Lease vs. Purchase

[KingOfJericho]

Wrong.

[Angry3]

Originally Posted by jpd

NO matter how you slice it a lease is like renting. At the end of the term you turn the car back in and pay for extra wear and tear. At best you owe zero. Buying the car gives you a future trade in value of $$$$. It seems that most people on this website lease because they don't have enough saved or a trade to support a modest monthly payment.

Survey says! Bzzzt.

[ralawren]

I started leasing in the 90's when the Mfgs were subsidizing the interest rates and residuals. Since then I have continued to lease or use Audi/VW balloon loan for same reason. Normally a lease will cost $1k more over 36 months, but I get tired of my car after 24 mos and trade them by 36 mos. Expensive but I enjoy the new toy!

[CommaD]

Originally Posted by jpd

NO matter how you slice it a lease is like renting. At the end of the term you turn the car back in and pay for extra wear and tear. At best you owe zero. Buying the car gives you a future trade in value of $$$$. It seems that most people on this website lease because they don't have enough saved or a trade to support a modest monthly payment.

I respect your opinion, but I don't totally agree.

When you decide to "purchase" over lease, you truly don't "own" anything until you pay off the loan. The future trade in value is unknown and there are a lot of variables involved. Who knows how much money will be spent on the vehicle for repairs after the warranty has expired. If you purchase an extended warranty, there is a cost to that too. And who can really predict the future market for buying your vehicle for sure? A lease has a more guaranteed plan.

There are definitely good arguments against a lease for some people. People who drive a lot of miles, for example. But lets not forget that miles affect the value of any vehicle whether it is leased or purchased.

I also would like to comment on the turn-in costs for leases. Besides miles, certainly there can be some wear and tear costs that can be costly, most likely the tires. For me personally, I take care of my cars and with my experiences, leasing companies only charge for major damages and tires. As long as you have done your free maintenance schedule, I don't think you have to worry about being charged for any mechanical problems either. I just don't see how wear and tear issues ONLY affect leases. Wear and tear issues also affect how much you can sell a car you own for. You think your not going to knock off something from your price to someone if you are selling them a car with bad tires?

You say that "It seems that most people on this website lease because they don't have enough saved or a trade to support a modest monthly payment." I am not sure that is a fair assessment. I think that most people who lease accept the fact that they will have a car payment in their life. Through a lease you can get more for a lower payment. You have the piece of mind of a reliable, under warranty, new vehicle every few years. A vehicle that you still have the option to purchase if you change your mind. A vehicle that you don't have to worry about selling yourself, just turn it in. For most, a lot of these positives of a lease greatly outweigh any "possible" return you might get in the future.

I totally understand the logic of your argument for purchasing a car over a lease. If it works for you, great... I just don't think it applies to everyone.

[Bimmer-Bob]

I think leasing is better than financing if you're immediately trading in your car for a new one once it's paid off (which some people do). But if you're interested in constantly flipping cars than financing is stupid anyway.

The disadvantage of a lease in my view, no matter what sort of financialese spin you try to apply to the situation, is that you are commiting yourself to ALWAYS having a car payment. Sure, you will always be driving a new car - but not a month will go by that you won't be paying for the privelege.

For me personally, that's unacceptable. I want to pay off my car and enjoy a period of time AT LEAST as great as my loan term payment-free. The trade-off? I have to drive an "older" car around for a while, and I'm on the hook for maintenance costs. But a well-kept and maintained car looks good no matter its age and I don't expect maintenance costs to equal or exceed the costs of early replacement (no HPFP ).

I had the added variable of being able to pick up my car at a discount via Military Sales, which also made financing more attractive to me.

There is really no "right" answer. Different solutions for different circumstances and priorities.

[potxoli]

^^

Hi,

Another point to consider is the complete predictability of payments while leasing a BMW with maintenance included. If your budget is $500/month say, you pick a car with that lease payment, then from a cash flow perspective you know that is ALL you have to pay ever. You lease for 3 years, enjoy free standard maintenance, bumper to bumper warranty and at the end of 3 years, you turn in the key and walk away.

My Family's daily driver is a Honda minivan. Fully paid off. I've owned it outright for 3 years. The blasted thing would always have some issues and they were expensive: AC compressor died $2000, Rear shocks leaked $750, Stupid pax tires worn out $1500. Sure, in aggregate, they were less a year than a monthly payment times 12, but it was more than aggravating since they were unplanned expenses.

Finally leasing means you can get the car you really want and not worry about it. My 535xi is in the shop for the 2nd time for HPFP. My lease is up in June. I'm debating lease vs buy on a 135i or 128i. Based on how unreliable these turbo engines are, I don't think I'd want to buy it. However, leasing it, who cars? So it becomes lease 135i vs buy 128i.

On the flip side though, the bad part of leasing is you are stuck with the car. it is very hard to get rid of a leased car. I leased a 535xi when my circumstances were different job and driving wise. I changed jobs and I barely drive it now. I will turn it in with over 15000 miles left on the allowed mileage. I tried to sell it via swap a lease, but if you are like me and lease with $0 down, your payments are not competitive with people on swapalease who put huge capital reduction down payments, so your car does not swap.

so Lease == no hassle and predictable, but you are stuck with the car for 3 years even if you want to get rid of it.

[Bimmer-Bob]

Originally Posted by potxoli

^^

Hi,

Another point to consider is the complete predictability of payments while leasing a BMW with maintenance included. If your budget is $500/month say, you pick a car with that lease payment, then from a cash flow perspective you know that is ALL you have to pay ever. You lease for 3 years, enjoy free standard maintenance, bumper to bumper warranty and at the end of 3 years, you turn in the key and walk away.

My Family's daily driver is a Honda minivan. Fully paid off. I've owned it outright for 3 years. The blasted thing would always have some issues and they were expensive: AC compressor died $2000, Rear shocks leaked $750, Stupid pax tires worn out $1500. Sure, in aggregate, they were less a year than a monthly payment times 12, but it was more than aggravating since they were unplanned expenses.

Finally leasing means you can get the car you really want and not worry about it. My 535xi is in the shop for the 2nd time for HPFP. My lease is up in June. I'm debating lease vs buy on a 135i or 128i. Based on how unreliable these turbo engines are, I don't think I'd want to buy it. However, leasing it, who cars? So it becomes lease 135i vs buy 128i.

On the flip side though, the bad part of leasing is you are stuck with the car. it is very hard to get rid of a leased car. I leased a 535xi when my circumstances were different job and driving wise. I changed jobs and I barely drive it now. I will turn it in with over 15000 miles left on the allowed mileage. I tried to sell it via swap a lease, but if you are like me and lease with $0 down, your payments are not competitive with people on swapalease who put huge capital reduction down payments, so your car does not swap.

so Lease == no hassle and predictable, but you are stuck with the car for 3 years even if you want to get rid of it.

I see your points, but to be fair the tire replacement expense would have been yours to cover even if the car had been a lease.

As far as the unpredictability of unplanned vehicle service - true enough, but one's budget should ideally include some amount towards these sorts of "rainy day" expenses. And even you admit that the cost of maintaining your payed off minivan is less than leasing a new one would be.

[M135]

Originally Posted by jpd

NO matter how you slice it a lease is like renting. At the end of the term you turn the car back in and pay for extra wear and tear. At best you owe zero. Buying the car gives you a future trade in value of $$$$. It seems that most people on this website lease because they don't have enough saved or a trade to support a modest monthly payment.

You probably consider a car an investment as well, right? Your logic is so flawed, I can't start to even be motivated to correct you.

[Aries932]

Originally Posted by 1SerieStud

The way I see it is: leasing a car is like renting a house/apartment. You make payments that never go towards anything, since you don't own anything at the end of the term.

So unless you see yourself changing cars very regularly, or unless you're mainly concerned about low payments, buying is the way to go if you truly like the car and see it in your future. My $0.02.

Umm actually this statement is completely incorrect. If anything a house usually holds its value...

With a car the more you drive it the more money you loose. In my case I just leased a brand new 2011 135i and I pay $500 per month for the next 3 years...so about $18,000 over the next 3 years I will pay into the car.

Now go take a look at a 2008 135i with around 40k miles on it. They will sell between 25,000 - 30,000....

http://www.bmwusa.com/standard/conte...fmJUzz4yYtqk4H

Now my 135i was 48,000 brand new with every option. So the money I paid in is almost the exact same amount you loose in the cars value over the same period of time.

Now here is where the difference comes in...if you are like me and believe a BMW is shit without a warrenty then this is the way to go. You never have to worry about selling the car you just turn it in and get a new one for the same price per month (unless you upgrade to say an M3....which you might be able to do if you are making more money at that point).

However if you are the type to keep your car forever well in that case do not lease...enjoy keeping your car and paying for all the ridiculously expensive repairs once your car is out of warrenty.

[Bimmer-Bob]

Originally Posted by Aries932

However if you are the type to keep your car forever well in that case do not lease...enjoy keeping your car and paying for all the ridiculously expensive repairs once your car is out of warrenty.

And enjoy making a car payment every month for the rest of your life.

[Aries932]

Originally Posted by Bimmer-Bob

And enjoy making a car payment every month for the rest of your life.

....Well the only time you would not be making a car payment with financing is after you have paid the car off...

By that time the car is almost always out of warrenty so....enjoy owning a BMW that is out of warrenty.

I would much rather have a car that I know the exact amount I am going to have to pay for it. You have no clue how much money you will need with a car out of warrenty.

Sometimes you get lucky and you dont need much...othertimes your subframe tears on your M3 when you are out of warrenty and all of a sudden you have to buy a new car.

So thanks for the smart ass remark...but I do not risk things like that. Oh and for the rest of my life I will have at the very most a 3 year old car. Man...that sux so bad.

[FJUNO78]

for purchasing to make sense, you have to keep the car for a long period of time. if you are cool with driving a car without a warranty, this can work.

like many folks here said, a car is not a good investment, infact it's not an investment at all - it is guaranteed to depreciate the moment you buy it. To compare it to home ownership / renting argument is laughable...

there is a reason alot of car manufactures exited the leasing game... they were stuck with a boatload of cars that were worth far below what they had calculated. The folks who leased won, the banks lost.

if you drive under 15k miles a year, and insist on having a warranty, leasing is a no brainer... especially with bmwfs... they support their leases with cash incentives and inflated residuals.

Another point, if the car gets into an accident and requires body work. The insurance company puts it back together. The guy who leases, hands it in to the dealership at lease end and gets something new. The guy who made this "great investment" and owns it, has to take a hit on trade in or when they sell it privately. This is a real risk, and for anyone to tell me otherwise is kidding themselves.

There are only 2 cars I would buy... An inexpensive beater... like a used civic in the $7k range. that or a track car or hobby car.

[Bimmer-Bob]

Originally Posted by Aries932

....Well the only time you would not be making a car payment with financing is after you have paid the car off...

By that time the car is almost always out of warrenty so....enjoy owning a BMW that is out of warrenty.

I would much rather have a car that I know the exact amount I am going to have to pay for it. You have no clue how much money you will need with a car out of warrenty.

Sometimes you get lucky and you dont need much...othertimes your subframe tears on your M3 when you are out of warrenty and all of a sudden you have to buy a new car.

So thanks for the smart ass remark...but I do not risk things like that. Oh and for the rest of my life I will have at the very most a 3 year old car. Man...that sux so bad.

Was my "smart ass remark" any more smart assed than yours? Don't act so butt-hurt.

My point is that by leasing, you are committed to a continual fixed expense each month. You very well may be okay with this. I am not.

While it's true that owning a car out of warranty can be catastrophically expensive, this is the exception, not the rule. Every car I have owned out of warranty has been substantially cheaper to maintain than it would have cost to replace. Obviously there comes a point where this is no longer true, but that point doesn't magically arise upon expiration of your warranty.

Part of the reason I didn't buy the turbo car was concerns over longevity - so far it looks like the N52-equipped vehicles are going to be generally reliable.

[Aries932]

Originally Posted by Bimmer-Bob

Was my "smart ass remark" any more smart assed than yours? Don't act so butt-hurt.

My point is that by leasing, you are committed to a continual fixed expense each month. You very well may be okay with this. I am not.

While it's true that owning a car out of warranty can be catastrophically expensive, this is the exception, not the rule. Every car I have owned out of warranty has been substantially cheaper to maintain than it would have cost to replace. Obviously there comes a point where this is no longer true, but that point doesn't magically arise upon expiration of your warranty.

Part of the reason I didn't buy the turbo car was concerns over longevity - so far it looks like the N52-equipped vehicles are going to be generally reliable.

I was not butt hurt at all...it all comes down to the type of person you are....I spend a good bit of money on cars and have no problem doing so. If I didnt lease a car...I would find myself buying a new car every 2-3 years.

I am just not a fan of having old cars. I like the new feel..the new features and dont ever want to feel like I am driving a car that is old. So for me it is much much more cost effective to lease.

If on the other hand the OP is like you and plans to keep the car for a long time...well then go ahead...financing is the way to go.

[RyanE92]

These debates always get so ridiculous. There are simply too many factors to make generalizations.

My $.02:

Assuming you are financially responsible, considering a vehicle within your means, and not looking for a way to get into a vehicle you cannot otherwise afford, both leading and traditional financing should be on the table. But first, you should decide on a vehicle and think about both how long you plan to keep it and how many miles you will drive. After you have those parameters figured out, then decide which option gets you in and out of the vehicle within your anticipated ownership term for the smallest amount of money. For me, that is frequently leasing since I like having a new car every few years. For the person driving 20,000 miles per year or keeping cars for ten years, it will probably be traditional financing.

[Brandon26pdx]

Originally Posted by 1SerieStud

The way I see it is: leasing a car is like renting a house/apartment. You make payments that never go towards anything, since you don't own anything at the end of the term.

So unless you see yourself changing cars very regularly, or unless you're mainly concerned about low payments, buying is the way to go if you truly like the car and see it in your future. My $0.02.

I'm a buyer too...leased once and never felt right about it. My main problem with leasing is that, like every sleazy cell phone carrier out there, it ropes you into a contract that carries hefty penalties for early termination. No thanks.

But to play devil's advocate, most people never "own" a car they buy either--they simply pay the higher payments and sell it 2-3 years later for something else. It's a surefire way to stay broke forever, truth be told.

[Brandon26pdx]

Originally Posted by FJUNO78

Another point, if the car gets into an accident and requires body work. The insurance company puts it back together. The guy who leases, hands it in to the dealership at lease end and gets something new. The guy who made this "great investment" and owns it, has to take a hit on trade in or when they sell it privately. This is a real risk, and for anyone to tell me otherwise is kidding themselves.

Yeah, this definitely is a real risk to ownership, especially if it's a luxury or performance car where prospective buyers are going hold the car's history to a higher level of scrutiny. I mean, shit happens and the other idiot drivers out there don't typically discriminate the "nice cars" from the crappy ones before they decide to hit you. It depends highly on how bad the damage is. Worst case scenario is relatively heavy damage involving the frame and suspension, requiring 5-figure repair bills, but not enough to total the car. Somebody backing into your $40-50k car requiring a new fender or bumper and some paint...yeah it definitely sucks but it's not really the end of the world.

With a lease you're off the hook on this kind of stuff because the residual value is fixed from the outset, although you're still no less obligated to drive the car (and pay for it) for the remainder of the contract, unless you can find someone to assume it.

[Brandon26pdx]

Originally Posted by jpd

NO matter how you slice it a lease is like renting. At the end of the term you turn the car back in and pay for extra wear and tear. At best you owe zero. Buying the car gives you a future trade in value of $$$$. It seems that most people on this website lease because they don't have enough saved or a trade to support a modest monthly payment.

Leasing is a relatively recent thing in the car buying world, I would say about the last 12-15 years it's really picked up steam. This was done in response to the outrageously increasing cost of new cars over the decades, for a long list of reasons. They're more sophisticated financial instruments than simple financing that used to be limited to B2B. Now they often seem to be subject to abuse by less than totally responsible consumers...basically used as a tool so people can drive off in more car than they can really afford.

Honestly I'm glad the banks are losing their asses a little on lease residuals and wouldn't mind a bit leases went away. Just like sub-prime mortgages, the goal here is for the banks to get rich by enticing riskier buyers into riskier contracts and then jamming them with fees. The buyer's, in general, cannot be trusted to police themselves.

[bdoooh]

I think it also comes with age.. Older folks want to buy their cars & keep it forever like my parents.. I am 23 years old. I don't want the same car for the rest of my life.. I want a new car ever few years whether I say so at the time or not..

I'm looking for a new lease because let's say a lease a brand new 135 is $500/mo with $2,000 down.. If you put that much down & financed it for 60 months, you'd be paying significantly more & in 3 years you would have gone nowhere in your loan. Whereas on a lease.. I can save up $10,000-$15,000 within the next 3 years.. and if I wanted to keep it for whatever reason I can just put that as a down and payment would be the exact same and I would just need to pay for it for another 2 years or so.. And in say.. 1 year later if I wanted to trade it in? Since I put that 10-15k down on it.. It would still have equity.

[M135]

I'd say you'd be looking at what, $700 per month with $2K down for 60 months at 2.9 (not sure what their rate is now though)? $200x36 months=$7200 and it is already owned.

Should mention that a used interest rate will be more than a new rate...you are still financing over half the vehicle value.