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      12-15-2011, 11:55 AM   #1
s4play
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Question Leasing a car better than buying or am I missing something?

So I've been thinking about getting back into an M3 sedan since I need the room, but it seems there are TONS of 2011 owners trying to get out of their leases???

Maybe I'm from the old asian ways but I always thought you saved more money by paying CASH for a car up front rather than leasing? I know in a lease you pay tax only on the portion of value you drive so there is a tax advantage. And you can write off lease payments as tax deductions. But in the end if you do the math you pay MORE for a car if you take the buyout option!

My friend told me Lease is for those who want to own a more expensive car but pay less money. So you never own the car, it's essentially a very expensive car rental as you never have the pink slip (title).

How does a buyer who want to buy a car in cash work around Lease assumptions? Can a dealer switch it?

Just out of curiosity how many of you guys leased vs. bought (monthly payments ok)?
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      12-15-2011, 11:59 AM   #2
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Lease here. Always have. You get to give the car back and get another one. For me conpaired to a higher finance payment to own the car in 5 years, it makes sense. I don't like to have a car past 3years anyway. Always new tech I want.

But if you have the cash to just buy outright I think that is may be better.
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      12-15-2011, 12:04 PM   #3
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I prefer to lease because I change cars a lot. Sometimes you can even get in a lease with no down payment. (sales specials or whatever)

However I bought my M3 because I wanna keep it.

Monthly payment #s are not a big factor.
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      12-15-2011, 12:08 PM   #4
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Agree with the above two posters and have always been a fan of leasing...

Except that when I test drove the M3, I knew I wouldn't want to give it up. Every now and then then husband suggests I should get rid of it for something more practical. He still gets nothing less than a death-stare and curt "No". So I know I made the right decision buying mine.
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      12-15-2011, 12:13 PM   #5
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I would lease but the rates are far too high in Canada. You're looking at a 41%~ residual as opposed to 60%+ at the end of 36 months. So I chose to just buy my ///M outright. Leasing is good if you know you could use the money to make more money in the same time frame, many people lease one car for this reason and then go on to to buy the next car. However, many people assume leases one after the other because by the time it comes to returning the car, yes you have essentially paid for an expensive rental but you have saved $$$ considering the fact you never had to worry about trade-in depreciation etc, BMW even offers something like $7500 in 'damages' for when you return the car on a lease so you won't have to worry about worn tires, a cracked windshield and things like that as long as it doesn't equate to more than $7500. Hope that helped a little.
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      12-15-2011, 12:13 PM   #6
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If you're looking to buy a used M3 off someone that's trying to get out of their leased car, I think you can just pay off their Payoff Balance and it's all yours free and clear. There may just be a couple hundred dollar processing fee by BMW Financial.

You'd probably save a couple thousand $ by paying it off compared to making 60 payments of $700 or so.
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      12-15-2011, 12:31 PM   #7
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It depends on the situation of the buyer. If the only way you can afford the payment is by leasing, then I would not recommend leasing. Also, you have to be able to take advantage of the tax deduction of the lease. I lease as I write the car off as an expense as I am self employed. Sometimes a lease payment is very low due to the manafacturer subsidizing the residual but the money factor can be somewhat high. This isn't a good lease as you won't build any equity in the car and you just walk away at the end of the lease.

My current lease at BMWFS is the best of both worlds, it has a realistic residual that actually mimics what your payoff would be if you were to buy over 60 mos. with a low money factor. When I factor in the tax write off I actually come out ahead vs. buying. If you end up buying at the end of the lease and finance the residual then it now becomes more expensive to lease than buy.

Like I said it all depends on the indiviuals situation.
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      12-15-2011, 12:35 PM   #8
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To me it has always made sense if you drive a lot. If you're going to put on very few km's per year then perhaps buying is better as selling is easier with low kms.
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      12-15-2011, 12:52 PM   #9
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I think it all depends. No wrong answers here. If you drive a lot, lease doesn't make sense. If you want a new car every 3 years, lease is the way to go. I financed mine because I want to keep it for a long time. However, I always have to option to trade-in if and when I want a change. Sure, there's depreciation and high maintenance costs, but my time table isn't dictated by the lease terms(yes, you can trade-in early or drag out the lease terms if your payments are low). After making the last payment, I'll still have the car(hopefully in good shape). I liked not having a car payment for the past 8 years on my pathfinder.
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      12-15-2011, 01:07 PM   #10
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My family and I are all car people. Our holidays are always spent at the car dealerships and car shows. We used to be a leasing family but lately we've gotten into the bad habit of just buying the lease car at the end of term. My 2008 Cayman S was a lease. But now I'm leaning towards purchasing the M3. It really comes down to your own personal preference. If you love the car the first day, then I'd recommend buying it. It's a lot cheaper to buy off the start then buying it at the end of your lease.
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      12-15-2011, 01:31 PM   #11
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Quote:
Originally Posted by stefan View Post
To me it has always made sense if you drive a lot. If you're going to put on very few km's per year then perhaps buying is better as selling is easier with low kms.
Unless you go over your allotted miles per year by a lot.
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      12-15-2011, 01:41 PM   #12
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Of course there are sound legitimate reasons to lease but I have a theory on this board.

Most leases here are because that is only way that they can get into the car.
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      12-15-2011, 01:43 PM   #13
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I never understood leasing, and I still can't figure out how leasing is better than buying or financing.

1,200 a month for 36-48 months will all but pay off an M3, assuming you put a little downpayment down when buying (don't want to bring up downpayments on leasing). But when you lease, your money is gone....you have no value to put forth to the next vehicle. So after the 36months, you are still setup to pay 1,200 on your next car, a month, after 72 months you will have paid 86,400, which far exceeds average paid price of an M3.

Leasing to me, looks like a hook to people who don't have cash or don't want to commit cash, if you continue to lease, you will be continuing to make monthly payments, whereas, if you buy or finance, there is an actual END to payments.

I do realize there are a lot of incentives, great lease offers, but at the end of the day, I'm really curious iff people who lease, truly think about the 40-60k that is constantly going nowhere everytime they lease their next car, sure you get a new car, but after a while, you will have paid 2x-3x for cars, then actual ownership would have costed you...

I've also never seen a lease valued at less than estimated deprectiation.
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      12-15-2011, 01:47 PM   #14
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Quote:
Originally Posted by tlp View Post
Of course there are sound legitimate reasons to lease but I have a theory on this board.

Most leases here are because that is only way that they can get into the car.
I have to completely agree with that!
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      12-15-2011, 01:53 PM   #15
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Quote:
Originally Posted by Lowest_Frequency View Post
Unless you go over your allotted miles per year by a lot.
Good point.
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      12-15-2011, 02:12 PM   #16
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And you can write off lease payments as tax deductions.
Who is your accountant and how do you write off lease payments as tax deductions? Unless it's a State tax write off.

For Federal Income Tax purposes, you can only write off the lease payments if they are business related.
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      12-15-2011, 02:29 PM   #17
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It Depends . . .

I really do not get these generic "leasing is better/worse than buying' statements. First, each lease has a specific cost to it that you need to understand. In essence, you pay the for the depreciation in the car (the difference between the amount you pay and the residual), plus an interest rate equivalent known as a money factor, plus taxes and fees.

Many car companies, including BMW, often subsidize their leases, either by providing for a larger residual value, which makes your monthly cost before interest lower, or by a low interest rate.

For example:

If you lease a 2012 M3 convertible right now, the residual is 60% at 15,000 miles, 62% at 12,000 miles, and 63% at 10,000 miles. I guarantee you that the car will not be worth near that much after three years, particularly to a private owner.

The current money factor, .00195, kind of sucks - it is the equivalent of a 4.68% interest rate. However, if you are a current leasee of bmw financed customer turning in your current car, you can get a MF reduction of .00030 for owner loyalty, plus the end of year "enhanced" loyalty reduction of .00075 (car must be taken for delivery by Jan 2), which brings your MF down to .00090, or the equivalent of 2.16% interest.

There are other options, such as putting down multiple security deposits, that can bring your rate down to the equivalent of less than 1% (although you do not get interest on your security deposit, but who is earning much money on their savings anyway at present).

Finally, there is a year end "mission to drive" credit of $1000.

Now, many dealers will try to mark the lease charges up, but I have never had one who will not do the deal if I insist firmly and at the outset that I will pay no markup over BMW lease rates and charges.

The net of all of this is that, assuming you get a deal of $1000 above invoice or so, you can lease a 2012 M3 vert for somewhere in the $700 to $800 dollar a month range with all lease fees (not including taxes, which vary too much by state to include here), depending on how many miles a year you are buying. This means a total cost of $25,000 to $29,000 for three years, with no worry about the value of your car at the end -- including if it is in an accident.

This total cost is several thousand less than what the car would cost you if you bought it and sold it in three years at any realistic sales price, even without including interest.

Now, in many cases, the manufacturer is NOT subsidizing the residual, and the money factor/interest rate is above or at market. In those cases, you probably want to forget about leasing. But you gotta run the numbers . . .
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      12-15-2011, 02:38 PM   #18
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Quote:
Originally Posted by jnr View Post
I really do not get these generic "leasing is better/worse than buying' statements. First, each lease has a specific cost to it that you need to understand. In essence, you pay the for the depreciation in the car (the difference between the amount you pay and the residual), plus an interest rate equivalent known as a money factor, plus taxes and fees.

Many car companies, including BMW, often subsidize their leases, either by providing for a larger residual value, which makes your monthly cost before interest lower, or by a low interest rate.

For example:

If you lease a 2012 M3 convertible right now, the residual is 60% at 15,000 miles, 62% at 12,000 miles, and 63% at 10,000 miles. I guarantee you that the car will not be worth near that much after three years, particularly to a private owner.

The current money factor, .00195, kind of sucks - it is the equivalent of a 4.68% interest rate. However, if you are a current leasee of bmw financed customer turning in your current car, you can get a MF reduction of .00030 for owner loyalty, plus the end of year "enhanced" loyalty reduction of .00075 (car must be taken for delivery by Jan 2), which brings your MF down to .00090, or the equivalent of 2.16% interest.

There are other options, such as putting down multiple security deposits, that can bring your rate down to the equivalent of less than 1% (although you do not get interest on your security deposit, but who is earning much money on their savings anyway at present).

Finally, there is a year end "mission to drive" credit of $1000.

Now, many dealers will try to mark the lease charges up, but I have never had one who will not do the deal if I insist firmly and at the outset that I will pay no markup over BMW lease rates and charges.

The net of all of this is that, assuming you get a deal of $1000 above invoice or so, you can lease a 2012 M3 vert for somewhere in the $700 to $800 dollar a month range with all lease fees (not including taxes, which vary too much by state to include here), depending on how many miles a year you are buying. This means a total cost of $25,000 to $29,000 for three years, with no worry about the value of your car at the end -- including if it is in an accident.

This total cost is several thousand less than what the car would cost you if you bought it and sold it in three years at any realistic sales price, even without including interest.

Now, in many cases, the manufacturer is NOT subsidizing the residual, and the money factor/interest rate is above or at market. In those cases, you probably want to forget about leasing. But you gotta run the numbers . . .
+1, I was all about buying my cars outright and have done so until now since I keep them for a long time but will definitely consider leasing my next car due to mileage allowance writeoffs for a Small Business Owner.
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      12-15-2011, 02:39 PM   #19
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Leasing can work if the rates are good, you like a new car every 2-3 years, your yearly mileage is predictable and <15k/yr, you don't like selling used cars privately, you're willing to pay more to mitigate risk against accident damage or falling used car values, you can write all of some of it as a business expense, you are in a state that doesn't charge you tax on the whole purchase price (like TX and IL do).
If you can check off several items on the above list, leasing may work for you.
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      12-15-2011, 02:40 PM   #20
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How many miles does everyone average a year? I can't tell you the last time I was under 15k miles in a year. All these leases... Anyone actually driving their cars?
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      12-15-2011, 02:48 PM   #21
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In addition to what others have said, leasing also works best in states like CA with high sales tax and that won't allow you to just pay tax on the difference between trade-in and purchase price.

With sales tax being 8 to 9+% in many areas in CA, having to only pay sales tax on 35% or 40% of the car presents a huge savings if you will be trading in the new car after 3 or 4 yrs.

Additionally, unlike in some other states, when you buy a car in CA, you have to pay sales tax on the full purchase price of the car even if you are trading in a car for your down payment. Leasing helps you circumvent this because you only pay sales tax on the leased portion of the car.
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      12-15-2011, 02:58 PM   #22
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i don't really know if this helps, but will relate the details of my own experience:

i bought a used '08 in May of 2010 with 8,000 mi (in one of the few states that does not require taxes to be paid on a used car purchase) for $45k cash out the door.

i have since doubled the mileage so the car now stands at 16,000 mi - just guesstimating here, but i believe that i could **probably** sell it for 40k or so tomorrow.

so 5g depreciation, 20 months of usage ... 250 a month?

ball parked, of course, and subject to a number of variables (e.g. 45k was a low ball offer and it took the prior owner 13 weeks to come around, 8k mi is 20 months is not a lot and maybe inflates re-sale, etc.).

anyway, purely academic - someone will have to pry this thing away from my cold, dead fingers ...

i'll freely admit that owning a car is an awful, awful investment and 45k was a lot (for me) to sink into one, but it's nice holding title free and clear. no mileage restrictions, no return dates, no limit or concerns re: mods or track - it's mine. additionally, if you have to splurge on luxury auto, i'm not convinced that a lease is the best route provided that you have the capital lying around ...
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