[TurboSpecC]

Originally Posted by flaversaver

Leasing really is not a smart financial decision unless you've got money to blow and like changing out cars every 3 years. Smart money says to buy a car and drive it into the ground. I've had my 330ci for 8 years now and its been a great car. I'll miss it once I buy my 435i, which may happen today.

Good luck owning a 435i out of warranty and pretending it's a good financial decision; those out-of-warranty repair costs for a modern German car sure can add up in both time and money! Leasing is for the risk-averse.

[Diesel power]

Like most people said buying a car really only makes sense if you're going to keep a car in the 6+ year range. I just did the quick math on my car. To finance it for 60 months (at 3.9%) would mean a monthly payment over a grand a month (with nothing down). Assuming the car is worth the residual (63% on a 10k mile lease) at the end I would end up having spent almost 30K. However doing a 3 year lease I end up with a much more manageable payment in the mid 5's and only laid out 21K with taxes. So after 3 years the lease saved almost 9 k. As depreciation slows it begins to swing the other way, but as others have said, by year 4 or 5 you will need new tires, and be paying BMW rates for maintenance.

[Yay-Z]

Originally Posted by Kafkaesque320

First off, don't EVER put money down on a lease. If you can't afford the lease w/out putting money down, get a cheaper car.



May be more hassle but you'll usually take a much bigger hit if you need to get out of a new car you bought (usually financed) if you are trying to sell in the first 3 years. When you factor in that most people put a sizeable down payment on a new car which they essentially lose much of with depreciation, plus the depreciation itself, plus lump sales tax cost etc. you can really take a bath selling a new car. If you can find someone to assume your lease which is fairly doable these days, you will suffer very little penalty (in theory).

---------------------------

I've been thinking on this topic more recently and 'lease vs. buy' isn't so cut an dried because many people manage to buy out their leased BMW for a much lower amt than the residual at lease end. The dealer buys the car from BMWFS and you essentially buy it back. Since they buy it from BMWFS at auction price, they can sell it to you at a profit that is still a few grand below your residual. In this case, instead of a balloon payment up front as it is with buying, you essentially pay much less for a 3 year 'test drive' and pay the lion's share on the back end.

Another thing with this is the matter of equity. At around the 5 year mark, when all is said and done, you might have some actual 'equity' in the car. To determine real equity, you have to subtract whatever sales tax was, what you paid in finance charges, etc. to understand actual equity, but if you buy new and sell at the 5 year mark, provided your car wasn't in an accident or isn't thrashed and you sell private party etc. for good to high KBB, you will make some money back. Maybe $3500 'back' on a $35000 car.. As I said though, you won't really 'make money' but rather, make up for what it cost you to get into the car in the first place; whether that was drive-off, down payment or sales tax.

Finally, leasing frees up cash flow in the short term if we are talking about new cars. There is no denying that. We are talking new cars here. Even lightly CPO'd cars are usually quite expensive so with leasing, it will always be cheaper in the short term. For example, I got into my car for $0 down, $1500 drive offs which included my first payment and my payment out the door with tax etc. is $360 a month. If I had financed the whole amount of the final selling price for three years, I would be paying hundreds more per month, thus more of my monthly cash flow would be going to paying down the car. If I had put a lump some of money down on the car, thousands of dollars, that money could have in theory been used more productively than sinking it into a rapidly depreciating asset. In the end though, I'd be left with a car that was worth money, I'd have equity and resale potential and my insurance rates would be lower. Still, you have to crunch the numbers and look at what it will really cost you to 'own' that car.

At the end of the day, if you do math on total cost of the vehicle over X amount of years, it comes out pretty close. Leasing ends up being $50 a month or more over X amount of years. So the longer you keep a car, provided you don't incur massive repair expensive, the cheaper it will be compared to leasing. But then you are rolling the dice on repairs, paying for maintenance and if the car gets in an accident, the value of the car can be drastically reduced.

Usually people who say leasing is 'throwing money away' no very little about both leasing and personal finance. Or, these are people that will tell you you should buy a 7 year old Accord and drive it for 10 more years. If we are simply talking about saving money, of course they'd be right. But we're not, because we drive new BMW's and that is not a good way to 'save money'.



There is no cut and dried answer to the lease or buy question because everyone's situation is different. This would be very bad advice in many instances. If however, you can afford to sink $50000 on something that will be worth $46500 the second you drive it off the lot and will be worth about 30% less than that 3 years later, essentially like putting money into a savings account with a NEGATIVE 40-50% return over 3-5 years, go right ahead. But if your situation DOES change in 3 years, as you mentioned and you need to unload that car you just paid cash for, you will certainly lose a shit ton of money. If that isn't a factor and you can afford to lose that much money, go right ahead but this is by no means prudent financial advice.

Buying cars is only a good idea if you plan to buy and hold for at least 5 years.

Lol, that's my point you got to in the end. If you can't afford to take a hit like that in depreciation or pay cash for the car, you can't afford it.

All this trickery to try and afford it is just that, buy what you can afford and call it a day.

Never met a successful guy that told me he leased his way to success.lol.

Y'all can try and spin it how you want but leasing is a bad deal.

[Kafkaesque328]

There is no spin, numbers are numbers and math is math. You tell us what your total cost of ownership is, less sale or trade in price over x amount of years vs. what it would cost to have a fixed cost/fixed payment over the same amount of years and then we'll talk real numbers. "What you can afford" is just semantics. Many, many people with extremely positive net worth lease cars and for many, it's tax deductible. If you can't bring something intelligent to the conversation, why bother?

Solid financial advice is to buy things that appreciate and lease things that depreciate. Talk to 'successful' guys who own their own business and ask them if they buy or lease their equipment and durable goods. They lease. Buying a car is throwing money, all at once, into a big hole in the ground. Cars get old, out of date, have problems, break down and diminish in value until they are worthless. They are never an investment and they are no different than a copier or printer in an office. Offices lease that equipment for a reason.

Re: OP and his dreadful idea of putting $14k down on a lease (holy shit), put $0, pay a higher payment and invest that $14k in something that actually makes money.

[Yay-Z]

Originally Posted by Kafkaesque320

There is no spin, numbers are numbers and math is math. You tell us what your total cost of ownership, less sale or trade in price vs. what it would cost to have a fixed cost/fixed payment over the same amount of years and then we'll talk numbers. Otherwise it is just semantics. Many, many people with extremely positive net worth lease cars and for many, it's tax deductible. If you can't bring something intelligent to the conversation, why bother?

Solid financial advice is to buy things that appreciate and lease things that depreciate. Talk to 'successful' guys who own their own business and ask them if they buy or lease their equipment and durable goods. They lease. Buying a car is throwing money, all at once, into a big hole in the ground. Period.

Re: OP and his dreadful idea of putting $14k down on a lease (holy shit), put $0, pay a higher payment and invest that $14k in something that actually makes money.

Looks like someone's feelings are hurt. Enjoy your lease

[Kafkaesque328]

Originally Posted by Yay-Z

Looks like someone's feelings are hurt. Enjoy your lease

Not at all. That's a convenient thing for you to say when you have nothing intelligent to contribute though. Are you always so flippant when someone calls you out on something?

It's simple. Take the money you would pay cash for a car and invest it in something conservative, like a mutual fund with a low expense ratio and a 7% return, just barely keeping up with inflation. Then lease that same car for 10 years. Compare that to sinking $50000 into a new car.

The guy who kept the cash and invested it while leasing something would have more money over x amount of years than the guy who bought his car, plain and simple.

[snj49er]

Originally Posted by Kre62

Put that 60K in bonds or stocks and after 3 years you'll have a bunch more money, and will have paid a small monthly lease fee for the car that comes out of your regular income. You'll be way ahead of the game.

That's really not entirely true. Someone investing in stocks in early 2000 lost 41% over the next 3 years. During a similar period beginning in early 2006, the market lost 39%. In the late 70's, bonds lost 17% over 3 years ignoring inflation.

If you incur financing costs in order to leave money invested in risky securities, you're using leverage. Often, that's a positive experience and the costs of borrowing simply reduce the investment return. But the other side of the coin is that, in a down market, borrowing costs add to investment losses. This can certainly be a risk worth taking in the long-term where market volatility is lower, but over a period as short as 3 years, an ugly outcome is possible.

[Kafkaesque328]

Originally Posted by snj49er

That's really not entirely true. Someone investing in stocks in early 2000 lost 41% over the next 3 years. During a similar period beginning in early 2006, the market lost 39%. In the late 70's, bonds lost 17% over 3 years ignoring inflation.

If you incur financing costs in order to leave money invested in risky securities, you're using leverage. Often, that's a positive experience and the costs of borrowing simply reduce the investment return. But the other side of the coin is that, in a down market, borrowing costs add to investment losses. This can certainly be a risk worth taking in the long-term where market volatility is lower, but over a period as short as 3 years, an ugly outcome is possible.

Definitely. But historically, that period you are referring to is not common. Long term, you'll almost always make money in the market unless you are nearing retirement. If you have time to invest and dollar cost average, you'll almost always make money while with a car, it is guaranteed you will lose money. For example, I lost a ton of money in 2008, but kept investing regardless, since you are essentially just getting stocks for pennies on the dollar at that point and now that the DOW as at record highs, I made a killing.

Emotional factors are another matter, like if you like or get attached to a car, I can see buying it. If I were able to buy my current car for a few grand below residual at lease end, hold onto it for a few years and 'make back' what I initially paid in drive offs and sales tax, in equity, to somewhat mitigate my losses, I would do that if I still wanted the car after that time. This would, over a 5-6 year term, be cheaper than leasing. You aren't doomed to turning in a lease car. You can always buy it and if you're crafty, you can buy it for below the residual and come out alright. For ex: if you get a good lease deal and negotiate the selling price when you lease instead of just monthly-payment shop and then buy it for below residual at lease end, it's no more expensive than if you had bought it in the first place.

[Kre62]

Originally Posted by Yay-Z

Lol, that's my point you got to in the end. If you can't afford to take a hit like that in depreciation or pay cash for the car, you can't afford it.

All this trickery to try and afford it is just that, buy what you can afford and call it a day.

Never met a successful guy that told me he leased his way to success.lol.

Y'all can try and spin it how you want but leasing is a bad deal.

What kind of idiot "takes a depreciation hit" just to prove to some unknown and unseen entity that he can supposedly "afford" something?

So if you have 100K and I offer you something for 100K and tell you that you will lose 90% on that item, youd do it just to prove you can afford it? Cause if so PM me.

I promise that more successful people who drive luxury cars lease vs buy, unless they have so much money they don't mind throwing it away on a car. But if they do so they know they are burning cash, they are under no illusion that buying the car is a smart financial move.

If you want long term utility from a car, buy something with added utility beyond just being a car. Meaning buy a 4WD, or a jeep, or something with utility and hold that long term. Holding luxury cars long term is a very, very unwise decision.

[Diesel power]

Originally Posted by Kre62

What kind of idiot "takes a depreciation hit" just to prove to some unknown and unseen entity that he can supposedly "afford" something?

So if you have 100K and I offer you something for 100K and tell you that you will lose 90% on that item, youd do it just to prove you can afford it? Cause if so PM me.

I promise that more successful people who drive luxury cars lease vs buy, unless they have so much money they don't mind throwing it away on a car. But if they do so they know they are burning cash, they are under no illusion that buying the car is a smart financial move.

If you want long term utility from a car, buy something with added utility beyond just being a car. Meaning buy a 4WD, or a jeep, or something with utility and hold that long term. Holding luxury cars long term is a very, very unwise decision.

+1 I'll take my savings and a newer car, and leave it for others to worry about just how much money I may or may not have.

[snj49er]

Originally Posted by Kafkaesque320

Definitely. But historically, that period you are referring to is not common. Long term, you'll almost always make money in the market unless you are nearing retirement. If you have time to invest and dollar cost average, you'll almost always make money while with a car, it is guaranteed you will lose money. For example, I lost a ton of money in 2008, but kept investing regardless, since you are essentially just getting stocks for pennies on the dollar at that point and now that the DOW as at record highs, I made a killing.

Emotional factors are another matter, like if you like or get attached to a car, I can see buying it. If I were able to buy my current car for a few grand below residual at lease end, hold onto it for a few years and 'make back' what I initially paid in drive offs and sales tax, in equity, to somewhat mitigate my losses, I would do that if I still wanted the car after that time. This would, over a 5-6 year term, be cheaper than leasing. You aren't doomed to turning in a lease car. You can always buy it and if you're crafty, you can buy it for below the residual and come out alright. For ex: if you get a good lease deal and negotiate the selling price when you lease instead of just monthly-payment shop and then buy it for below residual at lease end, it's no more expensive than if you had bought it in the first place.

We are on the same page. I just wanted to point out that there's no guarantee of a boatload of money following every short-term investment.

I'd be much less concerned about you getting emotionally attached to your car than selling all your stocks at the bottom of a market crater.

I believe you mentioned the tax deductibility of lease payments for businesses. Especially in high tax states, that's pretty big. Individuals aren't completely left out...in most states, individuals only pay sales tax on lease payments rather than the full vehicle price.

>> and a 7% return, just barely keeping up with inflation.

Are you talking about the US? Inflation has been 2% over the last 12 months and 2.6% over the last 25 years.

[bavarianride]

Buying, esp. with cash, serves as a reality check, if it feels too painful to shallow one usually will back off. Leasing(and to some extent finance), esp. perpetual leasing, breaks up a big chunk into small(er) pieces, and at times it is easy to lose sight of the accumulative effect over time. $50/month extra for 10 years on a $35k car is still 17% extra, assuming there is no rate hike and no significant price increase over the 10-year period. Obviously the wealthy and successful use leases to rent toys, when I become one of them I will start to lease.

[flaversaver]

Originally Posted by TurboSpecC

Good luck owning a 435i out of warranty and pretending it's a good financial decision; those out-of-warranty repair costs for a modern German car sure can add up in both time and money! Leasing is for the risk-averse.

What you are saying just isn't accurate. Sure you will have maintenance costs, but what you need to compare is no car payment and owning something vs a car payment and being in someone else's back pocket. I own my 330ci. I've had to put money in here and there as little things start to wear, etc, but even with those expenses I'm still paying maybe $120 / month when it is all said and done. I even go to the dealer where it is a little more pricey than an independent repair shop. I also get free bmw rental cars at the dealer so I'm not stuck without a ride.

Again, if we are talking about smart money, buy a car and drive it into the ground. That doesn't change. If you are more flush with cash and driving new cars is a hobby you can afford and enjoy putting your money into, then lease. Just make sure you understand all the leasing terms otherwise you'll get your ass handed to you in negotiations.

[chrisny]

Originally Posted by Kafkaesque320

Buying cars is only a good idea if you plan to buy and hold for at least 5 years.

^this. A lot of people like to say if you plan to keep more than 3 years because that's how long leases are, but it's really much longer than that, AT LEAST 5, like you said. I would argue even 5 isn't enough. Unless you're paying cash, at 5 years, you just paid it off before it's time to get a new one, so you still have constant payments just like leasing, you just kept the car longer (and it in turn depreciated longer before you trade it in) and your payments were higher.

Yes, you can put more miles on a purchased car than a leased, but those miles are no more free than on a lease, they hurt your resale. If you need that many miles, sure buying makes more sense, but there is still a cost involved with the high mileage.

I also balk at the idea of a lease being a way to afford a car you otherwise couldn't. If you buy it and keep it 7 years, you paid for it for 4 or 5 years, maybe 6, then had some years with no payments. If someone else leases two of those same cars in a row over that time, it's certainly not any cheaper. It's just distributed differently.

I'll also add the tax benefits of leasing tend to be much better for those that can write it off.

To me, you buy a new car only if you want to keep a car 7 or 8 years or more. You lease a car if you want to always have a new car and know you won't keep it 7 or 8 years. Basically, do you want constant payments and constant new cars, or do you want to keep a car a long time but not have payments the whole time…… The dollars just aren't as different as people think. Even for those paying cash, don't forget about the income lost by tying that money up in the car from day one (especially when interest rates are so low these days).

[Kre62]

Originally Posted by flaversaver

What you are saying just isn't accurate. Sure you will have maintenance costs, but what you need to compare is no car payment and owning something vs a car payment and being in someone else's back pocket. I own my 330ci. I've had to put money in here and there as little things start to wear, etc, but even with those expenses I'm still paying maybe $120 / month when it is all said and done. I even go to the dealer where it is a little more pricey than an independent repair shop. I also get free bmw rental cars at the dealer so I'm not stuck without a ride.

Again, if we are talking about smart money, buy a car and drive it into the ground. That doesn't change. If you are more flush with cash and driving new cars is a hobby you can afford and enjoy putting your money into, then lease. Just make sure you understand all the leasing terms otherwise you'll get your ass handed to you in negotiations.

The smart money does not buy and hold a luxury car.

At this point your car is no more beneficial to you than any car, Honda, Nissan, etc. No one is overly impressed by a 8-10 year old bimmer. if your intention was to hold a car long term you should have spent half the money on a quality Camry and avoided 2k tire changes and other maintenance costs. And so far you claim maintenance has been low but give it time. This is a BMW. There will be costs.

If you added up all the money you've spent so far on your car you could have leased three cars and had a nice new car every three years and been in the exact same position you are now, cause your car at this point ain't worth much.

[nicknaz]

This data is from 2011 so it is a bit dated, but check out this stats for % of cars leased

http://blog.polk.com/blog/blog-posts...ything-you-see

60% of 328 and 68% of C class leased

66% of 750 and 57% of S class leased

>60% of "premium" makes in LA and NYC area leased

"everyone" is doing it, so leasing must be the better /thread

[bavarianride]

Originally Posted by Kre62

The smart money does not buy and hold a luxury car.

At this point your car is no more beneficial to you than any car, Honda, Nissan, etc. No one is overly impressed by a 8-10 year old bimmer. if your intention was to hold a car long term you should have spent half the money on a quality Camry and avoided 2k tire changes and other maintenance costs. And so far you claim maintenance has been low but give it time. This is a BMW. There will be costs.

If you added up all the money you've spent so far on your car you could have leased three cars and had a nice new car every three years and been in the exact same position you are now, cause your car at this point ain't worth much.

Smart money usually will look at all options(e.g. lease vs. buy) and decide what is the best based on the parameters. For example, as of today, leasing a 2015 C-class, or any Porsche, is not a good idea, those are for purchases. Leasing a 2014 F30 may not be good since the support rates are gone, however buying a 2014 F30 is still good given the incentives and such. It does depend on the situations(with numbers being one, but not all, of the factors).

[Yay-Z]

Originally Posted by Kafkaesque320

Not at all. That's a convenient thing for you to say when you have nothing intelligent to contribute though. Are you always so flippant when someone calls you out on something?

It's simple. Take the money you would pay cash for a car and invest it in something conservative, like a mutual fund with a low expense ratio and a 7% return, just barely keeping up with inflation. Then lease that same car for 10 years. Compare that to sinking $50000 into a new car.

The guy who kept the cash and invested it while leasing something would have more money over x amount of years than the guy who bought his car, plain and simple.

Someone that paid cash for the car will have a devalued asset at the end of 10 years and would have spent $50,000 plus probably a few extra on maintenance of the car.

Someone that leased for 10 years (re upping every 3 year term) would have spent a whole lot more than $50,000 in payments over that same time not to mention fees for renewing a lease every 3 years and not have anything to show for it. In that period money factors could've risen, markets could've crashed so the assumption that the growth will be consistent is not factoring in risk. You're also forced every 3 years to be beholden to a car manufacturers current incentives or lack thereof, which could work in your favor and most of the time it wont. You could move to a state like Texas or Illinois and be forced to pay full tax on the car up front.

I prefer cash because it forces to me really think about what I value and ensures I don't buy things I cant afford. I prefer to buy used vehicles and hold as long as possible. It also provides me freedom to do as I please and gives me peace of mind that I don't have to go searching for money to make payments in bad times.

If leasing is so good how come we don't lease Ipads and furniture. They also devalue over time.

[Yay-Z]

Originally Posted by Kre62

The smart money does not buy and hold a luxury car.

At this point your car is no more beneficial to you than any car, Honda, Nissan, etc. No one is overly impressed by a 8-10 year old bimmer. if your intention was to hold a car long term you should have spent half the money on a quality Camry and avoided 2k tire changes and other maintenance costs. And so far you claim maintenance has been low but give it time. This is a BMW. There will be costs.

If you added up all the money you've spent so far on your car you could have leased three cars and had a nice new car every three years and been in the exact same position you are now, cause your car at this point ain't worth much.

So you're saying if someone likes the way a BMW drives not the status it brings its stupid to buy the car and hold? Interesting. Sounds to me like you care more about impressing people than being smart with your money.

[S4NoMore]

Smart money buys used cars, period.

Wealthy people pay cash, I seriously doubt anyone is leasing a supercar or $150k+ luxury car.

I would suggest that people tend to overestimate "repair costs" as well. $2k for tires? You're getting ripped off and/or buying rubber that you really don't need. Tirerack shows $1k-$1.2k for 335i M-sport OE tires, figure $200 for shipping/mount/balance. This is just one example from what I've read in this thread. If you take care of the car it's really not going to be outrageous post-warranty.

Leasing is for those who want minimal outlay of cash on a month-to-month basis. In my opinion this would seem to be those who want to stretch their means to maximize utility in the present. If you're comfortable with the next 36 months, go for it.

[jonkarn]

Unless you are paying cash for a 3-5 yr old used car, you are not using the smartest of money decisions. Since we are taking about lease vs. buy, both of these decisions are immediately the less financially sound.

Taking used cars out of the equation(I wouldn't want to buy someone else's stuff nor want to worry about being out of warranty), the simple and only answer to this debate is LEASE.

Rule #1 never invest in a LIABILITY, which is what a car is. Buying is only the better of the two for the smallest % of people who keep their cars for 7-10 yrs, or really just love their car and never want anything else, which these days with low interest rates, is no one I know.

It's ok to buy if you want. Buying cars, boats and other luxury items are some times emotionally driven. There is something to be said for just wanting to buy something even if it's not the financially sound thing to do. Just don't try to convince anyone that it is the smarter financial decision. It's NOT.

And to answer the guy who asked if that's the case then why we don't lease iPads/phones , etc...The option doesn't exist. I'm sure most people would if they could. As it is I subsidize my iPhone purchases with contract renewals when possible.

[bavarianride]

Originally Posted by jonkarn

Rule #1 never invest in a LIABILITY, which is what a car is. Buying is only the better of the two for the smallest % of people who keep their cars for 7-10 yrs, or really just love their car and never want anything else, which these days with low interest rates, is no one I know.

Should a purchased (e.g. cash) cars be treated as utility? Just like a $200/month cable bill can accumulate to $24k in ten years, the utility of, say, a F30, for 10 years and/or 100k to 150k miles can be purchased for $36k(e.g. recent prices of 2014 328i + ZPP+ZLP, or ZML+heat seats). A purchased car is similar to a toaster or a TV as far as "asset" and utility is concerned.

On the other hand, a lease(or finance, or even mortgage, before it is paid off) does resemble a liability, as there is committed cash outlay per month.

Quite a few in my circle of contacts are paying cash to buy cars these days. Many are locking in substantial market gains and using the cash to pay for utilities(e.g. new cars, or even houses).