Do You Lease or Buy Your BMW?

 

? cash!

Lots of study and work done!

 

then buy them at the end of the term....

 

As a business owner, I always used to lease. But interestingly enough, I had the accountants accross the hall run lease vs. buy numbers on both a 330 and a 550 for me. In both scenarios, I was putting down $40K and financing the remainder ($10K/$30K). They took into account the value of the lost money (2% interest assumed) as well as the tax benefits (cars don't have very good depreciation schedules). Last but not least, remember I'm in IL where you pay tax on the full amount of the car whether you lease it or buy it.

Interestingly enough, it came out cheaper to buy both cars over 36 months. The 330 was about $2K cheaper and the 550 was about $6K cheaper. However, both of these amounts assume that I will get the same residual on the car by selling it vs. leasing it. My accountants doubted that I would get 59% on the 550 and 64% on the 330 after 36 months - whereas if I were to lease it, those numbers were golden. So to them, their official word was that it was a wash financially - they did however recommend that I purchase the car.

PS - I agree with them about the residuals because I was heavily optioning up the car - I do not believe that options such as Comfort Seats, Active Steering, Fold Down Rears, and Sirius hold their values.

 

I stole mine.

 

Good economics need to be calculated as a wholeness.

A car (E60) is not a investment.

It is a pleasure, and everyday!

 

I will steal my next car. Its much cheaper, however, optionswise its the luck of the draw!

 

My employer leases it for me... :-)

I just pay the Inland Revenue the personal tax liability.. :-(

 

I did some very careful calcuations for ordinary consumers that truly allow for "all" factors--more like your accountants did--which probably was much better than the usual calculations. What I found is that leasing tends to be better for ordinary consumers than installment purchasing under a wide range of realistic assumptions--but, of course, that conclusion could change given more extreme assumptions. And, for me, the key to leasing being better is the assumption that one, in effect, saves/invests the difference in the lease versus purchase payments to have the money on hand to deal with the next lease/or purchase.

And, note that it is better to put nothing down on a lease unless a compensating money factor is obtained. There are several reason for this conclusion. First, one ought to be able to earn, on average and net of tax, enough to cover the effects of depreciation and sale-tax savings occassioned by a downpayment. But, most important, the compensating money factor would have to be very good before I would make a lease downpayment because one usually is uninsured on the amount of the downpayment in the event of a total loss on the car.

 

I always buy, pay cash, but never new. I look for a low miles car that is just a few months old. I also tend to buy in the mid-west where resale values are lower. In California (where I live) prices for all luxury items are higher. This year I bought a loaded 2005 545i for my wife at under $50,000. My business partner was able to get a new M5 out of Texas with less than 500 miles for almost $5,000 BELOW sticker when dealers out here want premiums of $10,000 to $20,000 above sticker. Bought a few Porshes in the last couple of years this way as well. Takes effort to do this but saves some money. I love geographic arbitrage, buy a great car in a weaker market, drive for a year, break even on the sale in California.