# Leasing vs Buying - What am I missing?



## marcelgood (Jan 24, 2003)

JetBlack330i said:


> Saw that yesterday in Roundel magazine.
> I think his point was that not all BMW's hold resale value, namely, the Z3. If it's bad for the seller, it must be good for the buyer. I really thought in going out and buying a Z3. That thought left my mind in about 5 minutes. Guess there is a reason why the market is what it is...


Right, it was the Roundel. I got his point and I just used it as an example. Other owners seem to be disappointed with the resale value of their E46s etc., too.

I just checked Edmunds.com to get an idea. According to them, a 2001 330Ci, a two year old vehicle, dealer retails for $26,523. Unfortunately, there is no such thing as a 2000 330Ci, but a 2000 328Ci retails for $24,289. Private party is lower and trade-in is even lower of course. I got 64% residual on my lease and 0.0017 MF (4.08%) . That's about $28,000 after three years. Combine that with the sales tax savings here in California (Only pay sales tax on the monthly payment) and I would have to work the market pretty hard to come out ahead if I had purchased the car and was going to sell it after three years.


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## brkf (May 26, 2003)

JetBlack330i said:


> Actually, cost per mile biases the comparison in favor of lease.
> One of the advantages of buying is that you have no mileage limit and you can enjoy your car fully, as you wish. For people like myself, who likes to drive (I've been known to go to Houston just for lunch), leasing would detract from my total ownership enjoyment.
> Other things that are not easily calculated... I wouldn't enjoy washing and waxing a car that is not mine. :dunno:


You know i wouldn't enjoy driving great distances in a leased or bought BMW. I currently must travel 90 miles roundtrip for work. I switched to the job after buying my ZHP and I must admit right now I regret that I bought my car. I'm going to have to buy another vehicle as my commuter car - one that will be reliable and cheap to maintain. My ZHP is fun but it's got over $1000 worth of tires on it and if I drive 50k miles in two years, I'm gonna have a worthless sports sedan with HUGE maintenance (and most likely being that it's a bimmer, repair) costs. Lease or purchase, either way, the idea of putting great miles on cars known for poor reliability and high repairs is scary.

If only i'd known I'd switch to another job...I would have sucked it up and just bought something cheesey like a Mazda6 or a TSX...sigh.

Oh well in the next month now I've gotta buy a commuter car.


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## belsouth (Aug 16, 2003)

I've got a call into my dealer for a callback on Monday, but does anyone know if BMW still allows MSD's on their lease programs? I read in another topic that they were reducing both the number allowed and the money factor reductions previously extended (i.e., prior to June or July '03).

Thanks.


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## marcelgood (Jan 24, 2003)

belsouth said:


> I've got a call into my dealer for a callback on Monday, but does anyone know if BMW still allows MSD's on their lease programs? I read in another topic that they were reducing both the number allowed and the money factor reductions previously extended (i.e., prior to June or July '03).
> 
> Thanks.


Yes, they do, but the max is down to 5 from 10 and each one reduces the MF by 0.00005, down from 0.0001. The program is not as attractive anymore as it used to be.


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## belsouth (Aug 16, 2003)

That's a bummer. Thanks for the info, marcelgood. Looks like I'll be buying after all.


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## pony_trekker (May 26, 2003)

marcelgood said:


> I highly doubt that for two reasons:
> 
> 1. Looked at the used car market lately? The resale values are in the gutter. I just saw an ad of my dealer over the weekend. They advertised CPOs and the headline said: "Over 135 CPOs in stock!" You do the math.
> 
> 2. The way loans are structured. The payment schedule of a typical loan is progressive like m3again mentioned above. Which means, that the portion of your monthly payment going towards paying off the loan is increasing over the term of the loan, because the interest amount is decreasing as your loan balance decreases. The problem with that is that you pay most of the interest in the first half or so of the loan period. So you penalize yourself if you sell your car before the end of the loan term. Mortgages are a very good example. Have you ever looked at the payment schedule of a typical mortgage? You will see that for the first 3 years your monthly mortgage payment is about 100% interest and you hardly pay off the mortgage. After 3 years you slowly start building equity. A car loan is not as extreme as a mortgage, but it's the same principle. Since you payed most of the interest already by the time you think about selling the car, you might as well keep it, otherwise you start a new loan and the whole game starts over.


And by the time you're paying principal, your warranty is gone, so unless you're driving an Accord or Camry, your repair bills escalate.


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## pony_trekker (May 26, 2003)

JST said:


> If the market is glowing hot when I am to turn in my lease, I will buy the car, resell it, and pocket the difference. Leasing gives you a put option, essentially--you don't have to exercise it.


If the market is glowing hot, you should buy real estate.



JST said:


> If leasing truly paid for itself from a financing company point-of-view, you wouldn't have so many financing companies taking huge profit hits from leasing or withdrawing from the leasing business altogether. But you do, and they are, and the reason is that they have historically been optimistic in their estimations of resale value. That optimisim was either a mistake, or it was designed to subsidize sales, but either way what's bad for the financing companies is good for the customer.


Leasing companies are withdrawing for liability reasons. When you lease a car, the leasing company is the owner. Its name is on the title. In certain states, the person whose name is on the title can be sued if there's an accident; in other's there's an exception for owners who don't operate the car or owners who rent long term, or lease.


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