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...and all the sudden I wonder if I just shouldn't buy the thing.

Car is a 2012 X5 35d with many options, MSRP a hair under 70K. I negotiated a purchase price (or cap cost before the acquisition fee) of a bit over 58K (reflecting many credits and a very small markup; I think is a pretty fantastic deal). The residual is 37K (53% of MSRP), and as I look at 2009 X5 35d's with the same mileage, I can't find one that cheap.

So the issue, then, is that while the residual/buyout is quite "fair" (and I get the advantage of both the low purchase price and high residual by leasing) I only get about half of that benefit if I take possession at the end of the lease, because I am essentially paying MSRP on half of the car.

I suppose if I knew for sure whether I will want to keep the car at the end of three years this would be an easy decision. But I don't even know if I will like it.

Am I thinking about this correctly? Thank you.
 

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Chairman of the Bored
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I used to always lease and when BMW has a fantastic lease deal on a car you want it makes sense. The problem is leases are pretty inflexible. I want to be able to trade in my cars whenever I want to and maybe keep it longer if I feel like it. Outside of a great deal if offered the big advantage to a lease is you are not taking back end risk, BMWFS is and the residuals have been higher than the true value. Your remark about paying MSRP for 1/2 the car is more or less true but you got the other 1/2 really cheap. When you lease you have to pay a lease fee of $725-$925 and the interest rate may be higher than the current credit union rate of 1.99% ( penfed.org for example ). Lease or buy is always a tough call.
 

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I know a thing or two...
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...and all the sudden I wonder if I just shouldn't buy the thing.

Car is a 2012 X5 35d with many options, MSRP a hair under 70K. I negotiated a purchase price (or cap cost before the acquisition fee) of a bit over 58K (reflecting many credits and a very small markup; I think is a pretty fantastic deal). The residual is 37K (53% of MSRP), and as I look at 2009 X5 35d's with the same mileage, I can't find one that cheap.

So the issue, then, is that while the residual/buyout is quite "fair" (and I get the advantage of both the low purchase price and high residual by leasing) I only get about half of that benefit if I take possession at the end of the lease, because I am essentially paying MSRP on half of the car.

I suppose if I knew for sure whether I will want to keep the car at the end of three years this would be an easy decision. But I don't even know if I will like it.

Am I thinking about this correctly? Thank you.
"paying MSRP for half of the car"?? I'm not really getting your thought process here. Yes, residual is based on MSRP... but you can lower it if you want, it would only increase your monthly payment in the lease term though.
 

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Chairman of the Bored
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What he meant was - If a car was 50k and the residual was 50% or 25k and the agreed price was 45k then you are paying 20k in rent charge during the lease and 25k when you buy the car. Hence 50% of MSRP for the back half but only 40% for the front half.
 

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I know a thing or two...
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What he meant was - If a car was 50k and the residual was 50% or 25k and the agreed price was 45k then you are paying 20k in rent charge during the lease and 25k when you buy the car. Hence 50% of MSRP for the back half but only 40% for the front half.
True. So would you rather pay 45% in the front half and 45% in the back half? if that makes you feel better, you can structure it that way. :dunno:
 

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N54
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Yeah. Other than how you "feel" about it, I don't see how buying it gives you any discount on the back half.

In fact, being overtly concerned about the 3rd year resale value would be a good reason to lease it assuming decent MF: you can buy it then if the residual is in your favor (below market), or walk away if not
 

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Leasing is great if you will have a never ending supply of "$800 a month" payments.

But life isn't always like that.

Paying for a car, or paying a 4,5 year note, gives you the option to maybe own a car and not have payments for a bit. Or buy a new car and still have the old one.

Every single discussion of leasing and how the deal is structured seems to assume people will always be employed and always be able to make a car payment.
 

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Leasing is great if you will have a never ending supply of "$800 a month" payments.

But life isn't always like that.

Paying for a car, or paying a 4,5 year note, gives you the option to maybe own a car and not have payments for a bit. Or buy a new car and still have the old one.

Every single discussion of leasing and how the deal is structured seems to assume people will always be employed and always be able to make a car payment.
But in many cases you have the option to buy a car after the lease and even negotiate down the residual almost making it cheaper or equal to buying.
 

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Every single discussion of leasing and how the deal is structured seems to assume people will always be employed and always be able to make a car payment.
What if you have a trust fund?
 

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resU deretsigeR
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I suppose if I knew for sure whether I will want to keep the car at the end of three years this would be an easy decision. But I don't even know if I will like it.

Am I thinking about this correctly? Thank you.
From your post, you should either take the lease deal or walk away.

Are you leasing this X5 instead of what you want because of the discounts?
 

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Don't these X5s just depreciate like elevators? I like the optionality of a car lease. Even if you have to pay $725 for the privilege.

If the car is worth more than the residual, you keep it (or find a buyer on your own). If it isn't, you let it go.

Don't go by selling prices of 2009s that are out there. Those are asking prices, and you'll be on the bid side of the equation if you decide to trade a car that you own.

...and all the sudden I wonder if I just shouldn't buy the thing.

Car is a 2012 X5 35d with many options, MSRP a hair under 70K. I negotiated a purchase price (or cap cost before the acquisition fee) of a bit over 58K (reflecting many credits and a very small markup; I think is a pretty fantastic deal). The residual is 37K (53% of MSRP), and as I look at 2009 X5 35d's with the same mileage, I can't find one that cheap.

So the issue, then, is that while the residual/buyout is quite "fair" (and I get the advantage of both the low purchase price and high residual by leasing) I only get about half of that benefit if I take possession at the end of the lease, because I am essentially paying MSRP on half of the car.

I suppose if I knew for sure whether I will want to keep the car at the end of three years this would be an easy decision. But I don't even know if I will like it.

Am I thinking about this correctly? Thank you.
 

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Leasing is great if you will have a never ending supply of "$800 a month" payments.

But life isn't always like that.

Paying for a car, or paying a 4,5 year note, gives you the option to maybe own a car and not have payments for a bit. Or buy a new car and still have the old one.

Every single discussion of leasing and how the deal is structured seems to assume people will always be employed and always be able to make a car payment.
I hear this logic often, but I have a different opinion.

The way I look at things, whether I am making a payment on a car or not, it is still costing me money. Even if it is paid off, it is an asset I own that is depreciating at a certain rate.

For example, I have a Nissan Armada in my driveway to pull my boat that is paid off. It depreciates at about $350/month. It costs me $350/month to NOT sell that vehicle. Just because the money doesn't come out of my checking account, makes no difference. My net worth is decreased by $350/mo.

Plus, if we take that monthly depreciation, and add the maintenance cost of your 5-6 year old out of warranty BMW, that will arrive at what your actual monthly cost to own will be. Run that equation on an old 7-series and a new 5 series lease looks pretty darn good.

Cars are not investments, they are assets that depreciate at an insane rate. To me whether I pay cash, finance, or lease a car -- it's the same goal. What is the lowest cost that will allow me to own this vehicle for a certain period.

If BMW FS wants to take the risk and guarantee me a higher residual value than I think I could get if I bought and re-sold the car myself, more power to em'.

Also, a lease is really no more difficult to exit than a loan, you can get a payoff online and buy out. Being upside down is being upside down, lease or loan, it's the same thing. Lose your job 2 mos after leasing or financing a new X5, and you're still screwed.

Unless there is a vehicle that makes good sense to drive into the ground (335d maybe?) and keep for 6-10 years, leasing to me make a lot of sense. I don't understand why people get so caught up in ownership concepts, and insist on tying up their capital in the driveway.

My 2.5 cents
 

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What is the lowest cost that will allow me to own this vehicle for a certain period.
Precisely.

With a lease you have no choice- the time period is the lease period.

What is the cheapest way to own a car for 8-10 years? Or longer if needed?

I have a 2001 F250 that I use to pull a 14,000 lb gooseneck horse trailer, other trailers, haul crap.

If I had a 2011 F250 4x4 diesel it would cost me, what? $500-650 a month? I'd be on my4th truck lease... instead I paid $40k for the last 120 months of use.

That truck is not costing me that much today...and every year that goes by it gets cheaper... and it hauls just fine. Your comment about the armada costing $350 a month...really? for the next 5 years? What can you buy for a $350 lease payment to pull a boat and replace it? In another 3 years, that armada will be running..still pulling a boat...will it still cost $350 a month?

Back to a lease, if you will always have money coming in, and you know you want new cars every 36 months, and you can afford that luxury, then hop onto the hamster wheel.

Footnote: I do my own maintenance, so the pain of $100 oil changes, and $1500 'Inspection 2's are unknown here....
 

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I know a thing or two...
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Precisely.

With a lease you have no choice- the time period is the lease period.

What is the cheapest way to own a car for 8-10 years? Or longer if needed?

I have a 2001 F250 that I use to pull a 14,000 lb gooseneck horse trailer, other trailers, haul crap.

If I had a 2011 F250 4x4 diesel it would cost me, what? $500-650 a month? I'd be on my4th truck lease... instead I paid $40k for the last 120 months of use.

That truck is not costing me that much today...and every year that goes by it gets cheaper... and it hauls just fine. Your comment about the armada costing $350 a month...really? for the next 5 years? What can you buy for a $350 lease payment to pull a boat and replace it? In another 3 years, that armada will be running..still pulling a boat...will it still cost $350 a month?

Back to a lease, if you will always have money coming in, and you know you want new cars every 36 months, and you can afford that luxury, then hop onto the hamster wheel.

Footnote: I do my own maintenance, so the pain of $100 oil changes, and $1500 'Inspection 2's are unknown here....
A lease is another way to finance the acquisition of a car. You have a contract for a fixed term, but there is nothing that says at the end that you have to go out and get another car. You can buy it at the end and keep it for 8-10 years if you want. You are implying that if I lease a car today, I am committing to continuously lease for the rest of time. In reality, I could decide "I want a new car this year" and they go out and lease it, and at the end buy it out and then keep it and drive it into the ground. I can quit the leasing game whenever I want and just pay off the car and keep it.

Sure, there are some limitations like (a) you must make a decision what to do with the car when you approach that 36 month point -- i.e. keep or return, and (b) if you decide to return, you are subject to the lease-end wear and tear and mileage guidelines. But there are also some perks... (c) ability to walk away if it is a lemon, (d) ability to walk away for almost another other reason why you would not want to keep the car, without having to worry about resale, and (e) possibility you can buy well below residual and therefore end up paying less in total for the car vs. what you would have on a straight purchase on day 1.

Otherwise, it is really not fundamentally different than buying the car with a loan.
 

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Precisely.

With a lease you have no choice- the time period is the lease period.

What is the cheapest way to own a car for 8-10 years? Or longer if needed?

I have a 2001 F250 that I use to pull a 14,000 lb gooseneck horse trailer, other trailers, haul crap.

If I had a 2011 F250 4x4 diesel it would cost me, what? $500-650 a month? I'd be on my4th truck lease... instead I paid $40k for the last 120 months of use.

That truck is not costing me that much today...and every year that goes by it gets cheaper... and it hauls just fine. Your comment about the armada costing $350 a month...really? for the next 5 years? What can you buy for a $350 lease payment to pull a boat and replace it? In another 3 years, that armada will be running..still pulling a boat...will it still cost $350 a month?

Back to a lease, if you will always have money coming in, and you know you want new cars every 36 months, and you can afford that luxury, then hop onto the hamster wheel.

Footnote: I do my own maintenance, so the pain of $100 oil changes, and $1500 'Inspection 2's are unknown here....
You have very good points. And I totally agree - if the plan is to keep something for 6+ years, buying it does make sense. In your example, you've chosen an especially good vehicle to keep for 6+ years, a Diesel F250 holds it's value well into the 250,000 mile range.

You are correct, the 2008 Armada will get cheaper year over year until it hits rock bottom value.... But here's my math -- I figure it's worth about $24k now, and an 05 Armada is worth about $12k. So if that's my future value, in three years it depreciates $12k more, then $12k/36 = $333/mo average depreciation before maintenance costs. When I first did that math, I was surprised as well it wasn't cheaper! And no, I can't replace it with a lease for cheaper, which is why I purchased it originally. I'm not saying leases are always the way to go, I'm saying go which way is cheaper for your purpose and keep an open mind.

Back to BMW's..... they typically aren't cost effective to keep into the 200,000 range like a full size truck. With a 2001 200k mile 7-Series, and a non-DIY person, I would say it is probably unsustainable from a cost and headache perspective. For that reason there are a lot of 2001 7-Series in junkyards today.

For most folks, they'll look at buying a BMW 'near new' with some good life left, or buying/leasing new. The ones that do buy will probably rarely keep the car for the life of the loan. I've done it both ways, and in general my BMW leases have cost me less per month than my outright 'near new' BMW purchases.

I guess my take is that if you're driving something "newer" that's still depreciating, you're on the hamster wheel regardless of lease, loan, or outright cash purchase. :)
 

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Good discussion. Thx.

I think the intangibles outside of the financial discussion are probably the important factors to consider when making the final decision.... Risk, job/financial stability, long term need for transportation, etc.

And I do agree no matter how you slice it, the first owner rides that depreciation curve down, no matter the financial vehicle they use to fund it. Buy used or own long to reduce that.

A

PS My DD is a 2003 E39 M5.... sweet car. 150k miles... I must be lucky. ;)
 

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And (f) possibly sell your purchase option for a profit.

Sure, there are some limitations like (a) you must make a decision what to do with the car when you approach that 36 month point -- i.e. keep or return, and (b) if you decide to return, you are subject to the lease-end wear and tear and mileage guidelines. But there are also some perks... (c) ability to walk away if it is a lemon, (d) ability to walk away for almost another other reason why you would not want to keep the car, without having to worry about resale, and (e) possibility you can buy well below residual and therefore end up paying less in total for the car vs. what you would have on a straight purchase on day 1.

Otherwise, it is really not fundamentally different than buying the car with a loan.
 

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///Monkeyazz Duck
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I hear this logic often, but I have a different opinion.

Cars are not investments, they are assets that depreciate at an insane rate. To me whether I pay cash, finance, or lease a car -- it's the same goal. What is the lowest cost that will allow me to own this vehicle for a certain period.

If BMW FS wants to take the risk and guarantee me a higher residual value than I think I could get if I bought and re-sold the car myself, more power to em'.

Also, a lease is really no more difficult to exit than a loan, you can get a payoff online and buy out. Being upside down is being upside down, lease or loan, it's the same thing. Lose your job 2 mos after leasing or financing a new X5, and you're still screwed.

Unless there is a vehicle that makes good sense to drive into the ground (335d maybe?) and keep for 6-10 years, leasing to me make a lot of sense. I don't understand why people get so caught up in ownership concepts, and insist on tying up their capital in the driveway.

My 2.5 cents
Spot on. Unless you are buying an exotic, or a bare bones workhorse of a truck / winter beater, a car is a disposable commodity that you are going to replace in 2-5 years. What is the most savvy way to use that commodity? Often (not always) it is by leasing.

Precisely.

With a lease you have no choice- the time period is the lease period.
Not necessarily. You CAN exit a lease early, through Swap-a-Lease, Lease Compare, or Craigs List. And you can continue using the commodity past the end of the lease period by exercising your call right (lease purchase option). But unlike purchasing, you also have the option of walking away at the end of the lease term, no questions asked. No running an ad in Auto Trader and having tire kickers come to your house; no getting bent over by a Pre-Owned manager when you trade it in; just quick, concise and professional.

What is the cheapest way to own a car for 8-10 years? Or longer if needed?
Talk about different strokes.... Why would I WANT to own a car for 8-10 years? A boat? Maybe. A home? Most definitely. But a depreciating asset with technology that has a half life of 6 months? My next door neighbor has a bumper sticker that says "Life's too short to own an ugly boat." It would be just as accurate to say "Life's too short to drive a 10-year-old car." YMMV.

The residual is 37K (53% of MSRP), and as I look at 2009 X5 35d's with the same mileage, I can't find one that cheap.
Don't get sucked into the trap of thinking history is guaranteed to repeat itself. That 3 year old (pre-LCI) X5 has basically the same body and interior as the 2012. So for folks whose friends and co-workers can't tell the difference, it's an appealing buy. But when that 2012 you're considering rolls off lease in 3 years, there will be a BRAND NEW X5 with a new body, new interior, and new technology. The 2012 is likely to be much less desirable, since everyone will be able to tell it is the prior model.
 
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