Why You Should Not Lease! A sampling of Yukon Denali Leases

If you have read through this site, you know that I offer many ways to help you figure out if you are getting a good deal on your lease. I also stress the importance of not leasing a car if you are at all unsure of any factors that determine how a lease is done. It is to easy to not know what you are getting and when you are purchasing something such as a Yukon Denali, you are spending $50K. You should know what you are doing, but many people do not.

I decided to sample Yukon Denali leases since most of them come fully loaded and it lessons the chance for expensive upgrades. Using Edmunds.com, I determined that the cost for a fully loaded Yukon Denali with an extra 5K in add-ons (sunroof, larger wheels, DVD, Navigation, etc) should cost about $50,000 not including any rebates. Through some research I was able to collect details from offers and prior purchases of leases.

I sampled 10 Yukon leases and here is what I found:

You can see the payments, terms, and residual payoffs vary greatly. Next I totaled the payments over the term and added the residual to determine the final cost (It does not show any down payment the buyer put towards the car so assume the total price below is lower than the actual total price). I then put in the cost over the same term for a 5% loan based on a fully loaded Yukon with $5K in upgrades costing $50K and compared the two.

You can see the difference. Car 10 ended up over $8,000 higher than the $50K car I put together. In fact, out of the 10 cars I sampled, only 3 came in better, and two of them we would have to assume they had full upgrades and did not put more than $356.00 dollars down. Also notice how bad most of the 39-month leases worked out.

If any of the 7 other cars had put money down, the terms become worse. To make matters worse, the blue book on a 2007 Yukon Denali is $37,000. Wow, look at car 1 and car 10, at the end of the lease term you have to pay nearly what the car is worth today after making 27 payments of over $700 per month. Sound like a good deal? I guess if your spending $50,000 on a car what is an extra 6-10K right? At least you had a nice sales person and your car payment met your budget.

I hope this puts a little more light into how much a lease can cost you if you don’t know all the terms. I would like to say that someone spending $50K knows the terms, but as demonstrated here, that is not the case.

Leasing any car, expensive or not, you can get ripped off. There is a reason all the ads push leases, either do your homework or don’t lease. Remember never buy a car based on a car payment.

If anything know this.
-A lease is simply financing the depreciation of the car. American cars lease bad as they do not hold their value. Cars like Toyota, Honda, and Nissan lease better.
-The more a car holds it value, the better your lease payment.
-Down payments for leases should be very small since any amount is usually applied to the residual (a dirty trick), which if you turn your car in the money is pocketed by the lease company.
-Always know the total cost if you were to buy the car at the end of the lease. Dealers will say this does not compare to a purchase, that is a lie. It does and it should be close to what you would buy the car on a conventional loan under market interest rates.
-You will be upside down on 90% of leases.

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Do you have the next great magazine idea but no one to fund your idea? Do you have great writing skills, but no magazine to publish your work? No worries, now you can start your own. MagCloud is a new company that helps you publish your own magazine. They print, mail, and collect the fees for your subscriptions, all you have to do is set a profit you wish to collect and upload a hi-rez pdf. of the magazine you create. Market your magazine and you are off to making money. There are no upfront fees, however, you do have to be invited to be a publisher in the beta release but you can become a member and purchase magazines that people have created.

Another great way to make some extra cash if you have the skills to layout a magazine.

One thing that I have found most common among wealthy individuals is the ability to have and maintain alternate sources of income. Most people concentrate on their primary source of income and that is it. For one reason or another, many people tend to not develop alternate sources of income. Perhaps it is due to time, laziness, lack of desire, or just knowledge. Fact is, if you can find alternate sources of revenue, you become less dependent on your primary source and build wealth.

Before you begin here are a few things to know. There are two kinds of alternate sources that can generate extra income:

Passive Income: This is the best kind. Once you set this income stream up, it takes little work and continues to produce income. Example of passive income would be interest from a savings account, rental properties, or dividends from investments.

Active Income: This requires consistent participation to continue the income stream. This could be a home-based business, selling things on ebay, or consulting.

The secret is to develop as many passive income streams as possible. That off course is easier said than done, but lets take a look at a few things that you could do.

Cd’s, Bonds, and Savings: These are typically very safe investments and can generate anywhere between 2-6%. Not going to make you rich, but a little extra money each month into these types of investments does earn you income and helps increase you total savings.

Mutual Funds: These come with a bit more risk, but they can typically yield a lot better than 6%. A great source to see Mutual Fund ratings is Morning Star or check out Forbes fund guide 2007. They have a great rating system and have further information on the types of funds out there.  If you want to get started you can either contact the fund directly or open and investment account.  I have the best luck with Schwab.com (a bit more expensive but great customer service).

Rental Investments: Property is a great way to increase passive income if done correctly. The biggest mistake I see people make is going for appreciation as opposed to cash flow. If you structure your loans and programs to go for appreciation, you will find yourself in a crunch when the housing market dips down as it is now. If you take the other approach and go for cash flow neutrality with fixed loans, what you get is a property where total value in the short term is not relevant as long as rents remain flat or increase. How do you do this?

1. Buy only with fixed loans. When you do this you know you cost for the life of the loan and will not be subjected to a raising mortgage rate. On investment property, raising payments can quickly turn a property into a cash burning machine and if you can’t cover the negative cash flow you will be forced to sell or lose the house.  More on calculating and comparing loans.

2. If the housing market is going down rents typically raise. Why? Loans become harder to get and less people are willing to jump into a house at higher prices when they think the value is going to drop. This increases the demand on rentals therby pushing rents up.  This is good if you plan to purchase and investment property and your housing costs are fixed.

3. If you are cash flow positive or cash flow neutral and have a fixed loan you are less concerned about property price. This may seem odd, but if you can find an opportunity where you don’t burn cash on a monthly basis your investment is paying for itself. It has been proven over the last 100+ years that over the long run property increases in value. If you are cash flow positive or neutral a temporary drop in housing should not be an issue to you because you strategy is long term. Today’s housing market is tough to find cash neutral properties, but they are starting to surface. Be patient and you will find some.

If done right a good property investment can begin to generate large income in 20-30 years, plus you get the value of the property on top of the income.

Develop anything that has royalties. Do you have a talent like writing music or writing screen plays? If you have something good try submitting it to various organizations or industry people to publish. If you are lucky enough to get a break you could see great passive income. You don’t have much to lose to not try. Just make sure to take the effort to find the right people to get the word out on your work.  Also I recomend filing a copyright.  This can be done by following the instructions at the US copyright office. 

Create proposals and send them to Corporate CEO’s. Think this one is stupid? You would be surprised how well some good thought out ideas are received by corporate CEOs. However, before you go writing you idea on a napkin to send off to a CEO, make sure you do the following:

-Have a clear plan of action.
-Identify where and how your idea can create value to the product or company your are going after.
-Spend time to clearly write and format your proposal.
-Check spelling.
-Don’t reveal the entire story only enough to cause interest.
-Have knowledge of the company, its officers, and its ethics.

Ok, so you have the cure for cancer and your afraid to reveal it to someone for fear of losing the idea. Well that is the risk you must take and if done correctly can yield you great benefits. If it truly is a brilliant idea, then go after it yourself or file a patent. Point is, there are thousands of great ideas that most people sit on for fear of losing them. Usually these people make nothing from their ideas or wait so long that someone else eventually thinks of it. Can you relate, “oh that was my idea”, difference is that other person took action. If you don’t take action you will never succeed!

There are many other ways to develop passive income. I hope that I have inspired your thinking a bit. Now lets look at active income.

The best way to succeed with Active income is to find a way to get paid for doing the things that make you happy. Think about it, how much harder would you try if you were getting paid to play golf or make crafts. The challenging part is finding a way to get paid. If you are clever you could probably find a way to get paid for anything, just depends on how much time and effort you have to put into your idea.

One friend of mine loves to surf. Going to the beach every day does not bring in much income, so he decided to help out with some surf lessons in Malibu. He spent some time developing relationships with the parents and now every summer he has a thriving business teaching surf lessons to kids. He gets to be at the beach in the day and works his normal job on the off days and nights. Just one example how taking something you like and creating an opportunity out of it.

If you are a good writer, there are many companies now that offer paid posts or paid articles. This is another great alternate source of income. Probably won’t make you rich, but maybe bring in extra travel money.

There are many ways to succeed with alternate sources of active income. It is really just limited to your time and ideas.

Hopefully this will inspire you to think of ways to bring in alternate sources of income. Not all of them will be a home run and make you wealthy. In fact, failure is part of the game. However, if you fail at something you also learn and perhaps the next thing you try might be a home run. At the end of the day, if you are not trying how can you ever expect to hit the home run.

I will end with one thing I like to say: “There are no bad ideas, just bad execution”.

If you have ever played a game of checkers, you know to win the game you need strategy and thinking ahead. If you can anticipate your opponents next three moves you can set them up and counter strike when they least expect it. Lets see how checkers compares to your career.

In checkers every move you make has a consequence and it is not your opponents fault. This holds true in your career. The first step in being successful is taking accountability for your actions. I think this has become lost in today’s work force. When I am out at lunch I here story after story about passed over promotions, mean bosses, and “if I were boss I would…..”. Granted, you may have a mean boss, you may have been passed over for a promotion, and you might be able to do a better job, but have you asked yourself what you did to be in this position? Are you treated poorly because you have attitude? If you think you can do better do you purposely do worse because you are mad? Every case is different, but in most cases your situation probably could be different if you had taken accountability for your actions and practiced strategy instead of content.

In checkers you must think far ahead and analyze every possibility to win the game. It is no different when you show up for work everyday. You must consistently be thinking ahead, and not just in your field. All companies have projects that require input and work from multiple departments. If you can anticipate these needs and have them ready or be first in line to suggest a well laid out plan, you will stand out from your co-workers who just show up day after day and do the assigned work only. The employees that stand out and move through departments to the top are the ones the stick their neck out. You may not always be right or have the best idea, but the key is to be first to suggest something.

In Checkers, when you have set you opponent up you must follow through or you will lose the opportunity: This is probably the most important point. If you have taken accountability, used strategy, and suggested new ideas before you co-workers, then you must follow up your foresight with action. If you don’t, the attention on you becomes lost and the company will re-focus on employees that will get the work done.

When backed in a corner in checkers you often use patience to seize a mistake by your adversary: Unfortunately, some companies do not inspire thought by their employees, do not encourage growth, and have horrible management, however, this does not mean a dead end for you. In circumstances such as this, you must be patient and find the right opportunity to seize. You can find it by learning how past employees have made it through the chain, knowing the strengths and weaknesses of your management team, finding the things that appeal to them to start building trust with them, and most importantly knowing what they value. This takes time, but if it is done right you should be able to change you actions and work ethics to satisfy their needs, gain trust, and earn their respect. When they have these things, it will be much easier for you to achieve you goals in that company.

You career is and should be seen as a game. The more time you invest in strategy and learning you opponents strengths and weakness, the better off you will do. Imagine trying to play a game of checkers where all you could see is your pieces. You probably would not do to well. If you treat you job like this, chances are you will stay where you are and not achieve you goals.

Happy playing!