Lease or Buy...

[eRiggs5]

The M3 has been my dream car and I know I could keep it for a while (5-8 yrs). There are benefits to both I know. I'm just lost with what to do. My commute is 15 min and we take my wife's car to work because of our dogs going with us but who says I couldn't get in the car and drive and never stop which could happen I'm sure I custom ordered it so it's exactly what I want. What to do!?

What did you all do and why? When it comes down to it. We leased my wife's car so I'm open to doing either.

#firstworldproblems

[mdefalco25]

You really need to do the math on this one and decide from there. For me, spending roughly $800/month to turn around and turn in a car with nothing to show for it doesn't make sense. This is a personal choice. I prefer to spend more over the life of having the car and then sell it to redeem some of my money back. Majority of people, guessing, only lease so they don't have to deal w/ the maintenance and like to switch to different cars frequently. If you plan/want to keep the car for more than 3 years
than buying is perhaps a better option. That's my 2 cents for what it is worth. Good luck!

[ontherivet]

Bought mine. Kept last car 18 years. Not sure I want to keep this one near than long but I can see 6-7 years easy. I won't put more than 6k miles a year on mine. I think a lot depends on your predisposition to keep more than 3-4 years, how bored you get, willingness to maintain, how you feel about monthly payments very long term, etc.

[XRAVE]

Originally Posted by eRiggs5

The M3 has been my dream car and I know I could keep it for a while (5-8 yrs). There are benefits to both I know. I'm just lost with what to do. My commute is 15 min and we take my wife's car to work because of our dogs going with us but who says I couldn't get in the car and drive and never stop which could happen I'm sure I custom ordered it so it's exactly what I want. What to do!?

What did you all do and why? When it comes down to it. We leased my wife's car so I'm open to doing either.

#firstworldproblems

If your not 100% sure you want it for 5-8 years, lease it and then decide at the end if you want to buy it or turn it in.

Lease is almost identical to finance except you don't have to put a big down payment and have less risk. The interest you pay on a lease is currently around 3.14%. Not much higher than a loan. You could also buy down the APR with MSDs but that's another story.

This car leases amazingly and why I plan on doing it a second time.

[eRiggs5]

Originally Posted by XRAVE

If your not 100% sure you want it for 5-8 years, lease it and then decide at the end if you want to buy it or turn it in.

Lease is almost identical to finance except you don't have to put a big down payment and have less risk. The interest you pay on a lease is currently around 3.14%. Not much higher than a loan. You could also buy down the APR with MSDs but that's another story.

This car leases amazingly and why I plan on doing it a second time.

My dealer just quoted me at 59% residual and .00172 MF. Seems a little high to me on 12k/year lease for 36 months.

[XRAVE]

Originally Posted by eRiggs5

My dealer just quoted me at 59% residual and .00172 MF. Seems a little high to me on 12k/year lease for 36 months.

Residual for 12k miles on an M3 is 60%. Hes up charging you 1% on the APR, base MF is .00132 (3.16% APR). .00172 (4.13% APR). That right there is like $1500 hes up charging.

What is the sale price hes giving you?

[BavarianFanatic]

The thing that many folks seem to forget when comparing the two is that a purchase isn't permanent. There's no reason you can't turn around and sell or trade in a car in 3 years. The upside is that you'll have some equity and, in many states, the benefit of a sales tax credit on the trade-in that you wouldn't have had with a lease.

I do a very detailed comparison of my all in costs for the two scenarios. In my case, comparing a 3 year lease to a 6 year finance. It usually works out to less than $100/mo. difference based on typical interest rates. I leased my last car, but opted to refinance it a little less than a year into it. I sold the car privately right at the 3 year mark. I walked away with a healthy amount of equity (I take VERY good care of my cars) that I would not have realized if I had stuck with the lease.

In the end, your own financial situation, tax laws, and frankly personal preferences will help guide you in the right direction. One of the biggest issues for me personally is that my state (PA) taxes leases at a rate that's 50% higher than purchases. I just view this as throwing money away personally.

[eRiggs5]

Originally Posted by XRAVE

Residual for 12k miles on an M3 is 60%. Hes up charging you 1% on the APR, base MF is .00132 (3.16% APR). .00172 (4.13% APR). That right there is like $1500 hes up charging.

What is the sale price hes giving you?

He emailed me back and said disregard the info, he had me on an m4 not m3. So yes, the residual is 60%, same MF .00172. Sale price is $80,079

[saleen556]

I lease my DD and buy cars that I plan on keeping awhile. I prefer leasing as I like a new car every 3 years. Unless you have a decent down payment and a good size monthly payment I haven't found equity in cars. They all depreciate. Also with leasing I don't have to sell the car and can just turn it in which I prefer. After 14 months in my 328 I was already upside down 9k. That's a bad investment to me.

[visi107]

From a state taxes situation MI charges 6% both on lease and buy so here its the same. To the person who said, you get a sales tax credit when you trade your car in, yeah that true but you paid that credit when you first bought the car so you aren't getting free money.

So obviously this is pretty complex. A lot of it has to do with personal choice and we can't help you there. I calculated this in detail a couple of years ago when I got a 328. By my calculations(strictly financially speaking), I would have needed to keep the bought car at least for 7 years to break even with the lease. So if you keep the bought car for longer then financially speaking you win. It did not seem worth it so i plan to lease.
If you are doing your own calculation comparison, don't forget to add a budget for regular maintenance work and extra warranty pay to the bought car.

[XRAVE]

Originally Posted by BavarianFanatic

The thing that many folks seem to forget when comparing the two is that a purchase isn't permanent. There's no reason you can't turn around and sell or trade in a car in 3 years. The upside is that you'll have some equity and, in many states, the benefit of a sales tax credit on the trade-in that you wouldn't have had with a lease.

I do a very detailed comparison of my all in costs for the two scenarios. In my case, comparing a 3 year lease to a 6 year finance. It usually works out to less than $100/mo. difference based on typical interest rates. I leased my last car, but opted to refinance it a little less than a year into it. I sold the car privately right at the 3 year mark. I walked away with a healthy amount of equity (I take VERY good care of my cars) that I would not have realized if I had stuck with the lease.

In the end, your own financial situation, tax laws, and frankly personal preferences will help guide you in the right direction. One of the biggest issues for me personally is that my state (PA) taxes leases at a rate that's 50% higher than purchases. I just view this as throwing money away personally.

99% of the time buying a car is throwing away money whether or not you lease it or buy it. You can't not confuse equity with profit, it just means that you paid more than it depreciated. Or you put a huge down payment. An example would be putting a 10k down payment. I'm sure I could sell the car the next day and have equity but its because I bought that equity.

Leasing is beautiful because the bank guarantees a residual rate for you, if it falls below that you can still turn it in with no cost, if the car somehow didn't depreciate as much as they expected, you can buy the car at the agreed upon value and sell it yourself for more. Again not a profit, just less cost of use. Also, at least in Florida, you only pay for taxes for the depreciated amount, a huge savings when compared to buying. Yes you can trade your car in but most of the time a dealer isn't going to give you a good value for your car.

When you come to look at these cars you have to say which option is going to cost you less over a given time and has less risk. That being said, there is no downside to leasing an M3 especially if you buy down the money factor making you interest lower than financing. On top of that you have a lot less risk than buying.

Leasing is so great for the customer than banks rarely offer it, that is why BMWFS is the one you lease it from. You used to be able to lease your car from an ordinary bank.

Bottom line, over 3 years you will have paid less leasing.

Originally Posted by eRiggs5

He emailed me back and said disregard the info, he had me on an m4 not m3. So yes, the residual is 60%, same MF .00172. Sale price is $80,079

Whats the MSRP? Also why don't you just get 10k miles, doesn't sound like you drive much.

[eRiggs5]

Originally Posted by XRAVE

99% of the time buying a car is throwing away money whether or not you lease it or buy it. You can't not confuse equity with profit, it just means that you paid more than it depreciated. Or you put a huge down payment. An example would be putting a 10k down payment. I'm sure I could sell the car the next day and have equity but its because I bought that equity.

Leasing is beautiful because the bank guarantees a residual rate for you, if it falls below that you can still turn it in with no cost, if the car somehow didn't depreciate as much as they expected, you can buy the car at the agreed upon value and sell it yourself for more. Again not a profit, just less cost of use. Also, at least in Florida, you only pay for taxes for the depreciated amount, a huge savings when compared to buying. Yes you can trade your car in but most of the time a dealer isn't going to give you a good value for your car.

When you come to look at these cars you have to say which option is going to cost you less over a given time and has less risk. That being said, there is no downside to leasing an M3 especially if you buy down the money factor making you interest lower than financing. On top of that you have a lot less risk than buying.

Leasing is so great for the customer than banks rarely offer it, that is why BMWFS is the one you lease it from. You used to be able to lease your car from an ordinary bank.

Bottom line, over 3 years you will have paid less leasing.

Whats the MSRP? Also why don't you just get 10k miles, doesn't sound like you drive much.

I have a feeling I'm going to want to drive it all the time. Lol 24/7 that's the only thing that scares me. At least 12k/year gives me 1000 miles to play with each month. MSRP 82,620. Paying all taxes, fees, etc up front.

[XRAVE]

Originally Posted by eRiggs5

I have a feeling I'm going to want to drive it all the time. Lol 24/7 that's the only thing that scares me. At least 12k/year gives me 1000 miles to play with each month. MSRP 82,620. Paying all taxes, fees, etc up front.

Are you tier 1 credit?

Hes charging you $1500 extra with the marked up money factor. I'm assuming incentives are included in the sale price.

Even though he is saying the sale price is 80k, you really are paying MSRP for that car.

I would re negotiate or walk away and find another dealer. Minimum you should get 4-5% off MSRP, base MF plus incentives.

[eRiggs5]

Originally Posted by XRAVE

Are you tier 1 credit?

Hes charging you $1500 extra with the marked up money factor. I'm assuming incentives are included in the sale price.

Even though he is saying the sale price is 80k, you really are paying MSRP for that car.

I would re negotiate or walk away and find another dealer. Minimum you should get 4-5% off MSRP, base MF plus incentives.

Getting $2600 off MSRP. No incentives are applied on that. Thad the best I can find around here. I've only looked locally (about 5 dealers)

[XRAVE]

Originally Posted by eRiggs5

Getting $2600 off MSRP. No incentives are applied on that. Thad the best I can find around here. I've only looked locally (about 5 dealers)

Your getting $2600 off but since he marked up the money factor, thats only $1000 off. I assumed the other $1000 was the $1000 incentive but if its not, then your actually sale price is $2000 under MSRP, about 2% off. If you don't care about getting a good deal go for it, but you could with some effort squeeze 1000-2000 more out of another dealer that is desperate.

Since you haven't signed you could walk away from this deal. I know it would be hard since it sounds like its almost here.

You don't need to shop locally, you live in Virginia which is within driving distance from PCD. If your not familiar with Performance Center Delivery, look it up on the forums. Its free and they deliver your car to the PCD (Greenville, SC). There you get to drive another M3 around the track and then drive home your BMW. Well worth it especially if you can find a better deal in another state.

I'm in FL and did my last deal through a NJ dealer.

[BavarianFanatic]

Originally Posted by XRAVE

99% of the time buying a car is throwing away money whether or not you lease it or buy it. You can't not confuse equity with profit, it just means that you paid more than it depreciated. Or you put a huge down payment. An example would be putting a 10k down payment. I'm sure I could sell the car the next day and have equity but its because I bought that equity.

Leasing is beautiful because the bank guarantees a residual rate for you, if it falls below that you can still turn it in with no cost, if the car somehow didn't depreciate as much as they expected, you can buy the car at the agreed upon value and sell it yourself for more. Again not a profit, just less cost of use. Also, at least in Florida, you only pay for taxes for the depreciated amount, a huge savings when compared to buying. Yes you can trade your car in but most of the time a dealer isn't going to give you a good value for your car.

When you come to look at these cars you have to say which option is going to cost you less over a given time and has less risk. That being said, there is no downside to leasing an M3 especially if you buy down the money factor making you interest lower than financing. On top of that you have a lot less risk than buying.

Leasing is so great for the customer than banks rarely offer it, that is why BMWFS is the one you lease it from. You used to be able to lease your car from an ordinary bank.

Bottom line, over 3 years you will have paid less leasing.



Whats the MSRP? Also why don't you just get 10k miles, doesn't sound like you drive much.

For starters, you're making really broad statements that really aren't universally true. I'm not going to jump down the rabbit hole, but there's no single "right" answer when it comes to buying vs. leasing. It's all about personal preference, tax situation (capital expenditure vs. operating expense), risk mitigation, etc. BMW very aggressively pushes for leasing because it affords them the ability to generate a ready supply of vehicles they can CPO and sell a second time in addition to getting customers used to the concept of a perpetual car payment when they need to keep replacing cars at lease end.

In my specific case above, I had a zero down lease. I didn't pay a dime at signing. When I refinanced, I had to make-up the difference in taxes as well as add in about $100 per month for the remainder of the term, but that's it. The bottom line is that if I had stuck with the lease, I would have paid $X and turned in the car at the end of the lease with nothing in my pocket. By financing and selling on my own, I was able to retain $Y above and beyond my total outlay for the delta between the lease cost and the finance cost. Put another way, it essentially lowered by net monthly payment over the entire term of ownership by a couple hundred dollars per month.

Granted, this is not necessarily a typical result. I take fanatical care of my cars and I'm careful to configure them so they have a very specific appeal. Dealers tend to see the things enthusiasts seek (manual, RWD, etc.) as negatives, not positives. As a result, there are very few of these "unicorns" on the market. I sold my car for above retail value to someone who traveled thousands of miles to buy it. If you're in a plain vanilla/dime a dozen car this won't work. I'm not expecting a similar result with the M3 since they are specifically an enthusiast car, so the market will be saturated with desirable examples in a few years. I intend to hold onto the car for at least 6 years, maybe longer, maybe not. As a rule of thumb, the value of a financed car tends to break even right around the 30-36 month mark (assuming nothing down).

As I said before, there's no right answer for everyone. Some folks aren't as careful with their cars. Others don't like the "hassle" of selling on their own or haggling over trade-in values. Some folks don't mind perpetual payments while others prefer to keep their cars forever and drive the wheels off of them. Then there are those who wouldn't consider for one second buying all of the depreciation of a brand new car. They migrate toward off lease examples that have barely been used but are still 50% of the original cost.

It's all about personal perspective and preference. I have owned literally dozens of cars over the years, some leased and others financed. Every time I have weighed the pros and cons for the specific vehicle and have stayed on top of the current market along the way. I wasn't actually planning to sell my car and get an M3 just yet (I had 3 years to go on my note), but I could see that the market was hot and the time was right so I jumped on it. Your results may vary of course.

[XRAVE]

Originally Posted by BavarianFanatic

For starters, you're making really broad statements that really aren't universally true. I'm not going to jump down the rabbit hole, but there's no single "right" answer when it comes to buying vs. leasing. It's all about personal preference, tax situation (capital expenditure vs. operating expense), risk mitigation, etc. BMW very aggressively pushes for leasing because it affords them the ability to generate a ready supply of vehicles they can CPO and sell a second time in addition to getting customers used to the concept of a perpetual car payment when they need to keep replacing cars at lease end.

In my specific case above, I had a zero down lease. I didn't pay a dime at signing. When I refinanced, I had to make-up the difference in taxes as well as add in about $100 per month for the remainder of the term, but that's it. The bottom line is that if I had stuck with the lease, I would have paid $X and turned in the car at the end of the lease with nothing in my pocket. By financing and selling on my own, I was able to retain $Y above and beyond my total outlay for the delta between the lease cost and the finance cost. Put another way, it essentially lowered by net monthly payment over the entire term of ownership by a couple hundred dollars per month.

Granted, this is not necessarily a typical result. I take fanatical care of my cars and I'm careful to configure them so they have a very specific appeal. Dealers tend to see the things enthusiasts seek (manual, RWD, etc.) as negatives, not positives. As a result, there are very few of these "unicorns" on the market. I sold my car for above retail value to someone who traveled thousands of miles to buy it. If you're in a plain vanilla/dime a dozen car this won't work. I'm not expecting a similar result with the M3 since they are specifically an enthusiast car, so the market will be saturated with desirable examples in a few years. I intend to hold onto the car for at least 6 years, maybe longer, maybe not. As a rule of thumb, the value of a financed car tends to break even right around the 30-36 month mark (assuming nothing down).

As I said before, there's no right answer for everyone. Some folks aren't as careful with their cars. Others don't like the "hassle" of selling on their own or haggling over trade-in values. Some folks don't mind perpetual payments while others prefer to keep their cars forever and drive the wheels off of them. Then there are those who wouldn't consider for one second buying all of the depreciation of a brand new car. They migrate toward off lease examples that have barely been used but are still 50% of the original cost.

It's all about personal perspective and preference. I have owned literally dozens of cars over the years, some leased and others financed. Every time I have weighed the pros and cons for the specific vehicle and have stayed on top of the current market along the way. I wasn't actually planning to sell my car and get an M3 just yet (I had 3 years to go on my note), but I could see that the market was hot and the time was right so I jumped on it. Your results may vary of course.

I understand where you are coming from but the OP is asking about leasing an M3. Like I said, 99% of the time you will only lose money when you get into a new car.

You gave the example of where you would break even on a finance car between 30-36 months (0 down). Lets say the same car was leased, 0 down. Finance payments are 100-200 more a month so over the same period of time you would have paid less with a lease with mitigated risk. Even as you say someone came from around the world to buy your car, they could do the same with your lease. As soon as you found an interested party you could buy the car outright from BMW and sell it your buyer. I sold my leased 135i which like you say had a very specific appeal. I didn't sell it privately but I sold it to Carmax and got $1000 in equity from a leased car. I could have gotten more selling it myself but I needed out quick and didn't want to deal with it. I was also able to sell this car to Carmax without every paying taxes on 50% of the car.

People are under the impression that a lease brings more cost over time and has more restrictions. My argument is that not only is a lease cheaper over a 36 month period but it gives you more options and less risk. Totaling a car is one example. Yes of course if you lease 2 cars back to back, over 6 years you would have paid more than if you financed 1 car for 6 years but that's apples to oranges.

Even if after the 3 year lease you decide you want to keep it for another 3 years, now you fiance the car for 3 more years at probably a great interest rate and are on the same boat as someone who financed the car from the start.

[BavarianDevil]

I lease because no matter what car I've owned, within 3 years i need something different. I have owned my 2015 M4 since last July and I love the car. However, I couldn't imagine driving it for more then 3 years. I already have the itch to want another car and I have only put 3500 miles on this one since last July.

[BavarianFanatic]

Originally Posted by XRAVE

I understand where you are coming from but the OP is asking about leasing an M3. Like I said, 99% of the time you will only lose money when you get into a new car.

You gave the example of where you would break even on a finance car between 30-36 months (0 down). Lets say the same car was leased, 0 down. Finance payments are 100-200 more a month so over the same period of time you would have paid less with a lease with mitigated risk. Even as you say someone came from around the world to buy your car, they could do the same with your lease. As soon as you found an interested party you could buy the car outright from BMW and sell it your buyer. I sold my leased 135i which like you say had a very specific appeal. I didn't sell it privately but I sold it to Carmax and got $1000 in equity from a leased car. I could have gotten more selling it myself but I needed out quick and didn't want to deal with it. I was also able to sell this car to Carmax without every paying taxes on 50% of the car.

People are under the impression that a lease brings more cost over time and has more restrictions. My argument is that not only is a lease cheaper over a 36 month period but it gives you more options and less risk. Totaling a car is one example. Yes of course if you lease 2 cars back to back, over 6 years you would have paid more than if you financed 1 car for 6 years but that's apples to oranges.

Even if after the 3 year lease you decide you want to keep it for another 3 years, now you fiance the car for 3 more years at probably a great interest rate and are on the same boat as someone who financed the car from the start.

I'm not really looking to start a debate, but it's pointless to argue hypothetical scenarios with fabricated data. I simply shared some of my experiences. Everyone's situation is unique. A lease is little more than the purchase of a predetermined percentage of the total vehicle cost. In theory, you're paying for the amount you'll use over the term. It's still a finance contract with interest. In my state, there is a tax penalty on leases.

[XRAVE]

Originally Posted by BavarianFanatic

I'm not really looking to start a debate, but it's pointless to argue hypothetical scenarios with fabricated data. I simply shared some of my experiences. Everyone's situation is unique. A lease is little more than the purchase of a predetermined percentage of the total vehicle cost. In theory, you're paying for the amount you'll use over the term. It's still a finance contract with interest. In my state, there is a tax penalty on leases.

A debate? We were having an educated conversation in order to help the OP decide on whether leasing or financing was better for him.

Without using hypothetical scenarios we can't illustrate the pros and cons.

[///F80M3]

I didn't have a good experience trying to sell my previous car so I lease from now on. I would rather have two new cars in 6 years than 1 financed car. I drive a lot also so leasing turns out to be better for me.

Some people put low miles or like to keep the car for more than 5 years so financing is better for them.

It's all preference.

[trey100]

I buy my wife's cars as she's very happy to keep them 7 years where as I get the itch (not that itch) every 2 years and spend the next 12 months deciding what I want. The only downsides I see to leasing for someone who is already committed to new cars every three years is:

1. Not all cars have good lease rates. Some cars have very low residuals that are lower than real value at the end of the lease. With a lease you are committing to that low residual.

2. Not all cars have good money factors. So need to take that into consideration.

3. There are fees with leases that in my opinion are just throwaway money. Aquisition, Disposition, Security Deposit, whatever. $1,000 or more is money that is just wasted.

4. If you like to modify cars, you have to undo a lot before turn in.

Overall with BMWs, I feel that leasing makes more sense than not for someone that switches cars often. Residuals are typically good, money factor reasonable, and there are MSDs to help even more. I figure it costs me $1,000-$2,000 more per year to lease than keeping a car long term. To me that is worth it knowing I'm always in a new, warrantied car. Never worry about brakes or anything else. And I get to enjoy looking for my next car. Life is too short.

Oh, and even though I take care of my cars, knowing it's not mine gives me a sense of freedom that I wouldn't have if I bought.