BMW 1 Series Coupe Forum / 1 Series Convertible Forum (1M / tii / 135i / 128i / Coupe / Cabrio / Hatchback) (BMW E82 E88 128i 130i 135i)
 





 

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      03-04-2008, 12:14 AM   #1
stefan
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1999 VF BMW M3  [5.00]
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2009 STi  [3.83]
Implications of buying..

Hey guys.. I'd like to field an opinion from you all..

In light of these brutal lease rates, I'm playing with the idea of buying the car outright, over a 4 year period (~$1200 a month, where it is around $900 to lease). What do you guys think of this? I'm somewhat worried about what I'm going to do with it after, and how much money I'll lose, essentially. I'm also a little afraid how much the 135i will improve over four years.

Also... I'm usually a big believer in buy-what-appreciates-rent-what-depreciates. But of course there is the enjoyment factor along the way.

After using Edmunds lease/buy calculator, it recommended buying instead of leasing at these rates.

Opinions are appreciated!
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      03-04-2008, 12:53 AM   #2
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Stefan, I'm planning on financing the car as well. I'd recommend financing b/c once the car is paid off, you still have an asset and you can sell it for its remaining value because its not as though it depreciates to $0 or anything. Since you mentioned you're concern about a better 135 coming along, remember you can always trade it in if something better comes along (you may or may not take a hit on that depending on how much of the car you've paid for versus how much its depreciated, but at $1200 a month you should be okay).

That being said,if the rate over 4 years is 6.75%, and the rate over 5 years is 6.75%, IMHO why not do it over 5 years? With most if not all loans these days there aren't any early payout penalties and if you want to put lump sums on the loan to shorten the length and pay it over 4 years, you can do that too. While you may pay *marginally* more interest if you finance over 5 years but payout over 4, it'll put you in a better position if things get a little tight one month since your payment will be closer to the $900 you were going to lease at versus the $1200 you're talking about.

Thats my take.
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      03-04-2008, 08:22 AM   #3
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^^^

I think you have to give us more info on your situation. Can you write off the lease? how often do you plan on switching your car???

I'm sure you know this already, but if you plan on keeping your car over a long period of time, it's always better to buy it/finance it.

If you can wait and you're worried about a better 1 coming out (usually there will by upgrades and "special" models throughout a cars life cycle) and don't like the rates right now, then hold off. I'm sure BMW Canada will have specials and discounts as the 1's life cycle runs its course.

If you're looking to save money or find a deal, now is definitely not the time. The introduction of a new model usually means no discounts or specials, the appeal is to have something first not getting a deal.
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      03-04-2008, 10:49 AM   #4
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Quote:
Originally Posted by stefan View Post
Hey guys.. I'd like to field an opinion from you all..

In light of these brutal lease rates, I'm playing with the idea of buying the car outright, over a 4 year period (~$1200 a month, where it is around $900 to lease). What do you guys think of this? I'm somewhat worried about what I'm going to do with it after, and how much money I'll lose, essentially. I'm also a little afraid how much the 135i will improve over four years.

Also... I'm usually a big believer in buy-what-appreciates-rent-what-depreciates. But of course there is the enjoyment factor along the way.

After using Edmunds lease/buy calculator, it recommended buying instead of leasing at these rates.

Opinions are appreciated!
Hey Stefan.. heres my honest opinion apart from all these lease rates/finance rates, depreciating and all this improvement throughout 4-5 year or even the new one series after that. If you really want something you'll buy it and honestly many people tell me that the first year isn't the best choice because of improvements but hey you know what after 1 year.. you'll think of the next.. then the next and then the next.. there is always going to be bigger and better things coming and if not then the market will die right? yes i am right.. I think currently this car is at a "decent price", not a bargin yet not overly priced because you are paying for a bmw however for what you get your getting something that is powerful, luxury, fun, and all that good stuff which not many cars out there have at the same price point.
i myself am not rich or balling like some ppl out there but I see this car to be one that is a good fit for what I want (small, powerful, good handling, luxury and my first bmw) so I am willing to pay a bit more to get it.. yes you can wait till bmw comes out with some promotion or drop their rates but then the 09 1er comes out and then you think to yourself wait a minute, maybe i should get that one and once again the ball starts rolling again and you are thinking to much and you end up not buying anything "AGAIN"... so in my opinion.. if you truly want this car just buy it just my 2 cents... hope some of it made sense.
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      03-04-2008, 11:30 AM   #5
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^^^

Well said and very good advice!
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      03-04-2008, 11:37 AM   #6
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I think leasing only make sense if you are able to write off the lease payments. There are a few american car companies that have 0% rates that probably make it descent also. However, everyone I know that leases ends up with extra charges at the end of the lease. Extra KM charges, rock chip repair charges, penalties if you have had any accident repairs done.
The best thing I ever did was save up for my first car. The day I bought it I began saving for my second car. I have done that for all my cars since. I began saving for a new car 5 years ago and that moeny has been locked up in an ING direct accound earning me good interest. I almost bought a cheaper car last year but figure I would wait an extra year or so till I had another $10,000 in that account and get a BMW.
As far as being a depreciating assest I figure I am ahead at the day with a BMW135. I figure after 5 or 6 years it will hold its value and be worth a descent price still. I am not paying any interest on a loan for the BMW plus I will be earning interest on my money that I am saving up for my next car. I hate paying interest to banks!!!
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      03-04-2008, 11:42 AM   #7
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LazyBmw is bang on. I'm essentially in the same situation buying my first BMW, and I'm actually quite pleased with the price point considering my other options were either the STI or the EVO. You get way more for your money.

I'm certainly not worried about the 1er becoming dated once newer models start rolling out in 2009 or later. Just read any comments by an owner of an e46. They still love their cars, and folks are still contemplating buying used e46's over new models offered by BMW.

I can't wait to be one of the first owners of what will most definitely become a classic.
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      03-04-2008, 01:10 PM   #8
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This is may or may not be a factor in the lease vs buy (finance) debate, but it is underpinning my decision to buy instead of leasing.

If I get it, the 135i will be the first new car I've ever acquired that I already know I'll want to take on a track (at least a few times each summer). I'm assuming any track use would violate the terms of most leasing agreements, so that means buying is my only option.

Am I correct, or is it possible to lease a car and openly use it on a track?
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      03-04-2008, 01:39 PM   #9
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^^^

Any track use will also violate most insurance policies.

If you do go to the track with your lease car and you don't want to let your dealer know, get an extra set of tires and rims for your car. A sure tale sign that you've been to the track is tire wear, especially close to the outer wall. Also, if your service is covered quick break pad wear, or boiled break fluid is also signs. Of course there are ways around all that...
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      03-04-2008, 02:15 PM   #10
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Quote:
Originally Posted by cjcjag View Post
This is may or may not be a factor in the lease vs buy (finance) debate, but it is underpinning my decision to buy instead of leasing.

If I get it, the 135i will be the first new car I've ever acquired that I already know I'll want to take on a track (at least a few times each summer). I'm assuming any track use would violate the terms of most leasing agreements, so that means buying is my only option.

Am I correct, or is it possible to lease a car and openly use it on a track?
I asked a friends about his lease as he takes his car on the track. The lease states that he must have valid insurance on the car. His insurance does not cover the track. Therefore he is technically violating his lease. However, he figures wether he ownes the car or leases it if he wreck it on the track then he is out a car! He tracked his last car often with no problems and turned it in at the end of teh elase with no problems. He did say that modifying the car for the track was a bigger issue. He wanted to do more to the car but he knew it needed to be returned to stock when his lease was up (he knew he would not buy out the car). This was ona Audi S4.
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      03-04-2008, 02:26 PM   #11
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There are additional things to keep in mind regarding the 135i then just the traditional math.

Like, how much do you believe in the 1-er?

And, do you see the 1-er staying a limited edition/low import numbers?

If the 135i ends up being the kind of massive success that many folks predict, while BMW refuses to import enough to keep up with demand like is currently rumored, you may be sitting on a gold mine.

Here is a twist to throw in. What if BMW decides NOT to import the next generation of the 1-er when it is redesigned, or even just delay it for a year or two? Or what if they drop the twin-turbo engine from the line-up if an M1 is put out?

The 135i could end up being a very limited edition, highly desired car that way out-performs the lease return values (or maybe not). And sure, you can buy out the balance of your lease at the end of the term and then sell it for profit. But you will have to get another 3-4 year loan to pay off the balance of the lease pay-off. In effect you run a 7-8 year loan with double the fees and higher interest rates. (Used car, off-lease interest loan rates are much higher than new).

If you believe in the 135i becoming a cult classic in the face of BMW decisions to limit imports, I would never lease. I would buy it with as short a term loan as practical, with as much down-payment, and the lowest interest rate you can find. If you don't believe in the 135i having lasting appeal, the lease may make more sense.

But in no case should you buy (or lease) anything that you aren't absolutely certain you can afford. Repo's instantly destroy any potential savings.

If this generation's 135i has artificially limited imports, and ends up being just a very limited run, it stands a good chance of going down the same path as the Defender 90 when it comes to values. Or it could go the way of Emu breeding pairs....
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      03-04-2008, 02:46 PM   #12
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^^^
I am very very skeptical of cars going up in value, unless they car limited exotics, ie. the Enzo, or are classic muscle car, ie. the ones you see at Barrett Jackson.

I think it's a false sense of security to think that just because it's limited mean that it will be worth anything. If anything, cult cars hold their value better but, in the majority of the cases won't sell for a profit, ie STi's and Evo. There are exceptions to every rule of course. No matter how good this car is right now or is going to be, I don't see it as a car that will go up in value. In fact I think the new min's have a better chance of going up in value than the 1.

Something else to consider, if it does become a cult/niche car your resale market will be limited and if might take you longer to sell. Also, don't forget buyers of cult/niche cars are pickier and harder to sell to. If you want to know what being squeezed feels like try selling a cult car. When I sold my STi, you wouldn't believe how picky people were. I took great care of my car and had upgrades, but people were expecting a brand new car...just a few things to keep in mind.
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      03-04-2008, 06:03 PM   #13
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I was trying more to imply better-than-lease numbers depreciation instead of appreciation, but your points are all well taken.

It is definitely not a sure thing. Buying upon expected future value is gambling. Just like in poker, sometimes you win, sometimes you lose. That is one of the benefits of leasing. There is no risk to the buyer, because the house (dealership) assumes the risk up front. When the lease is over, you don't have to care what the resale value is. You can just ignore all of that and hand them the keys and walk away. Of course the house isn't stupid, and it stacks the cards in it's favor.
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      03-04-2008, 06:14 PM   #14
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^^^

Ya I know what you were trying to say about the "better than lease numbers". My comments were just generally one on the topic of cars being like and investment not specific to your comment
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      03-04-2008, 06:28 PM   #15
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Oh yeah, I agree completely. Definitely less of an investment, and more of a game of chance.
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      03-04-2008, 07:55 PM   #16
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Quote:
Originally Posted by Nixon View Post
I was trying more to imply better-than-lease numbers depreciation instead of appreciation, but your points are all well taken.

It is definitely not a sure thing. Buying upon expected future value is gambling. Just like in poker, sometimes you win, sometimes you lose. That is one of the benefits of leasing. There is no risk to the buyer, because the house (dealership) assumes the risk up front. When the lease is over, you don't have to care what the resale value is. You can just ignore all of that and hand them the keys and walk away. Of course the house isn't stupid, and it stacks the cards in it's favor.
The one thing to consider in Canada is the impact of the currency. Notwithstanding a horrendous lease rate such as we have for the 1er, leasing makes a huge amount of common sense in the current environment even if you want to own your vehicle.

With the Canadian dollar over par against the US, it is quite possible that BMW Canada will feel enough of a pinch over the next few years that it will have to actually lower MSRP. This will hurt resids and will provide those with a lease the ability to walk away from their vehicle and let BMW Financial Services take the hit on the difference between the resid and the actual market value of the vehicle.

In this context, I feel that I have, at a 3.9% lease rate for my E92 335i, a very inexpensive put option for my car that is likely 'in the money'. At the end of my lease, it is conceivable that BMW Financial Services will offer to allow me to buy out my vehicle at below the resid. Or, I can walk away and purchase/lease the same vehicle for $$$ less. Either way, I win.

Accordingly, I think there is very little likelihood that the 1er in Canada will beat the lease depreciation schedule compared to if it is bought outright. As much demand as there might be, consider that the US looks like it will be in a fairly deep recession for some time and Canada may follow, although not to the same extent. In this type of an environment, used vehicle prices will hit the $hitter, especially premium vehicles such as BMW.

So, buying is good if you're a cash buyer and want to drive the vehicle into the ground. Not leasing in this environment is dangerous... Dilemma for 1er buyers is between the horrid 7.75% lease rate but protection of value through fixed resids vs. undue downward pressure on used prices but benefit of self-funding. Tough spot BMW has put us in. If the rate were even 5.0%, I'd say it's a no brainer lease. To add insult to injury, the Bank of Canada just reduced its target overnight rate to 3.5% from 4.0% today and the prime lending rate at Canadian chartered banks has fallen to 5.25% from 5.75%. Prime will almost inevitably fall to 5.0% in April - the Bank of Canada has alluded to this in its statement today. Think about the spread BMW Canada is making on the 1er lease rate.
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      03-04-2008, 09:23 PM   #17
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1999 VF BMW M3  [5.00]
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2008 135i  [5.00]
2003 M3  [3.10]
2011.75 BMW M3  [4.17]
2009 STi  [3.83]
Wow thanks for the input guys.. I hear all your opinions. I just asked for a quote on an "Owners Choice" finance, as this might work best for me. I'm going to try to get it down to 3 years. I've come to the conclusion that I simply cannot justify that least rate. I realize I will lose money, that's a given. But with lease rates being so close to financing over a similar term, it makes sense to me to do that, and attempt to sell at the end.

However, linus makes a good point. That said, it's interesting to note that BMWs are still in high demand despite other manufacturers lowering their MSRPs.
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