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      12-05-2005, 05:05 PM   #1
bimmerwannerbie
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Buy or Finance

I ordered a 325i. I can buy it out or finance. Which is a better option? Why? Thanks.

Last edited by bimmerwannerbie; 12-05-2005 at 05:17 PM. Reason: Wrong Forums
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      12-05-2005, 05:27 PM   #2
md37793
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Not to sound like an ass, but do you like paying interest and a car payment? If you have the cash to free and clear pay for the car, then why not just pay it off?
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      12-05-2005, 05:39 PM   #3
bimmerwannerbie
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honestly, hate paying interest. But just that taking $40K out is like.. ouch. I am only 25, so don't have much saving.
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      12-05-2005, 06:14 PM   #4
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If you never had a big loan, such as a car loan, it's better to finance. It'll help build your credit. You may have excellent credit, I'm sure you do, but try getting a car loan with no down payment without having a previous car loan before and you might get turned down. A lot of car companies have special programs for people like this. College grad program.

Also, how long are you planning to keep your car? A car depreciates. It's the worst investment. If you're planning to keep your car for a short time, than buying it out is not such a great idea. Financing might not even be a good idea also. Have you considered leasing?

If you don't like leasing, than just finance it. Instead of using all that money to buy out the car, put some down and use the rest for investments that will make you money.
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      12-05-2005, 11:37 PM   #5
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do it 50-50, put down a hefty down-payment, and only finance it for a couple of years. that's what i'm doing and i'm getting the best of both worlds, don't spend too much cash and won't be buried in payments for years...
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      12-05-2005, 11:41 PM   #6
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If you're going to go the finance route, if you can, try to pay it off in under 48 months. Also, do a lot of research before you do battle with the finance manager. He will be a shrewd adversary, if you're not prepared.
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      12-06-2005, 12:23 AM   #7
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Pay for it

Leasing is a waste of money, that said if you cannot afford to part with the 40K then you have 2 options.
1. Buy a cheaper car within your means
2. Think short term, Lease and pay the cost and possible penalties.

Consider the ongoing cost of owning a new BMW...
If you are 25 then your insurance will bump up significantly, you will also want to make sure you have good coverage for a $40K car.
The cost of a set of tires ($1K) every couple of years.
$80/ non scheduled oil change (though if you're leasing you'll probably stick to the 15K schedule)
Time in the maintenance shop, looks like most dealers take a long time to fix problems, on the order of days to weeks, and may not provide loaners.
Detailing cost (either your time or some one elses), you will probably feel a desire (and a need 'cos of the brake dust) to keep the BMW cleaner than you would a plain old car.
Premium Gas cost.
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      12-06-2005, 09:03 AM   #8
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Thank you for the response, My car is arriving at the port by 12/8. I will have to re-evaluate my financial suitation. Mostly, I will pay it off and start from 0. I am planning to keep the car for more than 3 years.
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      12-07-2005, 04:34 PM   #9
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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.
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