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Victon
12-23-2011, 01:58 PM
Hello, I became a member of MB and F10 clubs several weeks ago. In the beginning of this week I ordered BMW 550iX GT. Here is the configuration: code 111 ***8211; Order accepted at AG:

Imperial Blue
Everest Gray
Ash grain wood trim
Black all-weather BMW floor mats (front, rear and luggage compartment) - free
Convenience Pkg (power tailgate, soft closing doors, etc)
Cold Weather (heated wheel, front and rear seats)
Driver Assistance Pkg (Lane departure, blind spot, head-up display, etc)
Dynamic Handling Pkg (Damper, ARS, adaptive drive - have to find more about the latter)
MSport
Value Pkg (premium hi-fi and satellite radio) - included by default, no charge
19" RFT insurance for life (not mine, vehicle's) - free
Ski bag

This is ordered for a 36-month lease, 12,000 miles, $966 a month, 62% residual, $5,430 upfront payment (includes taxes and first month payment) of which $2500 paid as a deposit.

I may decide to buy this vehicle for $77,746 total cash price - "out the door", includes NY taxes, motor vehicle and documentation fees. Its MSRP is $82,375.

Question: what will be your advice ***8211; to lease or buy?

Mikez38
12-23-2011, 02:23 PM
Welcome to the club.
If you plan to keep the car for 5 or more years, I would consider a purchase. I have done that a number of times then usually get entranced by newer models and end up selling. My new plan is strictly leasing. Three years and out. I also get bored by a car after 3 years and need a change for that reason, the one exception being my 2003 911.

Capobranco
12-23-2011, 02:40 PM
Welcome to the club.
If you plan to keep the car for 5 or more years, I would consider a purchase. I have done that a number of times then usually get entranced by newer models and end up selling. My new plan is strictly leasing. Three years and out. I also get bored by a car after 3 years and need a change for that reason, the one exception being my 2003 911.

+1

- total agreement + leasing limits your downside.

geobrick
12-23-2011, 02:44 PM
+1

- total agreement + leasing limits your downside.

What are the downsides? Poor resale?

Capobranco
12-23-2011, 03:02 PM
What are the downsides? Poor resale?

I recently sold my GT and did well but the future is unknown. BMWs depreciate - I think the smart play is to limit the downside - at the end of a 3 year lease, you can still purchase the car if you so desire.

Victon
12-24-2011, 06:22 AM
I think the smart play is to limit the downside - at the end of a 3 year lease, you can still purchase the car if you so desire.

Bad option. You buy a 3-year old vehicle with intrest already eaten by yourself.

bdman
12-24-2011, 08:03 AM
Actually buying at the end of a lease is a great deal. Often you get better interest rates when you lease and at the end of lease you can pay fair market for the vehicle. I purchased 2 cars at end of lease and flipped them for a profit. Also if you can pay the buyout amount entirely you save on interest too. Who in their right mind would want to be paying almost $1k a month for a 4 year old car (on a 5 year financing deal) ? In addition I own a business and the lease allows me to write off a large portion of the payment instead of just the interest (as is the case if you finance).

Victon
12-24-2011, 08:47 AM
Actually buying at the end of a lease is a great deal. Often you get better interest rates when you lease

How can you pay better intrest rates when you lease? To tell the dealer that you are going to buy at the end of deal? and at the end of lease you can pay fair market

It's not fair market, I am afraid, - you forget that your monthly payment is already "inflated" with/by interest because you lease is a loan from the bank. You are already payming more than simply paying without any interst, no crediting.

for the vehicle.

I purchased 2 cars at end of lease and flipped them for a profit.

What does it mean?

Also if you can pay the buyout amount entirely you save on interest too. Who in their right mind would want to be paying almost $1k a month for a 4 year old car (on a 5 year financing deal) ?

Why a 4 year old car?


In addition I own a business and the lease allows me to write off a large portion of the payment instead of just the interest (as is the case if you finance).

Both do not apply in my case as I do not pay income taxes.

Please see above.

bdman
12-24-2011, 10:50 AM
First off BMW subsidizes all leases with outrageous residual rates at times. I lease at the end of the year and am flexible when it comes to which model and what model year.

For instance my last car was a 2008 E93 M3 loaded, car was $89k I paid $890/month with no money down because when I leased it in December 2008 the credit crisis caused the whole auto industry to offer great rates coupled with the fact that it was a leftover 2008 model. You can get good deals on financing a vehicle too but in general BMW leases are the best deals.

So while the "interest" rate may be the same to finance as it is to lease you get high residuals that lower the total cost of the lease since BMW can and does artificially inflate the value of the vehicle at the end of a 3 year lease.

In 1999 I leased my first BMW based on an ad in the NY Times at the end of the year that offered $399/month leases. I leased a pretty loaded 2000 328ci for $409/month for 3 years with 0 down. The car MSRP was around $40k, the buyout at end of lease was about $23k (can't remember exactly) but I managed on negotiating a fair market price of $19k since the 330 came out to replace the 328 and as such lowered the value of the 328 at Manheim (Dealer auction). My old college roommate then purchased the vehicle from me for $21k, saving him $2k and making me $2k (I did have to pay taxes on that though and other small fees). That allowed me to get into my 2003 E46 M3 convertible w/hardtop and have extra money to put on the lease to help cover taxes on the M3 lease.

Lets take the instance of a $100k car that you lease for 3 years for $1000/month (not realistic but just to give you round numbers). At the end of 36 months you will have paid $36k of the $100k leaving you with a buyout of $64k at end of lease. Lets say the vehicle is selling for considerably less at auction because they changed the body style during your lease and you negotiate a fair market value of $59k. You've now saved $5k! You can finance the $59k at that time and potentially get a better interest rate, or buy it outright if you have the cash.

That same car to purchase under the same scenario with no money down, etc... would cost you $1667/month, and you'll still be paying that amount in year 4 and year 5. Do you have $667/month extra to pay for 5 years? Would you want to be driving a 4-5 year out of warranty old body style car that's probably been beaten up (if you live in NYC like I do) ? Can you afford out of warranty repairs while paying $1667/month? Can you afford tires, bumper scrapes, dings, dents, etc...? Obviously you could buy the extended warranty, but that will only increase the amount you're paying for an old car.

Lets say a taxi hits your car (has happened to me in my 03 M3 and my sister 2 months ago in her 2010 328xi coupe) there is something called "diminished value" that will lower the value of your vehicle upon resale. So now you're paying $1667/month for 5 years on a vehicle that because of diminished value from your accident is worth less.

Every car I've owned was damaged in some small way and I paid out of pocket to fix them (I have a $1k deductible so it makes sense to cover any small repair costs), yet at the end of my leases I've never paid wear and tear or for diminished value. As a matter of fact I've gotten $500 back from BMW for turning in my car with far less mileage than the lease allowed (only applicable on high mileage leases).

Even if you don't pay income taxes now (someday soon you will be paying them) leasing a BMW is a better deal than financing one. I've leased 5 vehicles since 1999 and have plenty of experiences dealing with the issues of leasing vs financing.

Oh and BTW when you lease you are financing the cost of the vehicle for the time you are driving it. So the amount of interest paid on $36k (the amount due for the lease over 3 years) is significantly less than interest on $100k (the amount due when financing over 5 years). If you paid 10% interest (not realistic given low interest rates but I use this number to make it easy to calculate) on $36k for 3 years you'd be paying $3600 which when divided by 3 is $1200/year, that same 10% interest on $100k is $10,000 over 5 years so you'll be averaging $2k/year in interest charges.

I'm sure others here may dispute my math as there are plenty of other fees and numbers that need to be considered but all of these numbers are just meant to simply demonstrate the pluses of leasing vs financing. And if someday you do own a business then you will reap the benefits of paying Federal, State and City taxes like the rest of us in NYC and leasing will make more sense for you ;)

bdman
12-24-2011, 10:55 AM
Oh an BTW the better interest rates you get on leasing vs financing are due to the fact that you will be financing less money. If you don't have perfect credit (as I am lucky to say I do have, knocking on wood) then what kind of rate would you get on financing $100k vs $36k in the scenario I described in my previous post? It is far riskier to loan someone $100k than $36k, and this can also adversely affect your credit rating. If I was trying to buy a house and had a $100k loan from the bank I would not look as good from a credit standpoint as if I had a $36k loan.

Victon
12-24-2011, 11:10 AM
First off BMW subsidizes all leases with outrageous residual rates at times. I lease at the end of the year and am flexible when it comes to which model and what model year.

For instance my last car was a 2008 E93 M3 loaded, car was $89k I paid $890/month with no money down because when I leased it in December 2008 the credit crisis caused the whole auto industry to offer great rates coupled with the fact that it was a leftover 2008 model. You can get good deals on financing a vehicle too but in general BMW leases are the best deals.

So while the "interest" rate may be the same to finance as it is to lease you get high residuals that lower the total cost of the lease since BMW can and does artificially inflate the value of the vehicle at the end of a 3 year lease.

In 1999 I leased my first BMW based on an ad in the NY Times at the end of the year that offered $399/month leases. I leased a pretty loaded 2000 328ci for $409/month for 3 years with 0 down. The car MSRP was around $40k, the buyout at end of lease was about $23k (can't remember exactly) but I managed on negotiating a fair market price of $19k since the 330 came out to replace the 328 and as such lowered the value of the 328 at Manheim (Dealer auction). My old college roommate then purchased the vehicle from me for $21k, saving him $2k and making me $2k (I did have to pay taxes on that though and other small fees). That allowed me to get into my 2003 E46 M3 convertible w/hardtop and have extra money to put on the lease to help cover taxes on the M3 lease.

Lets take the instance of a $100k car that you lease for 3 years for $1000/month (not realistic but just to give you round numbers). At the end of 36 months you will have paid $36k of the $100k leaving you with a buyout of $64k at end of lease. Lets say the vehicle is selling for considerably less at auction because they changed the body style during your lease and you negotiate a fair market value of $59k. You've now saved $5k! You can finance the $59k at that time and potentially get a better interest rate, or buy it outright if you have the cash.

That same car to purchase under the same scenario with no money down, etc... would cost you $1667/month, and you'll still be paying that amount in year 4 and year 5. Do you have $667/month extra to pay for 5 years? Would you want to be driving a 4-5 year out of warranty old body style car that's probably been beaten up (if you live in NYC like I do) ? Can you afford out of warranty repairs while paying $1667/month? Can you afford tires, bumper scrapes, dings, dents, etc...? Obviously you could buy the extended warranty, but that will only increase the amount you're paying for an old car.

Lets say a taxi hits your car (has happened to me in my 03 M3 and my sister 2 months ago in her 2010 328xi coupe) there is something called "diminished value" that will lower the value of your vehicle upon resale. So now you're paying $1667/month for 5 years on a vehicle that because of diminished value from your accident is worth less.

Every car I've owned was damaged in some small way and I paid out of pocket to fix them (I have a $1k deductible so it makes sense to cover any small repair costs), yet at the end of my leases I've never paid wear and tear or for diminished value. As a matter of fact I've gotten $500 back from BMW for turning in my car with far less mileage than the lease allowed (only applicable on high mileage leases).

Even if you don't pay income taxes now (someday soon you will be paying them) leasing a BMW is a better deal than financing one. I've leased 5 vehicles since 1999 and have plenty of experiences dealing with the issues of leasing vs financing.

Oh and BTW when you lease you are financing the cost of the vehicle for the time you are driving it. So the amount of interest paid on $36k (the amount due for the lease over 3 years) is significantly less than interest on $100k (the amount due when financing over 5 years). If you paid 10% interest (not realistic given low interest rates but I use this number to make it easy to calculate) on $36k for 3 years you'd be paying $3600 which when divided by 3 is $1200/year, that same 10% interest on $100k is $10,000 over 5 years so you'll be averaging $2k/year in interest charges.

I'm sure others here may dispute my math as there are plenty of other fees and numbers that need to be considered but all of these numbers are just meant to simply demonstrate the pluses of leasing vs financing. And if someday you do own a business then you will reap the benefits of paying Federal, State and City taxes like the rest of us in NYC and leasing will make more sense for you ;)

It will take me some time to go through your calculations for which I am thankful: but (1) I do not intend to "finance", just buy outright - it's my money and (2) I will never own any business because of my status and will not pay taxes - it's your privilege. ;) (through probably one day, if I decide to become a green card or American) :dunno:

bdman
12-24-2011, 11:29 AM
Actually buying outright is even worse. While you can sell it if you need the cash you lose money driving it off the dealer's lot. I'd lease with no money down and put the rest of the cash into some kind of investment that guarantees a return, and you can still purchase it at the end of the lease for cash. As far as interest paid on the lease it will probably be less than the money you'd lose the moment you drive off the lot if you bought the car outright. Plus you can negotiate fair market value when buying at the end of the lease and potentially recoup the interest charges from the lease term.

chuck92116
12-24-2011, 11:44 AM
Buying or leasing any luxury car is excessive. Arguing over a few grand one way or the other is pointless.

There is no wrong answer in terms of financing or leasing. It comes down to your financial situation, preference, and lifestyle. There is no free lunch. We all pay dearly to drive these cars and no one is up on another because they chose a different route.

bdman
12-24-2011, 12:11 PM
The OP is asking for advice regarding what is better to lease or buy a BMW. Having gone back and forth on this question for 12 years with BMW I am only offering my perspective. Every car I've leased I could have bought outright with cash. Luckily I have 3 CPAs in my family and every one of them recommended holding on to the cash. You lease a BMW and buy a Honda, at least that was always what I was advised. Also I was taught to always hold on to money as long as you can. I am old school and do approve of buying things outright, however financially it is not the most prudent way to go. And when dealing with driving a BMW the best deals are always leases.

Victon
12-24-2011, 09:56 PM
Actually buying outright is even worse. While you can sell it if you need the cash you lose money driving it off the dealer's lot. I'd lease with no money down and put the rest of the cash into some kind of investment that guarantees a return, and you can still purchase it at the end of the lease for cash.

I understand financing when you don't have money to buy. It makes sense and helps. But it is counterproductive to avoid cash payment outright for the sake of investing this cash into smth "that guarantees return" (and take risk of loosing the investment!) and then compensate for the intrest paid to the bank for the car. Weird.. Sorry, I am not American capitalist ... probably need to learn about the financial system that nearly crashed here a couple of years ago ...

bdman
12-25-2011, 01:31 AM
Well I'm sure you'll learn soon enough since the EU is doing do well, can't entirely blame us Americans for that can you? Oh and btw rolling your money into CDs is the general method for "safe" investing. I guess since you're on a BMW board asking for financial advice then you must not know about CDs, here's a little excerpt from Wikipedia:

CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are "money in the bank". CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions. They are different from savings accounts in that the CD has a specific, fixed term (often monthly, three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.
In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand, although this may not be the case in an inverted yield curve situation. Fixed rates are common, but some institutions offer CDs with various forms of variable rates. For example, in mid-2004, interest rates were expected to rise, many banks and credit unions began to offer CDs with a "bump-up" feature. These allow for a single readjustment of the interest rate, at a time of the consumer's choosing, during the term of the CD. Sometimes, CDs that are indexed to the stock market, the bond market, or other indices are introduced.

kashrahman
12-25-2011, 12:00 PM
in general you will have a lower monthly payment with leasing, and it's easier to switch cars every few years.
but, if you drive lots of miles or plan on keeping your car for longer, it may make sense to buy.
i've done both --- we put 20K+ miles/yr on the wife's car (so we buy), mine typically gets 10K/yr so sometimes I lease.
financing usually through bmw which usually offers 1 or 2% interest.
for us, either way seems to work out equally well.

Victon
12-26-2011, 07:07 PM
Well I'm sure you'll learn soon enough since the EU is doing do well, can't entirely blame us Americans for that can you? Oh and btw rolling your money into CDs is the general method for "safe" investing. I guess since you're on a BMW board asking for financial advice then you must not know about CDs, here's a little excerpt from Wikipedia:

CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are "money in the bank". CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions. They are different from savings accounts in that the CD has a specific, fixed term (often monthly, three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.
In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand, although this may not be the case in an inverted yield curve situation. Fixed rates are common, but some institutions offer CDs with various forms of variable rates. For example, in mid-2004, interest rates were expected to rise, many banks and credit unions began to offer CDs with a "bump-up" feature. These allow for a single readjustment of the interest rate, at a time of the consumer's choosing, during the term of the CD. Sometimes, CDs that are indexed to the stock market, the bond market, or other indices are introduced.

Check the rates on CDs, please... It's better to keep money under the pillow..

The BoatMan
12-27-2011, 07:09 PM
Why would you pay 80k upfront with finance rates as low as they are?

There are safe investment vehicles (no pun intended) to place that money. If you are so eager to give it away for free...give it to me and I will make your monthly payments for you while earning a tidy return in the process.

bdman
12-27-2011, 07:16 PM
I wouldn't waste your time responding. The OP asks for advice and then chooses to criticize any intelligent responses.

wchewbaka
12-27-2011, 09:40 PM
Regardless of argumentative nature of the thread I have appreciated hearing the leasing perspective. Learned a lot from the discussion.

My perspective is from someone who buys a car and keeps it a long time. With 0.9% financing it makes no sense to pay cash. It makes more sense to take the free money, leave your own funds in a bottomed out stock market and wait for the fluctuations in returns to be high enough to pay off the loan with profits.... You can do it anytime within the term of the loan.

I believe it is a safe gamble, particularly in the face of very low CD and other fixed rates.

But the leasing argument is quite persuasive if you turn cars over...

jadnashuanh
12-28-2011, 01:39 PM
There have been some discussions about how BMW's loans work if you pay them off early...as with anything, read the fine print, then decide, it may work out, it may not.

There's something to be said about not having a bill at the end of the day, so for some, that comfort factor that it's already paid for helps them sleep at night. Now, whether that is the most prudent thing to do or not, is a totally different scenario.

Victon
12-29-2011, 10:36 AM
I wouldn't waste your time responding. The OP asks for advice and then chooses to criticize any intelligent responses.

I am not criticising ... just responding that advices do not seem practical to me ...