[mrjoed2]

Originally Posted by gs1403

Not sure what that has to do with opportunity cost. Pretty big difference between blowing $30-40k over three years versus being out $70-80k in one day (of which you'll get some back albeit same empty garage space

Don't understand your logic. A lease is nothing but a long term rental.
If I pay cash & keep 10 years, I am way ahead of the game vs 3 leases.
When you pay 40K over 3 years & end up with nothing, not sure how that is a smart move.

[TurtleBoy]

Originally Posted by mrjoed2

Don't understand your logic. A lease is nothing but a long term rental.
If I pay cash & keep 10 years, I am way ahead of the game vs 3 leases.
When you pay 40K over 3 years & end up with nothing, not sure how that is a smart move.

Depends on what your goal is. If it is to always have a vehicle that is new, under warranty, etc. then leasing may be the smart move. If the costs/savings is your motivation then it probably will not be. Each person has there own reason for leasing or purchasing and what seems like a great move for one may not be for the other. Just like some folks are only comfortable investing in CDs or bonds while others are 100% growth, neither is necessarily wrong. We all have our own comfort level with risk, spending, etc. Sometimes paying more is actually the least expensive, maybe not in terms of dollars but in terms of discomfort or stress.

[gs1403]

Originally Posted by mrjoed2

Don't understand your logic. A lease is nothing but a long term rental.
If I pay cash & keep 10 years, I am way ahead of the game vs 3 leases.
When you pay 40K over 3 years & end up with nothing, not sure how that is a smart move.

Good for you if you pay cash and keep 10 years. Aside from the fact that many people (I'd even say the majority here) including myself prefer and enjoy having new car that's fully covered under manufacturer's warranty every couple years or so, you won't convince me that it's prudent to own a daily-driven car, especially a BMW for 6-7 years past warranty. But that's a whole different topic about utility and preferences.

My point is simple. There's an opportunity cost to the $70-80k you put into something that's guaranteed to lose 45-50% of its value in three years, and up to 90% of its value in 10 years. That money could have been otherwise invested in real estate, stocks, bonds, businesses, an education, self gratification, whatever. Leasing, despite having its own opportunity costs, leaves you that much more initial capital to do so if you wish. And that difference in opportunity cost should be factored into these 'leasing versus buying outright' calculations as it is often not. I don't see why this is an argument.

[mrjoed2]

Originally Posted by TurtleBoy

Depends on what your goal is. If it is to always have a vehicle that is new, under warranty, etc. then leasing may be the smart move. If the costs/savings is your motivation then it probably will not be. Each person has there own reason for leasing or purchasing and what seems like a great move for one may not be for the other. Just like some folks are only comfortable investing in CDs or bonds while others are 100% growth, neither is necessarily wrong. We all have our own comfort level with risk, spending, etc. Sometimes paying more is actually the least expensive, maybe not in terms of dollars but in terms of discomfort or stress.

Good points. One other disadvantage of leasing is all the fine print regarding condition at turn in. As mentioned here previously, everything from scratches/nicks/dings to tire tread depth & upholstery condition are spelled out in detail. A leaser can be hit with big fees at turn in time. And of course if someone is at all interested in modifying/accessorizing or customizing a vehicle a lease is obviously a bad choice- wasted money.

[rmorin1249]

I am leasing our X5 and it is the first time I have leased. At this point in my life, completely retired, we are putting way less than 10K miles on each of our 3 cars so a low mileage lease was feasible. With the high depreciation of BMWs, just like almost all luxury makes, I did not want to tie up $75K in a depreciating asset. I can afford a monthly payment for a very nice car that is under full BtoB warranty. In addition, BMW still pays for all routine maintenance for 3 years which is the term of our lease. Since we get a new car every 3 years, I am fine with never "owning" the car. It will depreciate at least 50% in 3 years but the residual was set at 59% so in essence, BMW is till subsidizing leases to make it attractive for those that want to lease. Investing in a depreciating asset at this point in my life didn't make sense. If we end up really liking the X5 after 3 years I may look into buying a nice CPO 2020 model. I won't be buying out my car since the residual will be higher than the market value.

[Auricom]

Originally Posted by mrjoed2

Good points. One other disadvantage of leasing is all the fine print regarding condition at turn in. As mentioned here previously, everything from scratches/nicks/dings to tire tread depth & upholstery condition are spelled out in detail. A leaser can be hit with big fees at turn in time. And of course if someone is at all interested in modifying/accessorizing or customizing a vehicle a lease is obviously a bad choice- wasted money.

For repeat lease customers, it's a nonissue. You'll be surprised how lenient your dealer and BMW is on your turn vehicle as long as your vehicle isn't trashed. Eg, If a scratch can be covered by a credit card, tires with low tread (not bald), they'll ensure that their repeat customers get into their next BMW lease without hassle.

If you're interested in modifying, accessorizing, or customizing - unless it's reversible - one shouldn't be leasing, period - that's on them or better informed.

While all of my leased BMWs starting from 2001, have been trouble free, except for my 2001 540iT M Sportwagon (BMW V8s back then were horribad for reliability), I won't be owning one in the future. There's just too much technology in vehicles these days to f-up, LOL.

We're all adults and can do w/e with our finances - I don't really care if people buy or lease. We're all here to enjoy an automotive brand we're passionate about and the vehicles they make. Enjoy the ride!

[gs1403]

Originally Posted by Auricom

For repeat lease customers, it's a nonissue. You'll be surprised how lenient your dealer and BMW is on your turn vehicle as long as your vehicle isn't trashed. Eg, If a scratch can be covered by a credit card, tires with low tread (not bald), they'll will ensure that their repeat customers get into their next BMW lease without issue.

If you're interested in modifying, accessorizing, customizing, one shouldn't be leasing, period - that's on them, they should know better.

Yep, they generally don't seem to care unless the car is beat to s***, even if you're not buying from them again. Everyday wear and tear is a given, minor nicks, chips and dents are a non-issue, tire tread just at the bare safe minimum (which you shouldn't be driving at in the first place), curbed wheels they couldn't care less and if anything major, they're things you'd get hit with on resale anyways if you owned the car.

Basic reversible mods like wheels, suspension, exhaust, add-ons - no different than if you're parting out a car you're selling or trading in. If you've done something more permanent to your leased car, that's just very poor foresight.

[mtnbiker5]

Do what fits your budget. I drive approx 21k year and already eyeing up a high mileage lease. when you do the math a lot of it makes sense. What drives me crazy about BMW and other german cars, they don't last long. Ive gone through several german cars and i swear once you get close to 100k on them they blow up. its literally like someone at headquarters monitors and presses the "times up" button. oil leaks and everything else. yeah, their more fun to drive than most japanese cars but reliability is ridiculous. Im actually doing a lot of research on where BMW gets their parts from. I just don't get it. To have an $80k car literally break down because the software needed to be updated is retarded. Never see this from Lexus, unheard of. Im totally on the fence as to whether to step into a new X5. All the new tech is slick, no doubt, but all the new electronics scares the crap outta me. If your low mileage and just lease and turn in every 3 years who cares right. But if your passionate about the car, pay it off, own it, Im really having a tough time investing in something that is going to shit the bed fast. The only thing thats keeping me in the game with BMW is the service dept at the dealer where I live. Everything is just easy and turn key, in and out. Like a pit crew. There is value there. Lexus, Christ, its like every 2500 miles you get multiple alerts telling you you need another oil change. Constant.

[Penguino]

Originally Posted by sygazelle

For those who do invest the cash in an an appreciable asset, that's great and for them, a lease can be a good thing. For those who lease because they get get more car than they could otherwise afford, its great for instant gratification but probably not such a sound financial decision. They put themselves on a perpetual cycle of paying for a vehicle during its steepest depreciation rate (1st 3 years).

A lease is not a good thing. Even when investing the cash elsewhere. It's a BAD IDEA. I personally have lease all my cars for the last 15 years but I recognize investment wise it's the worst but I can afford it.

[Aimster82]

I lease because I want the latest tech/style. Easier to do that with a lease than buying.

I also don't have kids yet.. everyone tells me things change when you have kids.

[thomas_Rp]

As I mentioned before, the only reason I leased the X5 is to ensure the vehicle is always under warranty. I purchased my F10 and expensive repairs started after the warranty period expired. It is, frankly, very stressful.

[sygazelle]

Originally Posted by Penguino

A lease is not a good thing. Even when investing the cash elsewhere. It's a BAD IDEA. I personally have lease all my cars for the last 15 years but I recognize investment wise it's the worst but I can afford it.

I'm sure your situation is the case for a lot of people who lease. Very few, I think, actually take cash they didn't spend because they leased and actually invest in an appreciating asset. What's probably more prevalant is they lease more car than they could have afforded if they had purchased. Great instant gratification, but not the best choice in terms of financial decision making. Buying more car than you can afford at the highest point of the depreciation curve and then repeating that transaction every 3 years has a very high premium. But, if a person wants the latest and doen't want out-of-warranty issues, then its a price worth paying. I've kept 4 BMWs for years past their warranty and never had a problem. So far, I've been lucky I guess.

[avd3k]

There is no one-size-fit-all blanket answer. I evaluate lease vs. buy for every car purchase individually, since lease pricing IS heavily dependent on how the numbers set for each model at any given moment.
With the right deal, lease can be financially much better than buying. Rule of thumb for good lease deal: no down payment and monthly payment less than 1% of MSRP (or LeaseHacker.com Score of > 10 years, meaning it would take > 10 years of payments to be equal to MSRP).
Specific own examples (3 years leases): 2016 535i 68k MSRP, total lease cost 23k. 2018 M3 ZCP 82k MSRP, total lease cost 27k. Some folks manage to get even better deals.
That said, some brands or models have absolutely terrible lease rates and should never be leased (e.g. M2). Current numbers for X5 are not bad, but not great either, so I might buy this time instead of lease.
At the end of the day, from _purely_ financial perspective buying BMW is terrible idea regardless how to do it

[Penguino]

Originally Posted by sygazelle

I'm your situation is the case for a lot of people who lease. Very few, I think, actually take cash they didn't spend because they leased and actually invest in an appreciating asset. What's probably more prevalant is they lease more car than they could have afforded if they had purchased. Great instant gratification, but not the best choice in terms of financial decision making. Buying more car than you can afford at the highest point of the depreciation curve and then repeating that transaction every 3 years has a very high premium. But, if a person wants the latest and doen't want out-of-warranty issues, then its a price worth paying. I've kept 4 BMWs for years past their warranty and never had a problem. So far, I've been lucky I guess.

I matured. I have switched from lease to buy. And I'm keeping for 7 years now.

[Penguino]

Originally Posted by avd3k

There is no one-size-fit-all blanket answer. I evaluate lease vs. buy for every car purchase individually, since lease pricing IS heavily dependent on how the numbers set for each model at any given moment.
With the right deal, lease can be financially much better than buying. Rule of thumb for good lease deal: no down payment and monthly payment less than 1% of MSRP (or LeaseHacker.com Score of > 10 years, meaning it would take > 10 years of payments to be equal to MSRP).
Specific own examples (3 years leases): 2016 535i 68k MSRP, total lease cost 23k. 2018 M3 ZCP 82k MSRP, total lease cost 27k. Some folks manage to get even better deals.
That said, some brands or models have absolutely terrible lease rates and should never be leased (e.g. M2). Current numbers for X5 are not bad, but not great either, so I might buy this time instead of lease.
At the end of the day, from _purely_ financial perspective buying BMW is terrible idea regardless how to do it

That's the mindset that causes people to fall into the lease trap. "I got a $60k car for $500/month. Such a good deal!" But ideally you want to not pay $500 for rent for a vehicle. Ideally you want to pay it off, or loan for 36 months or so and keep it for 5-8 years.

[natahoa]

I planned to finance but now I’m seriously considering lease. In my case the money is coming out of an IRA that is currently earning 15 %. Finance would be at 2.99 percent but actual dollars/monthly payment would be much lower with a lease. So a lease keeps the max amount of $$ in savings earning for me.

Also, every dollar I take out of an IRA is taxed -an added expense to consider.

I’ve never leased a car or considered leasing. Every new car we have bought has been cash, a family car we always plan to drive into the ground.

With the X5 being my first tech and luxury car, I’m starting to think a lease will be best because I’m not comfortable with the long-term maintenance/cost history of BMWs. This way i can choose to decide later if I want to buy a BMW I plan to keep for longer than four or five years. Or switch to a Lexus - which hopefully will have some better choices in a few years. A Lexus I would not hesitate to keep long term.

If I finance for five years I end up with a car that is upside-down almost from the gitgo. Basically I’ll never really have any equity to put toward a trade or down payment. If I lease, when I get rid of the car I don’t expect to have any equity, but I’ll have a lot fewer dollars invested in it.

My car will probably be built next week, so I have maybe 10 more days to make a decision. I will have the dealer send me the specs on both lease and finance contracts before I go to pick up the car. I’m sure I will love the car, but being retired now I might want to keep a new car that is under warranty rather than maintain a BMW as it gets older.

[mattsrs]

Also with MSD you can lower lease payments the effective APR saving on the deposit you put towards MSD is near 8%

[amphiprion]

Originally Posted by natahoa

I planned to finance but now I’m seriously considering lease. In my case the money is coming out of an IRA that is currently earning 15 %. Finance would be at 2.99 percent but actual dollars/monthly payment would be much lower with a lease. So a lease keeps the max amount of $$ in savings earning for me.

Also, every dollar I take out of an IRA is taxed -an added expense to consider.

As already mentioned, buying maybe a better financial move for some, while for others it's to lease. It really does depend on the individual situation. If you're someone who wants a new car every few years (and can afford it), there is no sense in buying the car and taking the full hit on depreciation when it comes time to sell or trade. If you're in a state that only charges tax on the leased value of the vehicle instead of the full amount, that is another plus.

That being said, I don't know your situation, but I would generally question whether money should be taken out of an IRA for a brand new luxury car purchase. As you said, that penalty is an added expense along with the lost earnings of "15%".

[natahoa]

Yes, and I don’t expect the stock market to keep me in the 15% range forever - that could change for the worse at any time. But buying the car outright is nonsensical due to the tax hit. So I have to decide how to finance.

A 3-year lease would cost almost $1,000 a month less. With every dime I spend being taxable, that is a large potential savings. I feel like I will continue to want a car that is new under warranty. Trading it in at the end of the lease would probably give me a larger trade than financing for five years ( my original plan) but I’m not sure.

I’m going to get in touch with the finance manager this week and find out what all of the numbers are.

[TurtleBoy]

Originally Posted by natahoa

A 3-year lease would cost almost $1,000 a month less. With every dime I spend being taxable, that is a large potential savings. I feel like I will continue to want a car that is new under warranty. Trading it in at the end of the lease would probably give me a larger trade than financing for five years ( my original plan) but I’m not sure.

I’m going to get in touch with the finance manager this week and find out what all of the numbers are.

I’m not following that trade comparison, you don’t trade at the end of a lease you just return it.

[natahoa]

Originally Posted by TurtleBoy

I’m not following that trade comparison, you don’t trade at the end of a lease you just return it.

Good point. So if I have saved $1,000 a month for three years with a lease, I’ve saved $36k that is still in my IRA earning whatever (hopefully at least 9 percent). AND I’ve saved on the taxes incurred on withdrawing all of that money.

AND I’ve only spent $27k to drive a $70k car for three years. For someone living off retirement savings, this seems like a no-brainer to me. I think I’m convinced to lease and just lease a new vehicle again in three years.

[TurtleBoy]

Originally Posted by natahoa

Good point. So if I have saved $1,000 a month for three years with a lease, I’ve saved $36k that is still in my IRA earning whatever (hopefully at least 9 percent). AND I’ve saved on the taxes incurred on withdrawing all of that money.

AND I’ve only spent $27k to drive a $70k car for three years. For someone living off retirement savings, this seems like a no-brainer to me. I think I’m convinced to lease and just lease a new vehicle again in three years.

Depends on what your goals are. If it is to have a new vehicle every three years then that is definitely the way to go. If you want to keep you vehicle longer and not have any payments in the future, then purchasing it from the beginning would probably be the smarter move.