# Am I missing something or is now a great time to lease..



## bmw325 (Dec 19, 2001)

I've been doing some lease calculations using BMW's new low rates, and it seems like now is a great time to lease. So good, in fact, that it would actually be the same cost for me on a monthly bas my current car 325i (which I paid cash for) for 10 years. 
How so?
My car w/ sales tax was about $32k to buy
In 10 years, it will be worth around 4k
THe monthly depreciation will be $225/month
Add maintenance on to that, which I'm estimating at about $40/month and you get a total of $265

Running some lease numbers on a 330 using a .0007 money factor (which you can get w/ MSDs), a 61% residual +BMWCCA discount and Euro delivery (which is essentially free to me since i'd been planning to go to europe anyway) and investing the current equity I have in my car at a 4% return, and factoring in sales tax, nets a montly total of 265. If I run these numbers w/ the same 325i I own, and that number drops by another $30. 

Its always been conventional wisdom that buying a car for cash, and then holding on to it for 10+ years is the cheapest way to have a car-- but w/ these low lease rates, it seems like it might be worht it for me to sell my car and lease a new one. What do you guys think? 

I started looking into this because I was interested in getting ane39 530 before they end their production run-- of course, if I run that lease, the number goes up to about $330-- but then again, I'd have my "dream car" for an additional $65/month. That's what led me to plug in the 330 numbers for the hell of it--now I'm thinking a 330 for the same cost as my current 325 wouldn't be bad at all. 

One other advantage-- BMW's residuals seem to somewhat subvented at around 60%-62%, and there's a good possibility that the car will be worth less than that in 3 years. If that's the case, its sometimes possible to negotiate w/ the leasing company to buy the car out for a lower price than the actual residual value.

I'm sure there's some wishful thinking here- so if you guys want to burst my bubble go right ahead.


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## JST (Dec 19, 2001)

robg said:


> *I've been doing some lease calculations using BMW's new low rates, and it seems like now is a great time to lease. So good, in fact, that it would actually be the same cost for me on a monthly bas my current car 325i (which I paid cash for) for 10 years.
> How so?
> My car w/ sales tax was about $32k to buy
> In 10 years, it will be worth around 4k
> ...


You think $4K is the right value to use? Even 93 325s are going for more than that these days, though I suppose you have to figure in inflation.

I think that the "sweet spot" with buying is probably less than 10 years. Probably in the 6-8 year range, you are in a better part of the depreciation curve.


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## bmw325 (Dec 19, 2001)

*Re: Re: Am I missing something or is now a great time to lease..*



JST said:


> *You think $4K is the right value to use? Even 93 325s are going for more than that these days, though I suppose you have to figure in inflation.
> 
> I think that the "sweet spot" with buying is probably less than 10 years. Probably in the 6-8 year range, you are in a better part of the depreciation curve. *


kelley blue book lists a private party value of $5100 for a 93 325 a/ 100k in fair condition. That works out to about $224/month + the $40 maintenance (which I think is roughty accurate--maybe even a little low considering what can go wrong w/ BMWs as they approach 100k). Or, $264-- so not a big difference. Of course, these numbers do have a healthy dose of swag in them-- but I think, if anything, that number could err more towards being higher rather than lower given the probable chance of extra maintenace costs.


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## Clarke (Oct 21, 2002)

You also need to factor in the higher insurance rates of a lease vs buy.If you want to keep a car for a while personally I always buy.More flexability,less stress,early payoff and its My car.


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## OriBMW (Feb 20, 2003)

*Lease*

Don't forget the business expense of leasing. I'm able to write off most of the lease toward my business! Big tax savings. Less $$$ to Uncle Sam, more for my new convertible.


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## bmw325 (Dec 19, 2001)

rumatt said:


> *Every once in a while I think the lease rates look tempting also, but when I do the math I realize that it's not even close if you plan to keep the car 6 years or so. (No, I'm not anti-lease. If you get a new car every 3 years anyway, than leasing can make a lot of sense...)
> 
> I haven't done any math here, but how's this for two possible factors that are missing from the above comnparison:
> 
> ...


My current car was also ED-- but I did not get the BMWCCA discount.

Good points. Your second point is my main concern about this whole thing. Its definitely a gamble.


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## bmw325 (Dec 19, 2001)

*Re: Lease*



OriBMW said:


> *Don't forget the business expense of leasing. I'm able to write off most of the lease toward my business! Big tax savings. Less $$$ to Uncle Sam, more for my new convertible. *


Yes, this another reason that leasing is starting to appeal to me. I will probably start my own business within the next year-- and the tax advantage of leasing would make it very appealing. It'd probably be better to wait until I know if this will happen--but...

Of course, this is also an emotional decision-- I want an e39 before they stop making them which means I have to act now. I could get a CPO'd e39 in a year-- but the rates on CPO'd cars never seem to be as good, and the prices are often the same as the car would've been new via ED. I'm definitely doing some rationalizing here to appease my practical side. I don't want to something financially stupid JUST so I can have a 5. The current lease terms bring this deal within shooting range of the cost of keeping my current car. The biggest problem is figuring out what happens in 3 years when I either have to buy out the lease or lease a new car. Depending on what happens, that could make this deal quite unfavorable in the long run.


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## Faheem Daddy (Oct 7, 2002)

I've also noticed that it's a great time to lease;

you can lease a 325i for $299/month;
a Jaguar X-type for $349/month;
and the new Saab 9-3 Sedan for $299/month...


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## AF (Dec 21, 2001)

There seems to be some lease deals out there but I have a different theory . . . if you have the new car bug . . . go out and get one . . .

I don't see a reason to justify it by whether the lease or finance rate is good especially since you own your car outright and it is already 2 yrs old. 

Financially speaking, your current car will cost you less then the new one and one of the main reasons for that is you've already taken the biggest hit of depreication which is the first 2 yrs. the 3rd yr is pretty bad too but then it the depreication slows down a lot.

So what I am trying to say, forget the numbers, if you want a new car get it . . .


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## bmw325 (Dec 19, 2001)

rumatt said:


> *To a degree, sure. But it's nice to know how much money you're throwing out the window before making the decision. *


Exactly. It just seems like now is one of the rare times that I could actually get rid of a 2 year old car and not actually incur a big financial penalty for doing so. In fact, in looking at the numbers, and making some fairly reasonable assumptions, it seems like I could come out not much worse off (even factoring in the initial depreciation). While I would like a 5, I guess part of my personality is that I won't really want something if it seems like its a really bad decision financially. The numbers were coming out so favorably, that I wanted to run this idea by the board just to make sure my rose colored glasses weren't too rosey .  I also need to check the insurnace rates--to see if there's a big difference.

Alan, I hear you-- I hope my above explanation makes sense.

The biggest problem I've seen with my idea is what happens after the lease is over. Interest rates could be much higher, and if I have to buy out the car for the residual, the depreciation + maintenace for the next 7 years (after the lease is over) could actually cause the overall montly cost to go up.

I guess I'm starting to change my mind about leasing-- I'd always preferred the idea of owning it outright and keeping it for atleast 10 years (and this is what my dad always drilled into me). But, my current car will end up costing approx $260/month if kept 10 years. So, I'm losing that money anyway. If I can get a lease on a car that I want for an even lower monthly cost, I don't come out much worse off (even factoring in the depreciation of the past 2 years for my car). I also like the idea, that the because the interest rates are so low (effectilyve about 1%), I'm paying very little in "rent charges" each month. I'm mostly just paying a a depreication charge based on an somewhat inflated residual. Right now, it looks like my average monthly cost over 5 years (if I do this), will be $300/month. I think I can live w/ that-- I'll be maybe $2400 worse off in 5 years than if I had just kept my car. In 10 years, its harder to say, but I think I'll be maybe a total of $4k-5k worse off than if I'd just kept my car. Not too bad considering I'm "upgrading" to a 5 which I think I'll like more. Actually, if I do the numbers using my exact same car (but a 2003 model), I come out about even. Strange, but true.

I remeber reading something about leasing once that said, if you only had to pay for depreciation, everyone could be driving around in Ferraris or flying F-16s (since they hold a lot of their value). They used this point to introduce the concept in a lease known as the rent charge (determined by multiplying the money factory by the deprecation + the cap cost). Well, w/ the interest rates so low, I'm sort of able to do just that-- lease a 42k car for around the same montly cost as my 30k car.


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