Economically, leasing and purchasing are almost the same thing. The differences between the two alternatives can matter, but they often are not nearly as significant as some think. Under some conditions, one alternative is better tht the other and vice versa.
Well, you can do that under either alternative. Leasing and purchasing also are not that much different from a practical perspective. There are, of course, some differences.

 

That's a very good point, indeed. One could expect some incentive (somewhat lower rates) for those willing to be locked into a fixed - and rather short - ownership period, as car manufacturers can expect to earn more from these customers in the long run.

The drawback is that of course you ARE locked into a fixed and short ownership period with leasing. Long leasing periods (I think anything > 42 months) are not available in Germany for legal (tax related) reasons.

 

That's a very good point, indeed. One could expect some incentive (somewhat lower rates) for those willing to be locked into a fixed - and rather short - ownership period, as car manufacturers can expect to earn more from these customers in the long run.

The drawback is that of course you ARE locked into a fixed and short ownership period with leasing. Long leasing periods (I think anything > 42 months) are not available in Germany for legal (tax related) reasons.
[/quote]You can get longer leases in the US.

 

Well, I leased the E60 and paid cash for the E53 (X5 4.4). As most people said, it depends on everyone's individual circumstances. To say that people who lease cannot afford to buy is sort of a stretch wouldnt you say? For example, I leased my 2004 E60 because it was a first year model and I didnt want to get stuck with any long term issues the car my have, and we all now know that the E60 has had its fair share of kinks. Anyway, I think we can all agree at the end of the day that buying or leasing a new automobile is essentially pissing away good money but we all allow ourselves some of the guilty pleasures of life.

 

I got my 545 when the low lease money factor (effectively 2.4% APR) was in effect.

For me, the economic cost was less with leasing vs. buying (even though it is not a tax writeoff) given I was going to only keep the car 3-4 years whether I leased or paid cash. This is for 3 primary reasons.

1) I can get greater than 2.4% after-tax return on the $70K I would spend if buying the car so effectively, this is an interest rate arbitrage - i.e. borrow at 2.4%, invest at 3 to 8+% after-tax.
2) In most states, you pay the sales tax only on the "consumed" portion if leasing. With a 61% residual, I saved $3K in taxes vs. buying.
3) I locked in the 61% residual and given the 545 was to be replaced by the 550, I figured I might get less in a private party transaction in 3 years. Plus leasing protects you if you crash a car as it is tough to sell to a third party, while you just return it to BMW in a lease situation.

As these points indicate, the lease terms (APR, residual) are the key to the decision vs. a blanket assumption of one way is always better.

As mentioned by someone else, one downside is you are locked in for 3 years but you can always sub-lease it via swapalease.com etc.

Am I missing something? I have always purchased before and if someone can tell me what costs I missed, this would be helpful in the future when deciding buy vs. lease.

 

I'd have to look back at my very detailed calculations--which are not with me now. But, you hit the high points for sure. What I found, in buying by 545i, is that, for a very easy to attain earning rate, leasing was better, although as would be expected not by a large margin. Anyone thinking that leasing or purchasing ever will provide a big advantage over the other is missing a fundamental tenet of economics. "There ain't no free lunch."

 

I'd have to look back at my very detailed calculations--which are not with me now. But, you hit the high points for sure. What I found, in buying by 545i, is that, for a very easy to attain earning rate, leasing was better, although as would be expected not by a large margin. Anyone thinking that leasing or purchasing ever will provide a big advantage over the other is missing a fundamental tenet of economics. "There ain't no free lunch."
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Agreed, that's essentially the point I was making all along, there is no off the shelf "best" or "right/wrong" way to do it - it's also a moving goalpost as discounts, residuals and money factors all fluctuate.

 

Agree with all three of your points - in my case, 74% residual for 24 months on a 530i. My guess is, if I went to trade it in after two years, a BMW dealer would give me 65-70%, a non- BMW dealer less.

 

My car is leased, one other colleage has also leased and two have purchased taking a cash alternative. Our accountant has advised after three years taking all costs into consideration and allowing 18K miles per year that we come out evens. So why lease, simple someone elses has the hastle if things go wrong & just hand it back if you loose your job without financial penalties.
I dont have to claim milage for fuel used for business or argue about the wear & tear at the end.

 

This topic got more responses than I expected. Great debate. I personally could never make the lease numbers work for me. That's why I buy. Factors... 1. I negotiate a good purchase price. 2. I take excellent care of my cars - top resale value. 3. I keep them longer that the typical loan or lease period so it's like driving for free. 4. New cars depreciate the most the first 3 years... why 'pay' for only the most expensive years?

Think about this. If you are leasing... SOMEONE still is owning. What I mean is... Who do you think owns the car? Big business owns it. Either BMW or some lease company owns that car and is renting it to you. With that said... do you think they know what they are doing? Are they in business to lose money? Of course not. I always wonder why dealers push leasing on me. I think they like selling the car twice.

So, is BMW (with all their MBA's and accountants) smarter than they average car buyer? I think the numbers are in their favor.