[orso]

it seems not....for example, someone on this thread claims leasing is a good idea because of the high residual and that the E90 will take a hit when the new models come out....jeez, do you think someone in the finance department of BMW hasn't thought about that and adjusted the residual to take account of that?


the only way to figure this out is to compare the net present value of the relative cash flows....


assume a 10K asset you want to buy. You can either buy outright, finance or lease. You then need to know how much money you will pay each year, the residual value belonging to you if you finance and the appropriate discount rate. punch those numbers into a calculator and deduct any down payment (and add the residual value in the case of the finance option) and compare to the 10K upfront purchase option. whichever of the three numbers is larger is the way to go. usually the 10K upfront will win...i.e. the lease payments in today's dollar value will exceed 10K and so will the loan payments.

So the winner is usually the person who can pay it all upfront.

Now, since banks and BMWFinance are in the business of making money and they know that many people do not have 40K to pay upfront they step in and offer to front you the money...whether as a loan or a lease. BUT you pay a premium for that service and it is likely to be at a higher price than your alternative investment opportunities. But you may have no choice if you want the car.

In the case of the lease, they will adjust the residual to reflect the risk they are taking on with a lease.

So it seems to me that if you have the cash outright purchase always wins especially if you plan to hold on to the car (hence my question about lasting power of the E90) to the point where you have gotten more value out of it than its residual (e.g. keeping it for 100K miles).