19

For my first car, I bought a Toyota Camry. 3 years later I sold that car and I am leasing a BMW series 3. My lease will expire early next yr and I am thinking getting the X3/X5, do you recommend leasing or buying?

Personally by far I think the leasing option is a scheme. Of course the dealer/manufacturer will want you to change cars every 3 yrs so they can make more $$. Each time I walk into a dealership the sales will always eventually try to talk me into a lease. I think it must be that they know this is the scheme or even they have been brainwashed. They have every reason/excuse for you to do a lease.

The reason I don't like the lease is if you just lease a car for life you will end up paying for a car for the rest of your life. You can never pay off a car that way. I understand that by the time when my lease ends, I have the option to buy it, but now I have realized that the car value is way under the payoff quote, even given the condition is great and it only has 15k miles on it. Thoughts?

  • 15
    It's not the case that leasing is a "scheme". It just isn't for everyone. Especially if you're not a business. But even if you're not, there are times when it is right for a person, and times when it isn't . If it doesn't apply to you, though, that doesn't make it a "scheme". (And, if the dealership wants to "talk you into" a lease, and you don't like that: Choose a different dealer. They're not hard to find.) – davidbak Jun 14 '16 at 23:05
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    Should've kept the Camry ;-) – BrenBarn Jun 15 '16 at 6:17
  • 3
    Something I managed to negotiate into my contract for lease is to get a return for every miles not used at the end of the contract. They charge you for every mile above your 20k/yr, so if you can manage to get them to give you some money back on your next lease, it may tip the scale over in some cases. – Yousend Jun 15 '16 at 12:43
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    Leasing is too a scheme. It is a way to trick you into getting onto and staying on the car payment treadmill. It disguises the costs of getting a new vehicle every 2-4 years by seeming to have a low monthly payment, which is only low because you end up with nothing at the end (as compared to a loan). It has all the information-hiding drawbacks of being "four boxes" (car salesman techinique) plus some more of its own. There are exceptions where it may be better or at least equivalent to lease, but not for the average consumer. – stannius Jun 15 '16 at 20:34
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    He is getting a new car 2-4 years either way. If you go through cars that fast might as well lease. – Ross Jun 15 '16 at 20:51
25

I have a few recommendations/comments:

  1. Consider keeping your current car. The buyout amount for your lease is often negotiable. Tell the dealer you are NOT going to be leasing or buying a new car from them, but you are interested in buying out your BMW if they are willing to negotiate on the buyout amount. They will say, "no deals" and then you schedule to turn in your car. After a few days, they might call you back (it happened to me) and offer a lower price for you to keep your own car. Even if they don't call you back, you can call them one more time the day before you turn it and say, "last chance for a deal or I turn it in!" If they won't deal, turn it in.

The trick here is to make it clear to the dealer that you will not be getting a new car from them and their only hope of making some money is to sell you your own car. You need to be prepared to walk away and follow through. DON'T buy a new car from them even if you end up turning it in! They could still come back a day later and offer a deal.

  1. If you can't or don't want to keep your current car, after turning it in, look for a used/pre-owned BMW X3 (or whatever) that is just a few years old. You'll be able to find a late model year BMW very easily. BUY it! Don't lease it. You'll still make payments, but you'll save a lot of money because when you pay off the loan the car will be yours.

Leasing a new car every 3 years is not the best use of money. You have to really, really like that new car feeling every three years and be willing to pay a premium for it. If you're a car nut (like me) and want to spend money on a luxury car, it's far wiser to purchase a slightly used luxury vehicle, keep it for 8+ years, and that way you won't have a car payment half the time!

  • 9
    You can spend a hundred bucks at a professional detailing company and give the car a new car feel. It is WAY more economical that way. I heard you can also buy a new car scent spray for couple bucks, if that's really what you're after. – Nelson Jun 15 '16 at 2:14
  • Any car can be used for 8+ years, it doesn't have to be a luxury car. My family had a 18 years old Galaxy with more than half a million kilometers and it was still usable. – Bakuriu Jun 15 '16 at 13:38
  • I currently own a car with a potentially deadly airbag and no idea when a replacement will arrive. Kind of wish it was a lease at this point. My experience is that the monthly payment on a few year-old used car is more than the lease payment on a comparable new car. Depending on your financial situation, it's not always a better idea to tie a lot of money up in a car and if the car turns out to be a bad choice, you get to walk away. I've had leases where the effective cost was 1% which was far lower than what the loan rate would have been. – JimmyJames Jun 15 '16 at 16:11
  • For those of us that really, really like cars and get a lot of joy from a luxury vehicle, buying a late model year user luxury car every ~8 years or so is a decent compromise and a way to fulfill our silly desires without foolishly buying or leasing brand new cars every few years. True, it's not for everyone and you'll save far more money if you look at a car as transportation and nothing else. I just can't do that. – Rocky Jun 15 '16 at 16:34
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    @Bakuriu instead of "nearly half a million km" say "drove the equivalent of more than 12 laps around Earth Equator". More awesomeness. – Mindwin Jun 15 '16 at 17:31
6

If you lease a car, you are paying for the depreciation of a certain number of miles, even if you don't actually use those miles. Since you know you will be well under the standard number of miles when your lease is up, and you already know that you want to keep the car, buying is better than leasing.

5

Alternative: buy a recent-model used car in good condition. Or buy an older car in good condition. Let someone else pay the heavy depreciation that happens the moment you drive a new car off the dealer's lot.

3

Which to do is determined by how you like to consume cars. If you don't drive a lot and like to get a new car every 2-3 years, leasing is often the better choice.

If you drive a lot or want to keep a car longer than 3 years, you're normally better buying.

  • It doesn't matter whether you drive a lot or not. If you need a new car every two or three years, leasing is always the safe choice, because you know beforehand how much you pay every month, and you don't have to care about the used car market. If you drive your car until repair isn't worthwhile anymore, it's always the economic choice to buy a leasing return. Only if you want (not need!) a new car every two or three years, the economic choice may be to buy a new car, put it up for sale after two years, and when it is bought at the price you want, you can get a new one. – Alexander Jun 15 '16 at 2:52
2

Leasing is not exactly a scam, but it doesn't seem to be the right product for you. The point of leasing over buying is that it turns the capital purchase of a car which needs to be depreciated for tax purposes into what is effectively a rental expense. Rent is an expense that can be deducted directly without depreciation.

If you are not operating a business where you can take advantage of leasing's tax advantages, leasing is probably not for you. Because of the tax advantages, a lease can be more profitable for the car dealer. They can get a commission or finder's fee on the lease as well as the commission on the car sale. That extra profit comes from somewhere, presumably from you. If a business, you can then pass part of that to the government. As an individual, you lose that advantage.

At this point, the best financial decision that you could make would be to buy out the lease on your current car. Lease prices are set based on the assumption that the car will have been abused during the course of the lease. If you are driving the car less than expected, its value is probably higher than the cost of buying out the lease. If you buy that car, you can drive it for years. Save up some money and buy your next car for cash rather than using financing.

Of course, if you really want a new car and can afford it, you may not want to buy out the lease. That is of course your decision. You don't have to maximize your current financial position if buying a new car would return more satisfaction for the money in the long run. I would try to avoid financing for what is essentially a pleasure purchase though.

  • 1
    The reason I think it's a scam is cuz I have tried talking to a few diff dealers and at the end they always tried to talk me into a lease. I made my point cleared that I would like to keep the car for a while. They would ask such questions "how do u know u'll keep it for long? you sold your camry w/i 3 yrs" "monthly pmt will be lower for a lease", They really try to come up with all sort of reasons for me given that I told them already I would like to buy. Only reason I can think of is they get incentives when ppl do a lease, that way they can make more since u have to change car every 3 yrs – livedonkey Jun 15 '16 at 15:29
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    @livedonkey: There's a subtle-but-important difference between leasing being a scam and someone pushing you to sign a lease because they get some incentive for getting you to do it. – Blrfl Jun 15 '16 at 17:16
  • Agreed. I think there's also a subtle difference b/t a scam and a scheme. I was emphasizing that I believe this is a scheme in my OP, not sure why I used scam later. But anyway, if I were to create a scheme, I would make it as natural as possible. On a point, I think this might be a scheme on the dealer side or manufacturer, they just need to pay the sales more incentives if the sales get clients into a lease. This way, they sell more car because ppl have to switch every 3 yrs. – livedonkey Jun 15 '16 at 18:24
  • I don't think they assume the vehicle will be abused. They may use a conservative residual value because it is more profitable and less risky for the lessor. But if the lessee does use (drive more miles than allotted) and/or abuse (damage) the vehicle, the lessor will attempt to charge fees and penalties to the lessee to make up for it. – stannius Jun 15 '16 at 21:35
1

I usually recommend along these lines.

If you are going to drive the same car for many years, then buy. Your almost always better to buy, and then drive a car for 10 years than to lease and replace it every 2 years.

If you want a new car every two years then lease. You're usually better off leasing if you're going to replace the car before the auto loan is paid off or shortly there after. Also you can get "more car" for the same monthly money via leasing.

I honestly would advise you to either buy out your lease, or buy a barely used car. Then drive it for as long as you can. Take the extra money you would spend and spend it on an awesome vacation or something.

Also, if you're only driving 15 miles a day, then get a cheap, but solid car. Again, just my advice.

-5

Cars depreciate and lose value the second you drive off the lot. Why lose money?

Foreign cars require too much maintenance. What will kill your wallet will be the maintenance on the car, not the payment.

Think tires, oil changes, spark plug changes, transmission oil changes, filter changes, brake changes, cost of maintaining is the expensive part. Call the dealer speak to the servicing dept, and go to town. Ask away what all this costs. Basic stuff you expect to have, and find out what the cost of owning that car. Then ask yourself, "should I buy it?".

  • So you want to say that leasing is the way to go, because routine maintenance is already paid for by the monthly payment, right? – Alexander Jun 15 '16 at 3:01
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    No be smart. You want to own a luxury car, and mostikely you live at home with parents or with friends. You most likely don't own a house that will appreciate in value, or that you can write off at the end of the year. Look, you want to be ghetto rich, have the car but park it at mom's, regardless if it's a lease or a purchase; make your investment worthwhile. Try to qualify for a house instead. If your ready to throw away 800 a month for a car, then you should quality to buy a house. Don't be ghetto rich. Rich in cars, high in debt, rims + sound system but no place to park to call it your own – Laythesmack Jun 15 '16 at 7:23
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    "foreign cars require too much maintenance"?! So the amount of maintenance a car requires depends on where I live? A BMW bought in Germany requires less maintenance than one bought in France? – podiluska Jun 15 '16 at 9:10
  • @podiluska, A BMW in Germany costs a lot less to maintain at a main dealer then a BMW in the UK. – Ian Jun 15 '16 at 11:46
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    @Ian But it doesn't "require" any more or less maintenance. What about a Nissan built in Sunderland? Is that "foreign" or not, in the context of its servicing requirement? – podiluska Jun 15 '16 at 14:16

protected by Chris W. Rea Mar 16 '17 at 1:51

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