# Buy Vs Lease ? Check this out



## mclaren (Jan 5, 2005)

For this execise I'm going to assume you could get 5% on a 3 year CD which you can and you could put your lease payments in an account paying 5% which you probably can't. I'm also going to use numbers from my recent Z4 lease.

Buy: $45.870 + 7% tax +$200 ( for whatever ) = $49,280.90
3 year 5% CD with 20% income tax = $55,495.22 

Lease
3 year 5% CD of drive off of $4633.02 = $5,217.24
35 payments of $528.48 at 5% = $19,594.63
Payoff $29,332 + 7% tax = $31,374.54
Return 7 security deposits = -$3,850
Total Leasing cost = $52,336.41

Savings of Lease vs Buy = $3158.81

The money factor on the lease was .00021 (.0005 - 7*.00007 + .0002 )
which is the key to the savings.

Anything wrong with this ?


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## BayAreaBMWFan (Aug 8, 2004)

Nothing significantly wrong but for the fact that the future value of your monthly lease payments will be higher at a discount rate of 5%.

BMW gave you an interest rate of 0.5% and that is where the savings are coming from.

Leasing often makes a lot of sense especially when you have free money like in this case.


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## Andrew*Debbie (Jul 2, 2004)

I've said this before. Sometimes lease to own makes sense.


If you actually do this, you may be able to get the car for less than the residual. I've read posts that sometimes BMWFS will offer to sell you the car for less than the residual.

Also ask your dealer for the CPO price.


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## exchequer (Dec 1, 2003)

I can't get your lease numbers to work out in a lease calculator, which may not be surprising since I'm a leasing n00b. I get a $587 payment which includes $38 in tax compared to your $528.48 payment. Do you mind walking me through your lease numbers? I have to make this decisions soon and I was leaning toward buying, but this could sway my thinking. Thanks!

Here are the numbers I used:
Base Cap Cost: $49280
Cap Cost Reduction: $4633 (driveoff) - $3850 (returned security deposits) = $783
Residual: $29332
MF: 0.00021
Term: 36 months
Tax Rate: 7%

Here in the info you originally posted so it will be eaiser to reference without scrolling:


> Buy: $45.870 + 7% tax +$200 ( for whatever ) = $49,280.90
> 3 year 5% CD with 20% income tax = $55,495.22
> 
> Lease
> ...


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## chuck92103 (Oct 9, 2005)

mclaren said:


> For this execise I'm going to assume you could get 5% on a 3 year CD which you can and you could put your lease payments in an account paying 5% which you probably can't. I'm also going to use numbers from my recent Z4 lease.
> 
> Buy: $45.870 + 7% tax +$200 ( for whatever ) = $49,280.90
> 3 year 5% CD with 20% income tax = $55,495.22
> ...


Not quite. You forget that on a 3 year lease, you will need to buy tires before turning the car in. Also, any damage will have to be repaired. Tires alone can easily cost $1000. Plus when you re-lease at 3 years, you are incurring the setup charges again. So the 4th year (1st year of new lease) you would be behind.

However, nothing wrong with buying or leasing. Leasing will always be cheaper on a monthly basis because you are renting not buying. It is a bell curve however. If you look at 3 year window, the lease option looks attractive. If you look at a 6-12 year window, finance option looks better. Just depends if you want a new car every few years or if you want to hold onto it for awhile. Right now money is cheap, so leasing is very attractive to some folks. However, in a few years we may see very high interest rates in which case those who financed today will be in a much better position than those negotiatiing car deals at higher money rates.


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## suzer (Jan 4, 2002)

chuck92103 said:


> Not quite. You forget that on a 3 year lease, you will need to buy tires before turning the car in. Also, any damage will have to be repaired.


You only have to buy tires when you turn it in if they are below the wear level indicated on the turn-in sheet. I didn't buy tires on the X5 I leased for 3-years, they were fine.

AND if you bought the car, you'd be buying tires, too, when the wear began to negatively effect driving.


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## BayAreaBMWFan (Aug 8, 2004)

suzer said:


> You only have to buy tires when you turn it in if they are below the wear level indicated on the turn-in sheet. I didn't buy tires on the X5 I leased for 3-years, they were fine.
> 
> AND if you bought the car, you'd be buying tires, too, when the wear began to negatively effect driving.


Chuck's point is that you pay for the tires when you buy the car and then you pay for them again when you replace them. However if the tires are replaced close to the lease turn in time, you never get to use them!

For BMWs with the free maintenance, ED options, BMWCCA rebates, good lease rates and periodic specials, leasing is an attractive option versus owning for 5-6 years. Of course if you keep the car for 8-10 years it is likely to cost you less. But it is a toss up between buying for 5-6 years versus leasing for 3 years especially if you have to pay high sales tax.


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## jl5555 (Jan 28, 2003)

Your example is comparing apples to oranges. You are trying to compare the economics of leasing (at a very favorable lease finance rate) to the economics of investing in a depreciating asset. Of course the economics that include leverage will win out in such a comparison. But for the sake of comparing two like things your exercise is not very useful. 

Ideally you would be looking at lease finance purchase vs. debt finance purchase. (this is what most people do anyway.) People who plunk large amounts of cash down on depreciating assets are fools (and listen to Suzy Orman much too much). 

When you realize that lease finance and debt finance purchase are essentially the same you'll understand that as long as the finance rates and expected residuals are the same for the two options the economics will be essentially equal. In your situation, you have a lease finance rate and residual subsudized by BMW hoping to move metal. Thus the skewed economics in favor of leasing.

I can make the economic case that even leasing a new car every three years could be nearly equal to purchasing the car and owning if for 9 years.


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## martingalemetho (Apr 28, 2006)

Even if you plan to keep the car, leasing will be a good deal. Say you have the $49k to spend. Option 1 is to buy outright you would pay $49k today. Option 2 is to lease and pay $4600 today and put your other $42400 in the bank (say ING for 4.25%). Then out of the saving account make the payments and finally the residual payoff. In three years you will own the car and have several thousand left.


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## mclaren (Jan 5, 2005)

exchequer said:


> I can't get your lease numbers to work out in a lease calculator, which may not be surprising since I'm a leasing n00b. I get a $587 payment which includes $38 in tax compared to your $528.48 payment. Do you mind walking me through your lease numbers? I have to make this decisions soon and I was leaning toward buying, but this could sway my thinking. Thanks!
> 
> Here are the numbers I used:
> Base Cap Cost: $49280
> ...


You didn't figure the lease correctly.
The cap cost is $45870 + $625 (Lease Aquisistion )= $46495.


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## chuck92103 (Oct 9, 2005)

The cheapest vehicle is still and will always be the one that is paid off. 

A paid off BMW costs approx. $200 per month to maintain. Much less than any lease.

A paid off car costs always trumps a financed or leased one. :thumbup:


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## BayAreaBMWFan (Aug 8, 2004)

chuck92103 said:


> The cheapest vehicle is still and will always be the one that is paid off.
> 
> A paid off BMW costs approx. $200 per month to maintain. Much less than any lease.
> 
> A paid off car costs always trumps a financed or leased one. :thumbup:


If a paid off BMW costs $200 to mantain then it is almost a no-brainer to lease one every three years instead of paying it off. The lease of a new BMW includes the depreciation, the finance charge, the sales tax, the maintenance and the warranty. Even a used BMW will depreciate unless it is more than 6-7 years old. Though the depreciation will be lower I am quite sure that the difference is not going to be more than $200. The general rule of the thumb is 40% every three years. So a new car will be worth 60% of its MSRP after 3 years. A three year old car will be worth 36% of MSRP after another 3 years, resulting in another 24% (of MSRP) in depreciation. Though there is a 16% difference in depreciation between the first 3 years and the next three years, most smart buyers never pay MSRP on their cars (ED folks pay 88-90%). Thow in the free maintenance and repairs and you have a winner in the under-warranty lease.

To get an idea of what I am talking about, price out the lease for a new car and a lease for a similar three year old car on leasecompare.com. You will be surprised on how close the lease for three year old car is compared to a new car. Throw in ED and BMWCCA rebates into the mix; add special residuals and MF and it is almost a slam dunk. Of course if you plan to drive the car for 10 years you will come out ahead but if your horizon is less you (5-6 years), you are much better off leasing.


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## 760Lifan (Oct 6, 2004)

As it was said before, leasing or buying is always a case-to-case decision. If you can write your payments off, leasing isn't bad. If you want more freedom, financing is the way to go since you can get out of a finance much easier than out of a lease (on a lease, you find yourself upside-down more often than on a financing)...well, since cars are never such a great investment, it's at least smart to pick a BMW with an above average residual...


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## schley (May 26, 2005)

760Lifan said:


> As it was said before, leasing or buying is always a case-to-case decision. If you can write your payments off, leasing isn't bad. If you want more freedom, financing is the way to go since you can get out of a finance much easier than out of a lease (on a lease, you find yourself upside-down more often than on a financing)...well, since cars are never such a great investment, it's at least smart to pick a BMW with an above average residual...


Although you can choose to sell your financed car at any time, doing so is a pain in the ass. If you use it to trade in for another vehicle you aren't going to get fair market value. If you choose to sell it to car max you are going to take a bath.

The best case scenario is the one that requires the most time effort ect. Selling it to a private party. Take out ads in newspapers, auto trader ect ect.... wait , show your car, arrange your schedule to allow people just to see it and take it for a spin.

I did finance, although I think now I would have been better off leasing. To get out of a lease, throw it on leasetrader, swapalease and boom, if you got a decent residual and MF then you should only have to pay the lease transfer fee and you are done with it.

If we buy a car we haggle, go back and forth for every last 100. But when we sell, or trade it in, we are just glad to get rid of it to avoid another payment and sell it for 500-1000 (fillin the blank) less than we wanted.

The more I think about lease vs. buy the more I'm inclined to lease, a big reason is not having to worry about what to do with the vehicle I already have. Trade in, sell private ect.

If you are going to keep it for more than 4 years buy, and if not lease it is as simple as that. That is the essence of the comparison and most important factor IMO.

The only bad part of a lease is if you want to purchase at lease end, the residual is based off of MSRP not your purchase price. If a dealer is willing to sell it at 5% off of msrp, then that is the market and the residual should be based off of that number not the artificially high msrp(i know i'm dreaming). They want the car back to again turn around and cpo it to make another profit. If you don't want to purchase then turn it in and start over.

Try leasing a mercedes which have 5-6% holdback, and negotiating 2-3% UNDER invoice is the market for the savy buyer, yet mercedes wants to keep their msrp high and offer holdback rather than just lower the price of the msrp. I think this allows them to get back almost all of their leases, because nobody wants to pay the residual figure at lease turn in, and thus they can turn around and sell them as a cpo.


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## epoints (Apr 17, 2006)

*Getting a headache...*

Wow... reading this thread is giving me a headache. I am glad that there are somebody out there understanding all these stuffs and making (or saving) $$$.

My question is - as a simple minded person - do I just base on the monthly payment and initial down when I try to decide lease or purchase??? I am looking to keep the 550i for 5 years. I just sold my 911 and it's a bi&*^* going through the process, and it turns out it costs me $650 per month.

TIA,


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## 760Lifan (Oct 6, 2004)

schley said:


> Although you can choose to sell your financed car at any time, doing so is a pain in the ass. If you use it to trade in for another vehicle you aren't going to get fair market value. If you choose to sell it to car max you are going to take a bath.
> 
> The best case scenario is the one that requires the most time effort ect. Selling it to a private party. Take out ads in newspapers, auto trader ect ect.... wait , show your car, arrange your schedule to allow people just to see it and take it for a spin.
> 
> ...


I agree! As I said, there is no formula telling you "leasing is always better" or the other way round....We did both - one car is leased, the others are financed.

The key to success is doing your homework...:thumbup:


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## 760Lifan (Oct 6, 2004)

epoints said:


> My question is - as a simple minded person - do I just base on the monthly payment and initial down when I try to decide lease or purchase???


That's a big NO NO..:nono: This is exactly what dealers want you to think. If they start "O.K., let's take a piece of paper and work out your monthly payments..." , beware! They have so many different possibilities to hide their profit neatly in your payments...:thumbdwn: If you check out this board, you'll know what I'm taling about...



epoints said:


> I am looking to keep the 550i for 5 years. I just sold my 911 and it's a bi&*^* going through the process, and it turns out it costs me $650 per month.
> TIA,


Since 5 years are obviously exceeding the magical 4-year timeline, I'd suggest financing..


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## schley (May 26, 2005)

760Lifan said:


> That's a big NO NO..:nono: This is exactly what dealers want you to think. If they start "O.K., let's take a piece of paper and work out your monthly payments..." , beware! They have so many different possibilities to hide their profit neatly in your payments...:thumbdwn: If you check out this board, you'll know what I'm taling about...
> 
> Since 5 years are obviously exceeding the magical 4-year timeline, I'd suggest financing..


I agree that 5 years is too long to lease. Actually since the residuals and MF are so poor on BMW's after year 3 then really anything above and beyond 3 years is cause to finance.


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## chuck92103 (Oct 9, 2005)

When comparing buy vs. lease numbers, one should use the 15k miles per year rate and not the 12 since buyers do not have to worry about this. Part of having a car is being able to enjoy it and not have to park it when miles creep up. 

If you are the type to drive less then 10k miles per year, then you should account for the loss of use some way I would think. i.e. you are paying for something that you are not using.

For example, if your total lease cost for 36 months is $500 per month. In three years you would pay $18,000. Assuming 12k miles per year limit, you are paying to drive the car 36k miles. Each mile costs you $0.50 cents (not including potential tire replacement). 

If you in fact only drove the car 10k miles per year and 30k miles total over the life of the lease, you left 6k miles on the table. This equates to $3k dollars paid for unused miles. That is a lot of money. :yikes:


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## schley (May 26, 2005)

chuck92103 said:


> When comparing buy vs. lease numbers, one should use the 15k miles per year rate and not the 12 since buyers do not have to worry about this. Part of having a car is being able to enjoy it and not have to park it when miles creep up.
> 
> If you are the type to drive less then 10k miles per year, then you should account for the loss of use some way I would think. i.e. you are paying for something that you are not using.
> 
> ...


So you are suggesting that anyone who drives less should finance as opposed to lease? Not sure what you mean. As you know you can raise the residual 2% for 12k and 3% for 10k. Over milage at 20 cents per mile at lease end or 15 cents at outset, or 16 cents during, unless you have a 7 series.

So if you get the 12 k in your above example vs the 10 k your payment for that same car would be 1% more residual value, thus your payment would be a fraction cheaper and would have alower rent charge.

I think I understand your example however not sure if you are saying finance in which scenario vs lease. ):dunno:


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## epoints (Apr 17, 2006)

If these conditions are true, do you recommend lease vs. buy?

- drive at most 10k miles per year
- commute 8 miles round trip to train station
- drive car to weekend golf or day trip
- in past, have a new car every 5 years.
- longest car kept 7 years
- two kids (4 and 6) ==> different topic (330 vs. 530?)
- have cash to pay for it
- hate to go through car selling process
- fun factor is important ===> different topic again (smg vs. step)
- most of cars owned are either finance or paid
- never done leasing before because don't understand all the numbers

your advice?


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## BayAreaBMWFan (Aug 8, 2004)

*Low Milage == Tougher Call*



epoints said:


> If these conditions are true, do you recommend lease vs. buy?
> 
> - drive at most 10k miles per year
> - commute 8 miles round trip to train station
> ...


You are a low mileage driver. In your case the lease equation, as measured by per mile costs is not that sweet as a person who drives 15KMiles/year. Hence it is not that clear-cut a choice.

You need to keep the following facts in mind:

- The value of a BMW takes a significant hit when the car goes out of warranty. This is also reflected in the residuals which BMWFS offers. Since you have sold cars which are 5-6 years old, you will have some data on what you get for the car when you sell it as a percentage of the original MSRP.

- You pay 8-9% sales tax on the price of the car which can be substantial on a 550. On a lease you pay tax on the lease payment only. Note that if the lease has a high money factor, the interest portion can be fairly high and is also taxed. So the sales tax advantage is reduced some what.

- How much do you typically spend in repairs after the warranty expires? On a higher mileage car, the repair costs might be much more than a car which has less than 50K miles.

- Are you willing to do European Delivery to reduce your initial cost of purchase and amortize the 7-8% saving over a shorter lease term?

- Are you willing to wait for the right lease incentive? You can extend your BMWFS lease by 2 months, no questions asked and for another 4 months if you have a car on order. If you are doing a European Delivery, this gives you a 6 (edit) month window to pick the appropriate lease program (4 months before the expiration of the current lease and 2 months after). BMW heavily subsidizes their leases and you should wait for the right program.

- What is your post-tax rate of return on investments? If you are a savvy investor who makes a good return on investment than paying the least for the car and investing the money makes sense. However if you money makes 5% in a CD with a post-tax return of 3%, then perhaps financing/leasing a car makes less sense.

- Can you write-off your lease as a business expense? Leases are much easier to write-off at tax time than purchased/financed cars.

Since you have been keeping cars for 5-6 years, you will have collected some data about how much you spend in repairs and maintenance after the new car coverage expires. You will also have some data on the resale value. You should use that information to calculate the average depreciation over the life of ownership and the average out of pocket costs of maintaining the car.

Compare that the current residuals. A rule of thumb is to assume an ED sale price of 90% and a 36 month residual of 60% so an average annual depreciation of 10%. If your average depreciation plus maintenance costs are in the same ballpark (10% per year) you might as well lease. You will not have the hassle of selling the car at the end and do not carry any of the risks associated with owning a high value depreciating asset (diminished value after an accident, uncertain resale value etc.).

Calculating the lease numbers is easy after you have a spreadsheet set up.


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## bertbert2oo6 (Jun 14, 2006)

if you buy though, you can sell off the car when you're ready.... so with taht in mind, I think it's cheaper to buy in the long run

My dad is Mr. Frugal so he refuses to do all that financing/leasing stuff. He just pays for cars all upfront. But then again he isn't a car man so that rarely happens.

this is kinda like renting/buying a house, it's always better to buy cause you'll get money back but some peole can't afford a house obviously so they HAVE to rent.... except for a house you can make profit


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## BayAreaBMWFan (Aug 8, 2004)

bertbert2oo6 said:


> .
> 
> this is kinda like renting/buying a house, it's always better to buy cause you'll get money back but some peole can't afford a house obviously so they HAVE to rent.... except for a house you can make profit


A house is an appreciating asset (at least the land is). A car is a depreciating asset. Plus a house has tax advantages. You just can not compare the two.


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## epoints (Apr 17, 2006)

- The value of a BMW takes a significant hit when the car goes out of warranty. This is also reflected in the residuals which BMWFS offers. Since you have sold cars which are 5-6 years old, you will have some data on what you get for the car when you sell it as a percentage of the original MSRP.

Most of my cars are Japanese brand which hold value a bit better, except when there is mechanical problem, it does take a big hit.

- How much do you typically spend in repairs after the warranty expires? On a higher mileage car, the repair costs might be much more than a car which has less than 50K miles.

this is definitely true. On my Toyota minivan which trade-in price of $7k, the replacement of ABS would cost $2500.

- Are you willing to do European Delivery to reduce your initial cost of purchase and amortize the 7-8% saving over a shorter lease term?

I am planning to do ED.

- Are you willing to wait for the right lease incentive? You can extend your BMWFS lease by 2 months, no questions asked and for another 4 months if you have a car on order. If you are doing a European Delivery, this gives you a 5 month window to pick the appropriate lease program (3 months before the expiration of the current lease and 2 months after). BMW heavily subsidizes their leases and you should wait for the right program.

I don't quite get this. Are you saying, for example for ED, I can order the car and decide on lease term when the car is redeliver? (3month order + 2 month on shipping?)

- What is your post-tax rate of return on investments? If you are a savvy investor who makes a good return on investment than paying the least for the car and investing the money makes sense. However if you money makes 5% in a CD with a post-tax return of 3%, then perhaps financing/leasing a car makes less sense.

I plan to have the $$ put into a 5% CD to subsidize the monthly payments.

- Can you write-off your lease as a business expense? Leases are much easier to write-off at tax time than purchased/financed cars.

I cannot write-off.

.... 

Compare that the current residuals. A rule of thumb is to assume an ED sale price of 90% and a 36 month residual of 60% so an average annual depreciation of 10%. If your average depreciation plus maintenance costs are in the same ballpark (10% per year) you might as well lease. You will not have the hassle of selling the car at the end and do not carry any of the risks associated with owning a high value depreciating asset (diminished value after an accident, uncertain resale value etc.).

Calculating the lease numbers is easy after you have a spreadsheet set up.

This is good advice.... Thanks.


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## BayAreaBMWFan (Aug 8, 2004)

epoints said:


> - -_ Are you willing to wait for the right lease incentive? You can extend your BMWFS lease by 2 months, no questions asked and for another 4 months if you have a car on order. If you are doing a European Delivery, this gives you a 6 (edit) month window to pick the appropriate lease program (4 months before the expiration of the current lease and 2 months after). BMW heavily subsidizes their leases and you should wait for the right program_.
> 
> *I don't quite get this. Are you saying, for example for ED, I can order the car and decide on lease term when the car is redeliver? (3month order + 2 month on shipping?)*


What I meant was that there is a window of 6 (not 5 as I earlier wrote) months around the expiration of the current lease in which you can place your ED order without turning in your existing car. You can use it to get a favorable rate on your lease.

You need to follow the lease programs to see what the average deal is in terms of the money factor (interest rate) and residual (depreciation). Then when you see a month where the rates are favorable you lock in the good rates and order the car.

Assuming you will be serially leasing BMWs you have a window of 6 months around the expiry of the current lease to pick the month when you lock in the lease rates. You can order the ED car up to 4 months before the expiry of the current lease and you will get it around the time your lease expires. Or you can delay the order and extend the current lease. You can extend that up to two months after the expiration of the current lease since a two month extension is automatic. If you order the car during this two month period you can extend the existing lease for another four months till you receive your ED car.

As a result you have six different months availabe during which you can lock in the lease rates. Note that even if you lock in the rates and order, you can get a better deal if the rates improve till the time you pick up the car. By chosing a month in which the lease rates are favorable you can reduce your lease payments.

By the way, do not forget to join the BMW CCA to get the rebate checks on new cars.


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## 760Lifan (Oct 6, 2004)

BayAreaBMWFan said:


> A house is an appreciating asset (at least the land is). A car is a depreciating asset. Plus a house has tax advantages. You just can not compare the two.


Bingo - exactly what I wanted to say..


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## 06-E90 (Apr 7, 2006)

Buy what appreciates (house.) Rent what depreciates (car.)


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## epoints (Apr 17, 2006)

You need to follow the lease programs to see what the average deal is in terms of the money factor (interest rate) and residual (depreciation). Then when you see a month where the rates are favorable you lock in the good rates and order the car.

Are these lease program publicized by BMWUSA or individual dealers have their own?


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## BayAreaBMWFan (Aug 8, 2004)

epoints said:


> Are these lease program publicized by BMWUSA or individual dealers have their own?



Lease Program Posted Here..

They are released by BMWFS to the dealers and find their way here in a sticky which is updated monthly.


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## schley (May 26, 2005)

I agree with many that say there are many factors to consider and it is like a science project to figure out a magic formula for your to feel like you made the absolute best decision. 

I would advocate that for the low mileage driver to lease who doesn't keep the car past 5 years. A couple advantages is that for that same period of 5 years you are in your second fully warranteed, fully free maintained, no resale risk if in accident or damage car. It hasn't been brought up but 2 advantages to leasing is that if you get a car that has been in an accident you don't have to #1 keep it and deal with the lower resale and #2 try and sell it or be less than happy driving it with any flaws it may have.

There really are 3 clearcut reasons NOT to lease. 
1. You hang onto your cars, and are happy doing so 6 or more years.
2. You drive more than 18k a year.
3. You are going to or like to add accesories or modify your car.

Now work the numbers and it maybe a couple dollars cheaper or more expensive one way or the other, but buying the car outright has several significant disadvantages

1. Ties up much more money either up front or per month, which could be used for investing or other expenses.

2. You are exposed on resale value when trying to sell it, in particular if it has had any accidents or other flaws.

3. If you keep it past he warranty period you have to not only purchase the extended warranty (which isn't as comprehensive as the original 4/50k) AND purchase the extended maintanence. Add this up on an entry 3 series and you are looking at at least 3-4 grand.

4. The cost of tires I feel is a wash either way as i see it, the only way it screws you to lease is if you have put on new tires during your lease and only get to use 50% of their life span.

5. Having to stay in a vehicle because you are upside on the value of it. When that is depends on many factors but as others have said I think in general the break even point is between 5-6 years.

6. You can upgrade your car in 3 years and get the newest model without having to trade in a purchased vehicle, or feeling trapped because it is just too big of a hit to get our of your purchase to get the newest and newest model.

As I stated before I purchased and the more I think about it I certainly would have been better off leasing. Not that it is for everyone, but the above are my opinions after really much more time analyzing this question of lease vs. buy WAY MORE THAN I SHOULD:tsk:


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## epoints (Apr 17, 2006)

The more I think about what Schely and BABF said... I think leasing of expensive 550 is way to go...

I came up with some numbers for both ED and US Delivery

ED
MSRP = 66600
CAP = 61100
Term = 24 months
12k miles
MF = .00025 (base) +.0003 (ED) +.0004 (max dealer markup) -.00049 (7 MSD) = .00246
Residual rate = 70% + 2% = 72%
tax rate = 7.75%
MSD = 7

monthly lease payment of $864.29 or total of $21587 over 24 month

US Deliver
MSRP = 70695
CAP = 65695
Term = 24 months
12K miles
MF = .00025 (base) +.0004 (max dealer markup) -.00049 (7 MSD) = .00216
Residual rate = 70% + 2% = 72%
tax rate = 7.75%
MSD = 7

monthly lease payment of $935.58 or total of $23298.87 over 24 month

I also calculated the numbers for 3 years but yearly cost look the same.

Do these numbers look right? I am not sure about the MF, registration fees and other gov fees.


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## schley (May 26, 2005)

epoints said:


> The more I think about what Schely and BABF said... I think leasing of expensive 550 is way to go...
> 
> I came up with some numbers for both ED and US Delivery
> 
> ...


hmm i get an 24 month lease price of

ED - 754 a month
US Delivery - 935 a month

both of these are including tax

use leasefinder calculator and triple check but i used your numbers.

For a 3 year lease I get

ED - 814

US delivery - 928

both of these are including tax..... thus you can drive your new 2007 550 for two years 12k a year for 754 a month if you do ED, or 814 if you do three years.

Also keep in mind you have to pay the 625 aquisition fee at inception or roll that in. Dealers can mark this up 200 to 825 so I would think you can get the base if you are paying max markup on the MF. How much over invoice are you offering on this to the dealer btw as I didn't want to figure that out.

Your numbers are off because regardless of whether you take ED or US delivery the residual is ALWAYS factored off of US delivery MSRP, which is why ED is such a screaming deal!

You are the man driving a 70 grand car for 754 a month! That is 75 bucks less a month than my 2006 330 ED purchase payment!

Lease just looks better and better. Also are you a member of bmwcca if you your 550 qualifies you for a 1000 rebate on top of all this! This is regardless of whether you do ED or not, buy or lease.


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## BayAreaBMWFan (Aug 8, 2004)

schley said:


> Your numbers are off because regardless of whether you take ED or US delivery the *residual is ALWAYS factored off of US delivery MSRP*, which is why ED is such a screaming deal!
> 
> Also are you a member of bmwcca if you your 550 qualifies you for a 1000 rebate on top of all this! This is regardless of whether you do ED or not, buy or lease.


Do keep in mind that you pay for one month and a half extra in ED leases where you do not have use of the car. So the 24 month lease is actually a 21.5 month lease where you make 23 payments (BMWFS makes one). A 36 month lease is actually a 33.5 month lease where you make 35 payments.

This factor can be useful for high-milage drivers since you have a smaller time period to use the allocated miles.

Your DMV registration starts once you pick up the car in the US, which gives you another two months without having to pay for next year's registration.


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## JonathanIT (Feb 12, 2004)

schley said:


> It hasn't been brought up but 2 advantages to leasing is that if you get a car that has been in an accident you don't have to #1 keep it and deal with the lower resale and #2 try and sell it or be less than happy driving it with any flaws it may have.


This is a big advantage in the whole "lease vs. buy" debate. It was a significant reason I went with leasing... I look at it as "extra insurance" against catastrophic damage. If you're in a major accident ($25K or more in damage, frame repair), the insurance will not total out the car, they will fix it. Who wants the car then? If you financed, you're stuck underwater and then will take a big hit if you try to sell it. With a lease you can turn it in and walk away. Come to think of it, even a minor accident would make me want another car.

:thumbup:

--J.


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## schley (May 26, 2005)

BayAreaBMWFan said:


> Do keep in mind that you pay for one month and a half extra in ED leases where you do not have use of the car. So the 24 month lease is actually a 21.5 month lease where you make 23 payments (BMWFS makes one). A 36 month lease is actually a 33.5 month lease where you make 35 payments.
> 
> This factor can be useful for high-milage drivers since you have a smaller time period to use the allocated miles.
> 
> Your DMV registration starts once you pick up the car in the US, which gives you another two months without having to pay for next year's registration.


This is certainly correct and payment is due 14 days prior to pickup so depending on how long you drive in europe and when you drop it off, you could be making the 3rd and possibly 4th lease payment before you get the car in the US. This is including the 2nd lease payment that BMW makes for you.


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## epoints (Apr 17, 2006)

I see I have couple mistakes and typos in my numbers.. 


use ED MSRP instead of US MSRP
Inception fees of 450 instead of 650

But my numbers still do not match up with yours...:dunno: Please note I changed my option configuration (because not sure if aero kit can be rolled into lease - so I took it out)

ED
MSRP = 67095
Invoice = 57515
CAP = 58595
Term = 24 months
12k miles
MF = .00225 (base) +.0003 (ED) +.0004 (max dealer markup) -.00049 (7 MSD) = .00246
Residual rate = 70% + 2% = 72% or 61% for 36 month
tax rate = 7.75%
MSD = 7

monthly lease payment of $745.19 or total of $18904.58 over 24 month
monthly lease payment of $792.59 or total of $29553.16 over 36 month

US Deliver
MSRP = 70695
Invoice = 62005
CAP = 63095
Term = 24 months
12K miles
MF = .00225 (base) +.0004 (max dealer markup) -.00049 (7 MSD) = .00216
Residual rate = 70% + 2% = 72% or 61% for 36 month
tax rate = 7.75%
MSD = 7

monthly lease payment of $923.14 or total of $23000.35 over 24 month
monthly lease payment of $905.57 or total of $33445.55 over 36 month

Wow! ED does look really good...

Yes. I have to calculate the months on the ship which about 2 months. So, the payment per month is actually $859 for 24 (22) months lease and $869 for 36 (34) month lease. Or should I have divided by 23 and 35 respectively?

I am all excited now... Please REALITY CHECK!!! :yikes:

Questions:

Is inception fees same as acquisition fees?

Is .0004 MF good number for dealer markup?

If numbers are fairly correct, is it better to take the 2 year or 3 year lease?

Biggest question is - Will these numbers fly when I take it to the dealer????

I did not know financing can be this fun! :thumbup:


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## BayAreaBMWFan (Aug 8, 2004)

The maximum markup is limited to 0.0004 (about 1%).

I personally insist on no markup because the dealer is not carrying any risk and not doing anything to finance the car with BMWFS (i.e. shopping around for best rate). In fact from a dealer's perspective getting paid by BMWFS is even better and less work than a cash deal since there is no risk of the check bouncing!

The acquisition fee can be marked up by $200 to $825.

It is easy to do $1500 over ED invoice.

24 month vs 36 months is your choice. How often do you want to tool around the autobahn in your new BMW


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## schley (May 26, 2005)

epoints said:


> I see I have couple mistakes and typos in my numbers..
> 
> 
> use ED MSRP instead of US MSRP
> ...


K your ED payment is still off because again you are using ED MSRP, FORGET ABOUT ED MSRP it doesn't mean a thing! It is a non factor in your lease. The only thing you need is the US MSRP for that is the figure the residual is calculated off of. The 70695 is the msrp for both ED and US delivery. So your payment is wrong for ED again. I'm not sure why your calculations are off for US delivery.

2 year - 635.70
3 year - 732.68

Your US delivery is

2 year - 812.81
3 year - 844.95

again i'm using your figures and new msrp, and the calculator on leaseguide.com

For your new msrp these payments are correct, including tax. Go ahead and double check them and triple check them as it is hard to believe the ED numbers huh?!

As bayarea stated, I wouldn't put ANY markup in the deal! That is strickly extra profit above and beyond your dealer profit above invoice. I would also negotiate the aquisition fee to be the base of 625. If they want to give something to the finance guy take 200 off your dealer profit and agree to the 825 aquisition fee. Or take 200 off your dealer profit and agree to increase the mf by .0002, but giving them the MAX of .0004 I don't think is the best deal you can find.

Another benefit of ED is that they cannot add any fees into this purchase such as maco or training. If you do US delivery they can and probably will insist on this and it is what would make or break a deal IMO for it can add up to 500-700 dollars over your dealer profit. I and many treat these as included in the dealer profit and if that dealership doens't agree then keep searching.


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## GBPackerfan1963 (May 5, 2006)

> But my numbers still do not match up with yours...:dunno: Please note I changed my option configuration (because not sure if aero kit can be rolled into lease - so I took it out)


FYI, you can wrap the aero kit into the lease. I'm doing it. :thumbup:


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## epoints (Apr 17, 2006)

*Happy Father's Day*



firehire said:


> FYI, you can wrap the aero kit into the lease. I'm doing it. :thumbup:


Thank for the info. How much is Aero kit from dealer?

To all the father's out there..

Happy Father's Day!!! Take your kid(s) out in your 5s and have fun!!! :thumbup:


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## chrischeung (Sep 1, 2002)

*My experience*

Double Post - sorry


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## chrischeung (Sep 1, 2002)

*My experience*

This is my own personal experience. I just sold my 2003 325i today, for which I paid cash $30,800 plus taxes and fees (before rebates), and just sold today to painlessly to Carmax for $20,000. I was wondering to myself if I would have been better off leasing. I think I might have, which is why my current car is leased.

Assumptions for this 2003 calculation
- Acq of $575, MF of 0.001, 63% resdiual (10K/year), no disposition.
- CA tax rate of 8.25%.
- Opportunity cost rate of return 5% per annum after tax on $27,000 average principle.
- Although I sold my car for $20K (39 months of ownership), I'll assume I could have sold it for $20.5K at 36 months of ownership.
- BMWCCA rebate of $500

Calculations
BUY With CA Tax Excl. CA Tax
List $34,800 $34,800 
Neg $30,800 $30,800 
Rebate $(500) $(500)
Tax $2,541 $- 
Cost $32,841 $30,300 
Trade In $20,500 $20,500 
3yr ownership $12,341 $9,800

LEASE 
List $34,800 $34,800 
Neg $30,800 $30,800
Rebate $(500) $(500)
Acq $575 $575 
Residual (63%) $21,924 $21,924 
Monthly Payment $324 $299 
Total Cost $11,738 $10,849

Opportunity Cost 
5% after tax return on $27000 (3 yrs) $4,256

Total Cost (Lease) $7,482 $6,593 
Total Cost (Buy) $12,341 $9,800

Lease vs Buy $4,859 $3,207 (Leasing better off in both cases)

RESULTS
- I personally would have been better off leasing by around $4,800, including the tax component.
- However, when I sold my car to Carmax, I did so with about $1,500 of "fixes" (my car had the original tires on it (3K of tread left), my wife lost her key, 1 curbed wheel, 1 door ding). If I remember the BMWFS guide, I may be responsible for some tires $800, plus the key $200 = $1,000.

SUMMARY
Leasing seems to be better if you can get a decent rate of return on your cash, can maintain the car well, can turn the car in with just sufficient rubber, and not exceed the mileage, and live in a state which dings you with high sales tax for purchasing.

Buying may be better if you want less hassle managing a car (selling a car to Carmax is basically hassle free), don't know how many miles you will be driving, may keep the car longer or shorter, and live in a low tax state. Also, I figure I may have been able to sell my car privately for about $1,500 more than selling it to Carmax. In which case, leasing is still better than buying in this case.

It comes down to hindsight - we don't have it - make the best decision you can based on what you know of the future. 3 years ago, I was single, lived in a 1 bedroom apartment in Venice, was about to get engaged, and was just becoming cashflow comfortable, and thought I would drive the car for at least 5 years. Now, I'm married with a child, have a different job, Live in the San Francisco Bay Area, am more financially stable, and have come to the honest realization that I need a new car every 2-3 years. So leasing is for me at this point in time - I don't forsee major changes in my life over the next 2 years (famous last words).

But three thing I definitely love about leasing - Firstly, BMW takes the residual risk for you at the end. With year on year record sales, those cars are going to get out in the market in a few years, and with more cars, this should equate to lower residuals. I kind of like BMW eating some of that risk!

Secondly, in California, you only pay tax on the lease payment.

And finally, the freed up money can be made to be a real investment, not put into a pseudo investment called "my car".


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## BayAreaBMWFan (Aug 8, 2004)

Thanks Chris.

I did not get how you calculated the opportunity cost on a purchase though (5% after tax return on $27000 == 1488). I think it should be higher.
OK you corrected it.

I tried an analysis using future value calculations.
MF of 0.002
Pre-tax rate of return of 4.8%
Income Tax rate of 44.3%

Then leasing and buying were within $300 of each other. The key was that the effective post tax rate of return was 2.67% while the lease MF was equivalent to 4.8%. This highlights the fact that even with the most conservative investment and high income tax rate, leases do as well as purchases. If you could actually have a higher post tax rate of return on your investment (say 8%), you start doing better with the lease.

It also means that the lease money factor is perhaps the key. A lease with high residuals and high MF is not as good as one with lower residuals and lower MF but the same payments, since you are building less equity. Another factor to keep in mind is that unless your lease payments are also tax-deductible, if you assume the same pre-tax ROI as the lease money factors, the gap between leasing and buying narrows significantly since the lease payment is all post-tax compensating for the lower sales tax payments.


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## chrischeung (Sep 1, 2002)

*This ponders the question*



BayAreaBMWFan said:


> Thanks Chris.
> 
> I did not get how you calculated the opportunity cost on a purchase though (5% after tax return on $27000 == 1488). I think it should be higher.
> OK you corrected it.
> ...


For those who don't even want to actively invest, how about just putting the money towards their home? Would that be better?


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## chuck92103 (Oct 9, 2005)

JonathanIT said:


> This is a big advantage in the whole "lease vs. buy" debate. It was a significant reason I went with leasing... I look at it as "extra insurance" against catastrophic damage. If you're in a major accident ($25K or more in damage, frame repair), the insurance will not total out the car, they will fix it. Who wants the car then? If you financed, you're stuck underwater and then will take a big hit if you try to sell it. With a lease you can turn it in and walk away. Come to think of it, even a minor accident would make me want another car.
> 
> :thumbup:
> 
> --J.


You are correct. But no one wants to play the "totalled car" card regardless if they lease or not. Insurance still goes up and you could potentially be cancelled. So yes it is true you are protected to some extent because you lease, however, you are required to have more coverage and just like buying, you are subject to higher rates/cancellation due to claims history. But yes, if you are the type to total your cars, by all means lease.


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## JonathanIT (Feb 12, 2004)

chuck92103 said:


> But yes, if you are the type to total your cars, by all means lease.


What a lame thing to say. A friend of mine was rear ended by a truck on I-10 not too long after she had bought a brand new RX8. She's an excellent driver, and babied the car... but it was completely demolished from the rear bumper to the axle. It was no where near her fault; in fact it was a multi car pile-up and she managed to avoid the hitting the car in front of her and still got reamed. They fixed the car ($27K damage), but the diminished value has left her stuck.

But I guess you're not the "type" to ever total a car, eh? Heck, why even bother with insurance, it seems like a waste of money for such an excellent driver like yourself... who would never be in an accident. 

Besides, my point was that it doesn't even take a "total" accident; many who take special care of their cars would not feel the same even after a fender bender. Even if you start out with the intention of buying a car to keep, leasing offers insurance against any kind of damage for the first few years that would make you not want the car.

Heck, it even offers protection from "buyers remorse." Let's say you've always wanted a convertible so you finally go for it... well who knows, after having had one for a while you might decide it's not for you afterall (you know "the grass is always greener..."), and it's not the car you want to keep.

--J.


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## sdbrandon (Mar 18, 2006)

JonathanIT said:


> What a lame thing to say. A friend of mine was rear ended by a truck on I-10 not too long after she had bought a brand new RX8. She's an excellent driver, and babied the car... but it was completely demolished from the rear bumper to the axle. It was no where near her fault; in fact it was a multi car pile-up and she managed to avoid the hitting the car in front of her and still got reamed. They fixed the car ($27K damage), but the diminished value has left her stuck.
> 
> But I guess you're not the "type" to ever total a car, eh? Heck, why even bother with insurance, it seems like a waste of money for such an excellent driver like yourself... who would never be in an accident.
> 
> ...


Dimished value comes into to play when you go to sell. How much less was she quoted for trading in/selling out right? $27k seems like a lot of damage, close to totalled. On an accident involving a rear end, and that much damage, I would have sought legal assistance regardless if I bought or leased.

Regarding buy vs. lease, remember leasing only works if the majority of people buy/finance used and new cars. From a business standpoint, the majority have to buy. So don't beat up too hard on those who buy as they are doing you a favor.


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## BayAreaBMWFan (Aug 8, 2004)

chuck92103 said:


> You are correct. But no one wants to play the "totalled car" card regardless if they lease or not. Insurance still goes up and you could potentially be cancelled. So yes it is true you are protected to some extent because you lease, however, you are required to have more coverage and just like buying, you are subject to higher rates/cancellation due to claims history. But yes, if you are the type to total your cars, by all means lease.


Our cars have been rear-ended four times in the past seven years in three different states. Three times it was a low speed crash (we were stopped at a toll booth and twice at a red-light). The fourth time it was an unlicensed illegal who rammed into our car at 40mph and the car was totalled. The unlicensed illegal was driving behind a delivery truck and did not see the lights turn red. When the truck shifted lanes, she gassed up and hitting us as we were cruising to a stop. The car was totalled.

Our insurance rates HAVE NOT gone up because we were never at fault.

And chuck, I have corrected you multiple times regarding insurance. The coverage required by BMWFS is a maximum of $1000 deductible for the compreshensive and collission. I do not know about you but for newer cars I typically carry a $100 comprehensive and $500 collission deductible. Comprehensive deductibles are cheap, and these claims again do not affect your insurance ratings unless they are excessive (once every few months).


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## sdbrandon (Mar 18, 2006)

BayAreaBMWFan said:


> Our cars have been rear-ended four times in the past seven years in three different states. Three times it was a low speed crash (we were stopped at a toll booth and twice at a red-light). The fourth time it was an unlicensed illegal who rammed into our car at 40mph and the car was totalled. The unlicensed illegal was driving behind a delivery truck and did not see the lights turn red. When the truck shifted lanes, she gassed up and hitting us as we were cruising to a stop. The car was totalled.
> 
> Our insurance rates HAVE NOT gone up because we were never at fault.
> 
> And chuck, I have corrected you multiple times regarding insurance. The coverage required by BMWFS is a maximum of $1000 deductible for the compreshensive and collission. I do not know about you but for newer cars I typically carry a $100 comprehensive and $500 collission deductible. Comprehensive deductibles are cheap, and these claims again do not affect your insurance ratings unless they are excessive (once every few months).


Wow, you are definately a good lease candidate. rear ended four times. :yikes:


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## BayAreaBMWFan (Aug 8, 2004)

chrischeung said:


> For those who don't even want to actively invest, how about just putting the money towards their home? Would that be better?


Chris:

In my calculations I assumed that someone was paying cash. The opportunity cost I used was a CD (4.8%) which got taxed at the marginal income tax rate of (44.3% in CA). Even in this scenario the lease was ahead even though the net post tax rate of return on the cash used for purchase is 2.67%.

If you are financing you are paying interest at post tax income and at the same rate, the lease was $2600 less.

Of course if you can get a better return on investment, leasing becomes better. So if you put the money towards a house the return depends on the appreciation. If instead of putting $32K cash to buy the car, you put it as a 10% downpayment on a $320K home, any appreciation of the home is leveraged. So if the home goes up 15% in three years, your ROI is almost 50% pa! But then the home can go down too. A better comparison would be intermediate bond funds; relatively safer.

However, the strategy of investing in an appreciating asset (like a home) and borrowing for a depreciating asset (a car) is pretty much bullet proof with BMWs even with low return instruments like CDs!


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## BayAreaBMWFan (Aug 8, 2004)

sdbrandon said:


> Wow, you are definately a good lease candidate. rear ended four times. :yikes:


Yup. The first three times it was our Pathfinder which got hit. Each time the repair bill was a couple of thousands since they were all low speed crashes. Once it was a toll booth in the NJ turnpike where we were stuck in a 4 mile long backup. It was one car length at a time for an hour and during one such stop and go, the guy behind us put the foot on the gas pedal instead of the brake and rammed us in (it was around 11:00PM and late). The next time, a lady in an Audi chatting on a cell phone did not see the traffric stopped in front of her and rammed into the car behind ours which then hit our car. The third time a medical student who had not slept for 36 hours hit us when we were stopped at a red-light; she started rolling forward too early in anticipation of the light turning green and pickup up too much speed while we were still stopped.

When I traded it in after 63 months, I lost about $1000 due to the CARFAX report showing the accident! And after 63 months and $55K miles I got 34% of MSRP, which was equivalent to 40% of purchase price, and 36% of net price with sales tax.

I bought my first BMW cash after the car was totalled in 2003. I started wondering about how much I would lose if the car was hit, and it was frightening!


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## sdbrandon (Mar 18, 2006)

I lease my 6 series. Prefer something different every few years. I buy a 7 series every 7 years though. Leasing would not work for me on the 7. BMW does a model change every 7-8 years. I can't see leasing the same car twice. So I buy a new one on the second year of every new model year and keep it until the second year of the next model. Works out well for me. :thumbup: 

If BMW changed models significantly every couple of years, then I would definately be leasing the 7.


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## GBPackerfan1963 (May 5, 2006)

epoints said:


> Thank for the info. How much is Aero kit from dealer?


I want to say around 3900. Not cheap by any stretch of the imagination. There is a thread that tells you where to get it done for less.

http://www.bimmerfest.com/forums/showthread.php?t=142451&highlight=aero+kit


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## schley (May 26, 2005)

chuck92103 said:


> You are correct. But no one wants to play the "totalled car" card regardless if they lease or not. Insurance still goes up and you could potentially be cancelled. So yes it is true you are protected to some extent because you lease, however, you are required to have more coverage and just like buying, you are subject to higher rates/cancellation due to claims history. But yes, if you are the type to total your cars, by all means lease.


Chuck, no offense but it would have been better to stop after the, "You are correct." It is OK to agree and just leave it at that.:dunno:


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## JonathanIT (Feb 12, 2004)

sdbrandon said:


> Dimished value comes into to play when you go to sell. How much less was she quoted for trading in/selling out right? $27k seems like a lot of damage, close to totalled. On an accident involving a rear end, and that much damage, I would have sought legal assistance regardless if I bought or leased.


An owner can feel "diminished value" even if she didn't plan to sell... this car was her baby, she was going to take excellent care of it and keep it as a strictly "weekend" cruiser for going out (she has a Miata as a daily driver). After the accident, she had no desire for it at all. Whether it was "close" to totalled doesn't matter... the insurance company looks at a simple formula: is it cheaper to replace, or fix? The car was virtually new (extremely low miles), in showroom condition, and less than a year old. Replacement would be very near a brand new car, so over $35K.

Also, the truck that hit her had no insurance, it was a city owned vehicle (Pasadena) and they act as a "bonded" agency, sort of like their own insurance company. And they're real A$$holes. She had some medical costs also that she was trying to recoup (she wasn't even going after "pain and suffering"), plus the replacement for the car. But they've been fighting her every step of the way; she finally had to hire a lawyer and file a lawsuit. I hope she takes them to the cleaners and gets punitive damages after the way she's been treated! It's still pending.

--J.


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## epoints (Apr 17, 2006)

BayAreaBMWFan said:


> Chris:
> 
> In my calculations I assumed that someone was paying cash. The opportunity cost I used was a CD (4.8%) which got taxed at the marginal income tax rate of (44.3% in CA). Even in this scenario the lease was ahead even though the net post tax rate of return on the cash used for purchase is 2.67%.
> 
> ...


I did a massive speadsheet calculation using the following factors and assumptions:

1. lease costs $18,100 for 24 months and 28208 for 36 months (ED)
lease costs of 22623for 24 monhts and 32607 for 36 months (US DEL)
2. adjusted monthly cost (with 22.5 months and 34.5 months, respectively)
3. CD investment of 5.3% (countrywide)
4. tax rate (fed+CA) of 44%
5. inflation of 3%
6. depreciation of $22455 after 2year and $27,455 after 3 year (Edmunds)

And I arrived the following conclusions:

1. 2 year cost after investment is $16, 647 and 3 year cost 23,943 (ED)
2 year cost after investment is 21170 and 3 year for 28,342 (US DEL)
2. If you are leasing without ED, do a 24 months lease and invest the 50k into CD to offset costs; otherwise, it's cheaper to buy (not take into consideration of accident,..., etc)
3. with ED lease and investment, you will be 5800 and 3500 ahead in 2 year and 3 year lease, respectively.

4. ED lease without investment, 2 year lease put you ahead 4355 but in 3 year lease, you will be paying 750 than if purchase.

I think my number is probably a bit off but the conclusion will be the same. leaseing without ED does not show great advantage (unless you can write it off) and purchase has advantage over leasing after 3 year.

I have decided to go with 2 year lease to reap the benefit of residual and MF. Besides, new 5-series will be out in 2-3 year, then it would be time for a new lease.


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## BayAreaBMWFan (Aug 8, 2004)

epoints:
You have to factor in that if sell the car yourself, you might not get the residual value which BMWFS will give you. Also I do not think you have accounted for the 8-9% sales tax you will pay on a purchase. In your case, you seem to be planning to buy the car instead of financing. For high tax people, buying with cash is often better than financing since the return on zero-risk investments are taxable while the cost of financing is not tax-deductible.

Join the BMW CCA ASAP.


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## chrischeung (Sep 1, 2002)

*Buy vs Lease - what difference did it make?*

I just had a thought, how much difference did the Buy vs Lease deal make to me? I leased a 2000 323ci, which was then replaced by my 2003 325i which I purchased, which has since been replaced by my leased 2006 530i. From the leased 2000 to the bought 2003, I don't recall missing the additional money from the lease (in fact I had more since my personal financial situation improved), and didn't recall any sacrifice over that time.

But, what were my thoughts and behavioural differences between leasing and buying?

For my leased 2000 323ci: I was always more concerned about damage to the car that I would have to pay for on lease turn in. Initially I was particular about washing the car myself (it was black), observing the break in period, and concerned about going over the mileage allowance on the car. Since I was returning it, I tended to drive it much harder, though I never tried anything extraordinary like dropping the clutch above 2K rpm.

For my purchased 2003 325i: I was concerend about damage to the car that I would cause, and after getting fixed, would have to live with, and then when sold, have diminished value. Since I was honestly considering keeping the car out of warranty, I again avoided extraordinary actions like braking, revving the car up to 3K, then releasing the brake. I was even more careful about choosing that clear parking spot, avoiding curb rash, and chastising the Misses more for bad driving habits. My wife and I felt more "attached" the the car, since it was our first new owned BMW, and we were perplexed with the private sale vs dealer sale option.

Overall, I expect I will drive leased cars harder, be less concerned about wear and tear, and be more relaxed about how and where I use the car. Perhaps I can even off-road it? No - I'll reserve that for rentals.


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## BayAreaBMWFan (Aug 8, 2004)

That is very true chris.

You will never develop a strong emotional attachement with a car you plan to turn in another year. However you will enjoy it more and push it harder. So if you want a nice ride you can have fun with, with the option of a new model every few years, lease. 

However if you want to settle into a long term relationship, which might be expensive after warranty expires,  you should buy.

Kind of reminds me of another important fact of life ...


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## epoints (Apr 17, 2006)

BayAreaBMWFan said:


> epoints:
> You have to factor in that if sell the car yourself, you might not get the residual value which BMWFS will give you. Also I do not think you have accounted for the 8-9% sales tax you will pay on a purchase. In your case, you seem to be planning to buy the car instead of financing. For high tax people, buying with cash is often better than financing since the return on zero-risk investments are taxable while the cost of financing is not tax-deductible.
> 
> Join the BMW CCA ASAP.


I accounted additional 10% for tax + gov. fees, and the selling prices for each year were based on Edmund's depreciation value which I don't know if this is a good number to use.

I went through this calculation in helping determine where is the break even point between leasing and buying. I was surprise to see the financial benefits of leasing is not as great as I initially anticipated especially when I cannot write the lease payment off. On the other hands, other benefits of leasing (like Chris and others' posts) are the tipping factors.

As for CCA, I thought you would have to join for at least 1 year to qualify for the rebate?


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## BayAreaBMWFan (Aug 8, 2004)

epoints:

If you are paying cash for the car when buying and the expected post tax rate of return on the cash is low (due to high tax, conservative investments), then leasing is not all that better. This is because you are paying a higher finance charge on the lease which comes from post-tax income. Even them the lease is no worse due to sales tax savings. The low risk of course is a great upside.

However if you are able to invest wisely (bought a rental house in 2001 with the cash you paid for the car), leasing becomes a no-brainer. Similarly if you were financing the car, the lease is a better deal. 

It is all a function of your expected post tax rate of return on investment, and the finance charge you are paying (whether leasing or purchasing via a loan). In general, for a reasonably risk tolerant person it is better to put money into appreciating assets and let other people finance depreciating assets.

Yup you need one year for the CCA rebate but you never know when you would need the next bimmer  (cars do get stolen, totalled or you can get bored). So why take a chance; it is just $40/year and you get a great magazine with lot of discounts on bimmer related stuff.


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## DoctorBimmer (Feb 13, 2003)

*2yrs or 3 ?*

This has been a very timely thread for me. I always purchased, leases always seemed like a rip off to me, until recently. I've read all the posts and have a few comments/questions. First, I keep reading how great the deal is to take European Delivery (ED), but yet no one seems to calculate that you have to get there and have the time to do it. For those of you who have done it, how much did it cost you do it? I'm talking about the people who went over to take delivery, spend minimal time and return, not the "we were going on vacation anyway, so we took the kids and spent 2 weeks there.

While at the dealer this week for the first time in 2 yrs picking up a brochure and looking at the 530 / 550 the salesman said a couple of things that have not been mentioned here. He told me that a "great option" would be to prepay your 2 yrs lease up front and they would even make me a better deal. Has anyone done this? What advantages / disadvantages are there? Also, wouldn't there be a better lease deal on a existing car on the lot vs ordering? Or do I have that backwards?

I'm starting to think I am a leaser. I can barely make it 3 yrs, tops, before the new car bug bites. Sometimes it is 2yrs, which is the case now. I have had 5 new cars since 1995 and 3 used (not including my wifes cars). I keep immaculate care of them and 90% of the time I sell them privately (PITA - hate it). I swear each time that "this is it, this is a keeper" and my wife bets me something, last time a 1 carat diamond that I could not last 3 yrs as I boasted and proceeded to lose.

Oh yeah, one last comment that the salesman made, and I believe it was in conjunction with the "pay all at once" statement........that I would not have to pay any sales tax if I paid all up front (entire lease payment). Did I misunderstand? I'm in Austin, TX.

I'm leaning towards a 24 month lease on a 530i. I looked up all of my last car purchases and have a low of 10K miles a year to 14K per yr (current car). I have ~ $13K that I can put into my pocket after the sale of my LS430. Although I am a car nut, keep great care of them, I think I can live with having a lot of fun with a lease car and move onto the next whim with ease.


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## epoints (Apr 17, 2006)

DoctorBimmer said:


> This has been a very timely thread for me. I always purchased, leases always seemed like a rip off to me, until recently. I've read all the posts and have a few comments/questions. First, I keep reading how great the deal is to take European Delivery (ED), but yet no one seems to calculate that you have to get there and have the time to do it. For those of you who have done it, how much did it cost you do it? I'm talking about the people who went over to take delivery, spend minimal time and return, not the "we were going on vacation anyway, so we took the kids and spent 2 weeks there.
> 
> While at the dealer this week for the first time in 2 yrs picking up a brochure and looking at the 530 / 550 the salesman said a couple of things that have not been mentioned here. He told me that a "great option" would be to prepay your 2 yrs lease up front and they would even make me a better deal. Has anyone done this? What advantages / disadvantages are there? Also, wouldn't there be a better lease deal on a existing car on the lot vs ordering? Or do I have that backwards?
> 
> ...


First, I am not an expert on leasing and this will be my first lease. Having spent some times on this forum and receiving helps from great members, I have concluded that lease is the way to go especially when you want to drive a new car every 2-3 years.

In my case, I want SMG which is not readily available in local dealerships ( I think there are only 3 in US dealerships) and do not have options that I want. So, ED!

I did bunch of calculations (see above postings) with various scenarios (with investment, 1.5 months shipping gap, income tax rate, ...etc.) and derived the conclusion of leasing at 2 years would save me $4500. It would be better to purchase if you intend to lease longer than 3 years, IMO, but definitely no longer than 4 years because of warranty.

In CA, I would only pay for sales tax on lease payments. :thumbup:

The intention of ED is stimulate tourism in Europe and hoping to get you to spend more money than you save. So you have to look at this saving as vacation subsidy, but if you just want to fly and come back, my guess is you would save ($4500-$1000 airfare - $500 misc expenses) = $3000.

Based on my calculation, my 2 year lease payment would be $17750 or $740 a month.

My $.02,


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## chuck92103 (Oct 9, 2005)

epoints said:


> First, I am not an expert on leasing and this will be my first lease. Having spent some times on this forum and receiving helps from great members, I have concluded that lease is the way to go especially when you want to drive a new car every 2-3 years.
> 
> In my case, I want SMG which is not readily available in local dealerships ( I think there are only 3 in US dealerships) and do not have options that I want. So, ED!
> 
> ...


You are correct. Just remember at the and of two years, you need another car and need to shell out $2-3k again. You still come out ahead, but just make sure you look at all the numbers. :thumbup:

You are best to compare 2 3-year leases (or 3 2-year leases) to one 6 year car purchase.


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## BayAreaBMWFan (Aug 8, 2004)

You need to watch out for sales tax treatment when it comes to leases. Taxes are different in Texas so the savings may not be all that great compared to CA.

You can easily do a Euro Delivery in 36 hours. Fly out on Sunday afternoon. Get to Munich on Monday morning, take delivery, tool around the Autobahn, drop off and fly back on Monday evening. This is assuming you have direct flights. In the off-peak winter season, you can fly to Europe for $700 or much less. 

I would personally fly out on Saturday, spend the night in Munich on Sunday and then fly out on Monday evening to ensure that any flight issue does not disrupt the trip. You can do the trip on the President's Day Weekend and not have to take the Monday off too.

chuck: BMW CCA gives you a $1000 rebate on the 5 series, which kind of makes up for the trip cost. So when you are looking at 24 month vs 36 months, the trip costs should not be a factor. In general you would to go with one with the lowest net lease payment after accounting for the one and half months you pay extra for. I would consider the following:
> Is there a chance that you are going to go out of warranty if you take a 36 month lease?
> Is flying to Europe a pain for you?
> If you are going to be driving enough to need new tires, then you may want to factor that in.

To me it is clear that with BMWs free maintenance/warranty programs and their high residual leases it is a no brainer to do leases instead of buying for 5-6 years, especially if you drive 15K miles/year. You most probably will come out ahead doing two leases and driving two new cars financially instead of keeping one car for six years with out of warranty repair and uncovered maintenance expenses.


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## chuck92103 (Oct 9, 2005)

BayAreaBMWFan said:


> You need to watch out for sales tax treatment when it comes to leases. Taxes are different in Texas so the savings may not be all that great compared to CA.
> 
> You can easily do a Euro Delivery in 36 hours. Fly out on Sunday afternoon. Get to Munich on Monday morning, take delivery, tool around the Autobahn, drop off and fly back on Monday evening. This is assuming you have direct flights. In the off-peak winter season, you can fly to Europe for $700 or much less.
> 
> ...


Can you go out of warranty on a 36 month lease? :dunno: That is almost 17k miles per year. I thought 15k was the limit. Can you buy miles above 15K?


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## BayAreaBMWFan (Aug 8, 2004)

chuck: I am tempted to say use search or see a doctor for memory loss issues (you have been there on so many lease discussions!!) but here it goes.

You can buy miles at the start of the lease over 15K @15c/mile. BMW will compensate you at the end if you do not use them. However, you pay finance charge on these.
You can buy miles at 16c/mile up to six months before the lease expires. Again if you buy more than 15K/year and do not use them you get a refund at the end.
The end of lease cost of mile is 20c/mile.


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## chuck92103 (Oct 9, 2005)

BayAreaBMWFan said:


> chuck: I am tempted to say use search or see a doctor for memory loss issues (you have been there on so many lease discussions!!)


:rofl: Fair enough. After awhile these threads become one big blur and sometimes I even forget what I was discussing. :stickpoke


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## schley (May 26, 2005)

BayAreaBMWFan said:


> chuck: I am tempted to say use search or see a doctor for memory loss issues (you have been there on so many lease discussions!!) but here it goes.
> 
> You can buy miles at the start of the lease over 15K @15c/mile. BMW will compensate you at the end if you do not use them. However, you pay finance charge on these.
> You can buy miles at 16c/mile up to six months before the lease expires. Again if you buy more than 15K/year and do not use them you get a refund at the end.
> The end of lease cost of mile is 20c/mile.


Chuck you are knowledgable about leases I second the memory loss hypothesis.


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## mclaren (Jan 5, 2005)

Join the BMWCCA, don't make the mistake I made. I had been a member of BMWCCA previously but let it expire a number of years ago when I went to rice. When I leased my 2005 BMW in late 2004 for 3 years I figured I would wait a year then join so when my lease was up I'd have been a member for more than a year which is what I did. But then I leased the Z4 this month and have only been a member for 6 months so I lost the $500. Dumb huh.


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## BayAreaBMWFan (Aug 8, 2004)

chuck, another *risk* you avoid when you do not have to sell your car.


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## epoints (Apr 17, 2006)

550i - 740 a month
A brand new car - every 2 yearS


Not having sell you old car, PRICELESS:


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## schley (May 26, 2005)

epoints said:


> 550i - 740 a month
> A brand new car - every 2 yearS
> 
> Not having sell you old car, PRICELESS:


Priceless is right, well said.


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## shellbmb (Jul 16, 2006)

If I am considering a lease and have a trade-in which I expect to get some money back on, should I include that as a down payment into the lease? Or expect a check from the dealer? And should I expect to get more for my trade-in if I do put it back into the lease? I am trying to sell on my own, but that isn't going so well. 

I am looking to buy/lease a Z4M roadster. I have heard anywhere from sticker to a couple thousand below MSRP. Dealer invoice (according to specs on this website) is 53,400 with options and MSRP is 58,270. This is including destination charge and gas guzzler tax. What is a realistic number to shoot for? 

Also the July lease specs show a .00315 MF for that car on a 36mo/15k lease. Is it realistic to get a MF of .00254 by negotiating and adding 7 security deposits? .00254 is equivalent to the best APR I can get on a 60mo note (6.1%).


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## radgator1 (Jul 10, 2006)

If possible can someone help me out here with some real life numbers on lease vs buy. I will get a e90 335i sedan later this year by ED and will have to decide to pay cash vs lease. My situation is if I lease I would put lets say 40k toward a equitiy line of credit that I am paying around 7% on, however that is all deductable at the highest tax bracket in both federal and state income tax (California). I can deduct a portion of one leased vehicle however I already have a leased 2007 Lexus RX 350 with approximately a 640 monthly payment. I will likely keep the 335i 4 years if I purchase and 3 years if I lease. I tend to go over the 12k a year mileage on recent leases. Is there any rule of thumb to determine which would be better, a lower LOC payment plus a lease payment vs no car payment on the Bimmer but a higher LOC payment?

Thanks, Kevin


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## adgrant (Aug 13, 2003)

radgator1 said:


> If possible can someone help me out here with some real life numbers on lease vs buy. I will get a e90 335i sedan later this year by ED and will have to decide to pay cash vs lease. My situation is if I lease I would put lets say 40k toward a equitiy line of credit that I am paying around 7% on, however that is all deductable at the highest tax bracket in both federal and state income tax (California). I can deduct a portion of one leased vehicle however I already have a leased 2007 Lexus RX 350 with approximately a 640 monthly payment. I will likely keep the 335i 4 years if I purchase and 3 years if I lease. I tend to go over the 12k a year mileage on recent leases. Is there any rule of thumb to determine which would be better, a lower LOC payment plus a lease payment vs no car payment on the Bimmer but a higher LOC payment?
> 
> Thanks, Kevin


Is the rate on the LOC floating? What is your combined top tax rate (State and Federal).


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## radgator1 (Jul 10, 2006)

adgrant said:


> Is the rate on the LOC floating? What is your combined top tax rate (State and Federal).


Around 46% percent ignoring AMT. The LOC is with Wells Fargo. I think they call it a smart loan or something like that where it is fixed for 3 years (I've had it for around 4 months) then if you pay it down then re-draw on it that money goes into a variable rate which is prime minus .5 I think. It is an interst only payment.

Thanks again, Kevin


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## adgrant (Aug 13, 2003)

radgator1 said:


> Around 46% percent ignoring AMT. The LOC is with Wells Fargo. I think they call it a smart loan or something like that where it is fixed for 3 years (I've had it for around 4 months) then if you pay it down then re-draw on it that money goes into a variable rate which is prime minus .5 I think. It is an interst only payment.
> 
> Thanks again, Kevin


Your interest costs will probably be lower buying than leasing (a really low MF is unlikely). However, you can't really crunch the numbers until you have BMW's lease numbers.

BTW leasing does come with some benefits over owning; Gap insurance, a call option on the car and protection from diminished value.


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## Ågent99 (Jan 7, 2002)

adgrant said:


> BTW leasing does come with some benefits over owning; Gap insurance, a call option on the car and protection from diminished value.


...and the MSD program....

It has been shown that one can save even more dollars by doing a two year lease then purchasing extra miles at 16 cents/mile vs. doing a 3 year lease.

You gotta crunch the numbers...everyone's situation is unique.


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## erdoran (Feb 29, 2008)

My guess is that if someone is planning on buying a new car after three years, then leasing works. 

1. Difference in sales tax on leased portion vs full purchase price (state dependent)--in my case 9% on $12k vs 6% on $52k
2. Difference in residual value vs what you could actually sell the car for--from the offers BMWFS is making to folks with their leases ending, thousands of dollars

balance either of those vs the "premium" which I consider only the LAF and you end up WAY ahead.

Now, if you plan to keep your car for more than three years, it may not work as well, as others have said.

Secondarily there are tax benefits for businesses, from what I understand--I'm not familiar as I'm leasing personally.

Here are some numbers I swiped from another post I just read....

"we appraised a car near the end of lease. his residual was 70k after 2 years, and his olp was 56k. our number came in at 53k...and he only had 17,000 miles. 51-54 sounds like a safe bet for low miles."

Not sure what he means by olp--I read this as his buyout number after two years is $70K, so his payments were purchase price - $70K--but if he had bought the car and decided to sell it, he would pay $17k more for the privilege!


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## adgrant (Aug 13, 2003)

kostia said:


> The only thing I keep missing is people claiming how much chepaer it is to lease a depreciating asset and I was never clear on how they can claim this given my math, that is why I am looking for someone to show me where my math is wrong.


Your math is wrong because it is comparing apples to oranges. You are comparing owning one car for six years vs leasing two for the same period of time. Everyone else is comparing owning for three years vs leasing for three years.

Of course you will save money driving the same car for 6 years, you will save even more if you drive the same car for 10 years. People who lease want to drive a fairly new car covered by a new car warrantly. If they wanted to keep the same car for years, they wouldn't lease.


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## kostia (Apr 2, 2008)

The argument that is consistently being made is maintenance cost and owning a depreciating asset in the end the COST of lease vs COST of buying, disregarding "BUT I AM DRIVING A NEW CAR" factor. I am not questioning owning for 3 years vs leasing for 3 years that I can understand.
I am questioning "savings" when you consider long term driving - it does not work if you want to drive a new car every 2/3 years, since you are not concerned about actual cost at that point over a term longer then 3 years.
Cost-benefit of about $15K over 6 years for a 52K car is different for different people. 
It is all about the goals that you have and money you are willing to spend on entertainment. BTW in terms of deductions, for business you can depreciate the car the same way as writing down a lease which may be even more beneficial in some cases.
I was actually tryign to figure out if it makes sense for me to lease and as I said it does not look that it does especially considering what I would like to get. Thus I am willing to get CPO.


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## Corgidog (Sep 7, 2008)

chuck92103 said:


> The cheapest vehicle is still and will always be the one that is paid off.
> 
> A paid off BMW costs approx. $200 per month to maintain. Much less than any lease.
> 
> A paid off car costs always trumps a financed or leased one. :thumbup:


Can't let this statement pass even though it is almost 3 yrs later (lol).

Anyone know where one can get a "paid off car" (other than to pay it off which costs money.)


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## adgrant (Aug 13, 2003)

Corgidog said:


> Can't let this statement pass even though it is almost 3 yrs later (lol).
> 
> Anyone know where one can get a "paid off car" (other than to pay it off which costs money.)


Its pretty simple. You just keep your current car instead of leasing a new one and pay for the repairs yourself.


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## dnvrdrvr (Apr 22, 2009)

*Tax break for buying...*

So now there's a new monkey wrench to throw into the mix: what about the ability to write off sales tax for buying instead of leasing? I'm a leaser but am thinking of buying so I can deduct the tax on next years return...


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## BigPimp (Sep 27, 2003)

What are tax write off are you specifically referring to?


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## dnvrdrvr (Apr 22, 2009)

Thanks to one of the many stimulus packages approved recently, you can write off State sales tax on new vehicle purchases (leases don't qualify) valued up to $49,500 on your 2009 return. So you're talking about reducing income taxes paid. It only piqued my interest because my husband and I bumped into the next bracket in 2008 and lost our shorts - CPA told us to lower income any way we can to keep more of our it.

That said, I'm coming to the end of my lease on a 2006 330xi and while I've loved driving it, I'm ready for a new & different one. I'm pretty certain I'm a leaser. But am planning to order my next bimmer and get exactly what I want so would consider buying... if it makes sense. Husband is a buyer and so he's trying to influence me and threw this out as an argument to consider.


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## jackalope (Jan 29, 2009)

dnvrdrvr said:


> Thanks to one of the many stimulus packages approved recently, you can write off State sales tax on new vehicle purchases (leases don't qualify) valued up to $49,500 on your 2009 return. So you're talking about reducing income taxes paid. It only piqued my interest because my husband and I bumped into the next bracket in 2008 and lost our shorts - CPA told us to lower income any way we can to keep more of our it.
> 
> That said, I'm coming to the end of my lease on a 2006 330xi and while I've loved driving it, I'm ready for a new & different one. I'm pretty certain I'm a leaser. But am planning to order my next bimmer and get exactly what I want so would consider buying... if it makes sense. Husband is a buyer and so he's trying to influence me and threw this out as an argument to consider.


Perhaps the US Tax Code recently changed, but I was under the impression you could only write off sales tax if you do NOT write off your state income tax. I live in a state (Florida) where there is no state income tax so for me it makes sense to write off sales taxes. Note that when writing off sales tax you can either use a government formula (which most likely lowballs your tax spend) or you can declare the actual sales taxes you paid, but it's a pain to keep receipts on every single consumer purchase all year long.

In your case, I don't think you can write off BOTH state income taxes and state sales taxes, unless something recently changed.


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## kyfdx (Aug 4, 2003)

jackalope said:


> Perhaps the US Tax Code recently changed, but I was under the impression you could only write off sales tax if you do NOT write off your state income tax. I live in a state (Florida) where there is no state income tax so for me it makes sense to write off sales taxes. Note that when writing off sales tax you can either use a government formula (which most likely lowballs your tax spend) or you can declare the actual sales taxes you paid, but it's a pain to keep receipts on every single consumer purchase all year long.
> 
> In your case, I don't think you can write off BOTH state income taxes and state sales taxes, unless something recently changed.


It's a special "above the line" deduction... for this year only. You can take it, even if you don't itemize..

However... 6% tax on $40K is $2400, which will net you $600, if you are in the 25% federal bracket...

For most people, that's just one car payment...


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## Flyingman (Sep 13, 2009)

Lease, buy, whatever. The key is to enjoy the ride already!

Not many cars make you smile like a BMW. That's what you're paying for.

Now what's that worth to you?


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## lookingtobuy (Dec 28, 2009)

Total lease payment in the course of 36 months: $15,000 ish

Buyout price at end of lease: $29,999

WTF?

I'd rather finance.


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## la jolla bmw (Dec 26, 2009)

i'd finance it also at that rate jeez


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## clarkcc1 (Jan 23, 2007)

Flyingman said:


> Lease, buy, whatever. The key is to enjoy the ride already!
> 
> Not many cars make you smile like a BMW. That's what you're paying for.
> 
> Now what's that worth to you?


Salesmen must LOVE you


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## adgrant (Aug 13, 2003)

lookingtobuy said:


> Total lease payment in the course of 36 months: $15,000 ish
> 
> Buyout price at end of lease: $29,999
> 
> ...


When I bought my last car (2009 135i vert) the lease terms were unattractive so even though I like to lease I ended up just paying cash (always cheaper than financing).


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## devla (Jul 5, 2008)

Delete. Sorry, not sure how I ended up bumping this old thread.


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## Tomjh (Nov 15, 2011)

Andrew*Debbie said:


> I've said this before. Sometimes lease to own makes sense.
> 
> If you actually do this, you may be able to get the car for less than the residual. I've read posts that sometimes BMWFS will offer to sell you the car for less than the residual.
> 
> Also ask your dealer for the CPO price.


I'm thinking about the pros and cons as I have leased my last four cars. One advantage of a purchase is you can get a good discount up front but a payoff is based on the starting point of the msrp even if your lease is based on a reduction of the msrp


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