[E90 Enthusiast]

Originally Posted by dme330i

All of you who simply state that one way is always better than the other are misinformed. It all depends on your own particular situation and preference.

Well said!! Leasing, financing, who 'owns' the car.... it's all semantics. Cost of 'ownership' or operation is what you need to look at. Since people's driving habits, rate of depreciation, financing rates, term, tax considerations, etc. all vary so widely from situation to situation, there is no way that one method is always superior. Those who are making those broad generalizations are misinformed.

[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

[Thumpzilla]

Also, My last car got hit from behind, 6k worth of damage. Try selling it anywhere once they run a carfax report.

Never thought I'd lease, but when your buying a 45k car and you financed it, if it gets hit you will take a huge bath. If you leased it,they will fix it, probably won't run the same ever again...so you deal with it and throw them the keys when the term ends, it's their problem.

80% of all BMW's are leased, it's not for everyone but it does makes sense for alot of people.

Best time to buy is the last year of an old model just as the new models hit.

Good luck to all.

[theclay]

Originally Posted by Thumpzilla

80% of all BMW's are leased

Just wondering where you got that number? Is it a fact or just something you heard or thought up?
Not trying to be a jerk, just curious.

[Nikki]

Originally Posted by theclay

Just wondering where you got that number? Is it a fact or just something you heard or thought up?
Not trying to be a jerk, just curious.

I don't know where he got his numbers from, but my research provided the following:

BMW spokesman Robert Mitchell said between 45 percent and 55 percent of BMW customers typically lease their vehicles.

edit: and for a comparision, here is the US average:

Overall, leasing levels have crept up to 15.8 percent as of May 2005, reports Mike Chung, pricing and market analyst for Edmunds.com.

[orso]

it seems not....for example, someone on this thread claims leasing is a good idea because of the high residual and that the E90 will take a hit when the new models come out....jeez, do you think someone in the finance department of BMW hasn't thought about that and adjusted the residual to take account of that?


the only way to figure this out is to compare the net present value of the relative cash flows....


assume a 10K asset you want to buy. You can either buy outright, finance or lease. You then need to know how much money you will pay each year, the residual value belonging to you if you finance and the appropriate discount rate. punch those numbers into a calculator and deduct any down payment (and add the residual value in the case of the finance option) and compare to the 10K upfront purchase option. whichever of the three numbers is larger is the way to go. usually the 10K upfront will win...i.e. the lease payments in today's dollar value will exceed 10K and so will the loan payments.

So the winner is usually the person who can pay it all upfront.

Now, since banks and BMWFinance are in the business of making money and they know that many people do not have 40K to pay upfront they step in and offer to front you the money...whether as a loan or a lease. BUT you pay a premium for that service and it is likely to be at a higher price than your alternative investment opportunities. But you may have no choice if you want the car.

In the case of the lease, they will adjust the residual to reflect the risk they are taking on with a lease.

So it seems to me that if you have the cash outright purchase always wins especially if you plan to hold on to the car (hence my question about lasting power of the E90) to the point where you have gotten more value out of it than its residual (e.g. keeping it for 100K miles).

[RyBMW]

How accurate is the residual of 61%?

[Nikki]

Originally Posted by RyBMW

How accurate is the residual of 61%?

It's the commonly used number according to lease calculations I've seen.

[wchew]

Alright, this has nothing to do with BMW, why don't you guys just tell us what univerisity you went instead of telling us it is "very famous". Tell us the name and everyone can judge if it is "very famous". Heck, I know some people that thought the community college they went to are "very famous".

So I guess dxk you went to Harvard Business School? Kao BMW you are professor at Stanford/Berkeley? Cnote you went to Harvard as well?

[Nikki]

Originally Posted by wchew

Alright, this has nothing to do with BMW, why don't you guys just tell us what univerisity you went instead of telling us it is "very famous". Tell us the name and everyone can judge if it is "very famous". Heck, I know some people that thought the community college they went to are "very famous".

So I guess dxk you went to Harvard Business School? Kao BMW you are professor at Stanford/Berkeley? Cnote you went to Harvard as well?

Don't even bother with them. I have been reading through this thread and quickly discovered that at least half of these people don't know what the hell they are talking about.

[dme330i]

Originally Posted by orso

the only way to figure this out is to compare the net present value of the relative cash flows....

assume a 10K asset you want to buy. You can either buy outright, finance or lease. You then need to know how much money you will pay each year, the residual value belonging to you if you finance and the appropriate discount rate. punch those numbers into a calculator and deduct any down payment (and add the residual value in the case of the finance option) and compare to the 10K upfront purchase option. whichever of the three numbers is larger is the way to go. usually the 10K upfront will win...i.e. the lease payments in today's dollar value will exceed 10K and so will the loan payments.

So the winner is usually the person who can pay it all upfront. . . .

Valid points for a long-term owner. For the short term owner, however, considering front-end (i.e., sales tax) and back-end tax (i.e., income tax deduction) benefits, leases are hands-down, better than financing or paying for the car upfront. On average the tax-benefits save me approximately $7000 for the 2-year period vs. an up-front purchase. The effective net annualized cost (not including fuel) for me to drive a $42K 330i is approximately $4000.

[Thumpzilla]

I surely don't claim to be an authority on BMW's. My friend works at BMW and told be this, whether its valid or not

He did say that BMW feels they have to get up to 300hp on the 330 because of g35 ect.

Just trying to relay what little I know for the good of the group.

[F32Fleet]

Originally Posted by theclay

I agree that leasing is stupid unless you can write the lease off at tax time. However buying outright is the smartest way to go unless you enjoy giving banks your money and paying much more for the car in the end. I financed about half the cost because I didn't want to totally deplete my savings but I intend to pay off the loan early so as to avoid most of the interest.

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.

[wac77]

Originally Posted by Socom

NE1 that pays $42k cash for a car is stupid.

That is not true if the alternative is paying the $42K + another $6K interest over the next 4 years!!

[blueStreak]

Originally Posted by Nikki

I have been reading through this thread and quickly discovered that at least half of these people don't know what the hell they are talking about.

[Kao BMW]

I'm just kidding yall. I don't have a PhD. I was just imitating 'dxk' for starting his argument with his credentials. I'm mean who cares? It's not like we value someone's opinion more because they have an MBA or PhD, right? or do we...

My true feeling are that, yes, it all depends on financial situations. Of course it is.

Buying outright has it's benefit, financing has it's benefit, but I just don't think leasing serves any benefit.

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.

If you got the dough, buying outright is clean and crisp with no hidden fee. yea or nea?

[Thumpzilla]

[QUOTE=Thumpzilla]Also, My last car got hit from behind, 6k worth of damage. Try selling it anywhere once they run a carfax report.


http://www.e90post.com/forums/showthread.php?t=4177

[txusa03]

damn, 40% (on 9/8/2005) of you bought the car outright, you guys/gals have deep pockets...

[Flee67]

NE1 that pays $42k cash for a car is stupid.

What are the chances that someone who can pay cash for a car is stupid? Unless they're a professional athlete, entertainer, etc....?

#1 Has tons of excess cash (ie. makes $150k/yr),

Of course, if your monthly cash flow is quite high and you're still meeting your investment needs, why not just pay for the car outright? My interest rate is 0% because my monthly car payment is $0!

Financing the car (especially if the rates are low, or if you use a home equity loan for deductible interest) makes sense because it leaves more money available to invest in "appreciating" assets rather than putting it into something that loses money the second you drive off the lot.

As an alternative, you could instead add the amount that you would have spent on a lease/car payment into your investment stream and get the effects of dollar cost averaging. I personally don't like the idea of using home equity loans for non-home related items because your home is used as the security on other things, but that's just my opinion

[F32Fleet]

Originally Posted by Flee67

What are the chances that someone who can pay cash for a car is stupid? Unless they're a professional athlete, entertainer, etc....?

Of course, if your monthly cash flow is quite high and you're still meeting your investment needs, why not just pay for the car outright? My interest rate is 0% because my monthly car payment is $0!

As an alternative, you could instead add the amount that you would have spent on a lease/car payment into your investment stream and get the effects of dollar cost averaging. I personally don't like the idea of using home equity loans for non-home related items because your home is used as the security on other things, but that's just my opinion

I know a guy who makes about $75k/yr with 1/3 of that in the form of bonus income. He saved for 2yrs to buy a MB SLK cash. In this instance it does not make sense for him to dump all the money into a car. But like I said earlier, if you make lots of $$ then of course, pay cash.


It suffice to say, if people only paid cash for their cars then we'd be living in a vastly different world.

[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.

Leasing adds in the acquisition fee, an amount that is not there when financing. Consider that the "penalty" for leasing assuming interest rates are constant.

I did some net present value analysis before I decided on the lease/buy and determined that my difference in payment was approximately $250/mo with no money down. So here is what I have planned to do. Over the life of the car, I am going to take my $250 every month and 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.

There are also added "insurance" benefits to leasing. Like the care getting into an accident, being less than reliable (a real concern since I have leased the first year of a new body style), changes in one's lifestyle (i.e. kids), etc. These things mean more if you are financing and want to keep the car long term.

Just my $.02, I hope it helps someone.

[dxk]

Originally Posted by Kao BMW

I'm just kidding yall. I don't have a PhD. I was just imitating 'dxk' for starting his argument with his credentials. I'm mean who cares? It's not like we value someone's opinion more because they have an MBA or PhD, right? or do we...

My true feeling are that, yes, it all depends on financial situations. Of course it is.

Buying outright has it's benefit, financing has it's benefit, but I just don't think leasing serves any benefit.

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.

If you got the dough, buying outright is clean and crisp with no hidden fee. yea or nea?

I knew you were kidding and I did not mean to flaunt my credentials in any way; the point was that I wanted to save people money and to help them make a decision based on facts, so I merely mentioned my backround for the record - leasing is something I have analyzed a lot and believe when done right, is a very good idea for many, but not all.