F10: Buy or Lease?

Originally Posted by CRMESQ

This question can not be answered by looking at the numbers alone. There is also another factor, quality of life. As a business owner who has dedicated years of life to developing, growing, and maintaining a business, I want some rewards. One of those rewards is a new vehicle every three years. With regards to the financial end of it, the lease payments are run through the business so that car costs me less than the actual monthly payment. For me, leasing makes more sense when both the financial and non-financial factors are both taken into consideration.

As to the financial crisis, the problem was that home buyers had zero at stake when purchasing their homes. These buyers were given both primary and secondary mortgages covering the entire purchase price without having to put their own money into the deal (usually they had none). Moreover, the buyers did not even have to pay closing costs because they were built into the deal (seller's concession) and they wound up coming out of the financing. In short, people with no money were allowed to buy houses without paying any of their own money. Since creative financing provided them with the money to buy a house they could not afford in the first place, they had no problem walking away when they could not afford the mortgage. Had these same people been required to put down at least 20% of their own money, a healthy environment would have been maintained in which homes could be purchased with the appropriate financing.

Very one-sided point of view here. Had the banks lent their own money, and made their money by lending it, rather than slapping some paper together, getting fees, and dumping the loan, they would have been more careful to whom they lent money.

That you phoney up the lease on your personal car by making the taxpayer pay for your lifestyle, you are simply like some welfare queen sitting around on the governments dime. You are supposed to be paying for your own transportation.

So, leasing makes sense to you because you are having other people pay for your ride.

Originally Posted by Kamdog

Very one-sided point of view here. Had the banks lent their own money, and made their money by lending it, rather than slapping some paper together, getting fees, and dumping the loan, they would have been more careful to whom they lent money.

That you phoney up the lease on your personal car by making the taxpayer pay for your lifestyle, you are simply like some welfare queen sitting around on the governments dime. You are supposed to be paying for your own transportation.

So, leasing makes sense to you because you are having other people pay for your ride.

You have misunderstood what I have said. I in no way was defending the banks. In fact, I was criticizing the lending process, including the banks, as a part of what I said previously.

You are also speaking out of ignorance in your personal attacks against me. While commuting costs are not deductible, using your vehicle for business purposes is a legitimate deduction. In my situation, I travel to see clients, to other attorney's offices, and to the Court's through out the State of NJ almost every day of every week. In fact, the vast majority of the mileage that I put on my vehicle is for business purposes and is a legitimate business expense. After you create your own business, make it successful, and educate yourself on the tax code, we can chat more.

I think this is very unbecoming to attack another guy's business, how he makes his money and how he choses to spent it. This is socialist, we hear it alot nowadays from the top and it's not good for us or our country

There are countless of innocent people who have had their lives turned upside down, lost jobs, ruined retirement etc, etc due to the financial institutions casino shops. Most will not see justice done in their life time instead they will be saddled with higher taxes and lost entitlements while enormous bonuses are paid on Wall Street so save me your Goldman & Co. cheer leading. It's wasted on me.

Financial markets will be just fine without car leasing.

well, actually a lot more jobs have been created as a result of financing. About 50 million jobs in the 80s and 90s - financial services / technology boom. Most internet / computer / biotech companies have been started by financing from investment banks or investors with the advise and structure by the banks and most companies issue stocks and bonds to obtain funding for R&D. Anyway, this is finance 101 and is silly to continue. Feel free to believe what you want. BTW, the 401k is also a finance product not available in other countries although they're rolling it out.

Financial markets are a good thing for risk capital, company loans etc. Pushing credit cards, leases and kinky home loans onto the financially uneducated masses not so good. The big institutions (and small) have caused massive destruction and are bailed out by the tax payer. That's not "justice for all".

That said, I fully understand that leases are a good thing for many companies.

Wow-- I've never started a thread this long before!

My car still hasn't arrived and I'm still considering my original question, but if it was here now I think I'd be making a purchase, not a lease.

Originally Posted by njstrane

This is very simple. Leasing is more costly than owning. There is a caveat. You should own and keep a car well maintained for 8-10 years.

Let's talk about the duration of adulthood.

Let's for argument sake say from 18-68, you leased a car for $900/month. By age 68 you would have spent $540,000 in car payments.

In contrast, let's say you bought a $50,000 car every 10 years. During those 10 years your cars were well maintained. For those worried about maintenance, let's for argument sake say there were an average of $1,000 in repairs and maintenance yearly from years 6-10 out of warranty. Each car with taxes, interest, etc would cost about $60,000. This would be $55,000 if bought out right with cash. By age 68, you would have spent only $300,000 on car payments.

Listen close everyone. Here's the catch. Take the difference of $240,000. Over 50 years that's $4,800/year. Take that money and invest in an index fund like Vanguard annually. With the average rate of return over the past 30 years of the S&P 500 of 8.8% you will hit retirement age (68 in this case) with . . . Drum roll. . . .

$4,700,000

If you don't believe me, believe the power of compounding interest and check the numbers yourself.

Long story short.

Buy, keep your money and get rich.

Lease, waste your money and make BMW rich. ;-)

I read your post this evening...and I strongly agree with the concept....entirely. That said, things don't always work out with investments. Ten years ago I had a penny stock that increased in value from $500 to $60,000 in about six months. This was really easy money and I decided I wanted to splurg on a new 540i; but the conservative side of me ultimately settled for a $30,000 Maxima which was purchased with stock sale proceeds. I left the remaining $30,000 invested in the penny stock...and ended up losing most of it when some bad disclosures became public. Moral to the story - wish I had bought the bimmer (Of course I really wish I had sold the whole thing and purchased Apple stock)

Originally Posted by DXK

It's B.S. Not a single finance professor that I've had said anything of this kind! Exact opposite.

Well then, who was it who sold all those mortages to people under the premise that the price of houses would never go down? Granted they were not professors of finance, they don't work for banks. So, who in your opinion did it? How many of them had MBAs?

So how many doctors misdiagnosed a disease and patient died, how many were MDs? How many scientists made mistakes and miscalculations in their research, how many were PhDs? How many project managers mismanaged the projects, how many were PMPs? Let's go after all of them. But let's not allow those who took out 1% mortgages adjustable to 15% in year take any responsibility, because taking personal responsibility is not currently in vogue; it's always someone else's fault.
And while we are at it, let's go after the engineers who designed f10 since there appears to be some diffects in the cars. How many had masters in mechanical / electrical engineering?

Originally Posted by richschneid

Well then, who was it who sold all those mortages to people under the premise that the price of houses would never go down? Granted they were not professors of finance, they don't work for banks. So, who in your opinion did it? How many of them had MBAs?

Actually i think it was the govt. in the form of Fannie and Freddie that is the root of the mortgage problem and it is Fannie and Freddie that is costing the taxpayer more money than any other bailout and the money will almost certainly not be repaid, ever. It's also interesting that Fannie and Freddie are not being dealt with in any legislation. The banks have responsibility because they bundled garbage loans and sold them as AAA however the main cause of the problem is the govt. that lowered dramatically the lending standards required to get a mortgage.
In any case this is BMW forum so maybe we should get back to discussing the 5 series.

agree with Diver624 on all counts

Read "13 Bankers" and you will understand the root of our problems. Not a novel.

Originally Posted by DXK

So how many doctors misdiagnosed a disease and patient died, how many were MDs? How many scientists made mistakes and miscalculations in their research, how many were PhDs? How many project managers mismanaged the projects, how many were PMPs? Let's go after all of them. But let's not allow those who took out 1% mortgages adjustable to 15% in year take any responsibility, because taking personal responsibility is not currently in vogue; it's always someone else's fault.
And while we are at it, let's go after the engineers who designed f10 since there appears to be some diffects in the cars. How many had masters in mechanical / electrical engineering?

This is a non sequetor(sp). When a doctor kills a patient through incompetence he is sued for malpractice. If he displays continued incompetence his liscense is revoked. If he kills a patient deliberately to make money for himself he goes to jail for manslaughter, criminally neligent homicide, or murder. The patient, however, pays a bigger price, he loses his life.

Now, quit the irrelevant analogies, please. If you want to answer my question then do so, if you don't want to answer my question then don't. That is your perogative. But making inanane anlogies just begs the question and indicates that you think no one is responsible for the housing bubble, it was all just an honest mistake. Fortunately for the rest of us, most people disagree with you. But, of course, you are entitled to your opinion even if it is a minority opinion. In this case a very small minority.

So, I repeat:

"Well then, who was it who sold all those mortages to people under the premise that the price of houses would never go down? Granted they were not professors of finance, they don't work for banks. So, who in your opinion did it? How many of them had MBAs?"

Originally Posted by diver624@aol.co

Actually i think it was the govt. in the form of Fannie and Freddie that is the root of the mortgage problem and it is Fannie and Freddie that is costing the taxpayer more money than any other bailout and the money will almost certainly not be repaid, ever. It's also interesting that Fannie and Freddie are not being dealt with in any legislation. The banks have responsibility because they bundled garbage loans and sold them as AAA however the main cause of the problem is the govt. that lowered dramatically the lending standards required to get a mortgage.
In any case this is BMW forum so maybe we should get back to discussing the 5 series.

While what you say is true, that Fannie and Freddie secured the mortgages, they did not originate the mortgages or sell them to people. Who sold the mortgages, made a fee doing so, and then sold the bundled tranches as AAA securities as determined by Moody's and S&P? It was the private sector that sold, originated, and securitized the mortgages. My question is how many of these people had MBAs?

It was the gov't that lowered the standards, but the government didn't make any money selling the mortgages. I guess you are advocating for more, not less, government control over the marketplace.

But the rules regarding car loans and leases are not determined by the govenment and do not determine whether of not it is more or less expensive to buy a BMW in a given circumstance for a given owner or leasor. To get back on topic.

Originally Posted by richschneid

"Well then, who was it who sold all those mortages to people under the premise that the price of houses would never go down? Granted they were not professors of finance, they don't work for banks. So, who in your opinion did it? How many of them had MBAs?"

Um, my mortgage officer was not an MBA. In any case, you don't think it's beyond silly to blame a degree for the recession?
I had a dealer once who told me that my car will be worth $30,000 after 3 years, but as turned out was worth only $20,000. I am sure he had an MBA.
Oh and all those investors in Florida who flipped houses, they were all MBAs or were made to do that by MBAs.
And all those stocks that you buy, they should all go up because an MBA told you that.

Originally Posted by richschneid

But the rules regarding car loans and leases are not determined by the govenment and do not determine whether of not it is more or less expensive to buy a BMW in a given circumstance for a given owner or leasor. To get back on topic.

Oh look, you're wrong again! Government passed a law that restricted financial services companies from engaging in certain transactions and from charging fees and interest on certain products. So now, only people with great credit can qualify for loans with reduced rate since banks cannot take as much risk. So fewer people can get loans / leases and those who do will pay higher rate to compensate for potential losses that cannot be offset by something else.

Originally Posted by DXK

Oh look, you're wrong again! Government passed a law that restricted financial services companies from engaging in certain transactions and from charging fees and interest on certain products. So now, only people with great credit can qualify for loans with reduced rate since banks cannot take as much risk. So fewer people can get loans / leases and those who do will pay higher rate to compensate for potential losses that cannot be offset by something else.

We'll I'm glad I was wrong about that. At least I can admit when I'm wrong. At least I was wrong about a new law, so please forgive me. Now you still haven't answered my question, you persist in begging the question. I repeat again:

"Well then, who was it who sold all those mortages to people under the premise that the price of houses would never go down? Granted they were not professors of finance, they don't work for banks. So, who in your opinion did it? How many of them had MBAs?"

It's not about how many DIDN'T have MBAs. I asked how many DID have MBAs, or worked for people who had MBAs. Did your mortgage officer work for someone with an MBA? To use your misplaced analogy, almost every person who loses his medical liscense for incompetence is an MD or DO. How many of these private sector companies and banks that have almost bankrupted the country and many of it's citizen's were run, owned, or controlled by people who DID have MBAs? Not even to mention the MBA in charge who ran up FIVE TRILLION DOLLARS in government debt in addition to the TRILLIONS of mortgage debt run up by MBAs in the private sector.

Originally Posted by richschneid

We'll I'm glad I was wrong about that. At least I can admit when I'm wrong. At least I was wrong about a new law, so please forgive me. Now you still haven't answered my question, you persist in begging the question. I repeat again:

"Well then, who was it who sold all those mortages to people under the premise that the price of houses would never go down? Granted they were not professors of finance, they don't work for banks. So, who in your opinion did it? How many of them had MBAs?"

It's not about how many DIDN'T have MBAs. I asked how many DID have MBAs, or worked for people who had MBAs. Did your mortgage officer work for someone with an MBA? To use your misplaced analogy, almost every person who loses his medical liscense for incompetence is an MD or DO. How many of these private sector companies and banks that have almost bankrupted the country and many of it's citizen's were run, owned, or controlled by people who DID have MBAs? Not even to mention the MBA in charge who ran up FIVE TRILLION DOLLARS in government debt.

Are you a member of a Communist Party? Have you ever been or considered joining a Communist Party? Are you associated with anyone who might've been a member? Have you ever worked for someone who was a member of a communist party?

Originally Posted by DXK

Are you a member of a Communist Party? Have you ever been or considered joining a Communist Party? Are you associated with anyone who might've been a member? Have you ever worked for someone who was a member of a communist party?

No, as a matter of fact, I am a capitalist and entrepreneur who started my own business from scratch and made millions of dollars. That's why I pay cash for $80,000 cars and own my house outright. It's because I understand ECONOMICS and know for certain that MBAs do not for the most part. The reason we are in this mess is because so many of the "professors" of business in the Harvard business school and elsewhere do not understand Capitalism or economics. That is why we are in this mess.

Are you or have you ever been a Senator from Wisconsin?

To get back on topic. One of the reasons that a three years old 5 series has gone down in value is not because the cars are not as good it's because of all this massive debt run up by MBAs to line their own pockets.

No, but I thought you might since your questions are pretty similar.
You should go ahead and write a paper on Economics where you can blame MBAs and our business schools for all the recessions including the ones that had occurred prior to 1900 (birth of MBA) I am looking forward to seeing you at the Harvard Club as a guest lecturer. Too bad you have sold your chrome wheels, otherwise we'd enjoy it even more.

Originally Posted by DXK

No, but I thought you might since your questions are pretty similar.
You should go ahead and write a paper on Economics where you can blame MBAs and our business schools for all the recessions including the ones that had occurred prior to 1900 (birth of MBA) I am looking forward to seeing you at the Harvard Club as a guest lecturer. Too bad you have sold your chrome wheels, otherwise we'd enjoy it even more.

I don't think our business schools are responsible for any of our recessions except this one. BTW, BMW does sell chromed wheels for the 550i in it's accessory catalogue for $6000. In addition, last month I saw an S550 MB parked on Central Park South with actual MB chromed wheels too. So maybe if the Harvard Business school knew what they were doing our country's economy would be in as good shape as Germany's is. Maybe we wouldn't have to buy German cars and our auto industry would not have essentially gone bankrupt. Maybe if they understood why MB and BMW sell chromed wheels for six grand they wouldn't have been so responsible for this "The Great Recession" which some people, including me, think is actually a "soft" depression.

Perhaps not all professors at the Harvard business school don't understand economics, it's just the one's who think Milton Friedman had any understanding of economics. At least Alan Greenspan is more like me, he knows he made a mistake and admitted it publically.

I don't have to write a paper to this effect. There will be many economic history books which will document this quite well, thank you.

And maybe if you had any cogent arguments to back up your opinions you wouldn't have to resort to calling people names like "communist" and making fun of their taste in wheels as a last resort. Name calling is the last refuge of small minds, whether or not they have an MBA from Harvard Business School. Unless, of course, you are taught in Harvard Business School that the best way to defend yourself is to call people names when your misbegotten misunderstanding of economics causes the near destruction of the global economy.

This thread is getting WAAAAAAY OFF TOPIC!

Would you agree with me on the premise that if I do not wish to own my 2011 or 2012 535i xDrive beyond 3-4 years, and if purchased I would likely sell within 6 years, a lease would be more appropriate than paying cash upfront so far as money saved vs money lost in depreciation? I guess I'm looking for a more direct answer than 'it's personal preference'.

One issue I'm currently getting burned on is the amount of repairs necessary to keep my '04 325i in good condition. **** breaks. Often. I am not a heavy footed driver and as far as I can tell I treat the car very well. There are just so many mechanical issues. I do NOT want to own a BMW beyond warranty at this point.

Its funny how a lease or buy question led to this discussion.

Everyone is blaming either the government or finance companies for this crisis. while each might have contributed how about personal responsibility? At the end of the day, the buyer signs the final papers. If one is too stupid to understand what they are getting into who's fault is that? These people didn't have to take on loans or mortgages they couldn't afford. For that reason the truth is government regulation is there to protect us from ourselves. How silly is that? We need to take more responsibility for our actions and not blame others. Just because a lender offered a confusing loan product that the borrower had trouble understanding and failed to take the time to fully comprehend doesn't mean the borrower is without fault. Maybe the borrower isnt educated enough to know what to look for. Who's fault is that? While that part is unclear, it is clear that we (tax payers) are paying the price of other people's ignorance.

At one time in my life I experienced hardship and had to utilize credit to survive. Because of high utilization my interest rates went up and credit lines went down. It became difficult. I didn't blame anyone nor did I attempt to discharge my debt. I changed my life style, rebuilt my business and paid my debt. It wasn't easy but I took responsibility for my actions.

I run a business and it is important for me to project an image of success. If I'm asking a client to invest significant assets with me and I show up to a meeting in a hyundia, it doesn't make the right impression. As shallow and materialistic as it may sound, it happens to be true. The car I drive shouldn't have anything to do with my abilities as a professional but a a first impression is important. I lease a new BMW every 3 years. The tax deduction, business benefit and personal enjoyment I get from driving a new car is worth it to me.

To anyone who wants to criticize me, go ahead, it wont affect my life or decision process.

Originally Posted by EvolutionTheory

This thread is getting WAAAAAAY OFF TOPIC!

Would you agree with me on the premise that if I do not wish to own my 2011 or 2012 535i X-drive beyond 3-4 years, and if purchased I would likely sell within 6 years, a lease would be more appropriate than paying cash upfront so far as money saved vs money lost in depreciation? I guess I'm looking for a more direct answer than 'it's personal preference'.

One issue I'm currently getting burned on is the amount of repairs necessary to keep my '04 325i in good condition. **** breaks. Often. I am not a heavy footed driver and as far as I can tell I treat the car very well. There are just so many mechanical issues. I do NOT want to own a BMW beyond warranty at this point.

According to the 2011 Consumer's Reports Buying Guide the 2004 BMW 325i has an "average" frequency of repair. Maybe you just got a lemon. Your car is seven years old. To really address this accurately it would be helpful to know exactly how much you have spent on repairs, not maintainance, in the past two years.

Sorry, to get so "off topic", but some of this is about why we all spend so much money to buy a high quality German car rather than a less expensive American car. After all, some name callers would refer to the German economic system as "Socialism". Which, of course, it isn't. Or is it?