Doesn't Anyone Buy Anymore?

Originally Posted by mr_clueless

If I used the same ratio of income:cost of car as BJ, I'd have to be in a Yaris.

LOL. Forget the fact that my wife and I make a boatload of cash every month because that doesn't matter- we don't live that way. Mr. Ritchie Rich doesn't allocate a measly $549 a month for a car. We're actually quite conservative and prudent, quite proud of us, in fact.

What we budget for our monthly household expenses will be very close to what you and most everyone else budgets; we're just fortunate that what we don't spend goes right into savings and gets us closer to an early retirement and fully-paid college educations for our 4 children.

The car we drive is the great equalizer anyway. We all can afford a $50,000 car either via purchase or via lease. That's the constant. The variable isn't what you and I make or even the differences in our lifestyles. The variable is the age of the car each of us is driving for virtually the same exact expenditure.

BJ

Originally Posted by boltjaM3s

No question that family priorities shift over time.

But I'd argue, without trying to sound too elitist here, that if one can afford to purchase a $50,000 German luxury car then they surely can afford to pony up what amounts to $25 or $50 a month incremental for the privilege of perpetually driving brand new $50,000 cars.

A pack-a-day smoker will spend $450 a month on cigarettes. A social drinker will spend $300 a month hanging with the guys on Friday night's. Someone in a bowling league will fork over $275 a month to participate. Gym memberships, vacations, newspapers, movies, iTunes downloads, you get the point.

We merely make our cars into too big a deal. It's really just another monthly utility. Don't overthink it. Average out your 10 year old car and what it's true out-of-pocket cost was to you during that span. Divide by 10, divide by 12. Use that number and lease the best car you can for that outlay. Done.

And if you can't, if you simply can't get the quality of car that you want for the money you've customarily spent, well, there's another myth out the window. Turns out that it was the BMW buyer that bit off more car than he could chew, not the BMW leaser.

BJ

I think you overestimate the out of pocket costs for some cars. I have a 2006 Honda Accord, loaded with leather and Nav. It is a very comfortable car, not too far removed from your '04 TL. Since I paid it off 2.5 years ago, I've spent exactly $50 in maintenance (rear brake pads), and oil changes every 7500 miles. That's $10/month in maintenance, literally.

this is probably one of the best threads ive read here at bimmer keep it goin fellas learning alot here and now have alot to think. over

Sent from my XT557 using Bimmer App

Originally Posted by SamS

I think you overestimate the out of pocket costs for some cars. I have a 2006 Honda Accord, loaded with leather and Nav. It is a very comfortable car, not too far removed from your '04 TL. Since I paid it off 2.5 years ago, I've spent exactly $50 in maintenance (rear brake pads), and oil changes every 7500 miles. That's $10/month in maintenance, literally.

Very fair, and as I said the math isn't precise, just some top-of-head averages to play with.

Similarly, while the out-of-warranty expenses might be overstated, the compounded increase from the $50K float in the market is likely understated, might be a wash.

The conclusion (and I think we're both somewhat in the same place on this) is that the difference between owning and leasing during the same timespan of the purchase period is only a few bucks a month different. Could be as little as $25 could be as much as $100, but big-picture that's not a lot of money for those of us fortunate enough to be driving cars like these.

BJ

Doing the math, it takes a bit over six years of leasing, or two lease periods, to pay off the car. After that, you are driving the car only for maintenance and repair. For the period of the first lease, you are driving the exact same car, for the next, you are missing out on the LCI version, and for the next, you are driving the older model for the price of maintenance, then you go on from there.

If you are willing to drive older cars, however, you can usually own two cars for only one car payment a month.

I actually lease and buy.

I bought my wife a brand new Suburu Outback. Paid cash. No financing. She'll drive that around for the next 5 to 7 years, maybe longer.

I lease my cars. I get a new car every 3 years. So buying a car for myself doesn't make any sense.

Originally Posted by boltjaM3s

the compounded increase from the $50K float in the market is likely understated

Nah, it's not understated given the current interest rate environment, and the fact that those returns will be taxable.

Originally Posted by krash

I actually lease and buy.

I bought my wife a brand new Suburu Outback. Paid cash. No financing. She'll drive that around for the next 5 to 7 years, maybe longer.

I lease my cars. I get a new car every 3 years. So buying a car for myself doesn't make any sense.

Yup, did about the same for my wife. A 2012 CR-V. She has told me flat out that she couldn't care less about cars. We even drove a new X3 before the CR-V purchase, she was barely impressed. As long as it doesn't get wrecked or have a catastrophic failure in 5-7 years, I'm sure we'll keep it, and I'll be out way less money than leasing two cars over that time period.

Originally Posted by boltjaM3s

The 1M is an exception, a rare car that'll hold its value. Let's look at a typical $50,000 BMW 3 Series. Buy it for cash, keep it for 10 years.

That's $50,000 out-of-pocket in 2002, $5,000 a year, or $417.00 per month.

The car will be out of warranty for 7 years, assume that you'll need $4,500 worth of maintenance and repairs on the car during that span.

At the end of 10 years, you'll have a used car with high mileage worth $3,000 on private sale if you're lucky.

Purchase 1 car: Total out of pocket net resale value is: $51,500 or $5,150 per year, or $429.00 per month.

If you leased a series of $50,000 cars instead, paid it off slowly at $539.00 per month, took the remainder of the $50,000 and invested it, you'd make approximately $10,000 on that money over the 10 year period at a minimum.

Lease 4 cars: Total out of pocket net investment revenue is: $54,680 or $5,468 per year, or $455.00 per month.

So for an extra $25 a month you could have been in 4 brand new BMW's under warranty instead of being in 1 old BMW that's out of warranty for 7 years. And if the repair costs are lower and/or the investment revenue is lower, we're still only talking about a few dollars a month here, the cost of a typical lunch at a decent restaurant on a single day.

Philosophy and "pride" are nice, but the math sets you free.

BJ

Let's check your math using your numbers...

Starting Cash: $53,300

Purchase $50,000 + $3,000 Taxes + $300 Title
Maintenance: $4,500
Trade-in: $3,000
Monthly Investment $539
Investment Total: $64,680
Investment Income: $6,468
Taxes on Income: $1,940
Net Income: $4,528

Purchase Ending Cash: $67,700
Net Change: $14,400


One time Investment: $50,000
Investment Income: $10,000
Taxes on Income: $3,000
Net Income: $7,000
Lease payment: $539
Total Lease Payments: $64,680
Lease1: $1,500 Taxes + $300 Title + $725 Acquisition Fee + $500 Security Deposit
Lease2: $1,500 Taxes + $300 Title + $725 Acquisition Fee
Lease3: $1,500 Taxes + $300 Title + $725 Acquisition Fee
Lease4: $1,500 Taxes + $300 Title + $725 Acquisition Fee
Additional Lease Costs: $9,400

Lease Ending Cash: $50,900
Net Change: -$2,400

Net difference: $16,800 or $140/mo

Math may set you free, but understanding it could save you money.

Originally Posted by boltjaM3s

If you do the math, you'll find that you needlessly suffered in a used car for 5-7 years to save yourself a whopping $1500 when all is said and done.

That's $250 a year or $21 a month. Merely trim satellite radio or leather seats off a new lease and you'll wind up in 4 new cars during a 10 year span instead of in 1 old one.

BJ

I've spent about $25k owning my ZHP the last 7 years. Leasing at $550/month would have cost me $46k, more if there was money up front.

And unlike E90 owners you haven't seen me complaining about my RFTs and harsh suspension.

PS i see you mean a new car. That would have cost me about $35k or so.

Given the fact that BMWFS(a money making business) is aggressively offering incentives to promote leases(and financing), one has to ponder why .... On the other hand, if money is a non-issue, then one can always follows Steve Jobs to lease a Benz 550 every 6 months.

Buying a car with cash is always a stupid idea no matter how you look at it...tying up 50K in a depreciating asset...

Originally Posted by dunderhi

Let's check your math using your numbers...

Starting Cash: $53,300

Purchase $50,000 + $3,000 Taxes + $300 Title
Maintenance: $4,500
Trade-in: $3,000
Monthly Investment $539
Investment Total: $64,680
Investment Income: $6,468
Taxes on Income: $1,940
Net Income: $4,528

Purchase Ending Cash: $67,700
Net Change: $14,400


One time Investment: $50,000
Investment Income: $10,000
Taxes on Income: $3,000
Lease payment: $539
Lease1: $1,500 Taxes + $300 Title + $725 Acquisition Fee + $500 Security Deposit
Lease2: $1,500 Taxes + $300 Title + $725 Acquisition Fee
Lease3: $1,500 Taxes + $300 Title + $725 Acquisition Fee
Lease4: $1,500 Taxes + $300 Title + $725 Acquisition Fee
Additional Lease Costs: $9,400

Lease Ending Cash: $48,100
Net Change: -$5,200

Net difference: $19,600 or $163.33/mo

Math may set you free, but using it correctly will save you money.

On the leased vehicle, I must be a better negotiator than you because my $539 monthly payment is all-in, I did not pay for taxes, title, acquisition fee, or any security deposit.

Not sure what "additional lease costs" are either as it doesn't match the sum off the taxes/title/acquisition fee that, again, I didn't pay.

On the purchased vehicle, I don't understand that either. There's a $3000 trade-in value and the monthly payments on a 5 year note with interest would well exceed the $549 monthly 'investment' you're showing.

There is no "cash" at the end of either option. The leaser is clean and can move on, the buyer has a car worth a few grand net of the repair costs which is almost a wash.

BJ

Originally Posted by Chris90

I've spent about $25k owning my ZHP the last 7 years. Leasing at $550/month would have cost me $46k, more if there was money up front.

And unlike E90 owners you haven't seen me complaining about my RFTs and harsh suspension.

PS i see you mean a new car. That would have cost me about $35k or so.

You're comparing apples and oranges.

If the ZHP was $35K new then the lease payments would have been much lower than $550 per month. My F30 is a $48K configuration and my monthly payment is $539.

For fun, let's say you could have bought your ZHP for $35,000 cash or leased it for $393 per month.

$35,000 cash is equal to 89 monthly payments of $393 per month, so you would have been able to drive 3 brand new $35,000 cars and keep a consistent $393 lease payment in the same span of time instead of driving one old $35,000 car.

Your ZHP would still have a value at the end, but it would be eaten into a bit by whatever maintenance costs you'd have incurred out of warranty.

I've gone through this exercise on several different sites with several different posters with opposing points of view and in the end it always boils down to the same simple sentence:

For around $50 more a month you can avoid spending time in an old, out of date and out of warranty car. And $50 isn't much money to someone who can afford a BMW to begin with.

There are variations on the theme, but it always turns out to be a modest monthly outlay to buy yourself out of the used car game, always surprises people that all that work and all that suffering doesn't really add up to a substantial savings. There's a reason why more than 60% of all BMW's are leased; there just isn't enough meat on the bone to bother purchasing.

BJ

Originally Posted by 2010drive

Buying a car with cash is always a stupid idea no matter how you look at it...tying up 50K in a depreciating asset...

Cash is a depreciating asset thanks to the Fed. And with such high correlation these days, a collectible car is probably the safest investment.

Originally Posted by boltjaM3s

You're comparing apples and oranges.

If the ZHP was $35K new then the lease payments would have been much lower than $550 per month. My F30 is a $48K configuration and my monthly payment is $539.

For fun, let's say you could have bought your ZHP for $35,000 cash or leased it for $393 per month.

I paid $33k when it had 13k miles, it was $45k new. But people were buying them for $41k. So you can't assume cash buyers are getting no discount while your lease includes a large discount.

and your $3k trade-in is way off, by the way. A 10 year old E36 went for $5000, and it was only $35k new. So a $50k BMW would be worth something like $7k.

I do agree that cash buyers should buy a car 1-2 years old like I did, you'll save $10-15k in just a year. Paying cash for a new $50k with high depreciation makes no sense to me.

Originally Posted by Chris90

Cash is a depreciating asset thanks to the Fed. And with such high correlation these days, a collectible car is probably the safest investment.

That could work. Let me know when you're getting one.

BJ

Originally Posted by boltjaM3s

On the leased vehicle, I must be a better negotiator than you because my $539 monthly payment is all-in, I did not pay for taxes, title, acquisition fee, or any security deposit.

Not sure what "additional lease costs" are either as it doesn't match the sum off the taxes/title/acquisition fee that, again, I didn't pay.

On the purchased vehicle, I don't understand that either. There's a $3000 trade-in value and the monthly payments on a 5 year note with interest would well exceed the $549 monthly 'investment' you're showing.

There is no "cash" at the end of either option. The leaser is clean and can move on, the buyer has a car worth a few grand net of the repair costs which is almost a wash.

BJ

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.

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.

You're comparing BJ's $48k MSRP car lease which probably includes a $3k discount, to a $50k MSRP cash purchase with no discount? Put in $45k as the purchase price, and fix the way low trade-in value to $7k. I just saved the cash buyer $9000 right there.

BJ's math only works if you fudge it.

Originally Posted by boltjaM3s

That could work. Let me know when you're getting one.

BJ

I want to buy a Boss 302, but we need a 3 car garage first.

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.

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).

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.

BJ

Originally Posted by boltjaM3s

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).

i assume your lease is 15k miles/year? A 2002 325i cost $27,100. So even with your assumption the residual is $6k on a $50k car.

Don't fudge the math, please.

Originally Posted by Chris90

You're comparing BJ's $48k MSRP car lease which probably includes a $3k discount, to a $50k MSRP cash purchase with no discount? Put in $45k as the purchase price, and fix the way low trade-in value to $7k. I just saved the cash buyer $9000 right there.

BJ's math only works if you fudge it.

BJ's math needs no fudging. The concept in one simple sentence:

"Instead of giving BMW $50,000 for a depreciating asset worth $3,000 in 10 years, you keep that $50,000, invest it, and turn it into an appreciating asset worth $10,000 in 10 years."

That $7,000 difference in what you did with that $50,000 makes the variance between the buying decision and the leasing decision very small, means a lot of people are suffering in old BMW's when they don't need to be.

BJ

Originally Posted by boltjaM3s

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.

There you go again, comparing your lease at probably $45k vs a $50k car.

The cash buyer could buy your car for $45k easily. Use that number, and $6k residual, so he has spent $43,500. You spent $64,680. He saved $21,000.

Originally Posted by boltjaM3s

BJ's math needs no fudging. The concept in one simple sentence:

"Instead of giving BMW $50,000 for a depreciating asset worth $3,000 in 10 years, you keep that $50,000, invest it, and turn it into an appreciating asset worth $10,000 in 10 years."

That $7,000 difference in what you did with that $50,000 makes the variance between the buying decision and the leasing decision very small, means a lot of people are suffering in old BMW's when they don't need to be.

BJ

Hey, if fudging the numbers makes you feel better, knock yourself out. The cash buyer saved $21,000 over 10 years vs your lease. Maybe the leaser can make that up investing $45k, maybe he used Bernie Madoff, who knows.