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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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  #51  
Old 11-20-2010, 07:53 PM
richschneid richschneid is offline
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Quote:
Originally Posted by Newmanium View Post
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.
I sold my car to the dealer for 32k. He had it for sale for 42,900 and now lowered it to 39,900. The person who started this thread wants to keep his car for 8 years. That's the discussion. An eight year old V8 5 series sells for $11,000. Is that also a "crapshoot". Now today I met a guy driving a 1988 735i. He loves it with 120,000 miles and it is going strong. I know someone else who is driving his 1983 733i everyday. A friend of mine just bought a 2002 540i and loves it. Another guy who walks his dog with me is driving a 1994 740i every day and loves it. Driving a 6 year old or 8 year old BMW is what is not a "crapshoot". These cars are built to last 20 years and up to 200,000 miles. Buying a new one and keeping it for 8-10 years is very cost effective. The savings in depreciation is far greater than the cost of repairs and maintainence. That's why the resale value is so high.

My car is in "concours" condition and it certainly would have cost me very little just to drive it for another five years even out of warranty. If the depreciation on my new 550i over the next five years is $50,000 which is what I expect it to be then and the deprectiation on my current 650i would be much much less. Since the 650i is only worth 32k today then the depreciation over the nest five years is a maximum of $32,000 which is far less than than the $50,000 deprecitation on the new 550i. But given the fact that my 650i would likely be worth $10,000 when it is 10 years old the depreciation on it would be only $22,000 vs the $50,000 depreciation on my new 550i or a savings of $28,000 which is far less than the cost of maintainence and repairs would be for my 650i over the next five years if I kept it. The deprecition on my friends 1994 740i is virtually zero per year and he spends a lot less on maintainence and repairs than the $10,000 a year it cost me in depreciation on my new 550i.

So, it is very cost effective to buy an new 550i and keep it for eight years. This is especially true if you take good care of it the engine and transmission they will not need to be replaced before 120,000 miles. CPO only warranties the car for a max of 6 years and a CPO car is very expensive. The KBB CPO price for my 650i is more than $40,000. It's true that the resale value of used cars is low in the recession, but so it the price of new cars. The base list price of a new 550i is just under 60k and you can probably get one for around 56k. If you keep it for 8 years and sell it for 11k that's only 45k in depreciation or only $5,625/year average. There is no way that the warranty on a new or CPO car is going to compensate for that level of savings. If you buy a new one and take care of it, it's just not going to cost that much to maintain in years 4 through 8 after it's out of warranty. Besides, year 5 will usually be covered for most repairs for the original owner by BMW as a courtesy. I know I had repairs and even maintainence paid for out of warranty on my 650i including front brake pads and even winshield wiper blades. They also fixed my shift mechanism for free which was over $500.
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Last edited by richschneid; 11-20-2010 at 08:09 PM.
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  #52  
Old 11-20-2010, 08:48 PM
Financeman Financeman is offline
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Quote:
Originally Posted by richschneid View Post
. ....Driving a 6 year old or 8 year old BMW is what is not a "crapshoot". These cars are built to last 20 years and up to 200,000 miles. Buying a new one and keeping it for 8-10 years is very cost effective.....
...If you buy a new one and take care of it, it's just not going to cost that much to maintain in years 4 through 8 after it's out of warranty.
That may be true, but I am afraid the electronics and sophistication built into the new models will likely make them extremely expensive to maintain and repair down the road. I have no doubt that BMWs will go the distance...but the cost might be high. Just so much stuff to break and virtually no way to fix it yourself anymore. I hope I'm wrong. Based on my less than positive experience with an extremely well cared for low mileage 03 530i, I would hate to think how much worse these new models might be when they become five or six years old. To a certain degree this is true with other makes also..... IMO, repair costs (and inconvenience of such repairs) must be factored and added to depreciation totals that have been calculated by several on this thread.
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  #53  
Old 11-20-2010, 10:31 PM
Newmanium Newmanium is offline
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Quote:
Originally Posted by richschneid View Post
I sold my car to the dealer for 32k. He had it for sale for 42,900 and now lowered it to 39,900. The person who started this thread wants to keep his car for 8 years. That's the discussion. An eight year old V8 5 series sells for $11,000. Is that also a "crapshoot". Now today I met a guy driving a 1988 735i. He loves it with 120,000 miles and it is going strong. I know someone else who is driving his 1983 733i everyday. A friend of mine just bought a 2002 540i and loves it. Another guy who walks his dog with me is driving a 1994 740i every day and loves it. Driving a 6 year old or 8 year old BMW is what is not a "crapshoot". These cars are built to last 20 years and up to 200,000 miles. Buying a new one and keeping it for 8-10 years is very cost effective. The savings in depreciation is far greater than the cost of repairs and maintainence. That's why the resale value is so high.
You misunderstood - the crapshoot is in selling any car worth more than 20k. A lot fewer buyers above that level, can take many months before finding a good buyer in some markets.

And the BMWs and Mercedes of the 80's and early 90's were a different breed from the ones of today. Back then they were into over-engineering things for the heck of it, and the electronics were fairly basic. Nowadays, you need spendy computers to diagnose most problems - repair costs for modern BMWs in 10+ years will be outrageous compared to the classics you mentioned.

Leasing every 3 years is a luxurious, hassle-free way to own a car at a stable cost with low risk. Some can save money by buying, but lots of people end up spending more because they trade in 3 years, and find out what "subsidized lease residual" means (and what the actual residual ends up being for the buyers). The pitfalls people tend to make when assuming that buying is a no-brainer is (1) ignoring time-value of money (2) betting on very low repair costs (3) betting on very high residual value.
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Last edited by Newmanium; 11-20-2010 at 10:32 PM.
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  #54  
Old 11-21-2010, 04:16 AM
richschneid richschneid is offline
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Quote:
Originally Posted by Newmanium View Post
You misunderstood - the crapshoot is in selling any car worth more than 20k. A lot fewer buyers above that level, can take many months before finding a good buyer in some markets.

And the BMWs and Mercedes of the 80's and early 90's were a different breed from the ones of today. Back then they were into over-engineering things for the heck of it, and the electronics were fairly basic. Nowadays, you need spendy computers to diagnose most problems - repair costs for modern BMWs in 10+ years will be outrageous compared to the classics you mentioned.

Leasing every 3 years is a luxurious, hassle-free way to own a car at a stable cost with low risk. Some can save money by buying, but lots of people end up spending more because they trade in 3 years, and find out what "subsidized lease residual" means (and what the actual residual ends up being for the buyers). The pitfalls people tend to make when assuming that buying is a no-brainer is (1) ignoring time-value of money (2) betting on very low repair costs (3) betting on very high residual value.
You misunderstood what I said. I SOLD the car with no difficulty for 32k. Won't be that difficult to sell an 8 year old 5 series for 11k. The repair costs on an 8 year old BMW that you bought new will not be anything close to the $5000 a year you save in depreciation over a new one. This is not conjecture it is a very high probablity. I have owned three BMWs outside of warranty a 7, a 5, and a 6. The yearly cost of repairs and maintaince was never more than 30%, and usually a lot less, of the amount saved by the difference in depreciation during the years I had them out of warranty. The repair and maintainence costs for all the people I cited who drive BMWs out of warranty is far, far less than the cost of deprectiation of a car in warranty. These are just the actual factual numbers of the multiple people I know who own these. It is not a debate.
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Last edited by richschneid; 11-21-2010 at 07:09 AM.
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  #55  
Old 11-21-2010, 04:56 AM
richschneid richschneid is offline
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[QUOTE=Financeman;5641158]"That may be true, but I am afraid the electronics and sophistication built into the new models will likely make them extremely expensive to maintain and repair down the road."

This is pure conjecture on your part. That actual statistics are that the electronics of the previous BMWs have been far less reliable than the newer ones. Current BMWs can be diagnosed by computer and electrical problems require the simple replacement of a microprosessor unit.

The operative word in your statement is "afraid". Your fear is not born out by the actual statistics. Every BMW I have owned has been more reliable than the last generation. Statistics actually show that reliability of these cars has improved dramatically over time. The RELATIVE reliabilty of BMW compared to other brands may be less but that's due mostly to improvement in the other brands that is greater than the improvement in BMWs, not because BMWs have become less reliable.

I always keep my cars 5 or 6 years becasue it is less expensive. The only reason I get a new one is because I want to upgrade the vehicle. But I know that that first year of ownership is going to cost me at least $10,000 in depreciation compared to around $5000 in depreciation on my old car. The likelihood of me having to spend $5000 in repairs on my old car in that year is extremely low. I also know that a lease on an $80,000 car is going to cost me about $1000/month or about $12,000 that year.

My wife buys her cars new and keeps them for 10-12 years. She has had some major repairs but these have always cost less than the depreciation on a new vehicle. Her present car drives just like it did when it was new and her only major repair was $3000 for a new transmission three years ago, so that only cost $1000/year and will probably last at least another 3 years, probably more, for a total yearly cost of only $500 per year, far less than the depreciation on a new car. Her yearly cost of maintainence and repairs is less than $2,000/year at most. Far less than the yearly depreciation of a new car of the same type.

I think the operative psychological process by most owners on this blog is that they PREFER to get a new car every two to three years for their own personal gratification. This is completely reasonable. But they justify it by saying they are saving money by always having a car covered by warranty. The actual mathematical calculations using the well documented data in this regard simply contradicts this contention. The person who started this thread said he wants to keep his new car for EIGHT years. That is a different preference and it is a lot less expensive.

The only realistic reason that I can see for not owning an 8 year old BMW is the inconvenience of a repair in terms of time lost or the possibilty of a breakdown on the road which is very unlikely in a well maintained car. So, if you need your car for business and a breakdown will severly interfere with it, then it might make sense to never drive an older car. But none of the guys I know who drive older BMWs on a daily basis have ever complained to me about a lack of reliability of their cars in this regard.
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Last edited by richschneid; 11-21-2010 at 07:31 AM.
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  #56  
Old 11-21-2010, 10:03 AM
Stevej2001 Stevej2001 is offline
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As the op, I don't think the serial cpo suggestion makes sense for me. I ordered the car to be exactly like I wanted. I won't find that on the lot. My thought was that I would buy vs lease for 3 yrs to see if it's more reliable than my '08. If so I'd buy it at the end of the lease.

Reports of it being on the truck were exaggerated. It's still not here (any day now, my CA says) and I'm leaning towards buying. The 0.9% is really attractive.


Quote:
Originally Posted by Newmanium View Post
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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  #57  
Old 11-21-2010, 04:20 PM
Newmanium Newmanium is offline
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[QUOTE=richschneid;5641506]
Quote:
Originally Posted by Financeman View Post
I think the operative psychological process by most owners on this blog is that they PREFER to get a new car every two to three years for their own personal gratification. This is completely reasonable. But they justify it by saying they are saving money by always having a car covered by warranty. The actual mathematical calculations using the well documented data in this regard simply contradicts this contention. The person who started this thread said he wants to keep his new car for EIGHT years. That is a different preference and it is a lot less expensive.
You're a decent example in this regards - bought a 2006 650i for somewhere around 85k (guestimating according to reviews of averagely equipped cars). Sold it 5 years later for 32k, took a ~50k depreciation.

Leasing 2 650's back to back (3 and then 2 year leases) would have run around 1000/month. 20% extra over 5 years for getting a brand new car halfway through, plus money in the bank for most of the time. And we're not even considering tire savings, insurance from unexpected maintenance/warranty costs, flexibility to easily switch to a different car at year 3, etc. Seems like a pretty cheap premium.
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  #58  
Old 11-21-2010, 05:00 PM
richschneid richschneid is offline
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[QUOTE=Newmanium;5642726]
Quote:
Originally Posted by richschneid View Post

You're a decent example in this regards - bought a 2006 650i for somewhere around 85k (guestimating according to reviews of averagely equipped cars). Sold it 5 years later for 32k, took a ~50k depreciation.

Leasing 2 650's back to back (3 and then 2 year leases) would have run around 1000/month. 20% extra over 5 years for getting a brand new car halfway through, plus money in the bank for most of the time. And we're not even considering tire savings, insurance from unexpected maintenance/warranty costs, flexibility to easily switch to a different car at year 3, etc. Seems like a pretty cheap premium.
That's about 10 grand premium over five years which is about right. I actually only paid 80k plus sales tax. I got $32,500 for my '00 M5 so I only paid sales tax on $47,500. So, my depreciation was five grand less. The premium is more compared to 8 years of ownership. I guess from my psychological perspective I just feel better about the car knowing I own it. I just feel better knowing I it's mine and I'm not just renting it from someone else. I take really good care of my cars and everyone always comments that even my 5 or 6 year old cars look brand new. I make sure all the dents and scratches are professionally eliminated. It's not that expensive to do it so I always feel like I'm driving a new car. Like I said my 650i was in concours condition when I sold it at age five.

I have never leased a car even when I owned my own business and used the car for business. I just deducted the mileage costs from my personal income tax. It came out about the same.

The actual interest on the money is minimal nowadays. You are paying interest in the lease payment. I also don't feel the need to change cars every two to three years. Actually, I miss my old 650i sometimes. Besides, there is very little actual difference between a 2004 645i and a 2010 650i. Of course, there are certainly upgrades over the years but the basic car is the same. The new 2011 F10 will not be changed to the next generation 5 series until 2017 or 2018. Of course, I might want to change to a four door 6 series before then or an M if it comes out in xDrive, but this is unlikely.
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Last edited by richschneid; 11-21-2010 at 05:04 PM.
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  #59  
Old 11-21-2010, 05:10 PM
Newmanium Newmanium is offline
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Quote:
Originally Posted by richschneid View Post
The actual interest on the money is minimal nowadays. You are paying interest in the lease payment. I also don't feel the need to change cars every two to three years. Actually, I miss my old 650i sometimes. Besides, there is very little actual difference between a 2004 645i and a 2010 650i. Of course, there are certainly upgrades over the years but the basic car is the same. The new 2011 F10 will not be changed to the next generation 5 series until 2017 or 2018. Of course, I might want to change to a four door 6 series before then or an M if it comes out in xDrive, but this is unlikely.
The iDrive upgrade was just about night and day. Even going from a 2007 530i to the 2011 X5 was a HUGE upgrade, system is much more advanced and easy to use.

I agree that some people get a thrill from the idea of completely owning their car. I've sat in cars I've owned, and ones I've leased, and they both have felt pretty much the same... but to each their own.

There are advantages both ways, the key is just to understand the pros and cons, and find the best fit for their personal situation. The only thing I really despise is the people who think one way is always better than the other... that's as ridiculous as somebody claiming that all headaches should be treated with aspirin.
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  #60  
Old 11-21-2010, 05:20 PM
Jack Stefano Jack Stefano is offline
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Originally Posted by Newmanium View Post
I've sat in cars I've owned, and ones I've leased, and they both have felt pretty much the same... but to each their own.
It depends on how much money you have. It's sort of like Trump said about kids . . . if you have money, they're no big deal.

I understand leasing generally lowers your payments, and your car is always in warranty. But as Woody Allen pointed out in Mighty Aphrodite, there's a reason we buy cars vis a vis leasing them. Perhaps visceral, but I like to drive cars I can afford as opposed to squeezing into a lease that I can act like I can afford.

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  #61  
Old 11-21-2010, 05:48 PM
Rafa Rafa is offline
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Originally Posted by Jack Stefano View Post
It depends on how much money you have. It's sort of like Trump said about kids . . . if you have money, they're no big deal.

I understand leasing generally lowers your payments, and your car is always in warranty. But as Woody Allen pointed out in Mighty Aphrodite, there's a reason we buy cars vis a vis leasing them. Perhaps visceral, but I like to drive cars I can afford as opposed to squeezing into a lease that I can act like I can afford.
Visceral indeed. Definitely not cerebral. Whoever says that one who leases cannot afford the car is obviously not a very smart person.
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  #62  
Old 11-21-2010, 07:44 PM
richschneid richschneid is offline
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The iDrive upgrade was just about night and day. Even going from a 2007 530i to the 2011 X5 was a HUGE upgrade, system is much more advanced and easy to use.

I agree that some people get a thrill from the idea of completely owning their car. I've sat in cars I've owned, and ones I've leased, and they both have felt pretty much the same... but to each their own.

There are advantages both ways, the key is just to understand the pros and cons, and find the best fit for their personal situation. The only thing I really despise is the people who think one way is always better than the other... that's as ridiculous as somebody claiming that all headaches should be treated with aspirin.
Absolutely, true. Personal preference is the most important thing. This thread is about the pros and cons of whether or not to lease or buy for a person who intends to keep his car for 8 years. That is his personal preference. The other issue is the calculated cost of ownership. That is not an issue of personal preference. That is a matter of mathematical calculation and statistical analysis of probabilities. The one thing I "really despise is people who" don't understand that personal preference is personal and mathematical and statistical calulations using hard data and probability analysis is NOT personal in any way. Whether or not the iDrive update is worth the money of buying a new car is a matter of preference. How much it costs to buy the new car is a matter of mathematics and NOT personal preference. I personally couldn't have cared less about the iDrive update.

BTW, is it true that 8 year leases are not available?
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Last edited by richschneid; 11-22-2010 at 06:36 AM.
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  #63  
Old 11-21-2010, 08:27 PM
Financeman Financeman is offline
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[QUOTE=richschneid;5641506]
Quote:
Originally Posted by Financeman View Post
"That may be true, but I am afraid the electronics and sophistication built into the new models will likely make them extremely expensive to maintain and repair down the road."

This is pure conjecture on your part. That actual statistics are that the electronics of the previous BMWs have been far less reliable than the newer ones. Current BMWs can be diagnosed by computer and electrical problems require the simple replacement of a microprosessor unit..
Conjecture - no. Take a look at Consumer Reports from the more recent years....every five series prior to 09 reflects a "worse" or "much worse than average" rating for electrical systems. Maybe the brand new models are getting better, but it will be several years before we can determine if improvement can be substantiated. It might be simple to diagnose electrical problems and replace broken parts; but I am sure any resultant repairs will be expensive once the warranty has expired. Maybe the 2011's are better...guessing not.

I do not argue that driving any car for a long time is almost always cheaper than purchasing new or leasing every three years, even with high repair costs in later years. But IMO, BMW's track record is less than stellar and I don't buy the notion that reliability is dramatically improving (at least at the same rate of improvement as the rest of the auto market) .....take a look at JD Power and Associates 2010 results for mid sized luxury cars....BMW scored towards the bottom of the dependability study. I guess time will tell...... While I like the product line, not sure I would make another long term bet on BMW at this point. To each their own.
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  #64  
Old 11-21-2010, 09:28 PM
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1985mb 1985mb is offline
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Quote:
Originally Posted by richschneid View Post
Absolutely, true. Personal preference is the most important thing. This thread is about the pros and cons of whether or not to lease or buy for a person who intends to keep his car for 8 years. That is his personal preference. The other issue is the calculated cost of ownership. That is not an issue of personal preference. That is a matter of mathematical calculation and statistical analysis of probabilities. The one thing I "really despise is people who" don't understand that personal preference is personal and mathematical and statistical calulations using hard data and probability analysis is NOT personal in any way. Whether not the iDrive update is worth the money of buying a new car is a matter of preference. How much it costs to buy the new car is a matter of mathematics and NOT personal preference. I personally couldn't have cared less about the iDrive update.

BTW, is it true that 8 year leases are not available?
I've always said in other 'buy vs lease' threads that you have to run the numbers as comparably as possible. E.G. multiple leases over 6yrs vs owning for 6yrs. The cost of ownership cannot be mathematically calculated beyond the 4yr/50k new car warranty. The best that can be mathematically said is that your downside can be hedged to a $$$$ max amount (the cost of a BMW extended warranty). Up to 6yr/100k. The problem for the OP is that after yr 6 it's just assumptions/speculation on what your cost of ownership will be.

That's a pretty universal observation. About the 550i specifically, it's BMW's first attempt at a TT V8. We know nothing about the drivetrain's long term reliability nor all the new features/electronics. The best that can be speculated is that BMW learned something from their first attempt at a TT I6.
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Old 11-22-2010, 05:26 AM
richschneid richschneid is offline
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I've always said in other 'buy vs lease' threads that you have to run the numbers as comparably as possible. E.G. multiple leases over 6yrs vs owning for 6yrs. The cost of ownership cannot be mathematically calculated beyond the 4yr/50k new car warranty. The best that can be mathematically said is that your downside can be hedged to a $$$$ max amount (the cost of a BMW extended warranty). Up to 6yr/100k. The problem for the OP is that after yr 6 it's just assumptions/speculation on what your cost of ownership will be.

That's a pretty universal observation. About the 550i specifically, it's BMW's first attempt at a TT V8. We know nothing about the drivetrain's long term reliability nor all the new features/electronics. The best that can be speculated is that BMW learned something from their first attempt at a TT I6.
I think if you want to look at years 5-10 you can make a reasonable estimate. I think that depending on the number of miles driven per year routine maintainence can be calculated from the cost for oil changes, routine service, tires, wiper blades etc. This should easily be done for less than $1,000/year; major repairs also less than $1,000 year AVERAGE, not each year, or a total for five years of $5000; depreciation average about $3000/year. Total cost per year around $5000/year. Some cars will be higher but some much less. Remember this is a statistical analysis based on probability of needed repairs. If you own the car from new the repairs are less because you have the opportunity to do proper maintainence. Also, when parts are engineered and manufactured part of that process is for the engineer to calculate the expected life expectency of that part. This is expected, not absolute, and is expressed as a standard deviation about a mean. So, if you look at repair costs for all 550i's over 10 years you can calculate the mean cost for all those vehicles and the probability of being one or two standard deviations above or below the mean. The data published in Consumer Reports does give a lay person some access to this type of data. You can just ask them what percentage deviation they use to judge cars above or below average and the actual percentage of cars that require those repairs for the different levels of reliabilty, they will tell you.

A new car will have a lease payment of $12,000/year and/or depreciation of $10,000 year. So, the savings over five years is around $25,000 +/- $5000 as one standard deviation about the mean. Two standard deviations would be around $8,000.

This is my best estimate using reasonable numbers. If you think some of my premises are wrong or my calculations are off tell me which.

As far as Consumer Reports is concerned. This is a good sorce from which to estimate the frequency of repair for the individual components. Remember when somthing is listed as more frequent repair it usually means something around 10-12% or so. That's what I mean by statistical analysis and probability of breakage. Remember if something electrical breaks during years 0-4 and even ususally in year five it is fixed for free. Ususally once BMW fixes an electrical part it doesn't break again, so that part would not effect costs during years 6-10. Of course there are exceptions to this such as the HPFP on the TT I6, but this is rare. Even in this case I suspect BMW will continue to pay for these to be replaced every 15,000 miles indefinitely.

So, that's my calculations. It has nothing to do with personal preferences. My personal preference is to own my car and not lease, but THAT is a personal preference and not a calulation of cost. The cost of ownership is a calculation and not a personal preference. There is absolutely nothing wrong with getting a new car every 2-3 years, there are many reasons for doing so, that is a personal preference. But the cost of doing so is a mathematical calculation.
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Old 11-22-2010, 06:55 AM
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Read up on the book "Proofiness", has a good explanation for why we use numbers as authoritative facts even if they're made up. In this case, the flaw is in making a random assumption about the statistical distribution of savings and it's corresponding standard deviation.

The apples to apple comparison is leasing vs buying a BMW platinum extended warranty on the owned car to match the new warranty. If you price this out, you can do the closest comparo possible. Instead of guestimating the repair costs, which can vary widely, this puts an official number on it suitable for planning purposes.
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Old 11-22-2010, 07:25 AM
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I think it boils down to one thing: How do you use the car? If you are the kind of person that always wants a new car every 3 years or so, then leasing is the way to go. If you buy your cars and run them till they die, buy new cars. If you like to keep them 4-6 years, buy a new-used car, 2 years old or so.

Personally, I have been buying new cars and running them. This way we always had one newer car and one older car and ran two cars and kept one payment. When my daughter started to drive, I eventually bought her a new car. So, we now have 2 all-paid-for 2003 cars which have 100K and are in good running shape, and one more year on the BMW payments. Had we been leasing people, we would be paying 3 leases since 2003.

I happen to fall in love with my cars, and I would be personally distressed to have to turn my car in now and go looking for something else.
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Old 11-22-2010, 07:29 AM
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I'm in the want a new car every 3 years (or less) category. Generally speaking, I would get a car valued at about $55-60K. It's been that way since about 1996. I drive about 10K miles a year. The first 5 or 6 cars, I would always do a cash purchase. I would baby the car. Three years later, I was always shocked how much depreciation took place. I would always think the next car was hotter and nicer and surely it would not depreciate so badly, but that never seemed to be the case. I realized after the 6th car that I was spending at least $1000 a month in order to satisfy my craving for new wheels. Especially since sometimes, I could not wait and would trade at 2 or 2.5 years. So now I lease. It still costs about the same. It forces me to keep the car for the term. And I'm more relaxed about a scratch or ding. After all its a rental.
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Old 11-22-2010, 07:32 AM
richschneid richschneid is offline
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Originally Posted by Newmanium View Post
Read up on the book "Proofiness", has a good explanation for why we use numbers as authoritative facts even if they're made up. In this case, the flaw is in making a random assumption about the statistical distribution of savings and it's corresponding standard deviation.

The apples to apple comparison is leasing vs buying a BMW platinum extended warranty on the owned car to match the new warranty. If you price this out, you can do the closest comparo possible. Instead of guestimating the repair costs, which can vary widely, this puts an official number on it suitable for planning purposes.
Look, that is why you use deviations about the mean with a stated probablity analysis. I did this as a professional physicist and in the performance and interpretation of medical research data as a cardiologist my entire life. I minored in mathematics in college and took courses in the math department in both basic and advanced statistical analysis. I stated the standard deviations about the mean in my calculations. The is the "guestimation" of the repair costs. This is probability analysis in which you use the available data, in this case the historical data in Consumer Reports or one's own personal anecdotal data. Now don't critcize me for stating my education and background in statistical analysis. You were the one telling me what book to read on the subject, I am just defending myself against your accusations of my ignorance on the subject.

When you pay extra for a warranty on a car that is a probability analysis on your part that the price you pay for the warranty will be less than what you would be likely to pay for unknown repairs in the future. It is based on your "guestimation" of future repair costs. When a company, either BMW or a private company, sells you a warranty they are doing so on a "guestimation" of future repair costs. BTW, on most products Consumer Reports reccommends against buying the extended warranty. That is based on a statistical analysis of actual future repair costs. When BMW sells you the warranty in a CPO, they have already done the "guestimation" of the future repair costs on the car and have factored in a profit. So, for example, if you pay $3000 for a CPO warranty, the engineers and actuaries have already done the calculation that the likely overall repair costs averaged over the period of time for the warranty in that particular vehicle is far less than $3000. I just think that it is more "likely" that BMW can do a better guestimation of future repair costs on their cars than I can. When you buy the extended warranty you are betting that your car might be what is called an "outlier" in the analysis. All probability analyses will have data points that are far from the mean. In medical research this is called an "outlier" and is usually defined as something that is three standard deviations from the mean, or in the top or bottom 5%. If 50% is the mean then one standard deviation is 67%, two standard deviations is 90%, and three standard deviations is 95%. Of course, these are not absolute numbers, but can vary depending on the circumstances, but this is the general case.

I did not state "authoritative facts" I gave a probability analysis. If you don't understand the difference then I suggest you "read up on the book "Proofiness"", maybe it will explain the difference to you. My assumptions are not random, they are based on the hard data available. I gave a potential error inherent in each assumption. As I asked in my post, which of my "random assumptions" do you disagree with. Just calling them incorrect because you think they are "random assumptions" is a random assumption on your part. If you disagree with one of my assumptions say which one and why and then we can have a meaningful intelligent discussion about the basis of those assumptions. Just saying you disagree with them because you think they are "random" is intellectually dishonest and just begs the question entirely.
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Old 11-22-2010, 07:37 AM
richschneid richschneid is offline
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Quote:
Originally Posted by edspider View Post
I'm in the want a new car every 3 years (or less) category. Generally speaking, I would get a car valued at about $55-60K. It's been that way since about 1996. I drive about 10K miles a year. The first 5 or 6 cars, I would always do a cash purchase. I would baby the car. Three years later, I was always shocked how much depreciation took place. I would always think the next car was hotter and nicer and surely it would not depreciate so badly, but that never seemed to be the case. I realized after the 6th car that I was spending at least $1000 a month in order to satisfy my craving for new wheels. Especially since sometimes, I could not wait and would trade at 2 or 2.5 years. So now I lease. It still costs about the same. It forces me to keep the car for the term. And I'm more relaxed about a scratch or ding. After all its a rental.
If you keep the car for 3 years it is close to a wash. That's because the dealer can sell the car for more than you can. If you keep the car for 8 years, as the person who started this thread wants to do, then it's less expensive to buy.
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Old 11-22-2010, 01:52 PM
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I've sat in cars I've owned, and ones I've leased, and they both have felt pretty much the same... but to each their own.

Exactly.

There are advantages both ways, the key is just to understand the pros and cons, and find the best fit for their personal situation. .
Exactly.

Nuff said.
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Old 11-22-2010, 02:24 PM
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Originally Posted by richschneid View Post
I think if you want to look at years 5-10 you can make a reasonable estimate. I think that depending on the number of miles driven per year routine maintainence can be calculated from the cost for oil changes, routine service, tires, wiper blades etc. This should easily be done for less than $1,000/year
Scheduled maintenance (fluids, filters, brakes, etc.) can be nicely estimated - not really based on years but on miles driven. The expensive maint components like brakes depend on how much you drive (and how you drive). The problem is estimating repairs out of warranty.

Quote:
major repairs also less than $1,000 year AVERAGE, not each year, or a total for five years of $5000;
I don't know how you came across this number. It sounds like an assumption.

If someone could prove to me that a V8 powered E39 or E38 could be maintained spending only $1,000/yr on average for repairs, I'd actually go buy one. Those are two of my favorite BMW shapes. But I really doubt that's the case. The tech guys at Roundel lament the high repair costs of the E39. Those are people who know their stuff and are doing their own labor. Costs skyrocket even you start paying for labor, even at an indy.

NTM the out-of-warranty repair costs on an E39 540i may or may not have much correlation to such on a TT V8 F10 550i.
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Old 11-22-2010, 02:42 PM
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Exactly! Roundel always says you pay on the front end or back end. Mike Miller there says that market for used BMW will soon evaporate since nobody would want to pay for those rapairs and that since 90s the BMWs have become much less reliable.
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Old 11-22-2010, 06:12 PM
richschneid richschneid is offline
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Scheduled maintenance (fluids, filters, brakes, etc.) can be nicely estimated - not really based on years but on miles driven. The expensive maint components like brakes depend on how much you drive (and how you drive). The problem is estimating repairs out of warranty.



I don't know how you came across this number. It sounds like an assumption.

If someone could prove to me that a V8 powered E39 or E38 could be maintained spending only $1,000/yr on average for repairs, I'd actually go buy one. Those are two of my favorite BMW shapes. But I really doubt that's the case. The tech guys at Roundel lament the high repair costs of the E39. Those are people who know their stuff and are doing their own labor. Costs skyrocket even you start paying for labor, even at an indy.

NTM the out-of-warranty repair costs on an E39 540i may or may not have much correlation to such on a TT V8 F10 550i.
You are correct it is more difficult to estimate the cost of repairs. This is not a proof, it is an assumption based on my personal experience and multiple anecdotal experience of others. For example today I spoke with my friend who has driven a 1994 740i he purchased used 12 years ago. He hasn't driven that many miles since then but he is not retired. He paid $23,000 for the car and says he has not had ANY repairs since he bought it. My wife's car, a 1999 Accord has 90,000 miles and has had only one major repair. I know people who drive a 20 yo MB, a 20 yo 735i, an 8 yo ES 300, a 27 yo 733i and they all say major repairs are very uncommon. The guy with the 733i has wanted to refer me to his private mechanic who does his work for much less than my dealer. I have a friend who just bought a 2002 E39 540i a year ago and he has had no problems whatsoever.

My estimate of $5000 over five years is just that. I think the range would be about $2000 to $8000 within a 95% confidence interval. This would not change my conclusion about money being saved because of the lesser depreciation. It only chages the amount saved to be +/- $3000. I think this is a reasonable calculation for most cars. Of course, as I explained above there will be the occasional outlier in which a car will need a new engine before 120,000 miles or 10 years for $15,000, but that is probably very rare. If you buy the car new and take care of it properly, I don't think the engine will need to be replaced by then. Rebuilding the transmission might cost $3000-$5000 but that is a one time repair and most cars probably won't need it.

So, I suggest you do some research to try to estimate the actual numbers. Maybe you can contact some owners of older BMWs though your local chapter of the BMW CCA and see what they have to say. I can't prove it to you. I am doing an estimate based on multiple anecdotal observations. I see no reason to think that the engine in an E39 540i, which I did own and purchased new in 1999, should be any less reliable than the V8 in my tt 550i. These cars are built to last. That's one reason they have a high resale value and cost so much to buy. The engineering and quality control is excellent. Not perfect but excellent. The problems with the HPFP in the tt 3L six is really an outlier and BMW is paying to fix those. Before you buy an E39 540i I would check the frequency of repair for the various components in the published data. But the key is that buying a used car and not knowing if it was properly maintained is different than buying it new and making sure it does get properly maintained. Then the probability of expensive major repairs in years 5-10 is far less.

My personal experience with five consecutive V8 BMWs is that they are getting more reliable. My '99 540i was more reliable than my '93 740i. My 650i was the most reliable. What I have read about the Consumer Reports analysis of frequency of repair is that all makes have become more reliable over the years. The average longevity of all cars continues to increase with time. If you want to know the actual reliability numbers for V8 BMWs you can probable get them from Consumer's Union which publishes Consumer's Reports.
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Old 11-22-2010, 06:31 PM
Newmanium Newmanium is offline
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All probability analyses will have data points that are far from the mean. In medical research this is called an "outlier" and is usually defined as something that is three standard deviations from the mean, or in the top or bottom 5%. If 50% is the mean then one standard deviation is 67%, two standard deviations is 90%, and three standard deviations is 95%. Of course, these are not absolute numbers, but can vary depending on the circumstances, but this is the general case.
My point was that you're assuming a normal distribution, which is unknown in this case. Can't just smash any random car comparison guestimation into a normal distribution.

And as for your gripes about why a BMW warranty isn't necessary... it probably isn't. But otherwise the comparison to leasing is biased. It'd be like comparing two insurance rates, but increasing the deductible by $5000 for one of them - and then arguing that most people rarely even use insurance anyway, so you should go with the "cheaper" one that has the higher deductible. Apples/oranges.

The point is that always leasing a car is like buying premium insurance, and buying is like carrying the higher deductible. Unless you compensate by buying a warranty, you're essentially saving the money by "self-insuring", which of course is cheaper if nothing goes wrong - which is where the anecdotal evidence comes to play, e.g., "Me and my 4 friends have never had major repairs out of warranty!" As you should know, n=5 isn't worth much, statistically speaking.

And having such a strong stats background, you should also know that prior experience doesn't predict future results. Do 20 tails in a row increase the odds of a heads coming up on the next flip? You've had a string of luck, reading any wider trends into this is silly.
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