Endless lease vs buy debate (Tow area)

[jaydee172]

why would you want to lease? they need to abolish that option. either buy the car or come back w/ more money. if you can't afford a bmw, then dont get one.

[mryakan]

why would you want to lease? they need to abolish that option. either buy the car or come back w/ more money. if you can't afford a bmw, then dont get one.

This gets my vote for most ignorant vote of the century.

EDIT: However this presented an opportunity for me to put this as a placeholder thread for all the lease vs buy debates that pollute other threads.
You want to bash leases, defend them or just make ignorant comments for or against buying/leasing, you should post here or you will be towed here.

Have fun.

[3forme]

Agreed Mryakan. Leasing is like any other financial decision. You run the #s for lease, buy new or buy used vs. your utility for having the specific vehicle and the cash maximizing alternatives. Period.

Those of you who have some sort of visceral reaction to the above need to examine your motivations for owning this perfection of automotive excellence in the first place. It's not a club. It's a Religion.

Elitism has no place other than to judge those who own but cannot drive vs. how they decide to acquire.

Peace!

[chaz13]

why would you want to lease? they need to abolish that option. either buy the car or come back w/ more money. if you can't afford a bmw, then dont get one.

Some people own their own business like myself and get tax advantages by leasing. Not to mention cars are depreciating assets so why not just pay for what you are going to use instead of building equity in a depreciating asset? Owning is fine if you expect to keep the car a long time. If you like to have a new car every 3 years or so and don't want to worry about paying for repairs or service, leasing is ideal. If you expect to always have a car payment, which I would say most do, then pay for the amount of car you will use not the whole thing so you can get ripped off when you trade it in. Learn a little more about what you are talking about before you make uninformed statements. "It's better to keep your mouth shut and be thought a fool than to open it and remove all doubt" Mark Twain

[Sailvi767]

Keep one thing in mind on any lease. You should always run the numbers between leasing and buying. Don't go in set on one of the other. In general Dealers make a far larger profit on leases. That means the consumer pays more by leasing a car. There are exceptions to everything. Some like the ease of a lease even if it costs them more in the end. I run the lease verses purchase numbers on every vehicle I get. So far for me leasing has always been far more expensive. If you have a tax writeoff from a lease that might make a difference.

[PeterC4]

.... If you have a tax writeoff from a lease that might make a difference.

Not really. You can depreciate a car you own for tax purposes when applicable.

[Beer Goggles]

Leasing IS buy AND SELLING the car on the same day. Less money out, and if you don't keep cars long...why take the hit.

I'm guessing the original poster doesn't own it, and doesn't know what daddy did for his.

[chaz13]

Not really. You can depreciate a car you own for tax purposes when applicable.

Yeah I have done that but after 3 years you can only depreciate $1700 per year which is ridiculous. The first 3 years are around 4-6k then it drops way down and it would take forever to fully depreciate. So this time I am leasing and I can write off the entire payment.

[PeterC4]

Yeah I have done that but after 3 years you can only depreciate $1700 per year which is ridiculous. The first 3 years are around 4-6k then it drops way down and it would take forever to fully depreciate. So this time I am leasing and I can write off the entire payment.

Well, that not quite right either. You can also deduct financing charges on a car you own for business purposes.

[ukthunderace]

why would you want to lease? they need to abolish that option. either buy the car or come back w/ more money. if you can't afford a bmw, then dont get one.

While I really don't understand the whole lease mentality (it just seems like throwing money away to me), you, jaydee, sound like a snob who thinks because he can afford something, he is in another class of people. Don't fool yourself, you're just as much a prick as the rest of the people at the country club.

[Jhunter]

Yeah I have done that but after 3 years you can only depreciate $1700 per year which is ridiculous. The first 3 years are around 4-6k then it drops way down and it would take forever to fully depreciate. So this time I am leasing and I can write off the entire payment.

Actually the luxury auto depreciation limits are:

Year 1 $3,060
Year 2 $4,900
Year 3 $2,850
After $1,775

If you deduct a lease payment, then you must include a "lease inclusion amount" in income. On a $50,000 car, they are:

Year 1 $241
Year 2 $528
Year 3 $786
Year 4 $942
Year 5 $1,087

In either case you can only take deductions to the extent of your business use (commuting is not business use). If you deduct the entire cost, you must include a taxable fringe benefit amount in income for your personal use that is calculated by a formula.

In my experience there is some initial tax advantage to leasing but it is only a timing issue and not significant enough to drive the lease versus buy decision.

[Jhunter]

While I really don't understand the whole lease mentality (it just seems like throwing money away to me), you, jaydee, sound like a snob who thinks because he can afford something, he is in another class of people. Don't fool yourself, you're just as much a prick as the rest of the people at the country club.

Do we have class envy issues?

Leasing is not a mentality, it is a form of financing, nothing more. I have yet to see any explanation on the "throwing money away" that make sense.

Lets say you want a car for three years.

You can get a 3 year loan and pay $900 a month for 36 months. You then sell or trade the car. You paid a total of $32,400 and get $14,400 for the car. You are out of pocket $18,000 over the three years.

Or you lease the car for 36 months at $500 per month for a total of $18,000.

Under both you are out of pocket the same amount. In real life you look at your wants and needs and the cost of a lease versus financing. I have calculated a number of deals, sometimes a loan is a better deal, sometimes a lease is a better deal. There are also intangible factors and opportunity costs that play in.

[mryakan]

While I really don't understand the whole lease mentality (it just seems like throwing money away to me)

In a world with interest free loans and 0 depreciation that may hold true, but that world doesn't exist for autos. Research Total Cost of Ownership and then compare the TCO using a lease or traditional finance option and you'll understand why it is not throwing money away. Not to mention that the additional $$ you save on a monthly basis can theoretically be invested to generate a reasonable ROI that would be lost if that money was going to the bank in the case of higher payments with traditional financing. The math may not always work to the advantage of a lease, it all depends on the MF and residual and then the actual depreciation of the car at lease maturity, but it seems in the case of BMW (esp. 3 series) a lease is pretty close to a buy in terms of TCO. And then there is that monthly $$ amount saved...
You don't need tax savings for a lease to make sense. Some people make car buying decisions based on emotion, i.e. if I use traditional financing, I own the car, well you don't the bank does and if you don't believe me, try to skip 2 payments in a row and see if the car stays in your driveway. Yeah you will own it once you pay off the bank, but not many people keep their cars that long and also even with a lease you can sometimes buy and keep the car when the residual is in your favor. I bought my previous e36 after my lease ended and had I decided to sell it right away, I'd have made at least a couple of grand. In the end, my TCO for leasing was better or almost the same as financing, but I didn't have to make double the monthly payments. Additional compound interest paid to banks is real throwing money away.

[ukthunderace]

mryakan,
good explanation. I have always bought cars cash (not usually new...I save that money for my motorcycles), so I didn't really take into account the interest. Surely with the US economy in a slump and rates falling so far, it would be more advantageous to buy right now, right? Unless your credit rating is bad and you can't get the lower rates that is.

[mryakan]

mryakan,
good explanation. I have always bought cars cash (not usually new...I save that money for my motorcycles), so I didn't really take into account the interest. Surely with the US economy in a slump and rates falling so far, it would be more advantageous to buy right now, right? Unless your credit rating is bad and you can't get the lower rates that is.

It is nice to be able to buy cars cash, but sometimes it may not be the best financial decision to put that much cash into a depreciating asset (it is nice thought to own something outright). The money is probably better off being invested in something that has an ROI higher than what you are paying in interest or lease cost to finance/lease your car. If you like to own stuff outright and not have to bother with payments and interest and such, that is not a bad thing, but you may be paying some premium to have that luxury. I am not against that, it makes sense to some people. But leasing also offers one more benefit people usually forget, it shields you from the unforeseen risk of a car being problematic. Since while in a lease the car is usually under warranty, shall many problems arise with the car while you are leasing it, you can return it at lease end with 0 effect on your pocket. In a finance or buy situation, if you decide to get rid of the problematic car, you will most likely have to take a hit for that because a car with problems will get you less $$. So in a way, the lease has a built in protection of some sort.

[Jhunter]

mryakan,
good explanation. I have always bought cars cash (not usually new...I save that money for my motorcycles), so I didn't really take into account the interest. Surely with the US economy in a slump and rates falling so far, it would be more advantageous to buy right now, right? Unless your credit rating is bad and you can't get the lower rates that is.

Lease money factor rates just like loan interest rates are based on the market (unless the manufacturer lowers them below market to sell more cars) so if interest rates in general are declining, lease money factors will decline also.

[Beer Goggles]

Lease money factor rates just like loan interest rates are based on the market (unless the manufacturer lowers them below market to sell more cars) so if interest rates in general are declining, lease money factors will decline also.

BMW smartly leases through their financial so they inflate residuals to get the rates lower. This also keep resale high for all BMW owners since the ones on the lot aren't going to be sold at a loss.

If you don't understand leasing (not you hunter) or why it's good to do...don't comment.

[E92!Dreier]

Some people own their own business like myself and get tax advantages by leasing. Not to mention cars are depreciating assets so why not just pay for what you are going to use instead of building equity in a depreciating asset? Owning is fine if you expect to keep the car a long time. If you like to have a new car every 3 years or so and don't want to worry about paying for repairs or service, leasing is ideal. If you expect to always have a car payment, which I would say most do, then pay for the amount of car you will use not the whole thing so you can get ripped off when you trade it in. Learn a little more about what you are talking about before you make uninformed statements. "It's better to keep your mouth shut and be thought a fool than to open it and remove all doubt" Mark Twain

Well said sir!

[PeterC4]

It's interesting to see that this debate will never end. I think it boils down to this. Tax is generally neutral, all things being equal. There are 2 types of lessees. The first uses a lease it to drive an automobile he/she can't really afford and the opportunity cost of money translates into a more meaningful diminution in his/her standard of living in the future. (I think that's just a feature of the North American population). The second uses a lease because they can't be bothered using the cash to buy a car, and they want a new car all the time. They may also have a better use/need for the cash and want to maximize their ROI.

One thing that is common to most leases.... the residual risk is minimized. The other thing that is common is that low lease rates take the place of a discounted MSRP.

People that use cash, usually have a lot of it, are a smaller and an increasingly smaller part of the car buying population, want the flexibility to buy and sell cars when they want, and if they are in a situation where they have to curtail spending don't want to worry about a car payment or the implications of having to dump it. Mind you, people that have cash won't usually get into trouble anyway. When you think about it, a well equipped 3 series is about 45k to 50k with taxes, and add about 8k to that for Canadians. Let's face it, the fact of the matter is, most people don't have that discretionary money lying around. And for those that do, like investment bankers who's income moves around a lot, they use cash when they have it.

[greenie99]

why would you want to lease? they need to abolish that option. either buy the car or come back w/ more money. if you can't afford a bmw, then dont get one.

If you are too young and ignorant to understand financing, leave and come back when you do!!!

[PeterC4]

If you are too young and ignorant to understand financing, leave and come back when you do!!!

LOL...mind you Greenie, even the old guys don't always understand financing!

[JunkStory]

why would you want to lease? they need to abolish that option. either buy the car or come back w/ more money. if you can't afford a bmw, then dont get one.

Probably more than 50% of people who drive new luxury cars (BMW, MB, Audi, Lexus) lease them. If you lease, you get to update your car every few years, and you don't have to deal with the maintenance crap after the warranty is up. There are also other benefits too, as explained above. I assume that you are still in high school and/or have no knowledge in how the world runs.

[PeterC4]

Probably more than 50% of people who drive new luxury cars (BMW, MB, Audi, Lexus) lease them. If you lease, you get to update your car every few years, and you don't have to deal with the maintenance crap after the warranty is up. There are also other benefits too, as explained above. I assume that you are still in high school and/or have no knowledge in how the world runs.

Realistically, a good portion of the 50% of the people leasing those new luxury cars can't really afford to pay cash. If you earn $200,000 a year that's about $132,000 after US Fed taxes (we'll leave the slightly higher taxed Canadians out of it for now). Assuming no state taxes, and forgetting about other taxes, a $60,000 car is almost half your after-tax income. So people lease. Leasing reduces up-front costs, let's people turn over their cars more often, and gets consumers into perpetual monthly payments, likely for the rest of their working lives....it's North American consumerism at its finest!

[ukthunderace]

BMW smartly leases through their financial so they inflate residuals to get the rates lower. This also keep resale high for all BMW owners since the ones on the lot aren't going to be sold at a loss.

If you don't understand leasing (not you hunter) or why it's good to do...don't comment.

Uhhh, piss off This is a discussion thread, and it is not up to you to dictate who will and will not post.

[PeterC4]

BMW smartly leases through their financial so they inflate residuals to get the rates lower. This also keep resale high for all BMW owners since the ones on the lot aren't going to be sold at a loss.

If you don't understand leasing (not you hunter) or why it's good to do...don't comment.

That residual/high resale argument doesn't always work either. Since the Canadian dollar has gone to parity, most residual values in Canada have fallen by signficant amounts because you can cross the border and get a cheaper car. With the onset of a recession in the US, it will be interesting to see how BMW does with all their used cars off lease.