Doesn't Anyone Buy Anymore?

Originally Posted by SamS

I plan on taking my 3.29% BMW FS loan immediately over to PenFed, for 1.49%. BMW will get the hint, soon enough.

I kind of think your hint might get lost in the 95%+ of loans that stay written with BMWFS. They sell a lot of cars with high markups and at these rates. That's great since it ultimately allows the people here to get invoice+ and base rates at ease in most markets on most vehicles. But my point is that I think you will benefit and BMWFS will keep charging what they do or very close to it.

Originally Posted by akaMomo

I kind of think your hint might get lost in the 95%+ of loans that stay written with BMWFS. They sell a lot of cars with high markups and at these rates. That's great since it ultimately allows the people here to get invoice+ and base rates at ease in most markets on most vehicles. But my point is that I think you will benefit and BMWFS will keep charging what they do or very close to it.

You're probably right. But I'm not gonna let them fleece me out of an extra ~$800 for due to their inflated rates

Originally Posted by SamS

You're probably right. But I'm not gonna let them fleece me out of an extra ~$800 for due to their inflated rates

Understood. The one thing I would wonder is if eventually they re-wrote the rebate terms to prevent this. Ie, must hold for x months. Not sure.

In LA and probably in most other states, sales tax is charged on the down payment and the monthly rental fees.

I ordered a 335I with the deal they are currently offering. However, sales tax is not included in the price BMW offers cause the sales tax rates vary from state to state. My notes are $417 per month with a $4,600 up front cost. The less you put down on a lease, the higher your notes and total interest will be.

Originally Posted by akaMomo

Understood. The one thing I would wonder is if eventually they re-wrote the rebate terms to prevent this. Ie, must hold for x months. Not sure.

my dealer said... i should hold the loan for at least 3 months.

his reason was, that since i'd never bought a BMW before i want to hold it for 3 months so i get counted as a BMW financial services customer, so that next time around i can get those loyalty bonuses.

Originally Posted by hans007

my dealer said... i should hold the loan for at least 3 months.

his reason was, that since i'd never bought a BMW before i want to hold it for 3 months so i get counted as a BMW financial services customer, so that next time around i can get those loyalty bonuses.

I have a sneaky suspicion he is making up stuff. AFAIK, you just have to be an owner to qualify for any loyalty offer.

Maybe someone can answer this: I always hear that leases are good if you own a small business since you can write it off. Well, a buddy of mine is a contractor, and he had an old GTI, and he writes off $8000 a year (16k miles * 55 cents/mile) driving that car.

That's higher than a typical lease payment, so what is the advantage of leasing vs taking the mileage writeoff on an old car?

Originally Posted by Chris90

Maybe someone can answer this: I always hear that leases are good if you own a small business since you can write it off. Well, a buddy of mine is a contractor, and he had an old GTI, and he writes off $8000 a year (16k miles * 55 cents/mile) driving that car.

That's higher than a typical lease payment, so what is the advantage of leasing vs taking the mileage writeoff on an old car?

i think it goes towards his taxes.

Originally Posted by Chris90

Maybe someone can answer this: I always hear that leases are good if you own a small business since you can write it off. Well, a buddy of mine is a contractor, and he had an old GTI, and he writes off $8000 a year (16k miles * 55 cents/mile) driving that car.

That's higher than a typical lease payment, so what is the advantage of leasing vs taking the mileage writeoff on an old car?

It varies by situation of course. Business use can be made by a company or individual and either can be in differing tax scenarios.

For a personally owned vehicle you can write off actual cost of USE (maintenance, fuel, etc) or the per mile allowance the IRS sets annually ( .55 was for 2009, it was .51 in 2011 for example). Parking costs come in addition to either of these. That is for business USE on a personal return. On a personal return you are already using post-tax dollars. You buy the car with money after taxes. You don't need to worry about the accumulating asset in a tax sense.

A business is paying with PRE TAX dollars (gross income before taxes are due on profit). Depending on the structure of the business and your ownership in it, you may need to concern yourself with money that is piling up in the business. Buying a car with a business can be this situation. The vehicle itself is an ASSET. The business owns the vehicle, it makes payments, that money goes from the business checking account to an asset account (car) and has a split that goes off to the interest paid or cost of loan. The money doesn't leave your books it merely becomes a different type of asset (the physical car). The issue here is the $50k "spent" on the car is still on the books and will have to be taxed at some point. Even though you are spending that money it is being retained by the car you are accumulating. That retained asset will be taxed. You will owe that tax, either at the business level or depending on the business entity, at the personal level. Or both.

The business can depreciate part of that asset on a schedule of a certain number of years or all at once to a limit (section 179 deduction) to get it off the books. But a business that pays a lease is spending ALL of that payment on vehicle RENT and therefore it is 100% going from asset (money) to expense and off your books. No tax. You have paid for that vehicle with pre-tax dollars and there are usually a lot more of those around each year than post tax dollars. Have a look at your paycheck as one example.

Clearly situations vary. But if you own the right type of business entity it just might make sense to lease. Its like this whole thread, redux, and about six times more variables. This is why we pay accountants, or should, especially when you start earning and spending more. Or own a business. Or both.

I am not an accountant. Mine tells me to lease. I trust him and have seen him save me money over and over again - FOR MY SITUATION. They are all different, every last one. Accountants vary too along with their advice. If you are expecting any real kind of tax benefit your strategy should come from your accountant and not here, that's for sure. Ask him or her.

Originally Posted by Chris90

Maybe someone can answer this: I always hear that leases are good if you own a small business since you can write it off. Well, a buddy of mine is a contractor, and he had an old GTI, and he writes off $8000 a year (16k miles * 55 cents/mile) driving that car.

That's higher than a typical lease payment, so what is the advantage of leasing vs taking the mileage writeoff on an old car?

Whether you buy the car or lease it, you have the option to use the IRS tables for mileage. Note, if you use the vehicle for personal use, you have to separate the two. Personal usage should not be used in figuring the mileage. The same principle applies to other assets.

Late to the party but here's my experience.

I was ALL SET t to lease for 36 months. The way the CA presented the numbers, it appeared that I wouldn't really be paying much extra for a lease over buy, when comparing similar time periods.

And then I discussed with my accountant, who in 10 minutes convinced me to pay most of it out of pocket and finance a small amount for 4 years.

So, I guess numbers can be twisted either way, depending on which rationale you are using.

Finance rates are certainly much more attractive than BMW FS lease rates.

But if you prefer new wheels every 3 years, lease is the way to go. I like 4-5 year cycle so buy made more sense.

Originally Posted by lacarnut

Whether you buy the car or lease it, you have the option to use the IRS tables for mileage. Note, if you use the vehicle for personal use, you have to separate the two.

I think you are not supposed to deduct commuting miles, even if it is to your own business. But if you are driving to different places from your work, for your work, then you can deduct. I am not an accountant so take this for what it is.

Having said that, I think many people take deductions they technically should not. It is like folks who buy cars and other things with home equity loans and deduct the interest. You are not supposed to, but unless the amounts are large, you probably won't get caught.

Originally Posted by Alpine300ZHP

Your example and mine are why I do not subscribe to the "always lease" or "always buy" mantra. When I purchase a new car I look at both ways of paying for it and pick the one that makes the most sense. In 2011, for me, buying both cars made the most sense. 90% of my purchases have been leases though. Next up for me is an x5M or x5 5.0 and I will weigh the lease vs. buy when I get that car. Now Dunderhi...we must both be on the same wavelength because I have been seriously thinking about a 6 for my next car (the x5 will be for the wife). After doing a track day in a M6 I think I have found my new favorite BMW (once the wife gets the x5 I will no longer need or want a sedan).

Great minds do think alike, except Mrs. D isn't ready to part with her 335d quite yet. (Yes BJ, she has 40kmi on her out of date E90 and she doesn't want a new car.) Anyway, I ran the lease numbers on a $120k M6 doing an ED (allowing for $5k profit) with no money down and the taxes rolled in yields an $1,800/mo payment. Not too bad, but I predict that this time next year the ED profit margin would be down to $1,200; dropping the monthly payments by $100/month. Doing a loan hits about $2k/mo for 60mo at 3.29%. Unfortunately, this loan amount is too big for PenFed ($70k max), so BMW's rate might be the best choice on a buy.

Originally Posted by SamS

I plan on taking my 3.29% BMW FS loan immediately over to PenFed, for 1.49%. BMW will get the hint, soon enough.

Check your loan paperwork. I remember Jon Shaffer saying something about BMWFS has put some contractual language in there recently that stipulates that you must hold onto the loan for x amount of months or there is a pre-payment penalty equal to all of the dollar incentives paid to you at the time of sale. I am not 100% sure of the specifics, but it has been discussed here that BMWFS makes you hold onto the loan for a short period of time. I recall it being no more than 6 months.

Originally Posted by Alpine300ZHP

Check your loan paperwork. I remember Jon Shaffer saying something about BMWFS has put some contractual language in there recently that stipulates that you must hold onto the loan for x amount of months or there is a pre-payment penalty equal to all of the dollar incentives paid to you at the time of sale. I am not 100% sure of the specifics, but it has been discussed here that BMWFS makes you hold onto the loan for a short period of time. I recall it being no more than 6 months.

Yes, I will check that out thanks. Going in to do the loan paperwork in 3 weeks.

Originally Posted by dunderhi

Great minds do think alike, except Mrs. D isn't ready to part with her 335d quite yet. (Yes BJ, she has 40kmi on her out of date E90 and she doesn't want a new car.) Anyway, I ran the lease numbers on a $120k M6 doing an ED (allowing for $5k profit) with no money down and the taxes rolled in yields an $1,800/mo payment. Not too bad, but I predict that this time next year the ED profit margin would be down to $1,200; dropping the monthly payments by $100/month. Doing a loan hits about $2k/mo for 60mo at 3.29%. Unfortunately, this loan amount is too big for PenFed ($70k max), so BMW's rate might be the best choice on a buy.

Why not put $50k down to get the cheaper PenFed loan?

Originally Posted by bmw_or_audi

I think you are not supposed to deduct commuting miles, even if it is to your own business. But if you are driving to different places from your work, for your work, then you can deduct. I am not an accountant so take this for what it is.

Having said that, I think many people take deductions they technically should not. It is like folks who buy cars and other things with home equity loans and deduct the interest. You are not supposed to, but unless the amounts are large, you probably won't get caught.

Sounds right. I have a rental condo in FL and deduct mileage provided the majority of the days I stay there is for business purposes such as doing repairs. In other words, if I make repairs for 4 days and hang out on the beach 3 days, all of my mileage is deductable. I can also claim meals for those 4 days as a deduction under the IRS rules. If I spent 4 days at the beach and 3 days makeing repairs, none of my mileage would be deductable in commuting between my house and the condo.

Originally Posted by MonkeyCMonkeyDo

On a 5 year loan the first year is over 70% interest payments. It works like reverse slopes. The last two years of a 5 year loan you are finally paying mostly balance not interest. What was the payoff for the 50k loan after one year?

I'm not sure where you get this 70% number from, but it is nowhere near accurate. There is a certain amount of "front-loading" of interest due to the way interest is calculated on the outstanding balance, but it comes out nothing close to 70%... unless I'm missing something you are trying to explain.

Take a $50,000 five year loan at 4%. The first year is $9,218 towards loan principle, and $1,832 in interest. Or about 35% of the total $5,250 in interest for five years. So even in year one you are paying back far more toward principle than in interest.

There is a very linear drop in interest payments each month with a corresponding linear increase in principle payments. In this example about $3.00 a month difference on both sides of the equation.

Originally Posted by EnerJi

Why not put $50k down to get the cheaper PenFed loan?

It wouild be an option, but given my history of paying their loans off early I bet I could get them to waive their limit. If not their no closing cost home equity loans are only 1.99%.

Originally Posted by Weaselboy

I'm not sure where you get this 70% number from, but it is nowhere near accurate. There is a certain amount of "front-loading" of interest due to the way interest is calculated on the outstanding balance, but it comes out nothing close to 70%... unless I'm missing something you are trying to explain.

Take a $50,000 five year loan at 4%. The first year is $9,218 towards loan principle, and $1,832 in interest. Or about 35% of the total $5,250 in interest for five years. So even in year one you are paying back far more toward principle than in interest.

There is a very linear drop in interest payments each month with a corresponding linear increase in principle payments. In this example about $3.00 a month difference on both sides of the equation.

Sorry I was basing that number on traditional loans of 7 %. The number is equivalent to the loan amount. So a 4% loan is around 40% and a 1% loan would be 10% etc. the point wasn't a broad across the board type of statement. We are currently in an insanely low interest period that won't last. It used to be getting 4% from a credit union for a car was a great deal when 7% was standard.

Sorry I wasn't clear before. Typing on iPhone makes a lot of problems.

Originally Posted by MonkeyCMonkeyDo

Sorry I was basing that number on traditional loans of 7 %. The number is equivalent to the loan amount. So a 4% loan is around 40% and a 1% loan would be 10% etc. the point wasn't a broad across the board type of statement. We are currently in an insanely low interest period that won't last. It used to be getting 4% from a credit union for a car was a great deal when 7% was standard.

Sorry I wasn't clear before. Typing on iPhone makes a lot of problems.

That's untrue. As a case in point, below are 60 months loan @ 7% :

Number of Payments 60
Monthly Payment $990.06
Total Principal Paid $50,000.00
Total Interest Paid $9,403.60
Total Paid $59,403.60

The only way for someone to get hit with 70% total interest (60 months) is via sub-prime lending @ 23.25% APR.

Originally Posted by dunderhi

It wouild be an option, but given my history of paying their loans off early I bet I could get them to waive their limit. If not their no closing cost home equity loans are only 1.99%.

D, that's a good one.

Home equity comes with 1098 (tax-deductible... cough, cough ). In TX, we have HELOC in addition to home equity.

If you did not pay cash and purchase the car outright you are making monthly payments on a car that a bank or finance companies holds the title to. Leasing is simply an alternative method of finananing.

There is no "one size fits all" and you have to analyze your own situation carefully to determine what will work best for you.

CA

Lease tax write off's help.

Originally Posted by bayoucity

D, that's a good one.

Home equity comes with 1098 (tax-deductible... cough, cough ). In TX, we have HELOC in addition to home equity.

I found a few home equity loans of 2%. So that's a bit better than 1.49% car loan at penfed if you're in the 35% tax bracket. But most home loans require some upfront money and the savings would be slim on 40k.