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Doesn't Anyone Buy Anymore?

187K views 3K replies 227 participants last post by  alex2364 
#1 ·
I became a member of Bimmerfest a little while ago - I'll probably wind up buying a 328 with European Delivery (just waiting to test drive and see the car in person). But the point I want to make is that it seems as though more people lease this car rather than buy. I realize there are business reasons to lease (tax write-off) and that those that don't keep their car longer than three/four years that leasing might be the way to go. However, I plan to keep the car at least six/eight years - as a long-time car buyer I have always done this on the basis that a car depreciates immensely the first few years and then slows down - meaning that once you get past year three the car is less expensive unless the manufacturer is not reliable and various problems pop up in the later years (hopefully, this will not be the case with the 328). Anyway, just wanted to see if there was something that I am not aware of by buying instead of leasing (while I had planned to buy with cash - getting a 1.99 or even 2.99 loan might change my mind - I don't like to have debt).
 
#2 · (Edited)
Roughly 50% lease and the other half buys. There's no truly fiscally sound reason to lease except for business purchases. Otherwise leasing is really a lifestyle choice.

Just so you know, www.PenFed.org is a first rate credit union. Anyone can join. They have 1.99% financing currently up to 48 months, 2.49% to 60 months. Since they cater to the military they are very familiar with ED financing. Most other lenders are not. They get very nervous about not getting their lien perfected post haste. PenFed understands the process. BMWFS, of course, is the biggest lender for EDs. If you are eligible to join USAA they are also well versed with EDs. Are you a veteran? If so, you are eligible to join USAA. If you are eligible and are not a member I highly suggest joining. No one can touch their auto insurance rates. Their auto financing is usually right in line with PenFed's.
 
#3 ·
Perhaps a lot of folks lease because they like the payment.

That said, for long-term buyers, it also makes sense to lease with an eventual plan to purchase. There are two reasons behind this logic: 1) If the car turns out to be a dud or you wreak it, you can unload it at the end of the lease and 2) if the car is worth less than the residual, you can often negotiate a lower buyout price -- effectively giving you another bite at the apple. The downside to the lease is that the cost of money (the effective APR) is often a little higher.
 
#11 ·
Perhaps a lot of folks lease because they like the payment.

That said, for long-term buyers, it also makes sense to lease with an eventual plan to purchase. There are two reasons behind this logic: 1) If the car turns out to be a dud or you wreak it, you can unload it at the end of the lease and 2) if the car is worth less than the residual, you can often negotiate a lower buyout price -- effectively giving you another bite at the apple. The downside to the lease is that the cost of money (the effective APR) is often a little higher.
This is a valid point. Some people look at it as buying an option to purchase depending on future performance and circumstances.
 
#8 ·
I understand the concept of leasing - I was just trying to determine why so many people on here are talking about leasing (as opposed to buying - especially with the low interest rates out today). I have always thought of leasing as renting: at the end of the rent period you have nothing to show for what you spent. Of course, I understand when you're young it may become the sole option for getting into a BMW (or other expensive car).
 
#100 ·
Laughable / Funny, meaning is the same:

"I always find it funny when people say those that lease can't afford to buy."
Thanks for the quote but there were two points: the equity point and afford to buy point. I'm not sure what your point it. I still find it laughable people think of owning a car like an investment property - i.e., equity. I conceded the point about who can afford to buy...read my posts.

I'm not sure why this is conversation is dragging out.
 
#109 ·
Thanks for the quote but there were two points: the equity point and afford to buy point. I'm not sure what your point it. I still find it laughable people think of owning a car like an investment property - i.e., equity. I conceded the point about who can afford to buy...read my posts.

I'm not sure why this is conversation is dragging out.
Then we're in agreement...on both points.
 
#9 ·
Leasing made sense a while ago when the residuals were ridiculously high. Buying new never makes sense, you take the huge depreciation hit in the early years regardless of how long you hold on to it. All 3 BMW's I currently own were bought very low mile CPO at huge discounts vs new. I own several other cars I bought new, but buying them used wasn't an option.
 
#15 ·
Lease
-------
Smaller payment, no money down
New car every 2-3 years
Low miles traveled

Buy
----
Larger payment, with money down
Car is yours, no one can take it
High miles traveled

Those are the most basic reasons for doing one versus the other. Over time it really depends on your life style (and how long you keep a buy and how much money you dump into it) that really makes one choice better than the other.

I personally drive a TON (20-25k a year), so I have to own my cars or be willing to drive the **** out of my Corvette in the summer (to not go over my lease mileage on my "other" car). I did that once, never again.
 
#20 ·
I had originally planned to lease, but ended up buying due to idiosyncratic circumstances that involved me having to make some liquid assets conveniently "disappear". Needless to say I have a whole lot of equity in my 335d.

In the future I see myself moving towards the 2-3 year ED lease with max MSD model.
 
#26 ·
while I had planned to buy with cash - getting a 1.99 or even 2.99 loan might change my mind - I don't like to have debt
I just checked Fidelity and they're offering 0.05% on their money market fund, so a 1.99% loan would be 1.94% above the money market yield. Not a bad deal at all -- for BMW! I realize there are certain tax reasons to lease and some companies lease cars for some execs -- but I suspect that's not the majority of lessees.

"Never spend your money before you have it." - Thomas Jefferson
 
#28 ·
Other reasons why leasing can make sense depending on your circumstances and the terms of course:
1) It is generally better to buy an asset that appreciates (real estate, picasso painting) and to rent a depreciating asset (car)
2) leasing allows you to externalize the depreciation risk if you are in an accident and the cost of expensive post-warranty maintenance.
3) Leasing in conjunction with ED can mean big savings because the residual is based on US MSRP while the cap cost is based on ED price.

If I had not been in the situation where i need to "hide" some liquid assets I would have leased for sure.
 
#29 · (Edited)
People making these comparisons seem to suffer a lot from confirmation bias, so their numbers tend to come out the way they would like.

One risk with a lease is that you're making a commitment for the term of the lease. If it turns out you don't want or need the car for that long, it may be a little more difficult to unwind than a purchase, even one with a loan. But in general BMW FS is pretty flexible about these things. You also may have to keep up a leased car, or pay out of pocket when you turn it in. The bottom line may not be much different from the market value hit you take on your own car with, say, bent wheels or unmatched, worn tires, but reaching in your pocket feels different somehow. Again, BMW FS in my experience is pretty generous about turn-in condition. And of course there's the mileage issue. If you want or need to drive more, the lease is more expensive, reflecting the fact that a high-mileage car has a lower market value than an average car. The other side of the coin is that if you turn in a leased car with unused mileage allowance, you don't get any credit for that.

Beyond those things, a lease is a pretty good way of letting someone else take the risk of how much market value a car will lose through depreciation. If the car is worth more than the residual at the end of a closed-end lease, you can buy it and flip it, and take advantage of the lower depreciation just as if you had bought the car in the first place. If it's worth less, you can turn it in or (and here again BMW FS seems very accommodating) pay a lower market value than the lease contract residual.

Apart from those issues, consideration of whether you "own" the car (especially if there is a lien holder as the result of a loan), or have "equity" or whether or not you can "afford" the car are just subjective nonsense in the context of a lease/buy comparison.
 
#30 ·
People making these comparisons seem to suffer a lot from confirmation bias, so their numbers tend to come out the way they would like.

One risk with a lease is that you're making a commitment for the term of the lease. If it turns out you don't want or need the car for that long, it may be a little more difficult to unwind than a purchase, even one with a loan. But in general BMW FS is pretty flexible about these things. You also may have to keep up a leased car, or pay out of pocket when you turn it in. The bottom line may not be much different from the market value hit you take on your own car with, say, bent wheels or unmatched, worn tires, but reaching in your pocket feels different somehow. Again, BMW FS in my experience is pretty generous about turn-in condition. And of course there's the mileage issue. If you want or need to drive more, the lease is more expensive, reflecting the fact that a high-mileage car has a lower market value than an average car. The other side of the coin is that if you turn in a leased car with unused mileage allowance, you don't get any credit for that.
.
Not really, you can just assign the lease on lease trader and you won't be in a worse position than a purchase. Remember that with a lease, in most states you don't pay the full sales tax up front. So, even if you have to give an incentive to unload your lease, you'll still be in a better position than losing 15% of the car's value if you were to sell in 5 months.
 
#31 ·
Everyone presents a good aregument that a lease works for some people and a purchase for others. I actually see a lot more merit to a lease than before I started the thread; however, since I am a person that doesn't like to have car payments or incur debt I will still purchase with full cash payment. There is one more flip of the coin that stands out for me: if I were to lease I would feel that I am in a borrowed car and looking down the line it will never belong to me (unless the purchase makes sense at the end); however, with a purchased car - it's mine from the beginning. One last point: I think most of you who are not retired and have your income levels going up each year - probably leasing makes sense: you have a new car every three years or so and you can impress the girlfriend - the clients -or neighbors. When you're retired (or close to retirement) and you buy a car every six to eight years - then obviously, a lease makes no sense. But in the end (as Happy Chapin said in "Taxi") - we're both getting what we asked for!
 
#34 ·
After buying 6 BMWs in 15 years, I leased my current car and I actually feel good about the borrowed car feeling because I am not emotionally attached to it, so I use it like a car is supposed to be used instead of worrying about every minor squeak.
 
#32 ·
Is there any reason to not lease a car even if you want to keep it long term?

I don't know how MF works out, but I assume that instead of the 2% interest you might get financing, it would work out to maybe 4-5% interest rate on the depreciation for a lease.

So if you look only at the depreciated amount over the first 3 years (lets use 45% of $50,000), the cost to lease is in the interest rate which works out to about $1,400. If you lease, the cost of that same depreciation at 2% is $700.

At the end of the 36 months, you can buy out your lease at the residual (and re-finance it if you choose). So in the end, you've paid an extra $700 on a $50k car to lease instead of buy. By doing this there are lots of advantages....

1) if your car is a lemon, you can walk away
2) if your car was in a major accident, you can walk away
3) if you just want a new car you can walk away, or if residual is lower than what you can get elsewhere, you can buy it out and sell for a profit.
4) lower payments for those first 3 years, though higher payments after the 3 years (assuming you re-finance). most people would be in a better financial situation 3 years later, you can invest the difference and make some money, and then there's inflation.

probably a bunch more reasons, but essentially for $700 over 3 years, you have alot more options.

There are probably alot of flaws in my logic, so someone please help me out if I'm wrong
 
#35 ·
I bought mine ED. With loyalty, my finance rate is 0.1% and I can afford it. I also drive between 15,000 and 25,000 miles per year, and I don't want to have to not go somewhere because I'm out of miles on my lease. I would never lease unless it was going to my expense account.

I think that BMW took the "first hit is always free" mentality with the residuals we saw leading up to 2008. When we picked up our off-lease X5 in 2008, they had a Z4 M Roadster sitting in BMW of Peabody for $399 per month. Too bad I would have blown through the 10,000 miles in about a month in that baby.
 
#36 ·
I have always thought of leasing as renting: at the end of the rent period you have nothing to show for what you spent. Of course, I understand when you're young it may become the sole option for getting into a BMW (or other expensive car).
I come at it from a different perspective. Having owned 2 BMWs and seen how many repairs were covered under the warranty I've decided they are wonderful cars to drive but a source of large potential expenses once the cost of repairs are on your shoulders.

Some may decide to buy the car and if they like it they keep it, otherwise they sell it. Problem for me is selling a car after 4 years that is still worth around $20K+ is not the same as selling a 8 year old car for a few thousand. Most people can scrape together a few thousand, those with $20K cash are far fewer. Plus there's the hassle of showing the car, worrying about someone deciding to liberate it from you on a test drive, etc.

So I see a lease as a purchase with a prenegotiated sale. I know the purchase price, just as negotiable as on a ordinary purchase. And instead of having to sell the car myself I have already made the sale!
 
#46 ·
ome may decide to buy the car and if they like it they keep it, otherwise they sell it. Problem for me is selling a car after 4 years that is still worth around $20K+ is not the same as selling a 8 year old car for a few thousand. Most people can scrape together a few thousand, those with $20K cash are far fewer. Plus there's the hassle of showing the car, worrying about someone deciding to liberate it from you on a test drive, etc.
Well, you did achieve your goal of unloading the vehicle. Collect the insurance money and buy another vehicle :D
 
#38 ·
I've crunched the buy vs. lease numbers a bunch, and concluded that you spend a little less if you buy, but you have a bigger hassle and cash outlay. I've leased 5 cars (4 BMWs, 1 MB) and by my math the savings from buying probably averages around $700-1000 after 3 years, depending upon how much support you got with the residual. And that's if you sell it to a private party instead of taking less from a dealer by trading it in. To save that $700-1000, you have to put down a lot more up front, pay more monthly, carry the risk of killing your resale value if you wreck it, and deal with the hassle of selling the car.

But all that is based on keeping the car for 3 years. If you want to keep the car it's definitely better to buy on day 1 than to lease then buy. If you finance for 4 or 5 years and keep it for 7-8, you're much better off. If you buy it slightly used (still under warranty), you're the smartest guy in the room. I bought my car at lease end (for thousands less than the residual) and the numbers can't beat if I had bought it initially.
 
#39 ·
Maybe someone can help me out here so I can compare leasing vs. buying. I know how to figure if I pay cash or if I finance - since I have never leased - perhaps if we use real figures here then I can make the decision.

Based on my research - whether it be USA delivery or ED - I figure the car will cost $42K.

So what will a lease run on a $42K 2012 328 - let's say I want to do a 48 month lease - what will all my expenditures be at signing - what will the lease payment be - and what would I have to pay at the lease end. I probably will average 10K miles per year.
 
#41 ·
do some research/speculation on residuals and the money factor and plug it in to a lease payment calculator. it's pretty simple. you'll also have to factor in your local tax rate.

didn't you mention you were going to just pay cash? Cash is going to trump financing/leasing any day of the week and 10 times on sunday. you have no need for gap insurance coverage, you are fully equitable, and your total cost of ownership = total cost of the car + tax + license (no lease fees, no interest, no turn in fees, etc). If you want to get rid of your car early you can do it whenever you want and don't have to fuss with paying off a loan and waiting for your title.
 
#53 ·
For people who live in high sales tax states and who only pay sales tax on the car depreciation, leasing a BMW probably makes a lot of financial sense for many individuals. From my ballpark estimates, if you plan to keep the car for around 5 years/75000 miles in those high sales tax states, you are probably better off leasing if you can negotiate a decent deal and learn the intricacies of leasing.

And leasing gives you the valuable option in a state like California of getting out of the deal quickly without taking a bath on taxes/fees. For example, with a 3 year lease on a typically configured 2012 328i in a state such as California, you are saving roughly $2000 worth of taxes/fees compared to what you would pay in lease acquisition costs($725), arguably increased interest costs in many cases and sales taxes on the depreciation.

In addition, within the first year of a decent lease, you can probably get out of it with only a "non BMW" $2000 financial hit if you decide for whatever reason you need to get out of your lease. A year from now, a properly negotiated 3 series lease and $1200 incentive on lease trader/craigslist and the loss of the $725 acquisition fee. I would call that around a $2000 financial hit since those are payments not going to pay BMW for use of the car. I am not including the sales tax during that first year since you actually only paid sales tax on the months you used the car.

Selling a purchased 2012 328i after 12 months and 15000 miles, you would probably end up with a $5500 financial hit since your entire tax payment would be lost and not just the portion that would be allocated to the first year on a lease. And a new purchaser would demand a few thousand dollar savings on a used car since its a larger commitment then taking over a lease. The savings on a typical 335i would even be greater under this scenario.

Lastly, if I get a 2012 328i, what is pushing me to lease is fuel economy on cars is now progressing rapidly and I wouldn't mind taking a look at what other car manufactures and even BMW has out their by 2015.

If I lived in a state with a relatively low sales tax such as 5% or less, I would probably almost always buy unless I could write off the lease as a business expense.

Now is a state such as even CA, if you are very certain that you plan to keep the car for 6-15 years, I'd be the first to state a purchase makes more sense.
 
#54 ·
For people who live in high sales tax states and who only pay sales tax on the car depreciation, leasing a BMW probably makes a lot of financial sense for many individuals. From my ballpark estimates, if you plan to keep the car for around 5 years/75000 miles in those high sales tax states, you are probably better off leasing if you can negotiate a decent deal and learn the intricacies of leasing.

And leasing gives you the valuable option in a state like California of getting out of the deal quickly without taking a bath on taxes/fees. For example, with a 3 year lease on a typically configured 2012 328i in a state such as California, you are saving roughly $2000 worth of taxes/fees compared to what you would pay in lease acquisition costs($725), arguably increased interest costs in many cases and sales taxes on the depreciation.

In addition, within the first year of a decent lease, you can probably get out of it with only a "non BMW" $2000 financial hit if you decide for whatever reason you need to get out of your lease. A year from now, a properly negotiated 3 series lease and $1200 incentive on lease trader/craigslist and the loss of the $725 acquisition fee. I would call that around a $2000 financial hit since those are payments not going to pay BMW for use of the car. I am not including the sales tax during that first year since you actually only paid sales tax on the months you used the car.
With swapalease I ditched my 2006 330i for the cost of the advertisement in 2007. I had it less than a year. People loved the $480 a month payment I had negotiated already (without MSDs...lame dealership refused to do them).
 
#58 ·
Alright... here's my rationale at the end of the day using approximate numbers for my 135i. For the record, I leased.

Purchase Price: $44,500
Missouri Sales Tax: $2,647
Down Payment @ 20%: $8,900
Cash Outlay (purchase): $11,547
Financed Total: 35,600
60 months @ 5%: $671.82
3 Year Balance: $14,705.29
Estimated Trade-In: $26,000
Estimated Equity @ 36 Months: $11,294.71
Total 36 Payments: $24,185.52

Note here though that my estimated equity (and that's a best-case scenario) is less than my initial cash outlay. Granted a good chunk of this is because of the Missouri Sales Tax. As a result, I am actually losing money during that period that I have the car and lose the opportunity on the money that I'm spending per month.

In real terms here's what I did;

MSRP: 48,900
Purchase Price: $44,500
Doc Fees and Misc: $1000
Maxed MSD's (*7): $4100
Monthly Payment: $595.70
Total 36 Payments: $21445.20

I just put $1000 as a rough estimate of doc and misc fees. Dealers vary. Note here that my initial cash outlay is half what a purchase would be ($5100), but I also get $4100 of that back at the tail end of the lease. That means that in 3 years my cash out of pocket is a lot less with leasing ($22,445.20) as opposed to the purchase ($24,437.81). However there are a lot of other costs that you have to take into account when selling at the 3 year mark which include finding a buyer, for which you must also take into account the cost of advertising, test drives, scheduling... and basically the cost for your time to do so.

Note that I'm also presuming that either way you're going to sell the car at the 3 year mark. This is the assumption I made for myself because I have a habit of doing exactly that. In fact my average is more like 2 years and the lease actually forces me to get rid of my car LESS often. But again that's just me and may or may not apply to your situation.

At the end of the day, it makes sense for me to lease, but may or may not for you. Only you can answer that question. Be realistic with yourself about what you want to do with the car and how long you're going to keep it.

And for the record, I drive my car like I own it. For better or worse. I figure that wear and tear costs on the car at the end of the lease might eat up some of my MSD refund, but that's fine and a choice I make. I still consider the car mine as much as any car I've financed was mine. I also like the lack of stress knowing that in three years (less now) I'll be able to move onto something new. Maybe a new Bimmer, maybe something else... but probably planning another European Delivery trip. The chance to drive a new and fun little car like the 135i is worth it for me.

Note that the other option; buying cash was not an option. I could've probably bought a 128i pretty much bone stock with cash, but I didn't want that. As it stands, my cash reserves are untouched by the car and are there for any work I want to do on my house in the next three years. My payment is less than I would've had if I had purchased, and I feel that it makes sense for me to do it this way.

YMMV... and I hope this helps :)
 
#63 ·
For BMW, I believe they have the highest lease takers of any car manufacturer. I believe it's something like 60 or 70%.
 
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