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Why pre-ordering is dangerous (and often stupid)

 
 
tony cooper
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      06-29-2011
On Wed, 29 Jun 2011 16:22:27 -0400, Alan Browne
<(E-Mail Removed)> wrote:

>> I recently sold a 1977. If I lease them I have
>> to get rid of them. I currently lease a car. It would have been
>> cheaper to buy it, but now I know I have to replace it. OTOH, I just
>> bought a car I expect to own for the next ten years.

>
>Every car I buy is for 9 - 10 years.


A guy recently gave a presentation on fireworks photography at my
camera club. He uses a technique where he sets the camera to bulb,
holds a black card over the lens, removes the card when the firework
blossoms, re-covers the lens, and repeats. He gets several blossoms
in a frame. Pretty, if you like that sort of photograph.

When asked how long he keeps the shutter open, his reply was "Until
I'm done".

I feel the same way about trading cars. No set number of years, just
"When I'm ready".
--
Tony Cooper - Orlando, Florida
 
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tony cooper
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      06-29-2011
On Wed, 29 Jun 2011 16:57:53 -0400, Alan Browne
<(E-Mail Removed)> wrote:

>On 2011-06-29 16:40 , tony cooper wrote:
>> On Wed, 29 Jun 2011 16:22:27 -0400, Alan Browne
>> <(E-Mail Removed)> wrote:
>>
>>>> I recently sold a 1977. If I lease them I have
>>>> to get rid of them. I currently lease a car. It would have been
>>>> cheaper to buy it, but now I know I have to replace it. OTOH, I just
>>>> bought a car I expect to own for the next ten years.
>>>
>>> Every car I buy is for 9 - 10 years.

>>
>> A guy recently gave a presentation on fireworks photography at my
>> camera club. He uses a technique where he sets the camera to bulb,
>> holds a black card over the lens, removes the card when the firework
>> blossoms, re-covers the lens, and repeats. He gets several blossoms
>> in a frame. Pretty, if you like that sort of photograph.
>>
>> When asked how long he keeps the shutter open, his reply was "Until
>> I'm done".

>
>You can go quite a while if you think about it. Since it really is
>separate exposures (in the dark, with the shutter open there is no
>exposure - not enough to worry about, anyway).
>
>So each rocket sets its own exposure in that area of the film.
>
>The way I recall it is f/8 @ ISO 100.
>
>I did it a couple times using a ball cap for a shutter and a remote to
>hold the shutter open.
>
>After getting a feel for the "scene" I would typically allow 3 "sets" of
>shots into the frame while it was open and then close the shutter and
>move on.
>
>If it's a calm evening and the smoke builds up, then you do have to
>reduce the shutter time as the smoke reflects other light sources and
>rocket exhaust which reduces the contrast somewhat.


The handout he gave after the presentation says he uses a tripod,
cable release, ISO 100, and exposure of f/8, f/11, or f/16. He
usually uses f/8. Also, manual focus is important or the auto focus
searches around too much.



--
Tony Cooper - Orlando, Florida
 
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John McWilliams
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      06-29-2011
On 6/29/11 1:30 PM, Alan Browne wrote:
> On 2011-06-28 23:15 , John McWilliams wrote:
>> On 6/28/11 PDT 7:15 PM, Alan Browne wrote:
>>>
>>> The only smart (money) way to acquire a car is to pay the most you can
>>> in down payment, to pay off the car as quickly as possible and finally
>>> to use that same car as long as economically possible.

>>
>> The "only way", huh?? You presume the choices are lease or finance. What
>> about self finance? Opportunity cost of funds lost in downpayment?

>
> The cheapest (smart money) way to buy a car is to pay for it quickly at
> the best negotiated price.


Best price- no argument.

But cheapest way? Until you grasp that there are conditions under which
and outright cash purchase (which, will you not concede, is the quickest
way to pay for it?) may not be the smartest choice for an individual not
named AB, the rest of your argument is baseless.
 
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John McWilliams
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      06-29-2011
On 6/29/11 1:53 PM, Alan Browne wrote:
> On 2011-06-29 16:40 , tony cooper wrote:
>> On Wed, 29 Jun 2011 16:22:27 -0400, Alan Browne
>> <(E-Mail Removed)> wrote:
>>
>>>> I recently sold a 1977. If I lease them I have
>>>> to get rid of them. I currently lease a car. It would have been
>>>> cheaper to buy it, but now I know I have to replace it. OTOH, I just
>>>> bought a car I expect to own for the next ten years.
>>>
>>> Every car I buy is for 9 - 10 years.

>>
>> A guy recently gave a presentation on fireworks photography at my
>> camera club. He uses a technique where he sets the camera to bulb,
>> holds a black card over the lens, removes the card when the firework
>> blossoms, re-covers the lens, and repeats. He gets several blossoms
>> in a frame. Pretty, if you like that sort of photograph.
>>
>> When asked how long he keeps the shutter open, his reply was "Until
>> I'm done".
>>
>> I feel the same way about trading cars. No set number of years, just
>> "When I'm ready".

>
> It's a way to do it. I don't like cars and I despise maintaining them.
> So I buy a reliable brand (Honda) which needs minimal maintenance over
> 10 years and ~180,000 km. After that the rust starts up (Quebec uses a
> lot of salt on the roads) and other things begin to fail.
>
> So then I buy a new one.
>
> I believe the above formula is about as stingy as I can get and have a
> reliable, always starts at -35°C car that handles well and is efficient.
>
> If I bought a 1 year old Honda and drove it for 9 years I'd avoid the
> initial steep depreciation too. I just dislike not knowing how a
> previous owner treated the car.


This makes sense. But it doesn't support your "smartest way is to always
purchase outright for cash" as a rule for everyone.

 
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John McWilliams
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      06-29-2011
On 6/29/11 2:27 PM, tony cooper wrote:
> On Wed, 29 Jun 2011 16:57:53 -0400, Alan Browne
> <(E-Mail Removed)> wrote:
>
>> On 2011-06-29 16:40 , tony cooper wrote:
>>> On Wed, 29 Jun 2011 16:22:27 -0400, Alan Browne
>>> <(E-Mail Removed)> wrote:
>>>
>>>>> I recently sold a 1977. If I lease them I have
>>>>> to get rid of them. I currently lease a car. It would have been
>>>>> cheaper to buy it, but now I know I have to replace it. OTOH, I just
>>>>> bought a car I expect to own for the next ten years.
>>>>
>>>> Every car I buy is for 9 - 10 years.
>>>
>>> A guy recently gave a presentation on fireworks photography at my
>>> camera club. He uses a technique where he sets the camera to bulb,
>>> holds a black card over the lens, removes the card when the firework
>>> blossoms, re-covers the lens, and repeats. He gets several blossoms
>>> in a frame. Pretty, if you like that sort of photograph.
>>>
>>> When asked how long he keeps the shutter open, his reply was "Until
>>> I'm done".

>>
>> You can go quite a while if you think about it. Since it really is
>> separate exposures (in the dark, with the shutter open there is no
>> exposure - not enough to worry about, anyway).
>>
>> So each rocket sets its own exposure in that area of the film.
>>
>> The way I recall it is f/8 @ ISO 100.
>>
>> I did it a couple times using a ball cap for a shutter and a remote to
>> hold the shutter open.
>>
>> After getting a feel for the "scene" I would typically allow 3 "sets" of
>> shots into the frame while it was open and then close the shutter and
>> move on.
>>
>> If it's a calm evening and the smoke builds up, then you do have to
>> reduce the shutter time as the smoke reflects other light sources and
>> rocket exhaust which reduces the contrast somewhat.

>
> The handout he gave after the presentation says he uses a tripod,
> cable release, ISO 100, and exposure of f/8, f/11, or f/16. He
> usually uses f/8. Also, manual focus is important or the auto focus
> searches around too much.


Oh, yeah, esp. the latter point. Thanks for the black card reminder-
sometimes there's more ambient light even in "pitch black" skies than we
think, and if you're holding open 30 seconds or so to catch multiple
bursts, you may have undesirable effects.

 
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John McWilliams
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Posts: n/a
 
      06-29-2011
On 6/29/11 2:32 PM, Alan Browne wrote:
> On 2011-06-29 17:27 , tony cooper wrote:
>> On Wed, 29 Jun 2011 16:57:53 -0400, Alan Browne
>> <(E-Mail Removed)> wrote:
>>
>>> On 2011-06-29 16:40 , tony cooper wrote:
>>>> On Wed, 29 Jun 2011 16:22:27 -0400, Alan Browne
>>>> <(E-Mail Removed)> wrote:
>>>>
>>>>>> I recently sold a 1977. If I lease them I have
>>>>>> to get rid of them. I currently lease a car. It would have been
>>>>>> cheaper to buy it, but now I know I have to replace it. OTOH, I just
>>>>>> bought a car I expect to own for the next ten years.
>>>>>
>>>>> Every car I buy is for 9 - 10 years.
>>>>
>>>> A guy recently gave a presentation on fireworks photography at my
>>>> camera club. He uses a technique where he sets the camera to bulb,
>>>> holds a black card over the lens, removes the card when the firework
>>>> blossoms, re-covers the lens, and repeats. He gets several blossoms
>>>> in a frame. Pretty, if you like that sort of photograph.
>>>>
>>>> When asked how long he keeps the shutter open, his reply was "Until
>>>> I'm done".
>>>
>>> You can go quite a while if you think about it. Since it really is
>>> separate exposures (in the dark, with the shutter open there is no
>>> exposure - not enough to worry about, anyway).
>>>
>>> So each rocket sets its own exposure in that area of the film.
>>>
>>> The way I recall it is f/8 @ ISO 100.
>>>
>>> I did it a couple times using a ball cap for a shutter and a remote to
>>> hold the shutter open.
>>>
>>> After getting a feel for the "scene" I would typically allow 3 "sets" of
>>> shots into the frame while it was open and then close the shutter and
>>> move on.
>>>
>>> If it's a calm evening and the smoke builds up, then you do have to
>>> reduce the shutter time as the smoke reflects other light sources and
>>> rocket exhaust which reduces the contrast somewhat.

>>
>> The handout he gave after the presentation says he uses a tripod,
>> cable release, ISO 100, and exposure of f/8, f/11, or f/16. He
>> usually uses f/8. Also, manual focus is important or the auto focus
>> searches around too much.

>
> I rarely use AF (the other night at a wedding reception I had no choice
> to use it. Dim and my eyesight ain't that sharp in dim light anymore).
>
> Here's a couple (of the very few) I've done:
>
> http://gallery.photo.net/photo/642698-lg.jpg
>
> http://gallery.photo.net/photo/642676-lg.jpg
>
> Much better if you can have a city or waterscape to shoot them with, of
> course.


But much easier with a camera........

Nice shots.

 
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Michael Benveniste
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      06-30-2011
On 6/29/2011 8:53 PM, Alan Browne wrote:

> Prove it. Give me an actual case that shows end value better in a lease
> vs. an outright purchase for a car at a given price. Don't forget all
> the T&C's and the end states.


I'm not sure what you mean by "end value," but I can give you an
example where the lease had better value at the beginning and the
end of the lease term.

In 1990, I took such a lease deal on a Nissan Maxima SE. The terms
were such that if I exercised my right to buy at a fixed price at the
end of the 48-month lease, my effective interest rate worked out to
just over 5%. At that time, the yield curve for 3-5 year U.S.
treasuries was over 8%.

The car price was around $22,000 and had been negotiated before working
out financing. The extra registration fees were $115, and I had to pay
a refundable up-front fee to Nissan of around $300. Interest on the
treasury was subject to Federal Tax, so effectively the lease + end
purchase was just a little bit better.

However, that doesn't count the value of the put option that's inherent
in such an arrangement. As it turned out, I was involved in a major
accident with the that car. The other driver was 100% at fault, but
there was about $6000 of damage to the Maxima including frame repair.
While it was repaired (and I believe it was repaired well,) that made
it worth less than the residual value. So at the end of the lease, I
exercised my option, returned the car to Nissan, and ended up buying
a new Mazda.

As usual with finance, it works out to an exercise in numbers and
risk. While a business calculator makes doing present value
calculations a breeze, pricing the implied option still requires some
work and skill. And realistically, the 1+ hour I spent running numbers
and negotiating with the business manager is time I'll never get back.
If you're not willing to invest that effort, I suggest you don't even
consider a lease for a personal vehicle.

--
Mike Benveniste -- (Clarification Required)
Its name is Public opinion. It is held in reverence. It settles
everything. Some think it is the voice of God. -- Mark Twain
 
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PeterN
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      06-30-2011
On 6/29/2011 8:53 PM, Alan Browne wrote:
> On 2011-06-29 18:33 , John McWilliams wrote:
>> On 6/29/11 1:30 PM, Alan Browne wrote:
>>> On 2011-06-28 23:15 , John McWilliams wrote:
>>>> On 6/28/11 PDT 7:15 PM, Alan Browne wrote:
>>>>>
>>>>> The only smart (money) way to acquire a car is to pay the most you can
>>>>> in down payment, to pay off the car as quickly as possible and finally
>>>>> to use that same car as long as economically possible.
>>>>
>>>> The "only way", huh?? You presume the choices are lease or finance.
>>>> What
>>>> about self finance? Opportunity cost of funds lost in downpayment?
>>>
>>> The cheapest (smart money) way to buy a car is to pay for it quickly at
>>> the best negotiated price.

>>
>> Best price- no argument.
>>
>> But cheapest way? Until you grasp that there are conditions under which
>> and outright cash purchase (which, will you not concede, is the quickest
>> way to pay for it?) may not be the smartest choice for an individual not
>> named AB, the rest of your argument is baseless.

>
> Prove it. Give me an actual case that shows end value better in a lease
> vs. an outright purchase for a car at a given price. Don't forget all
> the T&C's and the end states.
>


I gave you an example.
Yes, zero interest is not common. discounts for leasing are not common.
Here are the actual numbers
Negotiated cash price 32,225

Monthly lease payments (36 @298 )
Buy back 17,550

You do the rest of the math. Leasing was a no brainer



--
Peter
 
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John McWilliams
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      06-30-2011
On 6/30/11 PDT 6:00 AM, PeterN wrote:
> On 6/29/2011 8:53 PM, Alan Browne wrote:
>> On 2011-06-29 18:33 , John McWilliams wrote:
>>> On 6/29/11 1:30 PM, Alan Browne wrote:
>>>> On 2011-06-28 23:15 , John McWilliams wrote:
>>>>> On 6/28/11 PDT 7:15 PM, Alan Browne wrote:
>>>>>>
>>>>>> The only smart (money) way to acquire a car is to pay the most you
>>>>>> can
>>>>>> in down payment, to pay off the car as quickly as possible and
>>>>>> finally
>>>>>> to use that same car as long as economically possible.
>>>>>
>>>>> The "only way", huh?? You presume the choices are lease or finance.
>>>>> What
>>>>> about self finance? Opportunity cost of funds lost in downpayment?
>>>>
>>>> The cheapest (smart money) way to buy a car is to pay for it quickly at
>>>> the best negotiated price.
>>>
>>> Best price- no argument.
>>>
>>> But cheapest way? Until you grasp that there are conditions under which
>>> and outright cash purchase (which, will you not concede, is the quickest
>>> way to pay for it?) may not be the smartest choice for an individual not
>>> named AB, the rest of your argument is baseless.

>>
>> Prove it. Give me an actual case that shows end value better in a lease
>> vs. an outright purchase for a car at a given price. Don't forget all
>> the T&C's and the end states.
>>

>
> I gave you an example.
> Yes, zero interest is not common. discounts for leasing are not common.
> Here are the actual numbers
> Negotiated cash price 32,225
>
> Monthly lease payments (36 @298 )
> Buy back 17,550
>
> You do the rest of the math. Leasing was a no brainer


I've pretty much given up. Alan seems to think that all leases have
higher buy-ins at e.o.l than market value. If I were to provide a
specific example, Alan would apply just his own time value of money to
it. as well as the assumption that the car would be kept an addtional
4-6 years.



 
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Michael Benveniste
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      06-30-2011
On 6/30/2011 5:14 PM, Alan Browne wrote:

> I didn't say end value, but end "state". To compare you have to bring
> both cases to a close if not equal end state.


Read your own post. The phrase "end value" clearly appears. I'm
used to people misquoting others, but you're misquoting yourself.

> In the end you bailed on the car because it was damaged goods and you
> had a perception of lower value. That was accidental serendipity.


No, it was a real and foreseeable risk. In effect, Nissan Motor
Acceptance Corporation was insuring me against that risk by granting
me the option at the end of the lease.

Note that I would have been slightly better off even without the
accident. And it wasn't just _my_ perception of lower value, it's the
market's as well. Major accidents show up in histories such as those
sold by CarFax.

> I'd bet the vast majority of people who lease personal vehicles do it
> because they do not have much (or any) cash to put down but are willing
> to pay a fixed amount every month. They do not make a financial analysis
> of any deep kind.


Their loss. It ain't exactly deep -- you plug the following into your
business calculator or spreadsheet.

-- The price of the car plus the additional fees you're paying.
-- The lease amount.
-- The end price you'll have to pay.
-- The term of the lease.

You then set the annuity flag and let the calculator or spreadsheet
compute the effective interest rate of the lease. If it's less than
your effective finance rate (self-financed or not), the lease is a
better deal. It was in my case.

If it's close, you have to decide if the option to return the
car is worth the difference. If it's not close, and it often isn't,
you don't lease.

> If one leases a car for 3 years for $400 per month and returns it, he
> has paid $14.4K and has nothing. And if he decides to buy it he pays a
> premium over the used value at that point.


Wrong. He's had use of the car for three years at a lower cost and
at less risk than if he had bought it.

> Leasing cars is a rubes game.


No, not understanding basic finance makes one a rube.

--
Mike Benveniste -- (Clarification Required)
Its name is Public opinion. It is held in reverence. It settles
everything. Some think it is the voice of God. -- Mark Twain
 
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