finance vs lease

[aschmidt]

Guys,

Question, probably asked many times - I usually keep my car for 7+ years, putting maybe 12000/year on it, whats the proper way to compare financing vs. lease? I'm getting X5 custom order ~$72k. Thinking to put $20k down. I'd favor owning the cars over leasing. Is it worth putting that much down? Should I consider choice financing?

Thanks in advance.

[Ex_Stig]

There is no financially sound reason to put a down payment on a lease.

[TheIceStormOf06]

Originally Posted by aschmidt

Guys,

Question, probably asked many times - I usually keep my car for 7+ years, putting maybe 12000/year on it, whats the proper way to compare financing vs. lease? I'm getting X5 custom order ~$72k. Thinking to put $20k down. I'd favor owning the cars over leasing. Is it worth putting that much down? Should I consider choice financing?

Thanks in advance.

There are several of these type of question in various threads on this board. However, NEVER put a down payment on a lease. You will lose that if you total it or if it's stolen. Inquire about MSDs (multiple security deposits) as you get that back on lease end. Your in Chicago so leasing is taxed differently. Based on the time you keep your car...72 month, I would purchase. The currently money factors equate to ~3-4% interest rates. You can get 2.19%/72 and have it paid off buy the time your ready for your next car. And have a trade-in worth $25-30k at a minimum. Look at the current values of a 2010 X5 35i with 75-85k miles? Plus you can use $10k to put on a Down Payment. But this is my opinion based on YOUR situation. If you put $10-20 down and keep for 72 months, your payment will be super affordable. Heck, you might even decide to do a 60 month term.

If you have a business or like a new car every 3 years, then lease it. Keep in mind, if you lease now, your lease will expire in time for the new 2019 X5. I'm buying it b/c I never buy BMW 1st or 2nd year model I like the LCIs. Which will be a 2022 model, I'm thinking. But that's just me.

[double_j]

Conventional wisdom says that if you hold your cars for that long, just buy the car (unless you're in a business situation that makes a lease arrangement preferential to a purchase).

Leasing basics and an overall debate of lease vs. finance are topics too complicated to be summarized in an ad hoc forum post. Google it or go to Edmunds/any other car buying site for the basics. Long story short...leases aren't the devil that some people make them out to be, but it's hard for anybody to tell you which is better since everybody's priorities and circumstances are different.

There is one universal piece of info for leases though and that is to put as little money down as possible since you likely wouldn't get much of it back if the car is stolen/totaled (especially early in the lease term). You're better off parking the planned down payment in a bank account somewhere and using it to fund your monthly payment.

[Kzang]

As mentioned above only time you would want to put down money is for multiple security deposits to reduce the Money Factor AKA MF AKA interests on a lease. At the end of the lease that money is returned to you. If you tend to keep the car for 7+ years, it is best to finance the car. If you like to drive a new car every 3 years then lease it. Another option with a lease is that if you like the car after the 3 years is up, you can purchase/finance the residual value of the car, if not then dump it with the dealer and get something different.

One of the most common misconception about a lease is that people "feel" that the car is not theirs and they are just renting it. The truth of the matter is the financed car is not your car either until the last payment is made with the bank. With a lease, after 3 years you have the option to dump it or finance it.

[alphaod]

That length is basically the entire product cycle. Financing is the way to go.

[aschmidt]

Thanks a lot everyone for the invaluable feedback!

[Flying Ace]

they're all terrible options. If you really want to save money and own for 7 years, buy preowned. Just to give you an idea, the anticipated price of a 7 year old $70k X5 is likely going to be $17k-$20k. Average mileage 2011 E70 50i's are currently selling at $22k and there's 1 more year of depreciation left. Obviously with preowned cars, you'll never be immune to depreciation, but you'll at least not eat the years 1-2 deprecation, the steepest part of the depreciation curve. (even at years 3-5 the X5 takes a huge hit based on my current experience with my '12 E70 as I've eaten $5k a year during my ownership so far. Not horrible, but not great either. My M3 only ate $3k a year in my 6 years of ownership)

But that's the price you pay for a custom ordered new car.

Anyways, now that you've made up your mind about buying custom new, finance is probably the best way here, as lease you have to mess with residual/buyout, any "deal" you get with getting a sweet residual is basically thrown away when you decided to keep beyond your lease term and buy out the car. Your lease essentially turns into a finance anyways if you need another loan during lease end. Then it comes down to total interests and fees you paid throughout your lifetime of ownership between a lease and finance option. So it's probably best to at least compare interest rates between the two options.

I know with finance, you have a better shot of reducing your MSRP. In any case, try to reduce your MSRP even on a lease. Don't just focus on monthly payments or down.

[Flying Ace]

Originally Posted by Kzang

As mentioned above only time you would want to put down money is for multiple security deposits to reduce the Money Factor AKA MF AKA interests on a lease. At the end of the lease that money is returned to you. If you tend to keep the car for 7+ years, it is best to finance the car. If you like to drive a new car every 3 years then lease it. Another option with a lease is that if you like the car after the 3 years is up, you can purchase/finance the residual value of the car, if not then dump it with the dealer and get something different.

One of the most common misconception about a lease is that people "feel" that the car is not theirs and they are just renting it. The truth of the matter is the financed car is not your car either until the last payment is made with the bank. With a lease, after 3 years you have the option to dump it or finance it.

Truth. I think most people feel like the lease end date is a dictated term to return your car, whereas a lot of people like to keep an open option to when they want to dump their car. Also, you're at the mercy of the then current market and lease deals when that happens, or you're out of a car. But this just comes down to planning, mostly, but some luck.

Also to add, leasing is not all that terrible. It all comes down to the details of the residual. I've seen some sweet lease deals on EV cars where the residual they allow you is way higher than the likely actual depreciation of the car after 3 years. IMO, in those cases, if you know you don't want to keep a car after 3 years (likely for an EV), then you go for this deal as the dealer is willing to accept a car valued more than what it actually is value upon lease return and you realize this benefit with a lower monthly payment (for EVs, I"ve also seen no down payment often too).