03-20-2016, 12:57 PM | #1 |
Private First Class
25
Rep 179
Posts |
one way to compare lease/buy
one approach to evaluate how much costlier a lease is as compared to buying outright is to get a quote for $0/down lease payment(so drive off would be first month's payment + 7 MSD's)& compare it to the below:
=pmt((1+APR)^(1/12)-1,36,-$Outthedoor price if bought today,MSRP*Residual%*(1+tax),1) pmt is a function available in excel & google docs. APR is your borrowing cost for buying the car today with 0 down.This should give you a sense for the premium you're paying to lease the car. Then decide whether you want to lease or buy. Happy shopping |
03-21-2016, 08:43 AM | #2 |
Lieutenant
352
Rep 556
Posts |
Looking at payment is the wrong way to consider lease vs. buy. Leasing is just a finance instrument where you pay a fee (Acquisition Fee) for the peace of mind of the finance company incurring the depreciation downside risk; nothing less, nothing more. It's basically an insurance product (insuring against greater-than-predicted depreciation due to market forces, reduced value due to collision, etc).
Done correctly, a lease should have a lower payment than financing with the same APR. If you then invest the additional free cash flow, it's likely that your investment earnings exceed the Acquisition fee, so you come out ahead after three years. |
Appreciate
3
|
03-21-2016, 10:03 AM | #3 |
Private First Class
25
Rep 179
Posts |
Obviously several ways to look at a leasing agreement. When considering against a purchase though, some were not making an apples-to-apples comparison, with a common refrain of 'but i dont build equity in a lease!'. It's an easy pitfall. Leasing is merely postponing ownership by renting (100-residual)% of the vehicle over the the lease term, but with a right to purchase at residual% at end of term. The above pmt formula reflects that accurately. This month with the $1500 lease incentive, for a well negotiated 3 series buy, the lease quote from the dealer should be within a few $'s of the above, & sometimes *below* the $ from pmt above. That should just blow people's mind & help realize how much better leasing is. And prevents comparing a 100% purchase price with a (100-residual%) lease payment & draw some incorrect conclusions.How one interprets the value of a lease or initial 100% purchase is upto them. Just helping put a *floor* to enable an accurate comparison that's all.
|
Appreciate
0
|
03-21-2016, 10:31 AM | #4 | |
Brigadier General
1610
Rep 3,946
Posts |
Quote:
In the end, I bought because I drive > 30k miles per year. Paying over-mileage would have been excessive. I also have access to a lift, air tools, alignment machines, and have the ISTA-D Rheingold software so repair/maintenance costs are not that much different than my 2008 Subaru Legacy GT. |
|
Appreciate
0
|
03-21-2016, 11:22 AM | #5 | |
Lieutenant
352
Rep 556
Posts |
Quote:
Sites like Edmunds will tell you that those extra miles will only cost you about $5k when selling private party, but the reality is that the buyer pool for 3-yr old BMWs with 90k miles is pretty shallow. Those extra miles could very well cost you more than $7200 upon sale/trade-in. Buying lots of excess miles on a lease definitely makes more sense on say a loaded 335i than a stripped 320i though, since BMW charges the same 16 cents/mile either way. |
|
Appreciate
0
|
03-21-2016, 11:42 AM | #6 |
Colonel
2860
Rep 2,752
Posts
Drives: 2020 M4 ZCP / 2023 X3 M40i
Join Date: May 2005
Location: Northern VA
|
|
Appreciate
0
|
03-21-2016, 12:01 PM | #7 | |
Lieutenant
352
Rep 556
Posts |
Quote:
-Higher acquisition fee -Higher MF -Lower residuals -Higher destination charge (despite lower fuel prices!) -Non-transferable maintenance -Higher mileage overage charges -Did they jack up the disposition fee yet? Leasing a similarly-equipped 2016 version of my 2014 F30 would be almost 20% more expensive than my current lease, for basically the same car. If they want my future business despite these price hikes, they need to at least add some worthwhile features (torque vectoring, cooled seats, steering feel, etc) in the G2x. |
|
Appreciate
0
|
03-21-2016, 12:04 PM | #8 | |
Brigadier General
1610
Rep 3,946
Posts |
Quote:
The math doesn't make leasing sound attractive in my use case (bare with me, this is not going to be perfect math)... http://www.bmwusa.com/bmw/special-of...016-340i-Sedan Total lease cost = signing + 35 months of payments + mileage overage (30+k/yer) ~$31000 to $35000 = 4404 + 35*479 + (9600* or 13800**) *(30000 miles - 10000 miles)*0.16 = 9600 **(30000 miles - 10000 miles)*0.23 = 13800 That's a decent amount of depreciation even with leasing. Cost to lease per year works out to around ~$10,000 to $11,000. If I own my car and use it for 7-8 years, you take the purchase price $47,000 (includes tax, title, regis) and divide ... comes out to around ~$6000-6500 per year. Sure, when you own it you have to pay for your own repairs/maintenance when it's out of warranty... But that's why I have access to lifts, air tools, alignment machines, wheel balancers, ISTA/D Rheingold, etc. |
|
Appreciate
0
|
03-21-2016, 12:04 PM | #9 | |
Colonel
2860
Rep 2,752
Posts
Drives: 2020 M4 ZCP / 2023 X3 M40i
Join Date: May 2005
Location: Northern VA
|
Quote:
|
|
Appreciate
0
|
03-21-2016, 12:10 PM | #10 | ||
Brigadier General
1610
Rep 3,946
Posts |
Quote:
Quote:
There's some concern as to whether the leasing incentives BMW has going on is sustainable... |
||
Appreciate
1
|
03-21-2016, 12:23 PM | #11 | |
Brigadier General
11346
Rep 3,411
Posts |
Quote:
|
|
Appreciate
1
|
03-21-2016, 12:29 PM | #12 | |
Lieutenant
352
Rep 556
Posts |
Quote:
The other side of that coin is that the USD has been very strong against the Euro, so they're doing anything they can to get more Dolla Bills Ya'll (DBY). Excess used inventory could hurt them down the road, but they can supercharge their balance sheet right now by selling lots of cars in exchange for DBY. If you think BMW leases are crazy, you should see the deals some people get from GM. Like a new Volt AND a Malibu for ~$250/month combined. “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” -Albert Einstein Last edited by the_phew; 03-21-2016 at 12:34 PM.. |
|
Appreciate
0
|
03-21-2016, 12:35 PM | #13 | |
Private First Class
25
Rep 179
Posts |
Quote:
|
|
Appreciate
0
|
03-21-2016, 01:00 PM | #14 | ||
Major
648
Rep 1,476
Posts
Drives: 2022 G01 X3 M40i (Black/Black)
Join Date: May 2005
Location: Little Rock, AR, USA
|
Quote:
__________________
2022 G01 X3 M40i (Black Sapphire/Black), HK, DAP, PAP, Shadow Line
2014 F30 335i (EB) 6MT, M Sport, Premium, Tech, DHP, HK, CW, M Brakes, M Exhaust 2006 E90 330i (Silver) 6MT, Sport |
||
Appreciate
0
|
03-21-2016, 01:22 PM | #15 | |
Major General
4966
Rep 6,227
Posts
Drives: 2018 340i M Sport
Join Date: Apr 2006
Location: Chicago, Edgewater (via Texas & Tennessee)
iTrader: (0)
Garage List 2018 BMW 340i M Sport [9.38]
2020 BMW M340i xDrive [10.00] 2018 BMW 340i M Sport [8.00] 2006 BMW 330i Sport [4.50] 2004 BMW 330i ZHP [7.25] 2000 BMW 328i [6.00] |
Quote:
BoltJaM3s made a pretty good case for looking at transportation cost as any other necessary utility (for many people with a comfortable income) and, therefore, a lease payment just like one would look at their monthly electric bill or fuel bill. There is the old adage that it's not good to own a depreciating asset. This is all dependant on people understanding leasing and using it properly, which, admittedly, very few lessees do. Last edited by tturedraider; 03-21-2016 at 01:31 PM.. |
|
Appreciate
0
|
03-21-2016, 02:07 PM | #16 |
Captain
138
Rep 690
Posts |
|
Appreciate
0
|
03-21-2016, 02:24 PM | #17 |
Private First Class
25
Rep 179
Posts |
Yes-exactly! & I was trying to help quantify the premium with the pmt calculation! It doesn't matter what the financial instrument is called - lease, rent, borrow etc.The pmt calc can be made instrument agnostic. If the total $outflow on lease + residual << outright purchase, then leasing saves $ over buying. But many, as evidenced in this thread get distracted by other considerations. Whether one is interested in leasing or not one should always understand the costs of both.
|
Appreciate
1
|
03-21-2016, 02:33 PM | #18 |
Major General
4966
Rep 6,227
Posts
Drives: 2018 340i M Sport
Join Date: Apr 2006
Location: Chicago, Edgewater (via Texas & Tennessee)
iTrader: (0)
Garage List 2018 BMW 340i M Sport [9.38]
2020 BMW M340i xDrive [10.00] 2018 BMW 340i M Sport [8.00] 2006 BMW 330i Sport [4.50] 2004 BMW 330i ZHP [7.25] 2000 BMW 328i [6.00] |
The only contracted amount is the 20¢ if you turn the car in over mileage. I think the odds are fairly high they would sell additional miles at 16¢, but it wouldn't surprise me if they chose to do it at 18¢.
|
Appreciate
0
|
03-21-2016, 02:36 PM | #19 | |
Brigadier General
11346
Rep 3,411
Posts |
Quote:
I'm not anti-leasing. As you say, it can be a good financial vehicle. Where it becomes a financial issue is when people who cannot afford a new car otherwise lease a car because of the attractive monthly payments (compared to purchase). They could instead, for example buy a 5 year old car and save money for a down payment on a house (appreciable asset). There is a reason car companies offer leases to individuals and its not to do them a favor, it to get them hooked on being a repeat customer. How many posts do you read where somebody says they have to start looking for another car because their lease is up. If they owned that car instead, their view would be different. They would be asking, do I still like my car? Does it make sense to trade it in for a new car or should I keep it and drive with no payments for a period of time? Today's cars still look and run great after 3 years. Other than bragging rights, there is limited incremental utility of a new car over a 3 year old car. If a person already has their house purchased, 401k withholding maxed out, fund for kids tuition established, and a savings account with a balance, then that's a different matter. Even if that person does not have these boxes checked, I'm not saying don't lease. That's a personal choice and a they should do what they want. What I am saying is if you are starting out and want to create wealth and have a solid financial life, leasing cars is not necessarily the way to go. |
|
Appreciate
2
|
03-21-2016, 02:37 PM | #20 |
Captain
131
Rep 682
Posts |
A lot of people also forget that if you take care of the car well, you can still sell it for a pretty good value at the end if you decide to trade-up, which you should factor into your initial calculations for buying.
What adage is that? It's a pretty silly one - every tangible asset depreciates. By that logic, the best thing to do is own no tangible assets.
__________________
2017 440i Gran Coupe xDrive MPPSK M-Sport Estoril Blue II w/ Individual Golden Brown Full Merino & Fineline Anthracite Wood
Track Handling + Premium + Cold Weather + Technology + Driver Assistance Packages |
Appreciate
0
|
03-21-2016, 03:02 PM | #21 | |
Major
648
Rep 1,476
Posts
Drives: 2022 G01 X3 M40i (Black/Black)
Join Date: May 2005
Location: Little Rock, AR, USA
|
Quote:
__________________
2022 G01 X3 M40i (Black Sapphire/Black), HK, DAP, PAP, Shadow Line
2014 F30 335i (EB) 6MT, M Sport, Premium, Tech, DHP, HK, CW, M Brakes, M Exhaust 2006 E90 330i (Silver) 6MT, Sport |
|
Appreciate
0
|
03-21-2016, 03:16 PM | #22 |
Colonel
2860
Rep 2,752
Posts
Drives: 2020 M4 ZCP / 2023 X3 M40i
Join Date: May 2005
Location: Northern VA
|
It's already been raised to $0.18/mile for everyone. $0.16 was never stated in the contract, just $0.20/mile at the end of the lease. They can raise it to as much as $0.20 without breaking any lease agreements. I just logged into my BMWFS account and it's $180 if I try to add 1000 miles to my account.
|
Appreciate
1
|
Post Reply |
Bookmarks |
|
|