Doesn't Anyone Buy Anymore?

Originally Posted by palermo22

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).

I decided to lease again because:


1. I have zero interest in owning a BMW out of warranty
2. I like having the option of turning in the car and walking away at the end of the lease. If I like it, I buy it out. Can't say the same about financing
3. I quite frankly do not trust BMW anymore to make a car which I feel comfortable investing my money in. Noted that all cars depreciate rapidly but I predict the F30 to be a car which people run away from in the used car market due to al the complex technology these cars are equipped with, beginning from steering, to suspension, iDrive, ...
4. I bought my current e90 2006 BMW 330i second hand, cash, paid In full. Seems like a smart move, right.? Over my 18 months of ownership, I've spent the equivalent of 18 months worth of lease payments for a 2010 328i, which I could have leased brand new at the time. Only thing is I was driving a 4 year old car instead. And it even gets better ... I will likely loose some more money when my f30 arrives and I need to sell my e90.
5. In 2-3 years, I will probably want the new one, and will get it for the same payment.



I look at leasing as me hiring BMW to design great cars for me to enjoy, have fun in and drive to and from my mundane daily activities, and in exchange, I make a monthly payment out to them as long as they keep me happy and earn my business.


All car investments are dumb. Whether leasing or financing. You may as well choose the low risk one.

Originally Posted by shicobico

I decided to lease again because:


1. I have zero interest in owning a BMW out of warranty
2. I like having the option of turning in the car and walking away at the end of the lease. If I like it, I buy it out. Can't say the same about financing
3. I quite frankly do not trust BMW anymore to make a car which I feel comfortable investing my money in. Noted that all cars depreciate rapidly but I predict the F30 to be a car which people run away from in the used car market due to al the complex technology these cars are equipped with, beginning from steering, to suspension, iDrive, ...
4. I bought my current e90 2006 BMW 330i second hand, cash, paid In full. Seems like a smart move, right.? Over my 18 months of ownership, I've spent the equivalent of 18 months worth of lease payments for a 2010 328i, which I could have leased brand new at the time. Only thing is I was driving a 4 year old car instead. And it even gets better ... I will likely loose some more money when my f30 arrives and I need to sell my e90.
5. In 2-3 years, I will probably want the new one, and will get it for the same payment.



I look at leasing as me hiring BMW to design great cars for me to enjoy, have fun in and drive to and from my mundane daily activities, and in exchange, I make a monthly payment out to them as long as they keep me happy and earn my business.


All car investments are dumb. Whether leasing or financing. You may as well choose the low risk one.

ive pondered this same thought as it really seems the way to go.thank you for this post it rekindled this thought

Sent from my XT557 using Bimmer App

Swapping out a vehicle every three to four years may be wise from a risk standpoint, but it isn't necessary prudent from a financial planning perspective. I've held on to my BMWs for six to 10 years and in most cases the post-warranty experience has been good.

My 2007 530i just passed the six year mark and hasn't cost me hardly anything. Depreciation since I bought it out of its lease four years ago has been quite low -- and this is with the mid-cycle facelift and the new F10 all coming out after I first leased my car.

My 2008 535i has been paid off for over a year, and I have spent less than one month's payment on it since then. I am not a big DIYer, but wiper blades and cabin filters and such are easy enough, and my indie costs less than half of the dealer.

And these cars don't blow up at 3 or 4 years, especially when you buy them new and take very good care of them from day one.

With my current car, I noticed another big hit in depreciation after it hit 100K. Probably because the car can no longer be CPO'ed.

I have always purchased vehicles outright, and until my last acquisition always new.

My parents helped me with the first two - graduating from HS to matriculate to college, then upon subsequent graduation and entry into military service.

I generally tend to hold on to them for 5 to 10 years, only exceptions being a 2001 E46 cab I let loose of after 2.5 years to move up to a 2004 ZHP, and the 2009 135 that I recently released to ascend up to the 1 M.

I like the feeling of ownership. It instills in me the values of:

(1) saving up and investing money for a specific goal and future purpose;
(2) resisting impulse purchases;
(3) taking exceptional care of personal property (both cosmetically and mechanically) to maximize resale return when flipping it; and
(4) not being indebted to any person or institution

Plus, I can mod it to my heart and wallets delight without worrying about returning it to original condition.

Only loan I've ever had to take out was 30 year VHA to purchase our house, and that was paid off in 15 years.

Hard to explain. I detest having to pay even just 1 cent more in principle (sic) or interest for something than I have to, regardless of whether it's a depreciating asset or not.

Admittedly, the 1 M was an exception as that was a proverbial diamond-in-the-rough to find.

Bottom line is I love being debt free, only beholden to God for the air in my lungs for as long as His good pleasure.

If there is no tax advantage(e.g. business usage) leasing seems to be at a disadvantage to buying. Also agreed with IndyMike on the merits of pay in full. It is preferable to pay off an expense, and a car is an expense.

Originally Posted by WJGreer

The downside is that when you lease you have a car payment forever.

So what?

It's not 1950 anymore. A $299 to $499 car payment isn't a big deal anymore. I'm going to have an electric bill forever, I'm going to have a gas bill forever, I'm going to have a phone bill forever, I'm going to have a cable bill forever.

What makes the car so special? Nothing. It's just another utility, another must-have item that requires a few hundred bucks each month. So might as well get something nice, safe, and always under warranty so you don't get bitten with extra cost like you do when you keep it too long for no reason.

View a monthly car payment as just another monthly utility because that's all it is.

BJ

Originally Posted by shicobico

All car investments are dumb. Whether leasing or financing. You may as well choose the low risk one.

Exactly.

There is no such thing as a "car investment". It's a quickly depreciating asset. If you never own it, it never depreciates.

You lease a car just like you "lease" electricity or gas or cable. It's just another utility. Lease what your monthly budget can afford, no different than your cable package or your cellphone dataplan.

Too many people do the wrong thing (buying) or burn calories needlessly (overthinking). It's a monthly payment, just another utility, not really worth talking about.

BJ

Originally Posted by Robert A

Swapping out a vehicle every three to four years may be wise from a risk standpoint, but it isn't necessary prudent from a financial planning perspective. I've held on to my BMWs for six to 10 years and in most cases the post-warranty experience has been good.

If you do the math, you'll find that you needlessly suffered in a used car for 5-7 years to save yourself a whopping $1500 when all is said and done.

That's $250 a year or $21 a month. Merely trim satellite radio or leather seats off a new lease and you'll wind up in 4 new cars during a 10 year span instead of in 1 old one.

BJ

Originally Posted by boltjaM3s

Exactly.

There is no such thing as a "car investment". It's a quickly depreciating asset. If you never own it, it never depreciates.

If you lease, your payment is the depreciation of the vehicle. Think about it... If you drove it off the lot 1 mile to a air conditioned storage unit, never drove it again for 3 years, you'd still make the $600/month payment, which is the sound of the car depreciating every month that goes by.

I bought to reward myself for...working a long time, got the profession goal that I wanted, kids prepaid college tuition paid off, I always wanted a BMW and now I could afford it.

Originally Posted by IndyMike

I have always purchased vehicles outright, and until my last acquisition always new.

My parents helped me with the first two - graduating from HS to matriculate to college, then upon subsequent graduation and entry into military service.

I generally tend to hold on to them for 5 to 10 years, only exceptions being a 2001 E46 cab I let loose of after 2.5 years to move up to a 2004 ZHP, and the 2009 135 that I recently released to ascend up to the 1 M.

I like the feeling of ownership. It instills in me the values of:

(1) saving up and investing money for a specific goal and future purpose;
(2) resisting impulse purchases;
(3) taking exceptional care of personal property (both cosmetically and mechanically) to maximize resale return when flipping it; and
(4) not being indebted to any person or institution

Plus, I can mod it to my heart and wallets delight without worrying about returning it to original condition.

Only loan I've ever had to take out was 30 year VHA to purchase our house, and that was paid off in 15 years.

Hard to explain. I detest having to pay even just 1 cent more in principle (sic) or interest for something than I have to, regardless of whether it's a depreciating asset or not.

Admittedly, the 1 M was an exception as that was a proverbial diamond-in-the-rough to find.

Bottom line is I love being debt free, only beholden to God for the air in my lungs for as long as His good pleasure.

The 1M is an exception, a rare car that'll hold its value. Let's look at a typical $50,000 BMW 3 Series. Buy it for cash, keep it for 10 years.

That's $50,000 out-of-pocket in 2002, $5,000 a year, or $417.00 per month.

The car will be out of warranty for 7 years, assume that you'll need $4,500 worth of maintenance and repairs on the car during that span.

At the end of 10 years, you'll have a used car with high mileage worth $3,000 on private sale if you're lucky.

Purchase 1 car: Total out of pocket net resale value is: $51,500 or $5,150 per year, or $429.00 per month.

If you leased a series of $50,000 cars instead, paid it off slowly at $539.00 per month, took the remainder of the $50,000 and invested it, you'd make approximately $10,000 on that money over the 10 year period at a minimum.

Lease 4 cars: Total out of pocket net investment revenue is: $54,680 or $5,468 per year, or $455.00 per month.

So for an extra $25 a month you could have been in 4 brand new BMW's under warranty instead of being in 1 old BMW that's out of warranty for 7 years. And if the repair costs are lower and/or the investment revenue is lower, we're still only talking about a few dollars a month here, the cost of a typical lunch at a decent restaurant on a single day.

Philosophy and "pride" are nice, but the math sets you free.

BJ

Originally Posted by SamS

If you lease, your payment is the depreciation of the vehicle. Think about it... If you drove it off the lot 1 mile to a air conditioned storage unit, never drove it again for 3 years, you'd still make the $600/month payment, which is the sound of the car depreciating every month that goes by.

A $549 a month 3 Series costs no more or no less than $19,764 by the time the lease is over. The car does not depreciate for the leaser. It depreciates for the bank that owns it.

I pay $700 a month for the gas/electric in my home. It's a necessity. Have to have it. So I don't think about what it does to me financially, don't try to play games to save a few nickels here or there. Same thing for my car. I budget $549 and I lease as much car as I can for that money perpetually. In a 10 year period, I'll be in my 4th brand new car while others will still be in their 1st car that now has 100,000 miles on it and bills piling up on repair issues.

The elimination of debt is the single biggest win on any investment portfolio. No credit card debt, very big deal. No car debt, just as big.

BJ

Originally Posted by LarryboysUDM

I bought to reward myself for...working a long time, got the profession goal that I wanted, kids prepaid college tuition paid off, I always wanted a BMW and now I could afford it.

That's great, and congratulations, but the smarter play would have been to keep that $50,000 invested smartly, pay off a lease $549 at a time, and use the money you make on the invested money to reduce the monthly cost on the overall lease.

$50,000 buys 1 car.

$50,000 leases 91 months of cars, or 7.6 years, or 3 brand new cars in the same span and that's before the compounded investment revenue from the $50,000 you're floating in your portfolio and net of the repair costs you would have spent on the aging car had you bought it.

I know is sounds like the American dream to walk into a luxury car showroom, open a briefcase full of cash, and walk out with a paid-off car. In reality, it's the wrong play.

BJ

Originally Posted by boltjaM3s

A $549 a month 3 Series costs no more or no less than $19,764 by the time the lease is over. The car does not depreciate for the leaser. It depreciates for the bank that owns it.

I pay $700 a month for the gas/electric in my home. It's a necessity. Have to have it. So I don't think about what it does to me financially, don't try to play games to save a few nickels here or there. Same thing for my car. I budget $549 and I lease as much car as I can for that money perpetually. In a 10 year period, I'll be in my 4th brand new car while others will still be in their 1st car that now has 100,000 miles on it and bills piling up on repair issues.

The elimination of debt is the single biggest win on any investment portfolio. No credit card debt, very big deal. No car debt, just as big.

BJ

It may depreciate for the bank, but you're the one who pays for the depreciation vs a brand new car, not the bank. Of course there is depreciation when you finance or pay cash, but don't fool yourself that folks who lease aren't a principle participant/investor in a depreciating asset.

You keep giving the example of someone that wants 4 cars over a 10 year period. Some people want 5 cars in 10 years, or a new car after 12 months, another in 4 years, and another after 5. Being tied to a contract for exactly 1095 days does not necessarily provide the most flexibility, at least not without more financial penalty than a traditional loan+ down payment.

BTW, I leased 3 cars and bought 6. So I'm pretty familiar with the financials of both sides. I see benefits to both, but it appears you do not.

I buy and keep the car a long time because:
(a) I don't want to have to deal with car salespeople anymore than I absolutely have to.
(b) I need to figure out everything about a car before I buy it and doing that every 3 years gets painful.

Can't say the same would apply to any other utility. Also, can't say that it applies to apartment renting, because there's no mileage/time clock running with that.

Originally Posted by boltjaM3s

So what?

It's not 1950 anymore. A $299 to $499 car payment isn't a big deal anymore. I'm going to have an electric bill forever, I'm going to have a gas bill forever, I'm going to have a phone bill forever, I'm going to have a cable bill forever.

What makes the car so special? Nothing. It's just another utility, another must-have item that requires a few hundred bucks each month. So might as well get something nice, safe, and always under warranty so you don't get bitten with extra cost like you do when you keep it too long for no reason.

View a monthly car payment as just another monthly utility because that's all it is.

BJ

I'm not judging; to each his own. Personally, all else constant, I'd rather minimize my monthly outlay. There's a mind value for me in not having a car payment. You might think differently.

I'll say this - I think people on these internet boards tend to overstate the expense of out-year maintenance. The last 2 BMWs I've had were each pretty inexpensive to maintain. At the moment I'm driving an 8-year old 545 that's in fantastic shape and has been paid for since '08. I think about replacing it almost every day, but can't bring myself to because there's really nothing wrong with it. Knock wood.

Originally Posted by SamS

BTW, I leased 3 cars and bought 6. So I'm pretty familiar with the financials of both sides. I see benefits to both, but it appears you do not.

When my career was in a different place I would buy Acura's used, 3 years off-lease, take out a 5 year loan, let someone else eat the depreciation, wind up paying less, feel good about how frugal I was. Did that religiously from 1990-2006.

The turning point came to me in the form of my 2004 Acura TL. Loved that car, great car, leased it, time was up. I could have spent $24,000 to buy the car and own it for another 3+ years, was about to.

But then I saw the new E93 and whipped out the calculator. And what I found was that if I put the $24,000 in the bank and withdrew it slowly at $599 a month I could be in an E93 for the next 3 years instead of suffering in an old, out of warranty Acura.

And looking back on all those cars I bought when I was in my 20's and 30's, all I did was give myself a larger monthly payment for the sake of having no payments for a few years, but it always averaged out to around $549 a month no matter what I did. So instead of repeating this endless cycle of driving old Acura's for $549 a month I decided to start driving new BMW's for $549 a month. Hasn't hurt my lifestyle at all, and I'm enjoying every minute of my new cars.

And the lease cycle is very interesting, too. First year you're in love. Second year you are comfortable, Third year you start to get a bit bored but you quickly get excited because you count down the months until the next car is in your garage. Because of BMW's pull ahead program and the time it takes to get one built/delivered from Germany, you start talking to your dealer about the next car before you're done with Month 24 in the current car. You're always in a "new car" mindset as a result which is very pleasing for those of us into new cars.

BJ

Originally Posted by mr_clueless

I buy and keep the car a long time because:
(a) I don't want to have to deal with car salespeople anymore than I absolutely have to.
(b) I need to figure out everything about a car before I buy it and doing that every 3 years gets painful.

Can't say the same would apply to any other utility. Also, can't say that it applies to apartment renting, because there's no mileage/time clock running with that.

That's cool, Mr. C, and I respect what you did.

The other side of the coin is that if you'd build a slight tolerance for salespeople and spent a few hours every-three-years doing some research, you'd have driven a 2006 E90, a 2009 E90 M-Sport, and a 2012 F30 in the exact same span as you're sitting in your 2003 E46 right up to this very day for just about the same money.

BJ

Originally Posted by boltjaM3s

If you do the math, you'll find that you needlessly suffered in a used car for 5-7 years to save yourself a whopping $1500 when all is said and done.

That's $250 a year or $21 a month. Merely trim satellite radio or leather seats off a new lease and you'll wind up in 4 new cars during a 10 year span instead of in 1 old one.

There's also insurance costs and taxes that need to be considered...they would be higher for the 4 new cars. And also need to factor any extra charges levied due to excess wear and tear. Otherwise, this is quite an eye-opener...I didn't think it would be that close.

Of course, this assumes that:
- the 4 cars will cost the same, which is probably not going to be the case.
- great lease deals will always be available...given the current economy that may well be the case.

Originally Posted by mr_clueless

There's also insurance costs and taxes that need to be considered...they would be higher for the 4 new cars. And also need to factor any extra charges levied due to excess wear and tear. Otherwise, this is quite an eye-opener...I didn't think it would be that close.

Of course, this assumes that:
- the 4 cars will cost the same, which is probably not going to be the case.
- great lease deals will always be available...given the current economy that may well be the case.

Of course I'm generalizing here. Some will say that maintenance costs are less than I forecasted, others will say that the resale value will be higher, others will say I underestimated the ROI on $50,000 in a decent mutual fund, I get all that.

The takeaway is that the difference in out-of-pocket cost between buying a single car and holding it for 10 years and leasing 4 cars during a span of 10 years is only a couple of dollars a month, perhaps the cost of a bagel and coffee, perhaps the cost of dinner and a movie. For those who can afford the $425-$525 monthly payments, another $25-$50 a month to be able to be in brand new cars every few years isn't much of an extravagance.

I mean, skip a 1 week family vacation in Turks & Caicos each year, you can put yourself in a 6 Gran Coupe for the same outlay as you currently do on the E46. Lots of variables, just a shifting of entertainment priorities here and there. You can say I'm being financially "stupid" to the tune of $50 a month and you might be right. But there are pack-a-day smokers who spend $450 a month on cigarettes, beer drinkers who'll lay out $250 a month on brew, dog owners who'll spend $225 a month on food and grooming. I don't have any of these vices, gives me the ability to get a new car every 3 years where others can't.

BJ

Originally Posted by boltjaM3s

When my career was in a different place I would buy Acura's used, 3 years off-lease, take out a 5 year loan, let someone else eat the depreciation, wind up paying less, feel good about how frugal I was. Did that religiously from 1990-2006.

The turning point came to me in the form of my 2004 Acura TL. Loved that car, great car, leased it, time was up. I could have spent $24,000 to buy the car and own it for another 3+ years, was about to.

But then I saw the new E93 and whipped out the calculator. And what I found was that if I put the $24,000 in the bank and withdrew it slowly at $599 a month I could be in an E93 for the next 3 years instead of suffering in an old, out of warranty Acura.

And looking back on all those cars I bought when I was in my 20's and 30's, all I did was give myself a larger monthly payment for the sake of having no payments for a few years, but it always averaged out to around $549 a month no matter what I did. So instead of repeating this endless cycle of driving old Acura's for $549 a month I decided to start driving new BMW's for $549 a month. Hasn't hurt my lifestyle at all, and I'm enjoying every minute of my new cars.

And the lease cycle is very interesting, too. First year you're in love. Second year you are comfortable, Third year you start to get a bit bored but you quickly get excited because you count down the months until the next car is in your garage. Because of BMW's pull ahead program and the time it takes to get one built/delivered from Germany, you start talking to your dealer about the next car before you're done with Month 24 in the current car. You're always in a "new car" mindset as a result which is very pleasing for those of us into new cars.

BJ

Well maybe I was wrong about ya BJ. But maybe not

You remember when you had your Acura paid off, and still loved it? Is it really such a bad idea for a person in a similar position to hang onto that car for a few more years (i.e. no payments) and use that $600/month towards sending their kid to a private school, or allowing for their spouse to work part time for a few years in order to care for a new baby? Not everyone needs a brand new BMW every 3 years.

Originally Posted by SamS

Well maybe I was wrong about ya BJ. But maybe not

You remember when you had your Acura paid off, and still loved it? Is it really such a bad idea for a person in a similar position to hang onto that car for a few more years (i.e. no payments) and use that $600/month towards sending their kid to a private school, or allowing for their spouse to work part time for a few years in order to care for a new baby? Not everyone needs a brand new BMW every 3 years.

If I used the same ratio of income:cost of car as BJ, I'd have to be in a Yaris.

Originally Posted by SamS

Well maybe I was wrong about ya BJ. But maybe not

You remember when you had your Acura paid off, and still loved it? Is it really such a bad idea for a person in a similar position to hang onto that car for a few more years (i.e. no payments) and use that $600/month towards sending their kid to a private school, or allowing for their spouse to work part time for a few years in order to care for a new baby? Not everyone needs a brand new BMW every 3 years.

No question that family priorities shift over time.

But I'd argue, without trying to sound too elitist here, that if one can afford to purchase a $50,000 German luxury car then they surely can afford to pony up what amounts to $25 or $50 a month incremental for the privilege of perpetually driving brand new $50,000 cars.

A pack-a-day smoker will spend $450 a month on cigarettes. A social drinker will spend $300 a month hanging with the guys on Friday night's. Someone in a bowling league will fork over $275 a month to participate. Gym memberships, vacations, newspapers, movies, iTunes downloads, you get the point.

We merely make our cars into too big a deal. It's really just another monthly utility. Don't overthink it. Average out your 10 year old car and what it's true out-of-pocket cost was to you during that span. Divide by 10, divide by 12. Use that number and lease the best car you can for that outlay. Done.

And if you can't, if you simply can't get the quality of car that you want for the money you've customarily spent, well, there's another myth out the window. Turns out that it was the BMW buyer that bit off more car than he could chew, not the BMW leaser.

BJ