[akashmehrotra]

Hi

My heart is set on a X7 and I currently own a X5 35d which I absolutely still love.

I was reaching out to seek help on buy vs lease decision. I feel this is a bad time to buy an expensive car like an x7.

While I understand the benefits of buy (I have never ever leased a car), one of the big cons as I see on buying is that I will be stuck with the car for atleast 5+ years. The car technology is changing so quickly that in 2-3 years BMW will have an answer to electric and autopilot + more innovation.

I feel if I lease, I will be in a much better position to upgrade in 3 years to something more advanced and innovative vs try to sell the X7 at a pretty bad price - considering there will be much advanced options available and the car would have devalued significantly owing to that.

Appreciate any guidance - am I thinking this right.

Also on my most recent X7 3yr/36k lease I am getting a MF of .0177 and a residual of 54%.

The MF seems high. Any idea what's the prevailing MF on 2020 X7 leases.

thanks

[2020bmwx7]

i think this is a personal decision and reading what you wrote, it sounds like you've made your decision (lease).

[Crimsonboz]

Originally Posted by akashmehrotra

Hi

My heart is set on a X7 and I currently own a X5 35d which I absolutely still love.

I was reaching out to seek help on buy vs lease decision. I feel this is a bad time to buy an expensive car like an x7.

While I understand the benefits of buy (I have never ever leased a car), one of the big cons as I see on buying is that I will be stuck with the car for atleast 5+ years. The car technology is changing so quickly that in 2-3 years BMW will have an answer to electric and autopilot + more innovation.

I feel if I lease, I will be in a much better position to upgrade in 3 years to something more advanced and innovative vs try to sell the X7 at a pretty bad price - considering there will be much advanced options available and the car would have devalued significantly owing to that.

Appreciate any guidance - am I thinking this right.

Also on my most recent X7 3yr/36k lease I am getting a MF of .0177 and a residual of 54%.

The MF seems high. Any idea what's the prevailing MF on 2020 X7 leases.

thanks

MF should be .00142 they are marking it up.

[toddwalton]

We lease 2 BMW's perpetually, have been doing so since 2004.

Luxury cars depreciate quickly, and repairs and technological obsolescence negate any positive revenue from the buy-and-sell game.

We are always in a new car, we never have to worry about maintenance or repair, and we never have the hassle of trying to sell a car. I haven't set foot in a DMV or paid for so much as a wiper blade in 16 years.

[Crimsonboz]

Originally Posted by toddwalton

We lease 2 BMW's perpetually, have been doing so since 2004.

Luxury cars depreciate quickly, and repairs and technological obsolescence negate any positive revenue from the buy-and-sell game.

We are always in a new car, we never have to worry about maintenance or repair, and we never have the hassle of trying to sell a car. I haven't set foot in a DMV or paid for so much as a wiper blade in 16 years.

There is some wisdom here. Plus if you ever wanted to own the vehicle, loved it, couldn’t give it up. Buy it at the end.

[jcarlilesiu]

Opposing point of view. The most expensive way to drive a car is leasing.

We have always bought and even driving the car for 4 years and trading it, we got $18,000 towards the X7 from our Yukon Denali.

Granted technology will advance and we will do without the latest and greatest for a couple of years before we trade, but we will have some value there.

Plus we live in a rural area so we put a lot of miles on vehicles.

[mitch57]

Originally Posted by jcarlilesiu

Opposing point of view. The most expensive way to drive a car is leasing.

We have always bought and even driving the car for 4 years and trading it, we got $18,000 towards the X7 from our Yukon Denali.

Granted technology will advance and we will do without the latest and greatest for a couple of years before we trade, but we will have some value there.

Plus we live in a rural area so we put a lot of miles on vehicles.

I agree. Plus, being retired, I don't won't payments or debt. Regardless of depreciation, when we are ready to sell there will be value in the vehicle which we can use to off set the cost of a new vehicle. Even if you still owe money on a purchased vehicle you can trade it in and usually come out ahead. Plus, your not subject to fees for driving it over the leased mileage limit or getting penalized for dings and dents.

All that being said, if you can't afford to buy the vehicle outright and don't keep it past your purchase payment period then Leasing is a viable option. Some folks just accept the fact that they will always have a car, house, and credit card payments. At my age I don't want any payments or debt.

[toddwalton]

Originally Posted by Crimsonboz

There is some wisdom here. Plus if you ever wanted to own the vehicle, loved it, couldn’t give it up. Buy it at the end.

Exactly. You have the option.

Look, this isn't a Honda forum. We're talking about $70,000 and up vehicles. The outside shot at saving a few hundred dollars vs. having the flexibility to walk away and always be in a brand new car is an easy decision.

[toddwalton]

Originally Posted by jcarlilesiu

Opposing point of view. The most expensive way to drive a car is leasing.

Yes and no. My investment consultant insists we lease and what he was able to do with our money this year I don't even want to say, it's an embarrassingly big number. Better to have $70,000 invested and making money than having it tied up in a depreciating asset like a luxury car.

Originally Posted by jcarlilesiu

We have always bought and even driving the car for 4 years and trading it, we got $18,000 towards the X7 from our Yukon Denali.

But since you were likely paying $800 more per month having bought the car than leasing the car, that's just semantics. I didn't have $18,000 in equity off of my X5 lease when returning it for the X7 but I didn't spend that $18,000 so its a win for me from that perspective.

Originally Posted by jcarlilesiu

Plus we live in a rural area so we put a lot of miles on vehicles.

Now that's the big one, if you can't manage 12K miles per year then leasing is not a win. Where we live here in the NYC metro area, 12K is where we are right on the nose, so it works out very well for us.

We view a lease as just another monthly payment, just another utility. You have a heating bill, you have a phone bill, you have a car payment. We get as much car as we can for our monthly budget, and we pay it. Like heat, food, or phone, there is no ROI. Transportation is something you need just like electricity or internet, it costs money, you pay it, it doesn't pay you back anything. Not sure why people think a car is like a mortgage. It's just another utility.

[760Lifan]

As a rule of thumb, if you want a new vehicle every 3 years, don't drive more than 15K miles/year and prefer pretty loaded models, there is simply no way around leasing.

I'm turning in my 2017 Audi Q7 in a week. It's a lease. Would I have financed this vehicle, I would be looking at $15K in negative equity ALTHOUGH I only drove 10K miles of the 30K allowed. Why? Because it's fully loaded.

One feature on there is a $5K B&O sound-system which I only paid 40% of over the lease. Guess what? When estimating the vehicle's trade-in value, this option wouldn't even increase the value by a single penny - you can't even select it on the estimate. So if I would have financed the vehicle, I would have lost the entire $5,000.

[1268]

It's all about the mileage. High miles lease low miles purchase. I own 4 vehicles outright and lease 2....all depends how you plan to use them and what their role is.

[Paultattoo]

Originally Posted by 760Lifan

As a rule of thumb, if you want a new vehicle every 3 years, don't drive more than 15K miles/year and prefer pretty loaded models, there is simply no way around leasing.

I'm turning in my 2017 Audi Q7 in a week. It's a lease. Would I have financed this vehicle, I would be looking at $15K in negative equity ALTHOUGH I only drove 10K miles of the 30K allowed. Why? Because it's fully loaded.

One feature on there is a $5K B&O sound-system which I only paid 40% of over the lease. Guess what? When estimating the vehicle's trade-in value, this option wouldn't even increase the value by a single penny - you can't even select it on the estimate. So if I would have financed the vehicle, I would have lost the entire $5,000.

I drive 25,000+ per year 😕

[Luminor513]

Originally Posted by jcarlilesiu

Opposing point of view. The most expensive way to drive a car is leasing.

We have always bought and even driving the car for 4 years and trading it, we got $18,000 towards the X7 from our Yukon Denali.

Granted technology will advance and we will do without the latest and greatest for a couple of years before we trade, but we will have some value there.

Plus we live in a rural area so we put a lot of miles on vehicles.

Realistic opposing view.....accidents happen. And when they do, the perceived value/equity in the vehicle is gone, or significantly diminished on top of an already drastic depreciation which is common for all German luxury cars. And furthermore, as someone already mentioned, repairs/maintenance on these cars beyond the warranty period is money down the toilet. All factors involved, leasing is much safer hence the popularity of leasing in today's car world, especially luxury segments.

[akashmehrotra]

whoa. thank you so much for the detailed perspectives. I have been a buy person till now, but I must say - today is not a good time to buy a car. the car technology is changing so drastically on multiple fronts, that I dont want to end up with a 100k car, which WILL be obsolete in 3 years - given where we might be in 3 years wrt car technology.

so I think I will settle for a lease. Sell my X5 and enjoy one year of free driving. I understand BMW sets the rate for lease MF and the quote I got is .000177 in my area. Apparently the MF went up. It still seems high from what I see on this forum. Wonder if someone has recent experiences leasing a 2020 X7. thanks

[phdhusky]

Originally Posted by akashmehrotra

whoa. thank you so much for the detailed perspectives. I have been a buy person till now, but I must say - today is not a good time to buy a car. the car technology is changing so drastically on multiple fronts, that I dont want to end up with a 100k car, which WILL be obsolete in 3 years - given where we might be in 3 years wrt car technology.

so I think I will settle for a lease. Sell my X5 and enjoy one year of free driving. I understand BMW sets the rate for lease MF and the quote I got is .000177 in my area. Apparently the MF went up. It still seems high from what I see on this forum. Wonder if someone has recent experiences leasing a 2020 X7. thanks

Go to edmunds and ask for the buy rate for the term of the lease you are looking for in your area. It should be around .00142, at least it is in mine.

Go to leasehackr forums and look at what broker's are getting and what other people are getting. There are some AMAZING deals to be had right now on left over 2019 50i, eg. ~800 a month on a 100k car with max MSD (multiple security deposits), loyalty credit, and normal drive offs.

[yousefnjr]

Spend some time reading on leasehackr forums. There is a lot to learn.

BMW (FS?) does set the MF, however the dealer can mark it up a certain amount if they wish. Up to you to negotiate that.

[aas5]

May be cheaper to buy from an out of state dealer and ship than pay a higher MF for 3 years

[Brukes]

It depends on your priorities and want you want.

A few thoughts to ponder in response to some of the other posters' comments:

1. Better to invest the cash in the market than invest in a depreciating asset -

Yes but, let's be practical about what leasing is - it's an interest only loan for the full price of the car for the duration of the lease. Current MFs imply that you're able to borrow at 3.5-4% depending on region; so in order to come out ahead you need to be posting 5-7% annual gains in your invested assets because of taxes and investment management costs. And sure, over the last three years markets have done well, and if you had just put it in the market it would've posted that and more over, but on a risk adjusted basis, the market (fixed income, real estate or equity) are not expected to generate that type of return on a go-forward basis. But you need to make the assessment as to what your investment options are and if you want to take the investment risk.

Also, you can borrow the full-price of the car to buy it at a lower rate albeit you'll need to pay principal back, but you're finance costs are lower and your opportunity cost is only marginally higher.

2. Car is obsolete after 3-years -

No. It still works, it'll still be under warranty for another year. Sure the tech won't be completely up-to-date but 2017 BMWs have pretty much all the same tech features as current models just with screens that aren't as nice.

3. Maintenance costs are too high on these luxury vehicles.

I have a 2020 40i - BMW website is quoting me at 5K to extend my full warranty for two years (6 years). If you price out two back-to-back leases (using 60% residuals and interest rate at 3.5%) And compare it to a buy assuming a residual value of 30% after 6 years + the cost of the warranty... your cost to own is still 20Kish less over 6 years vs leasing for the same period not to mention if you get some fees on lease return.

4. The value of a leasing is for those who want a new car every three years or who can't commit to 4+ years of ownership or are expensing it -

That's perfectly fine and makes a lot of sense - new cars are fun, flexibility has value if you know your needs may change (relocation, family size), and leasing is easier for expense purposes if you are using an LLC.

Anyways - leasing has its advantages but just wanted to balanced about the costs for the OP.

[Resjudicata]

I agree with 760liFan, and other comments above. As an economist, I have to encourage you to look at the Opportunity cost of money. if you have 100k and you can make ROI of 50% in stocks, 20% in bonds and 10% in cd equivalents; you would have easily almost 200k in 3 years with a modest portfolio allocation. subtract lease payments of about $40k and you still have $160,000.

however, if you buy your x7 for 80k, and only invest $20k at the same rates; you will have only $50-60k at the end. plus a car that probably is worth $40-50k.

I don't know about you, but I like $160k better than $100k. no risk, great reward, doesn't cost anything, and minimal up front capital.

Leasing is better, it takes all the risk out of the game. and frees up your capital.
The opposite side says buying is better, doesn't account for accurate depreciation. your lease payments is always equal to their depreciation. We all pay the same prices; it just depends what you want to have left over after 3 years to resell and flip; or to keep for another 20 years.

and options is the biggest one. you get $0 for any options you add unless you lease to recover 40%+ of the options.

[Resjudicata]

Originally Posted by Brukes

It depends on your priorities and want you want.

A few thoughts to ponder in response to some of the other posters' comments:

1. Better to invest the cash in the market than invest in a depreciating asset -

Yes but, let's be practical about what leasing is - it's an interest only loan for the full price of the car for the duration of the lease. Current MFs imply that you're able to borrow at 3.5-4% depending on region; so in order to come out ahead you need to be posting 5-7% annual gains in your invested assets because of taxes and investment management costs. And sure, over the last three years markets have done well, and if you had just put it in the market it would've posted that and more over, but on a risk adjusted basis, the market (fixed income, real estate or equity) are not expected to generate that type of return on a go-forward basis. But you need to make the assessment as to what your investment options are and if you want to take the investment risk.

Also, you can borrow the full-price of the car to buy it at a lower rate albeit you'll need to pay principal back, but you're finance costs are lower and your opportunity cost is only marginally higher.

2. Car is obsolete after 3-years -

No. It still works, it'll still be under warranty for another year. Sure the tech won't be completely up-to-date but 2017 BMWs have pretty much all the same tech features as current models just with screens that aren't as nice.

3. Maintenance costs are too high on these luxury vehicles.

I have a 2020 40i - BMW website is quoting me at 5K to extend my full warranty for two years (6 years). If you price out two back-to-back leases (using 60% residuals and interest rate at 3.5%) And compare it to a buy assuming a residual value of 30% after 6 years + the cost of the warranty... your cost to own is still 20Kish less over 6 years vs leasing for the same period not to mention if you get some fees on lease return.

4. The value of a leasing is for those who want a new car every three years or who can't commit to 4+ years of ownership or are expensing it -

That's perfectly fine and makes a lot of sense - new cars are fun, flexibility has value if you know your needs may change (relocation, family size), and leasing is easier for expense purposes if you are using an LLC.

Anyways - leasing has its advantages but just wanted to balanced about the costs for the OP.

specifically for point #3, he's missing the cost of wheels, tires, etc. and the lost value of options like the sound system and leathers. every 3-4 years you'll need to replace the rubber [wipers, tires, etc]. that's on average, assuming you don't blow a wheel or get in an accident.

if you get in a wreck, your owned car will drop 20%; where as your lease will drop 0% because it's already factored into the price up front.

[mitch57]

Here's some information on the pros and cons of purchasing versus leasing. https://www.consumerreports.org/buyi...ing-a-new-car/

[Resjudicata]

Originally Posted by mitch57

Here's some information on the pros and cons of purchasing versus leasing. https://www.consumerreports.org/buyi...ing-a-new-car/

Agreed and you'll notice at the chart at the end. The numbers are nearly identical $31k for a $29k sticker.

The only difference is 1 guy had 1 old car; and the second guy had 2 cars new each time. Almost identical costs after 6 years, which is about how long 90% of Americans drive their cars before selling.