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Old 06-27-2020, 04:11 AM
joebiron joebiron is offline
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Help me decide whether I should buy at end of lease

Hi folks,

I need some help thinking through a scenario. I currently am at the waning months of a 3-year, 15k mile lease on my absolutely awesome 2018 BMW 340i xDrive. I am very, very pleased with this car - it looks awesome, performs in a mind-blowing way, and (knock on wood) I have had absolutely zero problems of any kind. Not a single problem, even the slightest. It has been flawless and stunning and hands-down the best car I have ever owned.

3 years ago I decided I no longer wish to own daily driver vehicles that are out of warranty. I'm OCD about modeling scenarios and decided for my personal preference (drive new cars as daily drivers, factor in TCO, hassle-factor, etc.) leasing was a good option for me at this stage of my life. I don't regret that decision.

Situation and considerations:
  • lease is up on January 26 2021
  • I have a lot of other stuff going on this coming December and January and may be too distracted to be shopping for my next car, which could very well be another 340 or 440 but still thinking through options, negotiating, etc. may be difficult to do thoughtfully
  • the Equifax data breach a couple of years ago involved my data, and just a few weeks ago someone submitted a fraudulent unemployment claim in my name. Pain in the neck. I froze my credit on all three agencies, and now at this stage of my life, I have little, if any, need to thaw my credit, except that I would need to do so for a new lease. At this time, this would not be the end of the world, but I have a very bad taste in my mouth with credit checks of any kind. I realize this is emotional and not perfectly rational, but nevertheless it is where my head is at
  • In January I would have cash to purchase my 2018 340i, and while it has been flawless, I'd have only one year remaining on the warranty
  • I still hold to my principle of not wanting to own a car out of warranty, so if I did purchase it, I'd then be looking to trade-in in Jan 2022
  • I generally have been happy with the leasing concept, but I was trending to be over my miles at trade-in before COVID-19 happened. Since I've been working from a home office for the last three months, that mileage risk has been completely mitigated, but it is something I would struggle with for future years if I do lease

With all of this in mind, my options are:
  1. extend the lease a few months to give me time to properly choose my next lease. This will help every lease cycle because December is not the best month to be researching new models for me
  2. buy at end of lease, which still requires me to negotiate. I'm not sure how intense lease buyout negotiations get so would like to know experience of others
  3. start researching a new model now and see if I can get a follow-on lease lined up before the holidays, maybe even end my current lease early?
  4. forget leases going forward and just buy new cars then trade them in before warranty period ends
  5. others?

I realize there aren't necessarily specific questions above, I'm really just looking for some general thoughts and things I may not have considered. Any input is welcome.

Thanks!

Last edited by joebiron; 06-27-2020 at 04:23 AM.
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  #2  
Old 06-27-2020, 05:55 AM
Autoputzer Autoputzer is offline
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1. BMW's closed the loophole where you can negotiate with dealers to buy you car after you turn it in. BMW will punish dealers who sell you or a family member the car for less than BMW allows. BMW sometimes will offer to sell you the car directly for less than the lease contract residual price. Now is one of those times.

2. BMW's generally not going to extend your lease unless you have another new BMW (or MINI or Rolls-Royce) on order.

3. If you bought the car in January, you'd likely be paying "retail" for it, and you'd be selling it one year later for "trade-in." If you bought the car from a dealer (if BMW isn't willing to sell you the car directly at a discount) you could negotiate a CPO warranty and get another year of warranty coverage (for a total of five years).

4. Don't be afraid of those over-miles. They're the cheapest miles you'll put on a leased car, $0.25/miles instead of ~$0.75/mile.

5. If you're driving over 15k miles/year, (the lockdown/smackdown being an exception), leasing starts to make more sense. At normal mileage (~12k miles/year), the lease vs. buy crossover point for a BMW is somewhere around five or six years. The cross over point gets shorter as annual mileage goes up. The converse of that is also true. If you're driving 5k miles/year, leasing is a crazy idea. My 535i is six years old, and my TCO is about where it'd have been by leasing two of them. However, I will enjoy huge savings in the 7th, 8th, and 9th years, on the order of $25k. That $25k savings includes budgeting a pessimistic $0.20/mile ($2k/10k miles) for maintenance and repairs.

6. December-January is the best time to buy a factory ordered car. Demand is way down, and the dealers have already stocked up their inventory and sold all the factory-orders that were queued up waiting for the new models to come out. It takes 15 minutes to spec' a BMW on BMWUSA.com. Send the build code to the salesman, and you're off to the races.

If you're not willing to own a BMW past six years and you drive normal or higher than normal annual mileage, keep on leasing.

Unlike the F30, the G20 offers non-run-flat tires ($0) and a spare tire ($150) as options. The spare raises the trunk floor about seven inches, though.

Since you're OCD about modeling, here's my model (spreadsheet) of costs for my 2014 535i. The first six years are actual data, the next three are predictions. The spikes in maintenance costs were due to a new steering wheel scratched by a jacket zipper (~$900) and suspension damage from hitting a massive hole (intentionally dug and not completely filled in by the Bubbaville Beach Water and Sewer Department, $1100). My average monthly MDI&P for the first six years has been $867/month, about what a lease payment would have been. But, the monthly MDI&P's for the out years should average about $400/month.

Don't think of our affliction as "OCD." Instead, think of it as "having one's **** together," and "not being a dumbass."
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Last edited by Autoputzer; 06-27-2020 at 09:50 AM.
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  #3  
Old 06-27-2020, 09:33 AM
John MS John MS is online now
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1. Buying at the lease end has the distinct advantage of getting a used car that you are familiar with. No surprises. Just be sure to compare the price to similar cpo vehicles.

Continuing to lease or buying new and flipping every 3 years are expensive ways to assure yourself of never having to pay for repairs or maintenance out of pocket. In either scenario you pay early years depreciation over and over.

3. My advice would be to buy new or used and hold for the long term. My experience and that of many other drivers is that you will spend less overall. That includes maintenance and repairs.
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Old 06-28-2020, 02:26 AM
joebiron joebiron is offline
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Quote:
Originally Posted by John MS View Post
1. Buying at the lease end has the distinct advantage of getting a used car that you are familiar with. No surprises. Just be sure to compare the price to similar cpo vehicles.

Continuing to lease or buying new and flipping every 3 years are expensive ways to assure yourself of never having to pay for repairs or maintenance out of pocket. In either scenario you pay early years depreciation over and over.

3. My advice would be to buy new or used and hold for the long term. My experience and that of many other drivers is that you will spend less overall. That includes maintenance and repairs.
Thanks, and I do agree that long term ownership is most economical overall - in fact I've been doing that my whole 30 year driving career, but for other reasons I've decided that's not how I want to spend the next 30. With several drivers in the household, I have other "long term hold" vehicles that I own. For my personal daily driver, I want frequent refreshes, newest technology, etc.
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Old 06-28-2020, 02:45 AM
joebiron joebiron is offline
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Thanks for the great response, Autoputzer.

Quote:
Originally Posted by Autoputzer View Post
1. BMW's closed the loophole where you can negotiate with dealers to buy you car after you turn it in. BMW will punish dealers who sell you or a family member the car for less than BMW allows. BMW sometimes will offer to sell you the car directly for less than the lease contract residual price. Now is one of those times.
...
3. If you bought the car in January, you'd likely be paying "retail" for it, and you'd be selling it one year later for "trade-in." If you bought the car from a dealer (if BMW isn't willing to sell you the car directly at a discount) you could negotiate a CPO warranty and get another year of warranty coverage (for a total of five years).
Is this a matter of the BMW Dealership selling me the car after lease turn-in as a separate transaction versus BMW Financial/Corporate selling the car to me "directly"? If so, how do I start that conversation with them? Should I proactively call BMW Financial? As you can guess, this is my first lease with BMW, in fact first ever.

In the dealer-sold scenario, the extra year of CPO warranty is a good idea - I'm guessing that comes at some premium as with all CPO vehicles. Is that fair to assume?

Quote:
Originally Posted by Autoputzer View Post
4. Don't be afraid of those over-miles. They're the cheapest miles you'll put on a leased car, $0.25/miles instead of ~$0.75/mile.
Good point, I hadn't considered that. I was thinking of the mileage limit as a constraint to live within, but hadn't considered that the overage is actually a good deal.


Quote:
Originally Posted by Autoputzer View Post

6. December-January is the best time to buy a factory ordered car. Demand is way down, and the dealers have already stocked up their inventory and sold all the factory-orders that were queued up waiting for the new models to come out. It takes 15 minutes to spec' a BMW on BMWUSA.com. Send the build code to the salesman, and you're off to the races.

If you're not willing to own a BMW past six years and you drive normal or higher than normal annual mileage, keep on leasing.

Unlike the F30, the G20 offers non-run-flat tires ($0) and a spare tire ($150) as options. The spare raises the trunk floor about seven inches, though.

Since you're OCD about modeling, here's my model (spreadsheet) of costs for my 2014 535i. The first six years are actual data, the next three are predictions. The spikes in maintenance costs were due to a new steering wheel scratched by a jacket zipper (~$900) and suspension damage from hitting a massive hole (intentionally dug and not completely filled in by the Bubbaville Beach Water and Sewer Department, $1100). My average monthly MDI&P for the first six years has been $867/month, about what a lease payment would have been. But, the monthly MDI&P's for the out years should average about $400/month.

Don't think of our affliction as "OCD." Instead, think of it as "having one's **** together," and "not being a dumbass."
[/QUOTE]

You're right about the spec'ing, but I was referring to negotiating cap cost. Upon further reflection and in light of your insight about demand in Dec-Jan, I can live with the timing.

Slightly off-topic but unlike many I don't have a big issue with RFTs, and I do appreciate the driving dynamics that the stiffer sidewalls offer, and also appreciate the trunk space. This is a 3-series so the sporty dynamics is primarily what I'm after. If it were a 5, 6 or 7 I'd have a different preference.

Thanks for the spreadsheet, I will review and incorporate into my planning.

As the for "affliction", I am in complete agreement with you, and the "OCD" term is what DW likes to refer to it as. She is also quick to admit that her lifestyle of luxury is a direct consequence of this "affliction".
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  #6  
Old 06-28-2020, 07:30 PM
Autoputzer Autoputzer is offline
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I don't lease BMW's (yet). But, those who do say that BMW FS may send you a discounted buy-out offer. Back in the day, you could shop around to different dealerships to see what they'd sell you the car for after you turned it in there. They get first dibs on buying leased cars turned in at their dealership. BMW eventually figured out they were losing their shirts on unrestricted buy-outs.

A CPO warranty is worked into the price of a used car. You can also shop dealers for a BMW extended warranty.

Last edited by Autoputzer; 06-28-2020 at 07:34 PM.
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