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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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  #76  
Old 05-14-2012, 03:52 PM
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My lease situation challenges all myths about leasing :

1. I drive 30 k per year, hence I am leasing a 2011 X5, 30k per year , 36 month term.

2. I am reimbursed by my employer for all my vehicle expenses

I have no interest in owning any hi mileage vehicle, due to my unique circumstances
leasing is the best choice for me as I am reimbursed for all of my vehicle expenses.
Also by the way, adding that many miles only adds about 187.00 per month to the standard 15k per year lease payment if anyone is wondering.
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  #77  
Old 05-14-2012, 05:42 PM
PeterC4 PeterC4 is offline
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Quote:
Originally Posted by alex_c View Post
Au contraire my friend!!! It is in YOUR best interest to have a large residual. Since on a lease you only pay for the depreciation (+ interest) of the vehicle, the larger the residual, the lower the payments. Plain and simple. That's why BMW's have such a great lease deals: their residuals are higher than normal, therefore, less depreciation.

Then, when you return the vehicle, and it is supposed to be worth 58%, but it is not, you can make an offer for about 50%, or 48% or 45%, and if it is higher than wholesale even if it is lower than residual, you may be able to purchase the car at that price.

So, in short, you paid in lease payments the equivalent of 42% of the car (58% residual), and then, at the end of the lease, you may be able to purchase the car (if you want to) for another 48% (instead of 58%), effectively making it a total of 90% of the original agreed-upon price of the car, or easier to say, you end up with an additional 10% discount at the end of the term if you decide to keep the car.

So, leasing is not bad at all, especially with BMW's.

Now, some other brands -most notable, Audi- have very low residuals, which make the monthly lease payments higher. The only good thing is that at the end of the lease, instead of having a car that is worth 40% (residual), it ends being more valuable, lets say, 45%. In that case, you can actually trade-in the lease return and have some equity build up, even when it was a lease and not a purchase.

BTW, I used to teach Finance 101 in college... so this is fun for me
It took a long time to read through this thread and get to the heart of the matter. The leasing benefit is that you can know the residual value and the higher it is, ...your lease payments are lower. Residual values vary from brand to brand and most OEMs are reluctant to take, or subsidize, residual risk these days. Most people with the financial capacity can structure any payments they wish with their own credit facilities and can have great flexibility, cheap credit in this environment, and not worry about mileage. It's the value of the residual you have to take a risk on. This is where the options you forgo or the funky colour you wanted might have an impact. Unusually configured cars might be impacted adversely, well optioned cars with unique desirable colours could be in demand. As to the tax benefits, they are neutral where I live, you either depreciate the car for tax and deduct interest if you are eligible or deduct the lease payments.

The benefit of owning the car? You can keep it as long as you want and if you like to buy things with cash and avoid debt, not a bad way to go - but you take the residual risk if you flip it within 3 years or so. Some people who make a lot of money but work in volatile environments, (like investment banking), are typically cash buyers. Others feel comfortable living on credit. Can you own a decent modern BMW for 7-10 years from or near the onset of a new model year and make it worth your while...for sure. Can you do it for 3? Depends. Returning a car after 36 months that is over mileage and in bad shape will cost you too.
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Last edited by PeterC4; 05-14-2012 at 05:45 PM.
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  #78  
Old 05-14-2012, 06:43 PM
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Originally Posted by Joe-BMW View Post
Lease new, buy CPO. That's what I follow.
Yep, this is my rule too. I will not buy a new BMW. I'd rather lease the best BMW that has the best lease program or buy a used one from a private owner who has extended warranty or CPO warranty on the car already.
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  #79  
Old 05-14-2012, 11:07 PM
Stealth8 Stealth8 is offline
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Originally Posted by swajames View Post
Suze Orman focuses on the lowest common denominator. I have four personal cars, one of my four is leased. I am a business owner, and I can deduct the lease payments and some other operating expenses to the extent that the car is used for business purposes. Suze Orman's advice wouldn't work well for me as I can't deduct anything had I bought the car outright. Orman and her ilk are one size fits all merchants, she's not in the business of catering to affluent business owners or the more sophisticated professional. In reality, there is only one "one size fits all" answer to this question and that is that there IS NO "one size fits all" answer to which is the smartest approach in terms of a lease vs buy decision. The bottom line is that both can be viable options and terrible options - it is a fact and circumstance driven equation, and a smart customer can make either alternative work. For what it's worth, Orman would be simply aghast that you'd blown your cash on a BMW, even that relatively inexpensive one. Anything above the basic Honda and its ilk, and to the Ormans of this world you've made, to use your own platitude, a terrible financial decision.
Ahh...I own my own business as well and you can deduct the Purchase Price (over the amortization period) to the extent the car is used for business purposes. The same holds true for a Lease.

I have leased and purchased several BMWs and the decision usually comes down to how long I want to keep the car and the lease rates offerred. The position of the body style in the lifecycle is also a consideration. My 2009 E60 550i M-Sport had only 32k mi on it at the end of the 3 year lease and was like new. I would have been fine keeping this car for another 2 years anyway.

With my 2012 550i M-Sport it was about $8,000 cheaper to purchase the car (even with financing) than to lease it for 3 years and then buy it at the end of the lease (and yes, I know you can get some small discount on the lease-buyout price). When you lease you lease the most expensive portion of the vehicle.
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  #80  
Old 05-15-2012, 01:07 AM
poncekim poncekim is offline
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Everyone on this thread who thinks buying a BMW is better than leasing needs to open their mind and crunch some numbers. Note I'm talking about BMWs bc of the subsidies. It makes no sense to buy a BMW in 95% of the cases.

Someone mentioned buying an e60 and calculating his cost was 600/month and how he doubted you could lease for that much. There were much better deals than that leasing.

I used to buying only japanese cars until I stumbled onto this website and read about the great lease deals on BMWs. Since then I haven't bought another car. I still have my 2004 Acura tl that has been trouble free backup car but I love my BMW leases.

Here are my lease deals:

2007 100k Msrp m5 for 1050/month. When I turned the car in the residual was 10k higher than market value.

2011 m3 vert 79k Msrp for 660/month.

If you wait for the deals there is no better value than BMW leases.
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  #81  
Old 05-15-2012, 01:11 AM
dontay dontay is offline
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I just dislike milage restrictions especially in California where everything is so spread out.

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  #82  
Old 05-15-2012, 03:46 AM
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Originally Posted by jagu View Post
Yep, this is my rule too. I will not buy a new BMW. I'd rather lease the best BMW that has the best lease program or buy a used one from a private owner who has extended warranty or CPO warranty on the car already.
My philosophy as well ever since I took a HUGE beating on the depreciation of an `07 650i convertible I owned for a little over a year.
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  #83  
Old 05-15-2012, 04:16 AM
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Originally Posted by Imothph View Post

3)Is it really my car? I like the feeling that the car is MINE....not on loan from some company. I know that in practical terms it probably doesn't make any difference - if you finance the car, its technically owned by the bank ...right? Still - leasing has a "borrowed but it aint yours" feeling I don't like.

4) Limits on what you can do - I don't like that either. I'm not big into Mods for my newer cars - but I like knowing I have the option. I don't want to be looking at my ODO and wondering if I need to switch cars for a week to make sure I say under the mile limit.

Sometimes I think I'd be ok with a lease and that I should just do it - worst case I get out in three years and never do it again - though, you could apply that same sentence to "attempted robbery" ......worst case I get out in three years and never do it again.
Yes, I felt this way too a few days prior to leasing my first car... and yes, after understanding the lease I felt comfortable to say yes it can be my car if I want to purchase it after the lease ends.. OR if i'm not satisfied with the leased car then I can just return it and get a NEW car and wipe my hands clean.
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  #84  
Old 05-16-2012, 01:09 PM
bdgtexas bdgtexas is offline
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Quote:
Originally Posted by poncekim View Post
Everyone on this thread who thinks buying a BMW is better than leasing needs to open their mind and crunch some numbers. Note I'm talking about BMWs bc of the subsidies. It makes no sense to buy a BMW in 95% of the cases.
There is a reason something like 2/3+ new BMW's are leased. To prove it I decided to crunch the numbers on lease vs. finance vs buy, because running numbers is my thing. So I did the following:

I went to a couple different websites to find depreciation estimates for BMW's, averaged the various values over the first 5 years, charted it, and used excel to create a best fit line (R^2 over 0.99 BTW). The resulting equation is Depreciated_Value = Value_Initial*e^(-0.174*month/12) where Value_Initial is the starting 'worth' of the car and the month is how old the car is in months. This works out to 84% at 1 year, 71% at 2 years, 59% at 3 years, 50% at 4 years, and 42% at 5 years. One could argue these, but it was an average across a few sites, so i feel its as valid as any other method.

Next I took the most common 5 series, a 528i, and optioned it with what I would consider 'standard' options, premium package, tech package, comfort access, metallic paint, heated seats, etc. Works out to an MSRP of $53,695 and an US invoice of $49,415. For simplicity let's say you pay $1,000 over invoice, your new car taxes are 7.25% on the whole car if financed or bought and on the payments only if leased.

Next let's assume you are rich, so you can afford whatever the finance payment is or you can buy the car outright. You go for the best rates BMW offers for financing your new 5, 2.9% for 36 months. For leasing you are going to pay the acquisition fee and we will use the 10k a year lease residual and put down max MSD's.

For the sake of all of the comparisons you are going to 'keep' whatever car for 6 years, for leasing this means you would 're-up' at the end of year three to a new 3 year lease, paying a fresh acquisition fee, but rolling your MSD's.

Finally for purposes of this argument, you are going to set up an account equal to the initial purchase costs of the car (invoice, +1000, +tax) and all of your upfront costs or ongoing payments will be made out it, any money in it will be earning some rate of return.

At any point in time the net money you have in hand, or equity, is the depreciated value of the car - what you owe + what is in your account. With the lease we assume everything goes to term with no issues so the value of the car and remaining lease payments 'cancel,' but you always have your MSD's as equity. With buying outright your equity is simply equal to the value of the car at any point.

To the charts! I plugged this in at a 6%, 8% and 10% rate of return on your bank account and charted the equity over time. See the attached images. Your buy value is $54,070 (remember tax), finance payment is $1,570.04 (0 down), and lease is $749.63 with an initial down of the $725 acquisition + first payment + $5,250 in MSD's. With financing your bank accounts starts at $54,070, leasing $47,345.37 and buying 0.

Some observations:

1) If your rate of return is better than BMW's finance rate (or whatever bank you choose), financing is ALWAYS better than buying outright.
2) The lease to finance breakeven point is 34 months at 6% return, 37 months at 8%, 42 months at 10%. Meaning that you have to keep your car at least that long to be better off buying than leasing.
3) 0% return is equivalent to paying as you go out of pocket and takes 29 months for buying to be the better deal than leasing, this increases to 37 months if you do a BMW loan for 60 months at 3.9%.
4) The lease to buy breakeven point is 46 months at 6%, 57 months at 8%, and 70 months at 10%.
5) At a 0 return (out of pocket for lease) it still takes 19 months holding the car for buying out right to be better than leasing.
6) None of this includes maintenance, meaning there is a real possibility at a high rate of return (10% +) that buying out right IS NOT better than leasing for 6+ years, if you have the cash just sitting around (what are you anyways, scrooge mcduck?)
7) Yes this all changes at higher mileage leases.


Bottom line there are many scenarios where leasing is your best option (in a tax appropriate state, i.e. not Texas )

If anyone wants me to run a scenario for them let me know.... Yes I am a spreadsheet geek!
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  #85  
Old 05-16-2012, 09:37 PM
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Ace535i Ace535i is offline
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So if savings accounts are paying < 1% interest, then leasing for 36 months with maximum MSDs at 15K per year is hands down way better than a purchase financed with a 60 month 4.5% APR BMW bank loan? This conclusion is further supported knowing how expensive repairs would be after let's say on the eighth year of ownership?

Cheers to you for the detailed analysis! Are you an economist?

Last edited by Ace535i; 05-16-2012 at 09:40 PM.
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  #86  
Old 05-16-2012, 10:02 PM
dontay dontay is offline
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I know that I am in the minority but I like keeping my BMWs between 5 and 7 years so leasing is just not an option. Forget the BMW rates, Chase banks as a 2.54% for 75 months. I plan on paying off mine in 60 months but either way I view that as pretty much free money.
Also, if I leased I don't know what I would buy in 3 years? Another 5 series? X5 is nice but I don't want one, X3 is too small, 3 series is too small for my family, the 7 and the 6 series probably won't fit in my Garage because my 5 barely has room to spare.

The new 5 isnít due until at least 2017 so I am in no rush to lease something and go through the new car buying grind in 3 years; plus I hate mileage restrictions. I know that leasing makes sense for some people but for me I view it as a headache and puts me in a perpetual car buying mode. I happy with my 2012 M Sport from (shout out to G. Poland and Pacific BMW in Glendale, CA) and more than happy to enjoy it for the next 5-7 years.
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  #87  
Old 05-16-2012, 10:25 PM
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Ace535i Ace535i is offline
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Quote:
Originally Posted by dontay View Post
I know that I am in the minority but I like keeping my BMWs between 5 and 7 years so leasing is just not an option. Forget the BMW rates, Chase banks as a 2.54% for 75 months. I plan on paying off mine in 60 months but either way I view that as pretty much free money.
Also, if I leased I don't know what I would buy in 3 years? Another 5 series? X5 is nice but I don't want one, X3 is too small, 3 series is too small for my family, the 7 and the 6 series probably won't fit in my Garage because my 5 barely has room to spare.

The new 5 isnít due until at least 2017 so I am in no rush to lease something and go through the new car buying grind in 3 years; plus I hate mileage restrictions. I know that leasing makes sense for some people but for me I view it as a headache and puts me in a perpetual car buying mode. I happy with my 2012 M Sport from (shout out to G. Poland and Pacific BMW in Glendale, CA) and more than happy to enjoy it for the next 5-7 years.
75 months is a long time....does depreciation factor into your choice of finance period?
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  #88  
Old 05-16-2012, 10:38 PM
dontay dontay is offline
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I know depreciation is a significant factor but that just preference.

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  #89  
Old 05-28-2012, 02:29 AM
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Cars are expenses we all know that..I get it...cars lose value everyday. I say who cares...I need a car and all cars lose money over time so you just drive what you like and enjoy. Leases typically do two things:

1. encourage you to buy a more expensive car
2. puts more money in the dealers pockets because people who leased are usually more payment focused then price focus

dealers prefer leases. Also, if you ever get into a serious car accident with a lease vehicles you will most likely never lease again.
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  #90  
Old 05-28-2012, 08:59 AM
swajames swajames is offline
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Originally Posted by dontay View Post
Cars are expenses we all know that..I get it...cars lose value everyday. I say who cares...I need a car and all cars lose money over time so you just drive what you like and enjoy. Leases typically do two things:

1. encourage you to buy a more expensive car
2. puts more money in the dealers pockets because people who leased are usually more payment focused then price focus

dealers prefer leases. Also, if you ever get into a serious car accident with a lease vehicles you will most likely never lease again.
Dealers don't care. They want to shift cars - period. The selling price for the car is just as negotiable whether you lease, finance or write a check.

The last statement is somewhat bizarre... If the worst did happen, you're far better off that the car was leased. BMWFS is the one with the diminished value risk, your lease includes gap insurance in case the car was written off as a total loss and the payout is less than your payoff, and if the vehicle can be repaired you just hand the car back as normal at the end of the period.
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Last edited by swajames; 05-28-2012 at 09:06 AM.
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  #91  
Old 05-28-2012, 09:04 AM
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Bdg Texas - What do you estimate 12 month resale value as percent of MSRP?
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  #92  
Old 05-28-2012, 09:31 AM
dontay dontay is offline
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Originally Posted by swajames View Post
Dealers don't care. They want to shift cars - period. The selling price for the car is just as negotiable whether you lease, finance or write a check.

The last statement is somewhat bizarre... If the worst did happen, you're far better off that the car was leased. BMWFS is the one with the diminished value risk, your lease includes gap insurance in case the car was written off as a total loss and the payout is less than your payoff, and if the vehicle can be repaired you just hand the car back as normal at the end of the period.
Leasing allows the dealer to sell more cars
Leasing allows the dealer to sell more expensive cars
Leasing encourage people to buy a more epensive car
Leasing encourages people to switch cars often

I guess at the end of the day the dealer doesnt care how you pay but they do like leases.
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  #93  
Old 05-28-2012, 10:36 AM
swajames swajames is offline
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Originally Posted by dontay View Post
Leasing allows the dealer to sell more cars
Leasing allows the dealer to sell more expensive cars
Leasing encourage people to buy a more epensive car
Leasing encourages people to switch cars often

I guess at the end of the day the dealer doesnt care how you pay but they do like leases.
Again, you're using conjecture to extrapolate. Financing options offer choices. Whether you view those as an encouragement or an enabler depends upon one's prejudices, preconceptions or biases. That some people make different choices to you isn't any reason to invalidate theirs and nor do theirs invalidate yours. BMW makes it easier than most high end brands to get into their cars, but this isn't a universal truism. Audi is the polar opposite, with what are typically extremely poor financing and unmotivated dealers. MB is much closer to BMW, but BMW is leading the pack. BMW just goes about it in a different way, and it's working very well for them. They are the top selling luxury brand for three reasons - they make a fine car, they built a great brand, and they make it easy to acquire their product.

Simply put, your own choice and the choices of others that you're criticizing by implication ALL boil down to people choosing to buy more car than they need. Choose to buy anything above the most basic and cheapest car that fulfills your needs and you've done exactly what you accuse those who lease of choosing to do. No one "needs" a BMW. Plenty of folks want one. BMW is happy to accommodate. Welcome to America, my friend.
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Old 05-28-2012, 11:21 PM
dontay dontay is offline
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Of course we all have choices. Leases are designed to Sell more cars. I don't see that as being good or bad. It's a free market principle.

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  #95  
Old 05-29-2012, 10:13 AM
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Leasing has many advantages, some of which have been mentioned in earlier threads.

I view leases as another form of a "balloon financing". You do pay to play. $725 bank fee.

What is nice about leasing is that it fixes your costs for the lease period and it is expressed as a monthly lease payment. Residual (what the car is worth) at the end of the lease is fixed when the car is new. If you want to buy the car at the end of the lease, 90% of the time you can buy it for less than the contracted residual. Another hidden value.

And the risk of ownership is with the leasing company as gap insurance. If you have a serious accident and it is totaled, you insurance company pays what the FMV is at the time of the loss. Any shortfall is not your problem. It is BMW Financial and its reinsurance group problem. If the car has a carfax incident, not your problem as to the diminished value.

My moment was when I had a 2007 Audi 5000. Bought that car new and when it was time to sell it, the value was so low because of the sudden acceleration that I took it on the chin, big time. If I leased it, not my problem.

So give leasing a chance. It makes too much sense to not do it.
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Old 05-29-2012, 10:35 AM
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explain this to me

Quote:
Originally Posted by mjsbmw View Post
Leasing has many advantages, some of which have been mentioned in earlier threads.

I view leases as another form of a "balloon financing". You do pay to play. $725 bank fee.

What is nice about leasing is that it fixes your costs for the lease period and it is expressed as a monthly lease payment. Residual (what the car is worth) at the end of the lease is fixed when the car is new. If you want to buy the car at the end of the lease, 90% of the time you can buy it for less than the contracted residual. Another hidden value.

And the risk of ownership is with the leasing company as gap insurance. If you have a serious accident and it is totaled, you insurance company pays what the FMV is at the time of the loss. Any shortfall is not your problem. It is BMW Financial and its reinsurance group problem. If the car has a carfax incident, not your problem as to the diminished value.

My moment was when I had a 2007 Audi 5000. Bought that car new and when it was time to sell it, the value was so low because of the sudden acceleration that I took it on the chin, big time. If I leased it, not my problem.

So give leasing a chance. It makes too much sense to not do it.
--------
Your reasoning seems logical but let me give you a situation and can you tell me the lease vs buy pros and cons.

This is completely Hypothetical but based on some reality.

1. I buy a BMW lets say it is 55k out the door
2. I finance 60 months at a very low rate like 2.54%
3. I drive the vehicle for 6 years to about 65k miles
4. NO out of pocket expenses (no brakes jobs etc)
5. I sell the vehicle for roughly 15k (I think that is a conservative#)

So given the above scenario I actually paid 40k for the car and drove it for 6 years and drove it car payment free for 1 year.

Given a lease scenario wouldnt I have leased two cars in 6 years and then own nothing?
If i sell the car for 15k isnt that like getting almost 20% back.

Last edited by dontay; 05-29-2012 at 10:39 AM.
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Old 05-29-2012, 10:58 AM
swajames swajames is offline
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Originally Posted by dontay View Post
--------
Your reasoning seems logical but let me give you a situation and can you tell me the lease vs buy pros and cons.

This is completely Hypothetical but based on some reality.

1. I buy a BMW lets say it is 55k out the door
2. I finance 60 months at a very low rate like 2.54%
3. I drive the vehicle for 6 years to about 65k miles
4. NO out of pocket expenses (no brakes jobs etc)
5. I sell the vehicle for roughly 15k (I think that is a conservative#)

So given the above scenario I actually paid 40k for the car and drove it for 6 years and drove it car payment free for 1 year.

Given a lease scenario wouldnt I have leased two cars in 6 years and then own nothing?
If i sell the car for 15k isnt that like getting almost 20% back.
The big thing you are missing is that you would likely only pay 40,000 - and most likely less - to lease a couple of 55k cars for that same period without the loss of capital. No maintenance costs either. Comparisons are only valid with actual cases and not with hypotheticals but where you claim to get 20% back, a lessee never had to expend it in the first instance.
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Old 05-29-2012, 03:23 PM
dontay dontay is offline
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Originally Posted by swajames View Post
The big thing you are missing is that you would likely only pay 40,000 - and most likely less - to lease a couple of 55k cars for that same period without the loss of capital. No maintenance costs either. Comparisons are only valid with actual cases and not with hypotheticals but where you claim to get 20% back, a lessee never had to expend it in the first instance.

I guess I am just a stupid Software dude
Makes some sense I guess...anyway thanks for explaining.
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Old 05-29-2012, 04:38 PM
swajames swajames is offline
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I guess I am just a stupid Software dude
Makes some sense I guess...anyway thanks for explaining.
I've always taken the view that there's really no right or wrong answer to the buy vs lease question. You can make a great deal or a poor one irrespective of whether you want to buy or lease. With a little work you can make the math work either way, it largely boils down to what you're most comfortable with and the cost of money at the time you're in the market. For those who like you who like to keep their car a little longer the purchase route probably does make most sense.
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Old 05-29-2012, 08:59 PM
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christianfahey christianfahey is offline
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Originally Posted by mjsbmw View Post
Leasing has many advantages, some of which have been mentioned in earlier threads.

I view leases as another form of a "balloon financing". You do pay to play. $725 bank fee.

What is nice about leasing is that it fixes your costs for the lease period and it is expressed as a monthly lease payment. Residual (what the car is worth) at the end of the lease is fixed when the car is new. If you want to buy the car at the end of the lease, 90% of the time you can buy it for less than the contracted residual. Another hidden value.

And the risk of ownership is with the leasing company as gap insurance. If you have a serious accident and it is totaled, you insurance company pays what the FMV is at the time of the loss. Any shortfall is not your problem. It is BMW Financial and its reinsurance group problem. If the car has a carfax incident, not your problem as to the diminished value.

My moment was when I had a 2007 Audi 5000. Bought that car new and when it was time to sell it, the value was so low because of the sudden acceleration that I took it on the chin, big time. If I leased it, not my problem.

So give leasing a chance. It makes too much sense to not do it.
You didn't mean 2007, did you? My father had a 1984, and I think they changed the naming to A6 in about 1990. So, did you mean 1987 5000?

(btw I loved that car, and sorry about the hijack).

I own my current car, and my wife's past and current car. Why? Seriously, may sound silly, but I bought according to Suzy Orman; I could afford it, so I should buy it outright. Realistically, I probably did that because I could, and it was a matter of pride.

Now that I am shopping for a F10, I've been seriously considering. I am a bit concerned about the costly tech in the newer cars Also, I belong to a profession where writing off a vehicle is very legitimate, so there's that added incentive. I will likely lease, but will look at the comparative rates and incentives available at that time before I finalize my decision.

Last edited by christianfahey; 05-29-2012 at 09:09 PM.
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