Leasing a car better than buying or am I missing something?

[IFX]

Originally Posted by Ateam

sorry you don't have an e9x m3. Yes I could buy 2 e46m3s for cash. Why are you even posting what you would do regarding a car you do not even own? ballling

lol.. ok guy. Your internet penis is bigger. Hope your happy.

[Mr. ///M3 RD]

My thoughts on leasing ...

From a business point of view ... it makes sense if I had a good year and need to write off some expenses in order to reduce my tax burden. I've done it in my business life a few times after discussions with my accountant and financial advisor.

On the private side .... I would never ever do it since it would feel like opening a window and letting the wind carry away all that money. Just like it would be renting a house or purchasing the place to build equity.

Having said that. Perhaps my frame of mind if I was younger and did not have the cash to purchase full out a new performance car would be different. Leasing a high end car (if I had the income to pay for it) would be an option with todays high prices of performance cars. So in the end I guess it comes down to the mighty $ ... and the circumstances

[Ateam]

Originally Posted by IFX

lol.. ok guy. Your internet penis is bigger. Hope your happy.

[Race_Doc11]

Well said

Originally Posted by Nine

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.

[tlp]

Unless your writing off your lease payments...Leasing is just a nice word for Long Term Rental Contract.

When your Lease period is up you return your rental car.

[derric]

I think leasing can also be thought of more or less paying the depreciation on the car had you decided to purchase it. I think if you calculate the cumulative lease payments add some finance factor on the vehicle you get close to the depreciated value of the vehicle had you decided to buy it outright.

I never quite understood the pay cash up front concept though, as long as you can earn greater than 7 or so % on your money elsewhere why would you not work your money versus giving it to the dealer. Somewhat the same as buying a house.

[dmppdx]

At the end of the day, a lease isn't that much different than purchasing a car if you financed it over 8-9 years. The only difference is the terms with a lease are less flexible with regard to being able to get rid of it and some tax differences with regard to being able to write off the entire lease payment, versus being able to write off the interest expense and calculated depreciation if you purchased it.

Its very rare you would pay less for a lease than it would cost you to finance it then sell it after the same time period since lease companies are conservative with what they expect the residual to be after the lease term is over. So other than piece of mind of not having to hassle with negotiating selling a car you actually own when you get around to wanting a new one, I'm not sure what the benefit would be for leasing.

[James T. Kirk]

Allow me to DEBUNK some myths:

The OP's "old Asian way" of buying everything upfront in cash is a lousy way to tie up a chunk of cash into a depreciating asset that could otherwise be working for you in a real investment. There's a reason why cash buys are OLD SCHOOL and quite obsolete.

The WRITE OFF benefit is often offset by the increased cost in commercial insurance over individual insurance. Quite often, writing things off ends up being just a bunch of accounting LOCKER ROOM TALK amongst business owners who really don't analyze the final net cost/benefit at the end of the day. That compounded by the FIB that one's Bimmer is actually being used for commercial use when you're just commuting from home to work, is also a bit of an ethical issue.

Generally speaking, leases are great for folks who can STICK TO THE PLAN. If you can follow the lease calendar, keep your miles under your allotment and NOT try to buy it at the end of the lease, then you can maybe save money so long as the rates are decent.

That's why leasing is NOT FOR ME. I like the freedom to do anything I want with a car. Whether I want to make mods that violate the warranty PRIME DIRECTIVE, sell it after six months, or keep it after three years to INFINITY AND BEYOND. Financed ownership is the way to go. My money isn't tied up and I'm free to do what I please without getting hammered with penalty fees that can far exceed any natural depreciation if I want to sell early or keep it longer.
.

[Michaeljh2000]

Originally Posted by tlp

Most leases here are because that is only way that they can get into the car.

Yep.

[DBH]

Originally Posted by derric

I think leasing can also be thought of more or less paying the depreciation on the car had you decided to purchase it. I think if you calculate the cumulative lease payments add some finance factor on the vehicle you get close to the depreciated value of the vehicle had you decided to buy it outright.

I never quite understood the pay cash up front concept though, as long as you can earn greater than 7 or so % on your money elsewhere why would you not work your money versus giving it to the dealer. Somewhat the same as buying a house.

Please let us know where you get 7%+ on your money. When everyone gets <1% on their MMF, paying cash up front sounds pretty good vs >3% on an auto loan.

[JoLo]

I agree with the previous poster who said MOST people who lease only lease because in reality they can not actually afford to buy the car. Also I choose not to drive a rental vehicle for 3 years, i like to own mine and do what i please with them hahah

[Mr. ///M3 RD]

Originally Posted by JoLo

I agree with the previous poster who said MOST people who lease only lease because in reality they can not actually afford to buy the car. Also I choose not to drive a rental vehicle for 3 years, i like to own mine and do what i please with them hahah

+100 "it's a different kind of feeling altogether"

did I just say that ... might be a new BMW footnote oh well I do mean it

[Mr. ///M3 RD]

Originally Posted by James T. Kirk

Allow me to DEBUNK some myths:

The OP's "old Asian way" of buying everything upfront in cash is a lousy way to tie up a chunk of cash into a depreciating asset that could otherwise be working for you in a real investment. There's a reason why cash buys are OLD SCHOOL and quite obsolete.

What you think of a German friend I have that just put a brand new Ferrari California in his garage and covered it up. He visits the car as often as he likes. His point is "as good as gold besides it is nicer to look at then gold bars"

as for investments ... unless it is a sure say 1.5% return cash investment it deteriorates quite quickly in our today economy ...

[Dave07997S]

Originally Posted by tlp

Unless your writing off your lease payments...Leasing is just a nice word for Long Term Rental Contract.

When your Lease period is up you return your rental car.

This isn't true in all cases, you can build equity in a vehicle just as a purchase and you can buy the car at the end of the lease. My first two E46 M3s I sold walking away with $5k on my 01 M3 and almost $8k on my 04 M3, both of these cars were secured with just minimal drive-off. However, at the end of my 997S lease I broke even.

Dave

[Dave07997S]

Originally Posted by James T. Kirk

Allow me to DEBUNK some myths:

The OP's "old Asian way" of buying everything upfront in cash is a lousy way to tie up a chunk of cash into a depreciating asset that could otherwise be working for you in a real investment. There's a reason why cash buys are OLD SCHOOL and quite obsolete.

The WRITE OFF benefit is often offset by the increased cost in commercial insurance over individual insurance. Quite often, writing things off ends up being just a bunch of accounting LOCKER ROOM TALK amongst business owners who really don't analyze the final net cost/benefit at the end of the day. That compounded by the FIB that one's Bimmer is actually being used for commercial use when you're just commuting from home to work, is also a bit of an ethical issue.

Generally speaking, leases are great for folks who can STICK TO THE PLAN. If you can follow the lease calendar, keep your miles under your allotment and NOT try to buy it at the end of the lease, then you can maybe save money so long as the rates are decent.

That's why leasing is NOT FOR ME. I like the freedom to do anything I want with a car. Whether I want to make mods that violate the warranty PRIME DIRECTIVE, sell it after six months, or keep it after three years to INFINITY AND BEYOND. Financed ownership is the way to go. My money isn't tied up and I'm free to do what I please without getting hammered with penalty fees that can far exceed any natural depreciation if I want to sell early or keep it longer.
.

This is even more true with the fact that the cost of money is actually quite cheap. If you secure a 60 mos. loan for 1.9%, you can use the money that wasn't used to acquire the car and invest it and hopefully get a higher return. The way the stock market and other investments are paying out though...I don't know.

Dave

[flpnout]

I prefer to lease as I have committal issues....plus when and if I do get bored with it, I just stick it on swapalease.com. It is easier than trying to sell a car when you still have a bank lien on it, plus I hate paying all that taxes upfront if I don't end up keeping it. If you have the $$ to pay cash, then selling it later is easier since you have the title on hand. My way maybe costly, but I enjoy driving new things.

However, my lease is coming on my Z4 and I am considering on purchasing it. This Z4 is the longest I have kept a lease at a little over 2 years now. I heard from other peeps that when their lease ended, they had negotiated to lower the residual value on the contract and add CPO extended warranty and sometimes maintenance extension too. My coworker bought her 5 series at the end of the lease and BMW San Francisco lowered the residual and CPO the car. When she got it back, they even removed the dents and scratches as if it were new again.

[piloto]

To those arguing that those who lease can't afford the car outright, I think you're generalizing and perhaps don't have the same circumstances as those who are leasing. Yes, there are those who lease becuase they "can't afford it," but every one of those, there are those who buy and finance it over 7 or 8 years too.

In CA, if you're not going to keep the car over 4 years, leasing is not a bad deal at all, especially if you're a business owner. And unlike a poster said above, you have the ability to register the car under your own name, and hence buy "regular" insurance as opposed to commercial, and what you do is essentiall allocate the "miles used for work as a percentage of the total payments made annually" as a business expense.

Even without the tax advantage, given BMWs free service, and warranty period, and the fact that BMW tends to produce successively great cars, leasing is a strong option. In my case, all of my last cars have been better than the ones before, and when first getting them, I've thought I'm never going to get rid of this. But two or three years later, reality sets in and I'm conteplating the costs of maintenance for something out of warranty, and eyeing a new car. I have two nice used cars in my garage, in my 944S and S2000, so I always have a back-up car, and two to call my own.

I drive about 30K miles a year (and that's with traveling and being out of the country for at least 8 weeks), and BMW's $0.15/mi upfront ($0.16/mi during the lease but up to 4 months before lease end) additional mile purchase is very well priced, so it doesn't affect my decision to lease.

As for pumping money down the drain, it's the same if you buy a car and sell it after 3-4 years. Except it's better because you keep more of your cash with you throughout that process. Now, if you keep your cars 5+ years, by all means, buy it and enjoy it.

The bottom line is there are no two cases that are alike, and BMW's leases are some of, if not, the best out there, especially if you're getting the ED wholesale price (residual is based on US MSRP). But by no means are those who are leasing, doing so, because they couldn't afford the car.

[spdy330]

As others have noted if you plan on having a new car every 3 or so years then leasing makes sense. You will though have less money in your pocket because it could have been yours and not have to start all over. Leasing for some is a write off as some noted. For other it is probably (not always) because they can not afford the car to begin with.

I am sure you still can but back in the 90's I had my own business and wrote off on my taxes the mileage my truck every year and it was not a lease. I chose to write off mileage rather than the payment as I had a greater benefit as I drove so much. And after 5 years the car was still mine and I was still writing off mileage.

Some people think by writing off your lease payment is like getting the money back off your taxes. This is a misconception. If you paid for example 400 a month on a lease that would be 4800 a year. At tax time you will NOT get 4800 back in pocket from the write off but you will get to write off the tax on 4800. You still pay the 4800 in the end. Though I am sure most of you already knew this others may not.

Either way it is all about what you feel comfortable with and your plans for your next car. No right no wrong, its all about your choice.

[gblansten]

I lease and I plan to get a new car every three years during my professional life.

[rye m3]

This can be an interesting thread. I still believe most people lease because it's the only way they can get into the car. I want to see a poll asking how many people that lease their M3 have credit card debt?

Anyway, I even looked at this on a very simple basis. M3 lease 36/12k, 0 down, must be about $1000/mo. $12k per year. After 3 years, $36k. You've paid the depreciation as if the $70k car will be worth $34k. Lease residual of 60%, so your price to buy will be $42k. Buyout is an $8k loss. If you sell the car for $45k, you "make" $3k - I don't think so, you just narrowed the loss to $5k.

Leases are convenient and let you beat on a car. Leased a car for the first time. Family X3. Very low financing rate and a great residual. The family car gets beat on. Dinged, dirty, parked outside, not cleaned often enough, etc. I keep it well waxed and it looks nice, but the results are unavoidable due to negligent mothers with Suburbans. I'll see how the lease goes. Renting costs a bit more, but all those factors make it very difficult to sell or trade the car in after 3-4 years. Leasing will be very convenient. I think "renting" this rig will be the right move. Also, gets full duty in the winter, driving in snow every day. With the latest generation X3, also wanted to be sure to be able to get rid of it if they turned out to be a dog.

Another factor for owning an M3, if you treat it right, wash it every week, wax it with Zanos or whatever, you will NOT enjoy the benefit of the value at the end. Your car will be turned in and be the same as the car that was tracked 12 times a year and has 6 1" dings on each side.

[Mr. ///M3 RD]

Originally Posted by rye m3

This can be an interesting thread. I still believe most people lease because it's the only way they can get into the car. I want to see a poll asking how many people that lease their M3 have credit card debt?

Anyway, I even looked at this on a very simple basis. M3 lease 36/12k, 0 down, must be about $1000/mo. $12k per year. After 3 years, $36k. You've paid the depreciation as if the $70k car will be worth $34k. Lease residual of 60%, so your price to buy will be $42k. Buyout is an $8k loss. If you sell the car for $45k, you "make" $3k - I don't think so, you just narrowed the loss to $5k.

Leases are convenient and let you beat on a car. Leased a car for the first time. Family X3. Very low financing rate and a great residual. The family car gets beat on. Dinged, dirty, parked outside, not cleaned often enough, etc. I keep it well waxed and it looks nice, but the results are unavoidable due to negligent mothers with Suburbans. I'll see how the lease goes. Renting costs a bit more, but all those factors make it very difficult to sell or trade the car in after 3-4 years. Leasing will be very convenient. I think "renting" this rig will be the right move. Also, gets full duty in the winter, driving in snow every day. With the latest generation X3, also wanted to be sure to be able to get rid of it if they turned out to be a dog.

Another factor for owning an M3, if you treat it right, wash it every week, wax it with Zanos or whatever, you will NOT enjoy the benefit of the value at the end. Your car will be turned in and be the same as the car that was tracked 12 times a year and has 6 1" dings on each side.

One additional item to consider would be if you purchase your car then say after 3 years you trade the car in at a dealer your tax burden will be less. (trade in value minus new car price is taxable in Canada at 13% in most of our Provinces). On the other hand a private sale might even out this tax burden by getting a higher value for your car. Then I hate the hazel of selling a car privately (test driving and low balling etc.). In the end I think it all comes out even, I just find dealing with a dealership is easier for me anyway since I deal with the same dealer and get a pretty good discount as a repeat cash customer.

[JulieDriving]

Originally Posted by Rolf-Dieter

One additional item to consider would be if you purchase your car then say after 3 years you trade the car in at a dealer your tax burden will be less. (trade in value minus new car price is taxable in Canada at 13% in most of our Provinces). On the other hand a private sale might even out this tax burden by getting a higher value for your car. Then I hate the hazel of selling a car privately (test driving and low balling etc.). In the end I think it all comes out even, I just find dealing with a dealership is easier for me anyway since I deal with the same dealer and get a pretty good discount as a repeat cash customer.

Although if someone has the cash to pay off the residual on a lease (and is not leasing the car because they cannot afford the finance payments), they can just put that same money down on the new car and pay less tax.

There is no advantage in my mind to buying or financing (as compared to leasing) a car that you will be trading it after 3 years.

You are just paying for the depreciation of the car if you are leasing it. If you trade in a financed or 'bought out in cash' car, you are just getting back the money you did not give in the first place with a lease.

EDITED to add: If you know you are trading in a car after 2-3-4 years, leasing also protects you from the depreciated value of the car should it get into an accident. If you own it, you own the depreciated value. If it's leased, it's the leasing company's headache to deal with once you turn it back in.