Thread: Buy or Finance
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      12-07-2005, 05:34 PM   #9
BayAreaBMWFan
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Drives: E46 ZHP Vert
Join Date: Oct 2005
Location: San Francisco Bay Area

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You need to make a spreadsheet..

All depends on the post tax rate of return on investments.
When you are financing you are borrowing money at a certain rate.
You can use the same cash and invest it somewhere else.
If the post tax rate of return is less than the finance charge, you are better off paying cash. OTOH if it is higher then you can borrow the money for the car and invest it yourself.

The same works for leasing. You save a lot on sales tax but have to pay the bank fees and the desposition fee. The more expensive the car, the greater the sales tax savings. You also do not have the residual risk. If for some reason resale values tank, you will not have to sell/trade the car at a lower price.

And finally, with manufacturer incentives, you often have high residuals and low money factor which make leasing a no brainer vs buying.

Another thing to keep in mind is the cost of repairs. As cars become more complex electronically they are becoming more expensive to repair. Hourly labor rates here in the Bay Area can be between $90-$110 at independent shops. This means that even simple repairs can cost a lot. Hence keeping the car for a long time to save on the depreciation expense can backfire since the repair costs can really add up on high-tech cars in California.