11-27-2012, 07:39 AM
BMW Platinum Visa® Member
Join Date: Nov 2009
Mein Auto: BMW L328i
Right, but the $50,000 "invested" depreciates to $3,000 at the end of 10 years (assuming 150K miles, current KBB value for a 2002 3 Series).
Originally Posted by dunderhi
Okay, if $539/mo is your all-in cost, then subract the total of taxes and tags (the $9,400 additional lease costs, the $500 sec deposit doesn't count since it is returned - in theory) and the delta drops to $10,200. If your payments are $549 and not the $539 I used, the delta climbs to $11,400.
There are no payments on any note since the purchaser bought the car out right, but the purchaser still has $539/mo that he doesn't need to pay on his car, so he invests the money. The total investments of $539/mo times 120 months is $64,680.
The cash is the net amount of money that was invested plus interest and the trade-in value. It may only seem the the lessee is penniless at the end of the day, but remember he invested $50k one day one.
Not sure why you think that the buyer has an incremental $50,000 laying around for investments and that the leaser doesn't. Not sure why you think that that investment income should count as a benefit to the cash buyer and not the leaser, especially when it's the buyer who has purchased a depreciating asset, not the leaser. Remove that from your calculations as it's not apples to apples as you know.
At the end of 10 years:
The buyer is out of pocket $50,000 for the car + 4,500 for repairs or $54,500. He sells the car for $3,000. He's spent $51,500 and has no car.
The leaser is out of pocket $64,680 and has no car. But he rolled that $50,000 cash into different investments instead of giving it to BMW. He made $10,000 in assorted profit from that decade of investments, bringing his out of pocket down to $54,680.
The delta between the buyer and the leaser is $3,180 or $318 a year or $26 a month.
So had the buyer chosen a lease-and-invest path with that $50,000 he'd spend $26 more a month for the ability to be in 4 brand new 3 Series in the same 10 year period he was driving a 10 year old car.
Double that number, triple it if you want, the reality is that there isn't this mammoth variance between buying-and-keeping vs. leasing-new-cars. If we were in a Kia forum I could understand the $25-$75 a month being a real hardship and this being a difficult concept to digest. But we're in a BMW forum discussing $50,000 cars and for someone with a typical $549 monthly payment, having it drop to $525 or $499 isn't going to make their lives incrementally better.
Most people also don't have $50,000 cash to drop down, either. So they'd deal with the hardship of an $850 payment for 5 years to then have $0 payment for the last 5 years. That first 5 years hurts.
There's a reason that over 60% of all BMW's are leased. Because if you ask the average buyer whether he'd rather pay $499 a month and drive the same car for 10 long years -or- pay $539 a month and drive a brand new car every 36 months during those 10 years, they'd pay a bit more for that privilege.
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