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F10 / F11 (2011 - Current)
The new chapter in the highly successful story of the BMW 5 Series Sedan (F10) and wagon (F11)

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  #26  
Old 11-18-2010, 04:58 PM
DXK DXK is offline
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Whatever you decide about the car, being back at grad school is lots of fun even the Ivy league (not all girls are nerdy or ugly) at least not in Bus. school
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  #27  
Old 11-18-2010, 05:19 PM
Jack Stefano Jack Stefano is offline
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Originally Posted by EvolutionTheory View Post
Hah!
Yes, you make a valid point, but I'm not in the position to be a starving student even after leaving my current profession. I'll be covering school out of my own pocket without loans. The only reason I'm going back to school is because I've reached a glass ceiling in my industry. I'd like to move into a profession with the potential for a much higher return. Only catch is if I don't get into essentially an Ivy league I'll end up making less than I do now and all will be for not.

Anyway, I just wanted to clarify I'm not a HS kid spending his parent's money on a new 5 Series. You know, because anonymous opinions on the internet are so important.
Get what you want. Don't worry about those "annoying" payments while you go back to school. It'll all work itself out. Besides, if you're paying for Ivy League B-school on your own dime, I'm sure those payments won't be all that annoying. Wait . . . why aren't you paying cash?
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  #28  
Old 11-18-2010, 05:23 PM
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Originally Posted by Jack Stefano View Post
Get what you want. Don't worry about those "annoying" payments while you go back to school. It'll all work itself out. Besides, if you're paying for Ivy League B-school on your own dime, I'm sure those payments won't be all that annoying. Wait . . . why aren't you paying cash?
Granted I've just begun researching leasing vs purchasing about a week before finding this thread on a search but It has been my understanding leasing payments may be lower and more practical if I only plan on keeping the car for 3 or 4 years. If I buy outright my concern is if I want to trade or sell the car in a few years for a newer model I'll be losing more money in the depreciation.

The benefits of purchasing outright are, so far as I can tell, no hassle of payments and I can drive and mod it to my hearts content.

Is this a misunderstanding?

And It'd be law school Business degrees seem to be rather worthless at the moment and in the near future, though I guess the same could be said for a Juris Doctor.
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  #29  
Old 11-18-2010, 06:04 PM
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IMO, unless you get a killer Lease deal, you'll usually come out ahead if you buy outright, or even finance (especially a very slightly Used model) with a very low APR, take care of the car, keep the mileage conservative, and sell it via *Private Party*. Manufacturers are in business to make money, and I'm sure their version of a "3 year depreciation" will be more generous than what would be in actuality. Again though, it depends on the Lease deal, if they're just trying to get people in the car, and set the residual really high, or Dealer participation is extensive, then yeah, you'll come out ahead.

For a $60K car, you're looking usually at 3 year Lease payments (everything included) totaling about mid $30's K. In 9 years, you'll have spend about $100K cash driving a new/newer $60K car. I guess it depends on the person as to how "good of a deal" that sounds, as opposed to say, keeping the same car for 9 years, etc.
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Last edited by K-A; 11-18-2010 at 06:08 PM.
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  #30  
Old 11-18-2010, 06:09 PM
Jack Stefano Jack Stefano is offline
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Quote:
Originally Posted by EvolutionTheory View Post
Granted I've just begun researching leasing vs purchasing about a week before finding this thread on a search but It has been my understanding leasing payments may be lower and more practical if I only plan on keeping the car for 3 or 4 years. If I buy outright my concern is if I want to trade or sell the car in a few years for a newer model I'll be losing more money in the depreciation.

The benefits of purchasing outright are, so far as I can tell, no hassle of payments and I can drive and mod it to my hearts content.

Is this a misunderstanding?

And It'd be law school Business degrees seem to be rather worthless at the moment and in the near future, though I guess the same could be said for a Juris Doctor.
Unless you decide to represent plaintiffs or low end criminals, or find some other lucritive niche, the financial benefits of a law degree are far down the road and involve working your ass off for too many years. Don't let this internet post influence your career moves. I'm certain you've thought it all through. If you haven't, and you can get into an Ivy League B-School, I'd suggest that. As for the car, in your position I'd probably lease.
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  #31  
Old 11-18-2010, 07:37 PM
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Quote:
Originally Posted by Jack Stefano View Post
Unless you decide to represent plaintiffs or low end criminals, or find some other lucritive niche, the financial benefits of a law degree are far down the road and involve working your ass off for too many years. Don't let this internet post influence your career moves. I'm certain you've thought it all through. If you haven't, and you can get into an Ivy League B-School, I'd suggest that. As for the car, in your position I'd probably lease.
I was thinking intellectual property and at least looking forward to starting a law career free of debt, unlike most new graduates. However, that path is far down the road after many many baby steps through school. Essentially I took a look at my life and had to decide if I was on the path to where I wanted to be, and decided I'm not.

Driving that new Alpine White 535xi sure would help me tolerate those classes
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  #32  
Old 11-18-2010, 09:01 PM
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Question

Quote:
Originally Posted by K-A View Post
IMO, unless you get a killer Lease deal, you'll usually come out ahead if you buy outright, or even finance (especially a very slightly Used model) with a very low APR, take care of the car, keep the mileage conservative, and sell it via *Private Party*. Manufacturers are in business to make money, and I'm sure their version of a "3 year depreciation" will be more generous than what would be in actuality. Again though, it depends on the Lease deal, if they're just trying to get people in the car, and set the residual really high, or Dealer participation is extensive, then yeah, you'll come out ahead.

For a $60K car, you're looking usually at 3 year Lease payments (everything included) totaling about mid $30's K. In 9 years, you'll have spend about $100K cash driving a new/newer $60K car. I guess it depends on the person as to how "good of a deal" that sounds, as opposed to say, keeping the same car for 9 years, etc.
Here's a very general estimate I've worked out..

MSRP: $80,645
Estimated Lease for 36 month with my poor old 325 as trade-in: $851 month

By end of first lease I've paid about $30,600. If I re-lease a new bmw for a similar cost after six years I've paid essentially $15,000 less than if I purchased the car outright (Not counting taxes and other fees).

If I purchase the car initially in cash, after 6 years what do you think the car would be worth? I'm not sure of the best method to predict this, though I'm aware the 2011 5 Series was just awarded best resell value by KBB, right?

To justify an outright purchase in cash the car would need to be worth around $70k in 6 years?

Can anyone see an issue with my math?
And thanks to anyone who has provided and continues to provide feedback on this!
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  #33  
Old 11-18-2010, 09:51 PM
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Hmm, my brain is bogging on that math, let me re-analyze the numbers after this post. I just wanna say that, if I'm not mistaken, you're not including the trade-in of your 3'er?

I think $851 a month for an $80K car isn't possible at all, unless you're putting down a large amount (Lease).

I'd assume your 3 is still worth about $8-$10K or so? Maybe more? Let's just say $10K, then you're essentially spending $40K on that Lease where the payments equal $30,600 (and I think an $80K car might call for even more for a 3 year Lease?)

I'd say a 6 year old 535i wold be worth high teens? Maybe low-mid $20's? Whatever 2005 5'ers were going for right before the F10 dropped would probably give you a good idea.

Regarding being awarded "Best Resale Value", I find this hilarious, and it makes no sense? The car just debuted! Lol. M-B did a similar thing when it was announced the W212 had the "Best Resale Value" before it even launched? Haha, I guess these guys are engineering psychics now too.
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Last edited by K-A; 11-18-2010 at 09:53 PM.
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  #34  
Old 11-19-2010, 03:57 PM
lawbuz lawbuz is offline
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<>

I think that's the main issue. People focus on how much or how little they need to spend on a 3-year lease, but they fail to realize that they will need to buy or lease another car after the 3-year lease period ends. Given the option between a new 535i for $55,000 (including cost of financing at 0.9%) versus a 3-year lease payment totalling $29,000, the $55,000 payment seems like a lot, but two consecutive 3-year lease terms will cost $58,000, whereas the outright purchase will be cheaper for that 6-year period. The math worsens for leasing when you factor a third lease term.
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  #35  
Old 11-19-2010, 04:14 PM
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Originally Posted by lawbuz View Post
<>

I think that's the main issue. People focus on how much or how little they need to spend on a 3-year lease, but they fail to realize that they will need to buy or lease another car after the 3-year lease period ends. Given the option between a new 535i for $55,000 (including cost of financing at 0.9%) versus a 3-year lease payment totalling $29,000, the $55,000 payment seems like a lot, but two consecutive 3-year lease terms will cost $58,000, whereas the outright purchase will be cheaper for that 6-year period. The math worsens for leasing when you factor a third lease term.
I would be getting the 535 for about $80k though, not the base $55. It sames to be a significant difference leaning towards leasing at that point?
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  #36  
Old 11-19-2010, 11:53 PM
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Originally Posted by EvolutionTheory View Post
I would be getting the 535 for about $80k though, not the base $55. It sames to be a significant difference leaning towards leasing at that point?
I think you should get hard Lease numbers first, then see what actual "deal" they'll work you on the car for purchase price (or Lease selling price for that matter), then go from there in seeing which will be more financially responsible.

From my math, on certain cars, I feel Leasing is best used as a convenience factor. I really feel that getting a car with a good resale value ("goof" used loosely), and getting a good selling-price deal worked out, and low APR (if not buying cash), and having the ability and will to sell Private Party.... You'll come out ahead by a bit with the purchase.... IMO.
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  #37  
Old 11-20-2010, 05:58 AM
richschneid richschneid is offline
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Quote:
Originally Posted by EvolutionTheory View Post
Here's a very general estimate I've worked out..

MSRP: $80,645
Estimated Lease for 36 month with my poor old 325 as trade-in: $851 month

By end of first lease I've paid about $30,600. If I re-lease a new bmw for a similar cost after six years I've paid essentially $15,000 less than if I purchased the car outright (Not counting taxes and other fees).

If I purchase the car initially in cash, after 6 years what do you think the car would be worth? I'm not sure of the best method to predict this, though I'm aware the 2011 5 Series was just awarded best resell value by KBB, right?

To justify an outright purchase in cash the car would need to be worth around $70k in 6 years?

Can anyone see an issue with my math?
And thanks to anyone who has provided and continues to provide feedback on this!
Purchase price $80,000. Estimated resale value at six years $30,000. Depreciation cost $8,333 per year. Lost opportunity investment results on 50k is variable. Full lease cost should be calculated against leasing for the full $80,000, not the 80k minus the trade in value of your 3 series. The longer you keep the car the lower the average yearly depreciation, but the more the maintainence and repair costs. The gain in lower yearly deprciation is almost always more than the loss in higher maintainence and repair costs.
Estimated resale value is the gamble, but for a BMW 5 series this gamble is minimal. Sales tax applies to both lease and purchase.
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  #38  
Old 11-20-2010, 11:27 AM
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1985mb 1985mb is offline
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Quote:
Originally Posted by richschneid View Post
Purchase price $80,000. Estimated resale value at six years $30,000. Depreciation cost $8,333 per year. Lost opportunity investment results on 50k is variable. Full lease cost should be calculated against leasing for the full $80,000, not the 80k minus the trade in value of your 3 series. The longer you keep the car the lower the average yearly depreciation, but the more the maintainence and repair costs. The gain in lower yearly deprciation is almost always more than the loss in higher maintainence and repair costs.
Estimated resale value is the gamble, but for a BMW 5 series this gamble is minimal. Sales tax applies to both lease and purchase.
Honestly I think that's a bit ambitious on the resale value. I've seen at least two 2007 550s in the classifieds for $30k in the last few months. So within 4 years, resale value has come down to 30 (or less, considering there were no bites at that price).

So at the 4 yr mark you might be a bit higher than that due to the 2011 550's higher msrp, but it's going to be a lot lower than 30 after 6 yrs. Unless one is a very early adopter, after 6 yrs you have the anticipation of a new model being released and its effect on resale values. Anyone have a sense of what 2004-2005 545s are going for these days?
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  #39  
Old 11-20-2010, 11:42 AM
richschneid richschneid is offline
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Originally Posted by 1985mb View Post
Honestly I think that's a bit ambitious on the resale value. I've seen at least two 2007 550s in the classifieds for $30k in the last few months. So within 4 years, resale value has come down to 30 (or less, considering there were no bites at that price).

So at the 4 yr mark you might be a bit higher than that due to the 2011 550's higher msrp, but it's going to be a lot lower than 30 after 6 yrs. Unless one is a very early adopter, after 6 yrs you have the anticipation of a new model being released and its effect on resale values. Anyone have a sense of what 2004-2005 545s are going for these days?
I think the 80k purchase price is a little high as well. Let me give you two real life examples in my experience. 1993 740i purchase price 67k. Sold in 1999 6 years later for 21k. Cost 67-21 equals 46k over 6 years= $7,666/ year.

2005 650i purchase price around 80k present resale value around 35k. 5 series depreciation is probably less than depreciation on an '05 6 series.

I think a well equipped 550i F10 can be had for around 1000 over dealer invoice about 70k not the 80k that mine cost. And in 6 years be sold for around 30k or a cost of only 40k in depreciation. Even allowing for a 20k selling price the depreciation is still only $8,333 per year for 6 years. Do you think that is more "realistic"?

The last two years of depreciation are much less than the earlier years over a 6 years period. The most depreciation is in the first year and years 1-3 are less than years 4-6. Check this out on the KBB or any other similar source.
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  #40  
Old 11-20-2010, 11:53 AM
dnemer dnemer is offline
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Warren Buffett said it the best: BUY what appreciates, LEASE or RENT what depreciates.

Simple.
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  #41  
Old 11-20-2010, 12:19 PM
richschneid richschneid is offline
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Originally Posted by dnemer View Post
Warren Buffett said it the best: BUY what appreciates, LEASE or RENT what depreciates.

Simple.
Dealers always buy cars and sell them at a profit. Even Warren Buffett would agree with that. He was NOT talking about cars.

Now for a another real life example. Using the example of an 8 cylinder 5 series cited above, I just checked the KBB on a 6 year old 545i, a 2005. I think the purchase price with navigation would be around 60k that year. The current resale private party value with 70,000 miles is around $20,000. That is a deprecitation of only $40,000 over 6 years. That would be only $6,667/year much less than the $8,333/yr that is thought to be overly optimistic. I think a total depreciation of $50,000 over 6 years for an F10 550i is very realistic.

In calculating a purchase of an asset, as Warren Buffett will tell you, you do the following.
Purchase price minus sale price is the cost of ownership.

In calculating the rental cost it is rental cost per year times the number of years. So, in this instance one would need to get the monthly lease cost for a SIX YEAR LEASE multiply by 60 and then compare THAT to the depreciation costs of purchasing. Getting a new car every THREE years is not the same as driving the same car for six years regardless of lease or purchase. I think the person who started this thread mentioned driving his car for EIGHT years.

The KBB value of an eight year old 540i is $11,000 or a depreciation of $50,000 over 8 years. This is a yearly depreciation of only $6,250/year. So, the longer you own the car the lower the yearly cost of depreciation. The yearly cost of depreciation for years 6-8 on a V8 5 series in this example is down to less than $5,000/year or about half the depreciation average of $10,000/year for the first three years.
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Last edited by richschneid; 11-20-2010 at 12:28 PM.
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  #42  
Old 11-20-2010, 01:39 PM
dnemer dnemer is offline
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Originally Posted by richschneid View Post
I think the person who started this thread mentioned driving his car for EIGHT years.
In that case, buy. If you intend to have the same vehicle for more than 4-5 years, buy it. (Don't lease it.)

Simple.
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  #43  
Old 11-20-2010, 01:57 PM
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The company that leases the car is in business to make a profit...and DOES. No brainer. If you have the resources buy. But, more importantly, be patient cause impatience will cost you at the dealer.
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  #44  
Old 11-20-2010, 02:16 PM
dnemer dnemer is offline
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Originally Posted by G from Dallas View Post
The company that leases the car is in business to make a profit...and DOES. No brainer.
I am not sure if you know this, but the company that sells the car is in business to make a profit...and DOES.
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  #45  
Old 11-20-2010, 03:40 PM
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Originally Posted by G from Dallas View Post
The company that leases the car is in business to make a profit...and DOES. No brainer. If you have the resources buy. But, more importantly, be patient cause impatience will cost you at the dealer.
This is what I'm saying.

A Lease is where they tell you how much the car will depreciate in 3 years (and charge you accordingly). I'm certain *their* version of the cars depreciation is higher than what you'd encounter if you bought it, and sold it after 3 years (i.e, you'd come out ahead with a purchase).

Insane Lease incentives or insanely high Residuals not included, I'd wager, however.
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  #46  
Old 11-20-2010, 03:59 PM
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Your certainty is contradicted by the facts: BMW and others are always too optimistic about the residuals. I've had 3, 5 series and AMG cars and the residuals have always been higher than the market value. If the residual was lower, one would buy the car at the end of the lease and sold it for profit. For example, E60 5 series residuals are about 15% higher than maket value.
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  #47  
Old 11-20-2010, 04:14 PM
G from Dallas G from Dallas is offline
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I am not sure if you know this, but the company that sells the car is in business to make a profit...and DOES.
Yes, and in a lease, you're paying both!
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  #48  
Old 11-20-2010, 04:15 PM
Stanesq Stanesq is offline
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Originally Posted by DXK View Post
Your certainty is contradicted by the facts: BMW and others are always too optimistic about the residuals. I've had 3, 5 series and AMG cars and the residuals have always been higher than the market value. If the residual was lower, one would buy the car at the end of the lease and sold it for profit. For example, E60 5 series residuals are about 15% higher than maket value.
That has been my experience as well. Better to lease with a decent residual.
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  #49  
Old 11-20-2010, 04:22 PM
DXK DXK is offline
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Originally Posted by G from Dallas View Post
Yes, and in a lease, you're paying both!
Hey, when you buy a house, you pay bank interest for the mortgage and the price for the house, when you buy food in the supermarket both make profit, the producer and the store and when you finance the car, you pay interest to BMWFS and BMWAG, no ?
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  #50  
Old 11-20-2010, 04:44 PM
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Originally Posted by richschneid View Post
Dealers always buy cars and sell them at a profit. Even Warren Buffett would agree with that. He was NOT talking about cars.

Now for a another real life example. Using the example of an 8 cylinder 5 series cited above, I just checked the KBB on a 6 year old 545i, a 2005. I think the purchase price with navigation would be around 60k that year. The current resale private party value with 70,000 miles is around $20,000. That is a deprecitation of only $40,000 over 6 years. That would be only $6,667/year much less than the $8,333/yr that is thought to be overly optimistic. I think a total depreciation of $50,000 over 6 years for an F10 550i is very realistic.

In calculating a purchase of an asset, as Warren Buffett will tell you, you do the following.
Purchase price minus sale price is the cost of ownership.

In calculating the rental cost it is rental cost per year times the number of years. So, in this instance one would need to get the monthly lease cost for a SIX YEAR LEASE multiply by 60 and then compare THAT to the depreciation costs of purchasing. Getting a new car every THREE years is not the same as driving the same car for six years regardless of lease or purchase. I think the person who started this thread mentioned driving his car for EIGHT years.

The KBB value of an eight year old 540i is $11,000 or a depreciation of $50,000 over 8 years. This is a yearly depreciation of only $6,250/year. So, the longer you own the car the lower the yearly cost of depreciation. The yearly cost of depreciation for years 6-8 on a V8 5 series in this example is down to less than $5,000/year or about half the depreciation average of $10,000/year for the first three years.
You can't lease a car realistically for longer than 4 years, so the only way to compare is apples to oranges - of course it's cheaper to hold one car for 6-8 years.

I notice your 650i is still for sale. Personally, trying to sell a used car above 20k in value is a complete crapshoot. At that price range, most people are financing, and don't mind paying a slight premium for going to a dealer. Leasing allows you to avoid all this for a known cost. If you decide to tradein a 3-year old car, you will typically come out worse than leasing.

An alternative for somebody wanting to buy for 6-8 years, would be to consider doing CPO every 3 years instead. Provides better protection from out of warranty problems, without much of the cost.
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