# Lease vs Buy Analysis



## Dallas550 (Jan 16, 2011)

JTDM said:


> @Dallas550, i think you not only buy at a great deal, but also sells for a great profit. I dont think I have your talent, let alone I want to switch cars as often, so i will go with dummy safe route.


Lol. Don't get me wrong, in many cases, I agree leasing is the smart way to go.

As far as getting great deals, I only have bimmerfest and a ton of research to thank.



Robert A said:


> Two questions:
> 
> 1. On the finance calculation, are you assuming that you'll trade the car in or sell it privately? And why are you assuming that the lease end value is the best estimate of the car's eventual value?
> 
> 2. How do sales taxes on a lease or a purchase work in your state


Both key questions in my opinion. We were having this discussion in the other thread a couple of weeks ago. The difference between trade in and private party could be as much as $4-5k.


----------



## woron (Dec 13, 2011)

Dallas550 said:


> Just for a data point, the trade in on my 2 year old X3 is approx. 66% of MSRP. So in this case, the lease residual would probably win by a couple of points this time next year.


So if in a year you will be at 56%, then buying will cost a little more than lease.

And I am impressed with your selling talents (I saw other example that you've shared before)!


----------



## Kamdog (Apr 15, 2007)

JTDM said:


> I don't understand how a 2013 F10 is just a minor variations from your E60.
> 
> Of course, if you have to stick with your E60, you can buy it at the lease end. If you don't value the freedom of option (of which including keeping your current car) and you look at old car the same as new car, doesn't matter what math we do here, you won't be convinced.
> 
> ...


The 2010 is the E60, which is essentially the same car with a better iDrive. If, however, you end up getting the 2011 F10 model in 2010, then the 2013 F10 is the same car.

The thing with leases is that, for a slightly higher overall cost, you drive new cars. But you never get off the monthly payment. Looking at my own car, it is still worth more than I ever paid into it out of pocket, by around $7K, and and it has been a year and a half since I passed the time when payments matched. So, for 18 months, and counting, I have no lease payments, which for a 535, run over 700 a month, which adds another 12K.

And, since I maintain it to top standard, my car still does everything it did when I bought it. It helps that it is garaged, not driven often on snowy, salty roads, and no maintenance is delayed.


----------



## ae86pwr (Sep 2, 2004)

another lease vs buy thread ..... yikes.


----------



## 640GC (Mar 22, 2012)

nilfinite said:


> For BMW's it doesn't make sense to not lease. You lock in a residual so if you decide you don't want a car after 3 years, you can give it back. If you want to keep it, you always have the option to buy a leased car for the price you negotiated it for - your lease payments. It's basically free optionality.
> 
> I list all the benefits in this blog post.
> 
> http://leaseknowitall.com/2014/10/becoming-car-lease-know-part-3-deal/


In your article you state "Lets say you get a lease offer with an inflated residual." Offer a $500 - $1000 markup to the dealer over what they purchase the vehicle for from BMW Financial Services. Since BMW Financial Services will sell the dealer the car for less than the residual, the question is.

How do you find the price the dealer is going to pay so that you can make a proper offer?


----------



## dotmike24 (Dec 2, 2014)

It depends where you live. I live in California so Leasing is the better option with taxes being paid on a monthly basis. The residual value that BMWNA imposes does not match the value of the car in real world. The cost per mile has at least 10cents difference for lease and buy. It will take 8 years to match up the cost of lease and buy to break even, assuming your 8 years old 5 series still runs. I use my average miles a year at 15k/year. If you keep it longer than that, then you're a winner but I think most of the people here likes newer car rather than 8 year old car. Just my two cents here


----------



## socal59 (Oct 24, 2004)

Just curious, being in So Cal one can easily drive 20k to 25k miles per year. Does that kill the leasing advantage?


----------



## Kamdog (Apr 15, 2007)

socal59 said:


> Just curious, being in So Cal one can easily drive 20k to 25k miles per year. Does that kill the leasing advantage?


Many argue that no, it doesn't, you simply buy more miles.

As someone who used to commute to work, let me say that you are paying for those extra miles in your BMW whether you lease or buy. When you buy, you have grearly accellerated depreciation and significant increases in maintenance.

Leasing does cost more, on an ongoing basis, the real question is, is that extra cost worth the money, and the answer for many is yes.


----------



## TXPearl (Apr 16, 2010)

640GC said:


> ......
> 
> How do you find the price the dealer is going to pay so that you can make a proper offer?


Ask the dealer. No guarantee, but dealers I've worked with have openly shared this with me.

If that doesn't work, find a good estimate of the wholesale value. Should be close enough for your negotiations.


----------



## nilfinite (Mar 12, 2012)

640GC said:


> In your article you state "Lets say you get a lease offer with an inflated residual." Offer a $500 - $1000 markup to the dealer over what they purchase the vehicle for from BMW Financial Services. Since BMW Financial Services will sell the dealer the car for less than the residual, the question is.
> 
> How do you find the price the dealer is going to pay so that you can make a proper offer?


Yup, that is definitely a nuance to consider. If you work with enough dealers or have a good relationship with one, you should eventually get the right price.

And assuming you don't, as long as you are happy with the numbers that they tell you, that's all that matters anyway.

The point is, with an inflated residual, you're getting a double deal if you eventually plan on buying the car anyway. You get all the unfront cash incentives as well as the benefit of the inflated residual at lease end. Plus in states where you pay taxes on the payment, you'll pay less taxes overall.


----------



## JTDM (Jul 22, 2014)

Kamdog said:


> The thing with leases is that, for a slightly higher overall cost, you drive new cars. But you never get off the monthly payment. Looking at my own car, it is still worth more than I ever paid into it out of pocket, by around $7K, and and it has been a year and a half since I passed the time when payments matched. So, for 18 months, and counting, I have no lease payments, which for a 535, run over 700 a month, which adds another 12K.
> 
> And, since I maintain it to top standard, my car still does everything it did when I bought it. It helps that it is garaged, not driven often on snowy, salty roads, and no maintenance is delayed.


Kam, this is where we agree to disagree. A 535 where MSRP at 68k is $600 to me including tax and using full MSD. and as to your monthly payment, although you didnt say, that loan for 5yr period should be higher than leasing. if you want to put those extra away when you were leasing, you probably wont be worse paying those lease payment at the later time.

if i were live in a place with bad weather and salty road, i would have no fear driving my car at all. it 's a lease and i insured it accordingly. i dont need a winter beater save from a winter set of wheels and tires.

you can probably drive your e60 for another 5 to 10 years, and that's great if you want to drive that. but if you were that owner buy a car that she/he didnt like to keep 3 years after, you always have BMWNA ready to take your car back. That, is the option i wish every car has (inflated residual). I would be buying almost any car from the entire Porsche lineup if it comes with leasing support BMW offers.


----------



## TXPearl (Apr 16, 2010)

Having a monthly payment or not is irrelevant to the comparison, it's the true cost that matters. If you want to lease but don't like having monthly payments, do a one-pay lease (although the terms recently became less favorable).


----------



## Robert A (May 18, 2003)

Good point. A lot of people here, and most consumers, think only in terms of payment and not total cost.

The lease on my 535d is such that my total cost is my exact monthly payment x 36 months. My drive-off had a cap reduction of $1,000 (including tax) which was offset by the BMWCCA rebate. The only other items in the drive off were the refundable deposit and DMV fees.



TXPearl said:


> Having a monthly payment or not is irrelevant to the comparison, it's the true cost that matters. If you want to lease but don't like having monthly payments, do a one-pay lease (although the terms recently became less favorable).


----------



## Dwight_Schrute (Feb 20, 2009)

woron said:


> I see several problems with your calculations.
> 
> 1. if we are financing through BMWFS, we should use their current rates for MF and loan APR. Which are 0.0013 and 3.11%
> 2. Sales tax on lease in a lot (most?) states calculated on payment, not on sale price
> ...


Despite the fact that this member's name is one transposed letter from being moron, I like him/her and think they make some valid points.

I think leasing and buying both have their merits, depending on the situation. I leased my 335i because I planned on dumping it after 3 years but I became so emotionally attached that I bought it after the lease was over. Best financial move? Meh, probably not but let's all remember, if we made decisions based solely upon financial responsibility then we would all be driving 10 year old Camrys and Accords. Sometimes it isn't about stretching a dollar as far as it can go.


----------



## avalily (Jan 17, 2015)

Here's another factor -- how does this all impact your ability to get a mortgage? I have to assume banks will take a lease into consideration in deciding how much you can pay. I know that I will be more limited by what I can afford per month than I will be by a down payment requirement, so I am assuming that I would be better off with a paid off car than with a lease.


----------



## visi107 (Mar 20, 2013)

avalily said:


> Here's another factor -- how does this all impact your ability to get a mortgage? I have to assume banks will take a lease into consideration in deciding how much you can pay. I know that I will be more limited by what I can afford per month than I will be by a down payment requirement, so I am assuming that I would be better off with a paid off car than with a lease.


Well if you finance then you monthly payment will probably be more than your lease payment (unless you buy your car all cash or if you put a big down payment) so therefore a bigger payment would hurt you more when u take a loan out for something else.


----------



## dotmike24 (Dec 2, 2014)

+1 lol. Buying the car and buying a new doesn't make sense especially if you don't have enough income to get approved on your loan. I will rather use the $60k cash as my downpayment on my house and lease my 5 series rather than vice versa. If you don't have enough income buy your house first and Drive your old car and wait until you can afford to buy/lease your new car.


----------



## JTDM (Jul 22, 2014)

Dwight_Schrute said:


> Despite the fact that this member's name is one transposed letter from being moron, I like him/her and think they make some valid points.
> 
> I think leasing and buying both have their merits, depending on the situation. I leased my 335i because I planned on dumping it after 3 years but I became so emotionally attached that I bought it after the lease was over. Best financial move? Meh, probably not but let's all remember, if we made decisions based solely upon financial responsibility then we would all be driving 10 year old Camrys and Accords. Sometimes it isn't about stretching a dollar as far as it can go.


I want to meet you solely due to your user name. and your 335i. Seattle fester here.


----------



## dotmike24 (Dec 2, 2014)

The OP computation is so way off, if he's getting this deal for his lease, a $53000 5 series will inly cost you $490/month including tax for 15k miles/year with $1800 out pocket that includes your acquisition fee, first month, title, license and registration. Negotiated price for the car is only 46500 right now. After 36 months, your total cost will be $18,950. If you buy it cash outright, your cost is $46,500 x 1.09 (9%sales tax in CA) your total cost is $50685. To get a breakeven cost, you need to sell the car after 45k miles used in 3 years for $31,735. And this is paying cash already, if you can sell the car higher than that price then you came out as a winner. If you finance it, add 3.12% compunded annually and your overall cost, assuming you can sell the car at $31,735, assuming you finance it for 5 years and $1800 dp, same negotiated price, there will be $20,478.11 will be left on your loan. With $881.29 monthly payment. Your overall cost is $881.29x36months = 31726.44 + 1800 (dp) = 33,526 - difference of loan left and trade in -11,257. Your overall cost is $22,269. So make your argument


----------



## xofruitcake (Jul 24, 2010)

I think the problem with the spreadsheet is the bank interest rate. You use 0.0017 which translate to 4.08% and your bank rate is 0.5%. If your alternative of earning money with your cash is only 0.5%, of course you are better off in buying with cash. So it is the way you set up the discussion. Not many people has 40-50K sitting on a bank account taking 0.5% and not finding better way to use the cash (Stock market has gone up may be 13-14% for the last 5 years, paying off credit card interest etc.).

The real advantage of leasing is 1) the tax write off for someone who qualified for it and 2) the pre-determined residual that BMW (or any manufacturer) offer. It offers the leasee like us a chance to see if the car value really stand up. So at lease end if the residual for my car is 30K and I find one that is offered in dealer lot for 25K, I just save 5K. But if the market price for the car is 35K, I can just buy it from BMW at the residual.


----------



## Dallas550 (Jan 16, 2011)

namelessman said:


> Mine was a MY13 328i bought in Oct 2012, and it was 12% off MSRP, and that was without loyalty credit, which could be another 2% off(14% total). ED these days do not seem to provide the best discounts, esp. during end-of-MY when buildout cash was available(ED's only have a narrow window to participate, while on-the-lot units can benefit till Sept/Oct). Having said that, if a Euro trip is already planned(and airfare and accommodation are already in the budget), ED is a great way to travel Europe, and save on the expensive rentals.


I'm assuming this was a car on the lot? If it was a custom order, then that's a great deal. I have never been given 15%+ off for custom ordered vehicles outside of ED.

That window is extremely narrow on build out cash plus ED, very difficult to time.


----------



## namelessman (Dec 23, 2004)

woron said:


> Apple to apple comparison will be "should I lease or buy if I want to drive a new car". Just look at the OP.


In the context of OP's timeline of 30/36 months, my take is that lease will be preferred to purchase given the steep depreciation in those 30/36 months. As RobertA said it is not easy to compete with BMWNA's subsidized residual, and it will be a hard fight to make purchase competitive in those sweet spots(30/36 months) of leases.


----------



## namelessman (Dec 23, 2004)

Dallas550 said:


> I'm assuming this was a car on the lot? If it was a custom order, then that's a great deal. I have never been given 15%+ off for custom ordered vehicles outside of ED.
> 
> That window is extremely narrow on build out cash plus ED, very difficult to time.


It was a custom order placed in early Sept and delivered end of Oct 2012. That was at the time when BMWAG started dumping Euro allocations to the US, and F30 328i started piling up on the lots. Since then many still got close to 15% off(e.g. $2k option credit in Feb/March last year, and buildout cash at end of MY) on well timed custom orders.


----------



## Dallas550 (Jan 16, 2011)

namelessman said:


> It was a custom order placed in early Sept and delivered end of Oct 2012. That was at the time when BMWAG started dumping Euro allocations to the US, and F30 328i started piling up on the lots. Since then many still got close to 15% off(e.g. $2k option credit in Feb/March last year, and buildout cash at end of MY) on well timed custom orders.


Interesting to hear. Obviously a lot of this has to do with what model you're looking to buy and where you're located. Good deal nonetheless.


----------



## SerenaSid3 (Mar 4, 2015)

*Help me yall please*

hey guys! I'm new to this forum and I just had a couple questions about lease vs. buy. In the past my ex-husband took care of this... but now I'm on my own.

First, do you guys think leasing is a better option for me if I only like to keep my cars for 3 years max?


----------



## neilsarkar (Jan 21, 2012)

SerenaSid3 said:


> hey guys! I'm new to this forum and I just had a couple questions about lease vs. buy. In the past my ex-husband took care of this... but now I'm on my own.
> 
> First, do you guys think leasing is a better option for me if I only like to keep my cars for 3 years max?


Unequivocally yes. Why pay sales tax on the full car and then use a fraction of it?


----------



## Robert A (May 18, 2003)

Some states are different than ours. I would check.

In most cases, the lease works out better unless the residual is unusually low.


neilsarkar said:


> Unequivocally yes. Why pay sales tax on the full car and then use a fraction of it?


----------



## neilsarkar (Jan 21, 2012)

Robert A said:


> Some states are different than ours. I would check.
> 
> In most cases, the lease works out better unless the residual is unusually low.


1. I think Texas is the only state left that taxes the full price of a leased car.

2. Non-M BMW residuals are artificially kept high in most cases.


----------



## nilfinite (Mar 12, 2012)

SerenaSid3 said:


> hey guys! I'm new to this forum and I just had a couple questions about lease vs. buy. In the past my ex-husband took care of this... but now I'm on my own.
> 
> First, do you guys think leasing is a better option for me if I only like to keep my cars for 3 years max?


Yes it's almost always better to lease (especially BMWs) when it's 3 years at a time. Just be sure that when you do lease you don't fall into the common traps. Marking up money factor, acquisition fee, "other" fees, unnecessary warranties, etc.


----------



## 5hlinmd (Jun 17, 2014)

We still do so in Virginia.



neilsarkar said:


> 1. I think Texas is the only state left that taxes the full price of a leased car.


----------



## SerenaSid3 (Mar 4, 2015)

Someone tell me what the money factor is for March?


----------



## neilsarkar (Jan 21, 2012)

SerenaSid3 said:


> Someone tell me what the money factor is for March?


0.00129 is the base money factor. You can lower it to 0.0008 by making seven security deposits.


----------

