[NorCalAthlete]

Apologies if this is a repost, but search didn't really turn up any direct comparisons. I'm wondering about the pros/cons of leasing here. I've never leased a car before, and only purchased 1 brand new. Previous were all used.

What are the pros and cons of leasing vs buying/financing? I estimate I'll keep it for at least 4-5 years, to get the most out of that factory warranty/maintenance + a bit. Leases are only for 36 months, but it seems the price to purchase after amounts to the same as buying it in the first place.

Can you still custom build a lease like you would one you would order and purchase?

What restrictions get put on you with a lease? I've heard mileage, but at 12k/year that doesn't sound particularly restrictive?

What are the reasons to buy vs lease?

[Alan_NJ]

Yes, you can custom build and get it on a lease.

Pros are:
You can get more car than you could typically afford.
Never have to worry about post warranty stuff.
Get in another new car after the lease is up.
No money down except tax, fees and first payment.
Other ways to reduce monthly payment.

Cons are:
Any mods you add are wasted money unless you can reuse or sell elsewhere.
(with the exception of BMW mods that may be subsidized during the lease)
You have to keep great care of your car or else worry about lease end fees for damage above and beyond normal wear and tear. (sometimes forgiven if you go into another BMW)
Limited mileage - but if you go over BMW will let you buy more at the same rate before lease end.
You'd have to buy it out if you want to keep it after the lease - that ends up being expensive, and its very difficult to negotiate a better residual price at lease end. Typically not worth it.


A lot of people dont like the idea of having nothing at lease end.
They seem to feel that all the money is wasted.
But a car is not an investment, its not like you make money on it after your final payment when financing it, you just have some residual. Look at it like renting an apartment, except you get a new apartment every few years better than your old one - and you dont have to move (much)!
Doing the math, the cost of owning a car, post warranty and keeping up with maintenance and other costs, you may find that leasing costs no more.
(especially on a luxury brand!)


Im sure I didnt cover everything, but thats my thoughts towards leasing.
I lease, and the determining factor for me is how far I work since thats where most miles come from.
I work 10 minutes away and could get away with 10k miles saving on the monthly, but I still go with 12k because I like to drive.

I recall reading somewhere that overall leases account for somewhere around 28% of all car purchases.
But its 50% when counting just luxury brands. Theres a reason for that.

With all the said, make sure you are very familiar with leasing details before jumping in.
Know what money factor, cap cost, residual, MSRP, MSDs (multiple security deposits) all are and how they relate to one another and how you end up at your monthly payment.
Some things are hidden and can be taken advantage of by the dealer.

Be familiar with your insurance cost since you will be required to have specific levels of coverage on a lease vehicle you may not have to have (but should want) on a financed vehicle.

There is a LOT of info on these forums and the internet in general.

[Professor///M]

above covers a lot.

The pro and con of purchases equal themselves out...


The pro of purchase is that you can drive it as many miles as you want, take as good, or as bad care of it as you want, and you own it, it has value and equity.

The con, is that as soon as you purchase it is that it loses value due to depreciation. If you damage it in excess, its value may be lower than you owe.


The depreciation can often be recouped when you sell the vehicle, as your trade in value will lower the purchase price of your new vehicle, giving you a tax savings.


The really only benefit for a lease is if you want a car with low payments, and don't go over 15,000 miles, and if you're someone that tends to not smack up your car and keep it clean. It is also of benefit if you like new cars. At the end of the day, the costs can be about the same, but will ultimately be more if you continuously lease.

[Cyberdemon]

http://bit.ly/1ByIuET

If you plan on keeping the car past 36 months, there is generally no reason to lease. Purchasing a car out of a lease is financially one of the worst ways to purchase a car vs financing it from the start.

Lease mileage is very restrictive if you drive a lot. Some people commute 5 miles to work, never take road trips, etc. I commute 30 miles each way, so even with 15k is right at the threshold

[LMK5]

I think leasing is a great way to introduce yourself to a luxury brand if you've never driven one in the past. Additionally, BMW makes leasing attractive because of the high residuals. On top of that, adding multiple security deposits lowers your costs further.

Leasing is more complex than buying, but I enjoyed spending the time to learn RV, MSD, MF, CC, etc.

[newoldbeemer]

One other factor is, are you sure you can keep the car for at least 36 months? If you need to be able to sell anytime then buying is easier. For instance

- you are on a visa with a high-paying but not-so-secure job, layoff can happen anytime and your visa is tied to one company (think tech industry). If your company lays you off, you need to pack your bags in a couple of weeks and leave.

- you are not sure about finances, may need to sell anytime

- you have the tendency of changing cars in less than 3 years

- you may have a baby next year and need to change vehicle

You can still get out of a lease in these situations but it's much less hassle with a car you bought.

[mike@x-ph.com]

Lease Pro:
Cheaper
100% warranty
You can get a new car after lease ends

Leas Cons:
Everything u spent will go to waste (it is just like renting a car for a long period)
Cant add any mods


If you are planning on keeping the car for 5+years, you should buy it.
If you cant keep a car for more than 3, you should lease it.

[tpdietz]

My personal opinion here, but I think monthly cost is am enormous determining factor when choosing to lease or purchase.

If you aren't concerned with a monthly cost, then this is a moot point. But for some people, like myself, who don't have the capitol to buy cars in cash, leasing is very attractive.

For example, my car was 53k + 5k upside-down equity (because of a m-benz purchase), so call it $58k. With $14k down, my monthly payment for 15k miles/yr is $388/mo after taxes. If I were to buy that car, with $14k down, my payments at a 3% apr and 5 years would be $790/mo (according to some car loan calculator). Thats a big difference for me.

[ft1330]

Read one of the other 10000 threads on this topic...

[Professor///M]

Originally Posted by tpdietz

My personal opinion here, but I think monthly cost is am enormous determining factor when choosing to lease or purchase.

If you aren't concerned with a monthly cost, then this is a moot point. But for some people, like myself, who don't have the capitol to buy cars in cash, leasing is very attractive.

For example, my car was 53k + 5k upside-down equity (because of a m-benz purchase), so call it $58k. With $14k down, my monthly payment for 15k miles/yr is $388/mo after taxes. If I were to buy that car, with $14k down, my payments at a 3% apr and 5 years would be $790/mo (according to some car loan calculator). Thats a big difference for me.

BMW select can help, and can be lower than lease payments. It's a hair more than financing traditionally at the end of the day, but overall less than leasing. It's a good medium for people that like low payments, drive lots of miles, and may keep a car in the 2-5 year range. Not helpful if you are a 5+ year owner

[FC4]

Originally Posted by mike@x-ph.com

Leas Cons:
Everything u spent will go to waste (it is just like renting a car for a long period)
Cant add any mods

Everything spent going to waste? So the payments you make aren't going towards the use of a brand new vehicle? I also don't get the can't add any mods parts...my car is leased and I've added a JB4, intake, downpipe, etc. They installed perfectly fine and the car runs just as strong as if I had bought it outright.

[bavarianride]

Originally Posted by FC4

Everything spent going to waste? So the payments you make aren't going towards the use of a brand new vehicle? I also don't get the can't add any mods parts...my car is leased and I've added a JB4, intake, downpipe, etc. They installed perfectly fine and the car runs just as strong as if I had bought it outright.

The mods need to be removed upon lease return, correct? The removed mods will not provide any further utilities and they may not be worth much after 3 years(e.g.) of usage.

[FC4]

Originally Posted by bavarianride

The mods need to be removed upon lease return, correct? The removed mods will not provide any further utilities and they may not be worth much after 3 years(e.g.) of usage.

Correct.

How is this any different if you had purchased the car? Mods add no value and arguably can detract value when it comes time to sell the car. Obviously this is why most people uninstall mods, sell them separately, and return a car back to stock before listing it for sale. Any difference?

[Alan_NJ]

Originally Posted by tpdietz

For example, my car was 53k + 5k upside-down equity (because of a m-benz purchase), so call it $58k. With $14k down, my monthly payment for 15k miles/yr is $388/mo after taxes. If I were to buy that car, with $14k down, my payments at a 3% apr and 5 years would be $790/mo (according to some car loan calculator). Thats a big difference for me.

OP - Do not do this.
Putting 14k down on a lease is absurd.
If you are tempted to put money down because of a lower monthly, keep that money in a high interest savings account instead and apply it towards your higher monthly payment each month.

Its not wise to dump a large sum into a lease because its lost if the car is wrecked.
And why let BMW earn interest on your down payment when you could be earning it instead?
Plus what if something happens and you have to get rid of the car by having someone else assume the lease? Now youre out the money you put down.

If you have extra funds its always wiser to apply them towards MSDs so that will lower your monthly and youll get those funds back.

[S4NoMore]

^ x2. I've always heard the cardinal rule of leasing is to not put money down. Though in that example, being so upside down, circumstances may have been extenuating.

My 2 cents are that yes, with a finance your monthly payments are higher, but you have the ability to determine your own residual by taking care of the car and selling privately. The net cost spread over a term of ownership can actually be beaten by financing vs. leasing (and I've seen this firsthand, even in the short term under 3 years). Of course there is work associated with selling a car privately, not to mention taking good care of it, but to me it is worthwhile and I want to drive a car that's well cared for anyway. I also prefer the flexibility of not being locked into the lease, if the worst happens and I lose my job or need to save money, I can sell the car at any point within a matter of weeks.

[bavarianride]

Originally Posted by FC4

Correct.

How is this any different if you had purchased the car? Mods add no value and arguably can detract value when it comes time to sell the car. Obviously this is why most people uninstall mods, sell them separately, and return a car back to stock before listing it for sale. Any difference?

The slight difference would be for purchase it is owner's choice to remove the mod or not before sale(some posters did report enhanced resale with the mods, although it is rare). Also, there is no time limit on the sale(e.g. 3 years as in lease), and the owner can get as much utility out of the mods as desired.

[NorCalAthlete]

Currently, my truck is $190/month for payment (I owe about $7k more on it) but has a trade-in value of ~$23,000, private sale ~$25k-26k (or more if I can sell it to someone who wants it more. Added stuff like a Line-X spray in bed liner, bed cover, class 4 tow hitch, etc). Gas, on the other hand, is roughly 16-17 mpg average with about a 70-30 split city/freeway. It barely fits in parking garages, is too long to fit in most parking spaces in California, and I bought it when I was still moving around frequently with the military so everything I owned including my motorcycle could be loaded up and moved in 1 go. I've had it for almost 5 years now and it's served me well and is a fantastic truck, but it's no longer the most practical or fun to drive.

The most pessimistic gas savings estimate still more than balances out the insurance difference increase for me, and the maintenance over 4 years takes care of a solid chunk of the monthly increase in cost. Basically my cost would go up by about $350-$400/month, but at the same time with no maintenance I wouldn't have to worry about anything but tires. I'm also kicking my brother off my cell phone plan to his own, so that's another $85 back in my pocket.

I may be missing something but that's my estimate right now for financing based off of solid credit and ~$10,000 down payment. I do plan on adding some aftermarket bits like CF spoiler, kidney grills, and a couple of the CF interior trim pieces. Exhaust and wheels probably in a year or two depending on how I'm liking it at that point. For the first few years I had my truck I wanted to do the same but ended up leaving it stock aside from the bed liner and functional stuff. So not sure if I'll actually end up modifying much besides the minor aesthetics on a 435i.

I'm not worried too much about jobs - I'm majoring in Computer Science and live in Silicon Valley, and in addition to my own social and professional networks have the Veteran's associations who are always looking to help vets get hired. I have enough saved up that even if I weren't using the GI bill to pay for housing and college, I could float myself through graduation with all my current costs and still have a good chunk left in the bank.

I guess I'm just testing my theories to see if I've thought this through enough. I know it's not a need, it's a want, and I've mostly convinced myself it's doable. Seeing if anyone can poke enough holes in my thinking to sink my ship or not.

[Yay-Z]

Buy car and pay cash. I leased once and it was dumb.

How can you possibly predict your life 3 years out.

Jobs change, finances change, relationships change and not always for the better.

[NorCalAthlete]

Heh, job situation can only improve from here, currently single, and 0 expenses/debt aside from the truck/future BMW.

[Kre62]

I always have to laugh when people say that leasing is basically throwing your money away, or that you have "nothing to show" for your payments.

This is a car. Cars depreciate. If you "purchase" the car, you are also throwing your money away.

If your finance payment is 700 a month, and the car loses 700 a month in value, what's the net gain? Guess what? You just threw your money away.

Now, after a few years the depreciation rate slows and you might end up with something worth about 5-6K in 10 years. Wow. your investment lost 90% of its value. And you've paid interest on the loan, and now lots of money in maintenance costs. Overall you've thrown a TON of money away, much more than 70K-80K total.

Buying a luxury car is a fools errand. The only advantage of a luxury car over a Honda is social status. As luxury cars age, that status vanishes into thin air (because why cant you afford a new luxury car, poser?).

So if the extra value of a luxury car vanishes, why keep it long term? In addition, you are looking at $2K tire changes, extra high maintenance costs, etc.

The best solution is to pay as absolutely little as possible to capture that value that you can. The only option on luxury cars should be to lease. Keep the car 3 years, pay as little as possible, and let BMW pay the maintenance, then GET OUT.

Anyone who pays cash for a luxury car is completely wasting their money; THEY are throwing it away. Put that 60K in bonds or stocks and after 3 years you'll have a bunch more money, and will have paid a small monthly lease fee for the car that comes out of your regular income. You'll be way ahead of the game. Paying cash for a car is criminal stupidity, and shouldn't even be allowed in an educated society. Worst waste of money of all time.

In short, you buy an asset that appreciates. You lease or rent something that depreciates. End of story.

[flaversaver]

Leasing really is not a smart financial decision unless you've got money to blow and like changing out cars every 3 years. Smart money says to buy a car and drive it into the ground. I've had my 330ci for 8 years now and its been a great car. I'll miss it once I buy my 435i, which may happen today.

[Kafkaesque328]

First off, don't EVER put money down on a lease. If you can't afford the lease w/out putting money down, get a cheaper car.

Originally Posted by newoldbeemer

One other factor is, are you sure you can keep the car for at least 36 months? If you need to be able to sell anytime then buying is easier. For instance

- you are on a visa with a high-paying but not-so-secure job, layoff can happen anytime and your visa is tied to one company (think tech industry). If your company lays you off, you need to pack your bags in a couple of weeks and leave.

- you are not sure about finances, may need to sell anytime

- you have the tendency of changing cars in less than 3 years

- you may have a baby next year and need to change vehicle

You can still get out of a lease in these situations but it's much less hassle with a car you bought.

May be more hassle but you'll usually take a much bigger hit if you need to get out of a new car you bought (usually financed) if you are trying to sell in the first 3 years. When you factor in that most people put a sizeable down payment on a new car which they essentially lose much of with depreciation, plus the depreciation itself, plus lump sales tax cost etc. you can really take a bath selling a new car. If you can find someone to assume your lease which is fairly doable these days, you will suffer very little penalty (in theory).

---------------------------

I've been thinking on this topic more recently and 'lease vs. buy' isn't so cut an dried because many people manage to buy out their leased BMW for a much lower amt than the residual at lease end. The dealer buys the car from BMWFS and you essentially buy it back. Since they buy it from BMWFS at auction price, they can sell it to you at a profit that is still a few grand below your residual. In this case, instead of a balloon payment up front as it is with buying, you essentially pay much less for a 3 year 'test drive' and pay the lion's share on the back end.

Another thing with this is the matter of equity. At around the 5 year mark, when all is said and done, you might have some actual 'equity' in the car. To determine real equity, you have to subtract whatever sales tax was, what you paid in finance charges, etc. to understand actual equity, but if you buy new and sell at the 5 year mark, provided your car wasn't in an accident or isn't thrashed and you sell private party etc. for good to high KBB, you will make some money back. Maybe $3500 'back' on a $35000 car.. As I said though, you won't really 'make money' but rather, make up for what it cost you to get into the car in the first place; whether that was drive-off, down payment or sales tax.

Finally, leasing frees up cash flow in the short term if we are talking about new cars. There is no denying that. We are talking new cars here. Even lightly CPO'd cars are usually quite expensive so with leasing, it will always be cheaper in the short term. For example, I got into my car for $0 down, $1500 drive offs which included my first payment and my payment out the door with tax etc. is $360 a month. If I had financed the whole amount of the final selling price for three years, I would be paying hundreds more per month, thus more of my monthly cash flow would be going to paying down the car. If I had put a lump some of money down on the car, thousands of dollars, that money could have in theory been used more productively than sinking it into a rapidly depreciating asset. In the end though, I'd be left with a car that was worth money, I'd have equity and resale potential and my insurance rates would be lower. Still, you have to crunch the numbers and look at what it will really cost you to 'own' that car.

At the end of the day, if you do math on total cost of the vehicle over X amount of years, it comes out pretty close. Leasing ends up being $50 a month or more over X amount of years. So the longer you keep a car, provided you don't incur massive repair expensive, the cheaper it will be compared to leasing. But then you are rolling the dice on repairs, paying for maintenance and if the car gets in an accident, the value of the car can be drastically reduced.

Usually people who say leasing is 'throwing money away' no very little about both leasing and personal finance. Or, these are people that will tell you you should buy a 7 year old Accord and drive it for 10 more years. If we are simply talking about saving money, of course they'd be right. But we're not, because we drive new BMW's and that is not a good way to 'save money'.

Originally Posted by Yay-Z

Buy car and pay cash. I leased once and it was dumb.

How can you possibly predict your life 3 years out.

Jobs change, finances change, relationships change and not always for the better.

There is no cut and dried answer to the lease or buy question because everyone's situation is different. This would be very bad advice in many instances. If however, you can afford to sink $50000 on something that will be worth $46500 the second you drive it off the lot and will be worth about 30% less than that 3 years later, essentially like putting money into a savings account with a NEGATIVE 40-50% return over 3-5 years, go right ahead. But if your situation DOES change in 3 years, as you mentioned and you need to unload that car you just paid cash for, you will certainly lose a shit ton of money. If that isn't a factor and you can afford to lose that much money, go right ahead but this is by no means prudent financial advice.

Buying cars is only a good idea if you plan to buy and hold for at least 5 years.