I've been looking through this thread with a lot of interest since my 328 is due in less than a month. I've been a buy 'em and hold 'em car guy. My current ride, a 1999 A4, attests to that. The CA made a very convincing argument for leasing. Even though I started out sure I would buy, I educated myself on leasing and did the comparison. I was quite surprised. For my situation at least, it makes no sense to buy at all unless I just want to keep the car because I like it.
It seems to me which way the lease versus buy decision goes comes down to these parameters.
1. Risk assessment. This is estimating the degree of depreciation on a car and the amount of repairs needed over years of ownership. This may drive the purchase of an extended warranty for the ownership path. For me, this tipped the balance toward lease. Also at play here is your belief in the reliability of BMW, the robustness of the extensive electronics in the car, and belief in one's ability to be able to DIY repair the car or find an independent shop that can without having to take out a second mortgage. I distrust the longevity of the electronics. I also like everything working in a car and am not tolerant of things being broken. Thus the costly extended platinum warranty is a must for me.
2. Tax deductions on lease. Not of any use for me
3. Loan or cash purchase of car. I was planning to pay cash, but even without loan interest, leasing still won.
4. Emotional attachment. This is falling in love with your car and not wanting to give it up after three years. Or maybe the concern that there will be nothing available in three years that you like as well. This was a big factor for me, but I don't think it is enough to outweigh the financial argument.
5. Investment returns for money if not used to pay for the car outright. I found even a modest 3% return on the money instead of buying the car a big part of my decision.
The details
Purchase scenario
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MSRP 52220
Purchase price 49000
NJ sales tax 3325
NJ Luxury tax 196
Reg+ Title 420
NJ Tire fee 6
Doc Fee 349 (yeah yeah, screwed me a little here)
Financing incent. -1000
loan interest 100 (taking 10K loan for 6 months to get 1000 incentive, rapid payoff)
Upfront payout 50,896 (leaving trade in out of equation)
For depreciation
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I did a simple 15%/year calculation. You can go back and forth on depreciation rates. That is what leasing is all about isn't it, taking the gambling out of this. But the 15% depreciation results in the car's value being 32,070 after 3 years, which is close to BMW .63 residual (32899). Many say these residuals are too high, but I stayed with this depreciation since if anything it would favor the ownership case.
Year Value Depreciation
0 $52,220
1 $44,387 $7,833
2 $37,729 $6,658
3 $32,070 $5,659
4 $27,259 $4,810
5 $23,170 $4,089
6 $19,695 $3,476
7 $16,741 $2,954
8 $14,229 $2,511
9 $12,095 $2,134
10 $10,281 $1,814
Additional costs if buying the car. I am assuming 4 repair trips (200 in deductibles) per year. This is just a guess. I think my numbers are pretty conservative.
Year 5 $4173 7yr warranty (prices all over the map for this, but this is what my CA gave me, said was not negotiable. A discount on this is not going to be a huge difference to the outcome)
Year 5 $1300 Tires, oil change, warranty deductibles
Year 6 $1600 Maint/Brakes, oil change warranty deductibles
Year 7 $400 Repair visits, oil change, misc.
10K Miles Lease details (March numbers)
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Sale price $49,000
Incentive -$1,000
Price Paid $48,000
MF 0.00081 (7MSD) 00130 w/o MSD
Resdual 0.63
Bank Fee 875 (yes, I noticed this was bumped up from the BMW 725 fee - need to talk to them about that)
Sales Tax 1378
same luxury tax, reg and title, doc fees as buy
Term 36m
Monthly dep charge $419.48
Monthly finance chg $65.53
Monthly charge $485
Due at signing $7108 ($3500 MSD refundable, so I just left them out of the money use calculations)
Total cost of lease after 3 years $20,584
I then did a cost of ownership/lease comparison. I also then added into the equation that if I leased, I'd have $20K extra to invest in a 529 plan for my son's college education. That also introduced an extra feel good factor - I was indulging myself with a BMW AND looking out for my son. Neat, huh? I assumed a 3% annually compounded rate of return.
Cost of ownership comparison
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Yr /Own / Lease /Lease-Own/ /Lease with 20K invested-Own
1 $8,009
2 $14,667
3 $20,326 /$20,584 /$258 / -$1597
4 $25,137
5 $34,699
6 $39,774 /$41,168 /$1,394 /-$2,487
7 stopped here since would be starting a new 3rd lease and difficult to prorate costs
The cost comparison is subtracting the cost to lease from cost to own. The cost to own is calculated by taking expenses paid for a given year minus the remaining value of the car after depreciation. Positive numbers indicate a lease is more costly, negative numbers mean owning is more expensive. Sorry I could not manage the column formatting. You can see that even without considering alternative use of money for investing, the buy/lease came out nearly the same after three years ($258), and only about a $1K advantage to owning over after 6 years. After 6 years of leasing with the 20K invested, I have earned an additional $4K in my son's college fund.
Note: I made my repair estimates and warranty decision before doing the comparison. I was completely surprised by the outcome.
Now ownership might start to look more attractive in years 7-15 (!), but personally I am not going to take the risk of running the nav, the bluetooth stuff, the HUD, etc etc without warranty coverage. Fixing that stuff will be a nightmare and it would really piss me off to drive the car with it not working.
So I guess I am going to lease. I still want to learn about the buyout options, just in case I really do love the car and want to keep it. A lot will depend on what the current models look like at that time too.