Doesn't Anyone Buy Anymore?

Originally Posted by palermo22

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 just checked Fidelity and they're offering 0.05% on their money market fund, so a 1.99% loan would be 1.94% above the money market yield. Not a bad deal at all -- for BMW! I realize there are certain tax reasons to lease and some companies lease cars for some execs -- but I suspect that's not the majority of lessees.

"Never spend your money before you have it." - Thomas Jefferson

Originally Posted by davidc1

OK. So the guy who leased spent 17K and have 27k of liquid asset in the bank then.

Yes, and he can go out and buy that car for actual market value, which will most probably be less than $27k.

http://cgi.ebay.com/ebaymotors/NAVIG...ht_23831wt_958

Other reasons why leasing can make sense depending on your circumstances and the terms of course:
1) It is generally better to buy an asset that appreciates (real estate, picasso painting) and to rent a depreciating asset (car)
2) leasing allows you to externalize the depreciation risk if you are in an accident and the cost of expensive post-warranty maintenance.
3) Leasing in conjunction with ED can mean big savings because the residual is based on US MSRP while the cap cost is based on ED price.

If I had not been in the situation where i need to "hide" some liquid assets I would have leased for sure.

People making these comparisons seem to suffer a lot from confirmation bias, so their numbers tend to come out the way they would like.

One risk with a lease is that you're making a commitment for the term of the lease. If it turns out you don't want or need the car for that long, it may be a little more difficult to unwind than a purchase, even one with a loan. But in general BMW FS is pretty flexible about these things. You also may have to keep up a leased car, or pay out of pocket when you turn it in. The bottom line may not be much different from the market value hit you take on your own car with, say, bent wheels or unmatched, worn tires, but reaching in your pocket feels different somehow. Again, BMW FS in my experience is pretty generous about turn-in condition. And of course there's the mileage issue. If you want or need to drive more, the lease is more expensive, reflecting the fact that a high-mileage car has a lower market value than an average car. The other side of the coin is that if you turn in a leased car with unused mileage allowance, you don't get any credit for that.

Beyond those things, a lease is a pretty good way of letting someone else take the risk of how much market value a car will lose through depreciation. If the car is worth more than the residual at the end of a closed-end lease, you can buy it and flip it, and take advantage of the lower depreciation just as if you had bought the car in the first place. If it's worth less, you can turn it in or (and here again BMW FS seems very accommodating) pay a lower market value than the lease contract residual.

Apart from those issues, consideration of whether you "own" the car (especially if there is a lien holder as the result of a loan), or have "equity" or whether or not you can "afford" the car are just subjective nonsense in the context of a lease/buy comparison.

Originally Posted by raleedy

People making these comparisons seem to suffer a lot from confirmation bias, so their numbers tend to come out the way they would like.

One risk with a lease is that you're making a commitment for the term of the lease. If it turns out you don't want or need the car for that long, it may be a little more difficult to unwind than a purchase, even one with a loan. But in general BMW FS is pretty flexible about these things. You also may have to keep up a leased car, or pay out of pocket when you turn it in. The bottom line may not be much different from the market value hit you take on your own car with, say, bent wheels or unmatched, worn tires, but reaching in your pocket feels different somehow. Again, BMW FS in my experience is pretty generous about turn-in condition. And of course there's the mileage issue. If you want or need to drive more, the lease is more expensive, reflecting the fact that a high-mileage car has a lower market value than an average car. The other side of the coin is that if you turn in a leased car with unused mileage allowance, you don't get any credit for that.
.

Not really, you can just assign the lease on lease trader and you won't be in a worse position than a purchase. Remember that with a lease, in most states you don't pay the full sales tax up front. So, even if you have to give an incentive to unload your lease, you'll still be in a better position than losing 15% of the car's value if you were to sell in 5 months.

Everyone presents a good aregument that a lease works for some people and a purchase for others. I actually see a lot more merit to a lease than before I started the thread; however, since I am a person that doesn't like to have car payments or incur debt I will still purchase with full cash payment. There is one more flip of the coin that stands out for me: if I were to lease I would feel that I am in a borrowed car and looking down the line it will never belong to me (unless the purchase makes sense at the end); however, with a purchased car - it's mine from the beginning. One last point: I think most of you who are not retired and have your income levels going up each year - probably leasing makes sense: you have a new car every three years or so and you can impress the girlfriend - the clients -or neighbors. When you're retired (or close to retirement) and you buy a car every six to eight years - then obviously, a lease makes no sense. But in the end (as Happy Chapin said in "Taxi") - we're both getting what we asked for!

Is there any reason to not lease a car even if you want to keep it long term?

I don't know how MF works out, but I assume that instead of the 2% interest you might get financing, it would work out to maybe 4-5% interest rate on the depreciation for a lease.

So if you look only at the depreciated amount over the first 3 years (lets use 45% of $50,000), the cost to lease is in the interest rate which works out to about $1,400. If you lease, the cost of that same depreciation at 2% is $700.

At the end of the 36 months, you can buy out your lease at the residual (and re-finance it if you choose). So in the end, you've paid an extra $700 on a $50k car to lease instead of buy. By doing this there are lots of advantages....

1) if your car is a lemon, you can walk away
2) if your car was in a major accident, you can walk away
3) if you just want a new car you can walk away, or if residual is lower than what you can get elsewhere, you can buy it out and sell for a profit.
4) lower payments for those first 3 years, though higher payments after the 3 years (assuming you re-finance). most people would be in a better financial situation 3 years later, you can invest the difference and make some money, and then there's inflation.

probably a bunch more reasons, but essentially for $700 over 3 years, you have alot more options.

There are probably alot of flaws in my logic, so someone please help me out if I'm wrong

Unfortunately your math doesn't quite work out -- purchase price should be $48k.

Most importantly, your statement about what happens after 4 years is incorrect. If you've only spent $24k, you most likely still have a loan balance.

Originally Posted by palermo22

This may say it better (using a decently equipped 2012 328)

Lease $550 - 48 months - spent: $$26,400

Net spent: $26,400

Purchase - Spent $42,000

Value after four years: $24,000 (based on 50% depreciation)

Repairs and Maintenance (thus far) - all paid by BMW

So after four years I am now sitting with a car that I have spent $24,000 on and I have equity of $24,000. Under leasing - even if your payments only equalled $24,000 - after four years you have nothing!

Originally Posted by palermo22

Everyone presents a good aregument that a lease works for some people and a purchase for others. I actually see a lot more merit to a lease than before I started the thread; however, since I am a person that doesn't like to have car payments or incur debt I will still purchase with full cash payment. There is one more flip of the coin that stands out for me: if I were to lease I would feel that I am in a borrowed car and looking down the line it will never belong to me (unless the purchase makes sense at the end); however, with a purchased car - it's mine from the beginning. One last point: I think most of you who are not retired and have your income levels going up each year - probably leasing makes sense: you have a new car every three years or so and you can impress the girlfriend - the clients -or neighbors. When you're retired (or close to retirement) and you buy a car every six to eight years - then obviously, a lease makes no sense. But in the end (as Happy Chapin said in "Taxi") - we're both getting what we asked for!

After buying 6 BMWs in 15 years, I leased my current car and I actually feel good about the borrowed car feeling because I am not emotionally attached to it, so I use it like a car is supposed to be used instead of worrying about every minor squeak.

I bought mine ED. With loyalty, my finance rate is 0.1% and I can afford it. I also drive between 15,000 and 25,000 miles per year, and I don't want to have to not go somewhere because I'm out of miles on my lease. I would never lease unless it was going to my expense account.

I think that BMW took the "first hit is always free" mentality with the residuals we saw leading up to 2008. When we picked up our off-lease X5 in 2008, they had a Z4 M Roadster sitting in BMW of Peabody for $399 per month. Too bad I would have blown through the 10,000 miles in about a month in that baby.

I have always thought of leasing as renting: at the end of the rent period you have nothing to show for what you spent. Of course, I understand when you're young it may become the sole option for getting into a BMW (or other expensive car).

I come at it from a different perspective. Having owned 2 BMWs and seen how many repairs were covered under the warranty I've decided they are wonderful cars to drive but a source of large potential expenses once the cost of repairs are on your shoulders.

Some may decide to buy the car and if they like it they keep it, otherwise they sell it. Problem for me is selling a car after 4 years that is still worth around $20K+ is not the same as selling a 8 year old car for a few thousand. Most people can scrape together a few thousand, those with $20K cash are far fewer. Plus there's the hassle of showing the car, worrying about someone deciding to liberate it from you on a test drive, etc.

So I see a lease as a purchase with a prenegotiated sale. I know the purchase price, just as negotiable as on a ordinary purchase. And instead of having to sell the car myself I have already made the sale!

Originally Posted by palermo22

I have always thought of leasing as renting: at the end of the rent period you have nothing to show for what you spent.

So it depends here. sometimes nothing to show is worth more than sinking in 1000s of dollars in to a loan just to have a tiny bit of equity after year 3 and with 1-2 more years of loan payments to go. If you take the total cost of ownership on a finance it never makes sense (unless w/ a big down) to finance if you end up selling before your loan is over. You only recoup value after the loan is paid off.

It all depends on payment terms. I know people that finance for 5 years and want to sell in 3. you take the total cost of ownership with down payment and monthly payments, add it up and subtract the car equity they still have over the loan. usually they are worse off than someone who leased for 36 mos and end up with "nothing."

You got it right on the OP. You finance if you're keeping your car longer than the loan term. You lease when you want a new car every few years.

I've crunched the buy vs. lease numbers a bunch, and concluded that you spend a little less if you buy, but you have a bigger hassle and cash outlay. I've leased 5 cars (4 BMWs, 1 MB) and by my math the savings from buying probably averages around $700-1000 after 3 years, depending upon how much support you got with the residual. And that's if you sell it to a private party instead of taking less from a dealer by trading it in. To save that $700-1000, you have to put down a lot more up front, pay more monthly, carry the risk of killing your resale value if you wreck it, and deal with the hassle of selling the car.

But all that is based on keeping the car for 3 years. If you want to keep the car it's definitely better to buy on day 1 than to lease then buy. If you finance for 4 or 5 years and keep it for 7-8, you're much better off. If you buy it slightly used (still under warranty), you're the smartest guy in the room. I bought my car at lease end (for thousands less than the residual) and the numbers can't beat if I had bought it initially.

Maybe someone can help me out here so I can compare leasing vs. buying. I know how to figure if I pay cash or if I finance - since I have never leased - perhaps if we use real figures here then I can make the decision.

Based on my research - whether it be USA delivery or ED - I figure the car will cost $42K.

So what will a lease run on a $42K 2012 328 - let's say I want to do a 48 month lease - what will all my expenditures be at signing - what will the lease payment be - and what would I have to pay at the lease end. I probably will average 10K miles per year.

Originally Posted by palermo22

Maybe someone can help me out here so I can compare leasing vs. buying. I know how to figure if I pay cash or if I finance - since I have never leased - perhaps if we use real figures here then I can make the decision.

Based on my research - whether it be USA delivery or ED - I figure the car will cost $42K.

So what will a lease run on a $42K 2012 328 - let's say I want to do a 48 month lease - what will all my expenditures be at signing - what will the lease payment be - and what would I have to pay at the lease end. I probably will average 10K miles per year.

48 month leases on BMW is a deal breaker. 36 is the sweet spot for most.

do some research/speculation on residuals and the money factor and plug it in to a lease payment calculator. it's pretty simple. you'll also have to factor in your local tax rate.

didn't you mention you were going to just pay cash? Cash is going to trump financing/leasing any day of the week and 10 times on sunday. you have no need for gap insurance coverage, you are fully equitable, and your total cost of ownership = total cost of the car + tax + license (no lease fees, no interest, no turn in fees, etc). If you want to get rid of your car early you can do it whenever you want and don't have to fuss with paying off a loan and waiting for your title.

Heard many say you don't want to own a BMW out of warranty because of the prohibitive cost of repairs, like high 4-figure bills.

That would be the reason for turning over on a lease.

Originally Posted by wco81

Heard many say you don't want to own a BMW out of warranty because of the prohibitive cost of repairs, like high 4-figure bills.

That would be the reason for turning over on a lease.

Am I then taking a big gamble with the new 328 in planning to own it more than six years? Is this car more expensive to maintain/repair than the Audi A6 or a high end Japanese car?

Originally Posted by palermo22

Am I then taking a big gamble with the new 328 in planning to own it more than six years? Is this car more expensive to maintain/repair than the Audi A6 or a high end Japanese car?

If you are planning on owning it 6 years, consider getting the extended warranty

Originally Posted by palermo22

Am I then taking a big gamble with the new 328 in planning to own it more than six years? Is this car more expensive to maintain/repair than the Audi A6 or a high end Japanese car?

I have the 7/70 extended warranty on my E91. Considering how funky BMW electricals have become, it isn't all that expensive. My rule-of-thumb has been to figure on at least $1k in annual out of warranty repairs for a typical Eurocar, $2k+ for a Porsche.

Both the Audi and BMW are likely to dwarf the typical Lexus or Acura in out of warranty repair costs.

I would be uncomfortable taking my Sawzall to a leased car.

Originally Posted by mikemac

ome may decide to buy the car and if they like it they keep it, otherwise they sell it. Problem for me is selling a car after 4 years that is still worth around $20K+ is not the same as selling a 8 year old car for a few thousand. Most people can scrape together a few thousand, those with $20K cash are far fewer. Plus there's the hassle of showing the car, worrying about someone deciding to liberate it from you on a test drive, etc.

Well, you did achieve your goal of unloading the vehicle. Collect the insurance money and buy another vehicle

Originally Posted by Majikthese42

I have the 7/70 extended warranty on my E91. Considering how funky BMW electricals have become, it isn't all that expensive. My rule-of-thumb has been to figure on at least $1k in annual out of warranty repairs for a typical Eurocar, $2k+ for a Porsche.

Both the Audi and BMW are likely to dwarf the typical Lexus or Acura in out of warranty repair costs.

I would be uncomfortable taking my Sawzall to a leased car.

Do you mind rephrasing that in English!

Originally Posted by palermo22

Do you mind rephrasing that in English!

I can't translate but the good part is if you only put 10K miles on per year you probably won't have any out of pocket expenses except tires for the first 4 years while under the factory warranty. After that I doubt your expenses will be any more than an Audi but probably more than a Japanese luxury car. It's anyone's guess as to the reliability of the new turbo 4 cylinder as it's too new to say.

A 3 year lease will likely eliminate any out of pocket costs but of course, as you already know you will have no equity. Something like an Infiniti G37 or a Lexus might be a better long term car based on reliability. Then again you don't have the same coverage over the first 4 years as on a BMW.

At least based on posts in the E90 forum of Bimmerfest the E90 has not exhibited any large degree of technological problems.

Originally Posted by Michael Schott

Leasing is like renting no doubt but many of us prefer it for a few reasons. It's still much less expensive due to the residuals and relatively low money factors. Also, it allows you to get a brand new car every 3 years and avoid BMW's pricey maintenance. The negative and for some this is huge, is the lack of equity.

I hope no one really views buying a car as building equity - not a great rationale for buying. Cars depreciate so fast that the concept of equity in a car is laughable. I always find it funny when people say those that lease can't afford to buy. Personally, if someone wants to go there, if you have to take out a loan to buy, you can't afford it either. You don't own the car until the lien is taken off the title.

I say leasing is a smart choice for those that don't stay with a car for more than a few years and don't drive lots of miles. I've owned cars and leased cars. I never owned a car (other than an E46) longer than a typical lease (like 3 years). What's the point of making loan payments on 100% of the price of the car over 3-5 year period if I'm going to sell or trade it in in 3 years. I'd rather pay for the portion that I use over those three years and leave the risk of greater unexpected depreciation to the lessor. Also, why pay tax on the entire value when I can pay tax on just the portion I use - this can be costly if you buy and sell cars every few years.

One can ask whether driving a new car every 3 years makes financial sense - in this case it is a lifestyle choice as someone says.

People should make the best financial decisions for the purpose/need they are trying to fulfill. Buying isn't always the answer.

Sorry for the rambling and defensive post