Originally Posted by ///Machine
First a disclaimer: I do work with finance and am glad to help anyone
into navigating through these options. Lease haters, lease lovers, all welcome
. Lease, financing or baloon financing (BMW Select) are all feasible financing alternatives. Disclaimer done.
Everybody benefits from an increased number of buyers, which reduces the allocated fixed cost per unit.
Leasing can be bad, but it can also be good. A counter-argument can be made against buying outright and dropping a load of cash into a highly depreciating asset
. One can argue this is not a good use of capital (if a limited resource).
If leasing was so bad, it wouldn't be done. The % of leasing buyers is particularly high with BMWs (high residuals reduce monthly payments, thus increasing affordability), I once asked my CA and he said 7-8 in every 10 cars he sold were leased. Few would be able to afford M3s if production were cut to 20-30% of current levels. Even to 50% for that matter…
All financing strategies are valid, including BMW Select. Each provides certain flexibilities and optionalities that are desired and may vary by customer.
Back to OP’s case:
Analyzing his case before tax, he will pay $38.1k ($979*36+$2,850). The asset being leased will depreciate $33.2k (to 57% of $77,195 MSRP – the residual is always based on MSRP). A $5k disadvantage in this case. It seems the lease is overly expensive.
The MF seems a bit high. Last I checked with my dealer MY 2013s were going for a MF of 0.00145 (so 0.00175 is a bit too much). The residual seems 1% higher than what I would expect. I know the 10k is 60%. Historically 12K and 15K should be in 1% decreasing percentages to 59% and 58%, respectively.
I don’t know how much you use your car, but leases tend to make more sense when your normal annual mileage usage is limited to 10k. In this case, a residual of 60% and MF of 0.00145 would yield a $34.5k total cost, much closer to the $33.2 depreciation ($880 per month + ~$2.7k due at signing). In that case, it might be worth the additional $37 per month to have the car you want.
Right now you're looking at $136 per month higher than buying outright.
Back in March of 2012, I specd out a '12 M3 vert. Fully loaded, it had an msrp close to $79g. My due at signing was $1500.00, $887.00 per month before sales tax, 36 month term with 15,000 miles per year. At that time, the mf was .0006 and being a loyal customer they gave a break on the mf. I think thr residual was 60%. Using your formula, this was a great deal and a no brainer deal since the depreciation would have been $47g while I would have only paid $33,432.00 on my end.
Fast forward about a year and half and here I am faced with a Realistic mf and a lower residual...just too bad we can't have those rates back.
Would a dealerahip add on the. 003 to the mf for profit or is this not common? Could they have accidently used thr wrong mf or was this deliberately done to boost bottom line?