smcclaren

I got my dealer down to 62,500 out the door (Sport, Premium Sound, Sat Rad.). I usually drive around 12-15k miles a year and like to keep a car 3-4 years. According to KBB, the trade in value on an 04 w/ 15,000 miles is 43,800. The next 2 years the depreciation slows down to about 5-6k a year. If I write a check for the entire amount, the cost to own the car will be about $10k a year as long as I do not get in a wreck. The lease prices I have seen on the boards are in the 750-850/month for 36 months. Why would anyone buy vs. lease. What is the upside. The lease guarantees the cost to own. The only way buying is better would be to find private buyer to unload the car on. What have others done?

amigo525

I like leasing but only for 2 yrs/

tbone

If you are going to change cars often, I think leasing makes sense. The decpreciation costs keep gettiong worse and worse.

gmartin

I have held on to my last two cars for greater than ten years apiece - probably too long. I suspect the E60 will be in my garage for at least 5 years so I bought it.

EBMCS03

For that awesome price BUY IT! Dang I'm hating my dealer more and more.

Guest

Your analysis is incomplete -- you should ask yourself what profit is there for the auto manufacturer to lease a car to you versus just selling the car to you?? If the auto manufacturer did not make any profit in leasing, they would not offer you the opportunity to "rent" the car for an extended duration (say 2/3/4/5 years) as opposed to buying the car. As you know, the auto manufacturer makes profit both ways (either leasing or a sale).

A more complete analysis would factor in the up-front lease acquisition costs, mileage costs, and excess wear/tear & repair costs upon expiration of the lease, among other costs/risks that are called for or shifted to you in your leasing contract (i.e., you pay the sales tax, title, annual registration and license fees for a car you do not yet, and may not, eventually own, etc.). Aside from certain obvious advantages of ownership (like no mileage limitations), a lease is nothing more than a long term multi-year auto rental with an option to buy the rented car at the end of the term (e.g., you don't get this purchase option when you rent from Hertz).

From a purely theoretical perspective, the auto manufacturer makes profit twice when you lease versus buying (i.e., the manufacturer's leasing company has to buy the car from the manufacturer since they are not guaranteed that you will buy at the end of the lease, thereby paying the manufacturer profit for the sale, and then rents it to you on the leasing contract, where the leasing company makes profit on the lease), so it would not appear that there can be any advantage to you (the consumer) to lease versus buying since you must pay two guys in the food chain profit for the lease versus only one guy in the sale (you can ignore the dealer's profit since the dealer gets it either way, whether you lease or buy).

In my view, the only way it makes economic sense to lease is if (i) you cannot afford to actually purchase the vehicle (i.e., you do not have enough $$ or qualify for a sufficient loan to buy the car you want), but you do not want to drive a lesser vehicle than you can actually afford; (ii) there is a significant tax advantage to leasing (i.e., you can expense the cost against a business); or (iii) you can invest and appreciate the $$ you would have used to buy the car in some other way, rather than suffer the depreciation after purchase -- a full analysis would offset the actual appreciation, if any, against the increased costs of leasing (e.g., instead of spending the ~$68K, which includes tax, title, registration & license, to purchase, assume you pay about $8K up front to lease after the down payment, tax, title, license, registration, so you now have $60K for some other use).

Hormazd

Your analysis is incomplete -- you should ask yourself what profit is there for the auto manufacturer to lease a car to you versus just selling the car to you?? If the auto manufacturer did not make any profit in leasing, they would not offer you the opportunity to "rent" the car for an extended duration (say 2/3/4/5 years) as opposed to buying the car. As you know, the auto manufacturer makes profit both ways (either leasing or a sale).

A more complete analysis would factor in the up-front lease acquisition costs, mileage costs, and excess wear/tear & repair costs upon expiration of the lease, among other costs/risks that are called for or shifted to you in your leasing contract (i.e., you pay the sales tax, title, annual registration and license fees for a car you do not yet, and may not, eventually own, etc.). Aside from certain obvious advantages of ownership (like no mileage limitations), a lease is nothing more than a long term multi-year auto rental with an option to buy the rented car at the end of the term (e.g., you don't get this purchase option when you rent from Hertz).

From a purely theoretical perspective, the auto manufacturer makes profit twice when you lease versus buying (i.e., the manufacturer's leasing company has to buy the car from the manufacturer since they are not guaranteed that you will buy at the end of the lease, thereby paying the manufacturer profit for the sale, and then rents it to you on the leasing contract, where the leasing company makes profit on the lease), so it would not appear that there can be any advantage to you (the consumer) to lease versus buying since you must pay two guys in the food chain profit for the lease versus only one guy in the sale (you can ignore the dealer's profit since the dealer gets it either way, whether you lease or buy).

In my view, the only way it makes economic sense to lease is if (i) you cannot afford to actually purchase the vehicle (i.e., you do not have enough $$ or qualify for a sufficient loan to buy the car you want), but you do not want to drive a lesser vehicle than you can actually afford; (ii) there is a significant tax advantage to leasing (i.e., you can expense the cost against a business); or (iii) you can invest and appreciate the $$ you would have used to buy the car in some other way, rather than suffer the depreciation after purchase -- a full analysis would offset the actual appreciation, if any, against the increased costs of leasing (e.g., instead of spending the ~$68K, which includes tax, title, registration & license, to purchase, assume you pay about $8K up front to lease after the down payment, tax, title, license, registration, so you now have $60K for some other use).
[/quote]

The guest says your analysis is incomplete but then justifies leasing in his last two points. Cars depreciate, if you can expense the monthly cost of driving it then leasing makes sense. Also as this board will testify as desirable the E60 is , it is not a car you want to be owning out of warranty. I owned my last car for 14 years. I now run my own business and do not want the sudden costs maintenance. I also do not want to borrow at high rates (corporate auto loan) to depreciate the vehicle and then have the stress and hassle of selling it. Leasing brings me the advantage of predictable cost and I can drive a pink E60 with a 4 speed manual and don't have to worry about selling it.

I am already planning my next ED with the 550i in 2007 or 8

Zaphod

Your analysis is incomplete -- you should ask yourself what profit is there for the auto manufacturer to lease a car to you versus just selling the car to you?? If the auto manufacturer did not make any profit in leasing, they would not offer you the opportunity to "rent" the car for an extended duration (say 2/3/4/5 years) as opposed to buying the car. As you know, the auto manufacturer makes profit both ways (either leasing or a sale).

A more complete analysis would factor in the up-front lease acquisition costs, mileage costs, and excess wear/tear & repair costs upon expiration of the lease, among other costs/risks that are called for or shifted to you in your leasing contract (i.e., you pay the sales tax, title, annual registration and license fees for a car you do not yet, and may not, eventually own, etc.). Aside from certain obvious advantages of ownership (like no mileage limitations), a lease is nothing more than a long term multi-year auto rental with an option to buy the rented car at the end of the term (e.g., you don't get this purchase option when you rent from Hertz).

From a purely theoretical perspective, the auto manufacturer makes profit twice when you lease versus buying (i.e., the manufacturer's leasing company has to buy the car from the manufacturer since they are not guaranteed that you will buy at the end of the lease, thereby paying the manufacturer profit for the sale, and then rents it to you on the leasing contract, where the leasing company makes profit on the lease), so it would not appear that there can be any advantage to you (the consumer) to lease versus buying since you must pay two guys in the food chain profit for the lease versus only one guy in the sale (you can ignore the dealer's profit since the dealer gets it either way, whether you lease or buy).

In my view, the only way it makes economic sense to lease is if (i) you cannot afford to actually purchase the vehicle (i.e., you do not have enough $$ or qualify for a sufficient loan to buy the car you want), but you do not want to drive a lesser vehicle than you can actually afford; (ii) there is a significant tax advantage to leasing (i.e., you can expense the cost against a business); or (iii) you can invest and appreciate the $$ you would have used to buy the car in some other way, rather than suffer the depreciation after purchase -- a full analysis would offset the actual appreciation, if any, against the increased costs of leasing (e.g., instead of spending the ~$68K, which includes tax, title, registration & license, to purchase, assume you pay about $8K up front to lease after the down payment, tax, title, license, registration, so you now have $60K for some other use).
[/quote]

The guest says your analysis is incomplete but then justifies leasing in his last two points. Cars depreciate, if you can expense the monthly cost of driving it then leasing makes sense. Also as this board will testify as desirable the E60 is , it is not a car you want to be owning out of warranty. I owned my last car for 14 years. I now run my own business and do not want the sudden costs maintenance. I also do not want to borrow at high rates (corporate auto loan) to depreciate the vehicle and then have the stress and hassle of selling it. Leasing brings me the advantage of predictable cost and I can drive a pink E60 with a 4 speed manual and don't have to worry about selling it.

I am already planning my next ED with the 550i in 2007 or 8
[/quote]

If you drive the car for business purposes you are also allowed to deduct depreciation expense which may even be more advantageous than leasing since it is not necessarily a cash expenditure (and could be at an accelerated rate). So this not be a benefit of leasing that is not also a benefit from buying. There is also no real savings in financing costs since the lessor's financing costs must be refelected in the lease cost and as such are passed on to the lessee. Locking yourself into a long term lease creates an liability that you must pay off even if you do not formally recognize it as debt on your balance sheet. Essentially, guest is saying that there is no free lunch from leasing instead of buying and this must be true.

Hormazd

There is never a free lunch. If you buy you are still in a long term obligation. Yes the depreciation helps, I am depreciating one car and leasing two. It just depends on how long you want to keep the car and how many miles you drive it. The annual cash outlay after tax of ownership is greater than that of leasing. On the other hand after 5 years the bleeding stops. But then you have a fully depreciated car worth $8K and annual maintenance costs that could easily exceed $5K. Its just not worth it on the E60 IMO.

Guest

The analysis is incomplete (Hormazd misses the point -- I am not "justifying" leasing, but giving you a framework to analyze which is better for you). In addition, since Hormazd's business apparently does not have the free cash flow to purchase the car (i.e., he must take out a corporate auto loan), he focuses on the tax advantages of deducting the lease expense. If your business has the free cash flow/capital to actually purchase the car, then you can use a straight line depreciation of the purchase price over the 5 year class life (for tax purposes) of the car, with a potential additional bonus depreciation in the first year under Section 179 (you need to have your tax accountant advise you as to which gives your business a better tax advantage -- depreciating the auto purchase or expensing an auto lease).

Moreover, if you purchase the car, you can sell it at any time (unlike a lease, where you have to keep possession until the term of the contract has expired or the car is totaled, stolen, etc. and the insurance pays off the lease) -- you are not obligated to keep it after the warranty expires (if you agree with Hormazd that BMW's are too costly after the warranty expires).

Lastly, if you are unable to deduct the lease expense because you do not have a business, this entire line of tax advantages reasoning does not apply. You are simply down to the point of paying more for a long term rental (lease) versus purchase because either you can't afford to buy the e60 or you have a better use for the $$ you now have because you elected to lease.