wasupdu

I have a "newbie" question when it comes to leasing cars that I'm hoping someone can either explain or direct in me in the direction for some info.

I own my '05 525i free and clear. I'm beginning to look around for a new vehicle and I'm really considering a lease since I average about 8-9k miles on the car and have eliminated out of state travel altogether. My question is: Is it a stupid idea to prepay a lease? I've run some very basic numbers using the financial calculators (on MBUSA and BMWUSA) and it really seems to make sense for me to lease. I guess I'm looking for someone to highlight the leasing cons for me. I'd imagine that my car is only worth $17-20k given the current economy, but I'm interested in hearing opinions on buy vs lease in this situation. Also, I don't have a way to deduct the lease expense FWIW.

In addition, MBUSA offers a balloon payment option. What's that all about?

thanks,

monacobmw

Even if you prepay a lease, you are still financing the part of the car that you are not paying off.
You are really borrowing 100% of the car, but you are only paying off (up front) the part you will use.
Thus, you are still prepaying the interest.

You are really only saving interest on the part of the car that you are using and prepaying up front.

With the money factor equating to 3.4% APR, I would just go ahead and finance the lease.

As for buying, a lease is the exact same thing, except you are gambling that the residual you agree to up front is better than the actual residual at the end of the lease.

Most believe that BMW subsidizes the residual on a lease, so I think that it is the better deal.

DRANGED

I would absolutely NOT prepay the lease Cris. Take that money and save it for a rainy day should an unforeseen financial hardship arise.

sdg1871

Never ever prepay a lease or make any cap cost reduction whatsoever. I roll everything into my lease payment including the bank fee and the sales tax. If my car is stolen or totalled and I had prepaid those, the money would be lost.

If you total the car or it is stolen, you will lose all of your money (absent gap insurance) that you have prepaid.

The benefit to lease are lower monthly payments than ownership and no money up front.

Lease is a good option if you don't intend to mod your car and you like to get a new car ever 3 years or so.

pipper

never...EVER...prepay a lease....a very dumb thing to do. like wasupd said, if you car gets lost/stolen you lose your entire downpayment.
IMO if you own your car outrite, drive very few miles, and have very few problems with the car, just keep it until the new 5 series comes out.