Doesn't Anyone Buy Anymore?

Originally Posted by wco81

Heard many say you don't want to own a BMW out of warranty because of the prohibitive cost of repairs, like high 4-figure bills.

That would be the reason for turning over on a lease.

One reason I decided to lease after owning an E46 330i Sport is because it was costing me $1000-1500 for whatever went wrong with it. It's left me stranded in VT and on the highway in NY. I ended up leaving BMW for Lexus for many reasons and now I'm back with the 335ix Sport through a lease. I've never owned a car for more than 3 years other than the E46 and now I also want to avoid the hassles of fixing a bmw after the warranty runs. Lease makes the most sense for me.

Originally Posted by palermo22

Yes, I would imagine that would be huge: making $500+ payments for four years = $24,000+ and at the end of that period you have no equity.

Well if you make higher loan payments over the same period equal to 100% of the price of the car, I hope you have some "equity" in the car. Too bad that asset is continuing to depreciate as you own it. If you plan on selling that car after 4 years, you are at risk that it's not worth as much as you hoped.

People should start viewing a car, whether buying or leasing, as an expense. You just have options on how you want to fund that expense. Different options for people with different considerations.

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.

Originally Posted by wcinvest

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).

Originally Posted by Majikthese42

I have the 7/70 extended warranty on my E91. Considering how funky BMW electricals have become, it isn't all that expensive. My rule-of-thumb has been to figure on at least $1k in annual out of warranty repairs for a typical Eurocar, $2k+ for a Porsche.

Both the Audi and BMW are likely to dwarf the typical Lexus or Acura in out of warranty repair costs.

I would be uncomfortable taking my Sawzall to a leased car.

My 2000 A6 cost $2,000 every year when the state inspection was due like clockwork, and the extended warranty company on my 2004 Touareg, which was traded in with 97,000 miles on it probably lost twice what the car cost in repairs. That thing was a bitch... 2 air suspension replacements, stepper motors, electronics and not to mention a $1200 set of tires every 15k. Got our moneys worth out of that one.

You'd be surprised at how much Lexus and Acura repair bills can be. I know a lot of people whose MDX transmissions went out from 60-75k and who have had some significant bills.

Originally Posted by Meiac09

You'd be surprised at how much Lexus and Acura repair bills can be. I know a lot of people whose MDX transmissions went out from 60-75k and who have had some significant bills.

Yep, its a total crap shoot all those brands do is lower the odds.

Originally Posted by Meiac09

You'd be surprised at how much Lexus and Acura repair bills can be. I know a lot of people whose MDX transmissions went out from 60-75k and who have had some significant bills.

We had an early transmission failure on a Honda (same transmission issue) at 85k, which was a well-known problem. Honda has stepped up to the plate on these things with an extended warranty, and even outside of the extended warranty has been splitting the cost.

Our cost for the new transmission was $0.

Excepting the E46 subframes and E9x fuel pumps -- with the potential for huge class action lawsuit costs -- I haven't heard that BMW (or Porsche with the RMS and IMS failures) even looks out of the dugout too much. Just look at the "frequency of repair" charts. Honda/Acura and Toyota/Lexus are much more reliable than the Euros. But if I want to cut my curves close, the only choice is something that was at least designed within a couple hundred miles of the Alps.

It's a hobby. I play, I pay...

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

Also, if you have an accident, your car is worth a lot less at trade-in time no matter how well it's repaired. But if you leased, you just return the car and have no downside.

Originally Posted by Robert A

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.

so if you wreck or damage the car in any way you don't have to fix or pay for it if it's leased?

Originally Posted by bcl0328

so if you wreck or damage the car in any way you don't have to fix or pay for it if it's leased?

you do.

Originally Posted by justinnum1

you do.

alright, i guess i'm thinking too literally when he says 'walk away' meaning like you wreck it and take it back to the dealer and say i don't want it anymore.

it's more like wreck it, fix it, then you don't have a wrecked/fixed car when you turn it in and get a new one?

Originally Posted by palermo22

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).

For BMW, I believe they have the highest lease takers of any car manufacturer. I believe it's something like 60 or 70%.

The bottom line is that unless you can earn a return equal to or greater than your interest payments after income tax, it never pays to finance or lease.

Isn't the correct term "residual value" not "equity"?

Buy cash or go home

IMO, if you are comfortable owning a car for 6-10 years, and have a reserve of cash for repairs if needed, then buy. If you like new cars, or can work a payment into your budget but have no room for surprises, then lease. And, if when the lease is up, costs went up too much, lease a cheaper car.

Originally Posted by e46NJ

I hope no one really views buying a car as building equity - not a great rationale for buying. Cars depreciate so fast that the concept of equity in a car is laughable. I always find it funny when people say those that lease can't afford to buy. Personally, if someone wants to go there, if you have to take out a loan to buy, you can't afford it either. You don't own the car until the lien is taken off the title.

There are people who lease because they cannot afford to buy, so the concept is not laughable. Likewise just because one takes out a loan does not mean they cannot afford to buy something.

One other California anomaly:

In most states you get a tax credit on the value of your trade in. In California, you don't.

So if you trade in your $40,000 (residual value) car when you buy your next one, California considers that the same as paying the dealer an additonal $40,000 cash. I've heard that this is only the case in three states, while in the other 47 you would deduct the $40k trade-in from the cost of your next car and only pay tax on the difference. In CA, you pay full tax on this car, full tax on the next car, full tax on every car.

With leasing, you genuinely avoid paying tax beyond the amount your car has depreciated (aprox $3,500 savings in this example).

This (along with lower payments, the fear all the cameras/sensors/robots in my loaded 550 will become expensive to maintain in a few years, and BMW's tendency to charge little or nothing for minor damage upon lease return) convinced me to lease for the first time in my 40 years.


*Please, any Calif. tax experts, correct me if I've got anything wrong here.

Originally Posted by sunny5280

There are people who lease because they cannot afford to buy, so the concept is not laughable. Likewise just because one takes out a loan does not mean they cannot afford to buy something.

Amen. Different use of funds. I looked at buying and my buying patterns. I'm not a good person to buy a new car. I trade out of cars too often. Since 2003 I've had 6 cars.

On paper I could buy a car outright but then in a year or two when I'm sick of it I'll take a bath on the taxes and resale value. Leasing allows me to blow a fairly consistent amount of cash and bail on the lease when I'm bored. Used can be a good deal too as most of the depreciation hit was absorbed by the last owner.

Originally Posted by palermo22

Do you mind rephrasing that in English!

Sawzall = If I did not own a car outright, I would be reluctant to modify it to more closely fit my personal tastes, preferences and needs.

Originally Posted by blueguydotcom

Amen. Different use of funds. I looked at buying and my buying patterns. I'm not a good person to buy a new car. I trade out of cars too often. Since 2003 I've had 6 cars.

On paper I could buy a car outright but then in a year or two when I'm sick of it I'll take a bath on the taxes and resale value. Leasing allows me to blow a fairly consistent amount of cash and bail on the lease when I'm bored. Used can be a good deal too as most of the depreciation hit was absorbed by the last owner.

As it turns out, 2003 was a terrible car year for me. I had to buy three cars. So I bought my daughter a Civic, my wife a CR-V, and myself an Accord. When they were all paid off, I gave my daughter the Accord, sold the Civic, and bought my 535.

The Accord and Cr-V are still going strong, and the 535 is paid off too.

This is an important side of buying. Once you buy something, you own it. I now have three cars and no payments, rather than some 1500 a month in lease payments for the cars.

Originally Posted by blueguydotcom

On paper I could buy a car outright but then in a year or two when I'm sick of it I'll take a bath on the taxes and resale value.

If I did not change things in a car to more closely fit my personal tastes, preferences and needs I would probably get tired of it after a couple of years, too. How often do I want to do it over again? Not every couple of years! Kinda like breaking in a new pair of jeans -- once they're comfortable, they stay comfortable for a while.

Buying cars outright also keeps me from being too spendy on too many cars too often!

Originally Posted by sunny5280

There are people who lease because they cannot afford to buy, so the concept is not laughable. Likewise just because one takes out a loan does not mean they cannot afford to buy something.

I said I found it laughable that one thinks of equity in a car like it's investment property. Point taken about loans - I'm a big fan of arbitrage and leverage if you know where to invest your money.

Originally Posted by blueguydotcom

Amen. Different use of funds. I looked at buying and my buying patterns. I'm not a good person to buy a new car. I trade out of cars too often. Since 2003 I've had 6 cars.

Rookie:

May 2009: 2000 X5
July 2009: 2000 323Cic
Dec 2009: 2001 330xi
Feb 2010: 2001 X5
Aug 2010: 2006 330xi
Oct 2011: 2007 X5