Do most 1er car people lease or purchase?

[ILUSV]

My understanding of writing this off is as follows / In Oregon:

1. The vehicle has to over 5500 pounds

2. You can write it off one of two ways
-depreciation (which isn’t much the first year)
- Mileage




I don't drive more than 15k a year so I need to look into it some more

[WhiteOne]

If you have to lease in order to get "one" I believe you should find a less expensive car. Seems to much like sub prime mortgageing to me. Leasing insurance is much higher isn't it? Leasing works for some people but can be a nightmare for others. I have heard horror stories. YOMV

[stso0000]

I drive an insane number of miles each year (20K+) so I'm firmly entrenched in the BUY camp. There's no lease in existence that will allow me to drive that far without very large fees. That said, it's all about your financial situation and your desires. Leasing is great for those that can and want to pay the price but at some point they'll wise up and make the decision to stop throwing money away.

ST

[GT3]

Buy.

[sadu77]

2nd car. im leasing. im going to want something a little more practical in 3 years.

[Rye]

Originally Posted by sadu77

2nd car. im leasing. im going to want something a little more practical in 3 years.

You might want to see what type of interest rate you can get on an auto loan; maybe can get one lower than 6+% which BMWFS is charging for leasing a 1er. Plus, at the end of 3 years, resale value of the vehicle might be higher than the 58% residual value for the 135i. Lease rates are not too favorable right now for the 1er, but that's probably because it's a brand new model.

[WaFu]

Purchase.. seems more ppl purchase vs lease

[obLu]

I'll be waiting for the rates to be more like 3 series rates (hopefully) and then I'll lease.

I don't get people who have the mindset that leasing is somehow throwing money away while buying is somehow smarter? Leasing is fantastic for me; but I typically tire of a car after 2yrs and want something different, have never paid off a car in my life, and would never pay off a car in my life, because that would mean entering into the hell of making payments and paying for repairs (I do 15k miles a year).

I'm also fine with paying for the privilage of keeping cash on hand instead of giving it to someone else as down payment money. But my son and I are accident prone so there are always unplanned medical expenses (almost planned on at this point) and we're always doing some remodel project on the house. I shudder at the thought of having all that downpayment money just sitting there in that car. I'd rather pay somebody 5% to use their money.

Every time I've bought a car and then tried to sell it/trade it in after 2yrs, I've just broken even with the amount owed, or been upside down. So the end result between lease and buy are no different for me, I still have no real ownership of the vehicle. And over the same term, I've paid more on the traditional purchase loan.

Of course, that all depends on the MF and residual. If the MF isn't subsidized, then I'm not that hot on leasing. And my auto insurance company doesn't charge different rates between lease and purchase, so nothing to consider there.

In my situation lease is win win and purchase is expensive and then I'm burdened with the soft resale value. BTW, when I went to sell my 06 e90 last Sept, resale was awful on that car, worse than any other BMW I've owned.

[Garris]

Originally Posted by oblu

I'm also fine with paying for the privilage of keeping cash on hand instead of giving it to someone else as down payment money.

But aren't you also putting money down for the lease, or are you doing no money down?

- Garris

PS: Anyone with lease transfer or assumption experience?

[jdcolombo]

There is no magic in the lease vs. buy comparison. When you lease a car, you are simply "buying" the depreciation over the lease period. The difference between the residual and the purchase price is the depreciation, which you finance via the lease. If you lease a $40,000 car that has a 60% residual after three years, then with a lease you are "buying" the depreciation over three years ($16,000, or 40% of $40,000). The money factor is simply the interest rate you pay the lease company for the privilege of buying the depreciation - a lease is simply a loan that you take out to buy the depreciation over the lease term.

When you buy a car, you are also buying the depreciation over the time you own the car. So the "lease vs. buy" comparison is simple if you only keep a car for a typical lease period (e.g., three years). In these cases, the only questions for lease vs. buy are (1) is the purchase interest rate better than the lease interest rate and (2) given the way I drive the car, is the residual value specified in the lease period going to be higher or lower than its "real" market value at that time (if you typically trade cars in, then the market value is the wholesale value of the vehicle; if you sell the car, its market value is what you would get in a private sale). These are the only questions to think about; whether you lease or buy, at the end of three years you will have purchased the depreciation on the car. So if a lease gives you a better interest rate on that purchase, or if the lease over-estimates the residual value of the car at the end, the lease is the better option. If not, buying is the better option (this assumes that you have no problem with the other terms of the lease, such as not modding your car).

If you keep a car for longer than 3 years, then the financial comparison is slightly more difficult, but the concept is the same. Cars depreciate more slowly as they age. Therefore, the cost of owning a car ("buying" the depreciation each year) goes down over time as the depreciation flattens out. Say, for example, that my hypothetical $40,000 car depreciates 40% of its value over three years, and 60% of its value over 6 years (60% is probably too low; I just picked it to make the comparison simple). If you leased two $40,000 cars over the six year period, each for three years, you would be buying two 40% depreciation amounts (40% on car 1 for three years, then another 40% on car 2 for 3 years, or $32,000 of depreciation in my example). But if you buy one car and keep it for six years, you are buying one 60% depreciation amount, or $24,000 (60% of $40,000). Ergo, in my hypothetical, it is obviously cheaper for you to buy one car than to lease two over the same period (assuming that the repair/maintenance costs of ownership are the same as leasing - that's probably an incorrect assumption, although with BMW's they are the same for 4 years. Even after the warranty runs out, typical repair costs for a car 2 years out of warranty aren't very significant for "normal" mileage cars - or put another way, you'd have to spend $8000 on repairs in the final two years for ownership to equal the cost of leasing).

The longer you own a car, the longer you spread out the purchase of the depreciation, and therefore you end up "buying" less depreciation and ownership becomes cheaper. But make no mistake: since a car is a depreciating asset, whether you lease or buy you are doing the same thing: you are "buying" the annual depreciation in the car. That annual depreciation is lower as the car gets older, and therefore the cost of buying that annual depreciation goes down. That's why the cheapest way to own a car is to pay cash (no interest charges) and keep it for 10 years (spreading the early rapid depreciation over a longer ownership period).

John C.

Edit: I should add that if you buy a car and hold it only for the typical lease period, you are borrowing money to pre-pay for depreciation value that you will never use and getting zero return on that money. So the real cost of buying the depreciation using the "buy" option for a short term (e.g., 3 years) is actually higher than your interest rate on your loan. Think of it this way - suppose you borrowed $250,000 to buy a house that only cost $200,000, and took the excess $50,000 and buried it in your lawn. Every year you'd pay interest on the extra $50,000, but you would not earn anything on the $50,000. A car is like your lawn - it does not produce a positive rate of return on money you invest in it. When you buy a car on a 60-month loan and trade the car after three years, you borrowed money to buy the full depreciation value of the car, even though you are only going to actually use 40% of that depreciation over 3 years. That's one of the reasons that buying a car that you're going to trade after 3 years is almost always financially a worse deal than leasing it.

[Rye]

On spot it jdcolombo. Hopefully people will understand that though.

Garris - you want to put as little down as possible, unless it's the security deposit. The reason being is that the money you put down just to bring your payments is not given back to you at the end of the lease or if you happen to wreck the car before your lease is up. It's crazy to hear people put $3k down on a lease. If in say 3 months you total the car...insurance does not give you back the $3k you put down, they just pay off the remainder of the lease. Unlike if you bought a car and put money down to get a lower loan amount, insurance pays you the value of the car.

[buckwheat986]

JD...nice write up


thanks

[obLu]

Originally Posted by Garris

But aren't you also putting money down for the lease, or are you doing no money down?

- Garris

PS: Anyone with lease transfer or assumption experience?

No way! 0 down; again it all comes down to liking liquid cash and not being too bothered by monthly payments.

[obLu]

Originally Posted by Rye

On spot it jdcolombo. Hopefully people will understand that though.

Garris - you want to put as little down as possible, unless it's the security deposit. The reason being is that the money you put down just to bring your payments is not given back to you at the end of the lease or if you happen to wreck the car before your lease is up. It's crazy to hear people put $3k down on a lease. If in say 3 months you total the car...insurance does not give you back the $3k you put down, they just pay off the remainder of the lease. Unlike if you bought a car and put money down to get a lower loan amount, insurance pays you the value of the car.

Exactly, I've had that happen to two friends. They were a little surprised.

GAP is all about protecting the leasing company, not the leasee (leasor?).

[Esmallstii]

WOW,..didnt even know about that Money down thing!
I was gonna drop a good chunk of $$ down on it,..but now,..I'll just stick with the deposit amount and be done w/ it.
I got a quote of approx $650/month w/ $0 down.

[warmtoes]

Never put money down (or as little as possible) and take advantage of the multiple security deposit lease to reduce the money factor. The deposit is fully refundable even if the car is totalled.

[thesmokingone]

not only did I purchase the car but for like an extra 1k I got the extended warranty. Then I can pay the car off in like 3-4 years and keep it till the 6yr mark payment free. If you invest that car payment money smart for that two years and then repeat the system you always come out ahead.

[obLu]

Originally Posted by thesmokingone

not only did I purchase the car but for like an extra 1k I got the extended warranty. Then I can pay the car off in like 3-4 years and keep it till the 6yr mark payment free. If you invest that car payment money smart for that two years and then repeat the system you always come out ahead.

But then I'm 12yrs older and have only gotten to experience two cars. Life's too short for 2 cars every 12yrs.

Wow, thinking about that, my son will be in high school in 12yrs. Only having 2 cars in that amount of time would be criminal ... I'd go insane with new car/technology/power lust.

[TagMan]

Originally Posted by jdcolombo

There is no magic in the lease vs. buy comparison. When you lease a car, you are simply "buying" the depreciation over the lease period. The difference between the residual and the purchase price is the depreciation, which you finance via the lease. If you lease a $40,000 car that has a 60% residual after three years, then with a lease you are "buying" the depreciation over three years ($16,000, or 40% of $40,000). The money factor is simply the interest rate you pay the lease company for the privilege of buying the depreciation - a lease is simply a loan that you take out to buy the depreciation over the lease term.

When you buy a car, you are also buying the depreciation over the time you own the car. So the "lease vs. buy" comparison is simple if you only keep a car for a typical lease period (e.g., three years). In these cases, the only questions for lease vs. buy are (1) is the purchase interest rate better than the lease interest rate and (2) given the way I drive the car, is the residual value specified in the lease period going to be higher or lower than its "real" market value at that time (if you typically trade cars in, then the market value is the wholesale value of the vehicle; if you sell the car, its market value is what you would get in a private sale). These are the only questions to think about; whether you lease or buy, at the end of three years you will have purchased the depreciation on the car. So if a lease gives you a better interest rate on that purchase, or if the lease over-estimates the residual value of the car at the end, the lease is the better option. If not, buying is the better option (this assumes that you have no problem with the other terms of the lease, such as not modding your car).

If you keep a car for longer than 3 years, then the financial comparison is slightly more difficult, but the concept is the same. Cars depreciate more slowly as they age. Therefore, the cost of owning a car ("buying" the depreciation each year) goes down over time as the depreciation flattens out. Say, for example, that my hypothetical $40,000 car depreciates 40% of its value over three years, and 60% of its value over 6 years (60% is probably too low; I just picked it to make the comparison simple). If you leased two $40,000 cars over the six year period, each for three years, you would be buying two 40% depreciation amounts (40% on car 1 for three years, then another 40% on car 2 for 3 years, or $32,000 of depreciation in my example). But if you buy one car and keep it for six years, you are buying one 60% depreciation amount, or $24,000 (60% of $40,000). Ergo, in my hypothetical, it is obviously cheaper for you to buy one car than to lease two over the same period (assuming that the repair/maintenance costs of ownership are the same as leasing - that's probably an incorrect assumption, although with BMW's they are the same for 4 years. Even after the warranty runs out, typical repair costs for a car 2 years out of warranty aren't very significant for "normal" mileage cars - or put another way, you'd have to spend $8000 on repairs in the final two years for ownership to equal the cost of leasing).

The longer you own a car, the longer you spread out the purchase of the depreciation, and therefore you end up "buying" less depreciation and ownership becomes cheaper. But make no mistake: since a car is a depreciating asset, whether you lease or buy you are doing the same thing: you are "buying" the annual depreciation in the car. That annual depreciation is lower as the car gets older, and therefore the cost of buying that annual depreciation goes down. That's why the cheapest way to own a car is to pay cash (no interest charges) and keep it for 10 years (spreading the early rapid depreciation over a longer ownership period).

John C.

Edit: I should add that if you buy a car and hold it only for the typical lease period, you are borrowing money to pre-pay for depreciation value that you will never use and getting zero return on that money. So the real cost of buying the depreciation using the "buy" option for a short term (e.g., 3 years) is actually higher than your interest rate on your loan. Think of it this way - suppose you borrowed $250,000 to buy a house that only cost $200,000, and took the excess $50,000 and buried it in your lawn. Every year you'd pay interest on the extra $50,000, but you would not earn anything on the $50,000. A car is like your lawn - it does not produce a positive rate of return on money you invest in it. When you buy a car on a 60-month loan and trade the car after three years, you borrowed money to buy the full depreciation value of the car, even though you are only going to actually use 40% of that depreciation over 3 years. That's one of the reasons that buying a car that you're going to trade after 3 years is almost always financially a worse deal than leasing it.

Not exactly the case! Your post sounds very detailed and knowledgable, making you look like an expert... but in the end your conclusion is incorrect and your reasoning is flawed.

With some exceptions, usually attributable to manufacturer incentives, leasing is generally a more expensive proposition.

Sorry... but there are numerous websites devoted to the question of leasing vs. purchasing. The vast majority of these true experts conclude that leasing is a more expensive mechanism and has its advantages if there is a write-off, or if the manufacturer has offered an advantageous lease program for incentive purposes.

Of course, a huge advantage for leasing is the ability to sacrifice any equity and lower the down payment and overall cash flow, thus opening the doors of availability to many folks that would otherwise find conventional purchase financing prohibitive.

There are therefore advantages to each mechanism, but it's incorrect to mis-state those advantages or to spin leasing to be more cost-effective in circumstances where it is not.

[warmtoes]

But then I'm 12yrs older and have only gotten to experience two cars. Life's too short for 2 cars every 12yrs.

+1

[Dan203]

I like owning things, so I'm buying. However leasing is a good option if you're looking for lower payments and don't mind having to shop for a new car every 2-4 years.

Dan

[crzy4135i]

Originally Posted by thesmokingone

not only did I purchase the car but for like an extra 1k I got the extended warranty. Then I can pay the car off in like 3-4 years and keep it till the 6yr mark payment free. If you invest that car payment money smart for that two years and then repeat the system you always come out ahead.

From what I understand, they will not cpo cars that had dinan software installed. I'm very curious if I can pay the extra $1k for the extended warranty up front and not have it voided when I do the dinan software upgrade.