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F10 / F11 (2011 - Current)
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  #151  
Old 02-13-2013, 07:57 PM
PeterC4 PeterC4 is offline
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Quote:
Originally Posted by cordoor View Post
I'm not disagreeing with you. I'm simply explaining why I believe Dave says what he says.

I was simply saying "bad advice" is not the term I'd use.

I'd probably say he is feeding milk to babes. Whereas more sophisticated people like you would rather eat steak.
Well, I don't quite see it that way. I think it's bad advice because it is not complete and can literally be wrong in some cases. Sometimes, leasing is a good idea. When you can lease a depreciating asset for less than the depreciation you win, hands down. And when you can put the money to work or pay-off more critical debt (mortgage), I think you are better off. Anyway, I would love to debate it with the guy.
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  #152  
Old 02-13-2013, 08:05 PM
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Originally Posted by PeterC4 View Post
Well, I don't quite see it that way. I think it's bad advice because it is not complete and can literally be wrong in some cases. Sometimes, leasing is a good idea. When you can lease a depreciating asset for less than the depreciation you win, hands down. And when you can put the money to work or pay-off more critical debt (mortgage), I think you are better off. Anyway, I would love to debate it with the guy.
Typical Dave listener: "Depreciating huh?"

I think you are right about your assessment of leasing vs. buying. I just don't think the typical Dave listener (that is, the typical American) would understand it enough to make the right decision.
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  #153  
Old 02-13-2013, 08:51 PM
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The best financial decision in the long term will obviously be to buy a slightly 1-2 year old Used CPO model. That's what I tried to do until I realized even 2011 535i's with M Sport Package and almost any miles were going for barely less than discounted new 2013's (in some cases, even asking more, fathom that). At the same time, I've spoiled myself in wanting the emotional-effect of a brand new car now.

One good point about Leasing is that for those who invest their cash, by way of literal investments, trading stocks, etc., you can make lots of money because you didn't sacrifice a large chunk to buy a car (or at the same time you can also risk losing money which could have been even more safely tucked into the car, to balance out the perspective, however let's stick to the making money part, as that's the plan). Therefore, even if you went into a Lease with the intent to buy after the Lease (to make the comparison fair), after all is said and done, due to the rental fees, the higher Lease-end residual value, etc., you'd be paying a good $5+K than if you would have bought the car in the first place. However, let's say we're talking a $65K car, and even saying you'd "only" be putting $30K of it down, how much is the "Lease Luxury" worth to you? I.e, how much can you make from having that extra $30K+ with you, how much do you value a 2-3 year "Rent To Own" trial? How much do you value having the ability to not have to be stuck with the resale of a car that was in an accident, if the car got in an accident during that initial "Trial Period"? Etc.

Saying that your intent is to BUY a car, and you don't want to spend over a certain amount on a car for the next 5-6 years (which would eliminate the notion of Leasing multiple cars as you'd be spending almost the price of a new F10 for a 6 year rental), you can purchase outright and avoid all the Lease fee's and high residual purchase factor, or you can Lease, and value the above prospects I listed that come with it, realizing that you will have to pay a good $5K+ for that decision, but can prolong it extend it for the entire 6 (or 8 if you really pushed it) years in this case, while choosing to pay extra to take a more "risk free trial run".
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  #154  
Old 02-13-2013, 09:01 PM
swajames swajames is offline
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The bottom line is that BMW is throwing money at leases to move metal. BMW is selling you money at close to free, is setting its lease residuals artificially high and is making it easier than it's ever been to drive a new car. You can crunch the numbers all you like, but there's really no reason for a well structured lease deal to be markedly more (if any more) expensive than the cost you'd incur were to choose to finance or buy the same car outright over the same period. As I said above, deals are either good or bad, and the bad deals are not solely the preserve of the lessee. A poorly prepared buyer will pay more regardless of how they finance their vehicle.
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  #155  
Old 02-13-2013, 09:24 PM
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Popoemt Popoemt is offline
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I'm not getting these arguments pro or con either way? When it comes down to it with a lease, isn't it ultimately cheaper to lease a car? For example, over a 9 year period, with an average $1,000 lease payment, you would spend $108,000 and get 3 new cars out of it (with no money for warranty repairs/maintenance, etc), if you purchase you get the car outright for $100k, stay in it for 3 years, and go back to the dealer, most likely your dropping at least another 20-30k to buy a new car with trade in value built in? Times that out over 9 years (trading the purchased car in every 3 years), you're paying near the same, but fronting all the money instead of keeping it in pocket?? Maybe I'm simplifying this way too much?

I just read an article someone posted in the 7 forum that linked to an article from Edmunds that had this in it:

Retained Value
Our Imperial Blue Metallic BMW 750i rolled into the Inside Line test garage with a price tag of $90,870. It left one year later, down 23 percent in value according to Edmunds' TMV® Calculator. This equates to a price of $69,607 for a private-party sale.


It seems depreciation (after 3 years) in a purchased car would almost kill the idea of buying v. leasing? Si o no?

On another side note, this is me trying to figure out the benefits of leasing/purchasing as I am ready to buy/lease, and thinking the leasing is better, would love to have people offer advice/pointers on this thought process...
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Last edited by Popoemt; 02-13-2013 at 09:44 PM.
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  #156  
Old 02-13-2013, 09:32 PM
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K-A K-A is offline
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Quote:
Originally Posted by swajames View Post
The bottom line is that BMW is throwing money at leases to move metal. BMW is selling you money at close to free, is setting its lease residuals artificially high and is making it easier than it's ever been to drive a new car. You can crunch the numbers all you like, but there's really no reason for a well structured lease deal to be markedly more (if any more) expensive than the cost you'd incur were to choose to finance or buy the same car outright over the same period. As I said above, deals are either good or bad, and the bad deals are not solely the preserve of the lessee. A poorly prepared buyer will pay more regardless of how they finance their vehicle.
If you bought out a car that's attractive during its "Lease period" after the Lease is up, they'd "get you" on the buyout part. Using my own car as an example, which is a very good example of very attractive Lease pricing/terms due to artificially high residual (74% for two years on a $63,450 MSRP car):

My total payments, including drive off total to a little over or around $14,000 for two years (not including Tax each month, to keep things more easy to calculate, tax adds a little over $1K to the total). So if I return the car at Lease end, I "win" as I simply took advantage of a great deal. However, if I were initially planning to purchase one car for the next 6+ years, and chose Lease simply to keep cash in my bank to work for me with the intent to cancel out and even come hopefully far ahead of any losses incurred from not buying the car outright to begin with, choosing to have a "trial period" for a couple of years, also to extend my payment period for 7 years (instead of 5 like when you finance), etc., it gets more complicated.

My artificially high residual payment on a $63,450 car that was priced down to about $56.5 after discounts and incentives, is $46,900 after 24 months.

Therefore, if I chose to buy out this car (pretending that my initial plan again was to "buy one car for 6+ years", by way of Leasing for its extra benefits listed above, or outright buying), I'd be spending roughly $4-5K more over time as it would total me $60,900 to Lease then purchase my particular car.

So, basically, in my scenario, that $4K would have to be worth not only the luxury of "in case something happens within the first two years I can get out easily", but also being able to extend payments out on the car, therefore allowing me to use the $30+K I would have put down on it to make me even more money than $4K.

I hope that makes sense. Leasing is very complex when you start looking at how much it would cost you for 6 or so years, whether or not you buy the car or Lease multiples, when you start adding stuff up.
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Last edited by K-A; 02-13-2013 at 09:39 PM.
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  #157  
Old 02-13-2013, 10:26 PM
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cordoor cordoor is online now
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Yes, the scenario you describe certainly complicates the issue.

I will speak for my situation only: I prefer simplicity and fixed cost. I prefer simplicity so I can move on and do something else. I prefer fixed cost so I know what to expect. So for me, there are only two options that make sense:

1. Lease for whichever term gives the lowest monthly cost.

2. Buy new + extended warranty, using cash, and hold for seven years (typical length of an extended warranty).

These are the only two options I can think of that offer both simplicity and fixed cost while providing the best value for either the lease or buy scenario. For option 2, I do not want to buy CPO because searching for a used vehicle that has the features and colors you want takes time and is not simple (let's ignore the fact I'm sitting here wasting time on this forum )

So the option you choose depends on how frequently you want to be driving something new.

I'm leasing my F10, so you know my answer to that question.
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  #158  
Old 02-13-2013, 10:38 PM
swajames swajames is offline
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Quote:
Originally Posted by K-A View Post
If you bought out a car that's attractive during its "Lease period" after the Lease is up, they'd "get you" on the buyout part. Using my own car as an example, which is a very good example of very attractive Lease pricing/terms due to artificially high residual (74% for two years on a $63,450 MSRP car):

My total payments, including drive off total to a little over or around $14,000 for two years (not including Tax each month, to keep things more easy to calculate, tax adds a little over $1K to the total). So if I return the car at Lease end, I "win" as I simply took advantage of a great deal. However, if I were initially planning to purchase one car for the next 6+ years, and chose Lease simply to keep cash in my bank to work for me with the intent to cancel out and even come hopefully far ahead of any losses incurred from not buying the car outright to begin with, choosing to have a "trial period" for a couple of years, also to extend my payment period for 7 years (instead of 5 like when you finance), etc., it gets more complicated.

My artificially high residual payment on a $63,450 car that was priced down to about $56.5 after discounts and incentives, is $46,900 after 24 months.

Therefore, if I chose to buy out this car (pretending that my initial plan again was to "buy one car for 6+ years", by way of Leasing for its extra benefits listed above, or outright buying), I'd be spending roughly $4-5K more over time as it would total me $60,900 to Lease then purchase my particular car.

So, basically, in my scenario, that $4K would have to be worth not only the luxury of "in case something happens within the first two years I can get out easily", but also being able to extend payments out on the car, therefore allowing me to use the $30+K I would have put down on it to make me even more money than $4K.

I hope that makes sense. Leasing is very complex when you start looking at how much it would cost you for 6 or so years, whether or not you buy the car or Lease multiples, when you start adding stuff up.
It all depends how long you plan to keep the car. Keep it for the lease period only and you'd probably have paid less than you'd have suffered in depreciation over the same period had you purchased. Once you start getting out to six to seven years, though, leasing makes far less sense and it would, more likely than not, be better to buy.
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  #159  
Old 02-13-2013, 11:00 PM
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K-A K-A is offline
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Originally Posted by swajames View Post
It all depends how long you plan to keep the car. Keep it for the lease period only and you'd probably have paid less than you'd have suffered in depreciation over the same period had you purchased. Once you start getting out to six to seven years, though, leasing makes far less sense and it would, more likely than not, be better to buy.
Agreed, that's a quick way of saying what I was trying to say, lol.

However, an interesting concept is that although buying out my Lease (speaking hypothetically to use a specific example) would cost me $4-$5K more than if I were to purchase outright.... would the fact that I could keep a large chunk of cash in the bank be enough to offset that, considering the benefits of Leasing as a "trial period before embarking on the full purchase" are worth some dough, and of course the fact that I could keep as much cash to my name as possible due to spreading the payments out so much for so long, I wouldn't ever have to put all that much down, still be worth it? It's interesting to consider that.

Nobody ever really Leases with the intent to buy, because the high residual is too much a turnoff, but pretending that someone isn't in the Lease to "get out in a few years", and actively puts their money to work for them (to hopefully more than make back that $4K and then some due to getting the benefits of having that extra cash as an investment cushion), it might actually be a feasible option as well, if they just didn't want to part with their own car.
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  #160  
Old 02-14-2013, 01:55 AM
PeterC4 PeterC4 is offline
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Quote:
Originally Posted by Popoemt View Post
I'm not getting these arguments pro or con either way? When it comes down to it with a lease, isn't it ultimately cheaper to lease a car? For example, over a 9 year period, with an average $1,000 lease payment, you would spend $108,000 and get 3 new cars out of it (with no money for warranty repairs/maintenance, etc), if you purchase you get the car outright for $100k, stay in it for 3 years, and go back to the dealer, most likely your dropping at least another 20-30k to buy a new car with trade in value built in? Times that out over 9 years (trading the purchased car in every 3 years), you're paying near the same, but fronting all the money instead of keeping it in pocket?? Maybe I'm simplifying this way too much?

I just read an article someone posted in the 7 forum that linked to an article from Edmunds that had this in it:

Retained Value
Our Imperial Blue Metallic BMW 750i rolled into the Inside Line test garage with a price tag of $90,870. It left one year later, down 23 percent in value according to Edmunds' TMV® Calculator. This equates to a price of $69,607 for a private-party sale.


It seems depreciation (after 3 years) in a purchased car would almost kill the idea of buying v. leasing? Si o no?

On another side note, this is me trying to figure out the benefits of leasing/purchasing as I am ready to buy/lease, and thinking the leasing is better, would love to have people offer advice/pointers on this thought process...
It does depend on the economics...very low residuals in some cars make it less attractive to lease. In Canada, the combination you use would not be likely. For example a 535xi well equipped is like $72K to buy net of discounts and $1,200 to lease (all pre-tax but including PDI and freight). The other issue is lifestyle, cash flow. Some professionals who make high six figures and are in cyclical businesses like investment banking or commercial real estate are cash buyers because they need to have flexibility and certainty around having their cars. Others drive the heck out of them, with excessive mileage and a lease just doesn't work. In your example above, it all depends on those payments, which is dependant upon the interest rate and residual. But overall I tend to agree with you. If you can keep the lease deals favourable, you are always driving a new car under warranty. For some people it's the only way to go. For others they want certainty and the fewest monthly payment commitments possible, particularly as they enter retirement age. I had an Acura TL that I bought and as it got a little older it got shared between my two teenage kids who used it to go to university and get around. By the time it was going onto it's 9th year it had been in at least 5 different fender benders, my wife had scraped the side of a car on an underground garage pillar, it had over 100,000 miles on it and it had been well used. It was generally reliable, and outside of changing tires and going to the body shop often, it was a pretty good car. It cost me around $40,000 or so to buy. In that case, I felt I got my money out of it.
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Last edited by PeterC4; 02-14-2013 at 02:34 AM.
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  #161  
Old 02-24-2013, 08:17 AM
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hufington hufington is offline
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Quote:
Originally Posted by mryakanisachoad View Post
Most Americans who can't understand just how good these leasing deals are have never lived as an adult in a normal interest rate environment. They lack perspective and reference.

I shudder to think just how much one of these cars will cost to either purchase or lease 5 or 6 years from now.
Think of the fact that in some countries an F10 520 (not 528) would cost you around US$110,000 (a 535i would cost around $200K) and you need to pay that total sum up front. We should be grateful for whatever lease deals we are getting.
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