Do you ever have business ideas that you think could be the next big thing? My friend and I often have extra cash sitting on the side for the next business opportunity. Many times we’ll chat back and forth throughout the month and critique our new ideas. Most of the time, we realize that there is a massive hole in our plan and we’ll just forget about the whole thing, but lately we’ve discovered what we think might be a great idea. In the next few months, we might just start a new business.
The Current Lease Business
Currently, people really have three main options to purchase cars. They can either buy a car with cash (which is getting less popular by the day), with a loan, or with a lease. With a car purchase, whether it’s with cash or with payments, the buyer is obviously hoping to own the vehicle free and clear at some point in time. What’s becoming more popular these days is the car lease. The buyers know that they will never own the car, but the lease offers them lower payments for a really nice car that they can show off to their coworkers and friends.
With a car lease, you have to put money down, and then make monthly payments (often for a flat two years). If your car breaks down and is not covered by the manufacturers warranty, it is up to you to pay for it. Another main stipulation involves the miles driven on the car. The standard miles allowed is 12,000 per year. If you go over this mileage restriction, then you owe the leasing dealership extra money for each mile you went over.
If you remain within the restrictions, leasing is an inexpensive way (seemingly anyway) to drive around an incredibly sweet car, but what if you could do it for much cheaper? Here’s where my idea comes in.
The Used Car Lease
The 2013 Nissan Maxima costs $31,000 brand new from the dealership right now. With a $3,000 down-payment, your lease payment will be $650 a month. That’s pretty steep! Now what if you were interested in the 2010 model instead? It basically looks exactly the same as the 2013, but that lease payment could be much more reasonable. With that same $3,000 down-payment, your monthly payment could be reduced down to $400 a month. This way you could still drive in style, but at a much lower rate! What do you think about that?
The New Business
I have been urging people to buy vehicles with cash for the last three years, but there are many that just prefer to lease their cars because they can drive around in a nice ride and they can get a tax break on the payments. Since there are more and more of these people interested in leases, but can’t necessarily afford the brand new cars, I think it might be time for me to offer a used car option like I explained above.
On my end, instead of paying $31,000 for the brand new car to offer as a lease, I can find this car right now at below KBB rates for $11,000. I would then find an interested party to put the $3,000 down-payment on the car and make the $400 payment each month. After the 24 month lease term, I will have collected the initial $3k along with the additional $9,600 in lease payments, totaling $12,600. That’s $1,600 more than I even paid for the car, and it still has a value of $7,000 after those two years! That puts me $8,600 ahead on one vehile over the span of 2 years. It certainly won’t allow me to quit my job by leasing out one car at a time, but what if I could work my way up to 100? That’s a potential $860,000 over two years. I think I could survive on that.
What do you think of this idea? Do you think it’s a good one?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.