Loan vs Lease vs Own

[allinon72]

Fellas - by all means lease away. Getting awful defensive about it...some would say that's a red flag for justification.

[Aaaaaaaaa]

Agree to disagree

[gatorfast]

Originally Posted by HPIA4v2

No arguing on the strategy, but for M cars it's more difficult in real life than theory. Non-M BMWs, no problem too many of them to choose from.

This is the issue buying lease-return M-cars, If the car is reliable, clean and low mileage well the lessee will likely buy it financed though BMWFS.
If the ooriginal lessee passed on it, it'll be snatched by dealer cause they know it's easy sell after CPOed.
Whatever left, went to auction and get snatched by used car dealers.
This is the issue shopping for last M-car category, I know I can tell if car has been painted even with clean CarFax. I would like to nego the price down but a bunch of suckers (sorry for the term, these are people who only look at CarFax), will outbid me everytime.

At the end you better off just buy M-car new and keep it for long time.

I can't make much sense of what you are saying. Plenty of preowned M cars out there, most of which are either CPO or still under factory warranty.

I bought my CPO M3 back in December. It was 2 years old at the time so I am covered for 4 years of warranty (including the two CPO years) and saved probably $15-20k over buying new. It's a great strategy, at least for me, which I have used for every M car I have owned.

[GrussGott]

Originally Posted by allinon72

Fellas - by all means lease away. Getting awful defensive about it...some would say that's a red flag for justification.

It's not defensive of leasing, it's defensive of good information, which is overall what the forum is for. People swing through here all of time asking about things like this, and it's important to hear the details as we're all different.

For example, I think the economy is about to take a major shit so I wouldn't recommend anyone who doesn't have at least 10x the value of the car in liquid shinola even get one, much less take on a loan for one, and that's why I lease: never walk into a bar you don't know how and when to walk out of.

See I've been watching the ole 10-2 and it's got me nervous ... We're at about 2005 right now @ .98 ... if she gets near zero start looking for that exit

[marianoe]

Everyone’s situation is different, so I think it’s important to stay away from general statements. For me, I own one car and the M4 will be a lease. Here’s why:

For a long time, I was against leasing. But I've changed my mind now that I have experience "owning" and selling/trading-in a few cars. I typically trade-in my cars every 2-3 years, most have been financed. The European cars depreciated quickly, either I broke even or had negative equity when trading-in.

Most recently, I've had Toyota 4Runners. My first one had a few thousand in equity, so I traded in for a newer model. The current 4Runner, is about 2.5 years old. It's a TRDPro, comparable to what M is to BMW, so production is limited and they're hard to find new. These are selling used for more than I paid new.

Based on that, I decided to pay off the 4Runner and lease the M4. I want to keep the 4Runner for several years and want the flexibility to trade in the M4 in a few years.

It sounds simple, but I did a cost analysis over three years to determine what was best for my situation. These numbers are simplified and the equations aren’t written out with the entire calculations, but they do represent the end result of the calculations.

The numbers:

M4 - $78.5K selling price

• Cash Price - $83K w/taxes
• Lease - $1050/month for 36 Months and 10k/year, $1000 down
• Financing - $1,473/month for 60 months, with loan balance of $35,336 after 36 Months

Investable Cash - $83K

• Using M4 cash price as my baseline for investable cash
• Invested in liquid assets with estimated interest return of 10%/year
• Average return on portfolio is mid-teens/year, 10%/year is conservative in this situation

Estimated value of M4 in 3 years - $50K

• Based on KBB trade-in range of $47K-51K of a 2015 M4 with 30K miles

Options:

Pay cash for the M4, keep financing on the 4Runner

$83K cash - $83K purchase of M4 + $50K estimated value of M4 in 3 years = $50K in "assets"

Decision: No, I looked up resale and trade-in value of the M4 and saw how quickly they depreciate. The 4Runner is holding it's value really well and I plan on keeping it a long time. The loan was already half way paid off, so cash out of pocket was fairly low to pay it off.

So it came down to financing or leasing the M4, for the purpose of this thread I removed the 4Runner out of the finance and lease equations.

Finance M4

$83K invested cash - $53,028 (Total payments over 36 months) + $19,780 (Estimated interest) = $49,842 cash + $50,000 (Estimated value of M4) - $35,336 (Loan balance) = $65,506 in “assets”

Decision: No, I don't want cash tied up in a depreciating asset, when I will most likely upgrade in three years anyways.

Lease M4

$83K invested cash - $38,800 (Total Lease payments and down payment) + $22,500 (Estimated interest) = $66,700 all in liquid assets

Decision: Yes. I will most likely want to upgrade to a new one in a few years and want flexibility with investing.

Summary

• As you can see, leasing gives me an upside in three years and my original investable cash will be in liquid assets
• If investment returns are higher than financing or lease rates, it’s possible that leasing or financing is still the better option
• If I did want to keep the M4 at the end of the lease, I could buy it then and since I've been collecting interest over three years, I'd still have an upside over paying cash upfront
• Owning the 4Runner gives me peace of mind and the feeling of owning a car, while owning the M4 would be too much of a risk and I’d be missing out on potential interest

It all comes down to your own situation. Do the math and see what fits best for you.

[GrussGott]

The crazy thing is, anybody can afford anything these days because nobody checks:

Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.

Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles.

Indeed, with U.S. auto sales falling after a record 2016, many lenders including Santander say they’re tightening standards. Santander’s underwriting practices, however, continue to raise eyebrows. In May, Moody’s drew attention to the fact that Santander verified incomes on only 8 percent of loans it bundled into bonds, based on data that auto-debt issuers have recently started to disclose.

[Thescout13]

Originally Posted by GrussGott

The crazy thing is, anybody can afford anything these days because nobody checks:

Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.

Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles.

Indeed, with U.S. auto sales falling after a record 2016, many lenders including Santander say they’re tightening standards. Santander’s underwriting practices, however, continue to raise eyebrows. In May, Moody’s drew attention to the fact that Santander verified incomes on only 8 percent of loans it bundled into bonds, based on data that auto-debt issuers have recently started to disclose.

This is what I have been saying for the past few years to some of my close friends. Sub-prime auto loans are going to burst eventually. No wonder the janitors at work have hellcats and an SRT8 Jeeps.

[HPIA4v2]

Originally Posted by Thescout13

This is what I have been saying for the past few years to some of my close friends. Sub-prime auto loans are going to burst eventually. No wonder the janitors at work have hellcats and an SRT8 Jeeps.

Bail out time

But a smaller scale "bail-out" is happening already, to offset those bad loans the auto loan industry raises rates. BMWFS is affected as well. That's why I doubt MF will get better anytime soon.

[///M///]

I agree with everything GrussGott has stated on the lease vs buy option. There are huge pluses to leasing but and there is a big but here, leasing is not for everyone. It is dependent on everyone's individual situation. So making general statements like "only people who can't afford the M" lease does not make sense.

The above said, there is no denying the fact that.......

"Not everyone who leases can afford to buy a M". Now before all the lessees get butt-hurt over this, this is not aimed at most of you.

I think this is the point a lot of folks who buy these cars are trying to make. With the lease option the manufacturer is able to attract a much larger customer base and sell a lot more cars that they could have with just the buy option. While most people may have the luxury to choose between the lease vs buy option, there are a number of folks who only have the lease option available to them cuz they can only afford a 40-45k car and that is okay because the option is available.

[Mike991M4]

well, back in the day, I leased a saab on a 249/mo lease special. one year into the 3 year lease and it was worth less than the residual. I drove it for 3 years and gave it back and walked away for a total of $8964 out of pocket. that was a pretty good deal.

[eqpablon]

Originally Posted by Snappy Phoenix

Nuff said.......

Did you really just post advice from Dave Ramsey? That guy is the equivalent of AA for personal finance. In other words if you have any sense of personal finance and any level of responsibility, his advice isn't for you. Hell, a lot of his "investing" advice is flat out wrong. Same for his leasing and credit card advice.

Like I said, some people need DR style rules in their life because they are naturally irresponsible just like alcoholics need AA style rules.

I still can't believe that guy got posted as sound financial advice on this forum. Just goes to show some people may know how to make money, but they don't necessarily understand money.

[gatorfast]

Originally Posted by eqpablon

Did you really just post advice from Dave Ramsey? That guy is the equivalent of AA for personal finance. In other words if you have any sense of personal finance and any level of responsibility, his advice isn't for you. Hell, a lot of his "investing" advice is flat out wrong. Same for his leasing and credit card advice.

Like I said, some people need DR style rules in their life because they are naturally irresponsible just like alcoholics need AA style rules.

I still can't believe that guy got posted as sound financial advice on this forum. Just goes to show some people may know how to make money, but they don't necessarily understand money.

I just watched that video and it made absolutely no sense. His rationale for not leasing a car is that in doing so, the car manufacturers are making money which must mean it's a bad deal for you. Huh lol? Any company selling any product is making a profit from it or else they won't be in business long. He offers no other reason not to lease other than car makers profiting from it. In that case you probably shouldn't eat either since your local restaurant or grocery store is surely profiting from your food purchase.

[GrussGott]

Originally Posted by gatorfast

I just watched that video and it made absolutely no sense. His rationale for not leasing a car is that in doing so, the car manufacturers are making money which must mean it's a bad deal for you. Huh lol?

The best reason for me to lease, and I think just about anyone, is this:

could be the paranoia talking but ... let's say our economy takes a serious shit. Are you certain you want and can handle those payments?

Because my lease contract says I'm only on the hook for 40% of the car and then I can walk with zero effort on my part, while a loan says you're on the hook for the whole 100% enchilada. Now, of course, most people assume if they get trouble they'll just sell it, but if the market crashes you no gonna sell.

But comeon, what are the odds? I mean when was the last time the market majorly crashed, amiright??