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BMW 3-Series (E90 E92) Forum > BMW E90/E92/E93 3-series General Forums > General E90 Sedan / E91 Wagon / E92 Coupe / E93 Cabrio > How are people purchasing their BMW?



View Poll Results: How did you buy your E90?
Leasing 40 19.32%
Financing 81 39.13%
Buying outright 86 41.55%
Voters: 207. You may not vote on this poll

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      09-08-2005, 05:04 PM   #67
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Quote:
Originally Posted by wac77
That is not true if the alternative is paying the $42K + another $6K interest over the next 4 years!!
The counterpoint is that if you can put the money that you would have paid outright for a car into an investment that yields an annual return greater than the interest you're paying, you're better off financing than paying cash.
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      09-08-2005, 05:26 PM   #68
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Quote:
Originally Posted by selm
My favorite topic!

Let us not kid ourselves, the best financial thing to do is buy a 3 year old 4 cyl camry in cash, and drive it for the next 10 years. Now know one hear wants hear that as we are emotionally attached to our bimmers.

...invest it monthly into one of my ETFs which has returned greater than 14% over the last 3 years. Assuming that past performance is an indication of future performance, I more than make out by leasing over buying even when taking into account the acq. fee.
14% over 3 years or 14% per year? Where are you getting a return like that?

I bought outright because I hate car payments, paying interest, and because I could. I'm not rich, don't have a high income, but I've been buying ESPP shares in the company I work for and after a few years, it accumulated to enough to cover the car. Barely. I do expect to keep the car long term, at least 10 years. My last car I had for 8 years, and an earlier one I kept for 10. This one I can expect to even keep longer, I'd think, because it's much better built.

No, it's not a wise financial decision, the wiser thing might have been to buy a new Malibu (I have a GM credit card, grew up in a GM family) and put the extra 15K into a home upgrade. But just for once I wanted to treat myself, as long as I could.
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      09-08-2005, 06:05 PM   #69
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Quote:
Originally Posted by eimSD
14% over 3 years or 14% per year? Where are you getting a return like that?

I bought outright because I hate car payments, paying interest, and because I could. I'm not rich, don't have a high income, but I've been buying ESPP shares in the company I work for and after a few years, it accumulated to enough to cover the car. Barely. I do expect to keep the car long term, at least 10 years. My last car I had for 8 years, and an earlier one I kept for 10. This one I can expect to even keep longer, I'd think, because it's much better built.

No, it's not a wise financial decision, the wiser thing might have been to buy a new Malibu (I have a GM credit card, grew up in a GM family) and put the extra 15K into a home upgrade. But just for once I wanted to treat myself, as long as I could.
- did you happen to be in mission valley yesterday around 12:30? LoL.. i saw a artic E90, and was just curious if that was you! haha..
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      09-08-2005, 06:21 PM   #70
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Quote:
The counterpoint is that if you can put the money that you would have paid outright for a car into an investment that yields an annual return greater than the interest you're paying, you're better off financing than paying cash.
The key word is "if"...
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      09-08-2005, 06:45 PM   #71
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Quote:
Originally Posted by BellasBmw
- did you happen to be in mission valley yesterday around 12:30? LoL.. i saw a artic E90, and was just curious if that was you! haha..
Actually I WAS in mission valley yesterday, but unless you were driving through the parking garage of the mv Hilton, it wouldn't have been my car. I was there for a seminar, continuing education for my job. Normally would be in Univ. city, middle of a weekday...
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      09-08-2005, 07:15 PM   #72
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Quote:
Originally Posted by cpcollin
The counterpoint is that if you can put the money that you would have paid outright for a car into an investment that yields an annual return greater than the interest you're paying, you're better off financing than paying cash.
Name the investement that guarantees you an after tax return above the car loan interest rate every year for the next 4 or 5 years, and I'd agree. But then again - forget about cars, why aren't you and everybody else just getting rich by making that investement on borrowed money??
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      09-08-2005, 07:43 PM   #73
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Quote:
Originally Posted by eimSD
Actually I WAS in mission valley yesterday, but unless you were driving through the parking garage of the mv Hilton, it wouldn't have been my car. I was there for a seminar, continuing education for my job. Normally would be in Univ. city, middle of a weekday...
Ohh ok.. close but not quite! How funny, now when i see e90's out there, im always curious if its someone from the forum.
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      09-08-2005, 10:21 PM   #74
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Quote:
Originally Posted by wac77
Name the investement that guarantees you an after tax return above the car loan interest rate every year for the next 4 or 5 years, and I'd agree. But then again - forget about cars, why aren't you and everybody else just getting rich by making that investement on borrowed money??
Of course there's no guaranteed investment. Risk and return are inextricably linked. I financed approximately half the cost of my car at 4.49% with a 5yr term. At the time I settled financing, the 5yr treasury bond was yielding 4.22%. Add in some risk premium with a strong-credit corporate bond, and you're close to the goal with little risk (before tax).

It's all about your situation and risk tolerance. Instead of buying outright, I split the difference and hope to beat that 4.49% year over year. So far so good.
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      09-08-2005, 10:41 PM   #75
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Quote:
Originally Posted by Socom
NE1 that pays $42k cash for a car is stupid. When I say stupid I mean "bad financial decision". Why someone would put that much money into a depreciating asset that will most likely (regardless of your current intentions to keep the car for "years") be sold within the next 3-6 yrs is beyond me. The only reasons I can think of as to why someone would buy at car of this price #1 Has tons of excess cash (ie. makes $150k/yr), #2 Must drive 15k miles or more on a yearly basis.

As for financing your purchase..Here's a good rule of thumb, but you have to be extremely honest with yourself. My golden rule of auto financing is....If you can't payoff the loan in 48mo's without drasticaly(sp?) altering your lifestyle, you can't afford the car. period.

carry on.
I don't get your argument. I never said BMWs are a sound investment, it's not a house. Are you saying it's a better idea to constantly rent a car that you can't afford?
I don't make $150k a year but not too far off, I do drive more than 15k some years and I don't want anybody telling me how much I can drive my car, and I can pay off the loan in less than 48 monthes without a problem.
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      09-08-2005, 11:10 PM   #76
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Quote:
Originally Posted by wac77
Name the investement that guarantees you an after tax return above the car loan interest rate every year for the next 4 or 5 years, and I'd agree. But then again - forget about cars, why aren't you and everybody else just getting rich by making that investement on borrowed money??
I was neglecting the fact that principal is reduced over the term of the loan. Even at the figures I quoted in my earlier message, you can earn more after tax than you pay in interest over the life of the loan. (ignoring time value of money, and assuming you can make the monthly payments from ongoing income)

Assume:
* $40k principal, 100% financed.
* 4.49% borrowing rate.
* 4.22% 5-year treasury yield. Paying coupons 2x/yr.
* 35% tax rate (applied at time coupon paid for simplicity)
* Able to reinvest coupons at same rate (4.22%)

The monthly payment works out to $745.54
First payment = (595.87 principal, 149.67 interest)
Second payment = (598.10 principal, 147.44 interest)
...etc..

Total interest paid over 5 years: $4,732
Total after tax gain on $40k invested: $5,837
Net: $1,105

Sure it's just a theoretical example, but my point is that it's not that hard to use leverage to your advantage. The advantage can be magnified if you find a way to deduct the interest that you pay, such as financing with your home equity.

Rack me, I'm out.
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      09-09-2005, 03:08 AM   #77
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Quote:
Originally Posted by cpcollin
I was neglecting the fact that principal is reduced over the term of the loan. Even at the figures I quoted in my earlier message, you can earn more after tax than you pay in interest over the life of the loan. (ignoring time value of money, and assuming you can make the monthly payments from ongoing income)

Assume:
* $40k principal, 100% financed.
* 4.49% borrowing rate.
* 4.22% 5-year treasury yield. Paying coupons 2x/yr.
* 35% tax rate (applied at time coupon paid for simplicity)
* Able to reinvest coupons at same rate (4.22%)

The monthly payment works out to $745.54
First payment = (595.87 principal, 149.67 interest)
Second payment = (598.10 principal, 147.44 interest)
...etc..

Total interest paid over 5 years: $4,732
Total after tax gain on $40k invested: $5,837
Net: $1,105
Your computation is not really fair. You should either take the $745.54 monthly payment out of your invested capital (slowly reducing it to almost nothing after 5 years, cutting your total gain in half, approximately), OR consider the investement gains on a extra account that accumulates $745.54 a month, which would give you about half of those $5837 gains, in the purchasing scenario.

In the end, you have both the interest spread and the taxes playing against you. Can't win unless you consider higher return (riskier) investements!
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      09-09-2005, 07:43 AM   #78
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Quote:
Originally Posted by wac77
In the end, you have both the interest spread and the taxes playing against you. Can't win unless you consider higher return (riskier) investements!
Exactly. If you have the tolerance for it, a riskier investment wouldn't be a bad move. You still have taxes working against you, unless you're able to finance in a manner that lets you deduct your interest.

A few years ago you wouldn't be bad off putting the hypothetical $40k down on a rental property and let the rents service your mortgage. (You might not be bad off now, but I'm not willing to play in this market)

There's no unequivocally "right" way to acquire a vehicle. It's all situational. Personally, I like the opportunity to do something productive with my cash in the present so I did some financing rather than a full cash outlay. I also wanted an easy monthly payment, so I split the difference.

Good luck waiting for your xi!
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      09-16-2005, 08:39 AM   #79
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I buy my cars outright, my inlaws lease since they writeoff against their business, and my parents finance via home equity.

Nice to have choices. Whether or not its a good idea is always hindsight. I could very well lose 35% in my portfolio like I did in 2001-2003.
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      09-16-2005, 09:11 AM   #80
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[QUOTE=Thumpzilla]I believe a home has a tendency to go up in value, most cars do not.
So I don't think that is a good analogy.

The 335 will be out in Sept of 06, our current 330I will take a hit residual wise. I bought last time, leasing this time because it make sense given this info from a friend at BMW[/QUOTE
are you certain about the 9/06 availability of the 335 or even that it's coming to the us?
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      09-16-2005, 09:30 AM   #81
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I don't do any of these. I don't own my car, the company I work for has bought it outright with cash and gives the car back to me for my own exclusive use. They pay all insurance, maintenance, fuel etc etc, I just drive (oh, and pay the speeding fines ). I am not limited by annual kilometer limits, and every 4 years or 80,000 kms I get a new car, or can buy the car from the company at the car's "average wholesale value" according to the Red Book.

I can buy any car I like, and the amount that is included in my package is based on the purchase price of the car. Because I am on the highest tax rate of 49.5% my salary package amount is virtually halved, ie if the salary amount for the car is $10k, only $5k actually comes out of my hand.

It works well for me because of my employment circumstances and my tax/financial situation, however this scheme could be financially disasterous for someone in different circumstances, ie those on lower tax brackets.

The point is, that buying a car is probably your second largest purchase (after your house) and therefore a significant financial decision. What works for someone, is not appropriate for another. Those people prescribing what others should do without understanding their personal circumstances obviously do not have a finance background.

But here is advice that does apply to everybody: If you know what you are doing with money, then carefully consider and select the option what leaves you with the greatest overall wealth. If you don't know what this means, or are not good with money, then see your accountant or financial advisor and find out what purchasing method is actually the best for you.

Oh, and as for these idiotic generalist comments about "scams", something is only a scam, or a waste of money, if the extra cost involved in accessing that method is not outweighed by the extra value or benefits created for you personally, or you have been lead into a disadvantageous deal without doing your homework, in which case it isn't really a scam, but your own stupidity.
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      09-16-2005, 01:10 PM   #82
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Quote:
Originally Posted by Kao BMW
If you wanted to switch cars every 2 years, just trade in what you bought. I've always done that all my life... but again, my financial situation is a little different.
I hope you are joking, because if not then you have absolutely no understanding of auto financing. Your dealer must LOVE you, because your are the perfect customer.

If you are switching cars every two years then you should be leasing unless you are doing serious mods, or driving very high miles.

I also used to have the attitude that leasing was a poor financial decision, its only benefit being lower monthly payments. But when I decided I wanted an E90, I did a thourough investigation into leasing and found that it made a lot of sense for ME. I don't drive a lot of miles, I like a new car every 2-3 years, I hate paying for repairs, I hate selling a car privately or haggling on a trade-in, I like having the extra cash flow for investment or whatever, I can write off part of the lease through my business.

Leasing a BMW, in particular, can be very worthwhile because of their high residual values. I wouldn't dream of leasing an American car. :

Anyways, I know I am mostly repeating what others have already said in this thread, but I wanted to chime in because I'm surprised at how generally misunderstood leasing is. If you are someone who buys a new car every few years then I would encourage you to look into leasing.
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      09-19-2005, 01:15 PM   #83
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      09-19-2005, 09:32 PM   #84
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This may sound like a reiteration of previous posts, but I thought I might as well toss in my insights on leasing (eventhough I'm buying):

New cars will always depreciate (lose) value. No matter if you're buying or leasing, you will be spending money on your car's total value every day you have it (excluding gas and upkeep).

A simple way to look at leasing is you're only paying for your car's depreciation for the period that you drive it.

As compared to buying, where your paying for your car's depreciation, plus the total value of the car.

These simple numbers are what convinced me a while back:

Total cost new: $36,000
Term of lease: 3 yrs
Estimated value 3 yrs later (blue book): $24,000
Depreciation over 3 yrs: $36,000-$24,000 = $12,000
Monthly depreciation: $12,000/36 months = $333 / month = base payment

Of course all situations are different and there are a billion other factors/fees involved, so its just a matter of what fits best. This is what worked for me at the time (going against people saying leasing is stupid), and I never regretted it.


I'm not leasing anymore because I made a ton of cash in Real Estate (because of value "appreciation" obviously), so I'm buying now (which leaves me more options with the Bimmer).
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      09-20-2005, 07:30 AM   #85
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as long as you end up driving a bmw who cares how you got it , its all about driving and enjoying the beauty of an e90
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      09-20-2005, 07:46 AM   #86
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Quote:
Originally Posted by davinet78
as long as you end up driving a bmw who cares how you got it , its all about driving and enjoying the beauty of an e90
Well said
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      09-20-2005, 08:42 AM   #87
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I think the E90 is relatively inexpensive. Considering that the average American income is rougly 35 grand a year, most people could FEASIBLY afford to own one. I see tons of people driving Ford Expedition Eddie Bauer editions and wonder why didnt they purchase a beautifully engineered 3 series instead? One could argue because of the room, but why didn't they opt for a $20,000 Dodge Caravan instead? My point is that people when people think of BMW, they think, "whoa, outta my league", but then turnaround and spend 45k on a Expedition.
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      09-20-2005, 08:51 AM   #88
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