03-14-2014, 09:14 PM | #1 |
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My Calculations on Cost of Ownership Lease vs. Finance
Please check my work, but it seems clear to me that I'll be better off Financing than Leasing assuming the current 36 month offer and purchase at MSRP. Of course the big unknown is what a 36,000 mile 3 year-old version of the car I'm ordering would be worth.
Lease Option: For me the pro of the lease option is simple. I have a known value on what the car will be worth when it's time to turn the car in. I also tend to stress less about an accident. The big con of course is the rental argument with limits on mileage. MSRP: $65,950 Residual Percentage at 12,000 Miles: 57% Residual Value: $37,591.50 Percent off MSRP: 0.00% Negotiated Price: $65,950 Down Payment: $0 Net Cap Cost (Neg. Price – Down Payment): $65,950 Depreciation: $28,358.50 Lease Term: 36 Months Monthly Depreciation Payment: $787.74 Finance Cost = Net Cap Cost + Residual: 103,541.50 Interest Rate (APR): .00130 X 2400 = 1.944% Money Factor: 0.00081 Monthly Finance Fee: $83.87 Monthly Payment: $871.61 Sales Tax: 6%: $52.30 Total Monthly Payment: $923.91 7 MSD: $950 X 7 = $6,650 Title, Registration, and Other Fees: ~$1,000 Incentives/Rebates: $0 (Assuming there are none.) Drive-off (1st month’s payment + Fees + Maximum MSD): $8,573.91 3 Year Cost of Ownership: $1,000 + $33,260.76 = $34,260.76 Finance Option: The big pro to financing is open ended options. I can sell it when I want and drive it when I want. I take such good car of my cars that I never have a hard time selling them when I'm done. I can also reduce the cost of ownership on the next vehicle by trading the car and saving the future sales tax. 36,000 Miles 2.19% APR 72 Month Loan Purchase Price: $65,950 MSRP Tax: $4,017 Title, Registration, and Other Fees: ~$1,000 Total: $70,967 Monthly Payment: $1,052.73 including Tax Payments Made: $37,898.28 Remaining Lien: $36,647.65 after 3 Years Sale Price Estimate: $45,000 Net Positive Cash Flow After Sale: $45,000 - $36,647.65 = $8,352.35 Total Cash Outlay After 3 Years: $37,898.28 - $8352.35 = $29,645.93 Last edited by Money2536; 03-15-2014 at 02:41 PM.. |
03-14-2014, 09:21 PM | #3 |
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03-14-2014, 09:34 PM | #5 |
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My guess is that the lease residual values will rise sometime after launch. 57% residual is pretty painful, and I would love to pick up a low miles M3 in 3 years for $38K. The one thing to factor in is that the lease residuals probably compare well to the low trade in value, with no hassles.
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03-14-2014, 10:00 PM | #6 | |
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03-15-2014, 11:13 AM | #8 | |
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If you only want to keep it for 3 years, your total cost of ownership (cash on cash) may be better with a lease. The OP's example only makes financing work better because he assumes equity in the financing scenario vs. no equity that he could realize in the lease. Residual vs. expected market, money factor vs. interest rate, tolerance for uncertainty, miles driven per year, etc. all come into play. If you intend to keep a car long term, financing (or paying cash assuming your cost of funds exceeds your expected rate of return on the funds) is generally the way to go. I know there are people that would "never lease" or "never finance", but I've done both and fall into the depends on circumstances camp. |
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03-15-2014, 02:37 PM | #9 | |
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03-15-2014, 02:39 PM | #10 | |
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Also, I bought a similarly optioned/priced E92 M3 in 2011 and traded it after 15,000 miles for $48,500. I'm thinking my $45,000 assumption is a bit optimistic. |
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03-15-2014, 02:41 PM | #11 |
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03-15-2014, 03:54 PM | #12 |
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I see no way for the 3 year old M3/4 with 36K miles to retail for less than $42-45K
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03-15-2014, 06:38 PM | #13 |
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03-15-2014, 11:15 PM | #14 | |
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Maybe if the F80 was NOT a brand new platform would it make sense to finance (maybe). But the first year? Heck no, lease that sucker. |
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03-16-2014, 03:14 AM | #15 |
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Leasing is still less expensive. You forgot that you get your MSDs back at the end. Or did you already factor it in?
Also what about BMW Select? I've decided I'm going that route after doing plenty of these types of calculations. I really wanted to lease then buyout at the end of the lease so I can upgrade to an LCI model in 3/4 years specially If I can get invoice ED and Frozen color for ~$3,600. But I would much rather enjoy this M4 as if I will ride it to the wheels fall off and not worry about resale value as much at this point. Plus residuals suck right now
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03-19-2014, 11:17 AM | #18 | |
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http://www.bmwconfig.com/post/2011/0...nvestment.aspx Last edited by Money2536; 03-19-2014 at 11:27 AM.. |
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03-19-2014, 11:25 AM | #19 | |
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03-19-2014, 11:44 AM | #20 |
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FYI this is what BMW Select numbers look like using $65,950 price tag, 3.5 years seems like the sweet spot to resell the car here
Please let me know if corrections need to be made At the end of 36 months money put into the car= $29064 Amount still owed on the car= $42,429 Profit if car sold at $45K= $2,571 At the end of 42 months money put into the car= $33,780 Amount still owed= $37,713 Profit if car sold at $45K=$7,287
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03-20-2014, 12:42 PM | #21 |
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Do you own a business? If so, then leasing is the only way to go for tax reasons.
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04-03-2014, 06:05 PM | #22 | |
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