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X3 F25 (2011 - current)
The latest X3 brings some added style and some new features to the BMW SUV family. Talk about the new F25 now!

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  #1  
Old 08-08-2012, 10:14 AM
zerovector zerovector is offline
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Still trying to figure out buy/lease

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).
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  #2  
Old 08-08-2012, 11:39 AM
tango131 tango131 is offline
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Quote:
Originally Posted by zerovector View Post
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).
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).

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.
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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)
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  #3  
Old 08-08-2012, 12:05 PM
zerovector zerovector is offline
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Location: South California
 
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Quote:
Originally Posted by tango131 View Post
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).

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.
Cool thanks for your input. I'm hooked on the bigger screen you get with the navigation package but I really could care less about the nav. Too bad you can't have one without the other

I'm sure it's a pain in the ass to install it yourself too, knowing how BMW designs things...
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  #4  
Old 08-08-2012, 02:17 PM
zerovector zerovector is offline
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Also forgot to mention that about 15,000 of the 20,000 is from a sale of an older vehicle FWIW.
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  #5  
Old 08-08-2012, 03:20 PM
Marathon Man Marathon Man is offline
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Location: Houston
 
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Mein Auto: 2013 X3
That last note about part coming from sale of another vehicle doesn't matter. Cash is cash, once it is in your hand. You then make your investment decision basis the cash in hand without regard to where it came from. You could have earned it, inherited it, robbed a bank, it is still just cash. Just because it came from selling the car you are replacing with the new car shouldn't impact your decision to lease, finance, pay cash, etc. It just matters that you have $20K that you can use as you see fit.
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  #6  
Old 08-08-2012, 04:26 PM
Anfänger Anfänger is offline
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Although you don't need the extra $20k to meet closing costs on your new home purchase, might a hefty car loan payment be an issue in negotiating the best deal for your mortgage? If that's a concern, perhaps the lower monthly commitment of a lease would be helpful. Or for maximum flexibility, maybe delay the car purchase until after you choose the house?
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  #7  
Old 08-08-2012, 04:30 PM
zerovector zerovector is offline
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Location: South California
 
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Quote:
Originally Posted by Anfänger View Post
Although you don't need the extra $20k to meet closing costs on your new home purchase, might a hefty car loan payment be an issue in negotiating the best deal for your mortgage? If that's a concern, perhaps the lower monthly commitment of a lease would be helpful. Or for maximum flexibility, maybe delay the car purchase until after you choose the house?
Yea we were thinking about that. The lease terms as of current come out to around 675-700 per month based on the cost. I guess it's kind of hard to tell how much a 700 dollar car payment would alter my new home purchase deal without consulting the bank first.
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  #8  
Old 08-09-2012, 08:53 AM
e39frank e39frank is offline
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In regards to repair expense once the warranty is out my experience is not much to worry for the first two years after warranty expiration. i.e.. costs are less than payments on a new car. Please know I welcome input from anyone as I share same concern as original poster. A look at Consumer Reports repair records would seem to point toward a good reliability on 3 series and X3 models. I like the idea of a new car every three years with leasing. If you purchase the option is open to sell or keep at anytime which may be handy if you experience a windfall or have a loss of income.
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  #9  
Old 08-09-2012, 08:57 AM
e39frank e39frank is offline
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Location: Virginia
 
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Quote:
Originally Posted by tango131 View Post
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).

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.

I like your investment advice better than what I got from a financial advisor!
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  #10  
Old 08-09-2012, 07:03 PM
Wabbajack Wabbajack is offline
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Mein Auto: 2013 X3 35i
I agree with ^^^. I 100% financed $58K at 1.99% and my payment is $1031. I also agree that less than 2% is like "free money" and that you can better use that capital to grow your money.
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  #11  
Old 08-10-2012, 07:41 AM
UncleJ UncleJ is offline
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All good advice. One thing, BMW's are expensive to repair out of warranty. I made a mistake in not getting the extended warranty for my '06 X3 and sure enough right about 55K miles things started to go south. I have had a succession of things go wrong, including both front struts, and now have a number of other "issues" that are going to cost $$$$ in the months ahead unless I sell/trade soon. If you are going to keep the thing after the 50K then get the extended warranty. It is starting to turn into a money pit. Normally I buy for cash then pay myself back -- just a personal foible, but I like to "own" and not have to worry about things. When the markets were good that was not too wise, but now they are in the toilet it makes for sense for me.

Last edited by UncleJ; 08-10-2012 at 07:43 AM.
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  #12  
Old 08-10-2012, 09:47 AM
tango131 tango131 is offline
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Location: Chicago
 
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Mein Auto: Boxster S; '13 X3 AW/CHT
Quote:
Originally Posted by e39frank View Post
I like your investment advice better than what I got from a financial advisor!
ha ha, thx. it all started "clicking" when i started researching after the market crash 4 yrs ago (LOTs, because like I've said, i'm a nerd ) what do do with my saved money. everyone sold equities in 2008, i bought. if I only had $1M to start.... at 8% YOY, it would double about every 7-8 years... yeah, that's how the rich do it .

i'm "only" 33 so that is my plan.... long term investing. hoard cash now, finance as much as I can with these low crazy rates (twins on the way so buying a house too with the lowest downpayment a bank will let me get away with), and invest my cash for the long term.
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2010 Porsche Boxster S (Mine)
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