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      09-26-2007, 11:16 PM   #1
tenxaday
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lease or buy

i was wondering what would be better. I know you can't mod a leased vehicle, but most stuff that comes out would that void the warranty?

Some of my dads friends, said they always lease a car. Reason why new cars always have great promos. Then after the lease is up they give you the option to buy which would be a good price. They always sell it after that and make some money on it.

Just wondering? I just heard so many things, this will be my first new car if i decide to get one of these.
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      09-26-2007, 11:44 PM   #2
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Fact. You in general will never make money reselling a leased car. If you dont mod your car, a bmw lease is the best automobile lease in the industry. 3 years, no money for service, another car every three years, and you drive more car for way less per month and for a lot less out of pocket.

I lease my x3, and will lease the x3's replacement, however my 135 will be bought on normal terms.

-Mateo
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      09-27-2007, 12:00 AM   #3
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I would like to lease too but I'll never be able to keep it within the allotted miles for the term of the lease. Yeah, I know you can pay for more miles, but I doubt even that would be enough.
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      09-27-2007, 12:05 AM   #4
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I'm way over on my miles,,, its just the way it goes sometimes. I'm not worried about it really. Its all about cash flow to me.

-Mateo
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      09-27-2007, 12:22 AM   #5
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Quote:
Originally Posted by tenxaday View Post
i was wondering what would be better. I know you can't mod a leased vehicle, but most stuff that comes out would that void the warranty?

Some of my dads friends, said they always lease a car. Reason why new cars always have great promos. Then after the lease is up they give you the option to buy which would be a good price. They always sell it after that and make some money on it.

Just wondering? I just heard so many things, this will be my first new car if i decide to get one of these.
Couple of comments of this:

Firstly, I highly doubt that the example of you dad's friend is actually true. No matter how you slice it, the buy out at the end of the lease is not going to be a fantastic deal. It really depends on a number of factors that we wont know until the dealers get the cars but you are going to spending a lot to work a deal that way. The buy out is a tricky buying process but generally, if your intent is to buy the car and then make a profit, you should finance the car as opposed to leasing then buying. Consider:

Here are three potential options if you were to buy a bone stock 335i Coupe (MSRP: $41,575)(keep in mind that things vary slightly depending on down payment, lease/finance term, etc.)

Option 1: Lease (using leasecompare.com)

Assuming a 2,500 dollar down payment, 36 month term with 15,000 miles per year, and exceptional credit:

Monthly Payment: 713
Total Amount Financed: $25,668
Residual: $19,409
Net Cost (this is assuming you wrote a check for 19,409 and did not finance the buy-out): $45,077

Option 2: Finance the Buy-Out (everything the same up to the residual)

Monthly Payment (if you were to finance the 19,409 over 24 months at 7.9 percent): 877
Total Amount Financed: $21,408
Net Cost: $47,076

Option 3: Finance

Assuming a 2,500 dollar down payment, 60 month term, with an interest rate of 7.9%:

Monthly payment: 952
Total amount financed: $45,696

Now, as you can see, the lease buy-out can work in this scenario only if you can write a check for the buy-out at the end of the lease. Otherwise, you are paying around $1,500 dollars more. And keep in mind that this number gets a lot worse when you try to minimize the payment and extend the finance term. While you can get a good deal if you write a check for 19,409 at the end of the lease, chances are if you have that money at the end of the lease, you have that money at the start which changes things greatly for finance (which, again becomes the better choice).

Still, it would be nearly impossible to make a profit on this deal though. While you might be able to sell the car for more than the quoted residual of $19,409, you still would have to cover the ~$4,000 that you paid in interest throughout the length of the deal. It is unlikely you will sell the car for more than 25% over the residual.

note: these numbers are mostly hypothetical and I would expect the numbers to be, if anything, worse at the dealer than here.

Advice: Assume you are never going to make a profit on a car. Especially a new car.

Advice Part 2: Assume that the lease deals during the first year of a model are going to be poor. In a low production car like the 1 Series Coupe, the need for a dealer to move cars off their lot is lower (as the likelihood of a surplus is lower, comparatively).

Advice Part 3: Buy only what you can afford. People like leases because they help get drivers into cars that they normally couldnt afford. That doesnt mean that they are great deals. As I have said in other threads, people have an admiration for monthly payments and assume that a lower monthly payment is a better deal than a higher monthly payment. For thousands of reasons this isnt true. Keep in mind, then, that a lease still can be a bad deal and make you pay both more than you think and more than you can "afford".
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      09-27-2007, 12:25 AM   #6
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Quote:
Originally Posted by MPower View Post
Couple of comments of this:

Firstly, I highly doubt that the example of you dad's friend is actually true. No matter how you slice it, the buy out at the end of the lease is not going to be a fantastic deal. It really depends on a number of factors that we wont know until the dealers get the cars but you are going to spending a lot to work a deal that way. The buy out is a tricky buying process but generally, if your intent is to buy the car and then make a profit, you should finance the car as opposed to leasing then buying. Consider:

Here are two potential options if you were to buy a bone stock 335i Coupe (MSRP: $41,575)(keep in mind that things vary slightly depending on down payment, lease/finance term, etc.)

Option 1: Lease (using leasecompare.com)

Assuming a 2,500 dollar down payment, 36 month term with 15,000 miles per year, and exceptional credit:

Monthly Payment: 713
Total Amount Financed: $25,668
Residual: $19,409
Net Cost (this is assuming you wrote a check for 19,409 and did not finance the buy-out): $45,077

Option 2: Finance the Buy-Out (everything the same up to the residual)

Monthly Payment (if you were to finance the 19,409 over 24 months at 7.9 percent): 877
Total Amount Financed: $21,408
Net Cost: $47,076

Option 3: Finance

Assuming a 2,500 dollar down payment, 60 month term, with an interest rate of 7.9%:

Monthly payment: 952
Total amount financed: $45,696

Now, as you can see, the lease buy-out can work in this scenario only if you can write a check for the buy-out at the end of the lease. Otherwise, you are paying around $1,500 dollars more. And keep in mind that this number gets a lot worse when you try to minimize the payment and extend the finance term. While you can get a good deal if you write a check for 19,409 at the end of the lease, chances are if you have that money at the end of the lease, you have that money at the start which changes things greatly for finance (which, again becomes the better choice).

Still, it would be nearly impossible to make a profit on this deal though. While you might be able to sell the car for more than the quoted residual of $19,409, you still would have to cover the ~$4,000 that you paid in interest throughout the length of the deal. It is unlikely you will sell the car for more than 25% over the residual.

note: these numbers are mostly hypothetical and I would expect the numbers to be, if anything, worse at the dealer than here.

Advice: Assume you are never going to make a profit on a car. Especially a new car.

Advice Part 2: Assume that the lease deals during the first year of a model are going to be poor. In a low production car like the 1 Series Coupe, the need for a dealer to move cars off their lot is lower (as the likelihood of a surplus is lower, comparatively).

Advice Part 3: Buy only what you can afford. People like leases because they help get drivers into cars that they normally couldnt afford. That doesnt mean that they are great deals. As I have said in other threads, people have an admiration for monthly payments and assume that a lower monthly payment is a better deal than a higher monthly payment. For thousands of reasons this isnt true. Keep in mind, then, that a lease still can be a bad deal and make you pay both more than you think and more than you can "afford".
Love these forums. Thanks for explaining that. He just kept telling me this reason why, is that i don't keep car that long. but who know this can be the one
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      09-27-2007, 02:57 AM   #7
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Wow 713/mo for a $45k car on a 36/mo lease. Maybe its just me, but that lease company has some high payments. Rule number one on any lease... Only lease w/the car makers bank.

-Mateo
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      09-27-2007, 10:29 AM   #8
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Quote:
Originally Posted by mateo View Post
Wow 713/mo for a $45k car on a 36/mo lease. Maybe its just me, but that lease company has some high payments. Rule number one on any lease... Only lease w/the car makers bank.

-Mateo
That actually can work against you, especially if you are leasing a Porsche. Still, I would not expect these numbers to be any different (as in, better) when you go to a dealership as the numbers you will see on bmwusa.com are highly optimistic in most cases.

Regardless, this is the only website that gives you the residual and MF so that you really know what is going on.
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      09-27-2007, 02:16 PM   #9
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I generally lease because:

1) i swap cars often with wife, which keeps the mileage down...she barely drives our Pathfinder
2) very little or no money down on a lease
3) reasonable payments vs buying same car
4) you drive a car that is maintenance free and mechanical expense free during entire time you are leasing it (if BMW)
5)In certain circumstances,you can drive a slightly nicer car than you could otherwise afford when you lease
6) when you lease, you have the luxury of driving a new car every few years, taking advantage of new technological advances....if you get sick of cars easily, leasing is a good option

On the flip side A) you always have a payment B) mileage limits C)that car better be kept pristine and stock or else at lease termination they will hit you with excessive wear and tear charges that you may think are normal wear and tear....

9 out of 10 financial advisors would tell you to buy a slightly used car that is 1 to 2 years old, and drive it until the wheels fall off.....sound advice that I choose to ignore....in most financial matters i think with my head....when it comes to cars, I think with another body part....to me, cars are an indulgence...

It's been my experience that the newest cars that are introduced typically DO NOT carry the best lease deals(your experience may differ)....I will be buying the 135,simply because I plan to drive it for 5 years, maintain it beautifully (garaged,claybar, and waxed regularly) then give to my son when he turns 17.....
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      09-27-2007, 04:46 PM   #10
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I suggest checking out the well refined web sites that compare the advantages of each.

They're all over the Net.

Making money out of a lease is a longshot, but at least you have the possibility, or the option of just giving it back. I've had some leased cars I could have made some money on, but never deemed it worth the trouble.
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      09-27-2007, 06:50 PM   #11
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Quote:
Originally Posted by TESLAASTRO View Post
9 out of 10 financial advisors would tell you to buy a slightly used car that is 1 to 2 years old, and drive it until the wheels fall off.....sound advice that I choose to ignore....in most financial matters i think with my head....when it comes to cars, I think with another body part....to me, cars are an indulgence...
That's well put. I'm well aware of what "good financial advice" concerning cars sounds like, since I seem to think about cars alot anyway. I too tend to ignore it, for better or worse, because car-guys tend not to view cars the way most people do (like a large appliance).

But to make a point about the original topic. I leased a car once, and didn't feel right about it, being a car guy and all. I probably would never lease a car again. Pride in ownership I guess...
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      09-27-2007, 06:53 PM   #12
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Quote:
Originally Posted by TESLAASTRO View Post
6) when you lease, you have the luxury of driving a new car every few years, taking advantage of new technological advances....if you get sick of cars easily, leasing is a good option
I'd say that's partially true. The advantage with owning the car is that you create equity that can be applied to the new car purchase.
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      09-27-2007, 07:00 PM   #13
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unfortunately though, when you purchase a car most of the depreciation takes place within the first 2-3 years, the typical length of a lease being 36 months....if you purchase a car and trade in every 36 months, i can't imagine a scenario where you would do better financially over an equivalent lease....
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      09-27-2007, 07:08 PM   #14
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You're right but when you are able to build the equity, it makes a nice difference. In cars with good resale value, namely BMWs, MINIs, Porsches, etc. it becomes slightly easier.

Again, like I said before in previous posts, and something I'm sure you will agree with, you are almost always going to lose money on a car. It makes it nicer when you are able to "make" a little money.
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      09-27-2007, 07:34 PM   #15
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Quote:
Originally Posted by Brandon26pdx View Post
That's well put. I'm well aware of what "good financial advice" concerning cars sounds like, since I seem to think about cars alot anyway. I too tend to ignore it, for better or worse, because car-guys tend not to view cars the way most people do (like a large appliance).

But to make a point about the original topic. I leased a car once, and didn't feel right about it, being a car guy and all. I probably would never lease a car again. Pride in ownership I guess...
Unless you write a check for your car, you dont own it. Miss a few payments, and you'll find out real fast who does, when they tow it away. Leasing is a great way to keep your money for things that you can see a return on, like real estate. Now in the case of the one series. I'd never lease it due to it being the first model year, and due tot he fact I'll mod it.

-Mateo
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      09-27-2007, 07:49 PM   #16
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I think leasing vs buying is one of those personal decisions......if you plan to mod, forget leasing, drive alot, forget leasing, dont plan on keeping the car more than 4 years and dont want to put big $ down, maybe lease.....

Mpower you are right...if you can put a nice sum down, buy the vehicle, especially a high resale BMW (I suspect that 135 will have a nice resale value), and choose to upgrade or just trade, I suspect that you can do very well....
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