Timing and lease vs buy decision..

[katit]

I know there is 100 threads on topic, but wonder what you suggest for my case..

Car will be here in October or so. Scheduled to be built end of September, I have production number already

But I still can't decide if I should purchase or lease...

Here is my story. I have business and can write off more when I lease.

1. We run through all the numbers and if it's 3 year lease vs 3 year purchase - given current residuals it seems like break even. Deduct more on lease, save more when purchased.

2. This is my first lease. I tend to keep cars for a long time, at least cars I like. I had E39 540 for 8 years. If I like M3 as much as I liked 540 - I most likely not going to change for a while. I can do lot of stuff myself, but this days don't want to. So I can keep car until CPO warranty runs out.

3. Mileage. I'm not certain. It can be <10k miles per year or >12k. Not sure and can't know right now.

4. "Personal". I like to own. I like to do tint, install camera, etc. I get $$$ side, but for some reason I'd like to know that it's "my" car. I'd like to not think when to replace tires and so on. It's a base car, I believe residual will be much better.

Now to the questions..

1. Given what I said above - what would you do? Buy or lease?

2. I have price and it's solid. But car will be here in October. Dealer said we can't talk numbers in August. Need to talk in September. And it's good for 30 days? How does it work? When should I "lock" my rate? End of September? And then re-lock if something better comes out in October?

[Bmwguy11]

You should talk numbers now and lock in any current rates. They are usually good for I think 60 days if I recall. This way if the rates get worse, you can still keep the lower rates you get now.

"Talk numbers later" is dealer speak for "wait til the car is here and you can't resist it and I can jack the price/rates on you".

[katit]

Originally Posted by Bmwguy11

You should talk numbers now and lock in any current rates. They are usually good for I think 60 days if I recall. This way if the rates get worse, you can still keep the lower rates you get now.

"Talk numbers later" is dealer speak for "wait til the car is here and you can't resist it and I can jack the price/rates on you".

But even if it's 60 days - it's still not reaching purchase date. I guess I will need to lock them end of August. Currently I don't think it can get worse on leasing

[OutlawX3M]

Have you considered the vehicle's lifecycle?

May not be a factor to you but I've always kept it in mind. If there's a new version coming by the time the lease matures, leasing may be a convenient way to "upgrade" by turning in this one and purchasing/leasing the next one.

[katit]

Originally Posted by Outlaw M3

Have you considered the vehicle's lifecycle?

May not be a factor to you but I've always kept it in mind. If there's a new version coming by the time the lease matures, leasing may be a convenient way to "upgrade" by turning in this one and purchasing/leasing the next one.

Got point. And we don't know what going to happen. I'm 6sp type of guy and seeing how there is no manuals in regular BMWs anymore - I'm suspecting next gen M3 will not have one either.

Audi, MB, they all don't make manuals anymore..

I think lease would make sense to me if some of those conditions met:
1. Good residual/MF (it is not right now)
2. Car was problematic, I didn't like it, better model came out

On #2 it's just a guess right now. But given my experience with BMWs - I'm sure I'm going to like it a lot. And given 6sp situation - I afraid next one won't have it.

With purchase - the only negative I see is if I had to sell it after 3 years - I would go through more trouble. But again, it's all just $$$. Lease with good rates - win. With current rates - who knows.

[OutlawX3M]

Originally Posted by katit

Got point. And we don't know what going to happen. I'm 6sp type of guy and seeing how there is no manuals in regular BMWs anymore - I'm suspecting next gen M3 will not have one either.

Audi, MB, they all don't make manuals anymore..

I think lease would make sense to me if some of those conditions met:
1. Good residual/MF (it is not right now)
2. Car was problematic, I didn't like it, better model came out

On #2 it's just a guess right now. But given my experience with BMWs - I'm sure I'm going to like it a lot. And given 6sp situation - I afraid next one won't have it.

With purchase - the only negative I see is if I had to sell it after 3 years - I would go through more trouble. But again, it's all just $$$. Lease with good rates - win. With current rates - who knows.

I suck at using the search feature on the site but there's been a few posts I read where the leasing (rates/MF) are better as the MY progresses. Here's one I found via Google.

[katit]

Hopefully it will change for the better. But other than that, any comments?

It is about $2k more to finance Lease (acquisition fee + extra interest) - and this is break even with my tax numbers..

The only win is if residual is very high.

[BavarianFanatic]

If you tend to hold onto your cars for a while, why not just buy it and then fully depreciate it? Also, bear in mind that you have all the way up to the time you're signing on the dotted line to make a decision. Hell, you could even opt to lease and then the next day flip it into a loan.

[Draper]

Lease vs finance numbers over 3 years are very close. Would you have any business use? If so, a lease wins hands down.

Another plus with a lease is you get a bit more protection by not having to worry about things like diminished value (if the car is in a collision), though you'd still have the ability to capture positive equity, if present.

[katit]

Originally Posted by Draper

Lease vs finance numbers over 3 years are very close. Would you have any business use? If so, a lease wins hands down.

Well. According to my CPA - yes, we can write off more with lease. Precisely extra $7500 in 3 years for this specific car. When we take "rough" 30% - it's $2500 which is about the same number I'm paying in extra interest and acquisition fee. So. 3 years numbers about the same give or take.

Another plus with a lease is you get a bit more protection by not having to worry about things like diminished value (if the car is in a collision), though you'd still have the ability to capture positive equity, if present.

This part is not clear to me because I don't think it's easy as it sounds. How easy is that to sell car to private party while I have lease on it? I know it's doable, but potential buyers don't feel like it's smooth transaction. Trade in price higher than residual? Maybe possible in theory but I don't believe in it...

And I'd rather pay for diminished value insurance than think about other things where lease will limit me.

Again, I have time to think about it, keep ideas coming

[Draper]

Originally Posted by katit

Well. According to my CPA - yes, we can write off more with lease. Precisely extra $7500 in 3 years for this specific car. When we take "rough" 30% - it's $2500 which is about the same number I'm paying in extra interest and acquisition fee. So. 3 years numbers about the same give or take.

If you use MSDs, the effective interest rate for a lease is often times lower. For mine (whenever my car arrives) with max MSDs ends up being right at 2%.

Don't forget the sales tax savings as well. Most states only require you pay tax on the lease depreciation amount. On a purchase, you're paying full fare.

Originally Posted by katit

This part is not clear to me because I don't think it's easy as it sounds. How easy is that to sell car to private party while I have lease on it? I know it's doable, but potential buyers don't feel like it's smooth transaction. Trade in price higher than residual? Maybe possible in theory but I don't believe in it...

And I'd rather pay for diminished value insurance than think about other things where lease will limit me.

Again, I have time to think about it, keep ideas coming

You can either buy out the car, and sell it. Or trade in to a dealer.

Buying out the lease and selling usually isn't ideal since you're on the hook for the sales tax on the residual. A trade avoids this. Best case would be to find a private party buyer, and a dealer to handle the sale for you.

[NavyBeeker]

Sounds like you would rather own and have the peace of mind for modifying it and knowing it is "yours".

I feel similarly but couldn't deduct anything myself as a business expense in a lease. For me I will enjoy the car, bond with it more strongly and take care of it better as an owner. If those intangibles are important then I imagine you'll have constant regrets if you lease.

But you will need to choose if the $ savings or maintenance peace of mind is more valuable in the lease option. I don't like being forced to make another choice at end of lease to lease again or shop with zero equity for a new car.... just me though

[katit]

Originally Posted by Draper

If you use MSDs, the effective interest rate for a lease is often times lower. For mine (whenever my car arrives) with max MSDs ends up being right at 2%.

Not sure how you counted. Leasematic with money factor 0.00137 and 7x MSDs tells me APR 3.288%

Don't forget the sales tax savings as well. Most states only require you pay tax on the lease depreciation amount. On a purchase, you're paying full fare.

And that's another question I'm not 100% about. Will need to check.
BUT. With purchasing - I deduct my old car's value from new car value when pay sales tax at DMV.

So, it goes like that:
Buy car at say $60k, get temp tag for 30 days, drive it home.
Sell my Honda, get let's say $15k
Register car - pay tax on $45k

And even if I don't sell Honda in 30 days - I will pay tax for $60k but with more paperwork I will get refund when I sell Honda.

And with leasing? I don't know if I can do something about sales tax?

[katit]

Originally Posted by NavyBeeker

But you will need to choose if the $ savings or maintenance peace of mind is more valuable in the lease option.

Not sure what $ savings I will have? (as mentioned I estimated exact same)
And what maintenance piece of mind I will have with lease that is different from purchase? It will be exactly same. But as owner I may do extra oil change in between services or something like that.

[Draper]

Originally Posted by katit

Not sure how you counted. Leasematic with money factor 0.00137 and 7x MSDs tells me APR 3.288%

APR on the base money factor of .00137 is 3.288.

APR after max MSDs (.00088 MF) is 2.112.

Originally Posted by katit

And that's another question I'm not 100% about. Will need to check.
BUT. With purchasing - I deduct my old car's value from new car value when pay sales tax at DMV.

So, it goes like that:
Buy car at say $60k, get temp tag for 30 days, drive it home.
Sell my Honda, get let's say $15k
Register car - pay tax on $45k

And even if I don't sell Honda in 30 days - I will pay tax for $60k but with more paperwork I will get refund when I sell Honda.

And with leasing? I don't know if I can do something about sales tax?

In that case, you would need to trade the car in to the dealer towards your new purchase to realize any tax benefit.

[katit]

Originally Posted by Draper

APR on the base money factor of .00137 is 3.288.

APR after max MSDs (.00088 MF) is 2.112.

That is good to know!

In that case, you would need to trade the car in to the dealer towards your new purchase to realize any tax benefit.

I guess when it comes closer to time of a "deal" - I will ask them what they going to offer for trade-in on my car. I feel like I can sell it better myself, but will see. Another thing is - it's IL dealer and I'm in MO, not sure if they can do everything in house or not. All previous cars I bought even in MO - it was price to "drive off" and then tax was on me when I register car with DMV

[NavyBeeker]

OP - If your purchase loan payment is equal or similar to a lease payment, then that is a non factor... seems for most folks that the lease payment is less...

On maintenance - thinking that after the warranty period / mileage expires, you will be paying for repairs... as with a lease you are generally fully covered for the period of the lease... but that is less time than if you buy and keep the car longer. But you know this of course... just my thoughts.

[katit]

Originally Posted by NavyBeeker

OP - If your purchase loan payment is equal or similar to a lease payment, then that is a non factor... seems for most folks that the lease payment is less...

On maintenance - thinking that after the warranty period / mileage expires, you will be paying for repairs... as with a lease you are generally fully covered for the period of the lease... but that is less time than if you buy and keep the car longer. But you know this of course... just my thoughts.

No, in my case loan payment will be higher too. I'm not really concerned about this though. I'm thinking that if I keep I will buy CPO. And if I keep car for 6 years or so - I will end up with some cash at the end. I'm thinking no downpayment or very little and 60month loan. So, 5 years of payments slightly larger than lease. Then one more year without payments and then I will have good chunk of cash at sale. With lease I will always pay, will not have any cash left over but will driver 2 new cars in 6 years. And pay slightly less.

Oh, and I do all maintenance myself. I even have lift in garage Used to work a lot on cars, now I'm just to busy with business and kids. So, no "maintenance" expenses after 3 years for me. Yes, maybe couple of weekends with beer in garage - it's OK