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2019+ BMW 3 AND 4-SERIES FORUMS (G2x Generation) Ordering / Pricing / Order Tracking Forum Am I the only one *not* leasing?

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      11-18-2019, 08:37 AM   #23
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Quote:
Originally Posted by wtwo3 View Post
The only way buying a car is cheaper than leasing is if you keep the car past the break even point (the break-even point being the point at which the difference between the leasing payments and the finance payments converges) This varies based on the car, but typically this is in the 6-8 year range. (Not counting any maintenance you may have to pay for outside of warranty period).

As an example:

Let's say you have a car with a price of $65,000

Finance Option
Assuming $0 down, 7% sales tax, 3.5% APR, 60 month term
~10k miles/year; 50% Residual Value @ 36 months

Monthly Payment = $1,265

After 3 years of ownership, you will have paid $45,540
After 3 years of ownership, car is valued at $32,500
After 3 years of ownership, you will have $30,360 remaining to pay on the loan

So after 3 years of ownership, you will have positive equity of ~$2k

Lease Option:
Assuming $0 down, 7% sales tax (applied on monthly payment), 0.00128 MF, 36 months/10k miles;
61% Residual Value @ 36 months

Monthly payment: $926

After 3 years of leasing, you will have paid $33,336
After 3 years of leasing, you will have spent net $10,064 LESS than had you purchased. ($45,540 in finance payments - $33,336 in lease payments - $2,140 in equity)

So as I mentioned above, purchasing a new car is typically ONLY cheaper if you plan to keep it for a long time (6-8 years) and it remains trouble free.
You can negotiate the terms such as monthly payment and purchase/residual payoff price just like with a purchase.
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      11-18-2019, 10:16 AM   #24
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Quote:
Originally Posted by bimmer456 View Post
You can negotiate the terms such as monthly payment and purchase/residual payoff price just like with a purchase.
Residual value in a lease typically can not be negotiated. But your monthly payment is essentially a function of the difference between cap cost and residual value (plus interest/taxes/fees). So rather than wasting your efforts on trying to negotiate residual value, a better strategy would be to negotiate the discount off MSRP.

In lease terms for the lessee, 10% off MSRP is the equivalent of a 10% increase in residual value. The difference is you're more likely to get 10% off MSRP than you are to get a 10% bump on residual value.

Variables which impact the monthly payment in a lease are:

MSRP Can not be negotiated
Dealer discount off MSRP Can be negotiated
Incentives Can not be negotiated
Residual Value Typically can not be negotiated
Money Factor Unless dealer is inflating MF, can not be negotiated beyond buy rate
Government Fees Can not be negotiated
Dealer Fees Certain erroneous fees can be negotiated (i.e. inflated doc fees)
Lease Term Can be adjusted
Annual Mileage Can be adjusted
DAS (Due at signing) Can be adjusted/negotiated (i.e. downpayments, security deposits etc)
Sales Tax Can not be negotiated

To truly understand if you're getting a good deal on a lease, you need to properly understand how each of these factors play a role in the overall calculation.
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      11-18-2019, 10:57 AM   #25
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Quote:
Originally Posted by wtwo3 View Post
Residual value in a lease typically can not be negotiated. But your monthly payment is essentially a function of the difference between cap cost and residual value (plus interest/taxes/fees). So rather than wasting your efforts on trying to negotiate residual value, a better strategy would be to negotiate the discount off MSRP.

In lease terms for the lessee, 10% off MSRP is the equivalent of a 10% increase in residual value. The difference is you're more likely to get 10% off MSRP than you are to get a 10% bump on residual value.

Variables which impact the monthly payment in a lease are:

MSRP Can not be negotiated
Dealer discount off MSRP Can be negotiated
Incentives Can not be negotiated
Residual Value Typically can not be negotiated
Money Factor Unless dealer is inflating MF, can not be negotiated beyond buy rate
Government Fees Can not be negotiated
Dealer Fees Certain erroneous fees can be negotiated (i.e. inflated doc fees)
Lease Term Can be adjusted
Annual Mileage Can be adjusted
DAS (Due at signing) Can be adjusted/negotiated (i.e. downpayments, security deposits etc)
Sales Tax Can not be negotiated

To truly understand if you're getting a good deal on a lease, you need to properly understand how each of these factors play a role in the overall calculation.
Residual value CAN NOT be negotiated. The percentage is set by BMWFS.
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      10-21-2023, 09:59 PM   #26
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Haha, you're definitely not alone! I hear you on the car leasing vs. buying debate.
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      10-22-2023, 01:02 PM   #27
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I think he's got this problem sorted by now, gents.
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      10-22-2023, 01:15 PM   #28
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Quote:
Originally Posted by wtwo3 View Post
The only way buying a car is cheaper than leasing is if you keep the car past the break even point (the break-even point being the point at which the difference between the leasing payments and the finance payments converges) This varies based on the car, but typically this is in the 6-8 year range. (Not counting any maintenance you may have to pay for outside of warranty period).

As an example:

Let's say you have a car with a price of $65,000

Finance Option
Assuming $0 down, 7% sales tax, 3.5% APR, 60 month term
~10k miles/year; 50% Residual Value @ 36 months

Monthly Payment = $1,265

After 3 years of ownership, you will have paid $45,540
After 3 years of ownership, car is valued at $32,500
After 3 years of ownership, you will have $30,360 remaining to pay on the loan

So after 3 years of ownership, you will have positive equity of ~$2k

Lease Option:
Assuming $0 down, 7% sales tax (applied on monthly payment), 0.00128 MF, 36 months/10k miles;
61% Residual Value @ 36 months

Monthly payment: $926

After 3 years of leasing, you will have paid $33,336
After 3 years of leasing, you will have spent net $10,064 LESS than had you purchased. ($45,540 in finance payments - $33,336 in lease payments - $2,140 in equity)

So as I mentioned above, purchasing a new car is typically ONLY cheaper if you plan to keep it for a long time (6-8 years) and it remains trouble free.
Fudged the math there. If the residual is 61 and that is legit, car should be worth about 40k at end of term. Your conclusion is wrong, that is not true at all. Leasing is sometimes the better move but certainly not always.
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      10-22-2023, 01:17 PM   #29
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Pretty easy to see, look up 3 yr old 340s and what they are selling for. It’s not 50% of the original MSRP. It is a far higher percentage.
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      10-22-2023, 03:26 PM   #30
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Originally Posted by Panscan340 View Post
Fudged the math there. If the residual is 61 and that is legit, car should be worth about 40k at end of term. Your conclusion is wrong, that is not true at all. Leasing is sometimes the better move but certainly not always.
Way to dig up something from 4 years ago

Say what you will about the conclusion... I've softened my view on leasing since the last 4 years (unprecedented times will do that)... but how is the math wrong?
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      10-22-2023, 05:27 PM   #31
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Quote:
Originally Posted by Panscan340 View Post
Pretty easy to see, look up 3 yr old 340s and what they are selling for. It’s not 50% of the original MSRP. It is a far higher percentage.
You can't compare today's used prices to the residuals quoted 3+ years ago. If you could have known that used car prices were going to skyrocket, I'll happily give you my 401K to reinvest for me.
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      10-22-2023, 08:35 PM   #32
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Ya sorry my bad didn’t notice time of thread. My B
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      10-24-2023, 10:41 PM   #33
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Quote:
Originally Posted by wtwo3 View Post
Way to dig up something from 4 years ago

Say what you will about the conclusion... I've softened my view on leasing since the last 4 years (unprecedented times will do that)... but how is the math wrong?
The fallacy in your detailed post is that you gave wildly different residuals between the purchase and lease option, which is why the lease is so much cheaper. I think your example assumes that bmw financial will always juice the residual in a lease, to make them "cheaper". That has been gone for at least the last year or more.


True cost of the car is the residual (depreciated amount), plus tax, plus finance charges. Right now bmw leases are terrible because bmw hasn't artificially juiced the residual, and the money factor (rate) isn't low. Maybe there were years where bmw juiced the residual to the point where the true value at the end of 3 years, was lower than what bmw said the residual would be, but thats not normal or typical.

The car is going to be worth X amount at the end of 3 years, whether you lease it or finance it. Whatever you bought it for, plus tax, plus finance or lease charges.... minus what YOU can sell it for (worth x amount) after 3 years, is the TRUE cost of that car over 3 years.
Similarly, I believe people should look at the true cost of a lease by structuring it as $0 down, drive and sign, wtih all fees (taxes) folded into a single figure. Divide that by 36 and thats your real monthly cost. In general I think most people lose track of how much a lease costs because they're chasing a monthly payment , so they forget about how much they're putting down up front (and how much that equates to a monthly cost if you extrapolated it over 36 months).

If the money factor on a lease is significantly higher than on a purchase finance rate - the lease is likely going to be more expensive. Someone already brought it up in this thread but if you have a high value trade - there are many states where you get a sales tax credit on the new car purchase, but you do NOT on a lease. That can also contribute to the purchase being cheaper.

At this point lease or finance is nearly identical - just depends on rates, if you have a significant sales tax benefit from a trade, and any specific incentives in either direction.
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      10-25-2023, 05:19 AM   #34
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Quote:
Originally Posted by yukoncornelius View Post
That has been gone for at least the last year or more.
Again... that post is from 4 years ago.... it's not a "fallacy"... that's what the market was back then. In fact my m340i that I leased (with an at the time super inflated 61% residual), I ended up purchasing and selling because of the unprecedented market we saw.

Anyway, like I mentioned, I've since softened my view on this discussion as we've seen the market adjust.

Now leave my 4 year old posts alone people.
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      10-26-2023, 05:07 PM   #35
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Look...I paid cash for my 2024 M440i GC XDrive. My monthly car payment is $0. Interest rate $0. This allows me to invest what would be going to a car payment with my broker.

I can sell the car whenever I want or give it to my son.

People say...why buy a devaluing asset? Except for your home and investments everything you buy is either a devaluing asset or just plain old spending on services or disposable goods. Ever spend money on a vacation...restaurants...club memberships...rounds of golf..clothers...luxury goods (except appreciating items like some watches)? At least a car is an asset.

Which puts it in a rare category...you buy it and its value is not immediately consumed...like when your vacation is over or your restaurant meal is finished.

Also, what we all learned during the pandemic is there is great uncertainty in car prices, interest rates, and supply chain.

When you own your car, you go back into the market when your ready. Not because your lease is up.
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      10-27-2023, 11:16 AM   #36
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Quote:
Originally Posted by TTG View Post
Daily drivers, I lease..... other toys, I buy.

There is no way I would purchase a brand new daily driver. If I must purchase, I would go with a lease return CPO route.

This has been a decades old conversation. I recommend doing some research.
Exactly! It's a debate. That is why it is being discussed.
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      10-27-2023, 12:07 PM   #37
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Not sure where you guys are getting 60% value left on something like an M340 after 3 years. Have you seen the pricing for those cars? They are holding value.

My 20k down/60m/0.90% was a great deal. Those aren't around anymore, though.
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      10-27-2023, 01:03 PM   #38
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Quote:
Originally Posted by B58-M340iX View Post
Not sure where you guys are getting 60% value left on something like an M340 after 3 years. Have you seen the pricing for those cars? They are holding value.

My 20k down/60m/0.90% was a great deal. Those aren't around anymore, though.
This thread is 4 years old!
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      10-27-2023, 03:29 PM   #39
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Originally Posted by Burrcold View Post
This thread is 4 years old!
I missed that after seeing several recent replies. I was had by the resurrection lol
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      10-29-2023, 07:50 AM   #40
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Quote:
Originally Posted by wtwo3 View Post
Again... that post is from 4 years ago.... it's not a "fallacy"... that's what the market was back then. In fact my m340i that I leased (with an at the time super inflated 61% residual), I ended up purchasing and selling because of the unprecedented market we saw.

Anyway, like I mentioned, I've since softened my view on this discussion as we've seen the market adjust.

Now leave my 4 year old posts alone people.
Hypothetically, would buying or leasing make more sense for this situation:
1) you only plan to keep the car for 2-3 years with the expectation of needing more space for an expanding family (kids/dogs)
2) you need to keep monthly payments on the lower end due to an upcoming large pay cut at work
3) if buying, looking into CPO with low miles
4) able to put $20k as downpayment if buying
5) current vehicle is a full-size truck that monthly payment + fuel costs are no longer financially viable due to pay cut at work (wasn’t an issue at previous employment)

How would you handle this hypothetical?
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      10-29-2023, 12:35 PM   #41
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Quote:
Originally Posted by walkingpepper View Post
Hypothetically, would buying or leasing make more sense for this situation:
1) you only plan to keep the car for 2-3 years with the expectation of needing more space for an expanding family (kids/dogs)
2) you need to keep monthly payments on the lower end due to an upcoming large pay cut at work
3) if buying, looking into CPO with low miles
4) able to put $20k as downpayment if buying
5) current vehicle is a full-size truck that monthly payment + fuel costs are no longer financially viable due to pay cut at work (wasn’t an issue at previous employment)

How would you handle this hypothetical?
I think there's a lot of factors involved beyond personal situation (aside from bottlenecks). Typically leasing is a "lower risk" way to drive. The residual is predetermined, so 1) your cost of ownership is stable and predictable and 2) you can hedge on market fluctuations - if the used car market tanks, you can simply turn in your lease and not worry about being stuck with a car that diminished in value much more than originally expected. On the other hand if the used market is booming, you can buy out your lease and sell it to further reduce overall cost of ownership (in fact I did this very thing this past spring with my m340i - bought out my lease and sold it for an amount greater than the predetermined residual value).

However, the lease numbers have to work out for it to make sense. If there's lack of lease support through incentives and lack of favorable residuals/money factor, then it may just be worth it to purchase. Lease support has been in the dumps lately and so all 3 of my current cars are purchases.

In your hypothetical, you're comparing leasing vs buying a CPO. Typically speaking I'd say if you're trying to keep cost of ownership down, CPO is the way to go, but the market still hasn't fully corrected, in which case I'd look to lease... ONLY if the lease numbers make sense. So my answer is.. because of this still unusual and unprecedented market, there is no easy answer anymore.
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      10-29-2023, 03:23 PM   #42
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Quote:
Originally Posted by walkingpepper View Post
Hypothetically, would buying or leasing make more sense for this situation:
1) you only plan to keep the car for 2-3 years with the expectation of needing more space for an expanding family (kids/dogs)
2) you need to keep monthly payments on the lower end due to an upcoming large pay cut at work
3) if buying, looking into CPO with low miles
4) able to put $20k as downpayment if buying
5) current vehicle is a full-size truck that monthly payment + fuel costs are no longer financially viable due to pay cut at work (wasn’t an issue at previous employment)

How would you handle this hypothetical?
Simple. Buy a used jap suv.
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      12-01-2023, 10:41 AM   #43
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It's all about finding the right fit for your individual needs and how long you plan to keep that set of wheels. The break-even point can be a game-changer, and it's great that you're considering all the variables. And speaking of finding the right fit, if you're in Birmingham and looking for expert advice on mortgages, don't forget to check out Mortgage Broker Birmingham. They can help you navigate the home financing world with their local expertise!

Last edited by SarahCalhoun; 12-13-2023 at 03:07 AM..
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