Quote:
Originally Posted by Finito84
I consider the main reason for the lease the ability to get a new car every few years paying less per month than financing. The catch is that the lease you keep paying, lease payments go forever, while the financing you can stop after a few years, plus you keep an asset with some value.
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Yet with financing, one also bears the risk should that value unexpectedly drop or become illiquid.
Leasing is a risk mitigation strategy, giving you maximum optionality for minimum cost since it shifts the financial risk from the individual to the leasing company and its portfolio. For anybody planning on buying a new car in 3 years, not only is *BMWFS* leasing *usually* cheaper than financing, it comes with way fewer financial risks (e.g., car crash, market drop, etc).
For the last decade, even considering mileage costs, BMWFS leasing has always been cheaper for us (e.g., miles aren't free when selling a used car), plus we get all the optionality and low risk of the lease.
We use the same strategy with housing - after owning multiple homes for many years, we sold them and now we lease ... and hedge with shares of the REIT that owns our building! Much lower risk, lower cost. (thought model: what things do I want to use this month and how can I pay the least for them? Leasing! )
To your point, like credit cards, leasing has been used to prey on less financially savvy consumers; but also like credit cards, if you shop around, leasing can be a great way to hedge risk and lower costs. BMWFS has always given us a great deal and we'd be using it for the X5 if it weren't for the 45e's FTC.