In my opinion, based on what you describe, you are an ideal candidate for purchasing a car instead of leasing. If you plan to keep the car for more than five years, then purchasing absolutely makes more sense than leasing (unless you own your own company and could fully deduct your lease payments from your taxes).
Originally Posted by zerovector
Current situation: Wife and I both have excellent credit, zero debt (literally), cash flow is steady. We both tend to keep our cars for awhile (the last two I've have for 7 years, she's going on 7 years for her older 325i). We both really like the X3. Coming from a more sports oriented sedan, I'd enjoy the M-sport package and dynamic handling, so I'm certain that I would want that. So it's going to be a pretty expensive X3 (premium, tech, convenience, msport, dyn handling) at the end of the day.
This will potentially be my first time ever buying a BMW new. I think I might be a decent lease candidate (will probably stay under the mileage requirement), but also enjoy "owning" my vehicles. The small cash hit with leasing sounds good, but I do tend to hang on to my cars for awhile. Then again, to have a smaller payment (for us), we would want to put down around $20k. Obviously that's a good chunk of cash. We'd like to purchase a home in the next year, and that $20k won't really make a difference for us in terms of what type of house we might want to buy, but
it is a pretty good chunk of change -- more than I've ever put down on a car. I know I can always buy the car at the end of the lease, but that will incur a higher long-term cost.
Does anyone think the 2013 X3 will depreciate more than 45% in the first 3 years? Current BMWFS rates are set at a 56% residual. Anyone else been in a similar situation? I'm also a bit nervous about owning one of these newer BMW's outside of the warranty period as well. But the X3 with M-sport/dyn handling drives sooooo goood
(I obviously understand cars are always a losing game and shouldn't be viewed as investments for the most part).
Also, I would have to be crazy to put $20,000 down on a car, it simply makes no sense from an economic perspective. Current financing rates are extremely low, under 2% with excellent credit. My wife and I got 1.9% when we purchased our X3 last month. ….. that is essentially "free" money as it is about the rate of inflation. We financed about $40,000 over five years and pay about $700 a month.
I am not in finance (but consider myself a decent amateur investor), but would recommend instead to keep the $20,000 in your pocket. Cars are depreciating assets as you note that will lose value immediately after purchasing them. I would rather take the $20,000 and purchase several US (or foreign) stock market index funds with extremely low expense ratios, or even several five star rated mutual funds in different market sectors (technology, Pharma, global, healthcare, real estate, etc.). The $20,000 over five years, assuming a very conservative 5% compounded yearly rate of return (inflation is currently is about 2% per year = 3% net RofR), will return in about $6000 total after five years before taxes, which will still make a net profit even if you factor in finance charges for financing the car. If the market returned 8% over five years on average (which happens to be about the average return on the US market since people started keeping track decades ago – the UK market average is higher at about 11%) then your $20,000 will grow to about $30,000, giving you almost $10,000 in profit. Of course, you will make more the longer you hold the investment and the more your investment grows the more money you will make (this is the magic of compounding and how the truly rich stay that way).
Bottom line, purchase the car with putting as little money down as possible (have someone else take the main risk on that), take advantage of the ridiculously low new-car interest rates currently available for a large down payment, and invest the money you would have otherwise used for a down payment.
Just my two cents.
2013 X3 28i, AW, Chestnut, Sienna, ZAP, ZCV, ZCW, ZDH, ZPP, DHP, rear view, park distance, cargo net (Wife's)
2010 Porsche Boxster S (Mine)