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Doesn't Anyone Buy Anymore?

187K views 3K replies 227 participants last post by  alex2364 
#1 ·
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).
 
#157 · (Edited)
I am not sure why there is so much disinformation about buying vs leasing. Owning a car cost money and you can break the cost down to 4 components:

1) depreciation. That is the price we pay for the car - what the car can fetch in a few years. In a lease, car company set the residual (which is the price they will "buy" the car back from us). If we can sell the car more than the residual, the buy camp come out ahead on that count. If the residual is higher than the price that we can sell the car down the road, the lease camp come out ahead

2) finance cost - in lease term it is the money factor. Take the money x 2400 and we will get the rate in % (0.00195 money factor = 4.68%). If someone buy the car with cash, it is the rate that we can make money if we don't use the money to buy the car. If we finance

3) Fee: Lease has a 600 to 800 acquisition cost that buying don't have

4) Tax: Different state has different rule on tax on lease car vs buy. In California, buying pay full tax upfront. Lease only pay tax on the monthly payment. 3 year lease save about 50% of the sales tax.

Once you add the 4 cost together, you know which one cost less. It is not always buying better than lease or lease better than buy. It is car dependent and depending on how we finance it also.

Lease has two advantages: 1) you can write off the lease payment again business income if we have a business and use the car for business. buying can write off part of their purchase price but there is a limit. 2) And all lease car come with a gap insurance. If we total the car during the lease term, all we need to do is to hand the insurance check and can walk away from the lease. Try that if we purchase the car.

I bought and leased cars. Lately I have been leasing more because car manufacturer tends to put incentive in leasing (especially in high residual). Selling used car is a lot of work and you need to account for the time I put in as part of the cost of buying. Buy I would be jumping back to buying in a jiffy if manufacturer put a big cash bonus on purchase only that make the cost of ownership much lower than leasing. In most case, you would find that buying and leasing is at most $1000 different.
 
#158 ·
I am not sure why there is so much disinformation about buying vs leasing. Owning a car cost money and you can break the cost down to 4 components:

1) depreciation. That is the price we pay for the car - what the car can fetch in a few years. In a lease, car company set the residual (which is the price they will "buy" the car back from us). If we can sell the car more than the residual, the buy camp come out ahead on that count. If the residual is higher than the price that we can sell the car down the road, the lease camp come out ahead

2) finance cost - in lease term it is the money factor. Take the money x 2400 and we will get the rate in % (0.00195 money factor = 4.68%). If someone buy the car with cash, it is the rate that we can make money if we don't use the money to buy the car. If we finance

3) Fee: Lease has a 600 to 800 acquisition cost that buying don't have

4) Tax: Different state has different rule on tax on lease car vs buy. In California, buying pay full tax upfront. Lease only pay tax on the monthly payment. 3 year lease save about 50% of the sales tax.

Once you add the 4 cost together, you know which one cost less. It is not always buying better than lease or lease better than buy. It is car dependent and depending on how we finance it also.

Lease has two advantages: 1) you can write off the lease payment again business income if we have a business and use the car for business. buying can write off part of their purchase price but there is a limit. 2) And all lease car come with a gap insurance. If we total the car during the lease term, all we need to do is to hand the insurance check and can walk away from the lease. Try that if we purchase the car.

I bought and leased cars. Lately I have been leasing more because car manufacturer tends to put incentive in leasing (especially in high residual). Selling used car is a lot of work and you need to account for the time I put in as part of the cost of buying. Buy I would be jumping back to buying in a jiffy if manufacturer put a big cash bonus on purchase only that make the cost of ownership much lower than leasing. In most case, you would find that buying and leasing is at most $1000 different.
It is not as clear cut as you make it and it has already been discussed that each has its advantages and disadvantages. You make it sound as though leasing is the only way to go. Read through this thread and you will see that it's split 50/50.
 
#159 ·
You can't really compare lease vs buy on particular car over 48 month period. Lease will always be worse.
There are always good lease "deals" on some particular car any given month (can be BMW, VW, MB, Infiniti, etc). So if you're looking for a particular car, you might as well buy it.

If you're looking for lease, just look for the best lease that month or maybe wait a little to see if something better pops up.
I don't see how paying less than $400 a month on $42k car with 0 down (only MSD, but that's refundable) is a bad deal.
 
#160 ·
You can't really compare lease vs buy on particular car over 48 month period. Lease will always be worse.
There are always good lease "deals" on some particular car any given month (can be BMW, VW, MB, Infiniti, etc). So if you're looking for a particular car, you might as well buy it.

If you're looking for lease, just look for the best lease that month or maybe wait a little to see if something better pops up.
I don't see how paying less than $400 a month on $42k car with 0 down (only MSD, but that's refundable) is a bad deal.
Thats a hell of a deal...
 
#162 ·
Don't want to mislead anyone, my "deal" includes ED discount. I leased the car last June, with one of the 27-month "specials" BMW had going on. At the time 36-month lease on the same car would have at least 10% higher payment.

Without ED discount payment would probably be around $430 a month, which is still very reputable.
 
#166 ·
True, but most/a lot of us were going to Europe anyway (work-related, honeymoon, etc). And car rentals in Europe are expensive :).

It does not make sense to do ED just to get discount, most likely you won't break even, if you were to fly to Munich to pick up the car in the morning and leave in the evening. Unless it's one of those M3 cabrio/ Z4/750AH leases. Still not worth the trouble.
 
#167 ·
It is not as clear cut as you make it and it has already been discussed that each has its advantages and disadvantages. You make it sound as though leasing is the only way to go. Read through this thread and you will see that it's split 50/50.

I suggested you reread my post or repeat high school English comprehension. Which part of "It is not always buying better than lease or lease better than buy" that you don't understand? I think you are just letting your buy bias cloud your reading. There is nothing wrong with lease or buy. But if manufacturer try to offer incentive for me to lease, I will take the bait. If they decided to reduce my cost for buying a few thousand, I will buy. Right now in my hosuehold we have one purchase car and two lease car. I think that is as even as I can make it with 3 cars.


"Once you add the 4 cost together, you know which one cost less. It is not always buying better than lease or lease better than buy. It is car dependent and depending on how we finance it also."
 
#173 · (Edited)
This thread should really be stickied because it covers everything very very well in the lease vs buy discussion. At the end of the day, even if you negotiate great leases on cars that are good lease candidates (like 3 series) leasing is always more expensive then buying up-front with cash (new or used) and driving and maintaining the car long term. Reality though is that few people have the stomach to keep a car for 12-15 years... especially high earning professional types!
 
#175 ·
I've had mine for 7 years, paid cash for it when it was 18 months old (13k miles), saving like $13k off a new car. It's cost me roughly $3800/year in depreciation and maintenance. Not sure how that compares to leasing.
 
#183 ·
Leasing makes sense on a BMW forum cause BMW has crazy good lease deals. If this were an Audi forum, there wouldn't be much argument.
 
#184 · (Edited)
Audi has stepped it up lately, the residuals and MF improved quite a bit on their 2013 cars, to the point that an S4 would not have cost me much more to lease than my 328i. It doesn't hurt that I would have gotten a 6% from MSRP discount via my employer as well as Audi loyalty benefits (waived lease acquisition fee plus $1250 off of the cap of the car).

Leasing is a fine option for those who could buy the car but choose not to... generally those people understand that they are paying a premium to lease vs. buy. In my humble opinion leasing is a terrible option for most people who are strapped financially and live pay check to pay check. It's far better to suck it up and buy used, and save money for the time when a new car lease/purchase makes sense.
 
#189 · (Edited)
I could have written a check for my car. Why did I lease?

1. 3 year "option" on the new car.
2. I am commuting and putting a lot of miles on now, I'm not sure that I will want to keep long-term an expensive to maintain BMW (had an Audi, been there done that) that I am putting 15K+ miles on per year.
3. Lease deals on 3-series are quite good. 59% residual for 45,000 miles with an option to buy more miles up front for .10 a mile? Yes please, I'd like some more.
4. I'd rather keep my money in my investment account, money market account, etc. It's a "pad" in case something unexpected happens. Easier to keep making lease payments and draw on my "pad" if something awful happens then have $50,000 tied up in a new car that is an asset that takes a huge depreciation hit over the first 5 yrs.

At the end of the day, for people that can't write a check (if they would choose to) I would still recommend going the used car route.... having said that, I have been known to buy a new car when I was young, stupid (naive), and wanted to impress the ladies.

We all have our little foibles, and unless you have incredible will power it is tough to earn six figures and live like a pauper just so you can retire early and dote on your dogs/grandchildren into your old age (or in BJs case create a new generation of trust-fund kids screaming that the government is ripping them off).
 
#194 ·
Ah, but modern cars are extremely reliable and if someone chooses something more sensible than a BMW, they can pay $30,000 cash and have something extremely reliable that will get them around with very little fuss for a period of 10-15 years.

You have to see the other side of things which is the joy of living for years with zero car expenses other than gas, insurance and the occasional servicing.

Lawn service? I do that myself (good exercise).
Electricity? Who pays for that? (I have a 7,000 watt solar array, nice hedge against inflation).

Basically, like most people, I save where it makes sense for me to do so, in order to splurge in other areas, like buying a new $51,700 x-drive BMW.
 
#206 ·
You make a valid point, and I don't think anyone other than BJ is arguing that buying and keeping long term is a poor choice... it's ALWAYS less expensive in the long run unless you have a nightmare lemon of a vehicle.

However, I will actually say that leasing has another advantage. With a leased car I don't have the emotional attachment and obsessing over every ding, scratch and rock chip that I have with a car I am going to keep long term. Not to mention all the aggravation of making sure that each and every servicing is done the right way, as I will be on the hook for the costs if something eventually goes wrong.

Quite liberating actually.
 
#210 · (Edited)
Agree I'd say if you knew with 100% certainty that financial situations would never change, I'd have a hard time arguing against a lease (other than being restricted to a mile limit), and I actually might start :p, my problem is I'm young and even with a S* ton of liquidity that doesn't seem to translate to getting good rates on anything :(
 
#214 ·
I have both leased and financed all my cars for the last 28 years -14 cars at all and counting. Financially to me, it does not make any difference as I sell privately all my cars. 100% of the time I get the downpayment back at least, sometimes I get some some extra money. There is no distinction between a leased or financed car mod-wise to me: the wheels, brakes, audio are always upgraded with aftermarket. And still they are sold fine.

I do not see any of my cars as commodities, utilities or just transportation. I have to really like and enjoy what I get. Nevertheless, I can change cars like t-shirts and move on to the next one easily. If there is a finance deal too good to pass, I will take it -only after trying to get the car as close to invoice as possible. On the other hand, I do not see leasing as getting a car that I cannot "afford", I see it as getting the car that I want... for now.

I think that this thread is going too deep into something that it is very simple.
 
#229 ·
I do not see any of my cars as commodities, utilities or just transportation. I have to really like and enjoy what I get.

I think that this thread is going too deep into something that it is very simple.
Point of clarification:

When I refer to a car as a "utility" I don't mean to infer that it's a commonplace, pedestrian item of no emotional attachment.

You'd have to pry my iPhone 4 from my cold dead fingers I love it so much, but it doesn't mean that it's needs to be viewed financially as anything more/less to me than a $200 monthly payment.

People always refer to cars as a "depreciating asset" and that's not the proper term. If you lease, it's not "depreciating" and it's nothing more than another necessary monthly "utility".

I need aircon in the summer and heat in the winter. It costs me $500 a month. I could scimp with the thermostat and bring it down to $480 a month, but in the end I want to be comfortable and its inevitable that I'll spend that $480 or $500 and that's that.

Same for the car. You need it, it's going to cost you, you pay what you pay, the money's gone, it's not an "investment" on an "asset" that is "depreciating". Love your car, but it's just another electric bill. So might as well get a new one every few years that's completely under warranty, have no resale headaches, and move on.

BJ
 
#244 · (Edited)
Actually it is and I have done it many times. For example, you lease your typical 3 series for 36/15 and buy an additional 15k miles for .15 cents a mile. That works out to an additional cap cost of $2250.00. Many times it is still a better deal to lease and pay for the extra mileage versus buying.

I drive 30k plus miles a year and I purchased this 535i. Having said that though I tend to agree with statements made by BJ in this thread about the advantages of leasing. In my opinion leasing versus buying is based on the rates/residuals versus the finance rate. I look at each way of driving the car and make a decision on what makes the most sense financially. I can afford to buy or lease so that has nothing to do with it. It just so happened that when I got the 335d and the 535i the finance rate was so low that it made more sense to buy the cars versus leasing each of them. I am the type that gets a new car, on average, every couple of years, but that may change. I currently have my eye on the M5, E63 and Panamera....all of those cars are quite expensive to maintain out of warranty and I am pretty sure that if I get one of those it will be a lease because I do not want to own any of them with 150k miles (which is about 4-5 years worth of driving for me). My point to add to this discussion is that each person should take a close look at the car they are buying and look at leasing versus financing and make the choice that seems best for them. However, I do think people should not automatically say I will only lease or only buy. Either one can make great sense depending on incentives at the time.
 
#246 · (Edited)
According to my CA you can pre-buy extra lease miles at only .10 per mile which is a great price if true.

You get the 3 year 45K lease with a 59% residual and you buy an extra 15,000 miles at a cost of $1500 which is chicken feed. In addition to the set of tires you will have to replace you can also count on an additional $300-$600 or so for servicing after the included service ends.... then at lease end you dispose of the vehicle. It seems highly likely to me that this will work out cheaper than putting 60K miles on a car and trying to trade or re-sell it.

Leasing (A BMW specifically) sounds ideal for someone who racks up 20K miles per year.
 
#252 ·
:dunno: I am by no means an expert in these matters, or even what could be called well-versed. I just know that I keep cars a long time (I have two, average age of 10.5 years) and when I look at the Estimate a Payment page on BMW's website, having selected a base 328i with Premium ($41,045 MSRP) I see the option to lease for 48 months at $544/mo + $2500 down, or finance for 48 months at 3.79% at $867/mo + $2500 down. Total cost of the lease, extrapolated to 10 years so 2.5 leases is $71,530. Total cost of the purchase is $44,116. (Not including maintenance, but surely that won't eat up the $27k difference.) Is my math off, or am I missing something, or is it just my 10-year ownership horizon?
 
#285 ·
Your math is not off. You will probably save about $15-20K. My own car is almost 11 years old with 240+Kmiles, 100+Kmiles longer than I thought I'd keep it :D. But then you are driving a much older dingier car. And as BJ points out, you do get very tangible things for the extra $1,500-2000/year. And we should put the difference in perspective: I have been averaging 29-31mpg with my car, so I have burned about 8000 gallons of fuel during its lifetime. Assuming an average price of $4/gal for premium, that's $32K spent just on gas, which is a lot more than the $23K I paid for the car :rofl:. Add to that insurance, maintenance, yearly registration, and repairs. So the price of my car is a relatively small portion of its cost of operation. Maybe I should get a TDI Passat.

I do feel I saved a bunch, but I am also starting to feel life is getting shorter and shorter, so I will most likely keep my next car for a shorter period.
 
#253 ·
Your math is off. When the lease comes due, you can buy the car out for a reduced sum. If the APR of the loan and the APR of the money factor are the same, then on a present value basis, the total costs will be roughly identical. They'll differ only because of some bank fees.

Even for LT buyers (such as me), leases often make sense because A) if the car is worth less than the residual at the end of the lease, you may be able to negotiate a reduced buyout and B) if for any reason you want to get rid of the car (accidents, reliability, change in life circumstances), you hold an option.
 
#260 ·
With interest rates as low as there are there's no reason not to finance I guess (use the banks money) at lease end if you are doing a buyout but I prefer to pay cash if I want to purchase at lease end. I also have a policy of not holding a note on a car that is out of warranty.
 
#264 ·
I am the same way (when it comes to cars). I hate leverage, so this lease payment scares the cr@p out of me. Unfortunately, I am not in a position to pay cash, so financing at the most favorable terms possible makes sense. Plus, I'm giving myself three years to accumulate the buyout cash and make sure I don't have a lemon. The bottom line is that these lease terms are enabling me to buy a nicer car than I could afford without having to make other sacrifices to my lifestyle (i.e., my wife's lifestyle). That, to me, is the name of the game. I have loved BMWs since my dad bought his first (1984 528e). I had the good fortune of being able to fulfill my dream of buying one in 2006 and was able to do so with cash. This is my first car payment and it makes me uncomfortable to say the least, but at least I get to keep the dream alive, and do so on very favorable terms.
 
#266 ·
If you only drive short commute to work, from pure financial standpoint, leasing a electric car like the Volt will be the way to go. You can lease one for around $300 with no down for two years, never pay for gas.

The few BMW 1 series electric though cost over $500 a month with $2k down. Once electric becomes a viable alternative, leasing will probably be the only sensible option for them.
 
#267 ·
I have a buddy who got a volt. Not my cup of tea, it can't even get my heart going and I'm hyperactive. :rofl:

The tech is laughable, he couldn't even get it to stream BT audio from his droid. Interior is pure budget, a Prius feels more luxurious.

Now a Tesla, I might be able to do that. Not interested in the White Star (Model S) but their rumored Blue Star (smaller sedan) might work for me.

If it had a real world round trip range of 120 miles even in the winter time I could probably make it work.

Not a big fan though of giant touch screen dash boards a la Tesla and Ford MS Touch. Maybe when haptic feedback shows up they will be better.
 
#276 ·
I bought the 335i outright and am leasing the 7. I did the math in both cases and I think that I made the right decision both times. I have leased cars in the past and sometimes I purchased them after the lease was over and sometimes I gave them back. I have also financed cars. You have to look at each situtation individually,

CA
 
#289 ·
I bought the 335i outright and am leasing the 7. I did the math in both cases and I think that I made the right decision both times. I have leased cars in the past and sometimes I purchased them after the lease was over and sometimes I gave them back. I have also financed cars. You have to look at each situtation individually,

CA
The 335i historically has very good resale value, whereas the 7 Series typically have poor resale values. You made the right decision on both, IMO.
 
#293 ·
Clearly every lease vs buy calculation is different since BMW could be setting an artificially high residual or an artificially low money factor/interest rate to increase sales of a specific model with the Z4 last year being a prime example.

I live in California and despite the tax advantages of leasing if you are planning to own your car for less then 4-5 years, I decided to buy a BMW X1 via European Delivery since the car is lightly optioned and I feel as though I will come out ahead if I simply own it 30 months. On a much more heavily optioned X1, I feel as though I would need to hold it for at least 48 months for a purchase to pay off in comparison to a lease. I'm in the position to pay cash for the car so I avoid interest and the leasing bank fee but obviously I'm tying up some money that could be deployed elsewhere. $725 bank fee out of $50,000 is not that large of a percentage but out of ~$30,000 it is more noticeable.

There are a lot of factors to consider but lightly optioned fuel efficient cars often do much better then expected in terms of residual value since people buying used cars don't put that much value on most options besides items like air conditioning that are standard in most cars. Options on a BMW usually depreciate in value at a faster rate then the base car itself.

The other benefit of owning if you buy a car that wasn't too expensive at first -- lets say $36,000 before tax and title --, you may in position to drop/scale back insurance coverage after 3 to 4 years and take a risk that you won't crash the car to save even more money.
 
#302 ·
Clearly every lease vs buy calculation is different since BMW could be setting an artificially high residual or an artificially low money factor/interest rate to increase sales of a specific model with the Z4 last year being a prime example.

I live in California and despite the tax advantages of leasing if you are planning to own your car for less then 4-5 years, I decided to buy a BMW X1 via European Delivery since the car is lightly optioned and I feel as though I will come out ahead if I simply own it 30 months. On a much more heavily optioned X1, I feel as though I would need to hold it for at least 48 months for a purchase to pay off in comparison to a lease. I'm in the position to pay cash for the car so I avoid interest and the leasing bank fee but obviously I'm tying up some money that could be deployed elsewhere. $725 bank fee out of $50,000 is not that large of a percentage but out of ~$30,000 it is more noticeable.

There are a lot of factors to consider but lightly optioned fuel efficient cars often do much better then expected in terms of residual value since people buying used cars don't put that much value on most options besides items like air conditioning that are standard in most cars. Options on a BMW usually depreciate in value at a faster rate then the base car itself.

The other benefit of owning if you buy a car that wasn't too expensive at first -- lets say $36,000 before tax and title --, you may in position to drop/scale back insurance coverage after 3 to 4 years and take a risk that you won't crash the car to save even more money.
How much is your insurance? I live in California. Our insurance is dirt cheap compared to other states.
 
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