350 Million Reasons Not to Lease...

[Jack in Jax]

Actually, it was BMW that just acknowledged they found many reasons not to lease to customers: they've had to write off $350,000,000 USD, most of it in lost residual sales value, from their books. BMW cars are supposed to have high residual sales value, which has usually meant BMW can lease at relatively low rates because there's still a lot of value in the car when they flip it as a CPO or other sale at the expiration of the lease. No longer...

Turns out that, across all brands, 1 new car in 5 is leased in the USA (rather than purchased). But not the upscale brands, where leases are more common - e.g. 43% leases for Lexus, 42% for Cadillac, etc. But BMW is in a class of its own, with 60% of all new BMWs having been leased in recent years vs. sold. (Is anyone else as astounded by that number as I am?) To avoid this being a financial problem in the future, BMW has already raised lease rates by 3% - some of our members here walked away from buying a One for that reason - and at the same time have introduced better financing terms so they can still qualify the interested buyer.

Oh...and the new Seven is going to drive out the door, leased or purchased, for a sticker price with options for over a cool Hundred Thou. Armor plating extra.

Jack
(Source: September Roundel)

[warmtoes]

In Canada the lease rate for BMW's is supposedly upwards of 70%. Maybe not after they jack up the lease rates though.

[jkp1187]

I never understood why people leased, unless it was for business/fleet purposes and a tax write-off. If you can't afford the car, consider something else.

[jayce]

it's for people who just wants to "taste" the car.

[mistermojorizin]

Originally Posted by jkp1187

I never understood why people leased, unless it was for business/fleet purposes and a tax write-off. If you can't afford the car, consider something else.

it varies by the terms of the deal, sometimes its better to buy and sometimes its better to lease. bmw lease deals were often on profitable terms for the consumer as evidenced by its unprofitability for the company as discussed in the OP.

also, don't assume that if you have a business its better to lease. if you purchase a car for your business you can write off the depreciation on the car which can be equal or more than the tax write off for the lease.

you have to go a couple steps below the surface to get it.

[135i_TT]

Leasing is the worst thing anyone can do with a car unless your filthy rich.. IMO

[ModlessG]

I leased my 135 for a couple reasons. First uncertainty of gas prices I wasn't sure it was a good time to own any car. Second the residual value that BMW put on the car seemed too high 74% after 2 years. So I bet on the car being worth less than the residual. If I like the car at the lease end I will offer BMW less than the residual price perhaps $3000 less. If I don't like it I just turn it back in to them. If I don't like it and the value is higher than the residual then I will sell it and pocket the profit. Yep its real stupid that is why BMW is loosing money on leases

[gargoyal]

Originally Posted by mistermojorizin

it varies by the terms of the deal, sometimes its better to buy and sometimes its better to lease. bmw lease deals were often on profitable terms for the consumer as evidenced by its unprofitability for the company as discussed in the OP.

also, don't assume that if you have a business its better to lease. if you purchase a car for your business you can write off the depreciation on the car which can be equal or more than the tax write off for the lease.

you have to go a couple steps below the surface to get it.

Leasing is rarely the best financial option. There are times when it is an ok or a good option, but rarely is it the best choice. When manufactures are offering leasing specials they also are offering financing specials and rebates. You can almost always cut a better deal on a purchase.

Leasing is for people with cash flow and cash outlay issues. There is almost always a cost for the convenience of low payments and less cash down.

[WhiteOne]

People are turning in their GM built trucks after 2 years with a residual value of around $22000. GM is selling them for around $11000.
I hear a lot of people on this forum saying they are leasing because they can not afford to own "one" without a warranty.
Sounds like leasing works for some folks.
I bought mine.

[mistermojorizin]

Originally Posted by gargoyal

Leasing is rarely the best financial option. There are times when it is an ok or a good option, but rarely is it the best choice. When manufactures are offering leasing specials they also are offering financing specials and rebates. You can almost always cut a better deal on a purchase.

Leasing is for people with cash flow and cash outlay issues. There is almost always a cost for the convenience of low payments and less cash down.

i don't know how often it is the best financial option, i just know sometimes it is. and i know how to calculate it. the 1er was definitely better to buy than to lease. but in the past a lot of bmw's were much better to lease. it depends on the terms of the lease and how much you will actually be able to sell your car for after that same period if you decide to buy it. which, in turn, depends on how long you plan to keep your car.

read this: http://www.kiplinger.com/columns/car...8/car0107.html

myth #1: Buying is cheaper than leasing

[EmeraldRx]

I lease, have leased for years now. Its perfect for me. I put zero down, and pay taxes up front. I save on tax, I'm only paying the taxes on my portion of owenership. I pay less per month, and the car is gone in 3 years with no hassle, and I am always looking to buy in 3 years anyway.

[warmtoes]

I lease because my cash is tied up in an investment that is growing at a much higher rate than my lease is costing me. That is a no brainer.

[flyinggonzo]

I want to do business with some of you guys.

If BMW is taking a loss from the leasing business, then the guys who leased their cars are better off on a financial basis.

[135i_TT]

Its verrrrrry rare that you can sell the car for more then what you owe on a leased vehicle... plus if you over use the car or do any form of modifications your making it even harder to sell and on top of that to sale the vehicle is to much of a hassle because you dont own the car and its extremely hard to find someone to pay $30,000+ upfront to get you out of the lease and sell the car.. Plus it's a waste of money if you dont intend to keep the car you never get any profit off of that.

[Xyloft]

Originally Posted by 135i_TT

Leasing is the worst thing anyone can do with a car unless your filthy rich.. IMO

i really used to think the same way. (I bought my 1).

but really, leasing is for people who want a new car every 2-3 years and know they are only going to put X miles on it. if you aren't modding it, the car is always under warranty. and you have a set monthly payment you just accept as a bill.

i mean you'll never get to drive car with no car payment, but it only takes 1 1500 repair to have 5 months of $300 car payments.

am i planning on keeping my 1 for a long time. Yes.

did i plan on keeping my STI (30 months) and Tiburon (32 months) for a long time? Yep. should i be leasing until i settle down? probably, but i liek driving way to much (bmw tried to get me into a 24k/year lease lol).

[135i_TT]

Yea thats another reason leasing sucks bc of mileage.. when I had my Jetta TDI on a lease I was paying quite a bit but I went waaaaay over my mileage I was kind of worried about that but I don't need to worry now.
But the thing about knowing how many miles your going to put on the car is hard unless your not easily tempted to drive the 1-Series more then all your other vehicles.. know what I mean?
Idk like you say if your not planning on keeping the car long its ok but I feel bad for the other people who buy the car used.

[BMW F22]

It's not surprising at all. With luxury/expensive cars it actually makes more sense to lease. The reason? Possible drop in residual values. With a lease you are not penalized if the RV drops. Not only that but you can drive the same car with lower monthly payments. Ask anyone in the industry and they will tell you that people that are good with money would prefer lease over buy (most of the time).

[uofmtiger]

Love the lease vs buy debates. I bought my first BMW E46 and wanted to trade it in after the free maintenance was over. If you have a major problem with a bimmer, it can be very expensive to fix. I would rather spend my money toward a newer car with the free maintenance. I also paid down the money factor with multiple security deposits (MSD) and will get that money back. BMW makes it very attractive to lease, which is why I do it.

I did consider buying a 3 series because of the .9 percent financing, but knew I would end up trading it in early. So I leased the 135i. I am not real sure I will be buying a car until I am closer to retirement. I like to drive new cars too much.

However, if you would rather buy, I have no argument. We have a paid off Toyota in the garage, so I understand that it is nice not to have a payment and to have something to trade in.

[Nixon]

If you are betting that your car will go down in value much more than the Lease provider is charging, then a lease will save you money -- IF you end up being right.

Otherwise, the Lease provider has already worked the numbers in their favor, so that they are the ones who come out ahead in the end.

[yankees25]

Reasons companies like BMW are heavy into leasing is because they don't want to have to run ads like Chrysler does, advertising 40% off. It's a lot easier to hide a steep discount on a 7-series through a sweetheart lease vs. having a fire-sale. Think about the poor schmuck who bought at somewhere between invoice and sticker, only to see BMW come along with thousands off a few months later. Suddenly BMW sabotaged their residual value and cost themselves a repeat customer.

Subsidized leases work much better for high-end marques when cars are rotting on the lots. As for me, I feel for Jeep when they get our Jeep Commander back in February after the 27 month lease is out. The lease was based on $12K off sticker and an el-cheapo interest rate, and it will still likely be worth $4-$5K less than the residual at lease end.

[imported_mega]

350 million reasons TO lease, Bmw got the raw end of those leases

[OrientBlauZHP]

I'm considering leasing because I go through cars so fast....I don't think it matters if you lease vs buy; what does matter is how long you plan on holding onto the car and if the answer to that question is less than 3 years than a lease may be the right choice.