# Leasing vs buying a BMW: Math does not add up for buy?



## fsommers (Feb 19, 2012)

Dear collective wisdom,

I've so far had 3 BMW's, all leased. At this point, I'm re-evaluating whether I should buy my next car instead of leasing it. 

Owning the car just sounds more prudent - rather than shelling out money every month to a finance company, I actually own the stuff. I would also probably take more road trips if I didn't have to worry about excessive mileage charges on a lease. 

I am looking into the numbers, and am having a very hard time seeing how purchasing a BMW can be a better financial decision than leasing it. I may be making an error in my math, and so would appreciate any feedback / corrections. Feedback from long-term BMW owners would be welcome especially. 

My basic assumptions are a 335-kind of car in terms of price:

1. Purchase: $50,000 vehicle price. Factory warranty until 4 yrs / 50K miles. $3,000 extended warranty after that to 7 yrs vehicle age, or 100,000 miles. 

I included extended warranty so that the total cost of owning the car up to 7 years / 100K miles can be factored in. I am not consider costs of tires, etc., that the warranty may not cover.

2. Lease: $500 / mo payment. Again, that's roughly the same car. If I take the same 7 years, that would probably be 2 or 3 lease contracts over that time, with about the same payment amount for each. In this case, the cars are covered by factory warranty. (In 9 years of leasing BMWs, I actually paid nothing for maintenance, and only once did I buy 2 new tires, and did a few alignment jobs, but those mainly because of some track days . 

Where is this math going wrong:

A: Total cost of car + warranty: $53,000, fully warranty covered up to 100K miles, 7 years. Assume that the car will have 80-90K miles on it in 7 years. Even if I use 15% as an annual depreciation, the resale value would be about $16,000 after that time. In reality, a quick check on AutoTrader shows that 3-series cars may have more depreciation: BMWs with around a 100,000 miles are selling around $12,000-14,000K at the moment on Auto Trader). Suppose I can get $15,000 for the car after 7 yrs. (A big IF.) Then my total cost of the car was $38,000. 

B: For the lease, the $38,000 buys me 76 lease months at $500/mo. That spells out to about 6.5 years of lease payments. 

If that's true, then isn't lease vs buy kind of a wash? With leasing having the benefit of letting you drive a new car every few years?

I didn't including new tires in the buy option, which probably would be needed during the 100,000 miles. For the lease, I didn't include some lease start-up costs, destination charges, etc. I would think those are about equal for this example.

I didn't consider the buy option's math after 100,000 because I'm not sure how to estimate the maintenance cost on a 100,000+ mile car. With no maintenance plan, I can image that's not cheap. At that point, it's more a labor of love of maintaining the car.

Where am I going wrong with this? Any feedback would be appreciated.

-- Frank


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## Gluhwein (Aug 21, 2011)

You just cited the reasons why I will never buy a car again. The maintenance and warranty make it worthwhile starting a new lease every 3 years or so. And with BMW allowing you to do multiple security deposits, buying seems frivolous in the long run.


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## frank325 (Dec 29, 2005)

I've been driving my E90 for just over 9 years. In my case, buying was cheaper than leasing, but 9 years is a long time in the same car. Right now I can't wait to get my new 435 simply because I'm concerned something expensive will happen soon with this one. I wont have that until june at the earliest though. Just replaced the coolant pump and thermostat last year for 1400.00. After 9 years, I'm in a different place financially (much better) so I look forward to the peace of mind of a 3 year lease with no maintenance, and a new car after those 3 years.


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## Squeak (Sep 13, 2014)

In general, I think you are right due to BMW making leasing so attractive with their cars. Look at an Audi, and your calculations would swing towards owning.

I am assuming it is because BMW likes having all those 3-year old cars for CPO that allows for entry into their ecosystem at a lower price point, but does not diminish their brand.


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## beobmw (Jan 27, 2015)

Interesting topic. I am looking at my first BMW and for some reason I want to buy it, but looking at the numbers leasing makes more sense. I have both leased and purchased cars in the past.


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## JTDM (Jul 22, 2014)

BMW does want you to get into habit of leasing, with the warranty and service makes the argument pretty compelling. I used to pay cash for my e46, and I felt so much better owning at the time. But you don't get that BMWCCA money back if you only get a new car every ten years, nor do you covered by warranty and maintenance. 

While everyone kept saying leasing is evil and shy away from it, I will keep leasing BMW as long as the leasing program is supported by BMWFS.

Sent from BimmerApp mobile app


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## Squiddie (Dec 19, 2010)

The calculation has a couple problems. Especially around 1-time fees. But also that you are forced to repair all paint damage, curb rash, get tires etc every 2.5 or 3 years etc.

Then there is sales tax, which in many state has a huge advantage to the lease, and excise (town) state which can be bad for short leases.

And you need to worry about repairs, not maintenance.


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## need4speed (May 26, 2006)

It really depends on how long you are willing to keep the car. If you will be OK with keeping it for 2 or 3 years after it is paid off, buying makes more sense. If not a lease is likely the way to go. N4S


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## Dallas550 (Jan 16, 2011)

I'll throw a counter argument to leasing, as I've always bought my BMWs. My last two 5ers (550i and 535i) held their values tremendously over the years, and would be even with leasing, if not better. For full disclosure, I always do ED with an end of the year incentive, have an incredibly low interest rate (or pay cash), and pay little to no sales tax. Any other circumstance would probably lead me to lease as opposed to purchasing.


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## chrischeung (Sep 1, 2002)

Dallas550 said:


> My last two 5ers (550i and 535i) held their values tremendously over the years, and would be even with leasing, if not better.


One other big issue is how to "realize" that value. Is that through private sale, trade in, or dealer sale (BMW, Carmax etc.). Leasing provides a relatively painless way of disposing of your current car. While selling or trading in may involve significant price variability and work to realize the best value.


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## Hangman4358 (Nov 26, 2013)

Squeak said:


> In general, I think you are right due to BMW making leasing so attractive with their cars. Look at an Audi, and your calculations would swing towards owning.
> 
> I am assuming it is because BMW likes having all those 3-year old cars for CPO that allows for entry into their ecosystem at a lower price point, but does not diminish their brand.


This is really the point. BMW makes more money off of a customer who leases 3 1/3 in 10 years than one who buys 1 car every 10 years. They know this and have made their residuals so high that payments are much smaller and nobody will actually buy at the end because they will be upside down.

If you look at a civic on the other hand the residual is right on target with actual value after the lease. And Honda dealers taut a lease as a 3 year test drive. If you like it then you can buy it at fair market price. Of course they too make money on the lease but they'll also make money on the financing lof the buy.

Personally I find the maintenance thing a bit over done. If you own the car with no payment on it and you even pay 4 grand a year in repairs, which is way more than is realistic, it is way cheaper than $500 a month.

Our e39 in germany has gone almost 300k km with exactly 2 non-preventative maintenance issues. At 60k km it needed a new set of radiator hoses because of marder damage. And this last summer at 280k km it needed a new #3 sparkplug ahead of schedule. Other than that fluids, brakes and normal ware and tear items as required by any car. My brother's e60 is the same way at 10 years and 125k miles in the US.


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## Dallas550 (Jan 16, 2011)

chrischeung said:


> One other big issue is how to "realize" that value. Is that through private sale, trade in, or dealer sale (BMW, Carmax etc.). Leasing provides a relatively painless way of disposing of your current car. While selling or trading in may involve significant price variability and work to realize the best value.


Very true. I've always been fairly good at selling these cars myself, good color combos, decent options, etc. Also, friends of mine know that I flip cars every few years, so the word gets out. I've only traded a handful of cars, and honestly their values weren't too far off from private party after some negotiation. The best thing about it is the savings on the sales tax, which is one reason why I pay a fraction to the state compared to most new car buyers.


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## woron (Dec 13, 2011)

Hangman4358 said:


> If you own the car with no payment on it and you even pay 4 grand a year in repairs, which is way more than is realistic, it is way cheaper than $500 a month.


But repairs and maintenance is not your only cost. If you use a conservative 10%/year depreciation, you will lose another $5K per year.


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## fsommers (Feb 19, 2012)

Thanks for the great comments.

Unexpected big maintenance costs are my main concern with the ownership route. It seems, and is logical, that the relatively simpler the car, the less the expected maintenance cost.

In my case, I'm leasing a 335is (with the DCT), and just found out that should the transmission need replacement, it's something like $6,500 alone. The extended BMW warranty on this car is over $4,000 for just 2 extra years. There doesn't seem to be a maintenance plan after 100,000 miles, so it's a draw of luck beyond that.

For purchase, I'd probably choose a MT with a simpler engine, no special performance parts, and possibly not even nav, because navigation would be fairly outdated in 7-8 years. Also, I'd choose a model with a relatively large production history so I could better guess long-term maintenance costs.

It seems that some pretty big forces are changing how the industry works, with cars having so much tech and software embedded. It's not just a question of storing spare parts any more, but maintaining older versions of the software, for the manufacturer. It's very costly for them, I'm sure, to maintain software versions going back 7-8 or more years. Even Microsoft or Apple, etc, don't provide support for software that old, because of the complexity and, hence, cost. Maybe it's cheaper for the manufacturer if a car is simply recycled after some years... This is already happening with other tech goods, i.e., trying to maintain a 5-6 yr old cell phone is going to cost a lot more than recycling it and purchasing a new model. Maybe that's where BMW is going with the i3....

Hmm. I still want to own a BMW for the long-term... But then I may just get an old 2002 from the 1970s, which may be cheaper to maintain than a 2012 335is?

Ps: BTW, I love that touring in your signature. One of the cars I'd buy for the long-term for sure.



Hangman4358 said:


> This is really the point. BMW makes more money off of a customer who leases 3 1/3 in 10 years than one who buys 1 car every 10 years. They know this and have made their residuals so high that payments are much smaller and nobody will actually buy at the end because they will be upside down.
> 
> If you look at a civic on the other hand the residual is right on target with actual value after the lease. And Honda dealers taut a lease as a 3 year test drive. If you like it then you can buy it at fair market price. Of course they too make money on the lease but they'll also make money on the financing lof the buy.
> 
> ...


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## chrischeung (Sep 1, 2002)

One additional thought. Leasing is better if you are not disciplined. I personally have a tendency to want to change cars more often than financially prudent. Leasing locks me in a little better than buying. So it can save some money for some .


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## TXPearl (Apr 16, 2010)

Dallas550 said:


> Very true. I've always been fairly good at selling these cars myself, good color combos, decent options, etc. Also, friends of mine know that I flip cars every few years, so the word gets out. I've only traded a handful of cars, and honestly their values weren't too far off from private party after some negotiation. The best thing about it is the savings on the sales tax, which is one reason why I pay a fraction to the state compared to most new car buyers.


If you're not trading in, how do you save on the sales tax?


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## chrischeung (Sep 1, 2002)

TXPearl said:


> If you're not trading in, how do you save on the sales tax?


The way I read it, was that he received the benefit from trading in only.


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## Dallas550 (Jan 16, 2011)

In Texas you can use a so called "in and out" procedure. You can sell to a private party for an agreed upon price, and in turn, they agree to buy it through the dealer. The dealer then counts it as a trade, but you get the private party value for your car. Some dealers do this for free, others charge as much as $500. It was a trick a car salesman friend told me about many years ago, and it has saved me thousands in taxes. They key is you have to know about it and bring it up to the salesman, and usually his sales manager.


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## chrischeung (Sep 1, 2002)

Dallas550 said:


> In Texas you can use a so called "in and out" procedure. You can sell to a private party for an agreed upon price, and in turn, they agree to buy it through the dealer. The dealer then counts it as a trade, but you get the private party value for your car. Some dealers do this for free, others charge as much as $500. It was a trick a car salesman friend told me about many years ago, and it has saved me thousands in taxes. They key is you have to know about it and bring it up to the salesman, and usually his sales manager.


Nice. So how does this work? You need to have the new car deal worked out, including this procedure? Is there a timing window of opportunity concerning how far in advance/after contract that you can sell your car?


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## Dallas550 (Jan 16, 2011)

chrischeung said:


> Nice. So how does this work? You need to have the new car deal worked out, including this procedure? Is there a timing window of opportunity concerning how far in advance/after contract that you can sell your car?


Timing is tricky and it can vary by dealer. It can range from 30 days, all the way up to the end of the calendar year. For tax reasons, there is no reason why it can't be until the end of the calendar year, but some dealerships are skittish about leaving a deal open for that long.

As for the deal itself, I usually wait until I get some traffic on my "for sale" car before I work a deal. I then work out all of the specifics on my new car, and then mention I will be doing an in and out. The salesman will probably check with his manager to make sure it's OK. It always is...

Then I communicate with the buyer that everything is set up for them at the dealership. It also provides more security for the buyer in that the dealership takes on the intermediary role, and can provide financing, warranty, etc.


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