[Braska]

Hey guys. Long time lurker just running numbers on getting a new bmw x5 this spring.

Can you guys help me with where i am messing up? I used CarEdge to try to predict the depreciation of the X5 at about $85,300 with the options I have on it now for the x40i. With around 40k down and around 5.6k interest on the loan after 6 years to fully pay off the car they predicted I would have a residual value around $41,479 to resell the car for. Basically showing I would be in the hole for about $49k all said and done with the car. Then if I guesstimate about 13-15k of repairs/services/warranties (not sure if that's accurate but what another website guesses) we are at around 63k to own the car for these 6 years (ignoring insurance/gas etc since those will be constant variables for the other lease scenario too).

If you lease it comes to about $58,572 total cost for ownership for 3 years. Then if I double that to get to 6 years assuming I get another new BMW X5 at the end of this one (roughly guesstimating the price) I come up with $117,144 in total ownership cost for 6 years (again ignoring insurance etc).

Did I do something terribly wrong here or miss some variable or is the ownership really that much more lucrative as long as you are willing to stick with a car for 6 years?

Thanks in advance guys.

[TurtleBoy]

Welcome to the forum. There are many reasons to lease but generally, absence large lease cash, it being less expensive is not one of them. It usually is less to finance and keep for 6 years than lease twice.

I didn't run the numbers but the residual seems a little high as well as the lease cost a little high. I guess to be complete you should include the opportunity cost of the 40k down but that won't move the needle much.

[eelnoraa]

I just do a quick calculation on the purchase option.

85300 msrp - 40000 down = 45300 loan for 6 years. Average loan amount is 22650. Total interest is 5600 across 6 year, so annual interest is $933. Interest = 4.1%. All are reasonable.

As for resell value after 6 years, I think $41479 is kind of high for msrp of 85300 bmw. This is 49%. This is probably the resell value after 4 years. 6 years average resell value is more like 35-40%, so $30-$34k? Of course purely my guess.

For your lease option, I cannot figure out why so expansive. $58572 for 36 month is $1627/month. It is close to 2% of msrp. What is the lease detail?? Residual, money factor, down payment?

[SierraX5]

I use Leasing as an additional insurance policy. If the car gets hit, it's gone at the end of the lease. If it has issues, it's gone. Usually I buy most of them after the lease, but in the case of my most recent car, 2021 MB AMG GLE53, it was a great car, but lacking in power. Hence the new 24 Dravit X5M60i. If she winds up being a good car, I'll keep.

My total out of packet cost differential is usually +/- $1000.00 between buying with interest vs a 36 Month Lease with a cash buy out at the end. YMMV.

[Braska]

You guys were right. I don't know what I put in the calculator to get to that final 6 year lease price. It was actually 94,849 over 2 leases for this exact same car (again taking some liberties here and assuming the car is the same build and same cost the 2nd lease).

I am just using the BMW estimate on their website for the lease cost for now. I will grab a MF/residual when I go in next week to try to get a feel for the X5 versus X5 M etc ,but for now I just want to see if I am more looking to lease or buy.

I have debated doing a lease with the option to buy at the end. Does that generally cost more than just financing it outright?

I also agree that CarEdge is being generous there with that price and its likely closer to worth 34k. But even with that being the case and assuming about 13k in repairs (I don't know even if thats correct or if thats a worst case scenario given the warranty) then you still are sitting at about 68,900 all in for 6 years of ownership after selling it. That feels hard to turn down compared to the lease

[eelnoraa]

Originally Posted by Braska

You guys were right. I don't know what I put in the calculator to get to that final 6 year lease price. It was actually 94,849 over 2 leases for this exact same car (again taking some liberties here and assuming the car is the same build and same cost the 2nd lease).

I am just using the BMW estimate on their website for the lease cost for now. I will grab a MF/residual when I go in next week to try to get a feel for the X5 versus X5 M etc ,but for now I just want to see if I am more looking to lease or buy.

I have debated doing a lease with the option to buy at the end. Does that generally cost more than just financing it outright?

I also agree that CarEdge is being generous there with that price and its likely closer to worth 34k. But even with that being the case and assuming about 13k in repairs (I don't know even if thats correct or if thats a worst case scenario given the warranty) then you still are sitting at about 68,900 all in for 6 years of ownership after selling it. That feels hard to turn down compared to the lease

I think if you negotiate the same deal, same selling price for both. Finance for 6 years at compatible rate as lease MF. Then post lease purchase, finance for 3 years and get compatible interest. Then the number should come out very similar. The math is kind of the same

Comparing owning a car for 6 years vs lease 2x 3 years, of course former will be cheaper. On the 2nd 3 year, you are driving an old depreciated car vs another brand new car (to be depreciated). The most economical way is keep driving the same car for as long as you can. 9 year ownership vs 3x 3 year lease, the former will even look less expansive.

As to lease vs buy, I think it really depend on the deals, and you preference. And if you decide to lease, please don't put that $40k as down payment for lease. Put $0 down if you feel comfortable.

[TurtleBoy]

Originally Posted by Braska

I have debated doing a lease with the option to buy at the

Leasing and then buying is almost always more expensive unless there is some lease incentives that outweigh the extra interest costs and fees. You also have the unknown of the future loan interest rate unless you plan on paying cash at the end of the lease.

As with any financial comparison/decision, you need to run the specific numbers. Rules of thumb are often wrong.

[modesa]

If you're OK with driving a 4/5/6 year old out of warranty car for 3 years, why not save even more money by just buying a 4/5/6 year old car from day one？ You want a shiny new car you gotta pay up my man.

The part of leasing that isn't intuitive to most people is that vs a straight financing, where you take out a loan and pay it off in 3 years (or whatever), in a 3 year lease, you are still taking out the same loan, but only paying off the [depreciation] in 3 years, while the loan is still raking up interest. So it's true that in this sense, a lease is going to be more "expensive" than a purchase, but that's not anything intrinsic to leasing, it's just the time value of money - you're paying more interest because you're paying down less of the loan. If the rate of interest on the loan is lower than your after-tax risk free rate of return, then it makes sense to lease. Do you have e.g. a mortgage, or student loans? Bam, the higher of either the rate on the mortgage/student loans or the 5.3% pre-tax rate on T bills is your after-tax risk free rate of return.

[Braska]

Originally Posted by TurtleBoy

Leasing and then buying is almost always more expensive unless there is some lease incentives that outweigh the extra interest costs and fees. You also have the unknown of the future loan interest rate unless you plan on paying cash at the end of the lease.

As with any financial comparison/decision, you need to run the specific numbers. Rules of thumb are often wrong.

Yeah I am going to get some hard numbers for y'all soon. I love this community the level of analysis is fantastic. But I think I got my answer that if I can keep a financed car for 6 years its significantly cheaper. The why being that years 4-6 of driving is in a significantly depreciated car. I don't think the X5 changes enough every 6 years to really matter though so that might be the happy medium. But I will definitely come back with numbers soon to have fun with for leasing or purchasing or financing. I love this stuff. Thank you guys.

[Braska]

Originally Posted by modesa

If you're OK with driving a 4/5/6 year old out of warranty car for 3 years, why not save even more money by just buying a 4/5/6 year old car from day one？ You want a shiny new car you gotta pay up my man.

The part of leasing that isn't intuitive to most people is that vs a straight financing, where you take out a loan and pay it off in 3 years (or whatever), in a 3 year lease, you are still taking out the same loan, but only paying off the [depreciation] in 3 years, while the loan is still raking up interest. So it's true that in this sense, a lease is going to be more "expensive" than a purchase, but that's not anything intrinsic to leasing, it's just the time value of money - you're paying more interest because you're paying down less of the loan. If the rate of interest on the loan is lower than your after-tax risk free rate of return, then it makes sense to lease. Do you have e.g. a mortgage, or student loans? Bam, the higher of either the rate on the mortgage/student loans or the 5.3% pre-tax rate on T bills is your after-tax risk free rate of return.

I think the driving a car from new to 6 years is gonna be the perfect sweet spot. I've been leasing M cars for a few rounds now and loved it but have this almost like dirty feeling that I am throwing away money each time. I think a proper build X5 could stand the test of time for 6 years and then grab a refreshed model then. I will see if I can get some hard numbers from the dealer in the next few weeks just for fun until the spring. I imagine most numbers I get now will be much more competitive than in the spring too since this is the time of year they likely want more sales the most, but fingers crossed interest rates are down next year too. Thanks for your advice and help.

[aug0211]

How much does modification factor in here? How strict is BMW on lease returns?

I assume things like exhaust, engine, tunes, suspension, etc need to be returned to stock.

Visuals like body kits, wraps, removed. Will they penalize for any new holes on the underside of vehicle panels for body kit install?

[LOFT]

This is a very valuable post that other forum members should see, unless they wish to be blissfully blind to the long term cost of ownership.

I have averaged ownership of vehicles ranging from 6-8 years depending whether they are new or "perfect" CPO's.

With the low cost of money in the last 20 years, I've come in under a low of CDN $10K/year to to a high of $12K/year all with Audi's.

I expect it's going to be more with my 2022 X5 45e, but I'll keep tracking it.

BTW: my wife is financial planner, and she is OK with spending dollars on premium products as long as I understand the full cost/benefit equation.

And in that vein, my annual golf club expenses are more than my annual car expenses.

[chicagofan00]

Originally Posted by Braska

Yeah I am going to get some hard numbers for y'all soon. I love this community the level of analysis is fantastic. But I think I got my answer that if I can keep a financed car for 6 years its significantly cheaper. The why being that years 4-6 of driving is in a significantly depreciated car. I don't think the X5 changes enough every 6 years to really matter though so that might be the happy medium. But I will definitely come back with numbers soon to have fun with for leasing or purchasing or financing. I love this stuff. Thank you guys.

The only thing working against this argument right now is that the new X5 will be starting production in about 2 years which means the older gen will take a bit of an additional hit on depreciation as it will no longer be the current gen.

[TurtleBoy]

Originally Posted by chicagofan00

The only thing working against this argument right now is that the new X5 will be starting production in about 2 years which means the older gen will take a bit of an additional hit on depreciation as it will no longer be the current gen.

Yes, the depreciation will likely increase as the new X5 rolls out. The G65 will start production in August of 26.