[crbalch]

Hey guys,

I am VERY new to leasing, so when searching through threads I have no idea what the money factor is, what the residual is, etc etc. Wanted to get some input on my specific sale price, as well as my trade in, etc. and what makes most sense in terms of leasing or buying.

I ordered a 2016 M235xi and the sale price is 48,640. They are giving me 25,000 for my trade in for which I owe no money on, and I will also have a 1000 BMW drive event credit when it comes time to take delivery of the car.

I have already ordered the car, and it will be here in the next three weeks I'd say.

I have done the math regarding financing to own the vehicle, and with my 25k trade in, as well as 9.5% Chicago tax, and 2.8k down, I am looking at financing 23k. This would be a 60 month note at 1.9%, so around $400/mo.

Now, can someone explain why leasing may be better or worse in this situation, what kind of monthly payment I would be looking at, etc?

I do not drive a lot (17k miles on my 4 yr old 135i for instance)

Any input is appreciated!

[wuyu91410]

If you do not drive a lot, you can finance it. Cause when you choose leasing, the lowest miles per year is 10,000 miles, and then the residual value might be 59%. However, if you drive your new M235i for 3 years, you may just hit 10k miles. Then the car has a more residual value.

[BEM-S4]

You'll get f*cked on the lease with IL tax laws. There's some other owner choice thing that's a fake purchase / lease hybrid used to cheat on the taxes. Ask your sales advisor about it. Unlike most other states where you pay tax on portion that's not in the residual, IL you pay the whole thing.

[crbalch]

Originally Posted by BEM-S4

You'll get f*cked on the lease with IL tax laws. There's some other owner choice thing that's a fake purchase / lease hybrid used to cheat on the taxes. Ask your sales advisor about it. Unlike most other states where you pay tax on portion that's not in the residual, IL you pay the whole thing.

Good point

[crbalch]

Anyone else have any input? Still not sure what to do here really

[DS_BMW]

I would buy it with that much money down from the trade. Or get the cash from the trade and put it in an account and pay the lease with it auto deduction. It would almost be like its paid for without having to worry about the payment.

[crbalch]

Originally Posted by DS_BMW

I would buy it with that much money down from the trade.

Probably makes most sense...I keep low miles on my cars so I can always sell down the road without losing much money, but retain that equity.

[DS_BMW]

Originally Posted by crbalch

Probably makes most sense...I keep low miles on my cars so I can always sell down the road without losing much money, but retain that equity.

Edited my post

[DS_BMW]

Plus what's nice with a lease is if anything happens to the car your not losing money because of an accident or anything as it goes back to BMW free and clear.

[crbalch]

Originally Posted by DS_BMW

Plus what's nice with a lease is if anything happens to the car your not losing money because of an accident or anything as it goes back to BMW free and clear.

I just feel like the problem with a lease is that once I start leasing, it would be hard to buy later on down the road. I would have no equity to show for it later on, therefore I will have to finance the full amount versus using what I've already paid over the years as essentially a down payment (the trade in value). Is that the correct way of thinking about it?

[DS_BMW]

Originally Posted by crbalch

I just feel like the problem with a lease is that once I start leasing, it would be hard to buy later on down the road. I would have no equity to show for it later on, therefore I will have to finance the full amount versus using what I've already paid over the years as essentially a down payment (the trade in value). Is that the correct way of thinking about it?

Yeah I would say if you want to keep the car longer than 3 years I would finance it upfront.

[crbalch]

Originally Posted by DS_BMW

Yeah I would say if you want to keep the car longer than 3 years I would finance it upfront.

Think thats the right move also, 3 years flies by anyway, I feel like I would want to keep it longer haha

[Cyberdemon]

You can not and should not lease if you are trading in your car.

Firstly, you may not even be able to with that large of a down payment. Your residual value is almost as much as your trade in which means your lease payment would be basically nothing because all of the equity is in the down payment.

Secondly, any down payment made when leasing is lost if something happens to the car. If the car is written off even with gap insurance you are most likely losing most of if not all that money. I had this happen to friends during Hurricane Sandy - they lost thousands that they had put into down payment on cars that were only months old. They were able to recover the overpaid sales tax, but that was it.

If you think you want to lease, then you either need to have the dealer cut you a check or sell it privately. Put the money in the bank and use it to pay off the car one month at a time while accruing some small amount of interest.

Based on what you've described (low mileage and want flexibility) I would finance. You will be above water on the loan should you decide to sell the car at any point, and if you drive low miles then if you want to sell in 2 years or 4 years it will be much easier.

[crbalch]

Originally Posted by Cyberdemon

You can not and should not lease if you are trading in your car.

Firstly, you may not even be able to with that large of a down payment. Your residual value is almost as much as your trade in which means your lease payment would be basically nothing because all of the equity is in the down payment.

Secondly, any down payment made when leasing is lost if something happens to the car. If the car is written off even with gap insurance you are most likely losing most of if not all that money. I had this happen to friends during Hurricane Sandy - they lost thousands that they had put into down payment on cars that were only months old. They were able to recover the overpaid sales tax, but that was it.

If you think you want to lease, then you either need to have the dealer cut you a check or sell it privately. Put the money in the bank and use it to pay off the car one month at a time while accruing some small amount of interest.

Based on what you've described (low mileage and want flexibility) I would finance. You will be above water on the loan should you decide to sell the car at any point, and if you drive low miles then if you want to sell in 2 years or 4 years it will be much easier.

Yeah I would definitely be getting a check from the dealer if I was to go the lease route. I think it makes most sense to finance at this point. Appreciate the input!

[krhodes1]

I think leasing only really makes sense financially most of the time in two scenarios:

1. You can write off the lease as a business expense.

2. The auto maker is subsidizing the lease to a crazy extent. This definitely happens with BMWs occasionally, but it is very much NOT the case with the 2-series currently. VW is currently doing this to move Jettas - buddy of mine just got one for $99/mo with next to nothing upfront. Should have been more like $150-170.

In your case with $25K of equity in your trade, I don't really understand why you would even want to lease. You are very correct, it becomes a treadmill.

Especially as a really low-mileage driver, leasing just doesn't make sense. You are paying for a bunch of miles you won't use. And it sounds like IL is the same as my state of Maine - you get screwed on the sales tax. In Maine you also pay the full tax upfront, and then if you buyout the lease you get to pay the full tax on the buyout too!

Now if the darned thing would just get here - it got to the port in NJ a week ago! My last one made it from boat to Maine over a weekend! They are killing me...

[crbalch]

Originally Posted by hurleymlh

The fact that he has a trade in has absolutely nothing at all to do with the lease. I am not sure why people keep referencing your trade in when you already said that you were just going to have the dealership cut you a check for that. They are 2 completely separate transactions as long as he doesnt use that money as a cap reduction which it doesnt sound like he is doing. That being said - as long as you keep the transactions separate it really doesn't matter if you are trading or not.

As far as leasing vs buying - What you need to figure out is what makes more sense for you. How long do you want to keep the car? Do you want to worry about maintenance after the term is up etc. Right now the residuals arent the greatest on 2016s. Ideally you would want them northward of 60% and right now they are between 55-60 depending on mileage allowance etc. So it really isnt optimal time for leasing.

Some of the responses above sound like they are from people not very familiar with leasing or how it is structured. Leasing makes perfect sense for a lot more than business write offs especially if you understand how it works and if the residuals and money factors are aggressive.

Right, the trade in has zero affect on my decision. I certainly drive well under 10k miles a year, so to another posters point I would be wasting miles and paying for them. I can't write it off because I usually just do a simple tax return and don't itemize enough to move past the standard deduction for it to make sense. I especially couldn't based on the fact that I don't have my own business.

Looks like the residual for my car would be 57% with between .0013 and .0015 MF. I think my best bet at this point is just to finance the remainder after my trade.

edit: another huge factor is the tax law for leasing in IL...as others point out I'd be on the hook for the full amount when leasing unless I used the loophole. Not worth it for me

[ORIGIN M.]

Originally Posted by crbalch

Anyone else have any input? Still not sure what to do here really

3-5k out of pocket tops on a lease or purchase. The dealer will cut you back a check for the difference--- Then invest the 20k! No way in hell id walk away from that much cash.