Sell a lease or sell my car after ED?

[Greg220]

I'd like to ask for advice people who usually do lease + ED. Currently I have 2006 330i with options I like. I got it in late 2005 through ED and paid cash. Now I would like to do another ED and lease a new car, mainly to have transportation in Europe during a 2-3 month travel.

So, I have the following dillemas:

1. After I come back, should I sell my own car or sell the lease?

2. If the answer for 1 is "sell the lease", is there any hope of getting some down-payment from the buyer (since he takes over very low lease payments)?

3. If the answer for 1 is "sell the lease", then is it better to load the car with options or get bare bones? Also, would it be easier to sell a lease of 328i or 335i?

Basically, my own car is still pretty new and I'm very happy with it. I'm quite sure I will do another ED in 2009 and perhaps then it would make more sense to sell my own car and keep the leased one.

Comments greatly appreciated :)

[dk]

Why not just rent a BMW and save yourself a lot of hassle, cost, loan on your credit, etc??

[chrischeung]

You aren't allowed by BMWFS to transfer a lease in the first or last 6 months of the lease.

[Greg220]

That's a good point but actually if I do 3 month ED then by the time the car is re-delivered it will be 5.5 months leased (signed 2 weeks before ED and redelivered 8 weeks after ED). So, I would be only 2 weeks short which gives just enough time to find someone interested in inheriting the lease.

As for leasing versus renting a car, I thought with a lease I would spend less money because of the ED discount (and Lufthansa 2-4-1).

My questions are basically just for this single occurence. Once my own car is 4-5 years old, I will move into leasing.

[kyfdx]

That's a good point but actually if I do 3 month ED then by the time the car is re-delivered it will be 5.5 months leased (signed 2 weeks before ED and redelivered 8 weeks after ED). So, I would be only 2 weeks short which gives just enough time to find someone interested in inheriting the lease.

As for leasing versus renting a car, I thought with a lease I would spend less money because of the ED discount (and Lufthansa 2-4-1).

My questions are basically just for this single occurence. Once my own car is 4-5 years old, I will move into leasing.


The key? Don't put any money down on the lease.. If you do a really good job of negotiating, you may have a decent lease payment with only the minumum amount upfront... Then after the 6-month period, you can put it on Swapalease.

Figure 30-45 days to get a lease assumption done, though..

Seems like renting might be cheaper... by the time you make six payments.. with no guarantee that someone else will assume your lease.

[mason]

Are you saying you are not committed to whether keeping your car or getting rid of your car? I really like to learn (if there is a financial gain) if you do an ED via lease and kick the lease once the car return.

[Greg220]

I'm leaning towards selling my own car because that would unlock a pile of cash that I can use or simply put in a saving account and earn 5% interest.

I think I need to run some numbers and compare how much I will lose in depreciation of my car versus total of lease payments offset with interest from ~34k

[Greg220]

To estimate depreciation of a 2006 model in the next two years, I compared current values of 2006 and 2004 cars with roughly same options as mine (E46 doesn't have all of them):

KBB
2006: 36600-38600 (depending on condition)
2004: 27800-29400 (depending on condition, E46)

Edmunds
2006: 35000
2004: 28000 (E46)

Based on current lease residuals the result is:
Now: 35000 (estimated, because there is no 1 year lease)
In two years: 27500 (residual 61***37; of MSRP after 3 years of lease)

All the above sources predict roughly 8k depreciation in the next 2 years of my 2006 330i.

On the other hand, the total cost of leasing a new car is $9500-$500 (CCA rebate)-$3000 (interest on the unlocked cash offset by monthly payments) = $6000.

If my calculation is right, then the lease wins by $2k and I'm just comparing owning a used car with leasing a new car. The difference would be much larger if I compared buying a new car versus leasing a new car.

Please, correct me if I'm wrong in the calculations :)

Edit: I didn't account for the time overlap of having two cars while doing ED with leased one and having another one in the US (5 months).

[jl5555]

[QUOTE=Greg220;2219323].... Now I would like to do another ED and lease a new car, mainly to have transportation in Europe during a 2-3 month travel.[QUOTE]

I really like the way you think and the whole concept of this "pseudo" BMW ED short term lease. I think that you can do very well economically with the strategy you propose. I have financed all my ED's but have been considering moving to the lease side. With ED savings you have the possibility of passing along some extraordinary savings to someone else relatively hassle free (ie: no worries selling the car.)

Here's my thinking on the concept:

The economics of ED on a lease boil down to two things: residual and rate. So for you to be able to entice someone to take over your lease I think you should concentrate on high residual/low money factor cars. For the month of March that would be the 328 sedan with 71% 24 month residual and .00125 MF buy rate.

I think you need to pick a 15K lease residual even if you won't use it. Makes the car more marketable. Depending on how many miles you do in Europe during your 2-3 months you could approximate a 15k lease while only paying for a 12k lease and save 2% more only paying for 10% of the car.

ED provides about 17% savings off the MSRP which residual is based on. (10% MSRP to invoice and 7% ED savings.) With a 71% residual you're effectively paying for 12% of the car. For a nicely equipped 328 sedan at $35,000 (including all acquisition costs) that approximates $4,200 or $175 a month. The monthly finance rate is .25% so $87.50. I think that if you can throw a 6-month-old BMW 328 onto Swaplease at ~$250 per month ($~200 if you do 12k lease) you should have plenty of takers.

I don't know how to consider the security deposit reduction or if that can be transferred. I don't know how you would explain that to a prospective buyer??? But if you did do the max security deposits you save almost .0005 in MF which translates into about $50 savings on monthly finance cost.

Considering your situation of needing a car for 2-3 months I think it makes a lot of sense. Looking at the AutoEurope site which quote short term buyback leases for Peugeot cars a 2 1/2 month lease all inclusive starts at $2,100. That is for the cheapest car available; 206 Trendy Gas 1.4L (75 HP). Nothing even close to a nice BMW 5 series.

So even in the situation where you end up paying 6 months of lease payments at $300 per month including lease acquisition costs you're ahead economically on even the cheapest car available. Cars more comparable to a BMW cost over $3,000 for that time period.

Getting a new lease car allows you to take advantage of the BMWCCA reward program as well to offset the markup to the dealer. (I'm going to guess you could get a 328 sedan for around $500 over invoice.)

As to your situation of keeping the new lease car or selling the old that is entirely up to you. The economics are a bit more complicated in that situation. I think you're mostly dealing with sunk costs on your 330i which makes the argument for trading up to the 328i. But the economics involved of short term lease vs. BMW ED psuedo lease are certainly in your favor.

[jl5555]

On the other hand, the total cost of leasing a new car is $9500-$500 (CCA rebate)-$3000 (interest on the unlocked cash offset by monthly payments) = $6000.

Edit: I didn't account for the time overlap of having two cars while doing ED with leased one and having another one in the US (5 months).

I think those two issues say it all in terms of selling your current car or not. The answer would be: yes.

[bimmer12safrad]

There was a Thread here about "Occupation" but I missed the posts from the many Lease and Financial Analyst. Good to know that I can come here for free Finance consultation, however costly it will be.

[Greg220]

ED provides about 17% savings off the MSRP which residual is based on. (10% MSRP to invoice and 7% ED savings.) With a 71% residual you're effectively paying for 12% of the car. For a nicely equipped 328 sedan at $35,000 (including all acquisition costs) that approximates $4,200 or $175 a month. The monthly finance rate is .25% so $87.50. I think that if you can throw a 6-month-old BMW 328 onto Swaplease at ~$250 per month ($~200 if you do 12k lease) you should have plenty of takers.


Thank you for the answer. However, my calculations show around $300/mo lease payments on 328i ($7600 total cost of lease). That's just with a few options added, 10k miles/year and 7 MSDs. I'm using the Excel calculator posted on this forum.

[mason]

You shouldn't throw out the interest amount. It is cost of money. It is also useful to calcualte Present Value and Future Value so that you can truly compare apple to apple.

What is your US MSRP for the 328i? $300 a month seems a little low.

To jl555: The rate is not 0.25%. The monthly interest applied to your monthly payment is (Cap Cost + Residual) X MF.

[Greg220]

What is your US MSRP for the 328i? $300 a month seems a little low.

I don't have the Excel spreadsheet with me now but the low monthly payment is mostly because of 74% residual (10k miles/yr), 0.00125 MF and ED discount.

If I decide to keep the leased car I would anyway go for 335i with more options (despite higher MF).