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      04-26-2010, 09:19 PM   #1
HotSoss
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M3 Lease Versus Buy for Euro Delivery

I'm sure this has been discussed at length before here and across the net, but I wanted a fresh take given current circumstances. In another thread you've helped me configure my M3 for Euro Delivery, but the thing I'm having to decide is how best to pay for it.

1) Option one: pay cash- I have the cash for the whole purchase, but I prefer to keep as much cash on hand as possible for emergency use. Paying 100% cash isn't really my favorite option since I'm a believer in keeping cash on hand.

2) Finance: My bank is giving me a decent rate (4.2% for 60 months, 3.9% for 48 months), and this is what I had planned to do, with $15-25K down for about $700-900/month. Very doable but my concern is the uncertain future- higher fuel prices, and a more fuel efficient M3 around the corner (2013?) even though it will be the 6 cylinder, right? I'd like to think I'll own until it dies, but I know myself, and I'll probably want to spring for the next generation. If the new M3 is a hit, I'll take a serious depreciation hit-especially compared to other "regular" cars. If people like the current high revving M3 better, I won't lose as much on the resale, but I'll probably be end up wanting to keep mine in that circumstance. I like the idea of owning my car, but this seems like a risky option.

3) Lease: I was originally going to put the $15K down cut down monthly payments, but I think that is dumb, because I can just put the 15K in a "safe" investment and draw off it to help pay the monthly payments. The downside is the obvious lease finance charges, and the low residual values on the M3- but I think the reason for these is fact that BMW finance probably is banking on poor resale at lease maturation because of planned new models (even more so than usual this time around, I'm guessing). But the thing I like about this option is that even though the residual value is low, it is less risky than losing even more than that if fuel prices skyrocket and M3 resale values plummet.

I don't want to give the impression that finances are tight- I just like to choose the option that makes the most financial sense. I keep going back and forth with buy versus lease. Am I correct that 2013 is the predicted new M3 release date, and is it going to kill the current M3 resale value? If so, I'll probably fill BMW financial coffers by letting them split the risk with me and just lease.

But that leads to my final lease questions- for Euro Delivery- is the dealer supposed to use Euro MSRP and Euro residual, or US MSRP and residual? I'm suspicious that the values used aren't working to my advantage as much as I thought they would. The other thing is that they say they'll pay your second payment, but increase the money factor accordingly, such that the total lease payments over 35 months are higher than what it would have been for 36 months. Sham deal IMHO!
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      04-26-2010, 09:25 PM   #2
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Quote:
Originally Posted by HotSoss View Post
I'm sure this has been discussed at length before here and across the net, but I wanted a fresh take given current circumstances. In another thread you've helped me configure my M3 for Euro Delivery, but the thing I'm having to decide is how best to pay for it.

1) Option one: pay cash- I have the cash for the whole purchase, but I prefer to keep as much cash on hand as possible for emergency use. Paying 100% cash isn't really my favorite option since I'm a believer in keeping cash on hand.

2) Finance: My bank is giving me a decent rate (4.2% for 60 months, 3.9% for 48 months), and this is what I had planned to do, with $15-25K down for about $700-900/month. Very doable but my concern is the uncertain future- higher fuel prices, and a more fuel efficient M3 around the corner (2013?) even though it will be the 6 cylinder, right? I'd like to think I'll own until it dies, but I know myself, and I'll probably want to spring for the next generation. If the new M3 is a hit, I'll take a serious depreciation hit-especially compared to other "regular" cars. If people like the current high revving M3 better, I won't lose as much on the resale, but I'll probably be end up wanting to keep mine in that circumstance. I like the idea of owning my car, but this seems like a risky option.

3) Lease: I was originally going to put the $15K down cut down monthly payments, but I think that is dumb, because I can just put the 15K in a "safe" investment and draw off it to help pay the monthly payments. The downside is the obvious lease finance charges, and the low residual values on the M3- but I think the reason for these is fact that BMW finance probably is banking on poor resale at lease maturation because of planned new models (even more so than usual this time around, I'm guessing). But the thing I like about this option is that even though the residual value is low, it is less risky than losing even more than that if fuel prices skyrocket and M3 resale values plummet.

I don't want to give the impression that finances are tight- I just like to choose the option that makes the most financial sense. I keep going back and forth with buy versus lease. Am I correct that 2013 is the predicted new M3 release date, and is it going to kill the current M3 resale value? If so, I'll probably fill BMW financial coffers by letting them split the risk with me and just lease.

But that leads to my final lease questions- for Euro Delivery- is the dealer supposed to use Euro MSRP and Euro residual, or US MSRP and residual? I'm suspicious that the values used aren't working to my advantage as much as I thought they would. The other thing is that they say they'll pay your second payment, but increase the money factor accordingly, such that the total lease payments over 35 months are higher than what it would have been for 36 months. Sham deal IMHO!
The sales price or cap cost of the car is based on ED MSRP/invoice or whatever you negotiate. The lease residual is based on the US MSRP with options. If they are calculating the lease residual based on ED MSRP they don't know what they are doing.
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      04-26-2010, 09:33 PM   #3
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I say if you can't write off the auto lease payment as a business expense, then buying would probably be the better option. (lease rates and residuals suck balls for M3s)

I wouldn't worry too much about the next gen M3....you're buying one of the greatest high revving V8 at a very very reasonable price....just imagine this, BMW probably will never grace a M3 with a high revving gas guzzling V8....until we discover alien combustion technology.
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      04-26-2010, 11:45 PM   #4
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If you end up leasing it, don't forget about using multiple security deposits to reduce the money factor by as much as .00049. Do not put any money down.
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      04-26-2010, 11:53 PM   #5
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Leasing doesn't exactly protect you from depreciation given the 50% 3 year residual. ///M cars are in pretty good demand, so selling should be easy. I sold my e46 M3 in the 3rd year of a 4 year lease with very little trouble and got out of the lease almost even. Unless your car is crash damaged or we go into a depression, I can't imagine the M3 being worth less than 50%. Remember this is the last of the normally aspirated M cars, so that will hold some interest for some buyers and track enthusiasts that might be looking for a used M3 down the road.

I'm in the same boat as you though...waffling on the finance issue for my June 6 ED. One thing to consider is if they offer a summer drive credit of $2,500, you will need to finance or lease thru BMW to get it. Of course you can payoff right away if you want to...in that instance, finance would be better as you wouldn't pay an acquisition fee. Also if you have a current bmw lease, don't forget you will pay for the turn-in fee of $325 or so if you don't finance or lease again through BMW.
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      04-27-2010, 12:06 AM   #6
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I too was in the very same quandry as yourself. I decided to lease for a few reasons:

1. The depreciation of the car is pretty substantial, and I didnt feel like taking that hit.

2. It is a business expense, so i can write almost all of it off through my company (which if you can do this alone is most probably worth leasing).

3. You can always purchase the car at the end of the lease or trade it for the new upcoming model. It gives you a nice option

4. It requires less money initially, and the money you arent putting down can work a little for you, even though in this day it isnt working that much, but at least it is something.

I myself am doing drive offs and that is it. There is absolutely no sense in doing more. You are just wasting money to get a payment which is not that much less per month anyway.

Definitely something to ponder. Hope it helps.
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      04-27-2010, 12:22 AM   #7
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I wouldn't factor in the M3 value dropping in the future due to gas prices. There are about 100 million trucks and suvs on the road in this country that get worse gas mileage than the M3. That won't play much of a factor in the future resale.
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      04-27-2010, 01:25 AM   #8
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i don't know what state you are in, but in some states (like me in cali), lease gives the benefit on tax. you only pay tax on the portion that you "own". for example if the car is 60k, and residual is 35k. over the 3 yrs, you only pay sales tax on the 25k. it's beneficial when you are unsure if you are going to keep the car (or when you are likely changing to another car)

using MSD is great idea as well to jack down the rate, and it's refundable so no worry. i never recommend doing any kind of cap cost reduction with down payment, it just doesn't make sense.

i can tell you i have leased my past 3-4 cars, mostly with MSD and with great rates. i did a lot of calculations (comparing lease then buyout, vs 3 yr finance, etc...), and my lease always came out to be better in terms of interest paid and flexibility. of course things can be different (residual, rates, money factors, etc...). imho unless you have all the exact numbers, it's hard to give a clean call
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      04-27-2010, 06:33 AM   #9
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Lease versus buy is a close call, financially, unless you can write off the lease payments, in which case it's a no brainer, even with fees.

I also like some of the intangible benefits of leasing: you take the risk of loss due to damage out of the equation, you have every option still available at lease end, you don't have the hassle of selling the used car, and you can time your next transaction with precision. People who dislike leasing because they are "not building up any equity" have no clue.
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      04-27-2010, 06:38 AM   #10
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If you have decent 800+ FICO score, you should have no problem getting 2.9%-3.9% rates for an auto loan.
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      04-27-2010, 07:35 AM   #11
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If you have decent 800+ FICO score, you should have no problem getting 2.9%-3.9% rates for an auto loan.
Can you give any names for a 2.9% loan?
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      04-27-2010, 08:11 AM   #12
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Originally Posted by The J-Man View Post
I wouldn't factor in the M3 value dropping in the future due to gas prices. There are about 100 million trucks and suvs on the road in this country that get worse gas mileage than the M3. That won't play much of a factor in the future resale.
I would fear what gas prices do to the economy though. Some are saying that $4 gas is back this summer. That will be a crushing blow to the US economy and will have a serious impact on the resale value of these cars.
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      04-27-2010, 08:45 AM   #13
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I would fear what gas prices do to the economy though. Some are saying that $4 gas is back this summer. That will be a crushing blow to the US economy and will have a serious impact on the resale value of these cars.
Absolutely. Better to throw that risk on to BMWFS. While many other vehicles would lose value in that scenario, that doesn't mean the M3 won't as well. The risk of diminished value, whether due to the price of fuel, physical damage, or obsolescense is real risk, the elimination of which has some value.
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      04-27-2010, 11:29 AM   #14
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Originally Posted by EJ_92606 View Post
Leasing doesn't exactly protect you from depreciation given the 50% 3 year residual. ///M cars are in pretty good demand, so selling should be easy. I sold my e46 M3 in the 3rd year of a 4 year lease with very little trouble and got out of the lease almost even. Unless your car is crash damaged or we go into a depression, I can't imagine the M3 being worth less than 50%. Remember this is the last of the normally aspirated M cars, so that will hold some interest for some buyers and track enthusiasts that might be looking for a used M3 down the road.

I'm in the same boat as you though...waffling on the finance issue for my June 6 ED. One thing to consider is if they offer a summer drive credit of $2,500, you will need to finance or lease thru BMW to get it. Of course you can payoff right away if you want to...in that instance, finance would be better as you wouldn't pay an acquisition fee. Also if you have a current bmw lease, don't forget you will pay for the turn-in fee of $325 or so if you don't finance or lease again through BMW.
Will they offer this credit on ED cars?

And to the OP, when the new generation comes out, this one will tank in value (they already are tanking) just like the e36 and e46 did. Maybe a select group of enthusiats care about this being the last NA engine and so on but the majority of people buying this car just want the latest and don't care about past generations.
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      04-27-2010, 11:35 AM   #15
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Will they offer this credit on ED cars?

And to the OP, when the new generation comes out, this one will tank in value (they already are tanking) just like the e36 and e46 did. Maybe a select group of enthusiats care about this being the last NA engine and so on but the majority of people buying this car just want the latest and don't care about past generations.
They will offer the credit on ED cars IF and only if they have such credit available.
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      04-27-2010, 03:46 PM   #16
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Another way I've looked at it though: I'm getting the car for ED invoice plus $1200, which is about $59,500. Add around $3700 sales tax for my area, and you are at 63,200. For a 35 month lease, I'm paying a total of 39,500. All told for 3 years, if I take my total selling price (if I'd paid cash) minus what I'm paying for the lease, I'd have paid the car down to $23,700. If I financed with $15000 down, my payment of $890/month would take me down to owing only 16,160 on the car after 3 years. Residual is pegged at about $35,000. If I could sell the car for anything over 23,700 at three years (and it seems that would be a really tough market if it went that low, if the car was still in decent shape) I'd come out ahead, wouldn't I? Not sure if I'm comparing the right numbers here.
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      04-27-2010, 03:46 PM   #17
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Can you give any names for a 2.9% loan?

Bank America, penfed.
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      04-28-2010, 09:38 AM   #18
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Another way I've looked at it though: I'm getting the car for ED invoice plus $1200, which is about $59,500. Add around $3700 sales tax for my area, and you are at 63,200. For a 35 month lease, I'm paying a total of 39,500. All told for 3 years, if I take my total selling price (if I'd paid cash) minus what I'm paying for the lease, I'd have paid the car down to $23,700. If I financed with $15000 down, my payment of $890/month would take me down to owing only 16,160 on the car after 3 years. Residual is pegged at about $35,000. If I could sell the car for anything over 23,700 at three years (and it seems that would be a really tough market if it went that low, if the car was still in decent shape) I'd come out ahead, wouldn't I? Not sure if I'm comparing the right numbers here.
I don't follow you on this analysis. Keep it simple. When you lease, the leasing company is underwriting the residual and you're paying the depreciation they anticipate. In addition, your paying interest on the purchase price. When you buy with a loan, your paying the same (or slightly higher or slightly lower) depreciation and interest on the purchase price. At today's BMWFS rates for the M3, the interest rate on the lease is quite a bit higher than the loan rate. Maybe as much as $150/month higher, plus an acquisition fee. So what do you get for the extra money? See my previous post and, don't forget, if you can write off the lease for business purposes, it's much better financially than purchasing.
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