[mjr24]

Originally Posted by claykin

If I can make a recommendation for your future leases.... Buy more miles up front. Far more economical than paying on the backend.

About the overage, some manufacturers don't allow you to buy discounted miles after.

Not true, at all.

Residuals go down a lot with more miles bought up front. It's more expensive on a higher-priced car.

I run all the numbers before I lease....I know what I'm doing here.

[mjr24]

Originally Posted by 530iDriver

That might be it and every person situation is different. Leasing is unfortunately the most expensive way to finance a car.

https://www.consumerreports.org/cro/...hing/index.htm

https://www.barrons.com/articles/why...ase-1488585027

These are such stupid quotes. For those of us who use our car for business, leases provide way more of a tax write-off than buying a car would ever yield. If you don't deduct auto expenses on your taxes, I'm not even sure why you would comment here because you have no clue what you are talking about.

[claykin]

Originally Posted by mjr24

Not true, at all.

Residuals go down a lot with more miles bought up front. It's more expensive on a higher-priced car.

I run all the numbers before I lease....I know what I'm doing here.

You're quite angry. And taking black and white positions which are commonly incorrect. But more power to ya!

[530iDriver]

Originally Posted by mjr24

These are such stupid quotes. For those of us who use our car for business, leases provide way more of a tax write-off than buying a car would ever yield. If you don't deduct auto expenses on your taxes, I'm not even sure why you would comment here because you have no clue what you are talking about.

That's interesting. Tell us more..

[LogicalApex]

Originally Posted by mjr24

These are such stupid quotes. For those of us who use our car for business, leases provide way more of a tax write-off than buying a car would ever yield. If you don't deduct auto expenses on your taxes, I'm not even sure why you would comment here because you have no clue what you are talking about.

Care to explain a bit more in detail?

Leasing makes the paperwork easier and helps to free up capital for other uses by potentially allowing you to realize the asset value at lease inception (meaning you're not fronting the non-depreciated cost of the car up front and only paying for the deductible portion of the car transaction). From a taxing perspective though I don't see it being much different. The advantages I noted a second ago are liquidity related, but not taxation related.

You're still able to deduct all costs related to the auto in a purchase such as depreciation (remember in a lease you're paying this depreciation cost!), sales taxes, registration, repairs, maintenance, finance interest charges, and etc...

[jjscsix]

Originally Posted by LogicalApex

Care to explain a bit more in detail?

Leasing makes the paperwork easier and helps to free up capital for other uses by potentially allowing you to realize the asset value at lease inception (meaning you're not fronting the non-depreciated cost of the car up front and only paying for the deductible portion of the car transaction). From a taxing perspective though I don't see it being much different. The advantages I noted a second ago are liquidity related, but not taxation related.

You're still able to deduct all costs related to the auto in a purchase such as depreciation (remember in a lease you're paying this depreciation cost!), sales taxes, registration, repairs, maintenance, finance interest charges, and etc...

Leases do have tax advantages when used for business. A close friend of mine who owned his own company leased all of his cars until he retired for this reason.

[LogicalApex]

Originally Posted by jjscsix

Leases do have tax advantages when used for business. A close friend of mine who owned his own company leased all of his cars until he retired for this reason.

Yes, leasing has the same tax advantages as purchasing when used for business. The only difference between the two is leasing has a lower paperwork burden and your capital expenditure is kept off your books entirely.

If I could be allowed to make a very loose analogy... Leasing is like an interest only mortgage and purchasing (with traditional financing) is like a 30 year fixed rate mortgage. In both cases you're borrowing your principal (capital expenditure) and in both cases your interest charges are tax deductible, but leasing allows easier paperwork as your out of pocket is always the "costs" and never the "principal". And costs are business expenses that are fully deductible. The principal (or capital) isn't.

But, as I said earlier, there are no free lunches to be had. So you'll end up paying borrowing costs on the money and some money for the "easier paperwork" of it all. It's just that from a business perspective you look at costs differently. For instance, you come out with lower "transaction" costs on finance versus leasing on one end, but on the other you may end up with higher cost in accounting fees or employee time managing the extra paperwork.

Leasing for private use rarely makes good financial sense...

[Warp Ten]

Interesting discussion with quite a few opinions, both pro and against leasing. I sold BMWs for several years in my early retirement phase and often found myself advising clients on lease vs buy decisions. (My career business background was finance and management, not car sales). I found that how you decide to finance a car really depends on what your personal goals and needs are with regard to a car purchase. For example, there may be sound business reasons (including tax, capital allocation and others) for a car buyer to lease vehicles that override other arguments. Other people may just personally like the idea of "renting" a new car every three years that is always under warranty. Many argue that leasing is more expensive than an outright purchase (with or without financing) but in the long run I believe the difference is slight (and at least years ago I ran spreadsheet analyses on a variety of alternatives for myself and other people to document this.) There can be several variables that affect the outcome, including your own cost of capital/return on investment, finance and lease rates, etc.

There is always a cost of money in a car purchase, whether you pay cash (loss of investment income on the cash used), finance (interest) or lease (money factor). But the most significant cost of car ownership is depreciation and it is exactly the same for a given car whether you lease, buy and finance, or buy with cash. How it affects a buyer is more a matter of timing. Do you want to estimate it and pay for it monthly or do you want to wait 3,4 or 5 years and find out what it is then? As others have noted, the best way to minimize average annual depreciation cost is to simply keep the car a long time (or buy a used car), as depreciation is greatest in the early years and flattens out in later years. Finance costs are relatively minor by comparison and fairly similar in each financing case.

Furthermore, there may be other factors involved in a lease vs buy analysis. For one thing, a manufacturer might be trying to move certain models that have been slow sellers, so they offer a lease incentive that effectively and intentionally underestimates depreciation (by raising the calculated residual value), thereby lowering monthly lease payments. If it is a model you like and you're OK with "renting", your monthly cost to have the vehicle can be quite a bit lower than owning it for the same term. For another, leasing provides some cost certainty. The economy may change (although this is a bit difficult to predict) affecting the value of a car you own. The guy who leased a Hummer H2 in 2007 was in much better shape than the guy who bought it when they both went to get new cars three years later. Also, getting the lowest possible monthly payment regardless of other considerations may be the most important car buying factor to a buyer. Sometimes a lease can provide that and, at least with BMWs, that would be your only automotive cost other than gas, oil and insurance for 3 years.

Personally, in selling BMWs, I had never heard of someone leasing a car and then being 24,000 miles over the allowed lease mileage. Usually we would not recommend leasing for someone who incurred high annual mileages, as it is arguably cheaper to buy/finance. But even with high mileage lessees, the extra miles (and therefore depreciation) just got calculated into the (higher) payment. On higher mileage leases though the extra cost of estimating the higher mileage depreciation usually went in favor of the lessor (BMWFS).

Anyway, always lots of things to think about when you go into a car purchase. --Bob

[claykin]

Originally Posted by Warp Ten

Interesting discussion with quite a few opinions, both pro and against leasing. I sold BMWs for several years in my early retirement phase and often found myself advising clients on lease vs buy decisions. (My career business background was finance and management, not car sales). I found that how you decide to finance a car really depends on what your personal goals and needs are with regard to a car purchase. For example, there may be sound business reasons (including tax, capital allocation and others) for a car buyer to lease vehicles that override other arguments. Other people may just personally like the idea of "renting" a new car every three years that is always under warranty. Many argue that leasing is more expensive than an outright purchase (with or without financing) but in the long run I believe the difference is slight (and at least years ago I ran spreadsheet analyses on a variety of alternatives for myself and other people to document this.) There can be several variables that affect the outcome, including your own cost of capital/return on investment, finance and lease rates, etc.

There is always a cost of money in a car purchase, whether you pay cash (loss of investment income on the cash used), finance (interest) or lease (money factor). But the most significant cost of car ownership is depreciation and it is exactly the same for a given car whether you lease, buy and finance, or buy with cash. How it affects a buyer is more a matter of timing. Do you want to estimate it and pay for it monthly or do you want to wait 3,4 or 5 years and find out what it is then? As others have noted, the best way to minimize average annual depreciation cost is to simply keep the car a long time (or buy a used car), as depreciation is greatest in the early years and flattens out in later years. Finance costs are relatively minor by comparison and fairly similar in each financing case.

Furthermore, there may be other factors involved in a lease vs buy analysis. For one thing, a manufacturer might be trying to move certain models that have been slow sellers, so they offer a lease incentive that effectively and intentionally underestimates depreciation (by raising the calculated residual value), thereby lowering monthly lease payments. If it is a model you like and you're OK with "renting", your monthly cost to have the vehicle can be quite a bit lower than owning it for the same term. For another, leasing provides some cost certainty. The economy may change (although this is a bit difficult to predict) affecting the value of a car you own. The guy who leased a Hummer H2 in 2007 was in much better shape than the guy who bought it when they both went to get new cars three years later. Also, getting the lowest possible monthly payment regardless of other considerations may be the most important car buying factor to a buyer. Sometimes a lease can provide that and, at least with BMWs, that would be your only automotive cost other than gas, oil and insurance for 3 years.

Personally, in selling BMWs, I had never heard of someone leasing a car and then being 24,000 miles over the allowed lease mileage. Usually we would not recommend leasing for someone who incurred high annual mileages, as it is arguably cheaper to buy/finance. But even with high mileage lessees, the extra miles (and therefore depreciation) just got calculated into the (higher) payment. On higher mileage leases though the extra cost of estimating the higher mileage depreciation usually went in favor of the lessor (BMWFS).

Anyway, always lots of things to think about when you go into a car purchase. --Bob

Great post.

Here's some situations where leasing always wins over purchase.

Used valuation hit if vehicle is in an accident. Or otherwise needs paintwork. Sure some States diminished value claims, but it's rare that the calculations used actually cover the real loss.

If the model is a dud, poor reliability, etc. Just ask anyone who purchased a pre LCI E65, for example. Known problem models value drop like a rock.

Cars are so complicated today the old school mechanic has a difficult time doing even the simplest repairs/maintenance. Which means you're mostly stuck at the stealership for service for your depreciating asset. A poor bet IMO!

[530iDriver]

This is why you never buy brand new BMWs. 1-3 year old models is where is at.

[530iDriver]

Originally Posted by claykin

Great post.

Here's some situations where leasing always wins over purchase.

Used valuation hit if vehicle is in an accident. Or otherwise needs paintwork. Sure some States diminished value claims, but it's rare that the calculations used actually cover the real loss.

If the model is a dud, poor reliability, etc. Just ask anyone who purchased a pre LCI E65, for example. Known problem models value drop like a rock.

Cars are so complicated today the old school mechanic has a difficult time doing even the simplest repairs/maintenance. Which means you're mostly stuck at the stealership for service for your depreciating asset. A poor bet IMO!

Yes and no.

You can buy these cars CPO/Used, add BMW warranty coverage up to 7 years/125K miles. Rinse and repeat.

Has worked a treat for me.

[claykin]

Originally Posted by 530iDriver

Yes and no.

You can buy these cars CPO/Used, add BMW warranty coverage up to 7 years/125K miles. Rinse and repeat.

Has worked a treat for me.

As far as I'm concerned this discussion is leasing versus buying new.

[530iDriver]

Originally Posted by claykin

As far as I'm concerned this discussion is leasing versus buying new.

Yes acknowledged but buying used is also a valid discussion variable.

If you must buy new because you insist in the new car smell and want the car equipped/configured in a certain way, go ahead and do so. But be prepared to stick with that car for a long time or drive it into the ground to justify the first 2-3 years of heavy depreciation.

Admittedly, my CPOs (Both purchased under 1 year old) still had the new car smell alive and well...

It is had to argue with a well researched and vetted near new BMW if priced accordingly.

Another indicator... Are used BMWs same or more expensive than new ones? Haven't seen this phenomena but over in Toyota/Honda world it is very common to see used samples going for same or more asking money than a brand new equivalent.

[LogicalApex]

Originally Posted by 530iDriver

Yes acknowledged but buying used is also a valid discussion variable.

If you must buy new because you insist in the new car smell and want the car equipped/configured in a certain way, go ahead and do so. But be prepared to stick with that car for a long time or drive it into the ground to justify the first 2-3 years of heavy depreciation.

Admittedly, my CPOs (Both purchased under 1 year old) still had the new car smell alive and well...

It is had to argue with a well researched and vetted near new BMW if priced accordingly.

Another indicator... Are used BMWs same or more expensive than new ones? Haven't seen this phenomena but over in Toyota/Honda world it is very common to see used samples going for same or more asking money than a brand new equivalent.

Buyers should definitely fully evaluate used versus new when shopping around. I think it can vary quite a bit by brand and probably even within brands on which offers the best value at any given time.

For my G30 purchase new buying made the most sense when I looked at the numbers after negotiation. I wasn't able to negotiate a steep discount on the CPO cars I looked at with the options I wanted. The icing on the cake was also the EV tax rebate that wasn't available on a CPO (as I was shopping the PHEV). The difference was that I was able to negotiate away at least the first year's estimated depreciation cost which put me ahead of the less than 1 year CPO I was eying with the option spread I wanted.

At least in my area dealers seem to be less interested in deep discounts on CPO cars as they move fairly quickly (the used market is much more active than the new market) and you're forced to buy what's on the lot. So if you're not getting something super common you'll be waiting a while.

My advise would be to line up a few used prospects and shop the new car as a build (unless it is super common option set) so you can negotiate it as close as you can to the used price and pick which comes out ahead and has what you want. But start this shopping a few months early, at least.

[LuvMyE92]

Originally Posted by Warp Ten

Anyway, always lots of things to think about when you go into a car purchase. --Bob

Thanks for that Bob, very informative.

Some of the black & white statements "of fact" although well meaning, are not always helpful to everyone. For example, different states tax leases differently.

I've bought many cars and leased a few. I understand finance.

My former accountant (who, if he's not in jail, should be) once said that "leasing is a poor man's financing". He didn't like it. I liked it because (at the time) I could write off more on a lease than I could depreciation.

The best example of lease protection was my Infiniti Q45. I bought the very first generation, back in 1990?? Maybe 92. Who can remember that long ago. Anyway, it was a special deal, $399/month, nothing down. A lot of money back then. After 30 months (of 36) I grew to despise that car and wanted to trade it in. The lease payoff was something like $27K, but the value of the car was around $20K. It was cheaper to park it for the last 6 months, and that's what I did. Bought a nice E34 and drove that. I had a coworker whose husband's car had blown up, so they subleased the Q from me for the last few months. By the time I turned it in, the market value had fallen to $17K or so, even though the residual was $25K. So that really saved my bacon.

Also, leases generally have gap protection, so if the car is stolen or wrecked and is a total loss, you just walk away. No worries about owing more than what it's worth. And there are often incentives from BMW if you lease or purchase another one. They like to keep it in the family.

And if the car is wrecked but not totalled, you don't have to worry about diminished value.

In my state, the payments are taxed but not the purchase price, so that saves me money up-front. Now, if I buy it at lease end, then I do have to pay tax on that amount. But the overlap is minimal.

Anyway... I usually buy, but on the G30 I figured since I was buying past year end and getting all of those incentives on a year-old car but with the residual based on the original MSRP, I would do OK. Cross your fingers.

[mjr24]

Originally Posted by claykin

You're quite angry. And taking black and white positions which are commonly incorrect. But more power to ya!

Actually, I'm not.

I just don't understand how a simple question about mileage overage (which was already rendered moot) somehow turned into an unrelated discussion of leasing versus buying.

Buying versus leasing a $50k BMW is apples and oranges versus a $100k and up BMW.....especially when you get into different cars every 20-24 months.

My complaining about possibly having to pay an extra $0.03 per mile....or about $700 total....is not a good argument to make for buying versus leasing (when, had I bought it, putting 45k miles in 2 years on that same $85k car will likely cause said car to be worth $50k after 2 years, if that).

So let's do the math.....$85k car new....22k miles per year driven. Car has 45k miles after 2 years (or basically is a couple months away from being out of warranty).....$950/month lease payment......total cost is $22,800. Add another $6k for mileage penalties at end....$28,800 spent over 24 months.

Buy that same car....put 45k miles on it in those 2 years....car is worth $45-50k after 2 years (not to mention not many people are in the market to spend $50k on a car that has 45k miles and no warranty in a few months, I know I wouldn't be...).

So you tell me what the better deal is....let alone on the M5's, M6's I have had in the past and have now. The depreciation would be even greater.

[Pierre Louis]

Its hard to hide a higher interest rate for a lease with all the calculating apps available comparing lease vs. finance options.

When I lease, I usually get a good finance rate and it feels like I'm also borrowing the down payment when I lease. Apply the actual interest rate to both and voila, you will know if its a good deal.

Fees and residual matter, yes, but from a pure borrowing perspective, it is a valid comparison.

[ZulaM5]

Average ownership is 30-33 Months, even with a purchase.

People that buy cars don't own them long enough, especially in my area.

Then financing charges, warranties bought and not used, etc.

Leasing usually works out better for MOST people.

[530iDriver]

Originally Posted by ZulaM5

Average ownership is 30-33 Months, even with a purchase.

People that buy cars don't own them long enough, especially in my area.

Then financing charges, warranties bought and not used, etc.

Leasing usually works out better for MOST people.

Debatable.

MOST people are financially irresponsible.

[ZulaM5]

Originally Posted by 530iDriver

Debatable.

MOST people are financially irresponsible.

Now the thread is turning into if people are financially responsible or not?

Throw the BMW away.. Legs and Public Transit it is!

[530iDriver]

Originally Posted by ZulaM5

Now the thread is turning into if people are financially responsible or not?

Throw the BMW away.. Legs and Public Transit it is!

Yeah!!!

[Pierre Louis]

Now, now, have you met most people??

I'd rather buy/lease a car new and have exactly what I want/need and keep it for a time much longer than I would stay in a lesser/cheaper car and not have to keep losing money/trading it in every 3 years. But, I understand the itch for a newer car too. I'm just, uh, emotionally attached to an inanimate object as my child/family member or some such thing, ha ha. Meh.