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09-17-2008, 10:40 PM | #23 | |
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Cashflow for depreciating assets, cash for appreciating assets is a good rule of thumb. |
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09-17-2008, 11:31 PM | #24 |
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people who say leasing is wrong are the same people who want to "pay off their home quick" so they can "not have a payment" (and lose one of the best tax deductions they have) in lieu of putting the money to work in better investments
for people who but a new car every 3 years or so, and drive 10-15k miles a year, leasing is IDEAL. no up front sales tax, guaranteed residual, and an option to buy if you so choose. leasing has been PHENOMENAL over the last few years, mainly because the auto makers were subsidizing it and accepting CONSIDERABLE risk as has been pointed out. buying = up front sales tax and no guaranteed residual. tell me again why that's better? it's only better if you have incentives like BMW has now on financing because they've chosen to subsidize purchases, or when lease residuals fall to the point where payments become higher than typical finance payments. end of story
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09-18-2008, 02:39 AM | #25 | |
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leasing just scares people that don't understand it, and that don't understand finance. leasing is not always the best option for everyone, but neither is buying.
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09-18-2008, 02:47 AM | #26 |
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On a lease, I would feel like I was driving someone elses car.
I bought mine. It is paid for. It is a good feeling. Tax break be damned, I would love to have my house paid off. JMHO |
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09-18-2008, 02:59 AM | #27 |
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way way way oversimplified example regarding paying off a house (yea this is OT, but the guy above mentioned paying off a house, made me think):
a) you buy a house putting 0 down, borrowing the entire amount. you hold it for a year, and you sell it for a 5% gain (real estate gains 5% per year on average). Your return on investment (just the monthly payments) is huge because you didn't put money down. b) you buy a house and pay it off. hold it for a year and sell it for a 5% gain. you only made a 5% return. better off putting your money in the bank. which makes you feel better? you don't want to be overleveraged, of course that leads to bankruptcy. but you don't want to be so risk averse either. it's the concept of financial leverage and the power of borrowed money.
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09-18-2008, 05:18 AM | #28 |
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09-18-2008, 06:03 AM | #29 |
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I leased simply because I know I am going to want something new in 3 years. I only paid the taxes up front, I avoid any hassle of reselling the car. Its was an easy choice.
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09-18-2008, 06:07 AM | #30 |
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09-18-2008, 08:06 AM | #31 |
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Yah, the lease option has both financial and emotional components...
With both VW and BMW, I have found that they are partial to on-going lease customers. They have these so called "owner loyalty" programs which are designed to provide incentives to keep you hooked. That may all be changing now if its true they have been loosing money (which would not suprise me at all). I have had residual values which were way higher than what they would have offered me as a trade in. Will be curious to see if that is also going to be the case with my leased 1er.... I personally have been able to get pretty much everything waived at the end of the lease as long as I agreed to lease again. I have had all the costs of repairs, tire replacements and even extra mileage all waived. AND, then I got lower lease rates as a repeat customer. The only significant issue I see with my 1er is that I can't stop driving the damn thing. BMW charges 16 cents/mile if you buy extra miles before your lease runs out. That's $1,600 for 10,000 extra miles. I could be in trouble !!!!!
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09-18-2008, 08:35 AM | #32 |
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Where's the sense in discarding a perfectly good automobile after three years? Short-term financial thinking if you ask me. It is almost always cheaper to maintain/repair an older car than obtain a new one.
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09-18-2008, 08:55 AM | #33 |
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priced a bmw engine lately?
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09-18-2008, 09:22 AM | #34 | |
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It's not about sense. It's about enjoying yourself. Buying a BMW doesn't make good sense in the first place from a financial point of view. A Honda will get you where you need to go just as well for a lot less money. I find that I get tired of a car after about 3 years, and want something new. The chances that I'm going to pay off a car and drive it until the wheels fall off are exactly zero. Leasing is a good option for a lot of people. (FWIW, I didn't lease the 135i) |
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09-18-2008, 10:04 AM | #36 |
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I'm surprised at all the slamming of leasing, it makes me wonder if people understand how leasing really works, because its not actually much different from regular financing. The only difference is that a trade-in time and value is set in advance (i.e. the residual), with certain trade-in conditions also set (i.e. mileage). With that factored in, its pretty much a straight amortization from there-on in, just like financing (i.e. interest is calculated the same way).
Whether leasing is a good deal or not depends on the interest rate on the lease compared to if you financed, and what the residual value is compared to what you THINK you can sell the car for. This last part is a gamble, but as the original post points out, retailers (BMW in particular) often set the residual value artificially high in order to encourage sales and increase value in the used market. But financing is a gamble too, because you don't know how much you can sell your car for in 3 years time. For example, if you get in an accident that is totally not your fault and get it repaired perfectly at the best body shop in town, you've still lost $1000 or more on the resale value of your car. On a lease it doesn't matter. Also some options like navigation have horrible resale value, but with a lease its all calculated together with the overall residual. Leasing is not inherently better or worse than financing. They each just come from different perspectives and its up to the conditions and a little luck as to which will work out better. With my just returned 2006 325, I'm sure it worked out better for me to have leased it. -Tim |
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09-18-2008, 11:36 AM | #37 | |
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I just have a rule of thumb now days to not take any kind of loan out on anything that deprecates. When buying a new car they try to push a lease on me and the payments are way too high to pay for a car that you have nothing in the end. I think that is how people got into trouble with all the foreclosures. I have been bidding on shorts sales and foreclosures for investment property and see this over and over by the people trying to get out of there house that they overextended on, have two big SUV’s that are upside down on a lease, and have $25K credit card debt at 20% interest.. I agree about the resale value of BMW’s going down. In 2004 I traded in my 4 year old 3 series and lost $12K over the new price on the trade. In June when I traded in my 4 year old Z4 I lost $20K over the new price. I guess the guys that did lease somehow got a better deal than the people that took loans but the piece of mind of no payments is priceless to me.
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09-18-2008, 12:14 PM | #38 |
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I posted the original information because I think it's interesting - and for potential buyers, also helpful - to know what a dealer network is thinking and how they are structuring their business strategy before we put our money on the table. You'll notice the post wasn't 'pro-lease' or 'anti-lease' - the 1/3 Billion dollar write-down is a comment about BMW NA's business (and not a very good one...), not about what a given buyer should do. It's relevance to us is that it coaches us on how the game is changing.
As for the financial aspects of leasing (vs. borrowing to own vs. buying outright), I don't think I saw a single post above this one that approaches the financials of car buying the way a financial planner would. I may have missed it but every 'pro' or 'con' lease comment seemed to be based on a glorious assumption: the purchase of new, high-end car can make some kind of financial sense. All kinds of spreadsheet number-crunching and factor weighing can spring from that assumption, of course, but we all know it isn't really true. We eat food for its nutritional value; it's our body's fuel. We eat dessert 'cause it just tastes so good. Jack |
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09-18-2008, 12:18 PM | #39 | |
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09-18-2008, 01:08 PM | #40 | |
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b) I agree a 5% return on a large cash sum is quite poor value. In both cases realty, survey & conveyancing fees would count against your gains. Therefore neither would make me feel better. I lease my work vehicle as I can partially offset the lease payment & also lower my tax bracket at the same time. When the lease is up I often buy out the vehicle privately and use it as my 'smoker' It's a better bet than trying to find a 2nd hand car to use as a smoker because I know the history of it. My weekend vehicle is another thing altogether. With a few exceptions, I buy but try not buy anything that requires me to take out a loan. . |
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09-18-2008, 01:28 PM | #41 |
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350 million reasons not to get into a discussion between lease or purchase. Both positions are defensible and the decision is base on individual preference and financial wherewithal.
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09-18-2008, 02:24 PM | #42 |
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Here is my personal perspective...
If I had bought my 335i in 2007 instead of the current 2 year lease I would have been in serious trouble: 1. It has been unreliable - I'd never want to keep it long term. 2. Its market value after 2 years will be significantly lower than the RV from the lease - blame the economy, the recent brutal RV adjustments etc. If I bought it with my own money, I'd loose my shirt on it. Leased and used a testbed, it has been an eye opening experience in more ways than one. I'm still pondering my next year's move come lease end: get a new 135i hoping all previous problems have been solved, wait another year to buy a used E90 M3, or go to a totally different brand. Leasing has provided me with the freedom to ponder these choices, while my cash is slowly being eroded in the lousy stock market. :smile:
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09-18-2008, 02:27 PM | #43 |
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i was just oversimplifying for example sake. here in LA, before this recession property was going up a little bit more than 5% :wink:. getting property with 0 down was the best way to leverage that
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09-18-2008, 02:29 PM | #44 | |
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that's all i was trying to argue in this thread. that you can't categorically say that one is better than the other.
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