Thoughts about trading into a lease

[b1aze]

So I am essentially looking to decrease my current car payment monthly a little bit. My wife and I are closing on our first house at the end of this month and while we are trying to set ourselves up to live financially well within our means (saving ~20% of our net income monthly), I find myself feeling more responsible than I have in the past, especially about my car.

Im currently spending ~$560/mo for the next 50months to finance my 2010 135i. I currently have some negative equity in the car that I am willing to put cash down to make it at least break-even if I can get myself into a better spot monthly for a payment. I really like the car and could see myself living with this car for a good long time. It fills all of my needs and wants as far as power, comfort, and appeal. It is a tight coupe for a baby seat but thats what my wife's SUV is for I am at 48k miles and out of warranty in the next month or so, so there are a few things on the horizon that I dont necessarily love the thought of (water pump, clutch eventually, VANOS bits, suspension components/bushings, etc).

I am looking at potentially trying to get into a 2012/13 135iS lease. I think that the iS will be a very desirable car, especially once the E82 chassis ends production and it already has things that I would like to do to my current vehicle (BMWPE, PPK2) already rolled into the cost, and the overall difference in cost is not much compared to a similarly optioned 135i. I would not mind a 36+mo lease-to-own situation if I can get a monthly payment that I am happy with that makes sense. I would need to get it for ~450 or less monthly for it to make sense for me between the cash-up-front to break even on the 135i and the inevitable maintenance costs on the horizon for the 2010 135i.

My question is, is this an awful idea? I would love to stay in an E82 while still decreasing my total monthly cost-to-drive. My other consideration is trading the 135i in for an 09ish 128i with 6MT but I am unsure if that will be any better monthly/financially than a lease-to-own option.

I realize that in the long run, the lease-to-own will cost me more than buying used (by a long shot) but I have a gut feeling that if I can get into a 135iS before production stops and hold onto it for 6+ years, it will maintain its value.

Thoughts? Any other options that I havn't thought of?

[b1aze]

Originally Posted by Team Plutonium

Well, if you want to be more financially responsible keep your current car, and don't lease a brand new "better" car. This makes no sense at all, especially since you have negative equity.

Even taking into account knowing that I will need to spend at a very minimum $500 in the next few months on a waterpump alone, and also a clutch in the next year or so? Also, reducing my monthly cost out of pocket for maintenence? An extended warranty alone would be ~$2500

[Joekerr]

I assume that's a typo and you don't have another 50 months of payments? Maybe you meant 5 months? If not, then its a different ballgame.

Leasing is basically paying amortization on a car, plus some "interest" which is more than the stated rate because amortization isn't really as much as your lease payment. That being said, leases are good to get a car you wouldn't otherwise finance due to the cost, but they don't make a lot of financial sense (and I say this as someone who loves to lease).

If you really want to tighten your financial situation, get rid of the 135 if you are really nervous about the maintenance (otherwise, keep it if you have it paid off in 5 months) and buy a beater car to get you around for the next couple years. It will amaze you how much you can better yourself financially saving for a few years with a beater.

Yeah, not much fun to drive, but pays dividends in the future. I don't think a lot of people understand the irreparable damage they are doing to their financial situation when they get into bad debt when young (ie. for a car, vacation, etc). Good debt is typically a house mortgage, though that's iffy nowadays too because capital appreciation isn't always there - depends on the area. Used to be more secure.

Anyways, point is, save up now, but actually set it aside, don't spend it on a couch or something (your wife will probably want this), don't treat it as disposable income. Set it aside, let it earn interest, and you'll be in a better spot!

[b1aze]

Originally Posted by Team Plutonium

It sounds to me that you should be leasing a different car, maybe a GTI, if you are worried about spending $500 over a couple of months you need to scale back - big time. And I sincerely hope you don't have 50 more months of car payments left!

Im certainly not worried about it per-se but if i can get rid of some negative equity with that ~500 as opposed to having to spend it on non-positive equity maintenance, i dont see how its such a big deal. If by spending ~4k up front now to get rid of negative equity instead of spending that money on maintenance in the next 3 years (which I am fairly certain I would end up spending that much if not more) AND reducing my monthly cost by ~$100/mo ($3600 over the potential lease) wheres the huge gap? We are more than comfortable affording my current payment, but I wouldnt mind reducing it slightly while still keeping the type of car I really enjoy having.

And yes, 50 months left on a used car purchase i made about a year ago. I bought the car out-of-state and unfortunately in too much haste to consider putting any money down on it. I rolled the sales tax and registration as well as delivery into the overall financed amount, so its my own damn fault im upside down in the note. If i could have done it over again, I would have been much more patient on it and waited for a better deal but I cant go back and change it now.

Originally Posted by Joekerr

I assume that's a typo and you don't have another 50 months of payments? Maybe you meant 5 months? If not, then its a different ballgame.

Leasing is basically paying amortization on a car, plus some "interest" which is more than the stated rate because amortization isn't really as much as your lease payment. That being said, leases are good to get a car you wouldn't otherwise finance due to the cost, but they don't make a lot of financial sense (and I say this as someone who loves to lease).

If you really want to tighten your financial situation, get rid of the 135 if you are really nervous about the maintenance (otherwise, keep it if you have it paid off in 5 months) and buy a beater car to get you around for the next couple years. It will amaze you how much you can better yourself financially saving for a few years with a beater.

Yeah, not much fun to drive, but pays dividends in the future. I don't think a lot of people understand the irreparable damage they are doing to their financial situation when they get into bad debt when young (ie. for a car, vacation, etc). Good debt is typically a house mortgage, though that's iffy nowadays too because capital appreciation isn't always there - depends on the area. Used to be more secure.

Anyways, point is, save up now, but actually set it aside, don't spend it on a couch or something (your wife will probably want this), don't treat it as disposable income. Set it aside, let it earn interest, and you'll be in a better spot!

See my above response.

Edit: Is this the same Joekerr from PartTime Poker??

[b1aze]

Originally Posted by Team Plutonium

In this case I really think you'll be better of by getting a less expensive car overall.

Im not exactly sure what youre basing this off of. I already stated that we are SAVING 20% of our combined net income monthly (directly into a separate savings account), including the mortgage, 2 car payments, her school loan and still contributing to 2 401Ks. We aren't stretched thin by any means. Please justify your opinion further.

[b1aze]

Originally Posted by Team Plutonium

So what is the purpose of this thread then? You stated you want to be more conservative and responsible with your funds since you and your wife close on your first house. You have negative equity on a currently owned car, and thinking of leasing a better, newer car to save on monthly payments and maintenance. The fact alone that you are starting to calculate at this minuscule level (we are talking a couple of hundred bucks a month) suggests that a less expensive car would be the way to go.

Also, if you don't like to hear answers to your financial questions don't ask them on a public forum.

The purpose of the thread was to see if it was a HUGE mistake to get into a lease over keeping my current vehicle. Yes, it was partially to see if i can decrease my monthly payment slightly, but maintain my happiness with the car and what I drive. I enjoy the car enough to warrant spending ~$500/month on it versus $250 on an econobox that gives me zero enjoyment driving. My goal isnt to save an absolute max of money on my monthly car payment, but to minimize costs while trying to keep myself in a car that i love driving every day.

I guess I could talk myself and justify into and out of it either way. Sorry to have bothered you...

[MisterSkiMask]

Originally Posted by b1aze

So I am essentially looking to decrease my current car payment monthly a little bit. My wife and I are closing on our first house at the end of this month and while we are trying to set ourselves up to live financially well within our means (saving ~20% of our net income monthly), I find myself feeling more responsible than I have in the past, especially about my car.

Im currently spending ~$560/mo for the next 50months to finance my 2010 135i. I currently have some negative equity in the car that I am willing to put cash down to make it at least break-even if I can get myself into a better spot monthly for a payment. I really like the car and could see myself living with this car for a good long time. It fills all of my needs and wants as far as power, comfort, and appeal. It is a tight coupe for a baby seat but thats what my wife's SUV is for I am at 48k miles and out of warranty in the next month or so, so there are a few things on the horizon that I dont necessarily love the thought of (water pump, clutch eventually, VANOS bits, suspension components/bushings, etc).

I am looking at potentially trying to get into a 2012/13 135iS lease. I think that the iS will be a very desirable car, especially once the E82 chassis ends production and it already has things that I would like to do to my current vehicle (BMWPE, PPK2) already rolled into the cost, and the overall difference in cost is not much compared to a similarly optioned 135i. I would not mind a 36+mo lease-to-own situation if I can get a monthly payment that I am happy with that makes sense. I would need to get it for ~450 or less monthly for it to make sense for me between the cash-up-front to break even on the 135i and the inevitable maintenance costs on the horizon for the 2010 135i.

My question is, is this an awful idea? I would love to stay in an E82 while still decreasing my total monthly cost-to-drive. My other consideration is trading the 135i in for an 09ish 128i with 6MT but I am unsure if that will be any better monthly/financially than a lease-to-own option.

I realize that in the long run, the lease-to-own will cost me more than buying used (by a long shot) but I have a gut feeling that if I can get into a 135iS before production stops and hold onto it for 6+ years, it will maintain its value.

Thoughts? Any other options that I havn't thought of?

Neg. equity is a killer, if I were in your shoes the only way I would consider leasing (which is a good way to quickly wipe the slate clean, potentially) is a much less expensive car for a short time 2 or 3 years. I would even consider a pickup truck or something like that.

When you are trying to close on a house, your monthly payments are a big deal.

I would also say, do not 'lease to buy' lease to lease and buy to buy.

Make sure you consider your mileage!

Good luck.

[ErvGotti]

Man a 50 month loan on a car just about to be out of warranty is Killer. I'd say go for it. It seems for the most part that you have your finances in order, and as MisterSkiMask stated it would be a way to wipe the slate clean. For 36 month's you can bank the extra monthly payments, not have to worry about shit breaking, and at the end use the money you banked to buy an extended warranty if you decide to buy the lease. IMHO in your situation I'd rather slip into a 36 month lease than a crappy 50 month loan.

[NemesisX]

Originally Posted by b1aze

The purpose of the thread was to see if it was a HUGE mistake to get into a lease over keeping my current vehicle. Yes, it was partially to see if i can decrease my monthly payment slightly, but maintain my happiness with the car and what I drive. I enjoy the car enough to warrant spending ~$500/month on it versus $250 on an econobox that gives me zero enjoyment driving. My goal isnt to save an absolute max of money on my monthly car payment, but to minimize costs while trying to keep myself in a car that i love driving every day.

I guess I could talk myself and justify into and out of it either way. Sorry to have bothered you...

Well, personally I think leasing is a huge mistake period unless you're filthy rich but that's another debate

[Joekerr]

Wow, was hoping that 50 months was a typo. And no, I'm not the one from part time poker - I don't play online.

I'm not sure then - seems to me that 50 months is too long, but then based on your response above, seems like you don't actually have a goal to save more, you are comfortable where you are, you just are looking for other ideas without having to drive an econo box.

If that's the case, I really have no suggestions for you - its up to you as you already know, can't really give you more advice than that. Good luck with whatever you decide.

[boostedTIAG335]

I don't understand why everyone is so shocked to hear that he has 50 payments left? Most car notes are written up for 60 months. Where's the shocker? I really don't get it.

Anyway. If you wind up leasing a car and 36 months from now you decide that a coupe isn't practical anymore, you just pissed away $16,200 ($450 lease payment * 36 months). If you decide to keep your current car and since you still have 50 payments left (OMG WOW 50 PAYMENTS!? IS THAT HOW FINANCING WORKS!?) , you'll most likely start to build some equity in it 36 months from now.

My advice: Stick with what you have now and suck up the repairs/maintenance. Or lease to buy, but make sure a tiny coupe will still be practical 5 to 7 years from now.

[Nkc]

I think we can just throw out all the financial analysis on this issue...Please omit the "living well within our means" BS because it doesn't add up at all. You still have 50mths of financing a 135 that is soon to be out of warranty while having problems paying for that. WAIT There's more, you now want to go for a more expensive (newer) car and lease it and also wouldn't mind a lease to own option. Everything sounds wrong.

OP already know what he wants. The heart wants what the heart wants but please don't mention living well within your means because this isn't.

[b1aze]

Originally Posted by boostedTIAG335

I don't understand why everyone is so shocked to hear that he has 50 payments left? Most car notes are written up for 60 months. Where's the shocker? I really don't get it.

Anyway. If you wind up leasing a car and 36 months from now you decide that a coupe isn't practical anymore, you just pissed away $16,200 ($450 lease payment * 36 months). If you decide to keep your current car and since you still have 50 payments left (OMG WOW 50 PAYMENTS!? IS THAT HOW FINANCING WORKS!?) , you'll most likely start to build some equity in it 36 months from now.

My advice: Stick with what you have now and suck up the repairs/maintenance. Or lease to buy, but make sure a tiny coupe will still be practical 5 to 7 years from now.

Thats exactly what I realized. At some point in the short term, likely within the 36months that i would be leasing, I will not be upside down and might even have a bit of equity in it. No one can be 100% positive that the coupe will work 5-7 years from now, but if its paid for in full by then, it doesn't really matter if it works directly for me, as its just liquid and can be easily sold.

Originally Posted by Nkc

I think we can just throw out all the financial analysis on this issue...Please omit the "living well within our means" BS because it doesn't add up at all. You still have 50mths of financing a 135 that is soon to be out of warranty while having problems paying for that. WAIT There's more, you now want to go for a more expensive (newer) car and lease it and also wouldn't mind a lease to own option. Everything sounds wrong.

OP already know what he wants. The heart wants what the heart wants but please don't mention living well within your means because this isn't.

Well within our means on an average monthly basis. We aren't paycheck to paycheck, we still go out and do things, take vacations and we never stress about money because its comfortable. I dont have problems paying for it, i never said that i did. What i did say is that i would not mind lowering my monthly payment on it. And when i was dissecting maintenance costs, it was more of a value calculation than worrying about paying for it.

I did some thinking and decided it would be more responsible to just ride the note out, pay it off when I get a chance and get out from under it. We are debating between paying my remaining note off (~29k) or my wife's suv (15k) once we move in and get settled into the house. We have the cash ready (40k+), just want to be sure that we are situated before we take the cash out of our pocket.

[jlstyle]

Originally Posted by boostedTIAG335

I don't understand why everyone is so shocked to hear that he has 50 payments left? Most car notes are written up for 60 months. Where's the shocker? I really don't get it.

I'm shocked because of $560 payment amount for 60 month on used 135i.
Not a great way to spend your money IMO.

Either way, getting back to OP's qustions.

Aquiring negative equity by buying expensive used car was your first mistake.
Trying to get rid of the negative equity by paying off after only one year will be your second mistake.

You buy used car to skip the initial depriciation cost but you weren't successful here.
But used cars will depreciate its value slower than the new cars, so you will be better off if you stick with the car for little while until negative equity eventually become smaller.
Yes, I know you are worried about your maint. cost but that's your luck.
Alot of expensive maint don't come early like you said. You don't replace your clutch after 50k.
Just try to keep your miles low and drive 1~1 1/2 more years then try to sell it even. Then you can do whatever you want to do.

If you carry negative equity to your new lease, your lease will be so large that it's stupid.
And if you are thinking off paying out cash for your negative balance up front... there are better place to spend your cash then trying to make up for the negative equity that you can eventually be negociated. I.E by keeping the car longer.

[jlstyle]

If I were you and really looking to save monthly payment, I would sell the car, pay off whatever you owe and get into cheap lease like G37 for 24 month for $370 a month, then come back to BMW with better lease deal.

What you are proposing here doesn't really save you much money. You are talking about $3600 in saving in course of 3 years (if you do 36month on E82) but you are already incurred loss of $400 by paying $4000 to pay off your current car.
AND, at the end of your 36month lease, you are out with $0 in your pocket if you lease, where as you could possibily bank some money by selling your current car after 3 years.

[firstkill]

If the money is not really an issue, then after the house closes

why don't you check if the dealer you want to lease for will give you some "credit" for the negative equity.

fk

[boostedTIAG335]

Originally Posted by jlstyle

If I were you and really looking to save monthly payment, I would sell the car, pay off whatever you owe and get into cheap lease like G37 for 24 month for $370 a month, then come back to BMW with better lease deal.

What you are proposing here doesn't really save you much money. You are talking about $3600 in saving in course of 3 years (if you do 36month on E82) but you are already incurred loss of $400 by paying $4000 to pay off your current car.
AND, at the end of your 36month lease, you are out with $0 in your pocket if you lease, where as you could possibily bank some money by selling your current car after 3 years.

IMO, to spend $9k on a 2 year lease that you knowingly will walk away from is not a smart way to spend your money. What will you have to show for it? That $9k could be used to reduce his negative equity or it could be used towards a lease that he eventually plans to buy out.

[jlstyle]

Originally Posted by boostedTIAG335

IMO, to spend $9k on a 2 year lease that you knowingly will walk away from is not a smart way to spend your money. What will you have to show for it? That $9k could be used to reduce his negative equity or it could be used towards a lease that he eventually plans to buy out.

Of course I agree with you. I made that statement only if he wants to get rid of the negative equity NOW and get into lower payment lease to compensate overall payment.
If he opts for a lease around $360, he is saving $200 a month which is $4,800 for 2 years which is about same amount he has to spend to pay off his current car. So after 2 years, he comes out even by leasing a cheaper car. You get my point?

[boostedTIAG335]

Originally Posted by jlstyle

Of course I agree with you. I made that statement only if he wants to get rid of the negative equity NOW and get into lower payment lease to compensate overall payment.
If he opts for a lease around $360, he is saving $200 a month which is $4,800 for 2 years which is about same amount he has to spend to pay off his current car. So after 2 years, he comes out even by leasing a cheaper car. You get my point?

Touche, my friend.