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BMW 3-Series and 4-Series Forum (F30 / F32) | F30POST > 2012-2019 BMW 3 and 4-Series Forums > 3 and 4 Series Ordering / Pricing / Order Tracking Forum (and European Delivery) > Lease or Buy...Can't decide
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      07-15-2014, 01:00 PM   #23
oonowindoo
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Quote:
Originally Posted by Luongo View Post
Illinois is one of the worst states when it comes to taxes.
High sales tax (7~10%), high state income tax, ridiculous tax on automobile lease but the worst is the property tax.

In Lake county, you pay nearly 3% of your home's value in property taxes annually. Imagine paying $15,000 a year in property taxes on a $500,000 house.

I wonder everyday why anyone would live in this state.
Wow.

I thought the tax in CA is bad. but at least we only get taxed once.

i think someone should file a lawsuit in federal court against the state. triple taxation should be illegal!
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      07-15-2014, 02:05 PM   #24
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As mentioned above, you can sell or trade in your car at any time during a lease.

A lease has a payoff just as if you were financing it. People assume your stuck with a lease for the full term and thats not the case. I've never leased a car and kept it full term. I average about 50k miles in 2.5 years. I've actually made cash on a sale a few times. I also had to come out of pocket about $2k when i traded in a car that was leased which was fine with me.

Again, people think they have to keep their car for the full term.

I also just don't like the return fee which is usually around $695. Oh and lets not forget how the dealer defines "wear and tear".

The "trick" for me is negotiating very hard to reduce the rate of depreciation. On average it takes me about 3 weeks to get the deal that i want and i almost always have to travel to the next county or city to get what i want.
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      07-15-2014, 02:44 PM   #25
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Originally Posted by franko9217 View Post
The "trick" for me is negotiating very hard to reduce the rate of depreciation. On average it takes me about 3 weeks to get the deal that i want and i almost always have to travel to the next county or city to get what i want.
The only one getting tricked is you if you think you're able to negotiate depreciation. Residual values are set and are not a point of negotiation.
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      07-15-2014, 03:14 PM   #26
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Originally Posted by FC4 View Post
The only one getting tricked is you if you think you're able to negotiate depreciation. Residual values are set and are not a point of negotiation.
I think he means that while the residual is set at a % of MSRP, you can negotiate down the capitalized cost.
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      07-15-2014, 03:54 PM   #27
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Originally Posted by Caught Looking View Post
I think he means that while the residual is set at a % of MSRP, you can negotiate down the capitalized cost.
+1

Nothing like a below invoice selling price to minimize the amount of depreciation you need to pay in the lease
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      07-15-2014, 04:54 PM   #28
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Here's my 2 cents worth.

Leasing is just a different way of financing a car. A way of financing part of a car actually. It was designed to allow for lower monthly payments and to allow people to change cars frequently easily. While the monthly payment may be less, when leasing you will ALWAYS have a payment. Also, it typically costs more to lease then buy in the long run for a few reasons. 1) New cars depreciate the most in the 1st few years. This is the part of the car you are paying for in a lease 2) Fees (there is usually an inception fee and a return fee. The return fee is often waved if you release the same brand). 3) interest - typically pay more interest on a lease. Called the "money factor" in lease terms. You pay this on the part of the car you are paying for (depreciation) plus on the part of the car you are not using (residual) b/c you are borrowing that part of the car from the lessor.

You can look up the definition and parts of a lease for more info, but briefly for both a purchase and lease you start with MSRP minus discounts. Apply any down payments. Then for a purchase you add the finance charge (interest) and divide into x number of payments. For a lease you them subtract the residual (predicted value of car at lease end) from that number, add finance charge and divide into x number of payments.

For a car that has a high residual (holds value well, or at least predicted to) you get a lower lease payment. For one that does not you will have a higher payment.

In the end, it really comes down to ones personal finances and desires. If you want a new car frequently, need a low monthly payment, and want the most convenient option, a lease makes sense.

If you don't mind keeping the car 4-5 years (BMW's do have warranty and maintaince for 4 years) you will end up paying less in the long run buying and trading in or selling after 4-5 years. Obviously the longer you keep the car (pending no major repairs) the less the car cost in the long run. It does become a gamble at some point. Trade in is less then private sale but easier. Many states though allow you to deduct the trade in amount from the new car sale price when computing sales tax so this often offsets the lower amount. For example new car costs $50,000. Trade is worth $20,000. So with the trade only have to pay sales tax on $30,000 on new car.

The economics are complex and in any case its worth running through both scenarios BEFORE doing the final deal. IMHO, when you talk leases at the dealer, they make it seem like numbers are "fixed" and the conversation focuses on monthly payment rather than total cost. The starting number (cap cost) for a lease IS negotiable!. Often the money factor (interest) can be. The residual usually is not.

Again for some people monthly payment is the more important factor. For others lower total cost over time. Neither option is necessarily better than the other. Since most of us can't just walk in and pay cash for a new car, working through and comparing both options makes sense.
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      07-15-2014, 05:49 PM   #29
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Originally Posted by WickedC5 View Post
I agree. Between getting taxed to death and the crappy winters, its not really that appealing.
... or just straight up killed in the City of Chicago.

Seems like the most heavily taxed states (which you would then think would go towards improving public service) should be a safer place to reside in....
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      07-15-2014, 08:38 PM   #30
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Very well said. Thank you.


Quote:
Originally Posted by Rautha View Post
Here's my 2 cents worth.

Leasing is just a different way of financing a car. A way of financing part of a car actually. It was designed to allow for lower monthly payments and to allow people to change cars frequently easily. While the monthly payment may be less, when leasing you will ALWAYS have a payment. Also, it typically costs more to lease then buy in the long run for a few reasons. 1) New cars depreciate the most in the 1st few years. This is the part of the car you are paying for in a lease 2) Fees (there is usually an inception fee and a return fee. The return fee is often waved if you release the same brand). 3) interest - typically pay more interest on a lease. Called the "money factor" in lease terms. You pay this on the part of the car you are paying for (depreciation) plus on the part of the car you are not using (residual) b/c you are borrowing that part of the car from the lessor.

You can look up the definition and parts of a lease for more info, but briefly for both a purchase and lease you start with MSRP minus discounts. Apply any down payments. Then for a purchase you add the finance charge (interest) and divide into x number of payments. For a lease you them subtract the residual (predicted value of car at lease end) from that number, add finance charge and divide into x number of payments.

For a car that has a high residual (holds value well, or at least predicted to) you get a lower lease payment. For one that does not you will have a higher payment.

In the end, it really comes down to ones personal finances and desires. If you want a new car frequently, need a low monthly payment, and want the most convenient option, a lease makes sense.

If you don't mind keeping the car 4-5 years (BMW's do have warranty and maintaince for 4 years) you will end up paying less in the long run buying and trading in or selling after 4-5 years. Obviously the longer you keep the car (pending no major repairs) the less the car cost in the long run. It does become a gamble at some point. Trade in is less then private sale but easier. Many states though allow you to deduct the trade in amount from the new car sale price when computing sales tax so this often offsets the lower amount. For example new car costs $50,000. Trade is worth $20,000. So with the trade only have to pay sales tax on $30,000 on new car.

The economics are complex and in any case its worth running through both scenarios BEFORE doing the final deal. IMHO, when you talk leases at the dealer, they make it seem like numbers are "fixed" and the conversation focuses on monthly payment rather than total cost. The starting number (cap cost) for a lease IS negotiable!. Often the money factor (interest) can be. The residual usually is not.

Again for some people monthly payment is the more important factor. For others lower total cost over time. Neither option is necessarily better than the other. Since most of us can't just walk in and pay cash for a new car, working through and comparing both options makes sense.
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      07-15-2014, 08:49 PM   #31
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Everyone's financial situation is different.

I am exceedingly patient and hold onto my cars for about 7 years on average.

Since I now work from home 3 out of 5 days a week I drive very few miles.

I am going to buy this time around. I have never leased.

When it is time for me to get a new car I will have an extremely nice BMW with very low miles (comparatively) for private party sale.

From a financial standpoint I will be very much further ahead than if I leased.

Another key for me is always securing the car for a great price.

Good luck!
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      07-15-2014, 11:37 PM   #32
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Quote:
Originally Posted by Xtabi View Post
When it is time for me to get a new car I will have an extremely nice BMW with very low miles (comparatively) for private party sale.

From a financial standpoint I will be very much further ahead than if I leased.
It's always a balancing act between repair (or extended warranty), maintenance and depreciation vs. the lease payment.

I've thought about this a lot myself, and have tried to estimate how much "convenience premium" I am paying from leasing. I figured that 7 years to keep a new car is about break even vs. leasing , but that is obviously sensitive to so many things, and is tough to generalize
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      07-16-2014, 04:58 AM   #33
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If your cost of leasing & then buying at lease-end is cheaper than cost of buying today, then lease it irrespective of intent to own. why would this be? because there may be incentives offered for leasing (eg.Honda)that may not be available for outright purchase (& vice versa eg. many chevy incentives). In BMW's case where cash incentives to lease or purchase are usually the same, a very good lease deal could work out cost neutral or maybe a grand or two more, & in those cases I would choose to lease & postpone the buy decision to lease end and treat the difference in cost as a premium to test ride it for the 3 years to see if its worth it. There's plety of online chatter about whether/how bmw may negotiate purchase price at lease-end so there's a *possibility* that lease-to-buy may end up cheaper than buying outright so theres no straight up answers and its well worth it to spend time and understand all your options fully. if you have decent credit, use that and borrow rather than paying cash is the only general piece of advise that works in all situations
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      07-16-2014, 10:35 PM   #34
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Quote:
Originally Posted by swamy View Post
There's plety of online chatter about whether/how bmw may negotiate purchase price at lease-end so there's a *possibility* that lease-to-buy may end up cheaper
The 2 times I've tried, BMW FS would not negotiate. The dealer where you are returning the car might though, unless it is a very easy to sell used car (like an automatic 328) that they want on their used car lot to make a profit on.
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      07-19-2014, 01:50 PM   #35
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super helpful thread!!! loving the input of everyones opinions...i myself am in the market and now because of this thread im more likely to lease.
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      07-19-2014, 03:42 PM   #36
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Quote:
Originally Posted by adhrp View Post
I find leases to be a huge waste of money unless you are the type who gets bored of cars easily or wants to try out a new type of car without committing right away and/or have lots of money to throw at leases. I am the type who cherishes my vehicles and keep them for several years. I'd rather throw my money into investments.
Respectfully, the last line is a bit of a contradiction. If you'd rather throw your money into investments than why dump cash into an 'asset' that is worth about 16% it's original value after 10 years? Cars are money pits and unless you keep it around 10 years and luck out on repairs and maintenance costs, it may cost you dearly vs. just having a fixed cost. Many people lease to free up cash for investments. If you had $60000 and 10 years would you rather have that $60k be worth $80k in 10 years with conservative investing or have it be worth $10k?

Someone on another forum put it this way: cars are a gallon of milk, a utility bill, etc. If you get out of the mind set that you will benefit financially by owning a car for the long term and accept that it's just a sunk cost, you'll be better off and will always be able to drive a nice car. If you have good credit and negotiate the 'selling price/cap cost reduction' you can lease new BMW's for dirt cheap and have minimal cash exposure to a rolling money pit.

OP, leasing will cost you about $50 more per month over the long run vs. buying and holding. When people actually add up long term cost of ownership and divide it by x amount of months, they realize they essentially had a car payment all along, they just paid a lot more up front to have that car that was eventually paid off. Unless you are sure you can keep your car for 15 years, I would lease, since we are talking about BMWs. If we were talking about a Honda Accord I would say to buy a 3 year old one and keep it 25 years. This is from a financial perspective. But if you are fine with having the same car for over a decade and can work on it yourself combined with using good indie shops etc., you could save some $$ in the long run, just not much.

All that being said: If you love the car after three years and want to keep it, you can just buy it off lease. I can totally relate to caring for and loving a car and keeping it a long time but I just think financially when you are talking about cars that are very expensive to maintain and repair off warranty, it's close to a wash so it really comes down to preference.
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Last edited by Kafkaesque328; 07-19-2014 at 04:07 PM..
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      07-22-2014, 09:22 AM   #37
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Quote:
Originally Posted by adhrp View Post
In case you are referring to my comment, I should make it clear that when I said investment I meant property or mutual fund or something. Not referring to the car.

Either way this is a thread about leasing or buying and I don't want to be that person to change it into yet another how-to-use-your-money-better unsolicited advice thread so I'll stop here. But just wanted to clarify my point.
Point taken
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      07-25-2014, 08:09 AM   #38
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I'm on the 3rd BMW lease. While it's been great to turn in the car every 3 years and benefitted from low monthly payments, I've definitely reached a point where perhaps next vehicle should finance it out right because my driving habits changed last few years where I don't drive the car that frequent more less long distance. I say this every 3 years though so I haven't learned anything except to roll into another lease but it's always on my mind.
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