchasing cash back or hidden dealer rebates. I think Lease Hacker https://leasehackr.com/ is the BH equivalent when it comes to car leases.
Luckywon
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Luckywon »

inbox788 wrote: Fri Apr 16, 2021 11:39 am What manufacturer and lender are your leases?
Have leased from Honda, Infiniti and BMW. Almost always have used the manufacturer's finance company, except for the very first lease, which was from an independent lender. As you alluded to, that was a mistake for many reasons. The car was a BMW which had been purchased in Germany by the dealership owner, and therefore was not eligible for a BMW finance company lease. Unfortunately, at the time, I didn't know better.

The Infiniti lease was the one where the dealership accepting the car return credited me for some of the excess depreciation.

BMW was the lease finance company which waived the disposition fee because I had not used up allotted mileage. They also said if I leased another BMW within 6 months, they would credit me another $250 or $500, my memory is fuzzy now.
inbox788
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by inbox788 »

Luckywon wrote: Fri Apr 16, 2021 11:54 am
inbox788 wrote: Fri Apr 16, 2021 11:39 am What manufacturer and lender are your leases?
Have leased from Honda, Infiniti and BMW. Almost always have used the manufacturer's finance company, except for the very first lease, which was from an independent lender. As you alluded to, that was a mistake for many reasons. The car was a BMW which had been purchased in Germany by the dealership owner, and therefore was not eligible for a BMW finance company lease. Unfortunately, at the time, I didn't know better.

The Infiniti lease was the one where the dealership accepting the car return credited me for some of the excess depreciation.

BMW was the lease finance company which waived the disposition fee because I had not used up allotted mileage. They also said if I leased another BMW within 6 months, they would credit me another $250 or $500, my memory is fuzzy now.
Yes, leases are highly variable. Fees are less noticeable on higher priced luxury brands (say an extra $30 on a $180 payment vs. extra $50 on $500) There's good and bad depending on how savvy and experienced you are.

Tying it back to the $4000 car. For an out of state college student who's not driving very much, a $4000 car (10 year old hand me down) is very common and practical, but the worry is whether it's reliable for the 4 years and if you're unlucky to need a $4000 repair during that time (what are the odds?). It's been a while since I've seen $99, no down leases (lowest recent was $133, but very limited regions, and not mine). That's about $4000 for 3 years of payments. Similar to the unlucky used car owner.
Tribonian
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Joined: Thu Dec 21, 2017 7:33 am

Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by Tribonian »

Being car free into mid-30s saved us a bundle. Being able to commute by bicycle, on foot or transit ($30/month) provided enough savings that we could rent brand new vehicles for road trips whenever we wanted. No sales taxes, no maintenance costs, insurance covered by cc, etc. once the kids are out of the house, we may abandon our 15 year old Subaru.
H-Town
Posts: 3562
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Re: The $2000-$4000 Car :) This made me wealthy so jump on board

Post by H-Town »

H-Town wrote: Sun Apr 11, 2021 3:31 pm
Tingting1013 wrote: Sun Apr 11, 2021 3:27 pm
H-Town wrote: Sun Apr 11, 2021 3:22 pm
Tingting1013 wrote: Sun Apr 11, 2021 3:21 pm
H-Town wrote: Sun Apr 11, 2021 3:20 pm

Yeah but I can drive my car out of the way :)
Only if you see it in time
Do you mean the people who text or talk on the phone? Or do you mean aggressive drivers who won’t let anyone in or change lane? Good luck to those people. A Tesla may not save them.
https://youtu.be/k60stdDRk6s
https://youtu.be/cPMvQphJQiE

Bottom line: I don’t trust a computer. And I don’t want to be beta testers for those safety tech, auto pilot, and whatnots. I’m driving. That’s it.
https://www.click2houston.com/news/loca ... cials-say/
HOUSTON – Two men are dead after a Tesla traveling in Spring crashed into a tree and no one was driving the vehicle, officials say.

The crash happened at 11:25 p.m. in the Carlton Woods subdivision near The Woodlands. The car burst into flames after hitting a tree near 18 Hammock Dunes Place.

Harris County Precinct 4 Constable Mark Herman told KPRC 2 that the investigation showed “no one was driving” the fully-electric 2019 Tesla when the accident happened. There was a person in the passenger seat of the front of the car and in the rear passenger seat of the car
This was just horrible accident from auto pilot Tesla... It happened near my area.
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